1.3 Workbook

The New Social Entrepreneur

Entrepreneurship is exploding throughout the world. More people than ever before in dozens of countries are trying to start and operate their own businesses. In the United States alone, more than one million new ventures are launched each year. It appears there is no end in sight to this growing desire people have to develop new products and services, determine their own career path, and create independence for themselves and their families.

We have interviewed hundreds of business founders in an attempt to identify the keys to new venture success. We have been looking for practices found in companies that succeed that are not present in those that fail: the differences that make the difference. One of the findings that has surprised us is the tremendous passion successful entrepreneurs have for serving the broader community in which they operate. The story typically goes like this: I never thought I would be so successful. It’s our customers who have gotten us where we are today. I would really like to do something to show our appreciation for this community.

The result: These entrepreneurs are supporting schools, disseminate health information, lowering grocery costs, helping families of the chronically ill, feeding the hungry, aiding the homeless, and funding cancer research. Before long, community members begin to reason: This business supports us, let’s support this business. So generosity endears the community to the organization, which aids the survival and growth of the venture even though this was not the original intent of giving. Robin Petgrave, founder of Celebrity Helicopters, explains it this way:

The entrepreneurs we have studied serve a broader purpose in several ways: some find a favorite charity or charities and provide donations and/or ongoing support; others partner with an organization that serves the same constituency; and some spin off a nonprofit organization to handle their charitable initiatives. In addition, most of the entrepreneurs we have interviewed are actively involved in speaking at schools, mentoring students, judging business plan competitions, helping other entrepreneurs, etc. A recent article in the Wall Street Journal entitled “Pro Bono Work Helps Firms Fight Economic Slump” shows how this type of activity leads to new relationships, increased visibility, and new business (September 1, 2009).

For some successful entrepreneurs, solving a serious social problem is the overarching objective of their business model; it’s more like they are starting a “movement” than a business. Blake Mycoskie, founder of TOMS Shoes, wanted to provide shoes to needy children in South America. He started a for-profit business, rather than a nonprofit, to improve long-term sustainability. He explained his reasoning at the 2009 Clinton Global Initiative conference:

Jeff Mendelsohn, founder of New Leaf Paper, shares similar sentiments. New Leaf Paper is a leader in the development and distribution of environmentally responsible printing and office papers. The company won the 2008 Social Capitalist Award from Fast Company Magazine and Monitor Group for its business success, environmental benefits, and impact on the overall paper industry. Jeff explained his strategy in a recent interview:

Jon Huntsman, founder of Huntsman Chemical and the major benefactor of the Huntsman School of Business at Utah State University, is perhaps the definitive example of this philosophy of “serving a broader purpose.” He explains it this way:

We refer to these heroes as social entrepreneurs: those who conceive, organize, manage, and assume the risk of an enterprise created for the good of society. Social entrepreneurship is therefore the application of innovative business practices in developing an enterprise that produces positive and sustainable social change. Though many of the entrepreneurs we have interviewed have gradually developed this practice as their companies grow, the pattern is clear: thriving entrepreneurs seek both business success and opportunities to benefit their community.

In this course you will learn about a number of these heroes and what they are doing to make a significant difference with their business ventures. You will learn about the various types of organizations they create and the benefits these entities produce for the receivers of the service, the givers of the service, and the entire organization. Most important, you will learn how to link your business with your community in a positive way that benefits all of your stakeholders. You will see that pursuing a cause bigger than yourself is not only a sound strategy, but it is the right thing to do with your resources. Let’s begin with a discussion of Corporate Social Responsibility.

Corporate Social Responsibility

Corporate Social Responsibility or CSR has become a significant topic of discussion in the business world. Large corporations have been encouraged (and even forced) to become more responsible in their communities, and many businesses are responding to the challenge. Being a responsible “corporate citizen” includes two important components: (1) Things an organization does to society, and (2) Things an organization does for society.

The first component of CSR requires companies to do no harm to the communities in which they operate. It is not acceptable to pollute the environment, sell products that are not safe, pursue questionable supply lines, expose people to hazardous working conditions, promote unhealthy practices, mistreat employees, etc. Every enterprise needs a plan for eliminating any negative impact it may have on its employees, community and environment. In our new world of social transparency, organizations that harm society in any way will struggle to survive.

While the first component of CSR is a responsibility of all organizations, the second component is an opportunity. In other words, organizations have the responsibility to do no harm; they also have the opportunity to go beyond this basic responsibility and make a difference in their communities. As mentioned above, many successful entrepreneurs use their resources to solve social problems, support school programs, promote literacy, fund cancer research, reduce poverty, address health concerns, etc. So businesses can do well financially, and also make their communities better places to live.

