Scaling Social Entrepreneurship

favorable Entrepreneurship Should Address the Large hearty Problems 53 VII- Scaling genial Entrepreneurship 58 VIII- The Conclusions 81 Foot n superstars 5 Many the great unwashed stimulated my thinking on affable entrepreneurship during my years at the non-profit foundation One laptop per Child (OLAP). Their ideas may non be fully allow in in this news. I would like to thank Giuliani Atomic, Marina Cortes, Chuck Kane, Walter Bender, and Miguel Brenner for their friendship, patient explanations and insights that enabled me to hopefully better understand fond problems and how favorable entrepreneurship discharge be applied to achieve solutions to much(prenominal) problems.Chuck also arranged for me to teach a course in accessible entrepreneurship each January in 2011-2015 at the MIT Sloan School of Management. Richard Bernstein of Greenberg Trauma should also be recognized for bringing me the opportunity to work for the first age In my career in the non-profit sector. As explained in the following Introduction, a single comment by Nicholas Negotiate led me to write this book. other comment from Nicholas may be the basis for my third book. Any errors in this book are wholly my responsibility.Many people encouraged me to write a book about OLAP. I elected not to do such a book and rather to more than gener exclusivelyy discuss the lessons I l make about how to scale a companionable entrepreneurship project. For more on the philosophy and history of OLAP I My best-loved OLAP picture. West Bank 2010 8 Introduction From September 2009 until April 2013 1 operated as the CUFF of One Laptop per Child Association. The mission of OLAP is to provide a modern education through a connected laptop to every child in the go bading sphere.Nicholas Negotiate, Seymour Paper and several other profs and staff at the MIT Media research lab founded OLAP in 2005. Nicholas was the co-founder of the oral famous MIT Media Lab and Seymour, his colleague at the Me dia Lab, was unitary of the leading authorities in the area of how to facilitate child learning through computers. When Nicholas founded the MIT Media Lab he adopted two principles that completed the culture of the organization 1. Demo or become 2. Do the impossible Demo or die basically determined the type of research that was desired.Rather than writing academic papers, students at the Media Lab were required to develop working prototypes, either physical working models or working computer code for computer-based solutions. Papers views on constructionist and constructivism in learning probably contributed to this approach. Alan Kay, another MIT faculty member of considerable distinction, may have also influenced this tenet. Do the Impossible defined the types of problems that were acceptable to work on and was based on the thinking of the legendary MIT professor Marvin Minsk.Students were encouraged to work on large, difficult problems where the technology for a solution did n ot already exist. This focalize on large problems is consistent with the concept in entrepreneurship to focus on large market opportunities, although at the Media Lab it was understood that the sponsors of the Media Lab would license and commercialism the new technology developed. This orientation toward large, difficult problems guide the philosophy and development of OLAP Loops mission is to provide a laptop to 1. Billion children in primary schools end-to-end the world. To achieve this end OLAP motiveed a solution that would scale on several dimensions. In maven of our occasional discussions said to Nicholas that OLAP, although it originated as a detonative non-profit, was a enormous example of kind entrepreneurship. Nicholas spo unrivaledd, social entrepreneurship does not scale. As was the case several times, Nicholas made a single statement that prompted me to go onward and think about an come forth-? manytimes for several years-? which returned in this book. Note N icholas view of the limitations of social entrepreneurship is based on a belief that to achieve scale in solving social problems an organization had to engage subject governments around the world. Such governments were much more likely to partner with non-profits that did not have the profit spring of an entrepreneur. Prior to OLAP I spent 30 years working in the private sector and cardinal of hose years I worked outside the U. S. I have worked in over forty countries, broadly speaking in Asia 10 and Latin America, and I lived in Peru and Indonesia.One advantage of spending so much time overseas is that I was able to first hand observe a countrys development over a significant accomplishment of time. With the exception of China, every country that I visited beginning in the 1 answer exhibited a significant improvement in the stock of living by the start of the 21 SST blow through the capitalist placement of free enterprise. The examples I would cite to demonstrate my point would include Mexico, Singapore, Korea,Taiwan, Peru and Thailand, all of which were very undeveloped countries in the early 1 sass and today are vibrant economies with a significant improvement in the standard of living. While stable governments, democracy and globalization