By Ian C. MacMillan, Dhirubhai Ambani Professor of Innovation and Entrepreneurship, and James D. Thompson, Director of the Wharton Social Enterprise Program
We recently published a free ebook, The Social Entrepreneur’s Playbook: Pressure Test Your Start-Up Idea—Step 1, through Wharton Digital Press. It summarizes part of our field research on the subject of social entrepreneurship, reflecting 26 years of combined experience. It explains the first step in the process of creating a social enterprise, testing the idea, that is designed to make modest profits while attacking and ameliorating a social problem. We provide a series of practical and pragmatic tools that people should use when starting a social enterprise.
We have developed a tough-love approach that helps aspiring social entrepreneurs systematically decrease uncertainty and significantly increase the likelihood of a successful launch. The free book focuses on the essential due diligence process you need to carry out before deploying resources to your effort, which may be noble of purpose but vainglorious in outcome. This due diligence starts with a systematic analysis of the scope and source of the social problem and the “market” for the solution to the problem. Often times, well-meaning people attempt to deliver a solution that the beneficiary has no interest in receiving, thereby wasting resources that are needed elsewhere to ease distress. As part of this market analysis, the would-be social entrepreneur needs to select a target segment to start the ball rolling and accomplish initial traction.
The next step in the due diligence process is to develop a beneficiary experience table that maps out, in detail, the entire experience that the beneficiary must go through in order to receive the benefit. Often times, all the benefactors think about is the actual delivery of a service, without thinking about the types of problems the beneficiary might face in getting to the place where the benefit is delivered. Such problems may include getting reliable power supply and water supply in the remote areas, letting people who could benefit know that the service is actually available and getting people to repair equipment and source spares for that equipment in remote areas. Subsequently we encourage entrepreneurs to create a deliverables table that specifies, in detail, everything that the entity must deliver for the beneficiary experience to work. The reason this is important is that any step in this experience that cannot be delivered by local infrastructure adds considerably to the cost of operations, since then the enterprise needs to deliver that missing step.
The ensuing step in the process is to look carefully at what the most competitive current alternative is that the beneficiary is using. In many cases the people who are at risk have been enduring, and surviving, without the service being offered, so one of the most common alternatives is for the beneficiaries to simply do nothing and continue to endure what they have been through, for perhaps generations. In many cases, recipients of the benefits may have to give up extremely limited resources in order to receive that benefit, and they may well be inclined to simply continue as in the past. It is important for the would-be creators of the enterprise to recognize that there is always some form of competitive alternative, with which the enterprise needs to compete. In one case, we looked at the competition for funds for a drinking water disinfectant treatment. It would be competing with the percentage of the tiny household budget that would be spent on cigarettes for the husband of the home.
With this first step of testing the idea completed, the would-be benefactor will have done enough to justify moving to steps two and three, which includes more detailed analyses and planning necessary to launch and scale a social enterprise. The expanded edition of the book, which will publish in the fall, addresses the full process for creating a successful enterprise, which stems from what we have learned in working with start-ups: The Social Entrepreneur’s Playbook: Pressure Test, Launch, and Scale Your Enterprise—Steps 1-3. Not only will this book be useful for people wanting to start an entrepreneurial enterprise with a social objective, but we feel it can be used by NGOs, not for profits, and charities. Many successful entrepreneurs who are reaching the stage where they would like to pay forward might feel their donations are better spent by expecting potential fundees to work through the process MacMillan and Thompson propose before asking for funds.
If you are at all interested in the topic, please download the free ebook and take the survey, which Wharton Digital Press is conducting in order to allow social entrepreneurs and those who support them to provide feedback that will shape the expanded edition. For more information, visit http://bit.ly/SocEntPlaybk. If you find the ebook helpful, please email it to your colleagues and share it with your followers on social media.
Ian (Mac) C. MacMillan is the Academic Director of the Sol C. Snider Entrepreneurial Center and Dhirubhai Ambani Professor of Entrepreneurial Management at the Wharton School, University of Pennsylvania. Prior to joining the academic world, he was a chemical engineer, and gained experience in gold and uranium mines, chemical and explosives factories, oil refineries, soap and food manufacturers, and the South African Atomic Energy Board. He has also been a director of companies in the travel, import-export, and pharmaceutical fields in the United States, South Africa, Canada, Hong Kong, and Japan. He has also consulted for numerous companies, including Microsoft, DuPont, General Electric, IBM, and Citibank. Mac is the author or coauthor of books and articles on new ventures, innovation, organizational politics, and strategy formulation.
James D. Thompson is Co-founder and Director of the Wharton Social Enterprise Program. His areas of research focus are social entrepreneurship, building future markets, and investment under conditions of high, or near-Knightian, uncertainty. He has worked in Africa for more than two decades, with firms ranging from small to large, across multiple business sectors. He currently serves on the executive board of a venture capital–funded company in Philadelphia and is on the investment advisory committee of a Swiss social entrepreneurship investment fund.