Building a Successful Social Venture

A Guide for Social Entrepreneurs

Eric Carlson, James Koch

• Publisher: Berrett-Koehler Publishers
• Year: 2018
• Edition: 1
• eBook ISBN:
  9781523095964
• Topic: Commerce
• Subtopic: Commerce Général

This is the first book on creating and running a social enterprise to combine theoretical discussions with current cases from around the world, filling a huge gap in the literature. It serves as an eminently practical blueprint for those who wish to build, sustain, and grow social ventures. Building a Successful Social Venture draws on Eric Carlson's and James Koch's pioneering work with the Global Social Benefit Institute, cofounded by Koch at Santa Clara University's Miller Center for Social Entrepreneurship. Since 2003, over 200 Silicon Valley executives have mentored more than 800 aspiring social entrepreneurs at the GSBI. It is this unparalleled real-world foundation that truly sets the book apart. Early versions of the book were used in both undergraduate and MBA classes.Part 1 of the book describes the assumptions that the GSBI model is based on: a bottom-up approach to social change, a focus on base-of-the-pyramid markets, and a specific approach to business planning developed by the GSBI. Part 2 presents the seven elements of the GSBI business planning process, and Part 3 lays out the keys to executing it. The book includes "Social Venture Snapshots" illustrating how different organizations have realized elements of the plan, as well as a wealth of checklists and exercises.Social ventures hold enormous promise to solve some of the world's most intractable problems. This book offers a tested framework for students, social entrepreneurs, and field researchers who wish to learn more about the application of business principles and theories of change for advancing social progress and creating a more just world.

Part I

Background

Part I of this book discusses the basics of a bottom-up approach, market-based discipline, and the logic of business planning—in other words, the main assumptions on which the rest of this book rests. We start by comparing top-down and bottom-up theories of social change and critique different measures of human well-being in the process. Then we shed some light on the market at the Base of the Pyramid and its many forms and features. We conclude by presenting a number of alternative paradigms for business planning, with special emphasis on the paradigm used throughout the majority of this book.

Chapter 1

Top-Down and Bottom-Up Theories of Social Progress

Pamela Hartigan began the 2012 Skoll World Forum with an eloquent recasting of a timeless nursery rhyme, lamenting our contemporary “Humpty Dumpty world.” In this world, “a good many of the king’s men are struggling to put Humpty back together again,” she said.¹ As you may recall, things do not quite work out for Mr. Dumpty.

Even so, Hartigan went on to herald a “phase of new thinking and experimentation” where a growing group of people “with imagination, commitment, persistence, and strong ethical fiber is working furiously to ensure that Humpty Dumpty’s model is transformed and replaced with pathways that achieve economic and social justice and arrest the destruction of our planet.” Far from leaving Humpty in a heap—or to the king’s men to fix—Hartigan urged the forum to “seize this hugely important opportunity” and concluded with a provocative question: “How do we rewire our systems, our practices, and our mindsets so our story reflects a greater convergence rather than fragmentation of effort?”

In other words, how do we harness “the global movement of outrage on the part of ordinary citizens against an increasingly unfair and unsustainable society” and join it with “practical, creative, and committed social entrepreneurs” so that Humpty Dumpty is not simply recast the same as he was? For Hartigan, succeeding in this way is to ensure that when “our collective story is told, it will be about depicting the time that occurred when human ingenuity, empathy, and integrity rises to dominance together to address unprecedented threats.”

Our world is awash in urgent environmental, human, and social challenges. Many of them—the scourge of global poverty, for instance—are interdependent, dynamic, and seemingly intractable. What we know about how to solve them is far from complete. Not only are these global challenges urgent, but their scale is also growing at rates that appear beyond the capacity of our institutions to adapt. Are governments, philanthropic groups, large companies, and the independent sector equipped for the job? Perhaps not as they are.

