Key Messages
Social Entrepreneurship: How Capitalism 2.0 Is Transforming The World For Good
Capitalism 1.0 is great for creating wealth, but it provides very little in the way of addressing global challenges such as climate change.
But with capitalism 2.0, we now have an effective approach to doing business that looks to both create wealth and help save the world.
Social entrepreneurship is the key element of this new version of capitalism, allowing businesses to not just sell products, but also make a measurable difference in curbing poverty and disease while providing essential infrastructure – so everyone benefits from the company’s success.
With these sections of The Business of Good Book Summary, you’ll learn why relying on charitable giving alone isn’t enough; why today’s social entrepreneurs are mostly millennials; and how successful social entrepreneurship should focus on this cause rather than the symptoms of problems.
So if you want to know more about how capitalism 2.0 could drastically improve how we do business today, The Business of Good is certainly worth checking out!
What Is Social Entrepreneurship? Social Entrepreneurship Is An Approach To Doing Business That Focuses On Making A Positive Social Impact As Well As Generating A Profit
It is possible for a social entrepreneur to have a positive impact on society while still making money and growing their business.
Just like an impact investor, a business can make a social impact too, not just through donations or setting up sustainability departments; it’s about making social good as central to the business model as profits.
One example of this is the author’s own real estate company.
By donating a portion of proceeds from each deal closed to a charity that builds wells in communities without clean drinking water, they were able to use this as a competitive advantage to attract new clients.
This shows that by focusing on their social mission, they were able to reach success in both their business objectives and overall positive societal impact.
It has been proven that these investments are effective: A survey done by the Global Impact Investing Network (GIIN) and JPMorgan Chase found that in 2014, 146 investors invested ten point six billion dollars and met or even exceeded expectations for financial returns and the resulting societal benefit for those investments.
Therefore, with the right attitude and approach, it is definitely possible for social entrepreneurs to make money while having a positive effect on society by investing in their business.
The Dangers Of Poorly Managed Charities: How Unchecked Costs Can Have Negative Effects On Communities
When it comes to giving to charity, mindless donations don’t do anything in the long run.
In some cases charities may be cutting back costs more than necessary and this can change their operations from actually changing a community for the better, to inefficiently dealing with administrative operations that don’t make any real difference.
When cost-cutting becomes too extreme then potential donors may lose faith and not want to contribute any money.
Worse still, there may even be negative impacts on a particular community.
For instance, when the National Football League sent T-shirts of the losing Super Bowl team to African countries without consulting local traders, they caused damage to the local clothing industry which left people worse off than before.
This serves as an example of why organizations need to critically evaluate their charitable efforts and make sure they are making a tangible difference on those who really need it.
Charity should not be about taking away responsibility or simply diverting funds; it needs to have a genuine impact on people’s lives and livelihoods.
Tapping Into The Bottom Of The Pyramid: Realizing The Potential Of Developing Economies
The potential market of the poorer communities in the world is immense and too often overlooked by most entrepreneurs.
With over four billion people living in developing countries and earning less than $1,500 a year, this demographic represents around $5 trillion in untapped opportunities.
Not to mention, these individuals make up over 50 percent of the world’s population.
Social entrepreneurs can no longer afford to ignore this massive opportunity.
Despite having low incomes, these people still need products that make their lives simpler and safer.
Companies such as Unilever have already begun targeting this market – in 2015, 60 percent of their sales derived from emerging markets!
Further, companies such as Medical Technology Transfer and Services (MTTS) have been able to successfully launch products tailored to these communities; their sleek device was specifically designed to hold one baby at a time so that those treated received the correct amount of light.
At heart, everyone simply wants quality products with easy design.
Social entrepreneurs should keep this truism in mind when tapping into this hugely overlooked yet vast untapped potential customers in the poorer communities of the world.
Kickstarters And Millennials: Together Taking The Lead In Capitalism 2
Today there are two powerful forces that are driving the transformation to capitalism 2.0: kickstarters and millennials.
These change-makers have the potential to create a lasting impact on society.
Kickstarters are wealthy donors who want to make sure their money is used for maximum benefit and results.
As an example, eBay co-founder Jeff Skoll formed the Skoll Foundation and has invested over $500 million in social ventures.
Through this initiative, recipients annually receive not only financial support but also institutional help, as well as access to a network of previous Skoll Award recipients.
This means that crucial funds are provided to those who wish to promote positive change in our world.
The millennials – those born between 1980 and 2000 – are equally essential in transforming capitalism 2.0.
Growing up with smartphones and powerful online technology have made them tech savvy while also having witnessed societal issues reach crisis levels, they now aspire to use their entrepreneurial spirit in order to start businesses which bring about tangible changes into our world.
Research even shows that twice as many millennials want to be entrepreneurs than climb the corporate ladder, indicating a keenness for the opportunity for reforming our society on their own terms through business ideas which combat major humanitarian problems faced today.
Socially minded investors or kickstarters therefore provide much needed funds for committed millennials who wish to change the world with their ideas from startups and new innovative enterprises.
Keys To Starting A Social Enterprise: Address The Root Cause Of Problems, Measure Impact, And Scale Up
Successful social entrepreneurs understand the importance of getting to the root of an issue, rather than just treating its symptoms.
They focus on solving problems instead of simpy offering solutions to surface level issues.
African Clean Energy is a great example of this, as they looked at why people were falling ill in African communities due to poor ventilation and open cooking fires–and developed a new environmentally-friendly stove as a solution.
It’s also important for social entrepreneurs to measure their impact and effectiveness.
This means noting how many people have access to their product or service, or how much money was spent relative to the income generated.
By measuring these metrics, you can assess whether your organisation’s efforts are making a real difference in terms of solving the problem at hand.
Additionally, knowing these numbers can also help you scale up your efforts in an efficient manner without wasting resources or cash.
The Key To Lasting Social Impact: Scaling Your Business And Embracing Risk
If you want to make a difference with your business, scale it so that your product or service becomes widely accessible.
To illustrate, social enterprise d.light utilized dropping costs of solar panels and LED bulbs to design an affordable, solar-powered light for people without electricity.
With millions of customers in 60 countries now using their product, the company is not only profiting but contributing to a better environment and quality of life.
On the other hand, don’t be afraid of failure if things don’t go as planned.
For instance, New York City worked with Goldman Sachs on a government program to reduce recidivism rates in juvenile detention centers.
Even though results were not what was hoped for, investor interest in social impact bonds stayed strong and Goldman continued forward with similar programs such as one aimed at increasing preschoolers’ reading levels.
Ultimately, scaling your socially-minded business while being prepared for any outcome can be key elements in ensuring a lasting impact and overcoming fear of failure.
Wrap Up
The main takeaway in The Business of Good is that it’s possible to make a positive social impact and still make a profit.
Social entrepreneurship has become an integral part of capitalism 2.0, allowing us to all benefit from the good that can come from this new era.
To ensure your company’s social impact is properly evaluated, be sure to utilize the IRIS platform or Impact Reporting and Investment Standards.
IRIS is available for free online for those interested in measuring return on investment related to their firm’s performance metrics.
At the end of the day, this book highlights that we don’t have to choose between doing well financially and doing good socially; instead, we can achieve both by becoming part of today’s growing trend of social entrepreneurship.
