Social Entrepreneurship Flashcards
1
Q
What is an entreprenuer and what are the three classes?
A
Def; A person who takes non-isunrable risk
THREE classes:
1) German; Schumpeter –> innovation
2) Chicago; Uncertainty
3) Austrian; Opportunities
2
Q
What FOUR competences does an entrepreneur need?
A
1) Innovation
2) Brokering (create access to info and relation)
3) Championing (mobilize enthusiasm)
4) Sposoring (mobilize financial resources for support)
3
Q
What are the drivers of SE?
A
- Crisis of the traditional welfare state
- Raising competitive pressure on non-profit
- Raising competitive pressure on profit sector, to find new sources of competitiveness
4
Q
What is the difference between the narrow and the extended view on SE?
A
Narrow:
- SE concept as the most recent innovation in the nonprofit sector
- A way to improve nonprofits’ operational efficiency
Extended:
- SE as a NEW, INDEPENDENT and cross-boundary field of inquiry
- The ability to actively contribute to social change with creativeness, innovation and economic sustainability
5
Q
Definition of SE
A
Social Entrepreneurship is an innovation process targeting social disequilibria through balancing conventional business logics with an attitude to serve community as typically happens in the nonprofit sector
6
Q
List the 5 key featurs of SE
A
1) Value-driven and human-centered
2) Professionalism
3) Innovative
4) Sustainability
5) Scalability
7
Q
What similarities and dissimilarities exist between SE and traditional entrepreneurship?
A
Similarities:
- Tension towards innovation
- Change-friendly mindset
- Problem-solving orientation
Differences of the SE
- Diverging long-run objectives
- Priority on social value creation
- Openness to third-part scalability
8
Q
What similarities and dissimilarities exist between SE and NON-profits?
A
Similarities:
- Community stewardship
- Participatory decision making models
- Stakeholder engagement
Differences of the SE
- Priority on PLANNING
- Focus on being efficient
- Balance between economic success and social aims
9
Q
What has prevented the development of a common school of though on entrepreneurship?
A
- Overemphasis on who entrepreneurs ARE rather than on what they DO
10
Q
Describe the 5 steps in the entrepreneurial process:
A
1) Identification
2) Evaluation
3) Formalization
4) Exploitation
5) Scaling-up –> then back to 1)
11
Q
In the context of the entrepreneurial process, describe the identification phase
A
- Identify an unfilled social problem and match it with a SOLUTION, which is an initiative breaking up pre-existing plans
12
Q
In the context of the entrepreneurial process, describe the evaluation phase
A
Two areas to evaluate if the idea identified is good:
1) Social value potential based on; Prevalence, relevance, radicalness, urgency and alternatives
2) Economic viability
13
Q
In the context of the entrepreneurial process, describe the formalization phase
A
Translation of the idea into a unique value proposition
1) Develop a mission statement to enhance legitimacy and attractiveness
2) Make commitments
14
Q
In the context of the entrepreneurial process, describe the exploitation phase
A
This is the execution of the opportunity.
Done by:
- Acquiring and organizing resources and competences
- Setting up an operating model
- Setting up an organizational model that fit legal arrangements
15
Q
In the context of the entrepreneurial process, describe the scaling-up phase
A
- Scaling to maximize social value
Three levels of scaling:
1) Programs (package of procedures and routines)
2) Organizations (autonomous legal entities)
3) Principles (Guidelines and value systems)
16
Q
How can we define a social innovation?
A
Innovation –> effective execution and diffusion of an idea
Innovation has to hold:
1) Novelty (not original)
2) Improvement (radical versus incremental)
3) Sustainability (triple bottom line)
17
Q
How does Phills et al. (2008) define a social innovation?
A
A novel solution to a social problem that is more effective, efficient, sustainable, or just than existing solutions and for which the value created accrues primarily to society as a whole rather than private individuals
18
Q
What are the FOUR types of social innovation?
A
1) New products or services
2) New process for production or delivery of existing good
3) Delivery of existing goods to underserved markets
4) New organizational or industrial structure
19
Q
Where does social entrepreneurship come from/what prompts are needed?
A
It comes from COMPASSION, which is made up of:
1) Traits (vision, creativity)
2) Background (grow up where?)
3) Behavior (Courage to criticism, failure approach)
20
Q
What are the 7 traits and skills an entrepreneur needs?
