Now is the best time to start your social enterprise. What is a social enterprise? A social enterprise is a company that takes the awesome power of commerce and focuses it on some of the most intractable issues of our time. Social entrepreneurs (those who start social enterprises) are taking on grand challenges from education to economic development, from poverty to peace, and everything in between.
Let’s look at seven reasons why now is the right time to start your social enterprise.
1. There is an Ecosystem of Support to Help You Start Your Social Enterprise
We got a lot of things wrong in the late 1990s. If you’re of a certain age, you probably remember all of the buzz about “the world wide web” or “the information superhighway”. As the dot-com bubble heated up, technology was king, valuations soared and narcissism grew. We were told that we were living in a new economy and that the old ways of measuring value did not apply. Founders in Silicon Valley and beyond had to burn piles of cash in order to demonstrate their success. From lavish launch parties to Super Bowl ads featuring sock puppets, it was inevitable that it would all come crashing down.
What we got right in the dot-com bubble was that technology would indeed reshape the business landscape in powerful and fundamental ways. Every industry would become vulnerable to digital disruptors. Just as the printing press democratized knowledge and power, code would shift the power from the gatekeepers to the masses.
Yet this revolution was about more than code. Yes, code is the new literacy, but there was something more important that came out of the dot-com bubble. A startup ecosystem was born that can be used for any kind of business, including social enterprises.
A Startup Ecosystem
As a result of the dot-com crash, founders learned how to be better founders. Investors learned how to take smarter risks. We learned about the importance of experimentation and developed an experimental mindset. We understood the growth imperative. Mentors and advisers were born. Accelerators and incubators were launched. Crowdfunding made the cost of initial capital almost negligible. As the market recovered, the cost of processing power, storage and software took an exponential plummet. It became inexpensive and easy for a kid in Mumbai to build something that would change the world.
This startup ecosystem makes possible the power of exponential change. Companies can rapidly scale to become billion dollar businesses. Entire industries are disrupted in a matter of months. In my opinion, there is no source of transformational change greater than an entrepreneur who leverages the power of the startup ecosystem.
Six Components of the Startup Ecosystem
Others have described this startup ecosystem more thoroughly and eloquently than I (For example, see work by the Kauffman Foundation or Daniel Isenberg’s Entrepreneurship Ecosystem). For simplicity’s sake I will describe the ecosystem as six components.
We often think of entrepreneurs as lone wolves – inventors tinkering in a garage alone or idealist who go against all common sense. However, research shows that entrepreneurs thrive when connected to others. Co-founders, founders from other companies, mentors, coaches and service companies all contribute to the success of an entrepreneur.
To move an idea from concept to product to profit requires working capital. Capital can come in many forms, for example bootstrapping, friends & family, crowdfunding, angel investors, venture capitalists, private equity, public equity or debt.
Why is Silicon Valley so successful? One reason is because of proximity. When founders, funders, talent and service providers are near one another, the likelihood for serendipity increases. Steven Collens of 1871 in Chicago describes this as density. Coworking implies physical proximity. If that is not possible, coworking and collaboration can happen online, though that may be second best.
Tools and Technology:
Depending on the nature of the business, tools and technology could include code from Github and cloud-based servers at Amazon Web Services. For others, tools might include supply chains, manufacturing and transportation. Tools and technology are becoming ubiquitous, but are not yet evenly distributed. However, as high-speed internet spreads around the world, tools are becoming available to billions of new people.
Universities, trade schools, large corporate employers or other startups can be great sources for talent. The availability of talent is key to rapidly growing startups.
Curriculum includes frameworks, templates, access to research and training material. Mark Moe of GSV Labs said “We need a trade school for the next generation.” I couldn’t agree more.
Using the Startup Ecosystem for Social Good
Social entrepreneurs and impact investors see in this startup ecosystem a way to rapidly scale their impact through investable, mission-driven companies. Ashoka, Acumen, Echoing Green, Fledge, The Unreasonable Institute, the Centre for Social Impact, Impact Hubs and dozens of other mission-driven organizations were either born in this ecosystem or were transformed by it. Each utilizes the startup ecosystem and contributes to it. With this startup ecosystem in place, now could be your time to start your social enterprise.
