Strategies for social enterprises

posted December 23, 2013 at 12:01 am
by  Raymund B. Habaradas
Social entrepreneurs are a bold lot. As Bill Drayton, author of Leading Social Entrepreneurs Changing the World, puts it: “Social entrepreneurs are not content to give a fish or teach how to fish. They will not rest until they have revolutionized the fishing industry.” This quotation captures how these driven individuals have created social value through innovative ideas that often challenge conventions. Their vehicle for this is the social enterprise.

Filling a void

By blending a strong social mission with new business models, social enterprises are “filling a void” that traditional businesses, governments, and non-profit organizations could not adequately do (Austin, et. al., 2006). Some governments, for example, have not been able to deliver basic social services effectively because of weak governance and the lack of resources. Commercial enterprises, on the other hand, could not sufficiently provide some public goods, especially for individuals at the bottom-of-the-pyramid. Moreover, philanthropic efforts by big corporations have largely been fragmented due to a variety of causes individual firms support. Finally, many non-profit organizations could not quickly scale up their programs to benefit more communities due to their dependence on donations and grants.

British author Charles Leadbeater observed that many social enterprises are small and fragile, yet, there is “growing interest among policymakers, young people, entrepreneurs, funders, and established business” in this sector. This, he said, “is testimony to the way that social enterprise addresses weaknesses in the operation of both markets and government.” In the Philippines, we have seen the emergence of social enterprises over the past decade. Credit partly goes to Gawad Kalinga, which played a huge role in jump-starting several social enterprises through its GK Enchanted Farm in Angat, Bulacan.

Overcoming unique challenges

For these social enterprises to succeed, however, they must overcome unique challenges resulting from having dual objectives (i.e. economic and social). For-profit social enterprises, in particular, must adopt and implement appropriate business strategies to keep themselves viable. However, existing business-strategy models and frameworks are based on assumptions that do not consider the special circumstances of for-profit social enterprises. The first assumption, eloquently articulated by Nobel Prize winner Milton Friedman, is that the primary goal of business is to generate maximum profit for its owners. The second assumption, as exemplified by Michael Porter’s competitive strategy, is that doing business is a largely zero-sum game, i.e. one player’s gain can be made at the expense of another player’s loss. These assumptions run counter to the raison d’etre of social enterprises, which seek to balance, if not reconcile, the interests of multiple stakeholders.

Fortunately, social enterprises can adopt alternative (i.e., collaborative and creative) strategies that do not attempt to ‘kill’ or ‘eliminate’ competition but that, instead, promote the common good. Among the more successful social enterprises in the Philippines seem to follow this path.

ECHOstore, for example, has been collaborating with government agencies, NGOs and other businesses to support the livelihood of community and women’s groups through market access. As stated in its Web site, ECHOstore “has worked with 82 organizations and foundations, impacting 8,000 households with over 34,000 beneficiaries. In addition, over 90 percent of the store’s community suppliers and women-led businesses.” Through the ECHOsi Foundation, the founders of ECHOstore (Chit Juan, Jeannie Javelosa, and Reena Francisco) have helped these community groups come up with new designs and product innovations that could be sold to the upscale retail market.

Documenting business models

At the DLSU Center for Business Research and Development, which I currently serve as director, one of our priorities is to understand the dynamics of social entrepreneurship. With some support from the DLSU Angelo King Institute, my research associate Patrick Aure and I have started documenting the business models of select Philippine social enterprises and the strategies they have adopted to achieve both their economic and social objectives. Among the questions we seek to answer are the following: How do for-profit social enterprises deal with the tensions that arise in their attempt to either balance or reconcile these seemingly conflicting objectives? What are the circumstances that allow for the ‘reconciling’ of these dual objectives? Have for-profit social enterprises ‘migrated’ from competitive strategy to more collaborative and creative strategies?

We also recognize the need to develop metrics for ‘social performance’ that will allow social enterprises to gauge the effectiveness of the strategies that they implement. While the measures of financial performance (e.g. profitability, liquidity, solvency, turnover, etc.) are taken for granted, the debate on what constitutes acceptable and practical measures of social performance is far from settled. This is another knowledge gap that we intend to address.

Over the next few months, we will focus our efforts on getting the cooperation of social enterprises throughout the country and on generating support from generous funding institutions, as we work on the succeeding phases of this research undertaking. We plan to come up with detailed case descriptions of business models and innovative practices that have emerged from the attempts of social entrepreneurs to keep their businesses viable even as they strive to remain true to their mission of ‘changing the world’.

Raymund B. Habaradas is an associate professor at the Management and Organization Department of De La Salle University, where he teaches Management Principles, Management of Organizations, and Management Research. He welcomes comments at [email protected]

The views expressed above are the author’s and do not necessarily reflect the official position of DLSU, its faculty, and its administrators.

 

 

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