Taking the impact of social enterprises to scale

Social enterprise is a rising phenomenon right across Europe. Social enterprises are hybrid organizations that combine aspects of charity and business at their core. Their purpose is to achieve a social mission through the use of market mechanisms. Several trends help account for their recent growth in numbers: One is the hybridization trend in both civil society and the business sector. We see traditional NGOs increasingly search for and experiment with new entrepreneurial approaches to innovate and self-finance their activities -in part fueled by competitive pressures, loud calls for more transparency and accountability, and budgetary cuts. We also see traditional businesses becoming more integrated, as they act more sustainably. Another trend at play is the intensifying citizens' distrust, disconnect and disillusionment with the status quo, as we grapple with widespread double-digit unemployment rates, particularly amongst the young and elderly; growing inequalities and yet crumbling systems of solidarity and redistribution systems. People yearn, increasingly so, for a deep change, as widespread experimentation with new forms of 'civic capitalism' testify. Finally, the social enterprise model, interestingly enough, seems to resonate well with both the political left and right. This gives the phenomenon potentially an ever stronger, broader support basis.

Admittedly, social enterprise today is still very much a niche or marginal phenomenon in statistical terms. [1] To illustrate, worldwide, on average 2.8% of people aged 18-64 are involved in social entrepreneurial activity as a nascent entrepreneur (thinking to start-up a social enterprise) or manager-owner of a new business (running a social venture that is less than 3.5 years old)[2]. The need for further growth of social enterprise in numbers is thus far from trivial. Indeed, given the sheer scale, depth and scope of society's major challenges, and given the enormous social innovation deficits that we have accumulated over time in many important policy areas, more exploration is clearly called for.

The remainder of this article, however, limits its focus to the challenge of how to increase the real impacts that social enterprises make. How can we accelerate the scaling of impactful social enterprise experiences? In short, how can we help grow social enterprise in true impact? I would like to highlight 3 powerful, practical strategies that, I believe, can really help us jumpstart the 'impact growth' of social enterprises.

Strategy 1: To shift from isolated to collective impact

To successfully move the needle in important societal domains such as poverty, (global) health, education, and social inclusion, be it at a local, regional, national or international level, I believe we need to shift from an isolated impact to collective impact perspective [3]. Large-scale social change arguably requires broad cross-sector coordination and learning, and yet the social sector tends to remain fragmented, focusing on the isolated intervention of individual organizations. Real progress, by contrast, depends on important actors from different sectors – corporations, civil society associations, government agencies, and hybrid organizations like social enterprises - working together towards a common agenda for solving a specific social problem.

Taking a collective impact perspective encourages us to think beyond the (elusive) 'golden nugget' – the single social enterprise with the most promising solution – and rather think in terms of 'golden platforms' - configurations or combinations of differentiated organizations and actions to solve a specific societal problem. The essential glue notably that holds all such platform participants together is a strong, shared vision for change, including a common understanding of the problem and joint approach to solving it through agreed upon actions. Furthermore, 'golden platforms' also require solid backbone organizations (with adequate problem-specific expertise and top-quality management skill) that can manage the entire collective impact platform, coordinating the different participating organizations. The backbone organization plays a hugely important role in enabling continuous learning, consistent and open communication across all platform participants. This implies, of course, that all platform participants must be committed to relentlessly monitor and critically discuss the progress they each make towards a same goal.

GAVI, the Vaccine Alliance, is a powerful illustration of a collective impact initiative at global level. GAVI is essentially an international back-bone organization, that was created back in 2000 to bring together the best of what key UN agencies, governments, the vaccine industry, private sector and civil society had to offer in order to improve childhood immunization coverage in poor countries and to accelerate access to new vaccines. Towards the end of the 20 th century, a new approach to a global problem was clearly needed. Global immunization efforts were beginning to plateau. Despite the promising progress of the previous two decades, by the Expanded Program on Immunization (EPI), there were still 30 million children living in poor countries who were not fully immunized. Coverage was stagnating and in some places even declining. And even though new life-saving vaccines were becoming available, beyond the original six EPI vaccines, virtually none were reaching children in developing countries, those who needed them most, because they were too expensive.

For many specific societal problems that are being tackled at a local, regional or national level, a systemic approach to social impact is required, one that focuses on the relationships between different organizations, including social enterprises, and the progress toward shared objectives. In some instances, a social enterprise may be ideally suited to step up as a backbone organization, playing a key brokerage role; in other instances, they may be great 'independent', in-between organizations, with sufficient clout to inspire and mobilize the various other platform members. Governments, notably, also have a real interest to effectively support those platforms whose goals coincide with their own policy-making priorities. Support could take the form, amongst others, of co-financing of the backbone organization's operations, or of contributing as a platform participant.

Strategy 2: To help social enterprises tackle 'behavioral bottlenecks'

I also believe that there is a huge, underexploited potential for social enterprises to realize a bigger impact through leveraging relevant insights from behavioral economics. Behavioral economics combines perspectives of economics, psychology and sociology, and has made in recent years huge advances in our understanding of why we do what we do, what drives our choices. We now understand people better than ever. Some of these new insights are counter-intuitive. Most are overlooked in policy and program design of social enterprises. All are powerful.

