January 02, 2007

Beyond Charity: The Case for Social Entrepreneurship - by Sanjay Anandaram

“How many national scale, socially relevant, market oriented, impact making businesses can you name in India?” is a question that I asked at a recent gathering of friends. This is partly due to the fact that the only answer that springs to my mind is “Amul”, partly out of a certain confidence that the other person too cannot name any other business and partly out of a genuine desire to know. This question has intrigued me for some time now. Why haven’t there been many more Amuls in our country? God knows there are enough and more social problems to be solved!

Amul was created by government initiative and by the passion of people like Dr Kurien. It wanted to bring out change in the way milk was produced and distributed on a massive scale. The vision was big, there was passion, there was capital (direct and indirect), there was terrific leadership, sustained and involved engagement with the grass-roots, and the formation of partnerships to create the impact via the business. If we are to get out of depending on the government for everything we have to think entrepreneurial (see first Indipreneur article). So the question can be reframed to: cannot similar and more impact be delivered by engaging and unleashing the entrepreneurial energies of millions by providing the right leadership, vision, management, partnerships, and capital?

After all, how different are the basics from any other vision of a passionate entrepreneurial team? India, according to some estimates, has the largest number of NGOs per capita. Most of them are doing a glorious job in their respective domains, impacting the lives of citizens in localized spheres of activity. But given the size and multitude of problems confronting India a different approach is also surely required. One that unleashes the entrepreneurial energies of the people and dove-tails into the market economy. One that creates financial sustenance if not independence. Entrepreneurship is an acknowledged method of job creation and income (if not wealth) creation.

One such approach is micro-finance. Micro-financial institutions focus on creating micro-entrepreneurs by providing access to micro-credit. While there are mixed reports on the overall impact of such programmes (which have a lot to do with the operational aspects of programme implementation) MFIs as vehicles have the ability to impact very significant numbers of people as the Grameen Bank has shown.

But what if one could create a socially relevant “for-profit” entity with all the discipline and rigour of any market driven capitalist venture? One who’s mantra is scale, growth, brand building, market competitiveness, quality, and so on? One whose sole objective of profit making is to benefit the vast numbers of producer groups that develop the products for the entity that in turn drive revenues and profits?

For this to happen, the following attributes are desired:

a) Focus: Laser like focus and clarity on the objectives of the entity – market facing and social. Example: “We will build a profitable branded national children’s garments business with revenues of Rs 1000 crore in 10 years” is a market focus while “We will positively impact 250,000 producer groups in these 10 years by ensuring that 90% of profits are ploughed back into these groups” is the social focus.

b) Scale: Inherent in the goals above is scale viz, Rs 500 crore, 100,000 producer groups.

c) Transparency & Integrity

d) A well rounded, passionate, relevantly experienced and qualified management and advisory team

e) Measurement systems and processes

f) Leveraging of technology to drive scale and bring in efficiencies

g) Partnerships with providers of complementary goods and services

h) Developing a unique value proposition for its offering based on design, quality, price competitiveness

Interestingly enough, investment capital is usually attracted to profit making businesses that demonstrate the above attributes (see other Indipreneur articles). Making profits is critical because it ensures sustainability of efforts. No one can keep pouring money into ventures without being able to measure outcomes. Profits are a key measure of outcomes. Abandoning the charity mind-set is another key matter. Asking people to contribute for a “good cause” and for the sake of the soul is one thing while asking them to be investors in a socially relevant profitable business is another. But then what will the investors get out of this venture apart from feeling good? What if investors were entitled to say, 6% dividends after the social obligations were met? What if a detailed business plan was made available to investors explaining the business logic like in the case of any other entrepreneurial venture?

I believe that the entrepreneurial energies of producer groups, socially sensitive management teams, and other stake holders will be harnessed for a new paradigm in social entrepreneurship. Capitalism is an efficient creator of wealth while socialism ensures more equitable distribution of this wealth. A marriage of the two is surely desirable but needs integrity, capability, efficiency, and transparency. The good news is that such ventures are already being conceptualized even in India and the day is not far off when we will see the creation of many 21st century Amuls in different sectors.

What do you think?

Sanjay Anandaram is a passionate advocate of entrepreneurship in India; He brings close to two decades of experience as an entrepreneur, corporate executive, venture investor, faculty member, advisor and mentor. He’s involved with Nasscom, TiE, IIM-Bangalore, and INSEAD business school in driving entrepreneurship. He can be reached at sanjay@jumpstartup.net. The views expressed here are his own.