Social Entrepreneurship: What’s the Difference?

Two-faced sculptureIf you have heard the term “Social Entrepreneur” but can’t exactly define what that means, you are not alone. I spent some time today on Twitter, trying to find the difference between a “social entrepreneur organization” and a plain old organization – the kind we all know in our communities.  I came up empty-handed.
Alison Rapping posted a similar request several months ago, asking, “What Really Is a Social Entrepreneur?”  She shared some great links to definitions and lots of ideas.  But she, too, found no definitive answer in the responses at her post.
I know many individuals who consider their organizations to be social entrepreneurial ventures.  Like other organizations, those social ventures have board problems and funding problems. They see themselves in competition with other organizations doing similar work.
And so aside from the fact that they consider their approaches to be innovative, plus the fact that they are not opposed to using business methods to generate revenues (with confessedly varying degrees of success), I am struggling to find what the difference is between a social entrepreneur venture and every other organization working to create a better world.
My wondering comes from a practical place. I am in the middle of exploring and planning the development of Creating the Future as an organization.  (I will be sharing my thinking here as soon as those thoughts are coherent enough to write down!)
The goal of that plan is to help those working to create a humane, vibrant, equitable world reach for their potential to make that change happen.
A pre-requisite to helping people reach for their potential is to meet them wherever they are along that path.
And a pre-requisite to meeting them where they are is to understand where they are and where they perceive themselves to be.
So for us, this is not an academic question. To be able to help Social Entrepreneurs reach their highest potential to create an amazing future for our world, we need to understand what they mean when they call themselves Social Entrepreneurs.  We need to know what difference they believe that makes for their work.
So if you consider your work to be that of a social entrepreneur rather than a “regular old nonprofit organization,” could you share what it is that creates that distinction?
  • What does your board talk about that is different from what other boards talk about?
  • How is the work you do different on a daily basis than what others do?
  • Spending time at your organization, what would I experience that is different? What would stand out or make me take notice? What would I feel or see or hear that would make me say, “Oh I get it – this is indeed different from an organization that is not a social enterprise!” ?
  • What results are you achieving that others are not achieving?
  • What change is happening because of the way your work is being done, that would not otherwise be able to be achieved?
I look forward to learning from this conversation. Thoughts, anyone?

15 Responses to Social Entrepreneurship: What’s the Difference?

  1. Great post that reaches out to the larger question I always have: why do we need social enterprise when we can just innovate in a way that serves our social, ecological and cultural needs? I pray for the day when the fees to conduct socially ‘irresponsible’ enterprise are greater than a corporation’s daily income (BP)…when terms like ‘social entrepreneur’ and ‘going green’ are as passe as the landline…when legislation like The Precautionary Principle are globally adopted by a generation eager to bring in a wave of innovation that is rooted in asking many of the questions you raise in this post, and therein, build better businesses that co-create a better world. Why not, right? 😉
    http://en.wikipedia.org/wiki/Precautionary_principle

  2. I love Danielle’s spirit of let’s just DO good social entrepreneurial work! Ever the process person, I have a few thoughts to share:
    (1) ‘Social Entrepreneur’ is one of those terms that seems to be often used and equally often misunderstood: hence the confusion that Hildy, you outline so well. Thus yes, some practical definitional clarity would be very helpful to provide guidance for those who would like to incorporate aspects of the social entrepreneurial spirit (wonderfully exemplified by Danielle) and approach into their work.
    (2) This definitional clarity – what does it really mean in practice – would be most effectively done by including those who currently consider themselves social entrepreneurs (as well as those who ‘think they might be’)! in the discussions
    (3) It is an important enough question that it would be great if this discussion could go beyond Twitter or blogs to a more ‘structured’ (or at least more inclusive of various ‘stakeholders’) venue.

  3. Hi Hildy,

    I consider myself an entrepreneur. My intent is better future, sooner. I’ve been called a social entrepreneur, a cleantech entreprneur and other and that’s fine but I still refer to myself as an entrepreneur because it is the way in which i pursue my intent.

    I’ve taken a few stabs at explaining/describing it… latest is here if you’re interested.

    http://igniter.com/post604

    Cheers,

    Michael

  4. Hi Hildy – I’m the founder and CEO of Care2.com (14 million member online community focused on making the world a better place), and I consider myself a “social entrepreneur”, so here are some thoughts on the topic:

    There really isn’t an ideal “label” for those of us using business to make the world a better place, but “social entrepreneur” seems to stick better than some other terms, so we’ll go with that. Care2 is also a B-Corporation (as in “For Benefit Corporation”) which is another label / certification that seems to work pretty well.

