..some thoughts on Social Entrepreneurship

About a month back, I was in Bangalore, and gate-crashed in into a friend's home to lounge around for about a week. Abhijit Bhaduri is a dear friend - a multi-faceted person who carries an author, singer, manager, actor, etc., all in one single body... and a blogger too at http://abhijitbhaduri.com

One side-benefit of staying with him was being featured on his site for this piece on Madhukar Shukla on Social Entrepreneurship

Abhijit: In a Business School environment, the focus is on the economic motive aka the profit-motive. What prompted you to initiate a course on social entrepreneurship?

Madhukar Shukla: Let me start with a qualifier about this term “business school”. This is a rather recent conversion of what were traditionally described as “management schools”, i.e., educational institutes which teach people how to create value by managing resources more efficiently and effectively – whether in business or in other social settings. By equating ‘management’ only with ‘business’, we tend to limit the vast array of roles which a management professional can play in the society. After all, almost 92-93% of India’s employable manpower, which accounts from almost 60% of our GDP, lies outside the for-profit organized business.

In that sense, my starting this course and other activities related to social entrepreneurship in XLRI is not really a radical departure from the core purpose of any management school or professional – though, yes, it does seem out-of-synch with the contemporary understanding of what management is all about.

For me personally, it was also born out of the realization that if management professionals have to ‘create value’, then in contemporary India, the critical managerial challenges lie out there in the larger society, not within the corporate boundaries. In today’s India, we need genuine management solutions to address larger societal problems.

Let me give some examples to illustrate what I mean:

Take GOONJ, a social enterprise organization which collects, sorts, and repairs 50-tonnes of reusable clothes from middle-class homes in Indian cities every month, and reaches them to the poor in the interior villages across 20 Indian states. Its per-unit cost of reaching a single piece of clothing to any part of India is less than a Rupee.

Or take SELCO India, which provides solar lightning solutions to rural masses at affordable price by financing the product through microfinance options; or Vaatsalya Hospitals, which provides state-of-the-art high-quality healthcare to semi-urban towns at affordable price; or Samridhi, which provides sustainable livelihoods to vegetable growers and milk-producers by providing them with easy market-access and better returns for their produce.

There are thousands of such examples of social enterprises which utilize managerial skills to make a real difference in the lives of people and society. Unfortunately, these stories and cases rarely become a part of the management education curriculum, and therefore, young management professionals never come to know about these options. One of the key objectives of the social entrepreneurship course was to provide exposure to such examples and options to the students.

Abhijit: Does the social enterprise need to run differently than the conventional for-profit organizations?

Madhukar Shukla: Oh, yes, in a number of ways! Firstly, there is the basic difference in the purpose of the organization itself. The for-profit organizations, obviously, exist to make profits – whereas the primary purpose of social enterprise is to make a social impact by solving critical societal problems. Since the purpose itself is different, the organizational processes and systems to achieve the purpose need to be different. One critical difference emanates from the question: who are the key stake-holders in the enterprise? Whose interests does the enterprise primarily serve? As compared to the for-profits, who primarily serve interest of the promoters or shareholders, for the social enterprises, the responsibility is to the community they serve.

Secondly, it is easy to measure profits, and therefore the success (or failure) of the commercial ventures. However, measuring social impact is not so very easy – I mean, it is very difficult to answer the question if one has made a difference in the life of people. Moreover, often the impact of social venture becomes visible only after many years. For instance, if Pratham’s Read India Program made more than 30mn children literate during last 4-years, its actual social impact – did it make them more productive? more socially aware and responsible? – can be assessed only after many years when these children grow up.

Abhijit: Do you notice something different among people who become social entrepreneurs? Are they motivated by different drives?

Madhukar Shukla: At least in my experience, in terms of their capabilities and qualifications, the social entrepreneurs I have met are just like any other entrepreneur. They possess an entrepreneur’s sharp sense in identifying a gap – an underserved “market” – and then designing innovative solutions to meet its needs. For instance, it is a common knowledge that urban middle-class households often find it difficult to locate qualified workmen (e.g., plumbers, masons, maids, carpenters, etc.), for odd domestic jobs; on the other hand, workmen with these skills spend inordinate time looking for jobs. Solomon JP, an Ashoka Fellow, saw an opportunity in this gap, and founded an online exchange, LabourNet, which connects the work-men with their prospective clients.

Similarly, like any entrepreneur (and unlike a typical manager) their ways of approaching issues is different; they seem to start by identifying what they want to achieve, and then working backward to mobilize resources to reach that goal. In doing so, they seem to have an innate ability to learn and self-correct as they move towards their goals. This makes them quite open to look for new opportunities. I still recall talking with the founder of a venture which works to rehabilitate the children of sex workers. When I asked her about her “fund-raising strategy”, she laughed and said, “oh, we decide what we want to do to make a sustainable impact in the lives of these kids – and then for funds, we pray!“ On probing further, she cryptically commented, “Well, in our case, so far the decisions have always preceded the resources!” I have found this stance across almost all social entrepreneurs I have known.

However, what does differentiate social entrepreneurs from others (including the commercial entrepreneurs) is the depth and intensity of their active engagement with larger society. The key-word is “active engagement”. While many of us feel strongly about social issues, mostly our concern does not get translated into specific actions. For social entrepreneurs, their concern about social issues is an over-arching factor which determines their actions. This also gets translated into a strong sense of accountability to the communities they serve.

Abhijit: How valid is the hypothesis that if the social enterprises scale up, they suffer from the same challenges/problems which the large for-profit organizations suffer from?

Madhukar Shukla: Well, ‘yes’ and ‘no’! – depending upon how we interpret the term “scaling up”. If it refers to scaling up of the enterprise, then obviously, like any organization, it will face the growing-up pangs like any for-profit venture.

However, in the social entrepreneurial space, scaling-up has another meaning too. Since the purpose of social venture is to make a social impact, perhaps it makes more sense to think about scaling-up of the “impact” rather than that of the “enterprise”. Social ventures actually scale-up the impact by creating a successful model which can be replicated by others. The success of Grameen Bank is not so much that Prof Md Yunus created an organization which could scale up to serve millions of poor in Bangladesh; rather its success was in developing and demonstrating a model for financial inclusion, which could be replicated by thousands of social entrepreneurs across the world.

Abhijit: Do you see that for-profit and social models merging together in time to come?

Madhukar Shukla: At least in India, with such a huge BoP (Bottom of Pyramid) “market”, this overlap between the for-profit and not-for-profit social ventures already exists. In the recent years, we have seen regular commercial banks foraying into rural areas to provide micro-credit, FMCG companies creating and marketing products for the rural masses, or telecom companies offering schemes which people with limited income can avail. Conversely, there are also a large number of social ventures which are for-profit – some registered as Section 25 companies, but also many as Private Limited Companies.

However, in spite of this increasing convergence between territories of the for-profit and not-for-profit models, my own hunch is that at least in India, the for-profit model will not be able to completely replace the not-for profit social ventures – at least not for many decades to come. My reason for saying this is because the for-profit models rely on existence of a “market” – i.e., a reasonably sized segment of people who can pay for a service or a product. In contemporary India, however, 837mn or 77% of the population lives on a daily income of less than Rs 20/day – and thus, a large proportion of population still remains outside the “market”. Or it offers profit margins which would make a commercial venture non-viable. That’s why the social ventures will continue to retain their relevance and separate identity.