Chapter 7: Social Entrepreneurship PDF

Chapter 7: Social Enterpreneurship Sustainable Business Management Introduction - Definition • In some companies shared/integrated value creation is part of their purpose from the beginning • These companies are founded to solve a social issue • Their business model aims for the company to be sel...

Chapter 7: Social Enterpreneurship Sustainable Business Management Introduction - Definition • In some companies shared/integrated value creation is part of their purpose from the beginning • These companies are founded to solve a social issue • Their business model aims for the company to be self-sustainable/profitable Sustainable Business Management Introduction - Definition • Fundamental difference between a social enterprise and an economic enterprise: • A social enterprise is founded with the purpose of creating social value and adapts its business model to be self-sustainable/profitable • An economic enterprise is founded with the purpose of creating economic value and adapts its business model to also deliver social value • Not all companies should become a social enterprise • A mix of both economic and social enterprises is needed to ensure innovation and stable employment • Social enterprise tend to have a local impact while economic enterprises can influence policies and standards Sustainable Business Management Introduction - Definition • The European Union has defined a social enterprise as an organisation that: • • • • Has a social mission: people or planet or both. Offers products or services to meet this mission. Gets a significant part of their earnings from their business. Reinvests the biggest part of the profits to realise its mission. • A social enterprise is not a legal form of business Sustainable Business Management Introduction – Social enterprise vs NGO vs CSR • Both social enterprises and NGOs want to create social value for society • However: • The biggest difference is the funding: NGOs will receive funding through others • A social enterprise will also create economic value to be able to sustain its business and invest in growing its business • Both social enterprises and CSR activities want to create social value for society • However, CSR is practised by companies that have the purpose to sell goods and services • Social enterpreneurship is a new mindset where the business model itself solves the social problems Sustainable Business Management Introduction – Race to the bottom vs race to fairness • A key concept in social enterpreneurship is the cost of fair trade • A social enterprise will always ensure a fair value chain • Therefor we need to define the race to the bottom and the race to fairness • Race to the bottom • • • • • The age of efficiency fuelled mass consumption It became cheaper to buy new things than to repair old ones This led to even more production, consumption and even cheaper products As a result the lifespan of a product declines and the utility as well This puts a strain on available resources and other planetary boundaries Sustainable Business Management Introduction – Race to the bottom vs race to fairness • Race to fairness • Shift from consumption maximisation to utility maximisation • The price of products should also internalise the utility and value of a product • This wil lead to higher prices but will also increase the lifespan of a product so the price becomes less of an expense and more of an investment • Creating a fair value chain comes with a cost • Fair prices need to be paid to all actors in the value chain • The whole value chain needs to be clean • This shift requires a mental shift from consumers who need to be willing to take into account the total value delivered by a product Sustainable Business Management Introduction – Challenges of Social Entrepreneurship • Social entrepreneurs face more challenges than economic entrepreneurs • A fair value chain is required • Value maximisation is a condition • The beneficiary is not always the customer 1. Social enterprises face a difficult market • The target population has limited buying power or the business climate is unstable • Usually there is a possibility for social enterprises because the traditional enterprises are not interested • Customers usually already have a (cheap) workaround to solve the social issue the social enterprise also wants to solve Sustainable Business Management Introduction – Challenges of Social Entrepreneurship 2. Social enterprises face competition • Usually, social enterprises offer products or services at a higher cost than the alternatives • Sometimes the current workaround is even free • A change in mindset is required to ensure that customers want to buy the more expensive, sustainable product • Social enterprises will have to be creative to cut costs to ensure that they can face this competition 3. Social enterprises have higher costs • The cost of fair trade • A good business model is required Sustainable Business Management Introduction – Challenges of Social Entrepreneurship 4. Social enterprises will have a harder time attracting investors • • • • For certain investors, creating social value will be a requirement Most investors are still looking for a financial ROI Finding start-up capital will be difficult Governments can subsidise social start-ups as they address social issues that governments are not always able to address 5. Social enterprises deal with a higher level of uncertainty • Social entrepreneurs often enter markets that have not been explored yet • The market and the social issues in these markets are often complex and nonobvious • Local expertise is a must to overcome this challenge Sustainable Business Management Social Innovation • Social enterprises come up with a new way of creating social value or fulfil existing needs in a fundamentally different way • Social innovation happens both in social enterprises (social entrepreneurship) as in economic enterprises (social intrapreneurship) Sustainable Business Management Social Innovation • Also in big companies, initiatives that fit the definition of social innovation, are launched • Human-capital intensive companies tend to hire high skilled employees who usually have the capacity to come up with great ideas • Companies with a strong brand will launch activities to protect their reputation • A shift in leaderships offers a fresh approach to the company that can result in (social) innovation • Social intrapreneurs also face different challenges • Traditional companies often see a trade-off between social and financial objectives • Internally their ideas might be seen as philanthropical while externally their ideas are seen as driven by profit • Social innovation is often seen as part of CSR or R&D Sustainable Business Management How to start a Social Enterprise • Starting a social enterprise has different pitfalls • The investments were too high • The target audience did not want the product or service • The socio-political environment was not ready • There is a better or cheaper alternative • The prerequisites were not managed well Sustainable Business Management How to start a Social Enterprise – 8 steps 1. Define the problem and the solution • What problem will be solved, who is the target audience? • Create personas to identify yourself with the target audience • Disqualifiers: criteria that disqualify your project no matter what the other features are. This could be and idea that needs equipment that is not easy to operate or easy to repair • Screen-in criteria: criteria that increase the attractiveness of a project. This could be and idea that can easily be tested on a small scale • Create an advisory board 2. Specify performance criteria • • • • How will the outcomes of the project be measured? Unit of social impact: how will the benefit be measured? Number of lives saved, children cured... Unit of revenue: what will the customers pay for? Items sold, hours of service delivered… Where will the funding come from? Sustainable Business Management How to start a Social Enterprise – 8 steps 3. Define and segment the target population • Define the target group and segment it if necessary according to location or other criteria • A pilot could be created based on this segment 4. Understand the beneficiary experience • Define the prerequisites that are necessary for the beneficiaries to actually use your product or service • Team up with local partners to make the prerequisites happen 5. Identify the most competitive alternative • Identify the alternative to decide whether this is a disqualifier or not • A much cheaper alternative makes it difficult to sell another product or service Sustainable Business Management How to start a Social Enterprise – 8 steps 6. Identify operation realities • Every business needs resources: tangible or intagible • The beneficiaries might need some skills so training could be needed • Create a list to have an overview of all costs 7. Address the inevitable sociopolitics • It is necessary to have a good knowledge of the rules and regulations in the markets a social enterprise will operate • Stakeholder management is very important 8. Write a concept statement • A summary of all previous steps with conclusions and decisions • Can be used to collect feedback and serve as input for the final decision non plausability of the idea Sustainable Business Management Business Models • Social enterprises need to ensure that they are self-sustainable or even profitable so they need to adapt their business models • A hybrid business model is required: “social enterprise” already contains both the business component and the social component • Co-value creation and collaboration are important • Sometimes consumers and producers are the same Sustainable Business Management Business Models – Social enterprises Sustainable Business Management Case: Billie Cup (p.214-215) • Would you use a deposit system like this? What are the pitfalls? • What type of social enterprise is Billie Cup? • What is the unit of impact and unit of revenue for Billie Cup? Sustainable Business Management Case: Beer4Nature (p.215-216) • What kind of social enterprise is Beer4Nature? • What is the unit of impact and unit of revenue for Beer4Nature? • Can you think of a solution for (one of) the challenges they face today? Sustainable Business Management