We’re talking about success and social value. Today many people lump this in a special category: social entrepreneurship. We’re not sure exactly what that is, so we’re interested in learning more. As it turns out, so were two Tuck class of 2013 students, Christopher Halstedt and Brad Callow. This past spring they did an independent study Senior Associate Dean Bob Hansen and Gregg on exactly this topic. They set out to see if they could understand what exactly is social entrepreneurship and how it creates social value. Here are some excerpts from what they found:
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We began this independent study with the mindset that we would target social entrepreneurs with for-profit practices (so-called Social Entrepreneurs). In exercise, this was much more difficult to achieve, as a lot of what nonprofits aim to accomplish comes solely from philanthropic influences. Of course we believe that successful nonprofits should think like for-profits and strategically position themselves for growth and scale; however, this mindset comes few and far between.
From our readings and anecdotal discussions, there were three key criteria we believe were essential. Though they were relatively simple, their respective impact on each nonprofit was and will continue to be significant:
• Is the idea worthwhile?
• Is it a good idea for the goal?
• Is there good execution and is it sustainable?
One learning experience from this independent study really revolved around the difficulty of measuring success in a nonprofit setting. We saw it time and time again, and the answer isn’t as simple as profitability, as each nonprofit has its own metrics for measurement of what makes for worthwhile outcomes. It was interesting to see that some nonprofits take a proactive approach in defining these measurements, while others had a tough time answering the basic question, what is your impact?
A clear plan for execution is an essential component of success. One nonprofit we interviewed lacked a simple business plan. They believed that if they had the social mission and supporters to fund that mission, then there was no need to strategically create a plan for the future. We found that those with business plans think strategically, and this is an imperative step to creating best-practices in a nonprofit setting. And of course, execution of the plan has to happen.
To really say there is success, we found it’s necessary to know if the idea can be sustainable. Will this nonprofit be in existence in 10, 20, 30 years? What about this idea makes it sustainable? Frankly in the end it really boiled down to whether the idea was being executed. Finally, we asked about social scalability. This became an important discussion point in our conversations: can this idea be implemented throughout the U.S., throughout the world? Has management considered such an idea and are they willing to expand, grow, or share this with other like-minded social entrepreneurs / philanthropists? Actually, they’re great questions to continue to ask in both the nonprofit and for-profit world.
There is a final lesson we learned in our work: keep it simple stupid! Overcomplicating an issue doesn’t do any good. Keep the strategy and metrics for success simple, and you can make better, sound decisions.
Any definition of social entrepreneurship should reflect the need for a substitute for the market discipline that works for business entrepreneurs. Social entrepreneurs play the role of change agents in the social sector by:
• Adopting a mission to create and sustain social value (not just private value),
• Recognizing and relentlessly pursuing new opportunities to serve that mission,
• Engaging in a process of continuous innovation, adaptation, and learning,
• Acting boldly without being limited by resources currently in hand, and,
• Exhibiting a heightened sense of accountability to the constituencies served and for the outcomes created.
Sound familiar? It’s essentially the same definition as our for-profit entrepreneur. This shouldn’t be surprising. Execution in pursuit of value creation should look the same no matter what the form. So what’s different? For social enterprises that have the twin goals of social outcomes and earning free cash flow from revenue, mission-related impact is the central criterion, but wealth creation isn’t ignored. “On the surface, many social enterprises look, feel, and even operate like traditional businesses. But looking me deeply, one discovers the defining characteristics of the social enterprise: mission is at the centre of business, with income generation playing an important supporting role.”
The concept of social entrepreneurship is centered not just on mission, but on entrepreneurship, making a social benefit-focused organization become more like a business. The idea is that nonprofits can benefit from the focus of for-profit businesses – customer focus, sound strategy, effective planning, efficient operations, financial discipline. Hopefully the social entrepreneur focuses as intently on excellence in all of these as any back-to-the-wall for-profit entrepreneur. For them, as perhaps it should be for all of us, success is social value.