    While nonprofits play an important part in the “do good” ecosystem (and we work directly with over 500 fantastic organizations), C-corporations (and now B-Corporations) are better suited for some opportunities. In these situations, companies have a variety of advantages over nonprofit models in terms of raising money, creating incentives, allocating resources, attracting talent and creating sustainable models. There’s such an entrenched (yet incorrect) belief in some parts of society that Nonprofit=Good and For-profit=Bad that I think folks trying to use business to achieve social and environmental good have tried to find a new term to describe what we do (and of course “for profit” isn’t a good term either – “profit” is rarely the reason social entrepreneurs go into business… we’re here first and foremost because we want to make a positive impact on the world).

    Our Board talks about similar issues as other corporate boards, but because we’re a B-Corp, we also have the legal right to consider our non-financial constituents (such as employees, suppliers, local community, the environment, etc.)

    That said, our Board has it fairly easy, as Care2’s actual product is “goodness”…the more our members take action on social and environmental causes, the more we generate in advertising revenues… so our mission and margin are entirely aligned (unlike many companies where the product may not be so great for the world, but the company is run in as environmentally and socially responsible a way as possible).

    Could we have achieved all this as a nonprofit? Possibly, but I doubt it. Primarily because: 1) We were able to get funding early on that we probably wouldn’t have gotten had we gone to foundations or high net worth individuals as a nonprofit (though there’s still great skepticism among most investors that they can “do well while doing good”). 2) We’ve been able to hire employees and provide stock ownership incentives we couldn’t have as a nonprofit. 3) We’ve developed a discipline and self-reliance we probably wouldn’t have developed otherwise – for years we knew that no one was going to bail us out if we didn’t get profitable, so it forced us to figure out the business model that now makes us sustainable… which means we’re providing true value for our customers and we don’t need to go back to Funders to ask for more money. And 3) as a startup, there were many times where we had to significantly alter our course to evolve our model (something that many nonprofits find difficult to do given funding constraints).

    I look forward to the day where “entrepreneur” is synonymous with “for good”, but until we get there, “social entrepreneur” is a distinction that works for me!

  5. Randy, a great response and I’d echo many of the points you made.

    I’m the founder of STREAT (www.streat.com.au), a social enterprise in Australia that provides homeless youth aged 16-25 with a supported pathway from the street to a career in the hospitality industry.

    In 2009 the Australian Centre for Nonprofit Studies and Social Traders had a stab at defining social enterprise, and the answer works well for STREAT, and partially captures why as the organisation’s founder I call myself a social entrepreneur.
    Here’s their definition of a social enterprise, along with my response…
    a. Are led by an economic, social, cultural, or environmental mission for public or community benefit (STREAT’s mission is to provide homeless youth with independence and a future by providing social support and training and employment in the hospitality industry)
    b. Trade to fulfill their mission (our street cafes have the dual purpose of generating income (by competing in the open market) and also providing the site for training and employment of our youth)
    c. Derive a substantial portion of their income from trade (we’re aiming for full financial sustainability through our own earned income by the end of our third year of operating – we’re in year 1 and tracking pretty well against this goal (our second site opens this week so wish us luck!)
    d. Reinvest the majority of their profit/surplus in the fulfilment of their mission (we reinvest 100% of profit).

    My guess is that most non-profits could easily tick off point a, though many couldn’t tick off b, c, or d. Now of course there’s a bunch of non-profits who are earning some income, but this isn’t their main or only source of income and they will continue to rely heavily on other income sources to fulfil their missions (eg like government grants, philanthropic money, fundraising activities).

    On the other hand, most for-profits could easily tick off point b and c. Some would tick off a, and of course most would reinvest a percentage of their profit back into their business (point d), but most would distributing their profits back to the owners or shareholders of the business.

