Social Entrepreneurship

Introduction to Social Entrepreneurship•Muhammad Yunus, Grameen Bank, and Micro-lending •Lack of access to credit•Margins and the removal of the middleman•“increasing” margins and their impact on sustainability and venture growth

New Venture undertaking requirements(Grameen Bank’s Impact)

– On Resources- funds, expertise, and energy– Bank’s vision - Low adverse risk in borrowers

Why was credit not otherwise available?

– Concept of collateral– Cultural/Gender bias– Location - accessibility to banking– Perceived Risk of default

What is Social Entrepreneurship? “from the French”- entreprendre, - to undertake.

• Traditional model of entrepreneurship– as a “commercial” enterprise– labor mental and physical effort –(Tangible)– physical capital -plant and equipment –T– human capital –knowledge and expertise –T– Managerial Skill – (Intangible)– Risk willingness – IT

Entrepreneurship models are “process” focused

* Opportunity recognition – From idea into opportunity

• Concept development – translation of opportunity into Enterprise concept

• Resource development and acquisition• Launch and venture growth• Harvest/grow the venture

Social Entrepreneurship (SE) uses the “enterprise” process, but seeks different ends/rewards – adding social value

• Pursues/Addresses social problems or needs unmet by private markets or governments

• Social entrepreneurship is motivated primarily by social benefit• Social entrepreneurship generally works “with” – not “against”

market forces -a balancing act between “moral imperatives” and “profit motives”

• Social entrepreneurs combine innovation, entrepreneurship, and social purpose and seek to be financially sustainable by generating revenue from trading

• The primary difference between Commercial Entrepreneurship and Social Entrepreneurship is not the entrepreneurial process, but the denomination of the rewards (from the created value) sought

• Exhibit heightened sense of accountability to those served for outcomes and their impact

Social Entrepreneurship Mission – To create and sustain “social” value –

– freed from profit as the reward ,the SE can generate opportunities from failure

– unmet social need may be in the form of unfilled demand or ‘latent’ demand

– opportunity can lead to development of an enterprise concept that is denominated in its value in three ways: 1. identifiable, 2. defensible, and 3. measurable.

• Note: Failure to identify and denominate social returns and set clear, specific goals at this stage is a key reason for many social enterprise failures.

Resources needed are determined and acquired

– Financial needs– Human resource needs– Human capital needs (knowledge and expertise)– Political and negotiation savvy

Launch and growth

– Follow a tangible business strategy with a plan– Needs a growth strategy, explicit and

transparent – Must cover plans for removing obstacles (plan B)

and measuring progress thru regular, appropriate monitoring

Goal attainment is a critical point of decision

– Shut down– Redefine– Stabilize and continue– Integrate into another venture with purpose

• Environment—latent condition in the population

• Resources—availability of resources for new ventures (societal or organizational slack)

• Displacement – structural dislocations in an existing social structure or system

• Personal traits – “Entrepreneurial personality”

• Preparation – learning and experience

Social Entrepreneurship Origins

Who are most likely to become Social Entrepreneurs?

• Immigrants --(Innate attribute)• Women -- Innate• Personal life trauma people --Innate• Community awareness and social concern –

social-psych• Persons who value compassion, justice,

equality, and liberty –(Social-Psychological)• (continued on next slide)

(cont.)Who are most likely to become Social Entrepreneurs?

• Innovators –(Psychological attribute)• Achievement oriented –Psych• Independent –Psych• Inner-directed --Psych• Tolerant of risk --Psych• Tolerant of ambiguity --Psych

Combining Risk Aversion and Innovativeness to Trigger Entrepreneurship

• High innovativeness and low risk aversion = Entrepreneur

• Non-innovative and low risk aversion = Gambler

• High innovativeness and high risk aversion = Dreamer

Social Entrepreneurship and Leadership characteristics

• Social Entrepreneur (SE) recognizes a social problem and all its complexity and binds the problem with a vision that has the potential to reshape the situation directly and change public attitudes that perpetuated the original problem

• SE holds significant personal credibility (referent power) which allows them to tap critical resources and actually build the necessary network of participating persons and organizations

• SE generates followers’ commitment to a project by framing the project in term of important social values, rather than purely economic terms. This results in a sense of collective purpose between and among the social entrepreneur and those who join the effort.

Common ‘Myths’ about Social and Commercial Entrepreneurship

• SEs are anti-business – rather collaboration for alignment and mutual benefit

• Difference between SE and Commercial Entrepreneurship (CE) is ‘GREED’ – many SEs are also CEs.

• SEs run non-profits – social entrepreneurship process can occur in any sector and with any legal status

• (continued on next slide)

(Continued ) - Common ‘Myths’

• SEs are born, not made – people can grow and learn to be comfortable with risk and ambiguity, as well as have their level of community awareness elevated. Ethical maturity, following Kolb’s theory of moral development, can be instrumental in SE creation.

• SEs are misfits – They value different goals, but certainly are anything but

• SEs usually fail – while slightly less than 50% of CEs actually fail, an even smaller percentage of SEs actually fail (<30%)[Cordes, et.al., 2001].

• SEs love risk – there is little empirical evidence for this claim, rather all successful entrepreneurs utilize “well thought out risk taking. By thinking, analyzing, and planning well, they mitigate risk and function under calculated risk paradigm.

Social Entrepreneurship Today

• Two excellent, creative examples of Social Entrepreneurship in action can be found at the following web sites: http://www.path.org/ and http://www.DonorsChoose.org/ .

• Both can be used by students to gain a “feel” of Social Entrepreneurship in the real world.

• mcamarata@semo.edu or mcamarata@aol.com for more information!