Thursday, December 22, 2011

Social Entrepreneurship as Economic Development

By Evan D. Robertson, Project Associate. 

The holidays can be a very stressful time for everyone involved. Anxious moments are usually centered around: what presents to get your loved one(s), fighting for said presents in the huge Black Friday crowd (apparently it is socially acceptable to throw an elbow or two), travel arrangements and resulting debacles, festivity planning, and, my most dreaded, how much do I give the Salvation Army Santa? Do I give more than once if I am making multiple trips? What if he eyes me while I am leaving the mall? The anxiety is solely due to the profound knowledge that whatever I give while helpful is nowhere near enough. The Great Recession has placed many, in the United States and abroad, in need of the most basic necessities. When the economy does recover many more mouths will go unfed, more heads will go unroofed, and more bodies will go unclothed than ever before. The challenges facing us are both humbling and deceptively surmountable. There is a growing segment of individuals are out prove these challenges can be overcome and audacious enough to leverage the power of capitalism to do good while doing well. 

Social entrepreneurship operates in a newly discovered gray area between profit-centric business models and social causes. The Ashoka Foundation describes social entrepreneurs as “change agents for society, seizing opportunities others miss and improving systems, inventing new approaches, and creating solutions to change society for the better.” The social entrepreneur engages in a high risk venture where profit margins are razor thin, where failure is always knocking on the door. As my co-worker, Jonathan Miller, recently discussed in his December 12th blog Legally Beneficial, these ventures are established on a wide spectrum of business models, ranging from the traditional non-profit, to thenewly emergent B Corporation, to a straight for-profit model.

Aravind Eye Care System is one such for-profit social venture founded by Dr. G. Venkataswamy who saw a critical need to address preventable blindness among India’s underserved. The eye care system has grown from a small hospital (11 beds in total) that preformed cataract surgery to both India’s wealthy and poor to a hospital system serving 2.6 million people. Aravind operates as a for-profit business with one important twist. Customers are charged based on their ability to pay, those in need pay substantially less than those who can more than afford the eye surgery. Thus, the wealthy subsidize those individuals who would have been otherwise unable to pay market rate. Along with the price discrimination, Aravind is able to stay profitable because of two other important innovations: it is able to supply its own low-cost lenses, significantly lowering the cost of doing business, and it is able to turn over patients at a high rate. Eye surgeries at Aravind take minutes, not hours, with the operating room housing two simultaneous eye surgeries being performed in unison. The operating model allowed Aravind to perform 300,000 surgeries between March 2010 and March 2011, all while operating as a going concern. 

Aravind provides a solid case study of how entrepreneurs are adapting to a world in greater need, and speaks to social entrepreneurs’ efforts in business model innovation. Who would have thought the answer to blindness in India was price differentiation, high patient throughput, and research and development investment into low cost eye lenses.

Social ventures, in whatever form, are a valuable piece of the local economy especially given that issues preventing economic development transcend job creation. If you subscribe to the belief that economic development is about raising standards of living and improving quality of life in your community, than social entrepreneurship and fostering social ventures in the local economy is a likely process for forging new paths of discovery to cure problems where both the public, private, and non-profit communities have been unable to provide for those most in need. With public service, social entrepreneurs will dare to imagine and rethink proven business models, turning them on their head, and making them work to serve their purpose, breathing new life into old. Who knows what spillovers may ensue.