From Ideas to Social From Ideas to Social EnterpriseEnterprise

From Ideas to Social From Ideas to Social EnterpriseEnterprise

ABDM4233 ENTREPRENEURSHIPABDM4233 ENTREPRENEURSHIP

byStephen Ong

Principal Lecturer (Specialist)Visiting Professor, Shenzhen University

1 - 2

Social Social EntrepreneurshipEntrepreneurship

2 - 3

Grameen : Empowering Grameen : Empowering People. Changing Lives.People. Changing Lives.

His observations in a village in 1974: His observations in a village in 1974: Craftspeople were skilled, but returns to those Craftspeople were skilled, but returns to those skills were limited by credit availabilityskills were limited by credit availability

The opportunity he saw: Micro-loans, with no The opportunity he saw: Micro-loans, with no collateral and low interest. This would boost the collateral and low interest. This would boost the return to craftspeoplereturn to craftspeople

The results: Very high loan repayment; Creation The results: Very high loan repayment; Creation of the Grameen Bank; Nationwide adoptionof the Grameen Bank; Nationwide adoption

The recognition: Professor Yunus won the 2006 The recognition: Professor Yunus won the 2006 Nobel Peace Prize.Nobel Peace Prize.

Grameen is a famous model of Grameen is a famous model of SOCIAL SOCIAL ENTREPRENEURSHIP (“SE”)ENTREPRENEURSHIP (“SE”)

2- 4

Persistent Persistent SESE concepts concepts

SE addresses social problems or needs SE addresses social problems or needs not met by private markets or governmentnot met by private markets or government Innovative solutions, unmet needs, private Innovative solutions, unmet needs, private

actionaction SE is motivated primarily by social benefitSE is motivated primarily by social benefit

Social mission + entrepreneurial behaviorSocial mission + entrepreneurial behavior SE generally works with market forcesSE generally works with market forces

Combining social purpose with financial Combining social purpose with financial sustainabilitysustainability

2 - 5

Process steps in Process steps in entrepreneurship (1)entrepreneurship (1)

Social entrepreneurs recognize Social entrepreneurs recognize opportunities to create social valueopportunities to create social value Seeing opportunity where others see only Seeing opportunity where others see only

threats and tragediesthreats and tragedies Addressing present or latent demandAddressing present or latent demand

Opportunity leads an enterprise Opportunity leads an enterprise conceptconcept Identify new products or marketsIdentify new products or markets Identify and define desired social rewards Identify and define desired social rewards

and how they are to be measuredand how they are to be measured

2- 6

Process steps in Process steps in entrepreneurship (2)entrepreneurship (2)

Resource needs are determined and Resource needs are determined and necessary resources acquirednecessary resources acquired Financial resources, human resources Financial resources, human resources

(labour), and human capital (expertise)(labour), and human capital (expertise) Launch and grow the social ventureLaunch and grow the social venture

Follow a strategy tied to metrics of Follow a strategy tied to metrics of successsuccess

Goal attainment and beyondGoal attainment and beyond What to do after success is attainedWhat to do after success is attained

Shut down, redefine service, continue, or Shut down, redefine service, continue, or mergemerge

Figure 1.1 portrays this processFigure 1.1 portrays this process

2- 7

Figure 1.1 The process of Social Figure 1.1 The process of Social EntrepreneurshipEntrepreneurship

Opportunity recognition• Social problems• Unmet needs

Concept development• Identification of social

rewards• New products or markets

Resource determination and acquisition• Financial resources• Human resources• Human capital

Launch and venture growth• Measurement of returns• Expansion and change

Goal attainment• Succeed in mission and shut down• Succeed in mission and find new

opportunity• Attain a stable service equilibrium• Integrate into another venture

Opportunity recognition• Social problems• Unmet needs

Concept development• Identification of social

rewards• New products or markets

Resource determination and acquisition• Financial resources• Human resources• Human capital

Launch and venture growth• Measurement of returns• Expansion and change

Goal attainment• Succeed in mission and shut down• Succeed in mission and find new

opportunity• Attain a stable service equilibrium• Integrate into another venture

2 - 8

The landscape of SEThe landscape of SE

Significant growth of the nonprofit Significant growth of the nonprofit sectorsector 3% annual growth in number of nonprofits 3% annual growth in number of nonprofits

from 1996 to 2004from 1996 to 2004 Growth is higher in public charities and Growth is higher in public charities and

private foundations than for nonprofits in private foundations than for nonprofits in generalgeneral