A
#1 Multiple stakeholder management #2 Attitude to educate #3 Social impact quantification #4 Co-creation of products and services #5 Social problem-solving #6 Search for sustainability #7 Social value over financial results
21
Q
What role does networks play in the context of innovation?
A
Brokers of networks often obtain information before everyone else, thus if you can situate yourself between two networks, you are in a highly innovation-prone position
22
Q
What are the 6 factors that foster entrepreneurial creativity?
A
- Associate ideas (connect information)
- Networks
- Have a “watchful” eye
- Challenge the “status quo”
- Experiment and test (failure is not dangerous)
- Learn from failures
23
Q
Two types of innovation from within?
A
1) innovation from the lab
2) grass-root innovation (bottom up)
24
Q
Four types of innovation from outside?
A
- Deconstruction –> copy
- Outsourced innovation
- Open innovation
- Design thinking
25
What defines design thinking as an innovation type?
HUMAN CENTERED --> based on observations of users and how they experience the solution
Definition: Design thinking is a human-centered approach to innovation that draws from the designers' toolkit to integrate the needs of people, the possibilities of technology, and the requirements for business success
26
What are the five processes in design thinking?
Circular:
1) Define (challenge and goal definition)
2) Gain empathy (observe customers)
- tools: direct observ., personas, scenarios
3) Ideate (quantity > quality)
- diverge and then converge --> be crazy
4) Prototype (get visuable and tangible)
5) Test (observe client reactions)
--> back to 1)
27
Why is planning important in SE?
1. Growing complexity and dynanism of current competitive dynamics
2. Resource scarcity and uncertainty prevails
3. Planning is critical to systematically formalize the entrepreneurial idea
4. Identify sources and resources while recognizing and anticipating organizational challenges
28
Is planning enough? and what are the main reasons why?
NO! not enough, planning fails because of lack of:
- Lack of planning skills
- Financial market (liability of small- and newness)
- Cultural capital (info. assym. and cultural distance)
- Market (cycle, lack of awareness)
- Symbolic capital (legitimacy, reputation)
- Institutional context (regulation)
- Entrepreneurial team (conflicts, heroes syndrom)
29
What can be used as a useful tool for a pre-feasibility asessment?
Theory of Change (ToC)
30
What is ToC and what are its components?
ToC = a business plan in a nutshell:
First, One sharp sentence describing how change will happen in a given context
Second, FOUR components:
- Problem/challenge
- Solution
- Approach/activities
- Impact
AND ASSUMPTIONS
31
What is the important outcome of the pre-feasibility assessment, which could be ToC?
Situating an entry;
- Replication of existing model
- First-mover
- Public sector as main client
- Social franchising
- Buying an existing business
- Transforming (existing initiative into SEV)
32
What is an important extension of the feasibility assessment (a tool), that helps firms formalize their plan?
The Social Business Model Canvas,
Remember that in SE we have stakeholder value > shareholder value
Helps you understand:
1. Value proposition
2. Value creation and delivery (key activities and resources)
3. Value capture (cost and revenue)
4. Value network (customers, suppliers)
33
How do we define a traditional business model versus and social business model?
Traditional: articulates how a startup (or company) will turn resources and capabilities into economic value
Social: adopts an organizational-level and system-level
perspective, builds on the triple-bottom line approach to define purpose and measure performance, while includes a wider range of stakeholders
34
What are the 9 components of the Social Business Model Canvas?
1) Customer segments
2) Value proposition
3) Customer relationships
4) Distribution channels
5) Revenue streams
6) Key activities
7) Key resources
8) Partners
9) Cost structure
35
What is important to consider in the SBM regarding customer segments?
- Beneficiaries not necessary = customers
- Different groups of beneficiaries (organizations, people, institutions)
- Social needs are latent and complex, beneficiaries rarely know they need it
- Willingness to pay may not exist
36
What is important to consider in the SBM regarding value proposition?
it is a Bundle of products and services (and related benefits) that create value for a specific customer segment
37
In relation to the SBM, what different types of customer relationships exist?
Relationships differ between various customer segments!
- Personal assistance
- Dedicated personal assistance
- Self-service
- Automated services
- Communities
- Co-creation
38
What is important to consider in the SBM regarding revenues?