Conceptual Roots

The conceptual foundations for this book are rooted in contexts of deep global poverty—contexts where scale matters. In the fifty years from 1962 to 2013, the world population grew from 3.2 billion to 7.1 billion, on a growth trajectory to reach 9.2 billion by 2050.² Imagine our increasingly fragile planet tripling in population over the course of a single eighty-seven-year lifetime, from 1962 to 2050. Now visualize more than 95 percent of this growth concentrated in poor countries with accelerating rural to urban migrations. Imagine populations ballooning in cities like Beijing, Kolkata, and Mexico City, where millions of people are already choking in traffic congestion and air pollution, and where the combination of infrastructure and fiscal deficits renders governments incapable of meeting basic life-supporting necessities like safe water, sanitation, housing, education, and general public safety. In these contexts and others like them, the ability to develop solutions that can be replicated at scale is urgent.

Especially among refugees and youth trapped in generational poverty, it is little wonder that the world is experiencing unprecedented population migration from destitute rural areas to cities, and from the global south to the global north. Even so, the 2016 Social Progress Index, a major study of social well-being across 133 nations, illuminates what populations migrating in search of greater income opportunities will discover—namely, that geographic advantages in per capita income and human well-being are not synonymous. Just take a look at the United States. Ranked 5th in the world in GDP per capita, the United States ranks 27th out of 133 nations on the Social Progress Index for personal safety; 40th in access to basic knowledge, because too many kids are not in school; 36th in environmental quality due to greenhouse gas emissions, poor water quality, and threats to biodiversity; and 68th on health and wellness, despite outspending every nation in the world on its healthcare system.³ Over the past twenty-five years, U.S. gains in per capita income have become increasingly concentrated in the top 1 to 5 percent of the population. Median household incomes have stagnated, income inequality has grown, and the majority of citizens have not experienced improvements in quality of life. All of this contributes to nationalist instincts and pushback from citizens who see waves of immigrants as a source of downward pressure on working-class wages and competition for increasingly scarce opportunities to join the middle class.

In the United States, the poverty threshold for a family of four in 2015 was $24,257 per year, approximately $16.50 a day per person.⁴ In richer parts of the developing world, it is $4.00 a day per person. And, when purchasing power parity is taken into account, in extremely poor nations, it is $2.00 a day. At these income levels, the poor exist in a precarious state. Above these minimum thresholds, people may not appear in poverty counts, but they do not live in a world where, to paraphrase Nobel Prize–winning economist Amartya Sen, they have the freedom to make life choices that can significantly improve their hopes of a better future.⁵ With respect to the hope of achieving a middle-class standard of living, Thomas Piketty’s work on global capitalism has painted a pessimistic picture documenting unprecedented increases in income inequality and declining upward mobility over the last thirty years.⁶

Although in 2017 the eight richest people in the world owned more wealth than the 3.6 billion people in the bottom half of the world’s population,⁷ increasing wealth disparity is not unique to developing countries. The Pew Research Center finds income inequality in the United States at the highest level since 1928.⁸ After accounting for taxes and income transfers like social security, the United States is second only to Chile in terms of having the highest level of inequality in the world. Moreover, wealth inequality is even greater than income inequality. In 2013, the highest-earning one-fifth of U.S. families earned 59.1 percent of all income and held 88.9 percent of all wealth. Similarly, in China and India, inequality—as measured by the Gini coefficient (which measures the statistical distribution of incomes)—grew substantially between 1990 and 2015, from 0.45 to 0.51 in India and from 0.33 to 0.53 in China.⁹ A Gini coefficient of 0 indicates that citizens shared equally in national income, whereas a coefficient of 1.0 indicates perfect inequality, with one person receiving 100 percent of all income. As elsewhere, the inability of India and China to develop and sustain a rising middle class imperils future growth and social stability.

Figure 1.1 Social Progress Index

GDP growth alone does not ensure social progress or improved well-being of citizens—both of which often depend on the shifting priorities of governmental bodies. Reflecting Amartya Sen’s “development as freedom” philosophy, the Social Progress Imperative movement sees the world differently, as reflected in its Social Progress Index (SPI) in Figure 1.1. It posits a more complete assessment of national wealth—one that encompasses the capacity of a society to meet its citizens’ basic human needs, enhance and sustain the quality of their lives, and create the conditions for all individuals to reach their full potential.