2. As the Rate of Change is Accelerating, Big-Hearted Kind People have a Unique Advantage
Do you have an intuitive feeling that the pace of change is increasing? Does it ever feel to you like the world is trying to shake itself apart? That’s because the startup ecosystem has a shadow side. The number of disruptive technologies being delivered to the marketplace is growing at an exponential pace. Entire industries are being disrupted by new players, often from outside the sector. The pace of change is so fast, even the disruptors are being disrupted. To call this phenomenon “change” hardly seems to cover it. There is a word for this. It’s called VUCA: volatility, uncertainty, complexity and ambiguity.
What is VUCA?
With the fall of the Berlin wall in 1989, and the rise of transnational threats, the leaders at the U.S. Army War College began thinking about a new kind of threat, one that did not go to battle with soldiers and tanks. Today, the story of global conflict and terrorist networks is old news, but in the late 1980s, it took a long view, based on relentless environmental scanning, to see this threat unfolding. The US Army War College coined the phrase VUCA: Volatility, Uncertainty, Complexity and Ambiguity.
VUCA in the Workplace
VUCA isn’t just on the battlefield. It’s happening in business as well. For example, in 1958, the average tenure of a company on the S&P 500 was sixty-one years. By 2012, the average tenure had fallen to eighteen years. Competitors are taking on once unassailable companies by outperforming them one product at a time. With the low cost of capital and the ubiquitous availability of technology, new entrants are killing established companies.
The Pace of Change is Picking Up
The pace of change continues to pick up. In his book Leaders Make the Future: Ten New Leadership Skills for an Uncertain World, Bob Johansen of the Institute for the Future tells us:
What will be new in the years ahead is the scale and intensity of the VUCA World. Having spent forty years forecasting, I believe that the future world will be more volatile, more uncertain, more complex and more ambiguous than we have ever experienced as a planet before.
The signs are all around us, from a widening gap between rich and poor to the increasing oscillation of the stock market. As Bob Dylan said, “The times, they are a-changin’.”
Rise of the Big-Hearted Kind People
For some people, disruptive change makes them want to pull back; to fight, fly or freeze. Our rational decision-making brain can be sub optimized as our emotions and survival skills kick in.
For others, rapid change causes them to want to connect with other people and their values. Disruption returns us to what matters the most to us. In the face of chaos, people seek authentic connections with authentic people; something bigger than themselves.
In times of transformation, big-hearted kind people rule the earth.
I see a pattern when I speak to the social entrepreneurs on my podcast, Social Entrepreneur. It looks something like this:
- Show up as your authentic self. Whoever you are, fully commit to that. You were created the way you are for a reason. You have had the experiences that you have had for a reason. The world needs your unique voice.
- Connect to something bigger than yourself. Find and follow your passions.
- Live a transparent life. Make it easy for people to connect with you. Often this happens through social media. Keep in mind, you don’t have to be an extrovert to connect with others. Just be authentic and transparent.
- Inspire others, attract a tribe. You don’t need to gather the tribe around you. Let the tribe gather around an idea bigger than you. Connect them to one another.
- Inspiration becomes influence. It is not immodest to say, the greater your influence, the greater the impact you can have.
- Use your influence to heal a wound. Find a pain and do something about it. Entrepreneurs find ways to meet business needs. Social entrepreneurs find ways to meet societal needs and through the process, create shared value.
- Change the world.
The higher the level of chaos, the more valuable big-hearted kind people become. Social enterprises that do good in the world are able to attract talent and resources. With the VUCA nature of today’s business, now could be the right time to start your social enterprise.
3. The Source of Competitive Advantage has Shifted, Favoring Nimble Social Enterprises
As a former Fortune 500 executive, I’m here to tell you, everything is changing. For some incumbent businesses, the asteroid has struck the earth. The dinosaurs just don’t know it yet. As a leader in a large global organization, it’s easy to imagine that the company is a permanent fixture, as if it has always been and always will be. But that’s not really true. When you look at the arc of human history, the modern corporation is a newcomer. If the last economic downturn taught us anything, it is that even the most staid corporations can fail.
