Recent years have seen an explosion in third-sector organizations, as nonprofits, foundations, cooperatives, professional associations and religious communities have assumed larger roles in society.
This is certainly no coincidence. In the wake of the sovereign debt crisis, governments are facing greater challenges in financing their obligations. As a result, private citizens are taking it upon themselves to search for alternative ways to meet basic social needs.
Leading this drive is a new breed of social entrepreneur. IESE's Marta Curto takes a closer look at these entrepreneurs and the role innovation plays in their activities.
Her study was published by "la Caixa" Chair of Corporate Social Responsibility and Corporate Governance at IESE.
What Is a Social Entrepreneur?
The term "social entrepreneur" was coined in the 1980s by Bill Drayton, founder of Ashoka, the world's largest social entrepreneurship network, and recipient of the 2011 Prince of Asturias Award for International Cooperation.
Social entrepreneurs generally have five points in common:
One of the key differences between social entrepreneurs and traditional entrepreneurs is how they approach innovation.
- They aim to create social value.
- They are able to perceive social needs.
- They respond with innovative ideas.
- They exhibit a below-average risk aversion.
- They have limited resources to pursue their mission.
Social enterprises innovate in areas of social import; that is, they aspire to create profound social change. Instead of trying to mitigate the consequences of a problem, they attack the root cause.
Consider the case of Faustino García Zapico from Spain. His goal was to ease the problems of prison violence between inmates and security officers, as well as turn prisons into centers of education and human improvement. To that end, he created "micro-societies," co-managed by the prisoners and guards.
One hotly debated aspect of social entrepreneurship is financial compensation: Should social entrepreneurs profit from their undertaking?
While social entrepreneurs must always be committed to creating social impact, most feel that this need not preclude them from making money from their activities.
A Composite Sketch
According to the Global Entrepreneurship Monitor (GEM), the typical entrepreneur is a self-employed, highly educated professional between 25 and 44 years old.
Interestingly, around 2 percent of the world's adult population is involved in social entrepreneurship activities, although that figure varies considerably by country.
The business areas chosen also vary by region. In less developed economies, the main concern is meeting basic needs, such as health care or access to clean water. In more industrialized economies, the focus tends to be on cultural endowment, providing services for disabled people or environmental protection.
The Keys to Success
Social entrepreneurs must not merely design a project to improve conditions for a particular group; their projects must also be operational on a large scale. This requires employing three strategies.
1. Develop an Organizational Model. Implement a structure capable of mobilizing resources and people.
The Cleveland Foundation, for example, created a philanthropic intermediary that put the contributions of individual donors under the control of community boards of directors with extensive knowledge of local needs.
2. Start a Program. Define a set of integrated steps with a specific purpose.
For instance, the Boot Camp for New Dads designed a program for hospitals, churches, military bases and community organizations, using father-to-father workshops to equip dads-to-be to engage with their infants.
3. Establish Principles. There need to be guidelines and values that enable the execution of projects.
The Knowledge is Power Program, a U.S. network of college-preparatory public schools for students from disadvantaged communities, is based on such cornerstones as "high expectations" and "results focus."
Once the strategy has been determined, the entrepreneur must put it into action.
This requires distributing information to other people looking to implement the innovation in their community, getting other organizations to become affiliated with the project, and creating branches.
To make a large-scale impact, a social entrepreneur must plan resources carefully, thoroughly assess the risks involved, consider the expected results, ensure the acceptance of the project among its beneficiaries, and decide when the program should be expanded.