Social entrepreneurship is attracting growing amounts of talent, money, and attention, but along with its increasing popularity has come less certainty about what exactly a social entrepreneur is and does.
 
The nascent field of social entrepreneurship is growing rapidly and attracting increased attention from many sectors. The term itself shows up frequently in the media, is referenced by public officials, has become common on university campuses, and informs the strategy of several prominent social sector organizations, including Ashoka and the Schwab and Skoll Foundation foundations.
 
The reasons behind the popularity of social entrepreneurship are many. On the most basic level, there’s something inherently interesting and appealing about entrepreneurs and the stories of why and how they do what they do. People are attracted to social entrepreneurs like last year’s Nobel Peace Prize laureate Muhammad Yunus for many of the same reasons that they find business entrepreneurs like Steve Jobs so compelling these extraordinary people come up with brilliant ideas and against all the odds succeed at creating new products and services that dramatically improve people’s lives.
 
But interest in social entrepreneurship transcends the phenomenon of popularity and fascination with people. Social entrepreneurship signals the imperative to drive social change, and it is that potential payoff, with its lasting, transformational benefit to society, that sets the field and its practitioners apart.
Although the potential benefits offered by social entrepreneurship are clear to many of those promoting and funding these activities, the actual definition of what social entrepreneurs do to produce this order of magnitude return is less clear. In fact, we would argue that the definition of social entrepreneurship today is anything but clear. As a result, social entrepreneurship has become so inclusive that it now has an immense tent into which all manner of socially beneficial activities fit.
 
In some respects this inclusiveness could be a good thing. If plenty of resources are pouring into the social sector, and if many causes that otherwise would not get sufficient funding now get support because they are regarded as social entrepreneurship, then it may be fine to have a loose definition. We are inclined to argue, however, that this is a flawed assumption and a precarious stance.
Social entrepreneurship is an appealing construct precisely because it holds such high promise. If that promise is not fulfilled because too many “nonentrepreneurial” efforts are included in the definition, then social entrepreneurship will fall into disrepute, and the kernel of true social entrepreneurship will be lost. Because of this danger, we believe that we need a much sharper definition of social entrepreneurship, one that enables us to determine the extent to which an activity is and is not “in the tent.” Our goal is not to make an invidious comparison between the contributions made by traditional social service organizations and the results of social entrepreneurship, but simply to highlight what differentiates them.
 
If we can achieve a rigorous definition, then those who support social entrepreneurship can focus their resources on building and strengthening a concrete and identifiable field. Absent that discipline, proponents of social entrepreneurship run the risk of giving the skeptics an ever-expanding target to shoot at, and the cynics even more reason to discount social innovation and those who drive it.

Starting With Entrepreneurship

Any definition of the term “social entrepreneurship” must start with the word “entrepreneurship.” The word “social” simply modifies entrepreneurship. If entrepreneurship doesn’t have a clear meaning, then modifying it with social won’t accomplish much, either.
 
The word entrepreneurship is a mixed blessing. On the positive side, it connotes a special, innate ability to sense and act on opportunity, combining out-of-the-box thinking with a unique brand of determination to create or bring about something new to the world. On the negative side, entrepreneurship is an ex post term, because entrepreneurial activities require a passage of time before their true impact is evident.
 
Interestingly, we don’t call someone who exhibits all of the personal characteristics of an entrepreneur opportunity sensing, out-of-the-box thinking, and determination yet who failed miserably in his or her venture an entrepreneur; we call him or her a business failure. Even someone like Bob Young, of Red Hat Software fame, is called a “serial entrepreneur” only after his first success; i.e., all of his prior failures are dubbed the work of a serial entrepreneur only after the occurrence of his first success. The problem with ex post definitions is that they tend to be ill defined. It’s simply harder to get your arms around what’s unproven. An entrepreneur can certainly claim to be one, but without at least one notch on the belt, the self-proclaimed will have a tough time persuading investors to place bets. Those investors, in turn, must be willing to assume greater risk as they assess the credibility of would-be entrepreneurs and the potential impact of formative ventures.
 
Even with these considerations, we believe that appropriating entrepreneurship for the term social entrepreneurship requires wrestling with what we actually mean by entrepreneurship. Is it simply alertness to opportunity? Creativity? Determination? Although these and other behavioral characteristics are part of the story and certainly provide important clues for prospective investors, they are not the whole story. Such descriptors are also used to describe inventors, artists, corporate executives, and other societal actors.
 
Like most students of entrepreneurship, we begin with French economist Jean-Baptiste Say, who in the early 19th century described the entrepreneur as one who “shifts economic resources out of an area of lower and into an area of higher productivity and greater yield,” thereby expanding the literal translation from the French, “one who undertakes,” to encompass the concept of value creation.¹
 
Writing a century later, Austrian economist Joseph Schumpeter built upon this basic concept of value creation, contributing what is arguably the most influential idea about entrepreneurship. Schumpeter identified in the entrepreneur the force required to drive economic progress, absent which economies would become static, structurally immobilized, and subject to decay. Enter the Unternehmer, Schumpeter’s entrepreneurial spirit, who identifies a commercial opportunity whether a material, product, service, or business and organizes a venture to implement it. Successful entrepreneurship, he argues, sets off a chain reaction, encouraging other entrepreneurs to iterate upon and ultimately propagate the innovation to the point of “creative destruction,” a state at which the new venture and all its related ventures effectively render existing products, services, and business models obsolete.²
 