were all lend f exerciseors in certain countries, see capitalist economy as the one common factor in the countries I cited and in many other countries. Based on my own experience I have great confidence in capitalist, profit companies as a way to improve peoples lives anywhere in the world and thereby address social needs.During the financial crisis of 2008 when the world stinting system purportedly came close to collapse, the issue of the morality of capitalism re- emerged as a popular topic and encouraged the growth of social entrepreneurship. account statement often paints capitalism as fundamentally amoral, lacking a moral system. Milton Friedmans now famous byword that the purpose of a corporation is to maximize shareholder returns did much to popularize the absence of morality in capitalism.However, to criticize capitalism for a lack of morality based on the egregious behavior of a few individuals is comparable to criticizing the social system of 11 government because of the behavior of Hitler or Stalin. It is the people pirating the social system that may be immoral and generally not the system itself. My belief that capitalism can behave morally and make a social contribution is in part based on the nine years spent working in Indonesia. Indonesia is one of the littleest countries in Asia with per capita income of $600 or about $2 per day during more or less of the time I lived there (1990-1999).With a lot of other people helping, I built a billion dollar retail company in seven years that purchased $700 trillion dollars a year in locally manufactured merchandise, created 20,000 new retail jobs, built out one million square feet of retail space ere year and was one of the lar gest private sector tax payers in the country. These activities had a positive social and sparing benefit beyond just our employees for thousands of other workers and their families in Indonesia. No socially motivated MONGO, multi-lateral bank or non-profit organization improved the number of lives we benefited operating a for-profit company.Perhaps further the Indonesian government affected more people than this private retail company. The point here is not to toot my horn but rather to show the positive impact in a poor country of a large, private, for-profit many with no explicit social mission. This confidence in the capitalist system instinctively makes me suspect of the need for the adjective social to modify entrepreneurship. (This may be similar to the think in microeconomics over whether utility needed the modifier marginal. Social to modify entrepreneurship implies that this form of entrepreneurship is 12 more focused on societal, economic and environmental problems tha n traditional entrepreneurship. Also implied is the idea that creating social regard as is better or preferred to merely creating economic encourage. Setting aside he problem of how one might measure social value, would question the premise that we even need a distinction for the social value component in social entrepreneurship, particularly given my experience in Indonesia.Despite my reluctance to acknowledge social as a meaningful distinction in entrepreneurship, I have organized this book on social entrepreneurship to develop the following themes Why social entrepreneurship emerged as a new subscriber line model, which includes an argument for how to combine capitalism and morality as an integrated approach (Chapter I-The Emergence of Social Entrepreneurship in he 21st Century) The governments defined purpose as the sole provider of public sizable has been relaxed, opening the door for the private sector to provide social services (Chapter II- Government and the Public Good ) The non-profit stool has influenced the development Of social entrepreneurship, resulting in social entrepreneurs erroneously electing non- profits status.Such an election restricts access to capital markets (in my experience) and deprives them of a key resource to scale their organizations 13 which we call society and the former state ought to provide merely a hay rotational entrepreneurship have made a significant contribution to addressing social problems worldwide. (Chapter VIII-The Conclusions) 15 Chapter I-The Emergence of Social Entrepreneurship in the 21 SST Century Many believe that social entrepreneurship emerged as an alternative form of entrepreneurship in the first decade of the 21st century because more and more people were turning away from tumid vexation in order to do good and save the world. While true for some individuals, I believe that four factors explain the emergence of social entrepreneurship 1. A Nobel prize for Muhammad Nuns . A transposition of the question of whether capitalism is moral 3.A wide spread recognition that government alone cannot solve social problems 4. The writings of C. K. Parallax and Clayton Christensen Muhammad Nuns and C. K. Parallax deserve much of the credit for the emergence of social entrepreneurship. The fact that Nuns is from Bangladesh and Parallax is from India is not a coincidence, but rather the basis for their more profound understanding of the dynamics of developing markets and their populations. Social entrepreneurship gained international hail when Muhammad