Innovation blossoms where the sectors converge

The celebration of social entrepreneurs and enterprises - reaching a zenith in 2006, when Muhammad Yunus and the Grameen Bank—the pioneers of microfinance—won the Nobel Peace Prize, tends to obscure the mechanisms that result in positive social change—the innovation itself—according to the authors of Rediscovering Social Innovation, an article in the Stanford Social Innovation Review Social.

They think the advantage of examining the pursuit of positive social change through an innovation lens is that this lens is agnostic about the sources of social value. Unlike the terms social entrepreneurship and social enterprise, social innovation transcends sectors, levels of analysis, and methods to discover the processes—the strategies, tactics, and theories of change—that produce lasting impact. Social innovation will certainly require understanding and fostering the conditions that produce solutions to social problems.

The mechanisms of social innovation—the underlying sequence of interactions and events—change as a society and its institutions evolve. Nonprofits, governments, and businesses have had various roles. These social innovations during the 1930’s were driven by a more expansive and direct role of government. The devolution of public services which began in the 1980’s such as day care, nursing homes, even military services to the private and nonprofit sector continues today. Since the 1960’s, pressure on the private sector to consider the social impact of its conduct has grown tremendously.

The authors believe that we increasingly see the three sectors joining forces to tackle the social problems that affect us all based upon a better appreciation of the complexity of global problems such as climate change and poverty. They do so by exchanging ideas and values, shifting relationships, and the integrating private capital with public and philanthropic support.

An example is socially responsible investing which simultaneously considers the social, environmental, and financial consequences of investments, applying the ethos of the nonprofit sector to the most purely financial of decisions: investment.

In principle, many people accept the trend of dissolving sector boundaries; in practice, however, they continue to toil in silos.

The authors say that to support cross-sector collaborations we have to examine policies and practices that impede the flow of ideas, values, capital, and talent across sector boundaries and constrain the roles and relationships among the sectors.

Entrepreneur as a change agent

When we say the word “entrepreneur” at the university, everyone immediately thinks we are referring to someone in the business school, technology transfer office or a start-up company.

So we avoid saying the word - - - - - - - - - - - -, until later in the conversation. It gets in the way of discussions we like to have about the potential of entrepreneurship as a lever for creating positive change, which most people at the university, especially students, embrace.

We think there is an eager audience for education focused on understanding and developing entrepreneurial behaviors, skills and attributes in many different contexts. Business is just one context. Others are social and creative.

The essence of entrepreneurship lies in creating and exploiting opportunities and pursuing innovation in practice. This involves learning, often by trial and error, how to design organizations of all kinds in different contexts and how to operate them successfully.

Universities are moving towards a more holistic concept of entrepreneurship, transcending the pure business focus.

We admire how the University of Rochester is equipping its students across the university to be successful in that regard. According to an AAC&U article “Building a Better Entrepreneurial Education,” it is aggressively fostering entrepreneurial skills in fields like education, engineering, nursing, and music—and in the business department, too. Courses in entrepreneurship are found in six schools on campus. The goal is to foster leadership, management, and team-building qualities.

Rochester’s brand of entrepreneurship is the “transformation of an idea into an enterprise that creates value—economic, social, cultural, or intellectual.” It focuses very little on the profit portion of the field.

In the AAC&U article, Vice Provost for Entrepreneurship Duncan Moore proudly points out: “Most of the projects being proposed by the students are not around business entrepreneurship, but social entrepreneurship,” he says.

“If we want to be sure our students will have a long career…they should have either international or entrepreneurial experiences," Moore says. “That’s not going to get outsourced.”

Next time you hear the word “entrepreneur," think attitude - towards engaging the world, and changing it.

Ventures come in all flavors

Some cast enterprise as the enemy of social concerns. Here are examples of what can be accomplished by joining social concerns with private enterprise:

• Diagnostic-For-All, that will deliver affordable point-of-care diagnostic solutions to the global medical community.

• Seeding Labs, which reclaims and refurbishes laboratory equipment from universities, hospitals and biotechnology companies in order to equip talented scientists and clinicians living and working in the developing world.

• Social Venture Lab, which provides a program to share ideas on best practices for businesses or organizations that consider their community contribution as part of their product or service.

• CleanFish, which works with artisan fishing communities around the world to help bring their sustainably harvested fish to a global marketplace.

• The Environmental Insurance Agency, which creates pay-as-you-drive auto insurance, to reward low-mileage drivers.

• Eyebeam, a lively incubator of creativity and thought, where artists and technologists actively engage with culture, addressing the issues and concerns of our time.

