Premature Innovation: What happens when a social entrepreneur has a great business idea in a market that isn’t ready for it?
Editor’s note: This post is the third in our series on social enterprise failures, organized in collaboration with the organization FuckUp Nights. You can view the other posts in the series here:
I founded GRIMA Biodiesel at the age of 21, inspired by some rumors on Google about a renewable fuel obtained from castor beans. You may be thinking that online chatter sounds like a pretty shaky foundation for a business, but in an age of global warming and soaring fuel costs, the reports were very intriguing. Everyone seemed interested in producing this biofuel to replace fossil fuels: it was touted as cheaper than diesel, and it released less harmful gas into the atmosphere. Its proclaimed benefits included agricultural revival, and it had already been implemented in vehicles in Brazil. Sounds good, doesn’t it?
Mexico’s government seemed to think so, and when it adopted legislation fostering the cultivation of bioenergetic seeds, large plants were built and companies like mine started to emerge. In that context, and with the help of a foundation, we imported a reactor to produce biodiesel. That’s when we had our first surprise: it was not cheap to make biodiesel, at least not as cheap as we had heard.
The second surprise was when we realized that in Mexico, the main actors who should have been boosting the industry – the government, producers and companies – had little knowledge and unclear ideas on how to move a project like this forward.
The third, most dispiriting surprise was that, despite biodiesel being a project that implied environmental altruism, no one was actually interested in this aspect – neither the companies, nor the government, nor the farmers. And that was for a very simple reason: money. Bioenergy projects, for the most part, do not elicit actual participation from these actors due to their lack of economic benefit. They just “sound good.”
Someone once said that an idea is the most powerful virus in the world. But what if this virus turns into a version of “the telephone game,” in which information is shared from person to person, becoming more distorted each time? In Mexico, no one had any idea how to develop the bioenergy industry. As a result, bad decisions were made by different industry stakeholders, and as they were disseminated to others, they affected both companies and producers. In contrast, the concept of producing biodiesel worked out in Brazil, since stakeholders had been working on it for 40 years, and had ample time to identify and share effective practices.
Lacking experience, industry support and effective models to emulate, GRIMA Biodiesel’s first iteration was a huge failure. But we didn’t give up. We refocused on diversifying and creating new business models to bring profitability to our core idea of improving the environment through biofuels. The experience of working through these difficult years has left me with two valuable lessons:
Never trust the ideas and conclusions of others. Have and make your own. This provides experience and positions you ahead of your potential competitors.
Diversify. Always. I conceive of companies as people, beings that require evolution and change to remain current. If your business idea is so rigid it resists diversification, I would suggest you shouldn’t bother. The market is global. Today, even a small enterprise can and should be global. And serving a global market requires the flexibility to respond to constant change.
Biodiesel is an incipient business model with various facets and myriad opportunities for those who can find them. But despite the fact that Mexico has spent at least one decade already working on biofuels, I can conclude that the industry is not yet ready to come into its own. The country lacks energy law reforms and public policies that generate agricultural incentives to develop bioenergy. Social participation is also lacking. We need companies that build on ideas, and that foster comprehensive projects that diversify the biodiesel business model, without losing track of the sustainability these projects require.
Though GRIMA Biodiesel still aims to be one of those companies, we came very close to missing our opportunity. And though we rebounded from our initial failure, it’s still not easy to talk about. We based a biodiesel project upon online rumors that lacked technical and scientific corroboration, and which applied to an entirely different country and context from the market we were targeting. That’s hard to admit, or accept. Still, I dare say this kind of mistake is something every single entrepreneur must experience to become wiser.
And when the mistake involves a social entrepreneur, it’s even more important that it become a learning experience. I see the failure of a social enterprise as our collective loss, whereas the failure of a traditional enterprise is just its own. This fact can provide social entrepreneurs with a unique resilience – you often see them continue to search for a broader social benefit in their work, even if their early efforts end in disappointment. For a true social entrepreneur, their mission doesn’t end, even if their company goes under.
Mauricio Monjaras Cabañas is an entrepreneur focused on the development of alternative energies.
This post was translated from Spanish to English by Carlos González-Rivera.