It is easy to say how one thinks things should or
ought to be; it is harder to explain how. In the case of social ventures, how
do you convince others to invest? How do you create a sustainable project? The divisions
between the spheres of social innovation and business are blurring.
While charitable initiatives may be appealing to social
ventures, they are not sustainable. It is important to recognize that people in
poverty have demands and wants just like anyone else; they have less to spend,
but they are still consumers and will buy goods or services that they feel are
beneficial to them. There is a clear economic market. As Whalen describes, “Even
the poorest people are still consumers. Like you and I, they make decisions
about what to buy each and every waking hour. Collectively they spend over $5
trillion dollars a year, roughly equal to the GDP of the third largest economy
in the world.”[i]
This is no small figure. Innovators and investors should look at this as an opportunity
and a market in which to scale innovative ideas.
While combining economic models with social innovation
will assist in scaling, I wonder how this influences the mission of social
ventures. Do social ventures have to relinquish some of their goals in order to
be sustainable? I came across an article discussing the difficulties that arise
from combining non-profit charitable projects with business-oriented
organizations, or as the authors call them, “hybrid models.”[ii] These models are
recognized as being an important key to success in many socially innovative
initiatives, where social impact projects are funded and sustained by business
profits, such as the model of the Aravind Eye Hospitals we discussed in class.
However, because these hybrid models are not as well
defined, there are some challenges, which Battilana et al. describe.[iii] The for-profit and
not-for-profit sectors operate very differently in terms of legal structures,
with differences in tax benefits, abilities to sell products, who owns the
company, and funding methods. Then there are inherent differences, including how
the organizations are structured and their values, and whether the focus is on
the customer or on the person receiving the profits. These are obstacles that
social ventures must overcome, but they also highlight how the traditional
models of business and non-profit are changing.
It’s important to recognize that there will be
compromise in any social venture that utilizes economic forces to grow. But
when you mix these two realms and compromises are made, how do you maintain the
integrity of the social venture?
[i] Whalen, Hugh. (2013). How
Misinformed Ideas About Profit Are Holding Back The World's Poor. Fast Company & Inc. http://www.fastcoexist.com/1682004/how-misinformed-ideas-about-profit-are-holding-back-the-worlds-poor
[ii] Battilana, Julie, Lee, Matthew,
Walker, John, & Dorsey, Cheryl. (2012). In Search of the Hybrid Ideal. Stanford Social Innovation Review.
[iii] Battilana, Julie, Lee, Matthew,
Walker, John, & Dorsey, Cheryl. (2012). In Search of the Hybrid Ideal. Stanford Social Innovation Review.
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