Despite casting the dramatis personae in heroic terms, Schumpeter’s analysis grounds entrepreneurship within a system, ascribing to the entrepreneur’s role a paradoxical impact, both disruptive and generative. Schumpeter sees the entrepreneur as an agent of change within the larger economy. Peter Drucker, on the other hand, does not see entrepreneurs as necessarily agents of change themselves, but rather as canny and committed exploiters of change. According to Drucker, “the entrepreneur always searches for change, responds to it, and exploits it as an opportunity,”³ a premise picked up by Israel Kirzner, who identifies “alertness” as the entrepreneur’s most critical ability.⁴
 
Regardless of whether they cast the entrepreneur as a breakthrough innovator or an early exploiter, theorists universally associate entrepreneurship with opportunity. Entrepreneurs are believed to have an exceptional ability to see and seize upon new opportunities, the commitment and drive required to pursue them, and an unflinching willingness to bear the inherent risks.
 
Building from this theoretical base, we believe that entrepreneurship describes the combination of a context in which an opportunity is situated, a set of personal characteristics required to identify and pursue this opportunity, and the creation of a particular outcome. To explore and illustrate our definition of entrepreneurship, we will take a close look at a few contemporary American entrepreneurs (or pairs thereof ): Steve Jobs and Steve Wozniak of Apple Computer, Pierre Omidyar and Jeff Skoll of eBay, Ann and Mike Moore of Snugli, and Fred Smith of FedEx.

Entrepreneurial Context

The starting point for entrepreneurship is what we call an entrepreneurial context. For Steve Jobs and Steve Wozniak, the entrepreneurial context was a computing system in which users were dependent on mainframe computers controlled by a central IT staff who guarded the mainframe like a shrine. Users got their computing tasks done, but only after waiting in line and using the software designed by the IT staff. If users wanted a software program to do something out of the ordinary, they were told to wait six months for the programming to be done.
 
From the users’ perspective, the experience was inefficient and unsatisfactory. But since the centralized computing model was the only one available, users put up with it and built the delays and inefficiencies into their workflow, resulting in an equilibrium, albeit an unsatisfactory one.
System dynamicists describe this kind of equilibrium as a “balanced feedback loop,” because there isn’t a strong force that has the likely effect of breaking the system out of its particular equilibrium. It is similar to a thermostat on an air conditioner: When the temperature rises, the air conditioner comes on and lowers the temperature, and the thermostat eventually turns the air conditioner off.
 
The centralized computing system that users had to endure was a particular kind of equilibrium: an unsatisfactory one. It is as if the thermostat were set five degrees too low so that everyone in the room was cold. Knowing they have a stable and predictable temperature, people simply wear extra sweaters, though of course they might wish that they didn’t have to.
 
Pierre Omidyar and Jeff Skoll identified an unsatisfactory equilibrium in the inability of geographically based markets to optimize the interests of both buyers and sellers. Sellers typically didn’t know who the best buyer was and buyers typically didn’t know who the best (or any) seller was. As a result, the market was not optimal for buyers or sellers. People selling used household goods, for example, held garage sales that attracted physically proximate buyers, but probably not the optimal number or types of buyers. People trying to buy obscure goods had no recourse but to search through Yellow Page directories, phoning and phoning to try to track down what they really wanted, often settling for something less than perfect. Because buyers and sellers couldn’t conceive of a better answer, the stable, yet suboptimal, equilibrium prevailed.
 
Ann and Mike Moore took note of a subpar equilibrium in parents’ limited options for toting their infants. Parents wishing to keep their babies close while carrying on basic tasks had two options: They could learn to juggle offspring in one arm while managing chores with the other, or they could plop the child in a stroller, buggy, or other container and keep the child nearby. Either option was less than ideal. Everyone knows that newborns benefit from the bonding that takes place because of close physical contact with their mothers and fathers, but even the most attentive and devoted parents can’t hold their babies continuously. With no other options, parents limped along, learning to shift their child from one hip to the other and becoming adept at “one-armed paper hanging,” or attempting to get their tasks accomplished during naptime.
 
In the case of Fred Smith, the suboptimal equilibrium he saw was the long-distance courier service. Before FedEx came along, sending a package across country was anything but simple. Local courier services picked up the package and transported it to a common carrier, who flew the package to the remote destination city, at which point it was handed over to a third party for final delivery (or perhaps back to the local courier’s operation in that city if it was a national company). This system was logistically complex, it involved a number of handoffs, and the scheduling was dictated by the needs of the common carriers. Often something would go wrong, but no one would take responsibility for solving the problem. Users learned to live with a slow, unreliable, and unsatisfactory service – an unpleasant but stable situation because no user could change it.
 
This definition (part 1 or 2) helps distinguish social entrepreneurship from social service provision and social activism. That social service providers, social activists, and social entrepreneurs will often adapt one another’s strategies and develop hybrid models is, to our minds, less inherently confusing and more respectful than indiscriminate use of these terms. It’s our hope that our categorization will help clarify the distinctive value each approach brings to society and lead ultimately to a better understanding and more informed decision making among those committed to advancing positive social change.
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SOURCES/AUTHORS
 
Roger L. Martin Served as dean of the Joseph L. Rotman School of Management at the University of Toronto since 1998.
He is director of the school’s AIC Institute for Corporate Citizenship and serves on the board of the Skoll Foundation.
 
Sally Osberg Served as president and CEO of the Skoll Foundation since 2001.
Before joining Skoll, Osberg was executive director for the Children’s Discovery Museum of San Jose. She sits on the boards of the Oracle Education Foundation and the Children’s Discovery Museum.