- Economic viability: price > cost
- Volume: set price to maximize social benefit
- Competition: Define pricing on what competitors are doing
39
In the SBM, what is meant by social value?
Social value creation refers to the ability of an institution, organization or individual to produce a tangible, durable change as a result of a certain action in a given field of intervention
40
What is important to consider in the SBM regarding resources?
What resources are the most important to the organization:
- Structural capital
- Intellectual capital
- Human capital
- Financial capital
- Symbolic capital
41
What is important to consider in the SBM regarding partners?
- Legitimacy versus liability of strangers
- Search for complementary assets to be exploited through partnerships
- Search for coherent partners (missions, managerial styles, workforce composition, target market, offering, culture, timing and evaluation styles)
- Cross sector boundaries!
42
What is important to consider in the SBM regarding costs?
- Fixed versus variable structure
| - potential negative externalities; unintended consequences for the beneficiaries
43
What are the lessons learned from building the Grameen business model, which has been formalized into a social business model?
Three are similar to those of conventional business model innovation
1. Challenging conventional thinking
2. Finding complementary partners
3. Undertaking continuous experimentation
Two are specific to social business models:
4. Recruiting/favoring social-profit-oriented shareholders
5. Specifying social profit objectives clearly and early
(6. Remember to involve key stakeholders along the process of defining the business model)
44
What is the third sector? and why is it important?
The sector containing organizations that are neither public nor private --> social businesses
Important since sector identity and prominence remain powerful, with third sector players considered as central players in the policy arena, and as sources of change, innovation, and closeness to citizens
45
Name four different types of third sector organizations
Remember; WIDE variety of legal structures exists
1. Private & organized
2. Public (quasi-public) goods
3. Value-driven
4. Limited or NO profit distribution
46
In terms of the Third Sector what happened after the GFC in 08/09?
- Interest in more inclusive and pluralistic economic systems, to answer new growing social needs
- To diffuse this need we need a new legal infrastrucutre to help define SOCIAL ENTERPRISE across borders
47
According to the European Commission, what defines a social enterprise?
OVERLAP BETWEEN THREE CIRCLES:
1) Entrepreneurial dimension: continuous economic activity
2) Social dimension: must pursue social goal
3) Governance dimension:
- must have limits on distribution of profits
- must be independent
- must have an inclusive governance
48
Is legal forms of SE in Europe homogeneous?
NO! very heterogenous, since no international rules exist
- Heterogeneity ranges from legal forms to statuses
- In general, Southern Europe lacks behind in legally defining a social enterprise
49
What kind of activities can a social enterprise engage in?
- Service activities --> economic integration (education, housing, healthcare)
- Expressive activities --> (sports and recreation)
- Strengthening democracies
- Environmental activities
- Solidarity with developing countries
50
In Italy, what two legal forms a social enterprise exist, and how are they defined?
- Social Enterprises (only a legal status): permanently and principally carries out an economic activity aimed at the production and distribution of social benefit goods and services, and pursues general-interest goals
- Cooperatives: Legal entities aimed at the promotion of human cooperation and social integration of the citizens through:
▪ Type A The management of services in the health and education sector;
▪ Type B: Employment of disadvantaged or disabled people (at least 30%).
51
What are some of the rules of being recognized as a social enterprise in Italy?
- It is a legal status only, not a legal entity
- Social entrepreneurial activity must represent 70% of revenues
- No distribution of dividends allowed
- Asset lock if default
- Workers have to participate in decision-making
- Capped salaries for all employees, mgmt, BoD
- Capped returns for loans and bonds (6%)
52
What are the pros and cons of the Italian Social Enterprise legal system?
Pros:
- Limited liability
- Social brand
- New legal model for religious entities
- Issue of financial instruments (Bonds)
Cons:
- No tax incentives except for Social Cooperatives
- No remuneration of private capital (charity format)
- No market for the shares of the SE
- Limited to few social businesses (hospital, education, art but no sports or production of consumer goods)
53
Which legal form is more dominant in Italy in regards to social enterprises?
Very few "Social enterprises" < 1000
| Dominant form is the "Social cooperative" by many thousands
54
What did the reform of the Italian SE case do?
