What Prevents Social Enterprises from Scaling

A recent clip of Malini Mehra, Founder & CEO for the Centre for Social Markets  answering the question of “What holds Socially business from scale?” presents an great opportunity to open a discussion about what problems prevent success for many social businesses’ business plans.

In the 2 minute clip, she mentions three issues that hold back the organization

  • Enabling environment – policies and regulations that inhibit (or support) the development of socially minded businesses
  • Investment availability – SE awareness of the financial instruments that are available
  • Network and organization – A platform to advocate for the needs of social enterprises

Each very important, and in the case of enabling environment, this is a HUGE issue for social enterprises operating in North Asia, China and HK in particular.  In China, for social enterprises that are trying to operate under a non-profit license, scale is legally difficult as NGOs are not allowed to register branch offices in other cities.  Were they to register as a for profit, which could potentially undermine the funding strategy of said enterprise, then opening branches would not be a problem.  But then again, as a for profit enterprise, they would find themselves unable to access government and foundation sources of revenue. SE and subcontinent Asia are moving a bit faster, particularly in Singapore where EDB sees supporting the development of socially minded businesses (profit and non) as a strategic interest.

Funding.  Yeah.  Ask any social entrepreneurs in China, and you will hear that access to funding is a problem, and it is often a problem of the “donor” in the eyes of the entrepreneur.  Donors just don’t understand, or aren’t serious. And they are not always wrong.  The investment community in HK and China is still in its early days.

Network and organization is a problem that is more due to the pervasive culture of social entrepreneurs as much as it is the development of a physical platform.

However,in addition to the above, there are a few other barriers that I feel exist. Internal barriers that are themselves far closer to the core of the problem with scale than issues of licenses, funding, and awareness.

1) Customer Segmentation – Simply put, most social entrepreneurs, particularly in the non-profit sector, have not segmented their market, developed profiles of different segments, and then built their sales model.  EVERYONE is a potential customer

2) Product Development/ Innovation – A byproduct of poor customer segmentation, as well as a byproduct of mission creep, firms often struggle with developing products and being “innovative” in a productive manner.  In the worst of times what will happen is that a organization will “innovate” themselves into a position where they have no core left. They are mercenaries to the buy side of the market, and have sold out their mission.  In the best of times, the core will be built upon in a manner that maintains the integrity of the mission, increases the impact / efficiency of the organization, and ultimately leads to greater support (internally and externally)

3) Confidence in Mission – Regardless of whether or not the organization is for profit or non, the average social entrepreneur still question themselves and the mission on a regular basis… and this needs to stop.  Confidence breeds confidence, and as I was telling the manager of one organization the other day, when the organization (or the entrepreneur) acts in a manner that shows confidence in the mission, clients, partners, donors, and (other) supporters will naturally align themselves… but if they act in a manner that lacks confidence, then the organization will only find itself used by others when it is in their own benefit.

4) People – The best plans in the world only remain theory unless you have the people to carry them out, and in the social entrepreneur space there tend to be people with more experience brainstorming than execution.  And this is a problem, particularly in young organizations whose roots have yet to fully take, but also in those that have been recognized for their work and are on the cusp of the next stage where program and budgets move to the next level.

To highlight my points above, I highly recommend readers watch the below clip where P&G’s Global Marketing & Brand-Building Officer Marc Pritchard speaks about how P&G works to develop products “with purpose”. Now, in recommending this clip, I am by no means saying that the products they are developing are “products of purpose” in the same sense that a socially minded entrepreneur would, but the process by which P&G has begun to develop products most certainly developing “products of purpose” in the eyes of its buyers.

A skill that would certainly benefit many of the socially minded entrepreneurs that are trying to understand how to target buyers of their product and service.  Regardless of whether or not they are looking to make a profit.

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