Nuns on the Nobel Prize in 2006 for his micro-lending activities in Bangladesh. Providing loans to foster economic development for very poor people had never been done on a large scale prior to Nuns Grahame Bank.Grahame Bank is now one of the largest companies in the world using social entrepreneurship as its business model, with 16 annual revenues in 201 1 exceeding $170 million. Toms Shoes, to be discussed in Chapter V, may indeed be la rger, but I could not find any reliable information on annual revenues. The key factor to explain the supremacy Of the Nuns program was that poor people actually do repay their loans (despite life to the contrary by many). I learned the same lesson in Indonesia in the asses building a credit card program for customers that earned only $1000 per year. The economic crisis of 2007 re-opened the debate from the asses about the morality of capitalism and the discernments for renewed debate were the same.A period of high economic growth and significant wealth accumulation was followed by a period of major(ip) economic collapse. Such wide swings in the economy were perceived as the fault of the capitalists and their immoral behavior, as evidenced by all the average people whose lives were disrupted hen the economy crashed. Faced With such stern criticism and claims of immorality, a natural outgrowth was for everyone, including for-profit corporations, to act in ways that were more social ly responsible. One derivative idea was social entrepreneurship. Harvard Business School (HOBS) weighed in with several articles in take for of capitalism and social responsibility.After all why do we need a business school if capitalism is doomed to collapse under the weight of its immoral behavior? Michael Porter, the world-renowned strategy professor at the school, draw the situation after 2007 17 The capitalist system is under siege. In recent years business increasingly has been viewed as a major cause of social, environmental, and economic problems. Companies are widely perceived to be prospering at the expense of the broader community. porters solution is the concept of shared value, which he defines as creating economic value in a way that also creates value for society by addressing its needs and challenges He concept of shared value Recognizes that societal needs, not just conventional economic needs, define markets. It also recognizes that social harms or weaknesses fr equently rate internal costs for firms-?such as wasted aptitude or raw materials, costly accidents, and the need for remedial training to compensate for inadequacies in education. 1 A classic example of shared value is a company that should avoid polluting a river because the pollution kills the companys electric potential customers down river. If this example does not move you to reconsider the morality of capitalism, other professors at HOBS offered perhaps more persuasive arguments.Rebecca Henderson and Karachi Raman from HOBS produced a paper titled Managers and Market Capitalism. Long overdue, in my opinion, the authors introduce the need for morality in capitalism. The paper argues that businesses have a moral responsibility in addition to Milton Friedmans economic dictum to maximize shareholder returns. The authors argue that businesses have a moral 18 obligation to serve society by preserving free markets and capitalism and not just satisfy the self-interest of shareholde rs. Essentially if capitalism and free markets were to end, the shareholders would be harmed by a significant or total loss in the value of their shareholdings.Therefore, egregious behavior, such as the 2007 financial crisis, undermines the integrity of capitalism and ere markets and is therefore immoral. Although the authors did not extend the argument, I believe that they would agree that more socially responsible behavior by corporations fosters more confidence in capitalism and thereby benefits shareholders. Many argue implicitly or explicitly for the need for more social ventures, including social entrepreneurship, due to the lack Of a moral compass in for-profit ventures as a result of the underlying concept of self-interest. I believe that Henderson and Raman present a simple logic that shows for-profit managers a reason for moral behavior-?the reservation of the capitalist system.While it may not meet the standards of the Ten Commandments or other long-familiar moral systems , preserving the capitalist system does provide the basis to infuse capitalism with an easily understood morality-?act in ways which foster an appreciation and respect for capitalism by society. All but the most die-hard communist should see value in the argument. If not yet convinced about the role Of morality in capitalism, Herbert Simon, the 1978 Nobel Prize winner in economics offers support to introduce morality in capitalism. Simon developed the concept of bounded rationality sections can only be optimal and never maximized. bound rationality offers for-profit managers the 19 flexibility for considerable moral and socially beneficial behaviors to perpetuate the capitalist system. best decisions are by definition a matter of interpretation and not held to the more rigorous standard of minimization.