For many – perhaps even most – the concept of
disruption has unsettling connotations: upheaval, disorder and
uncertainty. But for others, disruption equals opportunity.
That’s why disruption is the ultimate goal for entrepreneurs
looking to carve out a place for a new business or product in an
established industry. A decade ago, for instance, Apple changed
everything about the music industry when it debuted its iPod music
player. The iPod wasn’t just successful, it disrupted
That sense of entrepreneurship now is being applied to social issues and philanthropy. While traditional entrepreneurs gear their efforts toward generating profit, social entrepreneurs aim to disrupt social phenomena such as poverty, homelessness and disease.
Examples of social entrepreneurship in action can be found across the globe:
- In Chicago, Rev. Stan Sloan wanted to help homeless people find employment. A traditional strategy would have been to write a check to – or even establish – a jobs-training program. Instead, he started Sweet Miss Giving’s, a bakery that employs dozens of homeless people to give them training and experience and build their resumes.
- Kailash Satyarthi wanted to combat child labor in India and Pakistan. Instead of fighting for change through the countries’ legal systems, Satyarthi founded GoodWeave, a nonprofit that certifies child-labor-free rugs in order to apply market pressure to factories that employ children.
- Matt Flannery wanted to alleviate poverty in third-world countries. Instead of supporting an aid organization, he co-founded the nonprofit Kiva. The organization makes low-interest, small-amount loans to entrepreneurs such as pig farmers and cab drivers, or to fund microfinance organizations that work with such entrepreneurs. Since its founding in 2005, Kiva has provided nearly $230 million in loans, averaging just over $400 per loan – and 98.8% of those loans have been repaid.
These kinds of social-entrepreneurship success
stories have caught the attention of traditional
philanthropists and nonprofits.
“When philanthropists and large nonprofit institutions think
about how they can change the world, the lens they look through has
been forever changed. That’s mainly because of the work of
social entrepreneurs,” says Marguerite Griffin, Northern
Trust’s national director of Philanthropic Advisory Services.
“Social entrepreneurship is not a fad or a little color off
to the side of mainstream philanthropy. The paradigm has shifted.
This phenomenon is pointing the way toward how we are going to be
engaged in philanthropy going forward.”
But before you choose to enter into a social entrepreneurship venture rather than support a more traditional nonprofit, there are many factors to consider.
Not a One-Size-Fits-All
Social enterprises can be for-profit businesses that include a social component at the core of their mission, or nonprofits that operate as charitable organizations but with an entrepreneur’s system-disrupting approach to social issues. Or, they can be a combination of the two.
Oakland, California-based Revolution Foods is an example of for-profit social entrepreneurship. This for-profit venture was launched by two UC Berkeley Haas School of Business graduates in 2006. Since then, it has supplied nutritious, affordable lunches to schools across California, Colorado and Washington, D.C.
“A new generation of philanthropists is emerging,” says Tim Bresnahan, second vice president for Northern Trust’s Philanthropic Advisory Services group. “They are businesspeople who aren’t thinking of social responsibility as a secondary motivation, but as the primary reason they are starting a business.”
Others choose to participate in social entrepreneurship as a nonprofit. Not-for-profit organization Habitat for Humanity employs a disruptive strategy for combating homelessness. It uses volunteer labor to build houses and requires beneficiary homeowners to make affordable mortgage payments and invest hundreds of their own hours to build the homes.
Some organizations employ a hybrid strategy. Former basketball star Magic Johnson is committed to developing urban communities through the for-profit Magic Johnson Enterprises, for example. The organization brings movie theaters and coffee shops to neighborhoods that most retailers ignore. When Johnson’s businesses succeed, he not only enriches urban neighborhoods but also encourages additional economic development in those neighborhoods by demonstrating that they can support retail establishments.
Meanwhile, the nonprofit Magic Johnson Foundation provides community empowerment centers to give technology access to people in underserved urban communities.
Is Social Entrepreneurship for You?
Participating in a social enterprise – either by working as a social entrepreneur or by supporting one – isn’t for everyone.
One reason is that even the most successful entrepreneurs often fail. No matter how promising they are, a high percentage of radical, new, unproven ideas won’t work.
But entrepreneurs aren’t deterred by the risk of failure. The same is true of social entrepreneurship. In fact, people who have launched businesses or invested in new businesses tend to be more comfortable working with social entrepreneurs or launching their own social-entrepreneurial ventures.
“There’s a comfort level with risk and uncertainty for those donors [who have been entrepreneurs or startup investors] compared with other types of donors. They understand that with any kind of new venture, there will be lots of mistakes and corrections along the way, and that comfort level is a big factor,” says Mae Hong, director of the Chicago office of New York-based Rockefeller Philanthropy Advisors. “This is a really exciting space and time because people are trying to find new ways to do things. But with that experimentation will come a lot of failure, a lot of things that don’t work. That’s still a good thing.”
Hong adds that even successful entrepreneurs can struggle with the transition into social entrepreneurship. While the core idea involves applying creative entrepreneurial solutions to social issues, running a social enterprise is very different from running a traditional business – particularly for social ventures in the nonprofit space.
“People think, ‘I was successful in business, so I can be successful in doing social purpose work.’ But they often struggle because they think all their business principles will translate very simply [to social issues], and that’s not the case. Fighting homelessness is not the same as building widgets,” Hong says. “There’s a substantial learning curve if you want to get into this.”
Impact, Innovation and Engagement
One aspect entrepreneurs tend to enjoy about building businesses is the ability to measure their success. They can account for their market impact in dollars-and-cents terms. The most meaningful successes, though, are sometimes more abstract: The transcendent success of Apple’s iPod isn’t captured in a specific sales number but by how the product transformed the music industry.
Social entrepreneurial successes work much the same way. Because the goal of a social enterprise is to address a social issue, it’s difficult to precisely quantify impact. Habitat for Humanity can say it has built 400,000 homes, for example, but it’s much harder to pinpoint the extent to which it has helped eradicate homelessness.
What social entrepreneurship does provide, however, is the opportunity to innovate. For many would-be social entrepreneurs, the possibility that their idea for a social venture could have an iPod-like effect is too tempting to pass up.
“For philanthropists, the ultimate questions are how much do you want to participate and what do you want to say you were able to achieve?” Griffin says. “Some people have a remarkable thirst for impact. But you can’t go into social entrepreneurship saying, ‘I’ll only do it if I’m sure I’ll have a big impact.’”
That’s because all entrepreneurship is risky and uncertain. It’s also bold, innovative and promising. And if you’re inclined to swing for the fences in an effort to enact meaningful social change, it just might be for you.