• Partners for the Common Good, a wholesale loan participation network which serves the needs of low-income communities.

• Revolution Foods, a daily meal service in schools featuring meals that have no high fructose corn syrup or trans fats and contain only the highest-quality organic ingredients.

• Sweet Beginnings, helping ex-offenders fully reenter society by providing assistance in securing and retaining employment and developing a career path.

• Windows of Opportunity, a lead-safe window replacement business that protects children from lead poisoning and provides supportive employment training to youth ages 17-24 at risk of chronic unemployment.

• OneWorld Medical Devices addresses the large vaccine wastage problem that often results from improper temperature control.

• Mobile Medics, a traveling health care service that provides private sector, high quality, and affordable medical care through mobile clinics to paying villagers in India.

• Samasource aims to harness the world's untapped talent through socially responsible outsourcing.

• MyC4 raises capital for African entrepreneurs, and in so doing is striving to become a significant tool in the fight to end extreme poverty.

• MicroPlace makes socially responsible investments in microfinance to alleviate global poverty.

• RootSpace, promotes and celebrates entrepreneurship as a powerful force for economic, social, and environmental development around the world.

• Better World Books is a global bookstore that harnesses the power of capitalism to bring literacy and opportunity to people around the world.

• Benetech harnesses the power of technology for social benefit

• Living Cities brings opportunities and the power of mainstream markets to urban neighborhoods and residents historically left behind.

• Inveneo.org provides technology solutions to remote villages through non-governmental organizations and through commercial or government owned organizations.

• E+Co invests in local energy businesses in Africa, Asia and Latin America to support clean energy.

• AfriCeuticals strengthens Africa’s private health sector with certified human and veterinary products and services developed, sourced, manufactured, branded, and/or distributed in Africa.

• GeoOptics establishes a new model of community-based space development for the public good that could change the way the world collects and disseminates earth observational data.

Enterprise comes in all flavors, including social.

Social venturing for activists

so·cial en·ter·prise (n.)

An organization or venture that advances its social mission through entrepreneurial, earned income strategies.

This is a new model some non governmental organizations and donors are trying in the search for more powerful, lasting social impact. This model seems tailor made for a university campus like UMass Boston that prizes its engagement with the community to improve the human condition. I see growing interest in social enterprise as a strategy for addressing some of our most pressing problems.

It is not that hard to put together a for-profit arm, but to have it be a significant contributor to the core mission requires considerable strategic work. But my hunch is that the biggest challenge is that most social activists struggle to make the culture change that is required within the organization to even explore this model.

A social enterprise is one where the social aims are of equal importance to its commercial activities. Like any business, a social enterprise focuses on generating an income through the sale of goods and services to a market but the added value of a social enterprise comes from the way in which it uses its profits to maximize social, community or environmental benefits.

An announcement of this year's the winner of the MIT 100K Entrepreneurship Competition represents a coming of age of sorts for social ventures. A social venture won the grand prize of what is arguably the leading business plan competition in the world. Diagnostic for All is a not-for-profit venture from Harvard University aimed at delivering cheap, dispensable diagnostic tests to impoverished countries.

Harvard Business School gave legitimacy and gravitas to social ventures by creating the Social Enterprise Initiative in 1993, which has published more than 400 cases and teaching notes on topics related to social enterprise. It was the first formal academic program in the field. HBS has a great article called The Future of Social Enterprise on the current state of the field.

On the donor side, social venturing is picking up steam, especially as a number of high-profile business leaders (like Bill Gates) adopt this model for their charitable giving.

On the seeking side, the competition for donations and gifts seems to get tighter every year. And so-called donor fatigue seems to be becoming almost epidemic. That is in part why organizations are exploring ventures.

Investors like it when you're making just enough to pay your program expenses. It shows you've thought about sustaining your venture; it shows you have the discipline to keep your expenses low; but above all, it means you don't need them. The reason they like it when you don't need them is because that quality is what makes ventures succeed. The more you don't need them, the more they will invest.

Non profits are actually really good at identifying unserved needs and opportunities for programs and services. They also know best how to tailor a service for their particular client base, and can provide the kinds of supports required to make such a venture work. These attributes can result in community-changing ventures.

Fourth Sector Network has teamed with the Royal Bank of Scotland and NatWest to produce a new edition of A BUSINESS PLANNING GUIDE TO DEVELOPING A SOCIAL ENTERPRISE, a pragmatic tool to assess if the venture model is right for you and the range of stakeholders that have a connection with your program.

