What do Richard Branson and Mother Theresa have in common? They have both been agents for change. But when you put them together, you get - the social entrepreneur. It’s a concept and occupation that has been further clarified in new work being done by INSEAD Assistant Professor for Entrepreneurship, Filipe Santos.
“Social entrepreneurs see a problem that they feel compelled to resolve, show the world a solution, and start implementing it,” says Santos. “They deploy it through entrepreneurial action and get others engaged and interested in helping – unlike social activists who may use force and political pressure to achieve their goals.”
Groups such as Greenpeace fall into Santos’s category of ‘social activist’, while locating and destroying landmines is an activity addressed by social entrepreneurs. “There are something like 70-million landmines still buried in developing countries,” Santos points out. “They kill or injure 15,000 people a year. It would take 500 years to get rid of them by traditional methods (metal detection), but now two Dutch entrepreneurs have a new solution: they’ve trained mice to smell landmines. So now poor farmers are gaining a living by using mice to clear landmines, at half the normal price.”
Social entrepreneurs are driven by the social impact their efforts will have, not by profit. But they can also be a magnet for public and private investment. Santos points to the French example of Unis-Cité, developed by three Paris-based young entrepreneurs who were concerned about the lack of integration they saw among suburban minority youth into the city’s social fabric. They created an organisation which mobilised young people into volunteer teamwork, thereby creating a sense of purpose and cohesion among those who felt disenfranchised. The companies and local governments liked the pilot project and sponsored it but funds couldn’t be found to significantly scale the solution. “Then the riots (of 2007) happened - the result of just the sort of problems foreseen by the founders of Uni-Cité,” Santos recalls. “All of a sudden, their idea was crucial to the government and to society, and it received financial support and became part of the government’s response to the youth integration problem.”
The problems a social entrepreneur tackles can be large in nature: poverty, hunger, AIDS. The solutions, however, are usually found at the local level, with a heavy dose of creativity. “Many new ventures address large-scale problems and they try to solve them with their own limited internal resources,” Santos explains. “In this regard, the social entrepreneur and the commercial entrepreneur have a lot in common: they must find low-resource solutions to large problems. But because social entrepreneurs don’t really offer a return on investment they have to be really creative in resource mobilisation and business model design. So businesses can learn a lot from the social entrepreneur’s approach to problem-solving.”Santos believes that the often-used concept of the double bottom-line of economic value and social value is misleading. Value is a holistic concept that cannot be partitioned. The difference between social entrepreneurs and commercial entrepreneurs is not economic versus social. The difference is their focus on value creation versus value appropriation.
“The goal for some entrepreneurs is to appropriate value,” he says. “You get the upside of your market niche for the corporate owners or for yourself. This will lead them to focus on activities where value appropriation is easier,” says Santos, adding: “The commercial entrepreneur is likely to take this approach.”
But the goal of social entrepreneurs is not to appropriate value but to create it, as in the case of Uni-Cité. “Social entrepreneurs are motivated by value creation, by the social impact of what they are doing,” says Santos. “They are happy to see this value spill over to the whole of society.”
In some situations it is possible to create value but not appropriate it: take, for example, vaccines to cure or prevent diseases like polio. “Can I resell those to poor countries, to the Third World? Probably not,” says Santos. So a business – or someone looking to appropriate value – would not be likely to get involved. But social entrepreneurs would target this area: they would make getting the vaccines to where they are needed at low cost their priority. They would alert society and governments to the problem and start developing a sustainable solution.”
Timing is as important to the social entrepreneur as it is to the business entrepreneur: nothing is as strong as an idea whose time has come. In the Uni-Cité example, the social entrepreneurs saw the importance of the problem of disenfranchised youth before government and society did.
In the case of the Dutch-developed solution to locating land mines, the size of the problem and its destructive power created an awareness which cried for a solution. Neglected societal problems with a strong potential for value creation but weak potential for value appropriation are thus the distinctive domain of action of social entrepreneurs. These usually involve areas with strong positive externalities, where the value created spills over beyond the economic transaction. This happens often in areas related to education, the environment, healthcare, access to basic services and knowledge production. “Wikipedia is a wonderful example of social entrepreneurship” says Santos.
With the current economic climate creating an awareness of structural inequities in global business practices, as well as an awareness of the widening disparity between rich and poor countries, Santos thinks the time for social entrepreneurs to find their real voice has come.
“I think we will see social entrepreneurship growing and becoming more important and, alongside commercial entrepreneurship, it will become an engine for economic development and shared prosperity in society.”
Filipe Santos has published an INSEAD working paper called “A Positive Theory of Social Entrepreneurship.” He also directs the INSEAD Social Entrepreneurship Program (ISEP).