Busch: “Social contracts instead of hierarchical control are the future business model.”

The co-founder of Sandbox gave a talk at the open weekly Goldsmiths Social Entrepreneurship Society Social Innovation Speaker series on innovation communities and the power of collaboration.

Working now at the LSE Innovation Lab and having just finished his PHD in Social Entrepreneurship Christian Busch has always had a big focus on the international perspective of social innovation.

Busch presents social entrepreneurship as a golden mean or hybrid between social and financial value or as he puts it: “a combination of meaning and profit, of profit potential and social impact where you do well financially and good socially.”

In the future Busch hopes to see public policy become more engaged and comfortable with the idea of social enterprises over the next five years, by for example granting them the same tax breaks which charities enjoy at the moment.

One of his early projects was constructing living labs using locally contextualised communication in 15 different countries. This has turned into projects such as fighting corruption in Kenya using mobile phones, social media and peer2peer platforms sharing social capital by giving people access to the power of global peers and circumventing centralised governments.

This use of new methods against old models is a recurring theme in Busch’s work. As a teacher he often encounters the young people of the Y generation. Or the “why generation” as some call it. Facing a vastly different employment situation than their parents’ generation Busch emphasises that to have a purposeful career an entirely new business mind-set is needed.

Instead of looking at the hierarchy of needs coined by Maslow which focuses on the individual’s happiness increasing as they scale the pyramid alone, we need to look at ourselves and the communities around us as enlightened circles of needs which become stronger and more fulfilling the more they integrate with each other.

As Busch puts it: “Relation is the most important power in this new connected world.  If I help someone they help me back.”

In the old system there was often talk of someone either being a thought-leader or a do-leader, but now you have to be a bit of both as well as make sure you share your projects as widely as possible. You want the people who work with you to feel ownership of the projects, to feel as and become co-creators of the projects.

This integration of other people beyond the entrepreneur or founder herself has in the past often been a question of how much power they have been willing to give away. And that determined if the project became a movement or a network or relied on licensing, franchising and subsidiaries.

But simply giving away power does not create passion and Bush’s research into collaborative communities on both international and local levels clearly show that trust is one of the strongest driving forces behind great projects. You want to have complete and clear accountability among team members and users.

This is a core concept of success now, that you create a project around a context which other will want to represent, become champions of and share by word of mouth. In essence a social contract where people work with you not just because of the possibility of profit, but because they share your values and vision.

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Tim Jones on the changing role of roles

A RSA fellow, innovation facilitator and self-described “culture hustler”, gave a talk at the open weekly Goldsmiths Social Entrepreneurship Society Social Innovation Speaker series on how future employment might look and what working outside established professional Eco-systems can be like.

Tim Jones has spent over 20 years advising and instigating innovation in a variety of roles, something he admits can make it difficult to introduce yourself. With a lot of time spent in the arts and culture sectors, with a passion for socially engaged art, he often meets other professionals or aspiring youngsters in the same situation. He says: “in education they normally say you have to become the best at one specific thing, otherwise you won’t make enough of an impact to be remembered.”

Moving between the senior levels of management, academia and the frontline of new projects he has come to accept this lifestyle often requires being able to start anew every half year or so.  More than once Jones has had to witness a promising project stall, fail or never take off. And sometimes he has had to tell himself: “I’m going to give this project all my energy and intense focus for another four months. If that doesn’t work I’ll have to walk away.”

He compares it to racing a toboggan: “One it gets started you are going to have to race ahead on the chosen path. If you start slowing down or moving around too much you fall behind. And in the end there is no guarantee you won’t be overtaken and loose the race anyway.”

