![]()
Process and Management in Social Ventures![]()
7 The Process of Social Entrepreneurship
Objectives
After studying this chapter you will be able to
• identify and compare different models of the entrepreneurial process
• identify the four major components in the entrepreneurial process
• discuss the factors that contribute to opportunity identification for social entrepreneurs
• discuss some of the resource-acquisition strategies for social entrepreneurs
• discuss the activities involved in implementing the social entrepreneur’s idea
• discuss the role and importance of evaluation and feedback in fostering “continuous improvement” and goal achievement
Linking Vision and Process
When we talk about the “process of social entrepreneurship,” we are referring to the steps taken by social entrepreneurs to move from their initial idea through to its eventual implementation, as well as their evaluation of the results of their efforts. What stages does the social entrepreneur move through in the process, and what activities make up each stage?
In Chapter 3 we discussed the ways in which the social entrepreneur’s vision and mission are shaped. How do the vision and mission get “translated” into actions and processes? Figure 7.1 illustrates the stages an entrepreneur goes through to progress from his initial idea to the point of taking actions to address an unmet social need. Let us review these various steps leading up to the process of social entrepreneurship, which is the focal point of this chapter.
As we discussed in Chapter 3, the social entrepreneur’s vision is “the bridge that links the current situation to the envisioned future state.” In other words, the vision takes us from where we are to where we want to go. Within the context of social entrepreneurship, the vision focuses on the ideal state in which the unmet social need is resolved. The social venture’s mission emerges from the entrepreneur’s vision and articulates how the social venture will address the unmet social need. The mission is typically a relatively broad statement of purpose. Thus, the social entrepreneur also needs to develop specific goals to articulate how the venture will achieve its mission. Strategies are the means whereby the entrepreneur achieves his goals, and these strategies lead to action on the part of the entrepreneur and his various stakeholders. Finally, actions are organized into processes which will help the entrepreneur achieve his goals, fulfill his social venture’s mission, and realize his vision.
Figure 7.1 Getting from Vision to Process.
How does all this work in practice? Let’s look at a specific example. In Chapter 1 we started off with a case study on KaBOOM!, a nonprofit that helps communities organize to create playspaces for children. Founder Darrell Hammond’s vision was to “save play for America’s children” (www.kaboom.org). This vision was inspired by the death of two children who did not have a safe place to play. Seeking to harness the power of communities in addressing this unmet need, KaBOOM!’s mission is to
“create great playspaces through the participation and leadership of communities.”
KaBOOM!’s goal is as follows:
“Ultimately, we envision a place to play within walking distance of every child in America.”
As we saw in the KaBOOM! case study, Hammond employs a strategy of working with community residents, community organizations, and corporate volunteers. This strategy results in actions that include planning for, funding, and building neighborhood playgrounds. These actions have become standardized to create a process that has been replicated in 50 states to build over 2,000 playgrounds. Thus, by moving through the steps we have outlined in Figure 7.1, Hammond has been able to close the gap between his initial vision and purposeful actions directed toward solving an unmet social need.
Having traced the path from vision to process using our KaBoom! example, it is now time for us to focus on the components of entrepreneurial process while also examining a couple of the more well-known process models. A review of major textbooks and articles in the field of entrepreneurship suggests that process models typically include four distinct types of activities (Stevenson et al., 1989; Leach & Melicher, 2012): 1) opportunity identification, 2) securing the needed resources, 3) implementation or “resource exploitation,” and 4) evaluation and feedback. Different scholars have presented these components in various and expanded formats. Let us look at two of the more well-known “process” models, one of which has typically been applied to growth-oriented commercial ventures and the other that is specifically designed for nonprofits.
Figure 7.2 The Entrepreneurial Process.
Theoretical Models of the Entrepreneurial Process
The Life Cycle Model
One of the theoretical models that has been developed and applied to commercial ventures is the Life Cycle Model (Davidsson et al., 2006; Leach & Melicher, 2012; Timmons & Spinelli, 2004). This model is particularly appropriate for entrepreneurial ventures that start small but grow to significant size and scale.
Although researchers have proposed a number of different Life Cycle Models, the stages of the life cycle tend to fall into six major categories, as follows:
Development stage During the development stage, entrepreneurs identify their opportunity and “develop” their idea. They also begin the process of acquiring resources and developing strategies for implementation. This is the “thinking and planning” stage.
Startup stage During the startup stage, entrepreneurs actually launch their venture. This is the point at which entrepreneurs begin to implement and exploit the resources they have acquired and continue to acquire.
Figure 7.3 Life Cycle Model.
Survival stage During the survival stage, the new firm starts to generate revenues, but cash flow out still exceeds cash flow in. As its title implies, the survival stage is a critical time for the new venture, and the risk of failure is very high. Continued resource acquisition and effective implementation are particularly important during this stage. Consequently, evaluation and feedback are an essential part of keeping the new venture on track.