- Increased the number of sectors qualifying for SE
- Openness to limited forms of capital remuneration
- Fiscal incentives (100% tax-shield, if income is re-invested)
- Number of employees > number of volunteers
- Balancesheet is now compulsory and MUST contain the social impact also
55
What is a Community Interest Company? (CIC)
in the UK: a type of limited company designed specifically for those wishing to operate for the benefit of the community rather than for the benefit of the owners of the company
56
What are the features of a UK CIC?
- Different from charity as it is a NEW LEGAL FORM
- Easy to set up
- No fiscal benefit
- They present form of asset lock
- Dividend cap --> balance between encouraging investment and reinvesting to maximize community goals
57
What legal forms exist for SEs in the US?
- Traditional non-profits (tax exemption)
- L3C (Low-profit limited liability company) (eligible for program related invesments) --> more SE like
- B-Corps: Benefit organizations --> no tax exemptions, mission driven businesses with positive impact (ie. public benefits) AND profit
58
What tensions arise in SEs?
All tensions from both commercial sector AND the social sector. Tensions arise from:
1. Orientation (market versus mission)
2. Aim (social value versus economic value)
3. Beneficiaries (no price vs market price)
4. Funds (donations vs capital markets)
5. Workforce (voluntary vs salaried workers)
59
What are the pros and cons of incorporating as a NON-profit?
Pros:
- Tax exemptions
- Access to specific funding
- No financial return expected
- Social legitimacy
Cons:
- Activities highly regulated towards income generation
- Financial sustainability risks
60
What are the pros and cons of incorporating as a FOR-profit?
Pros:
- Less regualted
- Stronger commitment by owners, due to financial involvement
- Market legitimacy
Cons:
- Risk of mission drift
- Difficult to get funding for SOCIAL purposes
- No tax advantages
61
Traditionally, how has firms been avoiding the different pros and cons of for/non-profit incorporation?
For-profits with non-profit subsidiaries:
- To better handle commercial and social activity
- To receive donations and maximize mission achievement
Non profits with for profit subsidiaries
- To have additional sources of revenues
- To operate with less legal obligations
62
What are the tensions arising from choosing different organizational structures?
- Perfoming tensions
- Organizing tensions
- Belonging tensions
- Learning tensions
63
Describe the model developed by Santos et al. (2005) for making Hybrids work:
Two parameters:
1) Automatic versus contingent value spillovers
2) Beneficiaries = customers vs NOT
```
Then:
Auto + Benf = Market hybrid
Auto + No benf = Bridging hybrid
Cont + Benf = Blending hybrids
Cont + No bent = Coupling hybrids
```
64
Give some characteristics of each of the Social Business Hybrids
Market hybrid; low mission drift risk, easy to gain financial sustainability --> targets benefit directly
Bridging hybrid; intermediate mission drift risk and financial risk --> commercial operations are the direct source of social value, buy not for customers
Blending hybrids; Intermediate mission drift risk and financial risk --> targets should change behavior (contigent)
Coupling hybrids; High mission drift risk, and financial risk, --> social aspects are detached from the main business activities
65
What four dimesions change when we move from a market hybrid to a coupling hybrid in terms of management?
- Mission drift; LOW to HIGH
- Structure; commerical --> integrated --> differentiated
- Governance; MONITORING to INCLUSIVE
- Competences; BUSINESS --> DIFFERENTIATED
- Accounting; Operational --> blended
66
Why is measuring social value important, what are the drivers?
- It is easier to make money, than to give them away efficiently
Drivers:
- Investors (VP, VC, II) need to measure IMPACT
- Institutions --> infrastructure
- Social sector --> attractiveness (new business models)
67
Define Social Value Creation and what is meant by assessment
the ability of an institution, organization or individual to produce a tangible, durable change as a result of a certain action in a given field of intervention
Assessment is quantifying the difference made (IMPACT) in society for a given target market
68
What are the roots of accountability?
1) Disclosure of how resources have been used
| 2) Formalization of internal mechanisms
69
What is the virtuous cycle of Social Impact Assessment (SIA)?
Circle:
| Measurement --> Sharing --> Alignment --> Rewards --> Impact --> Measurem...
70
What is the overall thought of SIA?
To tell the story of how SOCIAL changes have been created by TRANSFORMING SOCIAL OUTCOMES into MONETARY VALUES
71
What are the two approaches, when transforming social value into monetary value?
1) Evaluation --> retrospectively
| 2) Foreacasting --> predicting
72
What are some of the basic principles of SIA?