Figure 1.2 portrays this growthFigure 1.2 portrays this growth

2 - 9

Figure 1.2 Social Venture Growth Figure 1.2 Social Venture Growth 1996 - 20041996 - 2004

3%

6%

7%

0%

1%

2%

3%

4%

5%

6%

7%

8%

All nonprofits Public charities Private foundations

Av

era

ge

an

nu

al g

row

th r

ate

, 19

96

-20

04

2 - 10

Categories of social Categories of social venture/SEventure/SE

1.1. Start a new product or serviceStart a new product or service2.2. Expand an existing product or serviceExpand an existing product or service3.3. Expand an existing activity for a new group Expand an existing activity for a new group

of peopleof people4.4. Expand an existing activity to a new Expand an existing activity to a new

geographic areageographic area5.5. Acquire an existing businessAcquire an existing business6.6. Partner or merge with an existing businessPartner or merge with an existing business

Source: Brinckerhoff, Peter C. (2000). Social Entrepreneurship: The Arts of Mission-Based Venture Source: Brinckerhoff, Peter C. (2000). Social Entrepreneurship: The Arts of Mission-Based Venture Development. New York: Wiley, pp. 16-21Development. New York: Wiley, pp. 16-21

2 - 11

Explaining entrepreneurship Explaining entrepreneurship (1)(1)

EnvironmentEnvironment Entrepreneurship is stimulated by a Entrepreneurship is stimulated by a

conducive environmentconducive environment ResourcesResources

Resource availability (financial, human Resource availability (financial, human resources, human capital) stimulates resources, human capital) stimulates entrepreneurshipentrepreneurship

PerturbationPerturbation Entrepreneurship occurs when people are Entrepreneurship occurs when people are

displaced from their routinesdisplaced from their routines

2 - 12

Explaining entrepreneurship Explaining entrepreneurship (2)(2)

Personal traitsPersonal traits Entrepreneurship occurs because of Entrepreneurship occurs because of

entrepreneurial personalities and typesentrepreneurial personalities and types PreparationPreparation

Entrepreneurship can be taught and Entrepreneurship can be taught and learned through education and experiencelearned through education and experience

2 - 13

Applying entrepreneurship Applying entrepreneurship theory to SEtheory to SE

These theories apply very well to SEThese theories apply very well to SE Environment, resources and perturbation Environment, resources and perturbation

are primarily external forcesare primarily external forces Personal traits and preparation are Personal traits and preparation are

primarily internal forcesprimarily internal forces This theory helps to explain SE, predict This theory helps to explain SE, predict

where it will occur, and suggest how to where it will occur, and suggest how to increase itincrease it

Figure 1.3 portrays these forcesFigure 1.3 portrays these forces

2 - 14

Figure 1.3 The forces on social Figure 1.3 The forces on social entrepreneurshipentrepreneurship

Environmental factors• Social climate conducive to social

entrepreneurship• Political climate that facilitates

social innovation

Availability of financial and nonfinancial resources

Perturbation of the environment• Political change• Cultural change• Economic change

Entrepreneurial personality traits

Preparation to exploit opportunities

• Education• Experience

Social entrepreneurshipprocess begins

External forces

Internal forces

Environmental factors• Social climate conducive to social

entrepreneurship• Political climate that facilitates

social innovation

Availability of financial and nonfinancial resources

Perturbation of the environment• Political change• Cultural change• Economic change

Entrepreneurial personality traits

Preparation to exploit opportunities

• Education• Experience

Social entrepreneurshipprocess begins

External forces

Internal forces

2 - 15

Characteristics of social Characteristics of social entrepreneursentrepreneurs

Dees (2001): “Change agents in the social Dees (2001): “Change agents in the social sector,” characterized by …sector,” characterized by … Mission orientationMission orientation Pursuing opportunitiesPursuing opportunities Continuous innovation, adaptation, learningContinuous innovation, adaptation, learning Bold action regardless of resource limitsBold action regardless of resource limits Heightened accountability to constituentsHeightened accountability to constituents

Various potential impacts of demographics, Various potential impacts of demographics, gender, personal experiencegender, personal experience

But do these innate traits explain SE?But do these innate traits explain SE?

