Tuesday, September 23, 2008

"Double-Social" Entrepreneurship

You all know the saying -- give a man a fish, he lives a day; teach him how to fish, and he lives a lifetime. There is certainly profound truth in this -- that imparting knowledge does more to improve lives than charity -- and I am not knocking it. The world needs more of both.

But reality is a bit more complicated. First, teaching someone fishing can be time-intensive and difficult to scale, unless one invents a better teaching methodology. Second, if fishing requires the use of a fishing equipment, then knowing how to fish is not enough -- you have to get the fishing equipment as well, which may be costly, especially if someone owns the intellectual property behind it and can charge a monopoly price.

What I am getting at is that doing good is not just a matter of good intention, it requires a good understanding of the role of innovation and scalable business model. This brings me to the concept of social entrepreneurship. Or, shall I say, the common misconception of what social entrepreneurship is about.

Social entrepreneurship has become a big buzzword these days, but like all buzzwords, its meaning has become vague and (as I will argue) potentially misleading. Generally, the term has been used to mean entrepreneurial activities directed at addressing some social problem (doing good), instead of making money for the entrepreneurs (doing well). In this sense, some have equated social enterprise with non-profit organization. There are some who believe that one can do good while doing well at the same time, and distinguish social entrepreneurship as having this characteristic, vs. the traditional non-profits that can do good but cannot do well, and thus need to rely on charity to fund its do-good activities. There are of course further distinctions -- some use the term to mean only a venture that can do good and do well at the same time, while others would include a venture that makes money in some conventional profit making activities and use the profit to subsidize its social (non-money making) activities. Regardless, most people seem to agree that the label "social" in social entrepreneurship refers to the intention of the venture -- trying to do good.

While this definition of social entrepreneurship (let's call it SE1) is certainly useful in highlighting its difference from conventional, purely profit-seeking venture in terms of its goal, it is in another sense not very helpful at all, because it doesn't tell us how social entrepreneurship actually differs from conventional entrepreneurship in terms of its entrepreneurial process.

I would like to argue that there is actually another meaning of social entrepreneurship that focuses on the process, not the goal. In this interpretation (let's call it SE2), social entrepreneurship is about a process of entrepreneuring that essentially socialize the core innovation or knowledge asset, versus conventional entrepreneuring, which emphasizes keeping one's core innovation or knowledge asset proprietary or private. In other words, in social entrepreneurship, the entrepreneur creates a new innovation or knowledge-asset, then allows (indeed, encourages or empowers) others to replicate it, whereas the conventional entrepreneurial model would have the entrepreneur trying to protect its innovation (e.g. seeking intellectual property rights protection with the aim to prevent others from imitating it).

The open-source model is essentially an example of social entrepreneurial model in the SE2 sense. Another example is the Wikipedia model. What makes the open-source and Wiki models powerful is that it encourages not only others to use its innovation, but also to contribute their own innovation or content which in turn is freely distributed. In other words, an SE2 entrepreneurial model unleashes and multiplies many more entrepreneurial contributions. Now, the open-source or Wiki model does not actually do away with the concept of intellectual property rights -- it just defines it differently from the conventional proprietary right, and involves a different form of licensing. It also involves a different entrepreneurial process or model for managing future innovations on top of the prior innovation, one that is social in nature (community of volunteer coders, user contents aggregation).

In my view , the really powerful social entrepreneurial ventures are therefore those that not only seek to achieve social goals (SE1), but also do it with a socialistic innovation process (SE2). If I may come back to the fishing analogy -- a social program to get volunteers to teach people how to fish and a chairty program to dole out fish both have social goals (SE1), and the former is certainly better than the latter. But even better would be an entrepreneur that invents a better way to fish that dramatically reduces the cost of the fishing equipment compared to existing technologies , then gives his or her invention away to the people to not only encourage them to use it (at the much lower cost compared to existing technology), but also to make their own improvement, and to have such improvements freely diffused as well. An alternative example would be an entrepreneur that invents a more scalable model to teach fishing, such that people who learn how to fish can easily (and are motivated/obligated to) become teachers of others.

There are actually a growing number of examples of such "double-social" entrepreneurship emerging in the developing world. One of the best examples I know is that of the Aravind Eye-Hospital in India, well documented in C.K. Prahalad's book, The fortune at the Bottom of the Pyramid. In essence, Aravind not only pioneered an innovative product technology (low-cost lens) and an innovative process technology (low-cost eye-surgery process), but literally make them available to a vast number of poor patients who could not otherwise afford it, using a business model that charges a small margin on more well-off patients to cover patients who cannot pay at all, or very little. The Aravind hospital system includes innovating a highly scalable model for training village girls to become effective nurses that handle most of the work conventionally done by doctors and surgeons, leaving the latter to concentrate only on work that truly require their critical skills.

The world needs more entrepreneurs with social goals. But what is truly in short supply are the double-soical entrepreneurs who have the vision and innovative know-how to create a venture that combines social entrepreneurial processes and social goals.


Chin Yong said...

Very interesting and well written. For SE2, and if there is such an idea, would the local VC invest into it? Given that our Universities and authority seems to place great effort in intellectual properties and patents?

And considering the long term effects of SE2 as an enterprise. The process is open and will it means that it can be easily duplicated?

Connect-the-dots@Singapore said...

On your first question, actually many of the SE2 ventures were funded through contributions by the user community or by philanthropic organizations. Take for example, Wikipedia, or Firefox. Because the entrepreneur is not out to make money for himself, people who share his cause is likely to contribute effort or money. Over time, if and when the innovation has taken off, some commercial companies may start to contribute to become part of the community providing value adding services on top of the innovation (take for example what happens to Linux).

On your second question, because its goal is to make social impact, the more the idea is being duplicated by others the wider is the impact, which is what the entrepreneur actually wants. So the true SE2 entrepreneur is not concerned so long as his idea is being duplicated to achieve the same social goal, and not for a different, money making purpose.

To ensure that his inventive idea is truly being spread to achieve his social goal, and not misappropriated, the SE2 entrepreneur will typically still establish his property rights (whether patents, brand name (trade-mark), or copyright), but adopts a licensing policy that encourages others to use it at low or no cost, provided that it is for the intended social, not-for-profit purpose, and/or provided that they acknowledge him/his venture as the owner and source of the IP. This in essence is part of the Creative Commons IP framework. In the case of open-source, the license may also stipulate that new improvements contributed by the users will also be distributed on the same term.

viduka said...

and to further the Firefox example -- they started off with philanthropic funding but make tonnes of money now from the Google search clicks.. or at least Mozilla Corp makes tonnes.. so there you have a great example of the innovation taking off and money coming in later.

wong keat wai said...

I was wondering, how sustainable are these projects if they are not making any profits? Surely, there is a need to make some profits so that the money earn can be reinvested back to the projects to fund expansion programmes, etc-etc; otherwise, they will forever be dependant upon contributions from philanthropic organizations.

What if monies from these organizations dries up?

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