- Involve stakeholders
- Value the things that MATTER
- Be Conservative
- Transparency
- Verify results
73
What are the prerequisites for SIA?
- Collection of data
- Prioritization of what data to collect
- Incorporation of results into decision-making
- Valuation of both positive and negative impacts
74
What is SROI, and how is it measured?
Social Return on Invested Capital is a performance measure for social value creation based on the monetization of stakeholder-based social impacts
SROI = ((Actual social revenues - Operating costs) / Total assets)
- Gives you an estimate of how much value is created for each dollar invested
75
What are the two different types of SROI?
Evaluating SROI:
- Capitalized Social Value (or average SROI trend)
Forecasting SROI:
- Net Present Social Value
76
What are the steps of the SROI process?
- Setting the stage of the analysis (secondary data collection)
- Defining the boundaries (scope, time frame)
- Mapping and involving relevant stakeholders
- Building social impact value chains (inputs, outputs, outcomes) --> remember in-class example
- Developing KPIs to measure outcomes!
- Data collection and SROI calculation
77
What are some of the widespread methods for estimating KPIs?
```
USE DIFFERENTIAL (before-after) ESTIMATES
- Incurred losses & cost prevention
```
- Hedonic pricing
- Stated preferences (Willingness to pay)
- Revealed preferences (time and travel cost as proxy for peoples' valuation of the place)
- QALYS and DALYS (quality and disability adjusted life years
- Life satisfaction measures
78
What is the formula for calculating the social value?
NPV(social cashflows) / total investments = SROI/SIRR
79
What are some pitfalls when calculating SROI?
- Deadweight; Amount of outcome happening regardless of the project
- Displacement; If your impact meant that someonelses impact was lower --> cannibalization
- Attribution; How much was caused by other factors than the organization itself
- Drop-off; Account for variability of project effectiveness over time
80
What is meant by scalability?
Spreading a social entrepreneurial opportunity (innovation, project, organization) beyond its boundaries, by reproducing it in different contexts with the aim of maximizing social impact
81
Why is social scalability different from commercial scalability?
Social enterprises, should measure the scalability based on social KPIs, thus social scalability differs from commercial scalability
82
What are the four challenges relating to scaling?
1) lack of infrastructure
2) Skills or capacity gaps
3) Local dependence on CEO/founder
4) Raising necessary capital
83
What are the three Objectives behind scaling?
Grow
- Increasing social impact, market diversification, product diversification
Disseminate
- Promotion of an intervention model to maximize impact by promoting the model/routines/processes/principles
Orchestrate
- Change public policies
- Initiate social movement
- Create a market for a new institutional infrastructure
84
When scaling along, grow, disseminate and orchestrate, how is max impact achieved?
GROW; Direct intervention
Disseminate; between
Orchestrate; Direct influence
85
Within each of the three scaling objectives/methods, what are the content options?
GROW; Branching, affiliation, Scale and scope internal growth
Disseminate; Technical assistance, knowledge dissemination, Licensing
Orchestrate; Public sector R&D, public visibility of a social problem, Lobbyism, Networks
86
When scaling along, grow, disseminate and orchestrate, how is this connnected to complexity and resource requirements?
GROW; HIGH complexity and resources
DISSEMINATE: MEDIUM complexity and resources
ORCHESTRATE: LOW complexity and resources
87
What is the 5 R's model?
Model used to evaluate what scaling option is the better:
1) READINESS --> are innovations, programs, organization etc. ready?
2) RESOURCES --> how many resources are needed?
3) RECEPTIVITY --> Openness of target beneficiaries
4) RISKS --> Evaluate the risks
5) RETURNS --> Impact not just about serving more people, but also serving them better
88
When should we scale?
When all internal and external conditions are at the right level
89
How do we scale?
```
Plan replication as a process:
Step 1: Assess the opportunity
Step 2: Define the object
Step 3: Assess feasibility
Step 4: Develop a plan
```
90
What if the organization is NOT ready for scaling?
- Re-focus on strengthening effectiveness
- Spin-off an organization to explore scaling
- Find a scaling partner --> Cross-sector social partnerships (CSSP)
91
In relation to collaborative scaling approaches, what are CSSP?
