Sustaining Social Good

As this week's theme (the final for our all-too-short term) is "The Future of Social Innovation and Enterprise," I want to touch on venture sustainability. As I believe I mentioned in one of my previous posts, the most powerful component of social entrepreneurship versus traditional charity is sustainability: allowing a venture to take profit such that it may become a self-sustaining engine for change. If we accept this premise as a concrete foundation of the field from the entrepreneur's side, I believe where the field must go next is to find ways to make sure this sustainability carries over on the customer side.

Enterprise (social or otherwise) in low-income countries

In an article from last week titled "Looking for a Google," discussed the state of enterprise and entrepreneurship in low-income countries. This is of interest to us as we look to the future of social entrepreneurship since this type of activity forms the building block of some of the themes in the course (e.g., all things Grameen, from women renting out Grameen phones to the entire rationale of microfinance). The article was written to highlight publication of the World Bank's World Development Report.

The Economist opens its article by highlighting the dearth of small companies in poor economies that are able to become big. I can't think of a better way to state the following, so here is a striking fact I have quoted from the article:

"In America, if a company lasts 35 years, it becomes on average ten times as productive and employs ten times as many people. If an Indian one lasts that long, its productivity merely doubles and its headcount actually falls... The bank’s survey of 54,000 firms in 102 developing countries finds that large firms (those with over 100 workers) have higher productivity and higher wages, are more likely to export and are more innovative than small firms (those with fewer than 20 employees)."

I suspect there are some issues of correlation and causation behind the report conclusion figures, but the general point stands. So what does it mean for social ventures that rely on empowering local entrepreneurs in low-income countries if those entrepreneurs find it difficult to succeed through growth? For example, do we need to care that Grameen Phone entrepreneurs lose profits over time as they face more users of their solution? I pose this question to the reader; my own answer will focus on the elements of social responsibility it raises.

Fish or bait?

With a standard venture (motivated more by profit and the entrepreneur's fulfillment), it is simple: make a great solution, sell it such that it generates profit, and help some customers along the way. For social ventures, I believe that the ability to slap a "social" label on your venture carries with it wider responsibilities over how you help your intended customers.

For me it comes back to the proverb about giving a man a fish (eat for a day) or teaching him how to fish (eat for a lifetime). I believe one key component of future social ventures will be an emphasis on educating the individual around the innovation. Handing a child a laptop when he or she has never used a computer before is handing them a fish: they may consume it ... or they may recognize it as bait for bigger fish (opportunities). Why take the chance that they, or their teachers, never look to the larger opportunities? Such an outcome is wasted social potential that could be avoided by paying attention to education around the venture: form user groups; train teachers; share successes with other customers. At the level raised in The Economist: provide business skills education, interface with policymakers.

My hope is that social investors consider both how financially sustainable the venture is and how sustainable the social value becomes where the venture is applied.

Epilogue: rethinking capitalism

In a beneficial coincidence, The Economist's editors chose to position an article on rethinking capitalism immediately after the one cited above. The crux is that Richard Branson of Virgin ... everything fame, is organizing the "B Team": a committee of business leaders tasked with spearheading individual ideas, member by member, on how capitalism can be reforged to look to the long-term and be more sustainable/socially responsible. This effort is basically the scions of business rethinking elements of capitalism from above.

With this in mind, I want to close my contributions for the semester by recognizing the powerful trend toward social ventures rethinking from "below." GE is the prime example of this kind of thought from our readings - focusing significant resources toward talented engineers and technologists who work  close to the BOP customers they serve. I think geographic location is less relevant that the theme: instead of solely focusing on how all the amazing solutions (and ideas!) from established economies could help the bottom of the pyramid, spend some time learning from the ingenuity and creativity of the people you intend to serve. Call it human-centered design, call it embedded entrepreneurship, call it whatever. Just recognize that solutions can come from any source. As more and more social entrepreneurs recognize this, it will unlock a fountain of new ways to tap this field's potential, sustaining it through a bright future.