Big Society Capital CEO Nick O’Donohoe: His move from big finance to social finance & why investment means more than just money in the bankRead More ›
Scaling Social Enterprise – Balancing “Doing Well” with “Doing Good”
At the recent Global Social Innovator’s Forum in Singapore, I attended a workshop by Bain and Co. about the assessment of social enterprises from the perspectives of “doing well”, the ability to be financially sustainable, and “doing good”, fulfilling the mandate to create social value. It was proposed that social enterprises, due to their mission, often feel reluctant about expressing their desire for market leadership, while others do not adequately consider the benefits of scale. However, the imperative to design scalable models is just as salient in the social sector as the private sector, and the balance between “doing well” and “doing good” is an important goal for any organization in achieving maximum impact.
As the representatives from Bain pointed out, there are many ways that scalability can deliver on measures of both “doing good” and “doing well”. Scale reduces costs to the consumer, which can be an inherent good in itself, while also potentially creating higher margins and higher profit. Some amount of scale is fundamental in delivering value to the consumer.
However, unlike other businesses in the private sector, scalability is often not included at the core of social enterprise model design. To maximize the “do good,” many focus on tailoring to local contexts instead. Unfortunately, the most tailored solutions at the local level can ultimately be the most difficult to scale. This, in turn, serves as an obstacle in attracting traditional or angel investment to finance scaling. In the absence of philanthropic resources that are attracted to the social aspect of the business plan, financially driven investors have yet to place significant funds in Asian social enterprises.
Perhaps more robust indicators of social enterprise success and a deeper understanding of social enterprise business models would help bridge this gap. However, with each national economy varying widely, it is questionable whether locally specialized investors or a specific class of socially-driven investors would help fill this funding gap in scaling Asian social enterprises.
“Going global” is not a problem isolated to social enterprises, but one that takes on added nuance compared to competing enterprises that do not have a social mission. Where many social enterprises are designed to alleviate specific and localized needs, immediate markets may be too small and overseas markets too removed from the core value proposition to be scaled without considerable adaptation.
This was certainly the case for successful models in Singapore, where the local market is small and distinct from geographically neighbouring regions, and politically distinct from culturally similar cities/states. For some social enterprises in Singapore and elsewhere, expansion may not be the answer because of the likeliness of compromising on “doing well” or “doing good,” as part of the local adaptation process.
Social enterprise is thus tasked with engraining social value into industries, and often models, that were designed without social impact in mind. Doing so is a big, daunting challenge with more barriers to scalability than the relentless pursuit of solely financial value.
Approaching either “do well” or “do good” in isolation risks compromising on one of the two values: to “do well” without intending to “do good” could create a sustainable model, but one where the social value exists externally to the core value proposition of the organization. In contrast, organizations that “do good” before “doing well” often struggle to move from one business model to another, and compromise both “do good” and “do well” in the process.
In weighing the balance of these two mandates, I believe that any social enterprise relies on their ability to do well enough to continue doing good. Social enterprises need to preserve their ability to deliver in their local environments through financial sustainability before focusing on scalability and adaptation.
In social enterprise, there really is no “one size fits all.” When looking to scale a social enterprise, how can the “do well” and “do good” components grow together?
Photo credit: http://www.flickr.com/photos/vculibraries/6032097281/
Recommended for you
Grant Schreiber Founder, Schreiber Media & Editor, Real Leaders
Ammara Niyaz MBA Graduate, Schulich School of Business, York University
Exploring the growing sub-sector of Islamic microfinanceRead More ›Ammara Niyaz MBA Graduate, Schulich School of Business, York University
Joanne Cave MSc Candidate in Comparative Social Policy, Oxford University
Why aren’t feminists interested in social finance and why doesn’t the social finance movement engage directly with feminist ideas?Read More ›