How to Foster Social Entrepreneurship with Greg Dees

CASE Founder Greg Dees was recently interviewed by Luke Miller Callahan, Founder of GroAction.  The interview covers a variety of interesting topics so we pulled out some highlights below – but we also recommend watching the interview in its entirety!

IMPACT INVESTING (01:27 – 11:57)

Dees and Miller Callahan started with a discussion of impact investing and the recent launch of CASE i3 (CASE’s new Initiative on Impact Investing).  Dees talked about launching CASE i3 because of our excitement about the potential of impact investing but also the realization that there is a lot of work to be done to meet that potential.

For example, despite the excitement surrounding impact investing, we are seeing that many social ventures are just not ready for impact investments that require close to market rate returns. Before they can get to this stage, these social ventures need to evolve with the help of patient capital, subsidies, and technical and management assistance. So, one of the challenges for the field is to build out the capital pipeline and come up with creative ways to fill the gaps that currently exist.  Dees talked about the gap in earlier stage funding and the need to get people excited about playing that role in the investment process and feeling good about the types of returns that they would receive at the earlier stage (which will be mainly social, not financial, returns).

The field needs creative solutions on how – and by whom – the gaps in the funding pipeline will be filled and how we can better understand and bridge the gap between the needs and expectations of the supply side and the demand side of capital.

For another perspective, Sasha Dichter, Acumen Fund Chief Innovation Officer and CASE i3 Advisor, was recently interviewed on Dowser and talked about some of these same issues (read here).

BUSINESS MODELS (11:57-20:00)

Dees and Cathy Clark have also been conducting research on the types of business models that social entrepreneur utilize (read some of their business model profiles on the Social Edge). They have discovered that business model development involves a lot of trial and error and that social entrepreneurs are constantly “tinkering” with their business models and making adjustments through experimentation.

Dees gave examples including that of VisionSpring.  VisionSpring’s original business model was to create their own core of salespeople who would sell eyeglasses within their communities.  However, they realized that this would be difficult to scale so they began to emphasize another model in which they found partners who already had salespeople on the ground and could add the VisionSpring eyeglasses to their existing portfolio of products. VisionSpring has been praised for “continually evolving its strategy to increase its impact” and we were fortunate to have Jordan Kassalow, VisionSpring CEO and founder, come to Fuqua recently to discuss VisionSpring’s business model evolution (read a summary of his talk here).

Dees recommends that social entrepreneurs continually iterate on their business model choices to move towards a point where they are self-sustaining and profitable, while maintaining their focus on social impact. If they are selling product, how can they decrease production or distribution costs? If they are a service model, are there better ways to deliver?  Can they piggy back on an existing resource or structure? Are there ways to generate additional revenue streams?

Bottom-line: see what works and what doesn’t, don’t worry about failing, tinker and change!

BENEFITS OF PEER LEARNING (20:00 – 25:44)

In addition to experimenting with their business models, Dees also discussed the benefits of peer learning for social entrepreneurs.

Dees stated that academics have an important role to play in developing frameworks that will help social entrepreneurs learn from successes and failures, and evaluate areas of their own business models.  But social entrepreneurs also want to interact with and talk with others that have been through similar situations before.  This theme came through in an assessment that CASE conducted of the field (download “Developing the Field of Social Entrepreneurship“).

This desire for peer learning creates a need for innovation in education programs. As an example, Dees talked about the Denali Initiative – a program that was funded by the Kauffman Foundation and run by Bill Strickland (of Manchester/Bidwell Corporation).  Denali was a 3 year program in which social entrepreneurs developed business venture ideas and implemented those ideas while participating in peer cohorts, getting feedback from each other and faculty, etc.  Denali engaged a small cohort, got them together in person to build relationships with one another, and ran the program for 3 years to encourage deep learning, deep connections and real impact. However, it is often difficult (and expensive) to create these environments and share knowledge effectively.

FORTHCOMING BOOK (25:44 – end)

The interview concluded with a discussion of the book that Dees is currently working on – focused on how to create a society that is innovative, adaptive, and truly supportive of social entrepreneurs.

Part 1 of the book makes the case for social entrepreneurship being just as – if not more – important than straight business entrepreneurship in helping societies be adaptive, robust and able to tackle problems in creative ways.

Part 2 looks at how we build the environment that can best foster effective social entrepreneurship. This means an environment that is disciplined and focused on problem solving, not just focused on charitable giving.   According to Dees, the charitable impulse is appropriate in some situations, but “truth is that if we want to have long lasting solutions to social problems, it is not going to be simply by giving charity, that is not the solution.  We need to get at the underlying problems and find something sustainable as a means to solve it.” Dees outlined some of the factors necessary to build a truly innovative society, including:

  • right funding structures (creativity around the capital pipeline as discussed earlier, innovative funding mechanisms like the Social Innovation Fund, etc)
  • right kinds of metrics (what is impact? How do we think about that?). We need to be rigorous in our metrics but also can’t pull away from things that are hard to measure, because those things might still be important.
  • public policy that supports, rather then erects barriers, to social entrepreneurs.  For example, good work is being down in changing legal barriers and creating new legal forms that help social ventures succeed (in the US, B Corporations – which were just approved in California – and LC3s; community interest companies in the UK).
  • talent and knowledge – build structures that let us capture and share knowledge not just from success but also from failures.

In the end, Dees believes that social entrepreneurs are an effective – and underutilized – R&D lab for society (read more on social entrepreneurs as learning labs).  With social entrepreneurs already experimenting and coming up with innovative solutions, our society needs to think about how to encourage, support, evaluate, learn from, scale up, and encourage investment in these social entrepreneurs.

Keep an eye out for Dees’s new book in 2012 to learn more!

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