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A starter kit for leaders of social change. The nascent field of social entrepreneurship is growing rapidly and attracting increased attention from many sectors. The term itself shows up frequently in the mediais 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. But interest in social entrepreneurship transcends the phenomenon of popularity and fascination with people. Social entrepreneurship als 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 Come watch porn and get your 9in or more serviced 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 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. 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. The problem with ex post definitions is that they tend to be ill defined.

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? 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.

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. 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.

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.

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 deed 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. 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.

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.

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. 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 or types of buyers. People trying to buy obscure goods had no recourse but to search through Yellow directories, phoning and phoning to try to track down what they really wanted, often settling for something less than perfect.

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. 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.

This system was logistically complex, it involved a 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.

The entrepreneur is attracted to this suboptimal equilibrium, seeing embedded in it an opportunity to provide a new solution, product, service, or process. The reason that the entrepreneur sees this condition as an opportunity to create something new, while so many others see it as an inconvenience to be tolerated, stems from the unique set of personal characteristics he or she brings to the situation — inspiration, creativity, direct action, courage, and fortitude. These characteristics are fundamental to the process of innovation.

The entrepreneur is inspired to alter the unpleasant equilibrium. Entrepreneurs might be motivated to do this because they are frustrated users or because they empathize with frustrated users.

Sometimes entrepreneurs are so gripped by the opportunity to change things that they possess a burning desire to demolish the status quo. The entrepreneur thinks creatively and develops a new solution that dramatically breaks with the existing one. Each found a completely new and utterly creative solution to the problem at hand. Once inspired by the opportunity and in possession of a creative solution, the entrepreneur takes direct action. Rather than waiting for someone else to intervene or trying to convince somebody else to solve the problem, the entrepreneur takes direct action by creating a new product or service and the venture to advance it.

Of course, entrepreneurs do have to influence others: first investors, even if just friends and family; then teammates and employees, to come work with them; and finally customers, to buy into their ideas and their innovations. Entrepreneurs demonstrate courage throughout the process of innovation, bearing the burden of risk and staring failure squarely if not repeatedly in the face.

This often requires entrepreneurs to take big risks and do things that others think are unwise, or even undoable. Finally, entrepreneurs possess the fortitude to drive their creative solutions through to fruition and market adoption. No entrepreneurial venture proceeds without setbacks or unexpected turns, and the entrepreneur needs to be able to find creative ways around the barriers and challenges that arise. Smith had to figure out how to keep investors confident that FedEx would eventually achieve the requisite scale to pay for the huge fixed infrastructure of trucks, planes, airport, and IT systems required for the new model he was creating.

FedEx had to survive hundreds of millions of dollars of losses before it reached a cash-flow positive state, and without a committed entrepreneur at the helm, the company would have been liquidated well before that point.

What happens when an entrepreneur successfully brings his or her personal characteristics to bear on a suboptimal equilibrium? He or she creates a new stable equilibrium, one that provides a meaningfully higher level of satisfaction for the participants in the system. The new equilibrium is permanent because it first survives and then stabilizes, even though some aspects of the original equilibrium may persist e.

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Its survival and success ultimately move beyond the entrepreneur and the original entrepreneurial venture. It is through mass-market adoption, ificant levels of imitation, and the creation of an ecosystem around and within the new equilibrium that it first stabilizes and then securely persists.

Once the users saw the new equilibrium appearing before their eyes, they embraced not only Apple but also the many competitors who leaped into the fray. In relatively short order, the founders had created an entire ecosystem with numerous hardware, software, and peripheral suppliers; distribution channels and value-added resellers; PC magazines; trade shows; and so on. Because of this new ecosystem, Apple could have exited from the market within a few years without destabilizing it. The new equilibrium, in other words, did not depend on the creation of a single venture, in this case Apple, but on the appropriation and replication of the model and the spawning of a host of other related businesses.

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In Schumpeterian terms, the combined effect firmly established a new computing order and rendered the old mainframe-based system obsolete. In the case of Omidyar and Skoll, the creation of eBay provided a superior way for buyers and sellers to connect, creating a higher equilibrium.

In each case, the delta between the quality of the old equilibrium and the new one was huge. The new equilibrium quickly became self-sustaining, and the initial entrepreneurial venture spawned numerous imitators. Together these outcomes ensured that everyone who benefited secured the higher ground. If these are the key components of entrepreneurship, what distinguishes social entrepreneurship from its for-profit cousin?

First, we believe that the most useful and informative way to define social entrepreneurship is to establish its congruence with entrepreneurship, seeing social entrepreneurship as grounded in these same three elements.

Anything else is confusing and unhelpful. To understand what differentiates the two sets of entrepreneurs from one another, it is important to dispel the notion that the difference can be ascribed simply to motivation — with entrepreneurs spurred on by money and social entrepreneurs driven by altruism. The truth is that entrepreneurs are rarely motivated by the prospect of financial gain, because the odds of making lots of money are clearly stacked against them.

Instead, both the entrepreneur and the social entrepreneur are strongly motivated by the opportunity they identify, pursuing that vision relentlessly, and deriving considerable psychic reward from the process of realizing their ideas. Regardless of whether they operate within a market or a not-for-profit context, most entrepreneurs are never fully compensated for the time, risk, effort, and capital that they pour into their venture.

Social entrepreneurship: the case for definition

We believe that the critical distinction between entrepreneurship and social entrepreneurship lies in the value proposition itself. For the entrepreneur, the value proposition anticipates and is organized to serve markets that can comfortably afford the new product or service, and is thus deed to create financial profit. From the outset, the expectation is that the entrepreneur and his or her investors will derive some personal financial gain.