Is the Social Enterprise a Passing Fad?

IMG_0001The backlash against the deficiencies of capitalism has led people to rethink the purpose of businesses. Governments are advocating the development of social enterprises as a viable alternative to public service delivery. Impact investing has emerged as a new asset class. There are stock exchanges established specifically for social enterprises. Business schools are setting up social entrepreneurship programmes one after another.

Amidst all the interest and enthusiasm, there is still no shared consensus on the essential nature of a social enterprise. Many people think that social enterprises exist to help the underprivileged by building up their capacities and creating opportunities for them. Some believe that social enterprises must be non-profits.

Wikipedia defines a social enterprise, based on the book “Understanding Social Enterprise: Theory and Practice” (Ridley-Duff and Bull, 2011), as “an organisation that applies commercial strategies to maximize improvements in human and environmental well-being, rather than maximising profits for external shareholders.” A social enterprise can be structured a for-profit  or a non-profit. This is a very broad definition, and certainly encompasses more than just organisations with a charitable purpose.

If we take a look back at history, the function of business was to provide the goods and services that a society needed. It is largely in the last 100 years that the meaning of “business” has been distorted. Instead of satisfying needs, companies now “thrive on” creating wants and desires and value creation has become synonymous with returns on shareholder value on a quarterly basis.

The relentless pursuit of profit has wreaked havoc on our economy, society and environment. It is also unsustainable for businesses themselves. The average life expectancy of a Fortune 500 company is between 40 and 50 years. The pace of corporate funerals is set to accelerate, according to a Yale study.

Delivering HappinessStudies have shown that the companies that perform best over time are purpose-driven organisations. These companies make money but profit is not their raison d’être. They improve the lives of people, address environmental issues, provide meaning for their employees and build sustainable businesses in the interests of all stakeholders.

My favourite example of such a purpose-driven organisation is Zappos. Tony Hsieh, CEO of the online retailer, says Zappos is all about “making customers and employees happy.” By demonstrating the crucial link between the purpose of an organization and sustainable growth, the Zappos culture is influencing companies around the world in a big way. Nonetheless, most people would not equate Zappos with a social enterprise.

Instead of singling out social enterprises as a desirable category of business, there is a strong case to be made that every business should integrate a social purpose into its core. Instead of teaching social enterprises as an elective, business schools should inculcate in every student the imperative of building for-purpose organisations. We need to encourage all aspiring entrepreneurs to think about in what ways they can make a difference to society. It is with this objective in mind that we launched the Make a Difference (MaD) Venture Fellows Programme in Hong Kong last year.  The Programme celebrates and supports young, innovative, doing-good and doing-well entrepreneurs. 16 MaD Venture Fellows from Hong Kong and 9 countries participated in an intensive 4-day programme, meeting with mentors, potential investors and business partners, as well as inspiring other entrepreneurs.

The three 2013 MaD Venture Stars, selected through an expert judging and crowd-voting process, demonstrate the myriad possibilities for a business to create a better world through innovation:

  • Insight Robotics, Hong Kong (www.insightrobotics.com) applies robotics technology to protecting critical infrastructures and key resources around the world. It detects and visualises remote incidents such as forest fires, oil leaks, water pollution, floods, droughts and security breaches for management authorities and assists them in devising the most efficient disaster recovery and contingency plans.
  • Wibbitz ,Israel (www.wibbitz.com) has created text-to-video technology that automatically turns any text-based article, post or feed on the Web into a video within 20 seconds. It helps reduce costs and production time for SME publishers and content providers, breaks down language barriers and has tremendous application potential in education.
  • Wifinity Tech, India (www.wifinitytech.com) applies simple and cost-effective wireless technology and artificial intelligence to help enterprises and buildings monitor, manage and economise on energy and water consumption. Enterprises and public institutions can reduce energy bills by 20% and water wastage by 15%, with ROI in less than 12 months.

None of these MaD ventures identify themselves as social enterprises, but their founders definitely have the vision to change the world for the better. It is cool to talk about social enterprises these days. We hope that this will just be a passing fad, as one day all businesses should have a social purpose. It is time to get back to the basics.

For more information about the MaD Venture Fellows Programme, visit http://www.MaD.asia or email: venture@MaD.asia.

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