This week’s readings highlighted some highly successful socially innovative products and services that use the models and approaches we’ve discussed in previous weeks. I think one of the most interesting elements of social entrepreneurship is the “creation of new business models that can meet the needs of underserved populations more efficiently, effectively, and if not profitably, at least sustainably.”[1] This weeks articles showed many examples of socially innovative ideas meeting the lower purchasing power of their new consumers through “frugal engineering.” I was especially struck by the technologies and business plans utilized by Husk Power Systems and the ones that are in development by Emergence BioEnergy presented in this week’s Economist article.[2] The fact that Husk Power Systems pilot plants were profitable speaks to the boundary spanning approach of social innovation and that sustainable—even profitable—products and services can sprout from a “social value” bottom line.
Yet the Economist article points out that these “social business” successes are trumped by failures. A couple months ago Tina Rosenberg of The New York Time’s “Fixes” blog[3] wrote about the challenges of starting and sustaining innovative “social businesses.”[4] She illustrates the problems of social businesses with KeBal, a healthy food cart business growing out of the NGO Mercy Corps other projects.
Mercy Corps had been running nutrition and other health workshops with mothers in Indonesia, primarily Jakarta slums, for many years. The workshops weren’t changing the ways mothers fed their children. The slum housing did not have kitchens and in order to cook, families had to go through extensive and expensive processes of cooking in alleys. So instead, most families lived off of street food, which tended to be fried, consisting of few nutrients, and sometimes even contaminated with formaldehyde by vendors to keep up fresh appearances. Mercy Corps started a social business—KeBal—that puts a flock of healthy food carts onto the streets.
The article discusses the difficulty the NGO had making the structural transition from NGO to a business, one that had to have a stricter bottom line in order to be sustainable. KeBal struggles to keep its prices competitive with the other carts. Otherwise they have no chance of reaching the mothers and children they are trying to help access nutritional choices. Rosenberg discusses how most small businesses fail, even when they are not social businesses. The odds are stacked pretty high against initiatives like KeBal at the moment. In Rosenberg’s article, a Duke Professor points out that the mark of a good social enterprise is the noun without the adjective. Social businesses face higher challenges. Just as many start-ups take awhile to turn profitable, it can take even longer for social business. The article claims that Grameen bank had to accept donations for 18 years before becoming sustainable.
We’ve certainly seen some promising developments in self-sustaining initiatives, especially with micro financing, but even more adaptive financing models will be needed. As Rosenberg points out “KeBal has the double challenge of serving people who can’t pay very much while having to change their eating habits. If this were easy to do profitably, social businesses wouldn’t be necessary.”
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