While an in-depth examination of poverty is beyond the scope of this book, overall evidence of effective top-down solutions for fostering a more just world—be it in the form of government programs to alleviate poverty or trickle-down economic prosperity—is weak. We turn next to a brief examination of this evidence through a review of alternative approaches for eliminating poverty.

Comparing Approaches to Poverty Reduction

Since the end of World War II and the formation of the United Nations, several efforts have been mounted worldwide to help eliminate or reduce poverty. These efforts can be divided into five categories:

1. Government programs: National governments use tax revenues or subsidies and, in some instances, foreign aid to fund or operate programs

2. Philanthropy: Wealthy individuals create private foundations, charities raise money to fund or operate programs, and corporate social responsibility (CSR) funds support community initiatives

3. Multinational corporations: Large corporations use their resources and organization to enter and serve markets with unmet needs

4. The informal economy: A parallel system of economic exchange that, in some instances, uses illegal methods to address problems

5. Social ventures: Small organizations (both nonprofit and for-profit) focus on reducing poverty in a specific market segment

Figure 1.2 compares these five approaches to poverty reduction. We will now briefly review the first four poverty reduction approaches. The remainder of the chapter lays the foundation for the advantages of the fifth category, social ventures.

Government and Philanthropy

Although some consider government programs or aid and philanthropy to be distinct approaches to economic development, they are grouped together here because each is based on the assumption that, with adequate resources or external incentives, social systems can be changed from the outside. In the case of government, this perspective encompasses trickle-down theories of economic development, or the belief that macropolicy to stimulate economic growth will have trickle-down benefits to the well-being of those at the lowest rungs of society.¹⁰ In the case of global philanthropy, belief systems encompass a variety of meta-theories—each reflecting alternative models of what constitutes social progress and how best to achieve it in the minds of benefactors and their foundation entities. In either instance, critical resources needed for achieving social progress are externally controlled at higher institutional levels by the gatekeepers to public or private wealth.

Figure 1.2 Approaches to Poverty Reduction

Many economists and politicians, from J. K. Galbraith to Ross Perot and Bernie Sanders, have criticized trickle-down economics as an inefficient way to tackle urgent social needs. However, as with noteworthy success stories from the world of foundations, macropolicy can contribute to economic prosperity across economic strata. When the government invests directly in creating businesses (e.g., manufacturing in China) or accelerating the development of industry clusters in concentrated urban regions, it can have a substantial impact on economic development. For example, in China, the poverty level has dropped from around 80 percent under communism to around 40 percent under government-sponsored capitalism.¹¹ Similarly, where government acts to stimulate capital formation in emergent technologies (e.g., Defense Advanced Research Projects Agency [DARPA] and advances in computer networking in the United States), significant and widely shared economic benefits can result. Even so, about 14 percent of the U.S. population (about forty-six million people) still lives below the poverty level, and a poverty rate of 40 percent in China equates to five hundred million people.¹² In fact, the socialist approach to economic policy in Sweden fares no better when it comes to eliminating poverty, with 25 percent of Swedish citizens living in poverty.¹³

While targeted government programs and philanthropic initiatives to address poverty or other unmet social needs can fill the gaps in broad-based macropolicy, both are subject to a number of execution risks, including lack of accountability, failure to foster innovation, mindless pursuit of “scale” or size in the presence of inefficiency, economic waste via bureaucratic intermediaries, and the absence of impact measurement or evidence of a return on investment. Social entrepreneurship can ameliorate these risks. In its emphasis on human agency and the development ...

Table of contents

• Cover
• Title Page
• Copyright Page
• Contents
• Preface
• PART I BACKGROUND
• PART II MANAGING A SUSTAINABLE/SCALABLE SOCIAL BUSINESS
• PART III EXECUTION
• Notes
• Acknowledgments
• Index
• About the Authors