Rapid growth stage During the rapid growth stage, the entrepreneur’s idea has “taken hold,” and the firm begins to generate substantial revenues. It is during this stage that many entrepreneurial firms, such as Google and Facebook, “go public” by doing an initial public offering (IPO). As the firm grows, it may require additional resources in the form of talent and expertise, equipment, R&D, and financial capital. Implementation may involve expanding into new products, services, or geographical territories. In this sense, entrepreneurs need to maintain their ability to identify different types of opportunities that may lead to firm expansion and growth.
Maturity stage During the maturity stage, the growth rate in revenues slows as new competitors enter the market. In many instances, new products or services take the place of the products and services that the firm is offering. Think of the decline in personal computers when tablets were introduced. This trend is consistent with Schumpeter’s theme of “creative destruction”; new ideas will replace old ones. We often underestimate the importance of the maturity stage, however, because we assume that the entrepreneur’s story is coming to an end. In fact, however, the maturity stage may provide an opportunity for further evaluation and feedback, ultimately leading to new entrepreneurial initiatives. Thus, entrepreneurs often use the maturity stage as an opportunity to “reinvent” the company by introducing a dramatically new generation of products and/or services, as was the case in Apple Computer’s migration from PCs to iPods, iPhones, and iPads. In other instances, the entrepreneur uses the maturity stage to harvest value and invest in a new entrepreneurial venture. Within the context of our focus on social entrepreneurship, many entrepreneurs also use the maturity stage as a time to “give back” by engaging either directly or indirectly in social ventures. Microsoft cofounder Bill Gates, who together with his wife, Melinda, established the Bill and Melinda Gates Foundation, provides us with a powerful example of this desire on the part of highly successful commercial entrepreneurs to use some of their accumulated wealth for the purpose of addressing unmet social needs.
Joseph Schumpeter (1883–1950) and the Theme of “Creative Destruction”
Joseph Schumpeter was an Austrian economist whose work has had a profound effect on the field of entrepreneurship. He was the first to recognize the important effects of innovation and entrepreneurial firms on the economy and proposed a theory of “creative destruction” in his 1911 book The Theory of Economic Development. Creative destruction refers to the process whereby new innovations replace old ways of doing things, leading to a continuous cycle of economic birth and renewal.
Although the Life Cycle Model was developed to explain the behavior of commercial ventures, it can also be applied to social ventures, particularly those that are organized as for-profit entities. In the case of nonprofits or hybrids, although they may not necessarily generate revenues and profits like commercial firms do, they nevertheless need to acquire resources to support their ventures. These may come in the form of volunteer labor, space, or financial support generated by grants, donations, fund-raising events, or the like. Similarly, nonprofit organizations need to mobilize their resources and implement effectively to ensure that desired outcomes are met.
In the realm of social entrepreneurship, Newman’s Own (www.newmansown.com) provides us with an example of a hybrid social venture that has followed the Life Cycle Model. Actor Paul Newman started off with one product, salad dressing, which he initially gave away and eventually sold to friends and neighbors. The success of this initial product led Newman to launch his firm, which now produces and sells over 120 products stocked in major grocery chains throughout the United States. Consistent with Newman’s Own social mission, 100 percent of the profits from those sales go to fund other social ventures as well as Newman’s personal passion, the Hole in the Wall camps for seriously ill children (www.teamholeinthewall.org). Although the firm initially provided funding to U.S. camps only, they have now expanded globally and fund camps in other countries as well.
As a firm (or organization) moves through the various stages of the life cycle it faces different types of challenges and opportunities. For example, during the Development Stage, the entrepreneur’s task is to formulate his or her idea and identify the business model. The “business model” includes the revenue model, which we have already discussed, as well as a description of the venture’s value proposition, key resources, and key processes (Johnson et al., 2008). Organizations that are unable to achieve this goal will not survive. In the Startup Stage, the entrepreneur actually launches the firm and begins to test the business model. In this sense, he or she begins to put the acquired resources to work.
Obviously, not all firms go through every stage of the life cycle. New firms have a relatively high failure rate; approximately 50 percent fail within the first four years. In light of this, a firm can get “derailed” at any stage of the life cycle. As noted above, new firms and organizations are particularly vulnerable at the Survival Stage because that is the point at which cash flow out exceeds cash flow in. If the firm does not have a sufficient store of cash to get through this phase, or if it cannot raise sufficient funds externally, it will fail. Surprisingly enough, new firms also encounter difficulties in the Rapid Growth stage. If a firm does not have the right resources in place, it can easily encounter difficulties. For example, growing firms need a well-balanced management team with expertise in all of the major functional areas (accounting, finance, marketing, management). Similarly, growing firms need proper systems and controls to manage growth and track performance outcomes. These systems and controls are an essential part of the feedback and evaluation loop. Thus, if we think about the types of opportunities and challenges included in each of the Life Cycle stages, they are not all that different from those that would be encountered in a social venture, particularly a social venture that lends itself to scale. The Life Cycle Model also helps us to understand the entrepreneurial process from the perspective of many for-profit and hybrid social ventures.
The Nonprofit Model
The Life Cycle Model was developed specifically to fit the process for developing a commercial venture, although it can also be adapted to explain the development of nonprofit and hybrid ventures. In contrast, Helen Haugh (2007) developed a model for nonprof...