The competitive advantage of large corporations such as standardization and mass production, are giving way to consumer trends of local, authentic, relationship-based experiences. Industrial food producers are losing market share to local, native cuisine. If your product connects people to one another, it will crush a shiny, new, yet unconnected model of the incumbent brand. What made the incumbent players successful before won’t necessarily make them winners in the connected, big-hearted experience economy.
In the industrial age, we made products that were better, faster and cheaper with no consideration of the impact on the employees, the communities in which we worked, and the planet on which we live. Today’s winners are focused on creating shared value: creating societal value and, in the process, creating economic value.
Trust has eroded in major institutions: financial institutions, churches, government, traditional media and large corporations. In the industrial age, the titans of industry made their millions on the backs of their workers and then spent their remaining days doing philanthropic work. However, in the connected economy, our work is connected to our values. Doing good works isn’t just an afterthought, it is part of our daily lives.
Consumers want products that are real, authentic and aligned to their values. Employees want something more from their careers. Corporate life is often seen as inhospitable and unstable. The best and the brightest are fleeing to start up companies or to join new purpose driven ventures. As a result, this is the best time to start your social enterprise.
4. There is a Purpose-Driven Generational Shift, Motivating Millennials to Join Social Enterprises
There is a generational shift that is taking over the workplace. For a generation that grew up with Enron, Tyco, WorldCom and the housing bubble, is it any wonder that they have lost faith in large institutions of all types? They want more out of life than sitting in a cubicle pretending to work.
According to Deloitte, 90% of millennials believe that “the success of a business should be measured in terms of more than just its financial performance”. 86% of millennials believe “business will have at least as much potential as government to meet society’s challenges.”
This is more than a trend. It is a generational shift.
Many founders are younger when they start a social enterprise. Their capital burn rate is low. They are used to a Ramen Noodle diet. No wonder so many startups come out of college university dorm rooms.
If fact, founders don’t have to reach college age to launch a successful startup. They just need a burning desire and support from the startup ecosystem. For example, consider Tom Osborn of GreenChar. When his mother became ill from the effects of smoke in their Kenyan home, he was in high school. He launched GreenChar when he was 17 years old. GreenChar produces a low smoke stove and low smoke briquettes made from agricultural waste. Today Tom is running a thriving social enterprise.
Millennials and Generation Z want to find purpose and meaning. They want to start or join a mission-driven business. That’s another reason to start your social enterprise now.
5. Older Workers are Looking for a Mission-Centric Encore Career
Younger people aren’t the only ones seeking greater purpose. Not every founder is in a dorm room, wearing a hoodie and eating Ramen Noodles. According to one large study, in some countries about 60% of those engaging in social entrepreneurship are older than 35.
Life expectancy is increasing, creating more years between retirement and the end of life. Older people have years of experience and wisdom to lend to startups. They often also have financial resources to sustain them during the first lean years of startup life.
When we live long enough, we have more and more chances to experience significant emotional events, such as an illness or the death of someone close to us. The longer we live, the more often the universe taps us on the shoulder, and whispers “Remember why you are here.”
As we age, we’re reminded of just how short this life is. Matthew Michalewicz, author of Life in Half a Second: How to Achieve Success Before Its Too Late, encourages us to do this exercise:
- Assume that, if you live in an industrialized country, your life expectancy is more or less 80 years.
- Subtract your age at your next birthday from 80.
- Multiply that number by 365.25, accounting for leap years.
- Add in the days remaining until your next birthday.
That’s how many days you have on this earth to do whatever it is you came here to do. In my case, as I write this, I will be 58 years old on my next birthday. My birthday is 176 days from now. That means that I have approximately 8,211 days left in my life to make whatever impact I came here to have.
That might help you understand why, as we age, we have a sense of urgency to make an impact. I clearly remember one corporate executive almost my age who told me, “When I joined the executive team at the age of 40, I was the youngest member of the team. That was 15 years ago. Sometimes I worry that I’m just fidgeting until I die.” But not everyone who leaves corporations are running away from their careers. You don’t have to be broken to be ready to start something new.
Many talented corporate people are moving towards a cause, not away from their career. Like social entrepreneurs at any age, they are inspired by a cause or moved by a global challenge.
