Is the Social Enterprise Bubble About to Burst?

Over the past two months, GOOD has profiled organizations in Africa using market solutions to solve water and sanitation challenges, improve agriculture, and promote public health. Social enterprises like these are transforming development work, and social entrepreneurs are being hailed as rock stars.

But social enterprise isn’t the first trend to hit the development sector. From women’s empowerment to “sustainability” to microfinance, the aid community has moved through its stash of silver bullets. What makes social enterprise any different?

We decided to ask some of Africa’s social entrepreneurs what they think is driving the hype, where the sector is going, and what advice they have for those just starting off.

Andrew Youn, founder of One Acre Fund, East Africa

Sharon Chang, founder of Yoxi TV, U.S.A.

Ashley Murray, founder and CEO of Waste Enterprisers, Ltd., Ghana

Timothy Wade, COO of Waste Enterprisers, Ltd., Ghana

Chid Liberty, CEO of Liberty and Justice, Liberia

Tzameret Fuerst, CEO of Circ MedTech, Ltd., maker of PrePex, U.S.A.

Peter Gross, business development manager-Africa, MicroEnsure, Africa and Asia

GOOD: Why do you think social enterprise has become so popular recently?

TIMOTHY WADE: [It’s the] economic downturn and disenchantment. People are looking for a new place to use funds and the traditional "safe" instruments have proved to be less than secure. Idealistic college graduates have a very bad taste in their mouths because large corporations and government corruption are being blamed for the near collapse of the capitalist system… College grads and MBAs in increasing numbers believe that they can and should use business to change the world while making a decent profit.

PETER GROSS: On the one side, development workers have watched a few mobile phone companies bring more development to the average African in the last 10 years than aid accomplished in the previous 50 years. On the other side, there are business people who have lived through two boom and bust cycles in the West in the last 10 years—dotcom, then housing—and are realizing that the classical motive of short-term profit maximization can be destructive… A final contributor is the breakdown of the idea that aid is good and business is bad. Social enterprise tries to combine the best development and business ideas, and that combination resonates with a lot of today's global leaders.

ASHLEY MURRAY: NGOs and aid agencies are increasingly subject to critique for being slow, ineffective, or out of touch with their client’s needs or preferences. On the other hand, social enterprise allows for having a social objective … while still being subject to market forces. If your idea, your management team, or your execution sucks, you’re out of business.

CHID LIBERTY: I think everyone feels good about providing opportunities for people who live on less than $2 a day or doing something to help conserve our environment, so it's just a bonus to do that while making money. It's a really cool concept.

GOOD: Do you think most social enterprises in Africa prioritize profit or social impact? Is there anything wrong with prioritizing profit?

ANDREW YOUN: It is certainly challenging to balance the right amount of profit with the right amount of social impact. On one hand, many traditional NGOs are not adequately using market forces to achieve scale. On the flip side, I think that “impact investors” are increasingly emphasizing profit while having unrealistic ideas about the amount of impact they are achieving. I think a good social enterprise should keep its eye on achieving scale while rigorously measuring impact-per-person served, and doing it as cost-effectively as possible, if not profitably.

LIBERTY: I think there's a pretty wide spectrum of opportunities in Africa. There is absolutely nothing wrong with prioritizing profits - that's the way we make our businesses sustainable and attract more capital.

TZAMERET FUERST: We feel it is important to balance profit and impact, but see no reason why you shouldn’t be able to do both responsibly. Having a positive impact on society is our goal and ultimate motivator, but being profitable is vital to creating sustainable solutions for the health sector.

GOOD: For a while, microfinance was thought to be the silver bullet for addressing poverty in the developing world, but after coming under scrutiny, it’s falling out of fashion. Is social enterprise on the same trajectory?

SHARON CHANG: First of all, I think social enterprise is higher in the food chain within the social innovation ecosystem. [Microfinance] is a tactical approach, while social enterprise is more of a conceptual framework. I don't think it will fall out of fashion, but I do think we will see fatigue if we can't figure out a way to slow down fragmentation. I think and hope that social enterprise is the logical and inevitable next step in our socioeconomic evolution. The question will be how long it's going to take to reach a high level of sophistication.

YOUN: Any enterprise can “fall out of fashion.” But if an enterprise creates tangible and life-changing benefits for its clients, in a cost-effective and scalable way, it will ultimately succeed.

WADE: Unfortunately, hype creates bubbles…News media feeds on these bubbles. There is a strange cycle of building up heroes --because people like heroes and like to hope and dream about a better world-- and then taking them apart. It is shocking and interesting to people when those who have be lauded suddenly show that they too are human.

GOOD: Is there a negative side or social enterprise? Are there limits to what it can do?

FUERST: There is no one-size-fits-all approach to solving social issues and philanthropy continues to play a significant role in making the world a better place. In a humanitarian crisis, for example, philanthropic organizations are arguably better equipped to mobilize massive resources and provide an immediate, large-scale response.

CHANG: Perhaps my perspective can seem naive, but I'd rather believe there is no limit to what can be achieved if we combine good intention with audacious imagination. Yet the view of a realist is such that there will always be unintended consequences.

WADE: There is no silver bullet to stopping oppression, developing poor economies, reforming governments, increasing democracy, and ending poverty— just this list points to the systemic nature of these issues. I predict that social enterprise will be a powerful force in the coming decades that moves the needle and makes a huge dent in raising people out of poverty and empowering them—but there will be thousands of failures and thousands of places where aid or an NGO might have done it better.

MURRAY: I do fear that people start social enterprises or become social entrepreneurs because it’s the cool, trendy thing to do. Indeed, I squirm at the language that’s often used in reference to social entrepreneurs, like they’re a special brand of godly human being.

LIBERTY: Someone, somewhere will find a reason to hate on everything.

GOOD: Do you have any “lessons learned” to share with people who are thinking of creating a social enterprise?

YOUN: Get on the ground and listen to the people you want to help! This is the heart of social enterprise—satisfying a customer with a product or service that they actually need.

MURRAY: Once you have a good idea, it’s having the right people on board that will make or break your business. Your human resources are your most important resource.

WADE: Go to the customer. Who are you trying to serve? Have you talked to them? Do they want your solution?

GROSS: It's hard to be the visionary and the operator at the same time. Figure out which role you are better suited to play, and find the best person you can find to do the other stuff. Also, don't worry about if you are the first to come up with the idea - just execute the hell out of yours and in 3 years, no one will care who was first. I'm sure someone else has said that before, but it's especially true for the types of people who gravitate to our field.

Photo courtesy of One Acre Fund