    But of course things aren’t quite this simplistic.
    – There isn’t strong agreement nationally – or internationally for that matter – about this overall definition of social enterprise. There are all sorts of hybrid orgs emerging across a spectrum that don’t neatly fit our definitions and often have government regulators scratching their heads too. For example, in Australia we don’t have separate classification and regulation of such enterprises like say the UK does with its Community Interest Companies (CIC) (Wikipedia has a pretty good definition at http://en.wikipedia.org/wiki/Community_interest_company ). And some people like Kim Alter at Virtue Ventures have spent years trying to define the broader landscape (you can check out their recently updated typology at http://www.virtueventures.com/node/75) but once again there isn’t consensus about this. There’s also lots of nuancing across country borders (I visited social enterprises in 7 countries across the planet before building STREAT and they all look pretty different)
    – There is often debate about point d, or how much money should be reinvested to qualify the entity as a social enterprise. What qualifies as ‘the majority of profit’? I’m pretty hardcore about this – I think it should 100%, particularly because in Australia social enterprises like STREAT can be classified as charities and hence get a heap of extra taxation concessions, along with access to philanthropic funding that for-profits aren’t eligible for. Many others would strongly disagree with me on this point. (OK, I might budge slightly on the percentages, but not much. I want the ‘majority of profit’ to be a ‘big majority’ and not say 51%.)

    So can you build a social enterprise without a social entrepreneur? Hmmm. Probably yes. Some large non-profits in Australia are building social enterprises as a good way to change lives all whilst generating income and diversifying their income streams . They’re great enterprises and I totally love what they’re doing. Some of these social enterprises are almost like non-profit spin-offs that have been largely funded from within the non-profit’s capital reserves ie, they’re funding part or all of the social enterprises off their current balance sheet. Hence there may not be the need for an entrepreneur but more need for good leaders or managers within these enterprises. (Or maybe this should be termed social intrapreneurship?)

    Building STREAT has been different to this. As the social entrepreneur of a brand new and independent social enterprise I’ve had to conceptualise STREAT and then get out there to find the money, people and support to build and run the organisation. The biggest difference is probably one of personal risk, particularly at the beginning of the process.

    A quick surf of Wikipedia tells me the following things about an entrepreneur…’a person who has possession of a new enterprise, venture or idea and assumes significant accountability for the inherent risks and the outcome…..Entrepreneurs choose a level of personal, professional or financial risk to pursue opportunity…..Entrepreneurs tend to identify a market opportunity and exploit it by organizing their resources effectively to accomplish an outcome that changes existing interactions within a given sector’.

    Like many entrepreneurs building their start-ups, I know of no social entrepreneurs building social enterprise start-ups who haven’t invested enormous amounts of time and personal money to realize their goals. Social entrepreneurs often personally risk a huge amount with the motivation of building social capital rather than capital. And certainly in Australia it can be harder to find social venture capital than venture capital. Recently I was speaking with a venture capitalist about funding and he said ‘we only invest if we can see that someone has serious skin in the game’. Most of the social entrepreneurs I know are pretty skinned!

    Anyway, enough musing. In summary, the old dichotomy of for-profit and non-profit doesn’t work any longer. Why? Because under these definitions I’m trying to build the most highly profitable non-profit I can.

    Doesn’t this create competing drivers and tensions within the business? Absolutely!

    Is it possible to resolve these tensions? Absolutely! Particularly with the right leadership (that’s hopefully where we social entrepreneurs fit in).

    Is it possible to achieve your mission under these conditions? Absolutely! Our first three young people left STREAT yesterday to start at a top Melbourne fine dining restaurant on Monday.

    That’s why my job as the social entrepreneur building STREAT seems to be one of the most risky, exhilarating, sleep-depriving, challenging, creative, nail-biting, complex and rewarding jobs on the planet.

    And I wouldn’t have it any other way.

  6. Great explanation of the challenges that all entrepreneurs face when legally structuring their project. Yet, the lack of a legal corporate for the entrepreneur who cares – does not constitute the definition of a social entrepreneur, but rather gets back to the question of ‘why not?” posted at the end of my last reply.

    The ‘Why Not?’ is because we allow for corporate law that bind entrepreneurs to operating in the fiscal interests of the shareholders (regardless of the environment, society or our culutures). That there isn’t a tax bracket or corporate structure that can perfectly accommodate an entrepreneur who seeks to innovate to solve social, cultural and ecological problems – and the reason why this is, is the problem itself.

  7. Hi Hildy,
    As always – a lot to think about. I generally describe social entrepreneurs as a group of people who are aiming to solve larger societal problems through a nonprofit organizational framework. I think of Partners in Health (solving disease in the developing world) or even Bat Kol (addressing equality in religion for religious Jewish lesbians) as two examples of social entpreneruship. The local child care for low-income women in Cambridge,MA, however, I would not classify the same way.