Cross-sector social partnerships (CSSP) include alll forms of voluntary collaboration between organizations belonging to different sectors and occur by combining organizational resources in order to purposefully offer solutions that benefit partners, as well as society at large
NEEDS for success
- Interest alignment, Mutual understanding, interdependecy, gains (risks) for all involved, social agenda
92
What are the pros and cons of CSSP when scaling?
Pros:
-- Access to new resources
– Improved image and credibility due to association with business partners
– Stronger power on setting the rules of the game
– Acquisition of new skills (communication, innovation, management)
– More favourable cost structure and efficiency gains
Cons:
– Loss of autenticity
– Credibility risks in case of project failure
– Risk of dependence and loss of decisional power
93
When are CSSPs more likely to fail? And what are the two main obstacles?
WHEN:
– Unrealistic objectives for the parties involved, in terms of time and expected results
– Overemphasis on resources at the expenses of knowledge transfer between partners
Intra-organizational and Inter-organizational obstacles may arise
94
When using CSSP, how can one overcome the inter-organizational obstacles?
- Invest in knowing your partner
- Search for coherent partners
- Formalize roles
- Understand the context of the partnership
95
What are the FOUR sources of finances?
Ranked by riskiness/expensiveness
- Equity
- Mezzanine
- Debt
- Grants (non-repayable)
96
What determines which type of funding an organization will target?
Maturity stage to a large degree
| --> grants --> VC --> PE --> Debt --> Mezzanine
97
Define the matrix that describes the new financing landscape
Y-axis; High to low engagement
X-axis; Philanthropic to commercial model
Q1: Social venture capital
Q2: Debt capital
Q3: Philanthrophy capital
Q4: Venture Philenthropy
98
What is the difference between impact investing and engaged philanthropy?
PRIMARY DIFFERENTIATOR IS COMMERCIAL VERSUS PHILANTHROPY VIEW
Impact investing implies lower degree of engagement, as well as some expectancy of return
Engaged philanthropy implies higher degree of engagement, and no returns (charity)
99
How is impact investing defined?
- Investing with the intention to generate social and environmental impact alongside a financial return.
- Impact investments can be made in both emerging and developed markets , and target a range of returns from below market to market rate
100
What do all impact investors have in common?
- Tailored financing
- Multi-year support
- Performance measurement
- Capacity-building
- Non-financial support
- High engagement
101
Who are the four actors in the New Financing Landscape/Ecosystem?
Commercial banks --> value banks
- give loans to SEs
Investment banks --> Social Investment Advisors
- new IB, focusing on the social sector
Stock Exchanges --> Social stock exchanges & crowdfunding
- Donation based and investment based crowdfunding
VC & PE --> SVP & II funds
102
What is a SIB?
Social Impact Bond
- financial mechanism in which investors pay for a set of interventions to improve a social outcome that is of social and/or financial interest to a government commissioner
- Repayment is contigent upon achievement of desired social outcome
103
What is Venture Philanthropy?
- Both financial and non-financial support to increase societal impacts
- Includes both the use of social investment and grants
104
What is patient capital?
A debt or equity investment in an early stage enterprise to support development and sustainability of a social purpose organization --> the closest you get to a donation, without being it, and the farthest away from a gamble..
Characteristics:
- Long-time horizons
- Risk-tolerance
- Social returns > financial returns
- Non-financial support
- Limited control
105
Describe the SVC Model
Investors --> SVC fund --> SEV --> Social impact
SVC; needs measurable results
SEV; needs long-term sustainability to build self-financing
106
What are the three common goals of SVCs?
1. To enhance legitimacy and credibility of SE and SE organizations (pressure on, scalability, measurability and transparency)
2. To provide the opportunity for networking among social entrepreneurs
3. To provide financial and other resources
107
What 6 things do SVCs offer to SEVs?
1) high engagement
2) long-term orientation of commitments
3) customization of financing approach
4) organizational capacity building
5) non-financial support (networks)
6) performance measurement
108
The 6 steps in the investment process of an SVP
1) teaming
- Mgmt team composition, governance structure
2) fundraising
- fundraising strategy and source mobilization
3) deal flow management
- Definition of the investment strategy, other projects research
4) investing
- Screening - DD - negotiation - portfolio composition
5) managing investments
- Brining value-added to the investees, monitoring and evaluation
6) harvesting/exiting
- Exit and support to financial resilience
