NextBillionNet has an article today of the same name, "When For-profit is the Right Answer for a Social Enterprise.". Of course, the question becomes "why social enterprises by default are not for-profit?". Guidelines for when a social enterprise should be for-profit are:
- A commercially-driven earned-income strategy
- The potential to be high impact, high-growth (scalable)
- A real solution to a real problem (value proposition)
- A product or service designed to meet their customers’ needs, customs and culture
- A realistic combination of price, distribution and sales to ensure their offerings get to those that need it most at the right price.
I would argue that except in the rare cases of facilities for the arts (museums, theaters, etc.) one should not undertake a social venture unless it meets 2-5 above. Therefore, the question for any social enterprise should be whether a commercially driven, for-profit strategy can be done successfully (1). A for-profit strategy should be the default given all the benefits available--capital markets, more staff availability, wider range of partners--and not the exception.
The size of the BOP is estimated to be two billion people. The efficiency and scale of the for-profit model, what might be called capitalism, is required to bring the necessary resources to make a meaningful impact in any reasonable time. We should be teaching the "for-profit social venture" as the default if we are serious about scaling solutions for the BOP.
Some of these thoughts were developed in work with colleagues that I have elected to keep confidential.