Defining social entrepreneurship

By Stephen King, Founder at

A growing sector and of particular interest to me, is social entrepreneurship. Like all new fields it can suffer from a wide and misunderstood definition. The nomenclature is important to distinguish itself from non-profit or charity programs, as being a socially led company operating with clear business practises.
Entrepreneurs have long been heralded as uncovering latent demand in the market place, solving problems in imaginative and innovation ways. Jean Baptiste Say[1] wrote at the turn of the century that an ‘entrepreneur shifts economic resources out of an area of lower and into an area of higher productivity and greater yield’. The social entrepreneur does the same by looking for inequality within the community and social system. This field is driven by the same passionate drive for business performance, with this social need at the beginning of the design in the venture.

To discuss further, let us talk through a couple examples of how a business model mindset could still work in the social sector. With my three examples I will move from organisations that are closest to the historical charity group to the other edge close to for-profit.
Fifteen restaurants are a social venture for providing underprivileged teenagers an opportunity to start a career in the restaurant industry. The foundation takes in hundreds of teenagers each year and staffs their restaurants from chefs to hosts to waiters and because of the quality of food, charges a hefty sum for the meals. This is a business that makes good money, and for most people is just a great restaurant; yet it serves social good while maintaining itself as an on-going concern without the continual funding of its initial foundation.
Fair Finance is an organisation that provides cost effective medium sized loans to the underprivileged in our city centres. The current alternatives are high-priced loans that take weeks to process, often time being refused by the high street banks. The company has adopted the micro-finance principles to an urban environment and been able to sustain good margins with these loans and only have 5-7 bad loan percent. This is again a business that anyone would want to finance, with a focus on the underprivileged and giving great rates with a social good outcome.
Whole foods is on the edge of this spectrum, as they have found a way to get everyone to eat better and charging a premium price for their organic and healthy food. As most health food stores were not very well branded or had low quality environments, it was not common to buy these types of foods. The re-engineering of the experience and then being able to attach this high price has made the company an on-going concern, while making those communities eat much better food.

This is my definition of the social entrepreneurship sector, which does purposely preclude a large section of the ‘third sector’. I do this to attract the serial entrepreneurs to an area where all of their business skills can be tested, prestige and pay can follow, all with a social goal in mind.
[1] J.Gregory Dees, “The meaning of Social Entrepreneurship”, 2001

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