Social Innovation & Entrepreneurship: An Adaptive Framework for Systems Change

In rare cases, a new concept serves as a foundation for a whole new field of practice and knowledge. Social entrepreneurship has the potential to be one of those rare field-creating concepts. 

Duke Center for the Advancement of Social Entrepreneurship

In any field of study and practice, there are competing perspectives on how the field is defined, particularly for a still-nascent field such as social innovation & entrepreneurship (SIE). Thematic tensions reflected in divergent definitions of SIE include an emphasis on individuals vs. organizations/networks, incremental impact vs. systems change, and enterprise vs. innovation (Developing the Field of Social Entrepreneurship; Duke 2008). While intellectual variance is a healthy part of field-building, definitions that are overly broad, narrow, or ambiguous threaten to undermine the integrity of a field.

 Social enterprise, which is often equated with the broader field of SIE, can be defined as a mission-focused venture that applies market-based strategies to create social, environmental, and economic value and uses the majority of net revenue to advance and sustain its social/environmental mission. It may be set up legally as a nonprofit, for-profit, or hybrid entity. 

Manciagli

SIE leverages the fundamental genius of markets advantageously. However, it is often those who have been excluded from equitable participation in the global economy—or even basic capital and local markets, including millions of women and small-scale farmers around the world, who are the focus of this field. Recognition of “market failure” is not a gross indictment of the market economy, a dynamic economic system that has generated historic—if inequitable and unstainable—prosperity. Rather, it is an acknowledgement that the market does some things very well and is not as effective at other things. It is, after all, a social construct and thus subject to socio-cultural-political forces, constraints, and tensions. 

Missing/incomplete markets and deep inequality are types of market failure (and, of course, policy failure—we might call this “system failure” since neither the private nor public sectors can be expected to singlehandedly resolve adaptive problems) addressed by the quintessential social innovation known as microfinance—the provision of loans and other financial services to people who lack access to the conventional financial system. Microloans provide low-income individuals with modest yet critical working capital they can invest in businesses and assets that can generate income and improve quality of life.

At its core, microfinance is modeled after a market-based system of finance that many of us take for granted. However, the key differentiating factor between effective microfinance models and those that are ineffective—even detrimental—is the degree to which microloans are accompanied by client-centered, wrap-around services—the types of holistic, auxiliary supports that define the work of the nonprofit sector. Effectiveness of the model depends on achieving positive outcomes for borrowers—the majority of whom are women—and their families/communities, such as poverty alleviation, school enrollment, and female empowerment. If we focus solely on the number of loans distributed, without critical client-centered services such as capacity-building, value chain support, social services, and peer support, microfinance models can lead to borrower vulnerability and negative outcomes (Datar et al 2008). We can see, then, that applying the best thinking and practices from both the private and nonprofit sectors—and adapting those strategies/models to the needs and contexts of key stakeholders—is an essential feature of SIE. The public sector engages by offering, for example, new legal frameworks, policy incentives, public-private partnerships, and catalytic funding that can help identify, seed, and scale the most promising models. 

The reduction of what must be a systems approach to an adaptive problem like poverty to simply the idea of “a market-based solution” is therefore both misleading and misguided. The entire framework within which SIE operates is fundamentally different than that of traditional markets. As Martin and Osberg put it, “the critical distinction between entrepreneurship and social entrepreneurship lies in the value proposition itself” (2007).

They, as well as Gregory Dees in his seminal article The Meaning of Social Entrepreneurship (2001), describe key differences between a purely market-based approach to problem-solving and one focused on mission/impact: a) while commercial entrepreneurs address problems/opportunities that primarily reflect inefficient equilibriums and for which the marketplace does a good job of assessing value, social entrepreneurs address those that the marketplace is not effective at valuing, such as public goods/harms, market failures, “wicked problems,” and “unjust equilibriums,” including benefits for people who cannot afford to pay; b) for commercial entrepreneurs, net revenue is the primary criterion for measuring value creation (even if financial gain is not their driving motivation), whereas for social entrepreneurs, it’s mission-related impact; and c) the salient value created by commercial entrepreneurs is generally prioritized/distributed to owners and investors, whereas the essential value created by social entrepreneurs is targeted primarily to a segment of society experiencing marginalization or society as a whole.

The tendency to equate SIE with social enterprise or “market-based solutions” is also driven by the term “social entrepreneurship” itself. Today, most people use the term entrepreneur to describe anyone who starts a business. As Dees points out, however, the term originated in French economics as early as the 17th century and was later elaborated by Baptiste Say and Schumpeter to “identify those who stimulated economic progress by finding new and better ways of doing things;” in other words, “the innovators and change agents in the economy.”

So, when Bill Drayton, a pioneer of this field who founded Ashoka, coined the term “social entrepreneur” in 1980, he was thinking about individuals with innovative, entrepreneurial mindsets and skillsets who could see new opportunities among dysfunctional patterns and help drive systemic change through pattern-breaking ideas. For these “changemakers,” it wasn’t about building a social enterprise; it was about creating new ways of addressing complex social challenges. Equating SIE with social enterprise has not only frustrated those who see the field as offering “an important new lens through which to view social change” (Developing the Field of Social Entrepreneurship 2008), but leaves it open to being coopted to promote more narrow ideological goals that, intentionally or not, can subvert its ability to catalyze authentic systems change and instead serve to maintain, even reinforce, the very unjust equilibrium that it professes to address. 