Jones shares his ideas and teaches in a variety of settings and often employs the fast paced PechaKucha method of presenting a slideshow of 20 slides with only 20 seconds for each. Among the advice he shared, a set of brief but powerful rules of thumb stood out if you want to work outside a defined role-set:

Kiss a lot of frogs – Many a time you will have to accept working many different projects not knowing which will turn out successful

Embrace expanding definitions – the world of the future will be constantly changing, so always make sure your projects are fluid enough to adapt to new developments

Drop the jargon – there is a language for experts and a language to use when dealing with the public, don’t mix them up in hopes of sounding smarter than is needed, it is more important to be understood properly

Use the white space – make sure to explore the areas between fields and communities, and keep an eye out for new spaces to branch out to

Start from where people already are – don’t waste resources trying to lure people into a new system, make it easy for people to find you. If you make videos put them on YouTube and share your events on Facebook

Always aim to scale – have a five-year plan in the back of your mind before you start something new

The Pareto principle; focus on the 20 percent that is essential – a beautiful restaurant with terrible food will never succeed

Share knowledge and empower people – people love to be engaged, take part and feel they gain something from working with you

Change people from part of the problem to part of the solution – ask your critics what can be done better and let them advise you on how to improve your projects

Focus on organisations and structure instead of projects – if you don’t have a proper structure in place you will never do more than one project, no matter how great the first one turns out to be

Interculturalism instead of multiculturalism – don’t just open a project up to a lot of different cultures, make sure they have a chance to blend and mix and share their strengths

Don’t fail the Photocopy test – be unique, if someone can google something just like your project in five seconds you’ve already lost

creativity essential retrain every four years – the future and especially the technology is changing faster and faster, be prepared to stay creative and retrain yourself and your team every four years to stay current.

Jones emphasises that discovering who you are in the world is not an easy task and much of your strength will come from your network. Making sure that you engage with the people around you on the personal (your team), peripersonal (your extended network) and extrapersonal (strangers) levels will be essential. As he concludes: “you will have to create own ecosystem.”

Eastmond: “Many people want to give more; they just want to ensure it is done right.”

Rebecca Eastmond gave a talk at the open weekly Goldsmiths Social Entrepreneurship Society Social Innovation Speaker series on the workings of effective philanthropy and donations.

As the managing Director of the Philanthropy Centre at JP Morgan works with a clientele of what can be described as the “super-wealthy.” And according to her they are incredible decent people.

It must be said that the 10 per cent of JP Morgan’s clientele whom Eastmond works with have come of their own volition, the centre works as an opt-in system. But as she recalls when she started in the philanthropy area, out of a 300 person survey 80 of their clients reported back with interest in not only donating, but donating more than they were already doing. On the condition though, that they wanted to make certain their donations were spent wisely.

This is in essence what the centre is all about; finding projects the clients feel give something back into the world, which leaves a legacy. Something Eastmond have long experience with, having managed a grant carried over from her previous work in the legal field where she spent evenings on human rights cases after working as a city lawyer during office hours.

She stresses that one of the criteria for a successful project is one which is rewarding for everyone involved.  One of the earliest projects of this type she was involved with was with Prince Charles. He had noticed that there were schools in the UK without any access to art for its students at all.

Together they raised funding to create a small team who sent artists from around the country to these schools to not only teach, but also get the staff at the school in touch with local artists to build a network which could continue after the project finished.

As she says: “Many people don’t realise that Prince Charles has been a social entrepreneur long before the term was invented. He would travel around the country, talk to the people, spot gaps and try to fix them.”

Three stories that have particularly impacted her have been examples of this kind of synergy of different groups or types of people.

One was an Italian addiction centre where the patients would help produce wine. So successfully they capped the profit of the wine branch of the centre to 40 per sent to ensure the focus would stay on the treatment of the patients. Patients who would first be declared cured after they could enjoy one and only one glass of their own wine with dinner.

In Greece she worked with a group of the elderly who survived a failing social safety net by skill sharing within their community. Former handymen traded homemade meals and similar. This idea has now been exported by Participle to other countries where the elderly are in risk of being left alone or without care.

And after bringing teams of domestic violence shelter workers together from around Europe a network of prices for best practise was set up. A system for sharing the best ideas and methods from otherwise often isolated organisations for the benefit of every member and patient.

Eastmond ended her talk about the giving sector on an optimistic note for the social entrepreneurship audience. According to her, a huge shift of resources, $41 trillion in the US alone, will increasingly move from the baby boomer generation to the millennials. In the sector this generation is referred to as the “Harry Potter kids”, she says, as they have “a bank vault of gold waiting for them to fight Voldemort with.”