    I also wonder, as Bonnie did, how processes might be different between nonprofit organizations and social entrepreneur organizations. The answer to that might be telling.

    Lastly, I might move the conversation in a different direction (if I may):
    1. What if every nonprofit organization always connected its mission, communication, and activities to addressing larger social issues?
    2. What if every nonprofit organization in the same sector connected and worked together on that larger social issue?

    I think that then we would see the power of collaboration to create a different future on a global scale!

    Regards,
    Debra

  8. Wonderful wonderful responses, one and all – thank you.

    Here is what all this has me wondering, having devoured the responses here and across various social media, and having clicked through every link anyone has provided (and that’s no small feat!).

    Let’s assume for a moment that the purpose of social entrepreneurship is the end result rather than the “business / merchant / trade” means towards that end. For example, let’s say I am independently wealthy and do not need to find funding in any way for the enterprise I envision. (Bill Gates comes to mind, as do others.)

    Focusing now on the end result of such enterprise, to what extent are the visionary end results we associate with social entrepreneurship (the “why,” the purpose) sustained once the individual entrepreneur is no longer on the scene?

    Anyone have any data or stories to point to? Thanks, all, for keeping my mind perking on all this!
    HG

  9. Thanks for the great post Hildy!

    When I attended a MeetUp of the Social Entrepreneurs group in New Orleans about two years ago, I said I couldn’t see how their concept is different than Goodwill Industries. I’ve been involved with Goodwill for quite a while and we describe Goodwill as “A Business With A Social Purpose.”

    And Goodwill’s been doing it for over 90 years…

  10. Hildy,

    your questions are not new ones, and I’m afraid you will not find 100% consensus on what – exactly – a social enterprise is. Nonetheless, your posting of it has given me much pause for thought.

    Most of the people I would call social entrepreneurs, whom I know from around the world (ie, not just the US), are trying to make new kinds of good happen in the world, using a combination of revenue streams to feed the workforce. The legal forms they take span the range from Non-profit to share issuing companies, depending on local legislative frameworks and and a lot of venture specific factors.

    Social enterprise as I see it is about putting impact first, and using every kind of revenue stream you can develop or find (often in creative combination) to make that impact happen, within the local legal structures that are available to you.

    To make the right decision, I think you need to be really clear on what you want to do and where the income streams can come from to feed your workforce. Then look at the various structures available to see how they will treat those income streams. There is no right or wrong answer here, but there may be one best answer that can work for you.

    Hope this helps in some small way, and thanks for once again jarring my thoughts 🙂

    C

  11. Due to some technical difficulties with the blog, Ron was unable to post this – I’m posting it for him. I promise we’ll be fixing the back end of the blog soon, gang. Sorry!

    Hi Hildy,
    I agree with Christina and others here. To me, social entrepreneurship is about finding the best way to harness the resources at hand to make a positive impact on the world around us and there are many different organizational structures that can be used.

    Non-profit organizations and government organizations are two possible approaches but I believe that for-profit businesses have some unique benefits for doing social good. The great thing about for-profit ventures is that once they are income positive, they have the potential to scale fairly rapidly. So if the venture is designed so that it produces socially positive outcomes as an inherent part of its business model the venture can be used as a scalable platform to better the world around us.

    To me a social entrepreneur is someone that has the drive and passion to envision a better world and the determination to create an organization that is able to bring that vision to fruition regardless of the legal structure of that organization.

    -Ron

    Ron Clabo
    Founder and President
    http://www.GiftOasis.com

  12. I’m in my final semester in the MBA in Sustainable Enterprise program, aka The Green MBA, at Dominican University in San Rafael CA. We’re studying this topic at this very moment in my capstone class. There’s a great book – New Venture Creation, Timmons and Spinelli, 8th edition, specifically Chapter 7. It makes a comparison of several closely related models and spells out the differences far better than I could reiterate them for you here. But thank you for putting this question out there.

    -Alejandro Moreno
    Green MBA Candidate,
    Dominican University of CA
    April 2011

  13. Thanks for the heads-up, Alejandro. Will definitely check it out – it seems, from what little I’ve seen, that they are considered gurus in the field. So thanks again!
    HG