Why Social Entrepreneurship Fails to Scale

Over the last month or so, I have been spending a lot of time on the issues related to stabilizing and scaling social entrepreneurs in Asia. Particularly tose in Hong Kong and Mainland China.

It is an issue that has been ongoing, and in a recent post Four Gaps in Social Entrepreneurship  Frogtek highlighted four of the key gaps that they see as being:

  1. Geographic and Cultural Gap. Social entrepreneurship, like all early stage investment activity, has to be fundamentally home-grown.
  2. Age and Experience Gap. Social enterprises seem to be populated with young people, for whom innovation and disruption seems more natural.
  3. Expectations and Communications Gap. Movements require a narrative that speaks to a higher purpose, and that is often built out of over-simplified stories.
  4. Funding and Risk Gap. Social capital is most critical to help prove not so much that an idea is socially worthwhile, but that it is sustainable and/or scalable.

For me though, where the biggest gap for me is simply in the fact that many social enterprises are still not able to develop products that address a real need.  Which is to say that there is a value gap, where the enterprises has a product or service that is not supported financially in the market at  a price that can sufficiently fund the development of the organization.

The business models are simply not there, at present form / time, and before it does there are a few things I feel need to happen:

  1. Social entrepreneurs, and their organizations, need to learn to better align their models to a true market.  A market not funded by competitions, foundations, or government subsidies, that have true consumers.
  2. Enterprises need to move away from story first pitching.  The stories are interesting, some of them very compelling, but for true sustainability and scale to occur the focus should be maintained on the product or service
  3. Enterprises need to begin collaborating, perhaps consolidating, so that scale is possible and the mission (whatever it is) is able to move to the next level.
  4. Leadership, i.e. entrepreneurs, need to build organizations that are larger than they are but building an organization with the ability to transfer leadership smoothly

To do this, there are a few things the organizations need to do:

  1. Keep a focus, staying on Track, and knowing when to make changes that are best for a long term mission and vision of the organization
  2. Researching the market to make sure that the product/ service offering (1) has a market (2) addresses an issue and (3) has a value that will translate into revenue
  3. Invest in People – Creating an organization that is bigger than one person and can survive the transfer of leadership
  4. Prove product / service value to the market
  5. Develop Budgets that reflect the hopes of the organization, the realities of the market, and will help executives make strategic decisions
  6. Create stable program / service portfolios and move past projects / services that are short term in nature… even if they are paying the bills in the short term

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