A quick introduction to Social Entrepreneurship, Part 3

By Christian Jensen, MA Social Entrepreneurship, Goldsmiths University

What does a social enterprise aim to do?

The above description of what characterizes a social entrepreneur and social enterprise mentions the creation of social value and the change of existing paradigms in a more positive manner, but what constitutes positive is not well defined and will change depending on whichever political, national or personal ideas any given organization or entrepreneur believes in.

There is so far no governing body which compares different social values against each other in terms of importance, and to avoid bureaucratization this may be a good thing. However there are a number of projects which seem to be universally accepted as worth pursuing, such as the United Nation’s 8 Millennium development goals10:

  1.        Eradicate extreme poverty and hunger
  2.        Achieve universal primary education
  3.        Promote gender equality and empower women
  4.        Reduce child mortality
  5.        Improve maternal health
  6.        Combat HIV/AIDS, malaria and other diseases
  7.        Ensure environmental sustainability
  8.        Global partnership for development

A red thread shared by these goals and many social enterprises could be summed up as the prevention of current or future suffering and the promotion of human wellbeing. A visual overview of how this can be done is using Maslow’s Hierarchy (or Pyramid) of Needs11, see FIG. 2.

fig 2

FIG. 2: Maslow’s Hierarchy of Needs

While the initial theory proposed in 1953 has been developed upon further, it presents an intuitively easy representation of the problems which social enterprises can engage to increase human wellbeing.

The pyramid has five layers, each representing a level of human needs, each layer difficult to reach if you have not achieved the levels below it. They move from the basics of survival (food, shelter, safety) to the realization of one’s self (getting respect, accomplishing goals, achieving happiness in short).

In order starting from the bottom the five layers of needs are (1) physiological, (2) safety, (3) love and belonging, (4) esteem and (5) self-actualization. In addition to a quick explanation of each there will be an example of a social enterprise which deals with the challenges associated with that level, each taken from David Bornstein’s book How to change the World.
(1)    Physiological: The absolute basic human needs: food, clean water and air and shelter. These are the most important as without them survival becomes difficult or impossible.
Example:  Fabio Rosa aimed to improve the lives of farmers across Brazil by offering a system of rural electrification, meaning the farms would be connected to the national power grid and improve their efficiency thereby staying competitive and avoid closure.12
(2)    Safety: These include protection against the elements, violence (both large-scale such as war and personal such as domestic abuse), disease and poverty. Often a basic semi-societal structure is needed to provide jobs, medical attention and peace.
Example: Florence Nightingale from England started a revolution of the medical industry saving countless lives by improving nursing training, implementing scientific standardization and sharing of knowledge across hospitals.13
(3)    Love and belonging: At the third level the needs rise beyond the purely physical and concepts such as family, friendship, love and intimacy becomes prevalent.
Example: After witnessing the low standards of treatment which faced her disabled son in Hungary Erzsébet Szekeres fought heavy bureaucracy for decades to create the Alliance Industrial Union which provide proper housing, care and outreach possibilities for its patients.14
(4)    Esteem: Includes recognition, valuation, acceptance and respect, both for one-self and from others.
Example: In India Javed Abidi founded the Disability Rights Group to ensure that disabled people were promoted from an almost invisible, neglected part of society to enjoying the rights to employment and respect which he had found sorely lacking.15

(5)    Self-actualization: The ability to take charge of one’s own life and set personal goals. Without the previous four levels a person may lack the physical and psychological resources to do so. It should be noted that the idea of self-actualization is often either individual and can be shaped by the values one’s upbringing and those of the surrounding society such as the pursuit of fame, wealth, power or happiness; or ideals shared with or within a community such as national, cultural or humanitarian goals.
Example:  The organization College Summit in the United States, founded by J.B. Schramm was built on the simple premise that a lot of high school students from lower-income families and areas could attend college if only they had a support network where they had a chance to grow.16

It should of course be noted that generally any business approach would exist in the hierarchy as any business must provide value to its users and value generally exists because they solve a need, be it a supermarket which sells food and therefore solves physiological needs or the fashion industry which has convinced its consumers that their products will help them achieve respect or happiness therefore being a category 4 or 5.  This difference in value types will be explored further in chapter four.