Capitalism to the rescue

On Sand Hill Road, the wide avenue in Silicon Valley lined with some of the country’s most powerful venture-capital firms, hundreds of millions of dollars pours into green technologies, according to a feature in the New York Times.

Doing well has always been about timing. Many a sound plan has failed because it was too early or too late. But progressive investors could see this day coming, and a few of them now will make a lot of money.

In a stint a little over ten years ago with the Environmental Business Council of the US, we labored to rally the business community around the Clinton-Gore environmental technology strategy (Bridge to a Sustainable Future: National Environmental Technology Strategy) which we helped shape. Its gratifying to finally see the investor interest.

Some dismiss the greening of venture capital as their latest effort to make a lot of money, not to save the environment. Others are saying that the venture capitalists are recklessly betting the firm on perhaps an idealistic quest. If the results are positive, I say: What’s wrong with doing-well-by-doing-good?

Social venturing, right up our alley

UMass Boston’s fulfillment of its urban mission is often touted through the prism of its engagement with the community to improve the human condition. So it seems like the new wave of "social venturing" washing over our community ought to be something we pay attention to.

An announcement last month of the winner of the MIT 100K Entrepreneurship Competition represents a coming of age of sorts for social ventures. A social venture won the grand prize of what is arguably the leading business plan competition in the world. Diagnostic for All is a not-for-profit venture from Harvard University aimed at delivering cheap, dispensable diagnostic tests to impoverished countries. Social entrepreneurs are similar to regular entrepreneurs with one main difference--their gains aren't measured in just financial success, but by the impact they have on society.

Perhaps the best known local social venture is One Laptop Per Child which is mass producing the extremely low cost, low power XO computer for children in the developing world. The mission is to provide a means for learning, self-expression, and exploration to the nearly two billion children of the developing world with little or no access to education. The XO initiative is not without controversy, but has inspired other businesses to market low-cost laptops of their own.

Some entrepreneurs arrive at the blending of mission and business as a practical matter of having to achieve self-sufficiency in an increasingly competitive environment. Today there are three times as many nonprofits as three decades ago all at the same watering hole. Other entrepreneurs have started social ventures because they see a business opportunity that can best be realized through a social venture.

No matter how they get there, either seeking to do well by doing good, or by seeking to do good by doing well, social venturing is really taking off around the world. This according to David Bornstein, author of the 2004 book How to Change the World: Social Entrepreneurs and the Power of New Ideas. A PBS series The New Heros ran a year after this book was published. "Take a journey into a world where people take action to make a big difference."

Harvard Business School gave legitimacy and gravitas to social ventures by creating the Social Enterprise Initiative in 1993, which has published more than 400 cases and teaching notes on topics related to social enterprise. It was the first formal academic program in the field.

In 1999, the Haas School of Business at UC Berkeley, Columbia Business School, and Yale School of Management launched the Global Social Venture Competition, the largest and oldest student-led business plan competition providing mentoring, exposure, and prizes for social ventures from around the world. Nearly 25% of entrants are now operating companies.

A group of faculty, alumni, and other leaders committed to social change at Stanford Graduate School of Business created in 2000 the Center for Social Innovation that publishes Social Innovation Review. In 2002, Columbia Business School launched the Research Initiative on Social Entrepreneurship. Also in 2002, Duke University established the Center for the Advancement of Social Entrepreneurship in the Fuqua School of Business. It is a research and education center that promotes the entrepreneurial pursuit of social impact through the thoughtful adaptation of business expertise.

The efforts undertaken by the business schools have not gone unnoticed by the Aspen Institute, a leadership think tank, which ranks MBA programs that are integrating social and environmental topics into their core classes, electives, and academic research. Stanford was the 2007 top school in its "Beyond Grey Pinstripes" biannual rankings of business schools.

How have social ventures fared? In 2002, the Investor's Circle collaborated with Harvard Business School and McKinsey & Company to conduct a study of the financial returns on $72 million of member investments over 10 years. The study found that companies generated respectable returns comparable to the stock market. The study was published in the McKinsey Quarterly, A Halo for Angel Investors.

Many of those who manage non-profits will tell you that it seems that they spend more time raising money than actually working toward their cause of choice. The competition for donations and gifts seems to get tighter every year. And so-called donor fatigue seems to be becoming almost epidemic. That is why more social ventures are moving toward business models that are self-sustainable without reliance on the generosity of benefactors.

The relentless won't-take-no-for-an-answer quality of entrepreneurs is what give social ventures an edge. They absorb failure, they learn, they surround themselves with a good team and then they redirect. These same attributes can result in community-changing solutions.