Social Entrepreneurship and Its Importance for Successful Nonprofit Practices in Today’s Economy

and Culture

Valeria BudinichVice President, Full Economic CitizenshipAshoka: Innovators for the Public

Novartis Pharmaceuticals CorporationThe Power of Partnering Roundtable

Social Enterprise: Affecting Societal Change Through Innovation and Entrepreneurship

November 9, 2010

CAN ENTR

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Contents•What is Social Entrepreneurship

• Different models for scaling social impact

•The Power of Social Entrepreneurs• Drawing Examples and learning

from Ashoka Fellows•Hybrid Value Chains

• Opportunities for businesses to transform sectors• Criteria and Impact• Healthpoint Services example• New Opportunities for HVCs

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The Power of a Social Entrepreneur

As some differentiate between an entrepreneur and a successful business manager, we differentiate between social entrepreneurs and social service providers.

A social entrepreneur is someone who sees a problem and finds a system-changing solution to the problem. She does not focus on treating the symptom, but chooses to change the system that caused the problem in the first place. Many social entrepreneurs are also service providers but they do it in a context where they are also focused on advocacy and/or creating a new and more efficient eco-system or “industry.”

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The History of AshokaAshoka is the leader in finding and electing leading social entrepreneurs over 70 countries around the world. Ashoka elects between 150 and 200 social entrepreneurs working in a wide variety of sectors. We call this our ‘Venture’ process.

5 years ago, Ashoka realized not only is support of the individual important, catalyzing collaborative entrepreneurship is also necessary. We have launched a series of Global Initiatives to enable this new type of entrepreneurship. Ashoka then understood that creating an environment conducive for social entrepreneurship and Everyone a Changemakers. We launched global initiatives focused on fostering this environment through:

• Online competitions to source global innovations;• Supporting entrepreneurialism at the youth level; and• Creating changemaker campuses across the US; among

others

Differing Models for Scaling Social Impact

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Scaling through policy and advocacy as well as partially or fully subsidized service delivery – a non-profit approach

Scaling through revenues and for-profit business models – a social enterprise approach

Scaling through influencing mainstream business and citizen sector organizations– a hybrid value chain approach

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A combination of these models or approaches

NON-PROFIT

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The Ashoka Fellowship and Health

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Ashoka has over 3,000 Fellows in its global network of leading social entrepreneurs, all of whom are working at the system-change level.

Over 400 of these Fellows are working on health-related issues in countries across the world. 179 have been elected in the last 10 years.

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Health Fellows Regional Distribution

The health sector is constantly addressed in our Fellows’ work around the globe.

Ashoka consistently elects Fellows each year in this sector.

Health Fellows Distribution by Focus

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By understanding the challenges Fellows address and the innovations they use, Ashoka can better identify trends and opportunities in the health sector.

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Sanjeev Arora (US):•New Idea: Increased training from specialists to primary care providers in rural areas of the US through telemedicine reduces disparities in US for patients with chronic diseases that do not have direct access to healthcare specialists through telemedicine.•Approach: Co-management of patients by primary care physicians and specialists allows community providers to learn how to treat complex conditions using video conferencing, data collection, and “teleclinics.” •Impact: Model has spread to multiple states in the US and is preparing for international expansion; community providers have increased ability to treat and quality of care.

Ashoka Health Fellows with System Changing Ideas

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Ashoka Health Fellows with System Changing Ideas

Vera Cordeiro (Brazil): •New idea: Providing patient families with the support they need in order to create the best environment for discharged children from hospitals, Vera’s organization, Renascer, allows children who are either convalescing from an acute illness or have a terminal illness but are receiving outpatient care to break the cycle of recurring illness in their lives.•Approach: By using a family-led poverty reduction program, the most critical problem the family has is identified, and through a process of mutual understanding and exchange of services between the families and Renascer, the problem is attacked.•Impact: Reduced the re-admittance rate of sick children to the public hospital by 60% and spread model to 23 hospitals in 6 states reaching over 23,000 people through a family-led poverty reduction program.

Learning from Fellow Innovation

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Through the innovative work of these social innovators, the citizen sector has learned that the power of a social entrepreneur can change a system in ways that may otherwise not be possible through traditional means. Within 10 years of being elected:•48% of Fellows change the market dynamics and value chains of the system•51% affect public policy and industry norms•72% create business social congruence•53% bring full citizenship and empathetic ethics to the systems they work in•44% bring about a culture of changemaking and social entrepreneurship

Despite the successes of social innovators, the gap between the needs of society and the current solutions available to address them are daunting. Ashoka believes the models to address this gap are collaborative business models.

A NEW

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“Working together, corporations and social entrepreneurs

can reshape industries and solve the world’s toughest problems.”

