Sharing Value through Entrepreneurship

Social Enterprise by
Sharing Value through Entrepreneurship

A Social entrepreneur recognizes social problems and uses entrepreneurial techniques to create, organize, and execute strategies to achieve the change required. To be one takes courage, a tenacious attitude and plenty of heart.

Today we have a pressing number of social issues that need tackling in the world; hunger, health, education, access to proper drinking water, climate change, to mention a few. As the population steadily increases by around 75 million people a year, it’s also doubtful that these problems are going to diminish anytime soon.

Whether the issues are increasing dramatically or if it’s simply our awareness of them, with the emergence of the internet and social media, can be debated, but what ever the reasons, there needs to be more research and analysis as to how to try and solve these issues and what long-term strategy is required.

The traditional model for solving social and environmental issues has been through the activities of non-profit organizations (NPOs) and charities. It is hard to get any concrete statistics on the number of registered charities globally, but in the US alone there are around 1.5 million, with more emerging every year.

A charity takes a donor’s money and spends it in the most effective and efficient way possible. Most peoples’ assessment of a charity’s efficiency is based on their ability to sustain low operating costs and maximize what it delivered to the project or end recipient. The problem with this is that it restricts the charity’s ability to be innovative and it creates a false reality for efficiency.

For example, a charity is given $100 and spends $90 on a solution and $10 on operating costs. Another charity is given $100 and develops a better solution for $70 and spends $20 on operating costs. A donor would prefer the first scenario. More of their money got through to the project, where as in reality the second is more efficient and there is money left over to re-invest.

You want to make 50 million dollars selling violent video games to kids, go for it. We’ll put you on the cover of Wired magazine. But you want to make half a million dollars trying to cure kids of malaria, and you’re considered a parasite yourself.
– Dan Pallotta

Imagine if, when Mark Zuckerberg was given the series of funding (roughly 600 million in 4 years) he received to build Facebook, he was told he could only spend 10% on operations and to forget being innovative. Now this is an extreme example, but the point I am making is that you can’t expect a charity to do clever stuff if they have no means to invest cleverly.

I am not suggesting that we want a world full of NPOs that are delivering less and less of the end dollar to the project, but clearly the traditional models for solving social issues need revision.

How can we expect a charity to be innovative in the way business is, if we apply a different set of rules and expectations?

What the charity sector has an abundance of is individuals with good intentions and the compassionate attitude required for the work they do. Many people choose to work for a NPO because they want to make a difference in the lives of others. This needs to stay and ultimately be encouraged, but there is more than compassion required, to deliver long-term impact.

I have come across some highly effective charities in South East Asia, that have implemented models allowing them to run on a low or near zero operating cost and still have a high level of business acumen within the organization. In some cases the founders have alternative revenue streams with speaking or writing books and in others they have developed innovative models to leverage air miles, hotels and so on. These are great models but also rare examples and often not viable for larger charities.

More integration and learning between the NPO and corporate sectors is crucial. There are a number of skills based volunteering organizations that are having some affect. Catch A Fire, based in New York, is a good example and they link skilled individuals to the nonprofit sector to help in more strategic business areas.

A great start but you still miss out on the area of innovation and solution development.

Time to replace CSR with Creating Shared Value.

CSR is a process which aims to embrace responsibility for the company’s actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public who may also be considered stakeholders.

Companies have been implementing CSR programs and policies for many years and publically traded companies are required to report on the activities they undertake.

Where CSR often falls short is in developing programs that have more relevance to the company’s activities and as a result have more impact in the field, as well as delivering value back to the business. Businesses have funding and resources and are also intimately linked to many social and environmental issues, making shared value a highly viable strategy, for achieving social impact.

Creating Shared Value is an opportunity for businesses to solve social problems, either directly or in partnership with the nonprofit community.

There are three ways a business can create shared value:

Re-conceiving products and markets – Defining markets in terms of unmet needs or social ills and developing profitable products or services that remedy these conditions.

Redefining productivity in the value chain – Increasing the productivity of the company or its suppliers by addressing the social and environmental constraints in its value chain.

Local cluster development – Strengthening the competitive context in key regions where the company operates in ways that contribute to the company’s growth and productivity.

In Thailand, GSK’s country office developed the Medicine Bank initiative to increase access to medicine while building trust locally by partnering with the Thai Red Cross and Royal Thai Army to provide and deliver medicine and sanitary supplies. The partnership with the Thai Red Cross sets out to provide health education and vaccines to the underprivileged for illnesses that are the main causes of death among young children in Thailand, including infant diarrhoea, influenza and pneumonia. More than 13,000 children have been vaccinated since June 2011, many of them street kids and orphans.

The programme is a great example of a company creating value and maximising its social impact by finding meaningful ways to deliver its own core products and services outside the usual marketplace.

Another example is Nestlé, worked closely with the farmers of the Moga Milk District in India, investing in local infrastructure and transferring world-class technology to build a competitive milk supply chain that simultaneously generated social benefits through improved health care, better education, and economic development.

There are many other examples, but there is still a great deal more work that can be done and as I speak to more corporate companies about this work, it’s clear there is still a lot more awareness and education needed.

If it’s possible for the business opportunity to continue being realised through solving social issues, then more investment will be generated. Large companies can potentially fund a slipstream of small business innovators and social entrepreneurs to bridge the gap that currently exists between the NPOs and profit sectors. More social and environmental issues can be solved, additional work will be created and NPOs can continue to do the work they do best, whilst staying lean.

Sounds Utopian? Quite possibly but nothing was solved without a great deal of dreaming in the early stages and there is certainly a lot more that needs to happen, to have the continued impact that’s required in the social sector.