A behavioral perspective emphasizes the big influence that context exerts on individual decision-making relative to the presumed influence of beliefs, preferences, and personality traits - something we persistently and immensely underestimate. When overloaded by choice options, we prefer the status quo. We have a tendency to delay savings, to postpone going to the gym today, etc. Widespread practical experimentation putting the insights from behavioral economics to practice demonstrates that very often seemingly minor visual cues, changes in the way a message or campaign is framed, process simplifications, or subtle reminders can have surprisingly large, positive effects on a program's take-up and compliance rates.

The numerous social enterprises that strive to lift the poor out of poverty, or avoid that people fall into poverty, in particular, stand to reap significant gains from leveraging a more profound, nuanced understanding of how poor and socially excluded people decide and behave. Conditions of poverty and social exclusion essentially create their own psychology. Living in poverty and experiencing chronic scarcity—continually not having enough money, food, time, or other necessities—imposes a tax on a person's mental bandwidth. It interferes with a person's ability to make decisions, plan for the future, and exercise self-control. In one study, scientists estimated poverty's effect on cognitive ability is the equivalent of losing 13 IQ points. Being poor means coping not just with a shortfall of money, but also with a concurrent shortfall of cognitive resources.[4] This simple, but powerful insight challenges social enterprises to examine more closely the drivers of this bandwidth tax and figure out ways to diminish those. In short, by aiming to remove 'behavioral bottlenecks', social enterprises can, I believe, truly scale the real impact they make.

In short, one underappreciated, yet compelling avenue to help scale the real impact that social enterprises make is to help social enterprises introduce small amendments to their program designs, marketing campaigns, or market propositions, that can have a big behavioral effect. In practice, this implicates the creation of a new market, where behavioral experts match with specific social enterprises. Given the public benefits involved, government may wish to promote the creation of this new market, by sponsoring the first role-model experimentations, [5] and thus raising awareness, which in turn will attract more actors and subsequent imitation.

Strategy 3: Help social enterprises break free from the home bias tendency

As a third strategy, I would like to argue that special efforts are needed to help more social enterprises scale cross-regionally and trans-nationally. In our own work supporting and monitoring the scaling trajectories of over 300 'social innovations' (not social enterprises, though over 80% of the social innovations in our study hail from social enterprises) over the past 2 years, social entrepreneurs tend to exhibit a home bias tendency. [6] They hugely underestimate the contribution that they could make elsewhere.

International networks of incubators like the BENISI and TRANSITION [7] networks, are particularly well-positioned to challenge this home bias tendency found across many 'scalers', and broaden the lens of opportunity for scaling beyond local markets. This is important if we (Austria) wish(es) to expedite the spread and reach of its social entrepreneurial initiatives across the whole of Europe. Without deliberate efforts to promote ambitious, international growth, we run a real risk that the already unequal distribution of social innovations and ecosystem support today will become even more pronounced in the future.

These international networks of incubators and the specific expertise they connect, however, require substantial upfront investments before first real benefits from joint actions and exchange of learnings can effectively materialize. Put differently, these are massive machines to build and get going. This can only be justified from a cost-benefit perspective if a sufficiently long-term focus is upheld. Relatedly, one of the real challenges for many growth aspiring social enterprises is being able to free up sufficient 'bandwidth' to successfully exploit and leverage the many opportunities – contacts and expertise – that these international networks can generate. Government-led financing schemes that are results-oriented would be warranted and much welcomed, as they, by design, not only encourage ambitious impact but also help bridge the financing gap to be able follow through on these good intentions.

To conclude, today's bulk of social entrepreneurial initiatives arguably remains too small-scale and fragmented. It is high noon for us to jumpstart a new wave of growth of social enterprise: a growth in impact. I hope the three strategies put forward here, can help inspire and unlock initiatives that effectively take impact to scale!

Professor Marieke Huysentruyt
SITE at Stockholm School of Economics and HEC Paris
Oksigen Lab

This article appeared originally in German in the White Paper on Social Entrepreneurship of the Wirtschaftsagentur Wien, Kreativzentrum departure. Find it here on ISSUU.

[1] For recent scientific findings on social enterprises based on, amongst others, the world's largest panel database on social enterprises, please refer to the SEFORÏS Project: http://www.seforis.eu/. For a recent mapping study on social enterprises across all EU member states commissioned by the European Commission (2014): seehttp://ec.europa.eu/social/main.jsp?langId=nl&catId=89&newsId=2149.

[2] This figure comes from the Global Entrepreneurship Monitor (2009). In 2015, GEM will once again collect high-level data on the prevalence of social entrepreneurial activity, so a more updated figure is on its way.

[3] For a pioneering article on this topic, see 'Collective Impact' written by John Kania and Mark Kramer, published in the Stanford Social Innovation Review in Winter 2011.

[4] For a terrific book publication on the topic of poverty and how it influences everyday decision-making, see "Scarcity: on why having too little means so much" (2013) authored by Sendhil Mullainathan and Eldar Shafir.

[5] Interestingly, the size of the government support could be made dependent on results. What is required then, is that the partnering actors (social enterprise, behavioral expert, government) agree ex ante on the desired impact and the size of financial rewards in the event of success and failure.

[6] This insight draws from the BENISI Project, funded by the European Commission. See http://benisi.eu/

[7] For more information about Transition, please refer to their website: http://transitionproject.eu/about-transition/proje...