Though Maslow didn’t use the pyramid structure himself, it is a fitting shape as more people in the world suffer from the problems in the lower layers and progressively fewer have reached the top. Another common metaphor, for example used by the Occupy Wall Street Movement and their 99% slogan17, is that the happiness and financial security of the upper layers are built and rests on the suffering and exploitation of the lower layers.

While that is a debate for another essay it is often recognized that the higher you are on the pyramid the greater your chance of being a happy, fulfilled human being. In extension any project which helps people move upwards can be categorized as a positive one. In her book Corporate Social Entrepreneurship: Integrity Within18, Christine A. Hemingway covers the relation between Maslow and Social Entrepreneurs more in depth and notes that the development of self and others often is a key part of either the enterprise or the entrepreneur herself.

Indeed if there exists a shared goal of the Social Entrepreneur community it could be to raise as many people as far up the pyramid as possible.

References

10. United Nations, Background description of the Millennium Goals: http://www.un.org/millenniumgoals/bkgd.shtml, Retrieved January 11th 2014

11. Maslow, A. H. 1953: A theory on human motivation (Classics in the history of psychology, http://psychclassics.yorku.ca/Maslow/motivation.htm,)  Retrieved January 11th 2014

12. Bornstein, David 2004: How to change the World Chapter 3 (Penguin Books)

13. Bornstein, David 2004: How to change the World Chapter 4 (Penguin Books)

14. Bornstein, David 2004: How to change the World Chapter 5 (Penguin Books)

15. Bornstein, David 2004: How to change the World Chapter 17 (Penguin Books)

16. Bornstein, David 2004: How to change the World Chapter 13 (Penguin Books)

17. We are the 99 percent http://wearethe99percent.tumblr.com/post/9289779051/we-are-the-99-percent,  Retrieved January 11th 2014

18. Hemingway , Christine A. 2013: Corporate Social Entrepreneurship, Chapter: Self-actualization and transcendence, integrity and the moral character. (Cambridge Press)

A Quick Introduction to Social Entrepreneurship, Part 2

By Christian Jensen

How does social entrepreneurship relate to various business models?

Joseph Schumpeter, an Austrian economist, was one of the first to try and define what he called the entrepreneurial spirit. He believed them to be the driving force of the market, pushing it ever forward and instigating change in their wake. If successful enough they would create “creative destruction” where old ideas when forced with the innovative powers of the entrepreneur either had to adapt or perish. Either way, entrepreneurs were literally the movers and shakers of the market.1

Peter Drucker, another economist from Austria, had a different point of view though. For him the entrepreneur was all about opportunity, a person with the foresight to spot where gaps in the market would form and the courage to take advantage of it. He would also highlight the difference between a businessman and an entrepreneur when it came to opportunity, the former repeating tried and tested business models while the latter would innovate, create new models.2

Gregory Dees takes inspiration from both in his description of what a Social Entrepreneur is, but takes it further3:

“Social entrepreneurs play the role of change agents in the social sector, by:

• Adopting a mission to create and sustain social value (not just private value),

• Recognizing and relentlessly pursuing new opportunities to serve that mission,

• Engaging in a process of continuous innovation, adaptation, and learning,

• Acting boldly without being limited by resources currently in hand, and

• Exhibiting a heightened sense of accountability to the constituencies served and for the outcomes created.”

But there is of course a difference between the person; the social entrepreneur and the business; the social enterprise. The Social Enterprise Typology by Kim Alter4 has a long list of definitions given by various institutions. To name a few:

The Non-profit Good Practice Guide: “A non-profit venture that combines the passion of a social mission with the discipline, innovation and determination commonly associated with for-profit businesses”

The UK-based Social Enterprise Coalition and the UK Government shares a definition: “A social enterprise is a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners.”

A red thread through these descriptions and many of similar definitions of Social Enterprises is the mix of the profit generating models and skillsets associated with more standard business world and the goals and values commonly attributed to the non-profit, third sector or charitable organisations. A grey zone of hybrid models and compromises between profit and purpose.

