In The Entrepreneurialist blog recently they posed the question "if social enterprises have emerged to fill a gap between the government and civil society". I think this question might have been better phrased "if social entrepreneurship has emerged to fill the gap between government and free enterprise" or for profit companies. I am always troubled by the assumption that there is a society above and beyond the cumulative individuals and their personal conflicts between self-interest and morality. The economic development theorists frequently talk about "society" but I am not sure that it is a meaningful term in an economic sense.
While many see social entrepreneurship as a force for good, I think it is more helpful to see social entrepreneurship as just another business model. While many in social enterprises are enamored by the "doing good" I think that business model thinking provides more insight.
First let's review the basic thinking of Clayton Christensen, the HBS professor who did so much ground breaking work on innovation. Basically, Christensen said that innovation appears in large, underserved markets where cheap, limited feature set products and services satisfy the customer need. Now consider the status of the developed country markets. These markets are saturated with products and services, slow growth and highly competitive. In contrast, developing markets have large populations, little competition for goods and services and very low customer expectations to satisfy basic needs. A Christensen approach is tailor made for developing markets. In fact, the developing markets may be the last remaining frontier for significant entrepreneurship (unless you are getting a PhD at MIT or Stanford).
In summary, I think that social entrepreneurship has emerged in recognition of the market opportunity in developing countries. The social entrepreneurship focus on low margins, cheap products and creating volunteer communities to keep costs down is pure Christensen and the basis for a business model. I have always been troubled by the label "social entrepreneurship" because a company could achieve all the same ends without ever thinking about "doing good". The poor person in Africa does not really care if the seeds they plant were developed by UNESCO, the Gates Foundation, 3M or a startup company in Atlanta. The poor person just wants their needs satisfied as cheaply as possible and the philosophy behind the solution is irrelevant.
This story was inspired in part by this post in Fast Company about C.K. Prahalad. Prahalad was a professor at the University of Michigan and one of his research interests was the "bottom of the pyramid", poor people in developing countries (such as his native India). One of his frequent themes was the aggregate purchasing power of the poor. My experience in Indonesia for ten years supports Prahalad's view and perhaps explains my reluctance to acknowledge any meaningful distinction between social and traditional entrepreneurship.
I would welcome comments on this post.
