How does social entrepreneurship work?

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Five experts, five questions: question 2

In addition to established organizations, there are also individuals – such as social activists and social entrepreneurs – who are striving to develop innovative solutions. What do individuals need to consider when developing social innovations and projects, so that they can be effectively implemented and are socially accepted?

Tamara Ferreira Schmidt

It's essential to explain the difference between a nonprofit-oriented innovator and a social entrepreneur based on the motivation of financial return. While a nonprofit innovator usually has no intention of financial return, a social entrepreneur has no intention of making a profit but intends to cover running expenses and allows himself/herself a personal salary.

When a for-profit business finds a way to create value for a customer, it has generally found its source of revenue; the customer pays for the value. It's not true in the nonprofit sector. When a social entrepreneur finds a way to create value for a beneficiary, it has not identified its economic engine. That is a separate step. Clara Miller, CEO of the Nonprofit Finance Fund, talks about all nonprofits being in two "businesses" - one related to their program activities and the other related to raising charitable "subsidies". Therefore it's crucial to find a suitable funding model for the project.

William Landes Foster, Peter Kim and Barbara Christiansen mention these funding models as possibilities: "Heartfelt Connector", "Beneficiary Builder", and "Member Motivator" are models primarily funded by many individual donations. "Big Bettor" is mainly funded by a single person or a few individuals or foundations. "Public Provider", "Policy Innovator", and "Beneficiary Broker" are mainly funded by the government. "Resource Recycler" is supported largely by corporate funding. And "Market Maker" and "Local Nationalizer" have a mix of funders.

Raju Gurung

Social activists and entrepreneurs can act as agents to ignite positive shifts in areas of society currently neglected by the market. Social innovators would do well to heed the following recommendations.

  • Don’t try to run a for-profit social business like a non-profit business. A business exists to find a sustainable business model to deliver lasting impact.
  • Don’t dilute your focus by trying to build the perfect vision from the get-go. It’s very easy to make things complex, and it takes time to build credibility and brand. Engage in the customer development process and try to focus on the major need that has not been addressed – the need that will serve as the best entry point into the market.
  • Simply copy-pasting solutions from “the West” into developing markets has often failed. You need to design solutions around people and the local context in which you serve.

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Evans Quartey Hammond

The following are some key factors that individuals and organisations must consider and manage when developing sustainable social innovation projects: it is necessary to validate the project's social impact in order to determine the social transformation and the problem that the project seeks to address. It is critical to assess the project's economic sustainability by developing financial models which ensure economic survival in the future. Inter-sectoral collaboration is also important, because it introduces various actors to the initiative and facilitates their interactions with one another; scalability and replicability help to determine whether the initiative can be expanded and replicated in a different situation or environment.

Magdalena Parcheva

Consideration of several key points contributes to the successful development, implementation and adoption of social innovations.
First of all, the social problem or challenge to which the socially innovative solution is directed must be clearly and concretely defined, and alternatives for its solution must be outlined.
The second key point is to develop a prototype taking into account the nature of social innovation. In most cases, social innovations refer to new practices, methods, mechanisms and the prototype phase should offer an optimal combination of approaches, practices and measures and assess their social impact. If possible, develop different alternative scenarios.
The third important factor is the integration of representatives of various stakeholders in the process of creating and implementing social innovation: business representatives, workers, social partners, representatives of universities and research institutes, public authorities. Formation of commitment to the social problem, motivation for participation of various stakeholders, building trust between partners are prerequisites for success in developing and adopting social innovation.
Last but not least is the fourth component - ensuring sustainability: developing and proposing mechanisms and a plan for the inclusion of social innovation in the social model, which contributes both to the adoption of the new solution and to achieving sustainable social change through its implementation.

Ingo Steffgen

I believe that social innovation is almost always initiated by individuals. Established organisations will then use their impact to achieve scaling effects and to advance these ideas. As is the case for any business idea, the market will usually decide to what extent an idea is accepted. However, there are examples from the business sphere, such as the Apple iPhone or Red Bull, that show that ‘demand’ can also be generated. However, I do not suggest using great packaging or a marketing campaign to convince people of the quality of a social innovation. Social change has to be developed together with the target group, instead, using prototypes or products and services with minimal usability or viability. My recommendation is to start as small as possible, and then promote the social innovation in cooperation with those who are meant to benefit from the idea.

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