In FIG. 1 these two characteristics have been lined up moving from 0 per cent profit and 100 per cent purpose at the top to the reverse at the bottom. A line where Social Entrepreneurs often find themselves fairly solidly in the middle of.

fig 1

FIG. 1 Social value v independent revenue stream spectrum

For a better understanding of how different concepts rate on the spectrum a quick description of a handful of organizational models will be explored starting with activist movements and moving down through the ranks to the more standard business model of pure profit generation.

Social Activism:  

Activist movements, campaigns and voluntary action can have much in common with Social Entrepreneurship such as goals and values. But activism or movements does not always incorporate any business aspect or attempt to gather revenue. One difference which could be highlighted between activism and the other categories further down the spectrum is where entrepreneurs act proactively in creating new solutions; activism is often reactively done in response to social damage caused by other parties. Roger L. Martin & Sally Osberg have defined this relationship further in their article Social Entrepreneurship: The Case for Definition5:

” Instead of taking direct action, as the social entrepreneur would, the social activist attempts to create change through indirect action, by influencing others – governments, NGOs, consumers, workers, etc. – to take action. Social activists may or may not create ventures or organizations to advance the changes they seek. Successful activism can yield substantial improvements to existing systems and even result in a new equilibrium, but the strategic nature of the action is distinct in its emphasis on influence rather than on direct action.”

Charity:

A charity is commonly understood as an organization which is reliant on outside resources, be it philanthropic funders and public donations.  The legal aspects of how and what charities may spend these resources wary from legal system to legal system, but generally states all but a certain per cent used to cover expenses and salaries must be used to further a charitable agenda.

According to the UK charities act of 20066 a “charity” is defined as such:

Meaning of “charity”

For the purposes of the law of England and Wales, “charity” means an institution which is established for charitable purposes only

Meaning of “charitable purpose”

For the purposes of the law of England and Wales, a charitable purpose is a purpose which is for the public benefit

A purpose falls within this subsection if it falls within any of the following

descriptions of purposes—

(a) the prevention or relief of poverty;
(b) the advancement of education;
(c) the advancement of religion;
(d) the advancement of health or the saving of lives;
(e) the advancement of citizenship or community development;
(f) the advancement of the arts, culture, heritage or science;
(g) the advancement of amateur sport;
(h) the advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality and diversity;
(i) the advancement of environmental protection or improvement;
(j) the relief of those in need by reason of youth, age, ill-health, disability, financial hardship or other disadvantage;
(k) the advancement of animal welfare;
(l) the promotion of the efficiency of the armed forces of the Crown, or of the efficiency of the police, fire and rescue services or ambulance services.

Social Venture or Business:

Nobel Prize Laureate Muhammed Yunus is widely considered a pillar of the social enterprise community. He has created a series of “non-loss” businesses across a broad range of markets, the majority of which try to improve the lives of the impoverished and is famous for creating the Grameen Bank service which allows the poor to borrow small amounts, so-called “micro banking.” He himself though makes a distinction between social entrepreneurship and his own model which he explains in his book: Building Social Business: The New Kind of Capitalism that Serves Humanity’s Most Pressing Needs.7

The difference in his definition of a social business, often called social ventures elsewhere is where some businesses make a profit by doing good; a social business is the reverse, making revenue to be able to do good. As he states: “A social business is outside the profit-seeking world. Its goal is to solve a social problem using business methods.”

Company created for revenue for survivability:

A company created in balance with the surrounding business community and resource flow, i.e. which only produces enough revenue to cover its own expenses such as employee salaries.  Often started by entrepreneurs in order to become self-sufficient, be in charge of own working hours or move to an area more aligned with the entrepreneur’s personal values and interests.

Can also be the first plateau many entrepreneurial projects aim to arrive at before planning further expansion as explained by the Global Entrepreneurship Monitor.8

Pure profit generation:

The most commonly known and well understood category of businesses, with success determined by amount of profit generated for its stakeholders and the percentagewise growth of this revenue stream on a yearly basis. No particular social agenda stated and depending on the callousness of its employees may act ruthlessly or destructively in its endeavours. The worst of these examples could be referred to the businesses which revere the “profit is god” model or P.I.G.s.

