Entrepreneurial innovation is one of the most powerful forces shaping the modern world. The results are all around us. From smartphones to social media to streaming services, the creations of entrepreneurs have had a profound impact on our daily lives. Recently, a new form of entrepreneurship has emerged that promises to be an even greater engine for good.
The field of social entrepreneurship has a long history, stretching all the way back to humanitarians like Florence Nightingale (who revolutionized the nursing industry in 1860). However, in the last thirty years, social enterprises have seen unprecedented growth in the private sector, becoming trailblazers of innovation.
Due to its sudden surge in prominence, the field of social entrepreneurship is still developing. However, it is important consumers understand the basics. One of the most frequently misunderstood aspects of social entrepreneurship is how it differs from more traditional entrepreneurship.
Value Propositions for Traditional and Social Entrepreneurship
The key difference between traditional entrepreneurship and social entrepreneurship is in their differing value propositions. A value proposition (VP) is “a business or marketing statement that a company uses to summarize why a consumer should buy a product or use a service.” In other words, a value proposition is why the company thinks their product or service has value.
For the traditional entrepreneur, the value proposition includes attributes such as price, quality, and convenience. This is why the vast majority of commercial goods advertised on cable television are portrayed as affordable, stylish, effective, and accessible. These are the attributes that typically draw consumers to products.
For the social entrepreneur, these attributes of price, quality, and convenience are still important. However, a social enterprise's value proposition includes an additional component. Social enterprises value their products and services for their transformative power to benefit a disadvantaged segment of society, particularly communities which are excluded, marginalized, or disenfranchised. This emphasis on the social value of a product or service is often referred to as the social value proposition (SVP).
So why is this important?
Adam Smith, the founder of modern economics, describes self-interest as one of the two primary economic forces in a free market (the other being competition). He famously stated in his book, The Wealth of Nations, “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 interest.” Similarly, the baker's customers are motivated not by generosity to the baker but by self-interest.
Social entrepreneurship is helping redefine the free market's definition of self-interest. It is understood that people are happier when they give to others and that happier people are more charitable. Yet, until recently, our natural charitable instincts have not been capitalized on by the free market.
With the inclusion of SVP's into a company's business plan, consumers have the opportunity to find a new value in the products and services they buy. Through their support of social enterprises, consumers can more accurately represent what they believe in and support social change.
There are plenty of new, growing social enterprises you can support. For example, Fair Trade organizations, such as The Etho, seek to provide ethically sourced goods from all over the world and, in the process, address the crisis of global poverty. A lot remains to be seen about how social enterprises will transform the market. But, with consumer-support, these companies have tremendous potential to create a more productive market and a healthier culture of consumerism in the process.