Pamela Hartigan, former Director of the Skoll Centre for Social Entrepreneurship at Oxford’s Saïd Business School, has argued that stripping the notion of innovation and systems change– “the essence of social entrepreneurial endeavor”–out of SIE can lead to a social enterprise industrial complex that feeds a dysfunctional system and that social entrepreneurship thus defined is insufficient to counter the forces of a global economy without systemic change (2014). She and Rebecca Henderson, Harvard Business School professor and author of “Reimagining Capitalism in a World on Fire,” are just part of a quickly growing community that sees a different path forward. 

This path includes countless inspiring examples of impact-driven enterprises that employ market-based strategies while emphasizing “shared value” and a “triple bottom line,” hybrid organizations made possible by innovations in both the public and private sectors: e.g., new legal frameworks such as the benefit corporation and private certification systems such as B Corps. Yet, while impact organizations are an essential part of the SIE toolkit, we need all of the tools that SIE has to offer; tools that I assert are intrinsic to the theory and practice of this field.

First, the toolkit includes fundamentally new ways of viewing the world, reflected, for example, in recognizing the shortcomings of relying so heavily on GDP as a measure of a country’s progress, which not only fails to adequately account for equity in society but encourages the maximization of revenue/growth without due regard to externalities or trade-offs between present and future. New frameworks such as the Social Progress and Legatum Prosperity Indices, without discounting the critical importance of a society’s economic progress/stability, incorporate measurements of well-being and opportunity. 

The toolkit also includes a human-centered approach to innovation and development, understanding people’s lives and needs and identifying what resources they need to be empowered, rather than conceiving and imposing a set of assumptions about what is good for others (which is too often a projection of what we think is good for us) from thousands of miles away, both literally and figuratively. Collaborating with and building the capacity of those communities is at the core of this approach. Collaboration, another essential tool, is also leveraged in the form of cross-sector partnerships, communities of practice, and collective impact.

Crucially, the path is guided by another tool, adaptive leadership (Heifetz & Linsky), which demands the courage to treat adaptive problems for what they are rather than trying to convince ourselves and others that we can avoid difficult change if we just pretend we’re dealing with technical problems that aren’t that messy, can be solved with a silver bullet, or can be swept under the rug by condemning a convenient scapegoat. The type of change we’re confronting (effectively addressing racial inequity, generational poverty, global pandemics, climate change, loss of biodiversity…) will require transformation in those outdated and detrimental norms that permeate the social, economic, political, and cultural domains and systems in which we’ve constructed our societies, none of which, of course, is easy. 

In short, I define SIE as a human-centered, adaptive, and systems-level process for addressing social and environmental problems through empowering, transformative, sustainable, and scalable approaches. The models led by Tostan in West Africa and BRAC in parts of Asia and Africa are powerful examples of SIE at work through such an approach. Below, I offer an adaptive framework for better understanding its application when we leverage the full breadth and depth of the tools at our disposal:

  1. Adaptive/Change Leadership; Community Engagement/Democratization; Capacity-Building/Empowerment

While technical problems require effective authority, change demands empathic and adaptive leadership that champions self-organizing; cultivates trust, capacity, and social capital; and creates the conditions that allow emerging and veteran leaders to thrive, including connecting and supporting them through collaborative networks and communities of practice that comprise a larger dynamic SIE ecosystem.

  1. Human-Centered Design for Social Innovation

Human-Centered Design places people at the center of a collaborative, interdisciplinary, iterative, empathy- and systems-driven design process that addresses adaptive problems. 

  1. Innovation & Impact Across the Sectors; Cross-Sector Collaboration; Collective Impact

The boundaries between the public, private, and civic sectors and among disciplines are being fundamentally redefined, with some of the most exciting examples of social innovation coming from those blurred interdisciplinary and inter-sector spaces and driven by cross-sector collaboration. 

  1. Impact Economy, Impact Organizations & the Social Enterprise Hybrid Spectrum

Diverse impact organizations along the Hybrid Spectrum (Alter), reflecting nonprofit, for-profit, and hybrid legal frameworks, strive for long-term sustainability; balance among ecology, community, and economic prosperity; shared value; and systems that work for everyone.

When leveraged purposefully, skillfully, and synergistically, these four pillars can lead to systems change, as depicted in the diagram below:

It is in this spirit that the SIE@FSU aims to contribute to building the field of SIE and strives:

“To inspire, prepare, and support a community of innovative, entrepreneurial & adaptive leaders who apply a human-centered and interdisciplinary mindset and skillset to systemically address the urgent social & environmental challenges in our rapidly-changing world.”    

Bruce Manciagli is Social Entrepreneur in Residence in COSSPP’s Interdisciplinary Social Science Program and has served as lead architect for FSU’s SIE Ecosystem. Visit https://www.sie.fsu.edu/our-approach to read the full paper and learn more about SIE@FSU.

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