entreSociety

Building an entrepreneurial society

Archive for the tag “Social change”

Social Business Part 1 — The stalled emergence of the social enterprise

The concept of the social enterprise is increasingly found in the news, social media and in the organizations arising to support them.  The social enterprise is expected to provide solutions to social issues while also being sustainable.  This sustainability is accomplished through a hybrid of not-for-profit and for-profit business models.  In my observation these entities start out on the drawing board as hybrids but tend to slide back towards traditional not-for-profits.   As this article will propose, we have not broken free from out-dated thinking that is needed for a new form of social enterprise to emerge.  I will present my thoughts in two separate posts.

The social sector has traditionally been not-for-profit organizations and government.  These groups addressed problems or needs where for-profit organizations were not engaged.  That is, there was no opportunity to make a profit so the private sector was not interested in investing.  The problem with this scenario is that the social problems and the cost of solving them has outstripped the supply of funding available.  On the flip side the funding that runs through the private financial system is building up and seems to be overrunning the investment opportunities in the private sector.  In parallel with these two trends the concept of social business and social finance has emerged.  Unfortunately, unlike the clear private/social poles that existed before, no one really knows how this new hybrid should work.

One thing we know from experience is that money flows quickly like water to where it can earn a return.  People and organizations don’t move at that pace.  They tend towards increment change.  As a result we are seeing social finance organizations emerging ahead of the organizations they need to invest in.  The band is starting to play but no one is on the dance floor.  We are also talking about impact investing before we fully understand what impact is and how we will measure it.  If we don’t solve this problem we will see poorly designed metrics and money chasing poor investment opportunities.  We need to shift our focus towards building sustainable social enterprises that we can invest in and we need them in large number.

For some there seems to be the expectation that existing not-for-profits and governments will tack on some form of impact measure and then carry on as usual.  This might be fine if what we have now is working effectively and efficiently and I don’t believe that is the case.  We have also seen private sector companies using superficial social measures to create the illusion of social impact.  Again most people don’t believe this is true on a wide scale.  The third alternative is the creation of a new set of organizations called social businesses.  They will have the joint social/financial outcomes baked in from the start.  The few that have been created tend to look like either a traditional not-for-profit or private sector company and mostly the former.  Founders tend to use one of these poles as a starting point when creating the business model.  With some exceptions they have not been very effective in creating large scale change or in being sustainable.

We need to break free from the status quo thinking that underlies the two primary business types in order to deal with social issues in a sustainable way.  In my next post I will discuss approaches for breaking away from these old ways of thinking that will enable us to successfully start building true social businesses.

Finding a real world problem to solve

As I have mentioned in previous posts a wave of entrepreneurs creating new ventures has a greater ability to solve the problems and capitalize on today’s opportunities than existing top down institutions.  Since that time I have had the opportunity to work with many entrepreneurs and speak with other mentors and funders of entrepreneurship.  While there are many good venture concepts that could lead to improvements in the world there are still many entertainment or recreation based ideas.  These ideas add value by raising an interest in entrepreneurship, testing business models and advancing the technology itself.  Now it is time to start turning the attention of entrepreneurs to serious problems and opportunities.

I have also discussed in previous posts that the entrepreneurial process starts with the problem and not the solution.  The success of an entrepreneur that finds a problem that their potential customers consider worth paying to solve is substantially higher than the ones that start with a solution and try to find acceptance later.  So we should start with the problems to solve.

The good thing about starting with problems to solve is that we have alot of them.  And many of these are worth solving with people willing and able to pay for the solution.  We need to look around us and see where we can improve life for ourselves and others.  The problems don’t have to be the huge, change the world in one day kind.  Often we are better to start small since we expect the ventures to build momentum over time as they grow and merge with other ideas.

Being critically observant or curious is a trait is essential to finding truly unique but important problems to solve.  When you see things that don’t work as they should we can ask ourselves why and what would need to change to fix it.  We should look at the system of cause and effects that created the problem.  Use a series of questions to drill down to root causes.  The first things we see are usually symptoms but not the cause of the problem.  A systems view is important to understanding a problem well enough to begin looking for a way to solve it.

Many solutions will require the use of a unique business model to deliver it successfully.  It is often not enough just to find a problem and build a simple solution. In the next post I will spend time talking about business model innovation and how to incorporate that.

For some background on finding problems to solve I refer you to the first three chapters of Innovator’s Solution by Clay Christensen.  I also encourage you to work in small teams since people often see things from different angles.  So I leave that as a starting point to find problems that matter where the solution helps the society we live in.

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