Monday
May 10
2010

Tilak Mishra

Reporting from Sankalp 2010

Just as Darwin discovered the law of evolution in organic nature and just as Marx discovered the law of evolution in human society, Sankalp 2010 discovered the law of evolution in social enterprises. Hosted by Intellecap in Mumbai on May 4-5, Sankalp displayed many Hybrid Value Chain (HVC) and Public Private Partnership (PPP) models that are systemically transforming the relationship between business and social / citizen sectors on the basis of mutual social and economic value creation.

In sum, Sankalp 2010 celebrated the successes of a rare tribe called social entrepreneurs, who are passionate about seeking ways to create value in the economic (jobs, income, etc.), social (health services, education, social inclusion and self-esteem), and cultural (reading, expression of creativity) spheres. As was profiled at Sankalp 2010, the work of this tribe, which addresses such basic human needs as water, housing, and health, also illustrate how various dimensions of value creation are interwoven and are necessary to enable broad-scale development and growth in underserved communities.

Much of the growth and innovation found in free market societies is credited to entrepreneurial activities and disposable income. Entrepreneurship, however, is sensitive to context and to the existence of economic reward systems, a point that was captured in the keynote address delivered by Mumbai Tiffin Box Suppliers Association (famously called “dabbawallas” that means “lunch-box guys” when translated in English), which is a Mumbai based six-sigma certified organization that delivers hundreds of thousands of lunch boxes to offices every day. In typical Drucker-speak, the dabbawalla highlighted the fact that their organization has for the last 120 years made “selling unnecessary” and rather “identified a need and filled it.” The result: error-rates of 1 in 16 million transactions; 400,000 transactions per day; 200,000 lunchboxes delivered to their clients by a 5000 member strong workforce (85% of who are illiterate) every single day, and without fail!

One necessary condition for growth is that innovation and entrepreneurial activities result in products and services that create value above input costs. Because many input costs – such as provision of infrastructure or legal institutions – are picked up by society in developed markets, the entrepreneur is able to capture a larger part of the value created. However, where markets are too inefficient to cater to specific social needs, the invisible hand of the government is expected to provide necessary services, as is the case with healthcare systems, education, etc.

In many underserved communities, however, neither the invisible hand of the government nor markets cater to even the most basic needs of their members, resulting in structural and behavioral barriers to the community’s growth and development. These barriers are addressed by products and services engineered by social entrepreneurs. While debating the role of the government in advancing this sector, the panelists at Sankalp 2010 were divided in their opinion: one side believed that government’s involvement was a “kiss of death” for this sector, while another side championed the idea of government acting as venture capitalist. In sum, panelists concluded that the role of government is to create an enabling legal, regulatory, and policy environments, which include the removal of market distortions stemming from preferential government policies or excessive regulations.

The last plenary panel of the first day of Sankalp discussed the financial infrastructure required to accelerate social enterprises, and it summed up the most recurring thought that persisted through the two day event: To increase market penetration for social enterprises, business models and technologies that have the potential for success in low-income markets need to replicate and scale-up, incorporating continuous innovation in technology development and deployment. However, one of the critical elements that ensure replication and scaling of social enterprises is their access to consumer and institutional financing, including some government investments in capacity building.

Because the social venture idea is relatively new and at proof of concept stage, panelists concluded that patient capital and funding flexibility is required, including innovations such as gap financing, bridge loans, receivables financing and quasi equity.

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