Wharton Social Entrepreneurship – Developing the Virtuous Cycle

By Greg Pitter, IT Director, Wharton External Affairs

“So here’s the thing.  Everybody calls what they’re doing social entrepreneurship, though nobody knows what that means.  You literally have people across the spectrum, and everybody has a version that suits their purposes. What we’re trying to do is carve a niche in-between that has a measureable social metric as well as a financial metric.”

Dr. James Thompson, a researcher and staff member with Wharton Entrepreneurship, has spent the past decade carving that niche.  His work with Prof. Ian MacMillan helped form the Wharton Societal Wealth Program, which has evolved into Wharton Social Entrepreneurship, but even they may not have been prepared for the rapid increase in interest in the subject in recent years.

  • A strong combination of social and entrepreneurial goals has driven the success of many new companies, including Wharton-alum founded ventures Warby Parker and Humanistic Robotics.  These ventures now generate huge student interest – for instance, signups for Entrepreneur in Residence sessions with David Gilboa (2012 Wharton MBA and co-founder of Warby Parker) filled up within two minutes of being made available.
  • At the Wharton School, an increasing percentage of student venture ideas in programs like the Venture Initiation Program and Business Plan Competition are directly focused on social issues, such as water quality, literacy, and poverty.  Classes and clubs in the field are all generating high levels of interest.
  • High profile stories, such as Mohammed Yunus‘s Nobel Peace Prize in 2006, continue to raise awareness about social entrepreneurship, as does increased media coverage.

Social Entrepreneurship isn’t in itself a new concept, but when Thompson and MacMillan began working on the subject around the turn of the century, the body of academic research on the subject was slim.  They set out to show how social entrepreneurship could provide an alternative to traditional aid models: a new way of confronting social problems using advanced entrepreneurial methodology with the goal of creating not only a social benefit but a successful business in which financial success and social impact are interdependent.  This in turn creates a “virtuous cycle”: the successful business grows, and in doing so does even more social good even as it produces more profit.

Workers in a Zambia animal feed plant

For example, Thompson traveled to Zambia to meet with The Feed Company, a tiny animal feed producer in a region plagued with famine and poverty, and saw an opportunity to create both a thriving business and a social good.  His team applied modern business ideas like linear programming to the problem of generating better chicken feed, and paired operational and product improvements with a smart business model tailored to the local economic conditions.  The Feed Company became a big success, but more importantly, as affordable high-quality feed became available to local farmers, the whole region saw a resurgence in agricultural activity, and the company is now expanding activity elsewhere in the country and is having an impact even across the border, into the Democratic Republic of Congo.

Following on their success in Zambia, Thompson and MacMillan are investigating whether some of the same technology can be employed by a nonprofit effort in Malawi that seeks to have villages build local poultry farms, with the proceeds going to the education of AIDS orphans.

This represents just one of a number of projects Thompson and MacMillan have been involved with over the past decade, across many countries and many industries.  Not all have had as staggering a success, but all have provided new insights into the larger question of how to take a social entrepreneurship approach to society’s hardest questions.  Some of these insights have developed into papers, such as 2010’s “Making Social Ventures Work” in the Harvard Business Review, and they are currently working on a book of guidelines for the aspiring social entrepreneur.

Looking back on the way his field has caught new attention over the past decade, Thompson points out the greater value of this program and why the growing interest in the field is more than just a passing fad:

“When we started this in 2001, there wasn’t much of this going on… other people were doing stuff, but not in a focused research sense the way we were.  Now, of course, it’s a huge deal in many places… if you look at student registration for our course, the size of the clubs, we see a wave of awareness that you can’t separate profits from society.  They’re intertwined.”