Filipe Santos

“Profit is not the main driver for a social entrepreneur.”

Inspired by role models such as Microsoft’s Bill Gates, social entrepreneurs are using their commercial skills and market-based incentives to tackle poverty, disease and environmental degradation. With government cutbacks touching every aspect of life, these socially-driven business leaders are set to play an increasingly important role.

Characteristics of today’s social entrepreneur

The common view of a social entrepreneur is a mix of Sir Richard Branson and Mother Teresa – commercial entrepreneurship combined with charity. The truth is more complex. At its best, social entrepreneurship is an organising process distinct from those in the business and social sectors. While social activists use political pressure to stop the negative impact of government and business, social entrepreneurs approach it from a different angle. They ask why people behave in a negative way, then look for market and/or community based incentives to encourage positive behaviour. On one level, their actions are no different to any commercial entrepreneur – pursuing opportunities for value creation through new business initiatives. The distinction is in their motivation. Whereas the main driver for commercial entrepreneurs is profit, their socially-minded counterparts want to improve society.

Creating a sustainable venture

What both types of entrepreneur have in common is the need to make ventures financially sustainable. Give money to a poor man and he can eat the next day – but what happens when the money is gone? Human beings cannot live off goodwill. Hence the concept of sustainable ‘microfinance lending’ pioneered by Muhammad Yunus in Bangladesh.

Lenders loan money to poor individuals so that they can create a small business. When that enterprise takes off, it generates returns to repay the loan and support the owner’s family and community in the long-term. Not only do the first of wave of beneficiaries improve their own lives, the money they give back to the lender is used to fund further loans. Creating a sustainable solution to a problem in society has become a hallmark of today’s social entrepreneurs.

Managing a growing enterprise

In the past, identifying problems and designing innovative solutions on a small scale was the typical approach of social enterprises. In the wake of the global fiscal crisis, the difficulty many entrepreneurs face is how to expand their operation to address the growth in numbers needing their help.

Over the past 200 years, management theories and powerful business tools in the areas of marketing, strategy and competitive advantage have helped entrepreneurs expand their commercial ventures. Growth within the social enterprise sector remains comparatively unknown territory. As the aftershocks of the economic turmoil continue to be felt around the world, rethinking management theory for social entrepreneurs is critical. Developing a set of powerful tools is necessary to enable the social enterprise sector to reach its full potential when society needs it most. It is for this reason that ISEAD’s Social Entrepreneurship Programme, launched in 2005, is promoting the leadership, organisation and business skills entrepreneurs require to manage a growing social enterprise.

To read the entire interview, download the corresponding Pictet Report.

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