Growing Up Fast, What the Dalberg Survey Tells Us About Successful Social Entrepreneurs
Every social entrepreneur has a million gut-wrenching questions: What model should I pursue? What’s the best way to fund my enterprise? How do I enter the market? How do I gauge impact?
To many, the choices borne out of those questions can feel like leaps of faith. Wouldn’t it save a lot of time if you could discover what made the good social enterprises great – and not just in anecdotal form? Dalberg Global Development Advisors clearly thought so. Working with Harvard University, the strategic consulting firm polled more than 60 social entrepreneurs to find out how they leapt the hurdles that every venture faces at one point or another. The report details the traits and the lessons that put these enterprises on a path of financial sustainability. It also includes several recommendations for fledgling entrepreneurs.
The project team included students from Harvard’s new “Innovation and Entrepreneurship” course. I chatted via email with Daniel Altman, director of thought leadership at Dalberg Global Development Advisors who also lead the survey team, about the results.
NextBillion.net: What were the goals of the survey?
Altman (left): The goals were to identify the issues that continue to challenge even the most successful social enterprises, and also to collect guidance for budding entrepreneurs hoping to enter the sector.
NextBillion.net: A key area you studied is where these firms are in terms of their growth/development. What insights did you glean from the responses?
Altman: We found that for-profit social enterprises were much more closer to being financially sustainable, if they weren’t already. This was undoubtedly a selection effect, at least in part; we sought leaders of successful enterprises as our respondents, and a for-profit enterprise that’s not sustainable isn’t usually successful. But the non-profit enterprises were much more likely to depend on grants or government contracts, which can be a lot less dependable than revenue from a consumer market.
NextBillion.net: You looked at ’measures of success’ by the type of enterprise: be it for profit, nonprofit, or a hybrid model. Which model to pursue is the perennial question of social entrepreneurs. Did you discover some trend lines in terms of growth/development among models?
Altman: In general, the for-profit enterprises represented in our sample reached sustainability faster. This is probably because they had to have more of the pieces in place when they launched – financing, relationships, and a solid business plan – or they wouldn’t have been able to do business. In other words, getting to square one may be the toughest part for for-profit enterprises, whereas the hard bit for non-profits and hybrids is more likely to be sustaining themselves once their initial funding runs out. Still, it’s important to note that we saw successful enterprises in all three categories.
NextBillion.net: Success factors were another area you tracked; asking entrepreneurs to rank those attributes that contributed to their success. What did you find?
Altman: There was a consensus that the skills and commitment of the implementing or operating team were paramount. In their comments, several of the respondents also cited the need for clarity about their missions and discipline in pursuing them; non-profits were especially concerned with staying true to their missions. The respondents also emphasized preparation – getting all your ducks in a row, including your relationships and due diligence in the community where you planned to operate – before launching a social enterprise.
Figure 5. Scores of success factors by type of enterprise.
Source: Figure 5., Dalberg Survey of Social Enterprise, December 2011.
NextBillion.net: I was surprised that about half of respondents operated in more than one industry. What influence do you think that might have in terms of their development?
Altman: Many of them operate social enterprises that blend two industries, rather than operating separately in two industries. For example, an mHealth enterprise might classify itself as both “technology” and “health”. Spanning two or more industries is especially challenging, since the delivery of a product or service could be affected by the regulation and evolution of all of them.
NextBillion.net: You also asked enterprises about challenges. What are the top challenges facing social entrepreneurs (and perhaps these break down differently depending on models) and what coping skills did you find among the successful organizations?
Altman: Financing was clearly a challenge across the board, particularly for enterprises whose leaders said they would always depend to some degree on outside funding like grants and donations. These enterprises were most common in industries like education and health. Maintaining motivation in the teams that were so important to the enterprises’ success was also an oft-cited challenge. In both of these areas, social enterprises continually need to make the case for their ability to deliver social benefits and, in the case of for-profits and hybrids, a financial return. If they can’t, their staff members and their financing will desert them.
NextBillion.net: Finally, what were some of the key recommendations you can share from this study?
Altman: Quite a few of our respondents, among them many household names in social enterprise, said that laser-like focus and never-say-die persistence were essential for success. No one should assume that running a social enterprise is easier than running a traditional business; finding a niche is just as important, and so is hard work. We are well aware of this at Dalberg, and for me it’s what makes these leaders’ stories so inspirational. That’s why the report is filled with their recommendations in their own words.
Download a copy of the full survey HERE.