As people later in their career seek ways to give back through an encore career, this might be the best time to start your social enterprise.
6. You Have more Opportunities to Meet Someone Who Needs You
The challenges that face us as a planet are massive. Climate change is beginning to have a fundamental impact on our lives. Because greenhouse gasses have a long-term and cumulative effect, the need to make essential changes is urgent. The growing global population and the rise of the global middle class makes it necessary to more than double the food production by the year 2050. Clean water is becoming more scarce, impacting families, agriculture, and energy. The list goes on.
The Millennium Development Goals, and now the Sustainable Development Goals have helped organize and focus efforts to tackle these grand challenges. From a macro level they have rallied governments, businesses, NGOs and charities to focus and coordinate efforts. They provide a way to measure our efforts.
These challenges stir the hearts of people who would be changemakers. Social entrepreneurs are inspired to make a difference. But there are 17 Sustainable Development Goals (SDGs), all of which seem quite important. And, any one of the SDGs is multifaceted with multiple players on a global scale. It’s easy to become overwhelmed. After many years and trillions of dollars, neither government nor philanthropy alone has been able to solve these issues. It can all seem staggering.
After interviewing well over 100 successful social entrepreneurs for the podcast Social Entrepreneur, I have noticed a pattern. I ask my guests to tell me about the path that led to them being social entrepreneurs. Invariably, they tell me about a personal experience. Alexandria Lafci of New Story went to Haiti and saw people living under blue tarps. Nur-E Farhana Rahman of Knotty Gal visited a girl’s school in Bangladesh and saw the school struggling to keep up with the demand. And Nokwethu Khojane of Lakheni returned to the townships of her childhood and was amazed at the ways that women collaborated to meet their needs. I could name dozens more examples. In every case, there was a significant emotional event, a personal connection, that sent the social entrepreneurs down a path to becoming a changemaker.
With global travel and global communication, it’s easier for us to experience the grand challenges on a personal human-to-human basis. You have more opportunities to experience first-hand the personal stories of those whose life is much different than our own. These encounters connect us with a person who is suffering. As we meet these people, it compels us to think that now is the right time to start a social enterprise.
7. The Regulatory Environment Supports You to Start Your Social Enterprise
While it might not be as exciting as other reasons, changes in corporate law have also created an environment that encourages social entrepreneurship.
One of the challenges of using business for social good is the legal requirement for corporations to maximize shareholder return. In the 1916 case of Dodge v. Ford Motor Company, two brothers, John Francis Dodge and Horace Elgin Dodge, sued to stop Henry Ford from withholding dividends to shareholders in order to pay employees more and to build more factories. The courts ruled in favor of the Dodge brothers, stating that…
…a business corporation is organized and carried on primarily for the profit of the stockholders.
Because the courts have ruled that the corporation is obligated to maximize shareholder return, activist shareholders have been able to constrain companies who sought to deliver more value to employees, communities, the environment and society in general. Companies have sought ways to serve all of their shareholders while reducing their liability.
In the face of this challenge, legislators in countries and states have passed new laws allowing companies to simultaneously create profit and social benefit. Depending on the country and state, these companies might be called social enterprises or benefit corporations. A benefit corporation is a for-profit entity that pursues social and environmental goals along with financial returns. The companies write into their charter their intent to create social benefit. Investors are therefore aware of this intent when they decide to invest.
In a benefit corporation, directors now have legal protection when pursuing a mission that benefits society and the environment but does not maximize profit. In the United States, as of this writing, 30 states and the District of Columbia have laws establishing the formation of benefit corporations. And, with this legal protection, this is the time to start a social enterprise.
The Seven Reasons to Start Your Social Enterprise Now
I’ve named seven reasons why now is the best time to start a social enterprise:
- There is an ecosystem of support to help you start your social enterprise.
- As the rate of change is accelerating, big-hearted kind people have a unique advantage.
- The source of competitive advantage has shifted, favoring nimble social enterprises.
- There is a purpose-driven generational shift, motivating millennials to join social enterprises.
- Older workers are looking for a mission-centric encore career.
- You have more opportunities to meet someone who needs you.
- The regulatory environment supports you to start your social enterprise.
What did I miss? What would you add? Tell me in the comments below.