Psychological characteristics of Psychological characteristics of entrepreneursentrepreneurs

InnovativenessInnovativeness Achievement orientationAchievement orientation IndependenceIndependence Sense of control over destinySense of control over destiny Low aversion to risk (i.e., willing to accept risk)Low aversion to risk (i.e., willing to accept risk) Tolerance for ambiguityTolerance for ambiguity For social entrepreneurs, For social entrepreneurs, community community

orientationorientation and and social concern social concern are important are important psychological characteristicspsychological characteristics

2 - 16

2 - 17

Figure 1.4 The characteristics of Figure 1.4 The characteristics of a social entrepreneura social entrepreneur

Innovativeness

Education and experience

Achievement orientation

Independence

Sense of control over destiny

Low risk aversion

Tolerance for ambiguity

Entrepreneurialorientation

Community awarenessAnd social concern

Socially-entrepreneurialorientation

Innate characteristics

Innovativeness

Education and experience

Achievement orientation

Independence

Sense of control over destiny

Low risk aversion

Tolerance for ambiguity

Entrepreneurialorientation

Community awarenessAnd social concern

Socially-entrepreneurialorientation

Innate characteristics

2- 18

Social entrepreneurs as …Social entrepreneurs as … LeadersLeaders

Shape a vision that change public Shape a vision that change public attitudesattitudes

Have significant personal credibilityHave significant personal credibility Generate commitment in terms of values Generate commitment in terms of values

to achieve collective purposeto achieve collective purpose PersonalitiesPersonalities

AchieversAchievers Super-salesmanSuper-salesman Real ManagerReal Manager Expert idea generatorExpert idea generator

2- 19

Myths about SE (1)Myths about SE (1)

Social entrepreneurs are against Social entrepreneurs are against businessbusiness Many social entrepreneurs come from Many social entrepreneurs come from

business and have succeeded in businessbusiness and have succeeded in business The difference between commercial The difference between commercial

and social entrepreneurship is greedand social entrepreneurship is greed Assumes that all commercial Assumes that all commercial

entrepreneurs are greedy, and that none entrepreneurs are greedy, and that none are philanthropicare philanthropic

2 - 20

Myths about SE (2)Myths about SE (2) Social entrepreneurs run nonprofits.Social entrepreneurs run nonprofits.

Some do, some don’t – many legal forms Some do, some don’t – many legal forms support SEsupport SE

Social entrepreneurs are born, not madeSocial entrepreneurs are born, not made Implies no role at all for nurture, that only Implies no role at all for nurture, that only

innate traits determine who does whatinnate traits determine who does what Myths for which there is no evidenceMyths for which there is no evidence

Social entrepreneurs are misfitsSocial entrepreneurs are misfits Social entrepreneurs usually failSocial entrepreneurs usually fail Social entrepreneurs love riskSocial entrepreneurs love risk

21

World Income DistributionWorld Income Distribution

22

People Living in Poverty, 1981-2002People Living in Poverty, 1981-2002

7.81% of Malaysian pop<$2 vs

KLCC cost of RM1.8B in 2004

23

The 12 Most and Least Populated Countries The 12 Most and Least Populated Countries and Their Per Capita Income, 2005and Their Per Capita Income, 2005

Malaysia 28m $7,760 in 2010Singapore 5m $40,070 Botswana 2m $6,740 Thailand 69m $4,150

24

UN Millennium Development Goals 2015UN Millennium Development Goals 2015

25

UN Millennium Development Goals 2015 UN Millennium Development Goals 2015 (continued)(continued)

26

Income and Happiness: Comparing CountriesIncome and Happiness: Comparing Countries

Further ReadingFurther Reading Scarborough, Norman, M. 2011. Scarborough, Norman, M. 2011. Essentials of Essentials of

Entrepreneurship and Small Business Management.Entrepreneurship and Small Business Management. 66thth edition. Pearson. edition. Pearson.

Brooks, Arthur C. (2006) Social Entrepreneurship : A Brooks, Arthur C. (2006) Social Entrepreneurship : A Modern Approach to Social Value Creation. Pearson Modern Approach to Social Value Creation. Pearson

Barringer, Bruce R. & Ireland, R. Duane, 2011 Barringer, Bruce R. & Ireland, R. Duane, 2011 Entrepreneurship – Successfully launching new Entrepreneurship – Successfully launching new ventures ventures 44thth edition, Pearson. edition, Pearson.

Schaper, M., Volery, T., Weber, P. & Lewis, K. 2011. Schaper, M., Volery, T., Weber, P. & Lewis, K. 2011. Entrepreneurship and Small Business.Entrepreneurship and Small Business. 3 3rdrd Asia Asia Pacific edition. John Wiley.Pacific edition. John Wiley.