04 Feb 2008  Research & Ideas

Putting Entrepreneurship in the Social Sector

Despite the best of intentions and trillions of dollars worth of assets, nonprofits have been unable to solve many of society's worst ills. A new casebook by 4 Harvard Business School professors argues that the social sector should take an entrepreneurial approach. Q&A with coauthor Jane C. Wei-Skillern. Key concepts include:

  • Societal problems are increasingly large and complex, taxing the ability of nonprofit organizations to solve them.
  • A new model for the social sector based on entrepreneurship would allow organizations to create more value with their limited resources and tap additional resources not directly under their control.
  • MBA students are increasingly interested in courses and careers related to social enterprise.

 

The social sector is big business. In the United States alone some 1.5 million nonprofits and other social ventures have combined revenues of $700 billion and control assets valued at $2 trillion—a seemingly substantial arsenal to tackle problems in crucial areas such as education, poverty, and health care.

But the truth is that many of these efforts, despite best intentions, have not solved the issues they target, says Harvard Business School professor Jane Wei-Skillern. "Traditional approaches are still falling short, especially as the intensity and complexity of social problems has grown."

These persistent problems seem to demand new models and new ways of thinking to crack them, and in that spirit Wei-Skillern and her HBS colleagues James E. Austin, Herman B. "Dutch" Leonard, and Howard H. Stevenson wrote the recent casebook Entrepreneurship in the Social Sector.

An entrepreneurial approach, they say, allows social organizations not only to maximize value from limited resources, but also to leverage resources beyond the organization's direct control through a creation of networks. Case studies in the book include looks at Newman's Own, KaBOOM!, STRIVE, the National Campaign to Prevent Teen Pregnancy, and the September 11th Fund.

We asked Wei-Skillern to discuss the book and its practical applications for business leaders.

Sean Silverthorne: Why did you and your coauthors write this book? Who is your target audience?

Jane Wei-Skillern: We wanted to take the ideas from our MBA social entrepreneurship course, which has been taught at HBS for many years, beyond the walls of the HBS classroom. The book is geared toward students with whom we would not otherwise have the opportunity to engage directly, instructors who are currently teaching or have an interest in developing social entrepreneurship courses, and last but not least, practitioners themselves, who are seeking to achieve mission impact as effectively, efficiently, and sustainably as possible.

Q: What do you mean by social entrepreneurship?

A: We define social entrepreneurship as innovative, social value-creating activity that can occur within or across the nonprofit, government, or business sectors. While virtually all enterprises, commercial and social, generate social value, fundamental to this definition is that the drive for social entrepreneurship is primarily to create social value, rather than personal or shareholder wealth.

Our definition of social entrepreneurship extends beyond more narrow definitions of social entrepreneurship that simply apply business expertise and market-based skills to nonprofits. We believe that the opportunities and challenges in the field of social entrepreneurship require not only the creative combination and adaptation of social and commercial approaches, but also the development of new conceptual frameworks and strategies tailored specifically to social value creation.

A perfect example of this is network approaches, which we cover in one of the chapters in the book. A network approach requires leaders to focus not only on management challenges and opportunities at an organizational level, but also more broadly on how to mobilize resources both within and outside organizational and sectoral boundaries to create social value. Social entrepreneurs who have innovated using network approaches are in many ways ahead of the curve, even relative to leaders in other fields.

Q: Despite the growing magnitude of the social sector, many of the challenges these organizations hope to address continue to persist. What difference can social entrepreneurship make?

A: Without question, the social sector has contributed in significant ways to addressing major societal problems, yet traditional approaches are still falling short, especially as the intensity and complexity of social problems has grown.

Solving these problems is not just a matter of mobilizing more resources to the field, but also developing entirely new models and ways of achieving sustainable mission impact. This reality makes social entrepreneurship approaches that achieve better leverage on resources, enhance effectiveness through creative partnerships, and enable more sustainable social impact increasingly relevant.

Social entrepreneurs stay relentlessly focused on their missions and seek to continually innovate to achieve greater impact with the resources that they are able to mobilize.

Q: On the theme of alliances and networks, the book offers a case on the Guide Dogs for the Blind Association (GDBA), which you coauthored. What does this case tell social entrepreneurs about the power of cross-organization alliances and the difficulties in putting them together?

A: This case is a prime example of social entrepreneurship because it illustrates how a social entrepreneur [GDBA chief executive Geraldine Peacock] used an innovative network approach to achieve tremendous mission impact by mobilizing resources and building capacity beyond GDBA's immediate control.

The organization worked with other nonprofits, government agencies, and private sector groups as equals, to build a network of long-term, trust-based relationships to deliver on the mission.

A key lesson from this case is that successful networks depend upon a willingness among all participants to invest significant resources (not just financial), relinquish control, and share recognition with their partners to advance the mission, not their organizations.

Q: Social entrepreneurship isn't just for NGOs, nonprofits, and philanthropists. What is the opportunity for corporate social entrepreneurship?

A: My colleagues Jim Austin, Dutch Leonard, Ezequiel Reficco, and I have written a couple of chapters in other books on just this topic. Businesses can be powerful generators of social value because of their distinctive sets of competencies and resources.

A major challenge facing business leaders is how to enhance the effectiveness of their social responsibility initiatives while substantially improving overall organizational performance.

Social entrepreneurs stay relentlessly focused on their missions and seek to continually innovate.

This challenge cannot be overcome through incremental change in existing activities. Instead, it requires a fundamental transformation in the way that companies do business. It entails identifying new opportunities, creating new strategies, and establishing the structures and processes needed to pursue them. It is more powerful to envision this challenge as an entrepreneurial undertaking aimed at the innovative cogeneration of social and economic value.

Q: The field of social entrepreneurship is relatively new. Do you find an increasing thirst among students to make careers in this field?

A: Absolutely. MBA interest in the field has increased dramatically in recent years, and I expect that this trend will continue. More and more students in the United States and other countries are seeking to earn their MBAs with an eye toward building careers in this field. Even students who plan to go into the business sector upon graduation are increasingly aware that they will be engaged as leaders in the social sector at some point in their lives, whether as executives, board members, or philanthropists.

In either case, these students are not content to simply follow in the footsteps of previous generations of leaders. They have grand ambitions to change the world and know that social entrepreneurship is a path to doing so.

Q: What are you working on next?

A: In researching several of the cases on networks for my course and the casebook, I was struck by the tremendous potential for this approach to transform the effectiveness of the sector. Thus, my current research focuses on these networked nonprofits and on deepening our understanding of how to build such networks.

I am developing a series of additional cases on how investing in a range of strategic networks can be a powerful lever for nonprofits to achieve greater social impact. This research explores specifically how these trust-based networks that leverage local resources in innovative ways can be catalyzed and maintained. Through an examination of a range of network strategies, from funder networks to intraorganizational networks to grassroots networks, this research is aimed at identifying approaches for increasing mission impact through network building.

About the author

Sean Silverthorne is the editor of HBS Working Knowledge.