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
multiple industries.
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.