The Low Income Healthcare Market

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The current size of the low-income consumer market in health care is estimated to be $202 billion.*

•In most countries, pharmaceuticals account for more than half of all low-income spending – self-medication is often the first response to illness in low-income markets. •In Asia, the rural low-income market is expected to be 2.4 times the size of the urban market.•In Africa, urban and rural low-income markets are comparable in size.

New market-based models to address the demand and needs of these markets are needed. Without them, billions of people are not served. * Drayton, Budinich; Harvard Business Review, A New Alliance for Global

Change. September 2010. Based on The Next 4 Billion research by WRI (2005).

A New Alliance for Global Change

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The time is ripe for collaboration between for-profit businesses and mission-driven individuals and organizations.

Hybrid Value Chains•Businesses offer scale, experience in large market-based operations and financing.•Social Entrepreneurs a deep understanding of communities they work with, low cost infrastructure at the grassroots level, and strong social networks.

Hybrid Value Chains

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Businesses that enter into HVCs can expect three kinds of Return on Investment

• Profits – new, untapped markets• Knowledge – gained from local partners • Talent – ability to enter new market segments and geographies

The Healthpoint Services Model (video)

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Healthpoint Services, Inc.

Healthpoint Services is a for-profit social enterprise operating in rural Punjab, India. The company was incubated out of Ashoka’s Healthcare for All initiative.

After one year, Healthpoint Services:•Operates 6 healthpoint units•Treated over 14,000 patients•Provides safe drinking water to 11,000 people daily•Initiated plans to pilot in rural Philippines in 2011

In India over the long-term, the company expects to •Be working in 10 states•Operating 10,000 units•Generating $500 million in revenue per year. Globally, potential gross revenues from an additional 4 countries are roughly 3x that of revenues in India.

Over the next 5 years, Healthpoint Services will: •Work in 4 states in India•Operate over 4,000 healthpoint units in India•Generate revenues of $180 million per year.

Hybrid Value Chains in Health

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Three types of opportunities are particularly ripe for HVC models:

• When the citizen sector is large and growing fast• There is a plethora of citizen sector organizations working to

address the health needs of local communities all around the world

• When market values are changing dramatically • As whole-systems models are used to improve healthcare

globally, new opportunities for innovation and partnership are created

•When charitable funding and “free services” can be replaced with genuine markets

• As sustainable health solutions becomes more of a requirement, cost-based models are gaining increasing acceptance

Four Hybrid Value Chain Criteria

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1.A product/service that consumers are willing to pay

2.Large scale market potential (eg, multi-billion opportunities)

3.Corporations and social entrepreneurs willing and able to work as strategic partners

4.A system-change business model with the capacity to create new opportunities for entry and competition

Constructing Successful HVCs

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Ashoka has incubated a mission-driven social enterprise, Healthpoint Services. It is part of a larger HVC model to transform the rural health sector and an example of how to construct a successful HVC:

• Ask hard questions about how the business is currently done• Charity-based health products without a clear distribution model, often addressing

symptoms rather than the cause• Reconceive value along multiple dimensions to find new markets

• Bringing healthcare services to rural areas, decreasing cost and time of travel incurred by consumer, creates access to new markets

• Look for pricing and financing innovations• Combining healthcare services, products, and clean water to create a hub for rural

healthcare increases efficiency of business and economies of scale• Organize to innovate

• Leveraging non-profit, local actors and creating a management team of deep expertise create ability for model to evolve

• Give the team time and permission to fail• Pilot phase allowed testing of different marketing schemes, technologies and

additional services until the right mix was found

Hybrid Value Chains and the Opportunity for Sector Transformation

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The Healthpoint Services example demonstrates the power a social entrepeneur combined with a new idea can have on a sector.

However, the social enterprise itself can not transform the rural health sector. Healthpoint Services is a part of a broader HVC ecosystem, with players from industry, government, the citizen sector and financial institutions. All are finding value from forging these new HVC partnerships, enabling greater social value to reach the underserved.

Ashoka has developed different HVC models in the Housing and Agriculture sectors and is expecting new HVCs to emerge in the Energy, Water, and Finance sectors.

COMMENTS, Q

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1. In the pre-Roundtable survey, roughly half of the participants said that they have (or would consider) social enterprise type projects. In your perspective, under what conditions a social enterprise approach is more appropriate than a non-profit one?

2. An increasing number of social entrepreneurs are collaborating with companies in for-profit ventures as a mean to scale-up their impact and shape markets. However, there is still considerable debate about commercial models mixing profits and social impact. Where do you stand on this debate?

3. When building hybrid value chains, social and business entrepreneurs and their teams need to develop new competencies, access new types of financing and recruit the appropriate talent. What would be your advise to those who lead these hybrid ventures? What are the risks and opportunities that they should focus on?

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DISCUSSION: SUGGESTED QUESTIONS TO COMMENTATORS

CONTACT INFORMATION

Valeria BudinichVice President, Full Economic

Citizenship

Email: vbudinich@ashoka.org

Phone: 703-600-8313

2511/10 PBA-1028904