Complex Made Simple: Emerging social enterprise models: Insights and issues

The flowering of wealth-creating organizations with a development purpose—or what have come to be called social enterprises—has pushed academe to undertake programs to study this phenomenon and serve the education requirements of a new segment of innovators and change agents in society. At the Asian Institute of Management’s Asian Center for Entrepreneurship, the Master in Entrepreneurship for Social and Development Entrepreneurs (Mesodev) Program was set up in 2002 to provide a learning opportunity for this growing segment to master the art of managing multiple bottom lines toward contributing to a broader process of democratizing the market. Democratizing the market is about enabling the poor and marginalized sectors of society to become effective market players not only as beneficiaries, but as partners, managers and owners of these social enterprises. In the process of creating these spaces, the more conscious practitioners are creating new benchmarks for wealth creation and are transforming the market into an arena for pursuing sustainable development. A continuing study of significant social-enterprise cases in various countries in Asia is yielding many insights relevant to social entrepreneurs. Validated by the experience of running Mesodev as a real-time course among Filipino social entrepreneurs, the body of knowledge being created is building a case for social entrepreneurship as a distinct field in management education. Social enterprises come in many sizes and legal forms. They range from micro to large and may be cooperatives, foundations, associations or even for-profit corporations. But it is not the size and form that differentiate social enterprises from traditional business enterprises. Social enterprises may be differentiated from traditional business enterprises in three ways—in terms of primary stakeholders, primary objectives and enterprise philosophy. Social enterprises have multiple bottom lines, primarily serve the interests of marginalized sectors and have a distributive enterprise philosophy. In contrast, traditional business enterprises, or private enterprises, have a single bottom line, primarily serve the interests of proprietors or stockholders, and have an accumulative enterprise philosophy. There are different typologies or models of social enterprises. They manifest certain differences that need to be appreciated to inform the art of managing multiple bottom lines. There are at least four models of social enterprises that have been observed in Asia: empowerment, intermediation, social inclusion and resource mobilization models. They may be differentiated in terms of the following: • the nature of the primary stakeholders • the objectives vis á vis the primary stakeholders • the extent of participation of the primary stakeholders in the enterprise • the benefits derived by the primary stakeholders and the nature of the availment process; and • the relative importance given to enterprise profits There are important implications of this differentiation between social enterprises and traditional business enterprises, as well as these four types of social enterprise models, not only for social entrepreneurs but also for management educators or mentors of social entrepreneurs. One important implication is in the measurement of social enterprise outcomes. Empowerment, social inclusion and intermediation models, given their objectives of improving the state or quality of life of a specific set of marginalized sectors, need to identify or create proxy indicators for these outcomes. Where no simple proxy indicator is appropriate, development indexing is offered as an option. Another important implication is in the area of what achieving financial sustainability means. For empowerment and social-inclusion strategies, achieving financial sustainability may mean generating enough revenues just to sustain social-enterprise operations. But for intermediation and resource-mobilization strategies, enterprise profits need to be optimized. In the area of scaling up impact, resource mobilization and intermediation models usually need and face the problem of accessing financial capital to grow. Although multiple bottom lines are pursued, the trajectory of growth may be similar to private enterprises. The idea of venture-capital funds for social enterprises could assist them greatly in this regard. But for social inclusion and empowerment models, scaling up impact may not mean growing the enterprise in the same way as private enterprises. In this sense, it may not be appropriate for venture capital funds to support them. The success of empowerment and social-inclusion models usually attract other players who are interested in replicating their model in their context. With some social entrepreneurs of these successful models, a conscious effort is made by them to engage government and the corporate sector in replicating the model among other similarly situated stakeholders. This process of replication needs to be studied closely, as there have been both failure and success stories. An important innovation to address this is the idea of social franchising, which entails developing the capability of the original social enterprise to effectively assist the process of replication by becoming quality assurance consultants to government, the corporate sector or other players interested in the replication effort. ***** This is a summary of the paper to be presented at the Scholl Forum on Social Entrepreneurship from March 27-29, 2007, at Oxford, United Kingdom.  Marie Lisa M. Dacanay is Associate Professor at the Asian Institute of Management and part of the core faculty of the Asian Center for Entrepreneurship. She is Program Director and Guru of the Master in Entrepreneurship for Social and Development Entrepreneurs Program under AIM-ACE.

 

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