Often supporters of and supported by the free market model of capitalism covered in depth in Geoff Mulgan’s book: “The Locust and the Bee: Predators and Creators in Capitalism’s Future.”9

Companies with projects that range across categories:

The real world is though almost never as clear black, white and grey as the above spectrum proposes. Many companies have several business strands each with a different task which could wary from each other on the spectrum. Depending on the legal definitions from country to country there also exists many sub- or dual categories which the spectrum does not account for. Some companies engage in charitable acts purely for tax purposes which mean there is a difference between social intent and social impact; some companies may well have one without the other.

The next two chapters will look at these in greater depth, first an attempt to explain what a social intent and social cause may be and then what a social impact may come from a business model, whether intentional or not.

References

  1. 1.       Schumpeter, Joseph 1975 : Capitalism, Socialism, and Democracy (New York: Harper)
  2. 2.       Drucker , Peter 1995: Innovation & Entrepreneurship (New York: Harper Business)
  3. Dees , Gregory 1998:  The Meaning of  Social Entrepreneurship (Stanford Business School)
  4. Alter, Kim Social enterprise typology http://www.4lenses.org/setypology Retrieved January 11th 2014
  5. Martin,  Roger L. & Sally Osberg 2007:  Social Entrepreneurship: The Case for Definition, Stanford Social Innovation Review, Spring edition
  6. UK Government Charities act 2006 http://www.legislation.gov.uk/ukpga/2006/50/resources Retrieved January 11th 2014
  7. Yunus, Muhammed 2011: Building Social Business: The New Kind of Capitalism that Serves Humanity’s Most Pressing Needs. (New York: Public Affairs Books)
  8. Global Entrepreneurship Monitor, 2012 Global Report http://www.gemconsortium.org/docs/2645/gem-2012-global-report Retrieved January 11th 2014
  9. Mulgan, Geoff 2013: The Locust and the Bee: Predators and Creators in Capitalism’s Future. Chapter 3, (Princeton: Princeton University Press,)

A quick introduction to Social Entrepreneurship, Part 1

Introduction

This article series will attempt to briefly sum up several Social Entrepreneurship terms and definitions in a simple structure which can be used by academics and businesspersons without prior knowledge of the topics alike.

Being a comparatively young concept there has yet to emerge a clear shared language of frameworks and theories among practitioners and researchers. Depending on professional or academic circles the terms may have different names and characteristics, if they are precisely coined or social entrepreneurship itself even known about. While this will most likely consolidate in the future as more time and research are devoted to it, for now there is often overlap or contradictions between theories.

This creates confusion both in- and outside the social entrepreneurship community, understandably since it can be difficult to define what social entrepreneurship is, business theory, social science or something third, and its academic theories touching on many subjects at once such as economics, sociology, politics and psychology to name a few.

This confusion can make it difficult for outsiders to understand or implement the ideas which Social Entrepreneurship offers. Even if a businessperson wishes to use or learn more, for example how their own business relates to a social enterprise model, the sometimes conflicting explanations or lack of a clear description can be a strong deterrent.

  • This article series will try to present a step-by-step explanation of Social Entrepreneurship and its relation to the classic idea of business. Afterwards it will then attempt to combine the definitions given by using three existing companies as examples on how different business models are categorized by Social Entrepreneurship.
  • The second part will define what Social Entrepreneurship is and the types of companies which can or cannot be called social enterprises. They will be categorized on a sliding scale of resources devoted to social causes versus profit generation, from charities to the more common definition of a company.
  • Thirdly  it will attempt to define the aspect of the problems which the social enterprises or companies state to attempt to solve. This will be set in the context of Maslow’s Hierarchy of Needs, ranging from the more basic issues of human survival such as disease and hunger to the realization of human potential such as education or civil liberties.
  • Fourthly it will explain the differences in efficiency of the stated goals on a scale ranging from patch solutions, i.e. temporary alleviation of detrimental effects to projects aiming to combat the root causes of problems.
  • Fifthly it will then define the different types of value created by each method, how directly it affects a given target or community and how one effect further create value in other, sometimes unexpected, areas. This last chapter will also explain how companies which have no stated social purpose can still create, or claim to create, social value.
  • Finally, as mentioned above, all these terms will then be demonstrated and explained in combination by categorizing and defining three different types of companies, their stated goals and the final value created by each.