Innovation at work in Social Entrepreneurship by Sommer Dinning

Forward by B. Ray Dinning, JD, LLM (taxation)

Social Entrepreneurship is alive and well in Universities and Governments worldwide with every major MBA Program educating future business leaders about the social benefits of ventures that make money and help others.  With roughly 2/3rds of the world’s population living with an income of $2 a day, the applicability of technology and products to this burgeoning world market is a new phenomenon.  Bill Gates, Richard Branson and others are finding new ways to market products and services to this market.  Innovation is a key component to this process as prducts must be re-engineered to be affordable to the world market.  For example, the wind up radio, wind up computer, cell phones and other technology are currently being marketed and sold to this demographic group.  In Africa, this challenge is even greater and the need more prolific.  One thing is certain:  social entrepreneurship is the wave of the future in world markets.

The Role of Innovation in Social Entrepreneurship by Sommer Dinning (Regent University October, 2009)

The role of innovation in social entrepreneurship in our global economy has never been greater than today. With over four billion people living below the poverty line with household incomes of less than $2 per day, the world’s population is focused on day-to-day living and the necessities of life such as food, water, shelter and health care.  To combat these basic but daunting needs, social entrepreneurs must be creative to innovate new solutions, they must be organized and structured in their corporate culture and they must work in tandem with governmental, non-profit and for-profit organizations to achieve sustainable change to the world’s basic issues.

Innovation is one of the keys to taking existing technology to make it profitable and sustainable in its application to meeting the basic needs of the poverty stricken masses.  Bessant and Tidd (2007) noted that “the challenge of meeting their basic needs for food, water, shelter and healthcare require high levels of creativity—but beyond this social agenda lies a considerable innovation opportunity” (p. 308). The opportunity is how to mobilize social entrepreneurs, universities, scientists, nonprofits and the business community to tackle these issues in a profitable and sustainable manner. Bessant and Tidd notes that “Social entrepreneurs recognize a social problem and use traditional entrepreneurial principles to organize, create and manage a venture to make social change” (p. 314).

Professor Jeffrey Sachs, economist and founder of Earth Institute at Columbia University argues that the world must begin “mobilising global science and technology to address the crises of public health, agricultural productivity, environmental degradation and demographic stress confronting these countries. In part this will require that the wealthy governments enable the grossly underfinanced and underempowered United Nations institutions to become vibrant and active partners of human development.”  See Center for International Development at Harvard University dated August 14, 1999 (Speech of Professor Jeffrey Sachs).

Thorough innovation and creative application of existing business models to the problems of the poor has led to major leaps in social entrepreneurship in recent years. “In many cases it is an individual-driven thing, where a passion for change leads to remarkable and sustainable results” (Bessant & Tidd, 2007, pp. 300).  For example, Professor Mohammed Yunus, Founder of the Grameen Bank and Nobel Prize Winner used creativity and innovation to create a micro finance bank of the poor.  His efforts have ignited the quest to encourage innovation to solve the world problems faced by four billion people.  For example, Massachusetts Institute of Technology has instituted its IDEAS Competition to promote innovation to aid world issues.  The year’s MIT Yunus Challenge “calls for innovative small-scale energy storage solutions to help alleviate poverty. Solutions must address the needs of people living on less than $2 per day.”  See www.mit.edu/ideas/www/challenge.htm

One of the greatest challenges to innovation and social entrepreneurship is that the profitmaking objective driving business and the implementation of capital to make money is not the primary motivation in social enterprise.  As Bessant and Tidd note, “Social entrepreneurs are “concerned in some way with making the world a better place.” While social entrepreneurship is rapidly gaining momentum in universities and government sectors worldwide, mobilizing capital is obviously a challenge in social entrepreneurship as capital markets generally require a satisfactory return on investment.  This requires the social entrepreneur to make their project attractive to capital markets mainly by showing the social impact and public relations benefits. To overcome these obstacles, the social entrepreneur must be more vigilant, structured and professional to attract necessary capital.

As the social entrepreneur, once seen as a dreamer or frugal missionary, becomes more business-like, professional and structured, capital providers will follow.  For example, the Government of Scotland recently launched its “Social Entrepreneurs Fund is aimed at individuals who want to set-up and run a business with a social and/or environmental purpose.  The fund will provide financial and business support to help get new enterprises off the ground.”  Additionally, through innovative ideas, traditional capital models can be granted incentives to fund social ventures.   For example, on July 1, 2009, South Africa enacted a provision which promotes the creation of social entrepreneurship venture capital funds for micro enterprise and small business funding.  Provision 12J to the Income Tax Act allows for a 100% tax deduction to South Africa individuals and businesses which invest in new venture capital funds which promote social entrepreneurship.  Here, a traditional funding source, private venture capital, was given creative incentives to pay for new social enterprise businesses.  The incentive is that the individuals receive both the investment and a 100% tax deduction.  Thus, innovation plays a significant role in the implementation of capital and funding sources into social entrepreneurship ventures.

Partnerships are another key factor in utilizing innovation in social entrepreneurship.  In a 2002 Report entitled “Working for a Sustainable World”, President Bush and then Secretary of State Colin Powell noted that “Partnerships are Key” in addressing the world’s needs in a meaningful and sustainable manner.  Working for a Sustainable World – US Government Initiatives to Promote Sustainable Development (August 2002).  President Bush notes in his report that government must promote partnerships with nonprofits, universities, for-profit business and science and technology to achieve sustainable results.  President Bush also emphasizes that the nonprofit sector provided over $4 billion into sustainable development and social entrepreneurship and that only through partnerships can these resources be harnessed into lasting change in tackling the world’s basic needs.

The role of innovation and creativity, good business structure and governance and partnerships in seeking to meet the needs of roughly 60% of the world’s population through social entrepreneurship is gaining rapid credence.  This also follows the Biblical model of wise stewardship in Luke 16:1 and the requirement for innovation and stewardship in the Parable of the Talents in Matthew 25:4-30.  Finally, many of the 4 billion people in this world who are needy are the widows, the orphans and the destitute.  In James 1:27, God gives us insight into our role as wise stewards and how we must use our innovation, good governance and creativity for good.  Here, in clear terms, the Bible provides that the “Religion that God our Father accepts as pure and faultless is this: to look after orphans and widows in their distress and to keep oneself from being polluted by the world.”  Social entrepreneurship and harnessing the power of innovation to promote social goodness is not only Biblical, it is becoming a social force for the 21st century.  Through this creative spirit, we all have a role in utilizing our talents and ingenuity for good in the most pure and faultless pursuit – the care of those in need around the world.

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