H&D Partners

What Should We Expect From Social Entrepreneurs?

High hopes

We who studied economics, back in the day, were taught many different theories about the role of government in enabling economic development. But the main mantra was that one should leave private economic agents to fend for themselves, and that government should intervene where and when it spotted market failures, to correct the sub-optimal tendencies that put into peril free competition and trade. This theory was (and still is) backed by many world leaders who vouch for small government and rule under the belief that everyone will be better off if the private sector is left free to do its thing.

The world has changed. Many issues have gained momentum. Issues which were always there, but the relevance of which just a few decades back was not assimilated by the general public. There was very little sense of urgency to solve the great ecological problems that the world is facing, or to tackle the issues of the great migration waves that are affecting the way of life of millions of people, including our own. We could bring forward hundreds of examples but suffice it to say that it was just a tad over 20 years ago that the United Nations adopted the Millennium Development Goals, that were the inspiration for the ratification of the Sustainable Development Goals which made their entrance less than a decade ago. General awareness that things need to change is now stronger than ever. Better late than never, one would say.

Adam Smith said that “it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest”. Shall we stand back, and expect that just the regard for self-interest of entrepreneurs will solve everything, including the societal challenges that we face? Obviously not. That is not going to happen if we as a society leave the problems to the private sector to figure out alone. This is where Governments need to have a leading role as we are in a clear case of a “market failure” scenario.

Unfortunately, for a variety of different reasons that lead to inefficiencies and incapability of the public sector to intervene, this is not happening at a fast enough pace.  Hence, hopes have been put on a new breed of entrepreneur, the social entrepreneur: an individual who pursues novel business ideas with the potential to solve or alleviate certain community-oriented problems and world challenges.

Social entrepreneurs are poised to provide viable and sustainable solutions to resolve problems which markets can’t solve (and often contribute to create) and governments are incapable of fixing. Social entrepreneurs take on the problems the market and public sector cannot or will not address, while creating jobs and wealth and with a business model that is repeatable, scalable and of course, profitable. The hopes that social entrepreneurs can solve our problems at are an all-time high, and on the rise. This is the reason why supporting founders to set up social businesses is becoming a trend and why international organizations are funding a growing number of programs that are aimed at supporting them.

Reality check

But let’s put things into context. What our experience tells us about the entrepreneurs’ journey is that it leads to failure more often than not.  In the entrepreneurship world failure is the norm and success the exception.  It is commonly accepted that less than 1 entrepreneur out of 10 manages to find the right ingredient mix that will make their business idea successful, and this without factoring in the social component. We need to start facing the truth, that we all know, but too often forget: startups fail. For a million different reasons.

And the truth is that we are pushing entrepreneurs to venture in the entrepreneurial journey to implement profitable socially oriented businesses which will contribute to the world’s wellbeing, knowing from the very beginning that the vast majority of them will not succeed.

So, what about failing?

Now, failing we are told, is part of the entrepreneurs’ baggage of experience. “Fail fast”, “Fail forward” are buzzwords that we hear so often, that they have taken a prominent place in our vocabulary of practitioners. We encourage entrepreneurs to test, pivot, change, set aside ideas that are not validated as fast as possible, so that they can close what is not working and pass to the next innovation and business idea, with greater strength, more experience and having learned valuable lessons. All this is good, and in theory I do not find there is much to argue on the case. In theory. In practice things may be slightly different as failing a business has different meanings whether you are looking at it from the standpoint of an ecosystem player or from the perspective of the entrepreneur. And we too often consider the former and not the latter.

Failing a business is a very personal matter and entrepreneurs will have to cope with it as they deem fit. It may be a fast process which is quickly enough accepted, or it may be a slow one that needs to be fully internalized and digested. It may bring someone to decide that it is better to go job hunting or to try again with the next big and crazy idea. Whatever happens it is a disruptive process in one’s life that can have significant psychological, financial and social consequences. A process that in general is not made easier by the largely dominating culture that surrounds them, which stigmatizes failure to the highest degree.

Given that this is the case, probably the extent to which we ask social entrepreneurs to enter the journey for solving world challenges that we are not able to solve through government interventions should be re-assessed. The “fail fast” theory trembles a bit here. In ecosystems which stigmatize failure and hardly give second chances, as an entrepreneur you might want to fail a little slower, and make sure that you have tried everything that is one’s power to make things work… you will not be dealt a second hand of cards.

So, how much are we entitled to push entrepreneurs to solve our social issues, when we are the primary ones who are responsible for not providing the right environment for them to fail? I personally have not developed an answer to this, but I feel this should be a central element to be discussed and solved as it ties into the realistic expectations that we can set on social entrepreneurs.

August 2022

Giordano Dichter



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