Doing great things in our communities has its roots in the very founding or our country. America is a grand experiment in freedom. The Declaration of Independence is the strongest document ever written about a people’s desire for self-government and citizen problem solving. It boldly proclaims that all people have certain unalienable rights that cannot be taken from them. One of these sacred privileges – the pursuit of happiness – was a new political doctrine at the time. This was not a call for self-centered hedonism, but a cry for all citizens to work together for the good of society. The Declaration ends with the commitment from the people to make the grand experiment in freedom work: “We mutually pledge to each other our lives, our fortunes, and our sacred honor.”

After winning the revolutionary war, our forefathers were ready to prove to the world that self-government would work. They were all in the grand experiment together and understood the importance of participation from every individual. They worked together to build each other’s barns and plant and harvest each other’s crops; they held town meetings to plan their schools, roads and cities; they cared for the sick and afflicted, and adopted the children of those who tragically died. It was a marvelous display of “all for one and one for all.”

Eyes from abroad watched the American experiment with great interest. The ruling class was sure it would fail; the common citizens hoped it would succeed and set a new precedent for the world. In the early 19th century, a French political philosopher named Alexis de Tocqueville came to America to examine the grand experiment up close. His observations are published in a multivolume work entitled Democracy in America. Believing that the essence of this new society took place in its local communities he observed:

So it was citizen problem solving that allowed us to first survive and then thrive as a nation. However, today in the 21st century our country is much larger, more complex, and faces a different set of circumstances. Unfortunately, along with the growth and complexity, we have delegated many of our problems to the government. Since we pay a substantial amount of taxes and elect public officials to represent us, it is reasonable to assume that the government should solve our serious challenges. If only it were that simple.

Most of us now recognize that the government cannot and should not be expected to address all of our social ills. Our toughest problems are simply too vast, too complex, and too expensive for government to render effective and efficient solutions. The answer to our problems is what it has been from the beginning: “We the People.” We need to resuscitate the community spirit observed by Tocqueville. We need to restore our tradition of a single society working for the good of all. We need to reclaim for ourselves the role in public life we have forfeited to the government through our own inaction.

Our contention is simple: successful business builders can play a key role in solving problems in our communities – they have the skills, experience and resources to make a difference. We believe that all aspiring entrepreneurs should build a social component into their business plans. At first, the contribution may be time, skills and expertise; as time goes on, it may include financial resources as well. We believe that using business models to address our social concerns – either directly or indirectly – is not only an excellent solution to problems we face in our communities, it is also the right thing to do.

In sum, every organization has a social responsibility to do no harm to its employees, community and environment. Business ventures will fail it they pollute the air, contaminate the water, harm wildlife, operate toxic facilities, or abuse employees. In addition, organizations have an opportunity to contribute real value to the communities in which they operate. It is our right as American citizens to work together to pursue happiness for all members of society. Of course, organizations must be healthy, sustainable, and have full support of their owners and shareholders to support community endeavors. Big hearted leaders will not be able to contribute if their companies are teetering on the brink of survival. So all the practices required for successful business building must be in place before organizations can use their resources to pursue social initiatives. When this is the case, organizations can realize tremendous benefits from participating in the process of making our communities stronger and better places to live. These benefits will be discussed in detail in Lesson 3 in this course.

Types of Contributions You Can Make

Life in the 21st century presents different challenges than those faced by the founders our country. Our cities are much larger, society is more complex, and we are being bombarded with more information than ever before in our history. During the 19th and early 20th centuries, people worked together to build their barns, mend their fences and harvest their crops. This reliance on one another for physical labor produced strong emotional bonds between these citizens. Now that we no longer need each other for physical assistance, we have forfeited the social ties this once created. In the midst of this information age, many of us are alone and isolated. We can live in a community for years and never get to know the challenges our neighbors face.

The reality is, millions of Americans live in poverty, millions are hungry, and a high percentage of our citizens are illiterate. Our basic support unit – the family – is deteriorating, domestic violence is widespread, teenage pregnancy is high, children are growing up without role models, drug use is on the rise, and gang membership is increasing rapidly. So there is no shortage of challenges for organization to address. Here are some statistics on a few of the social problems facing our country (there are obviously many more than these). We have also included a brief story of an entrepreneur or business leader who is assisting with these challenges.

Challenges with Youth

• Nearly 10% of high school students have taken a weapon to school
• Juveniles commit approximately 15% of all violent crimes in America
• 25% of all males arrested for violent crimes are under 18 years of age
• 25% or all property crimes in America are committed by juveniles
• Nearly 50% of all crimes of arson are committed by teenagers
• More than 3,000 students are dropping out of high school every day
• Gang membership has more than doubled in the past few decades

Bill Stickland grew up in the inner city of Pittsburgh. He was going nowhere, fast. Getting shot, going to jail, and dropping out of school were likely possibilities. Then one day he walked past the art room at his high school and saw a teacher making ceramics. He had never seen anything like it before. The teacher, Mr. Ross, showed him how to make pottery. Bill soon discovered that he was very good with clay. He realized he had value, his self-esteem increased, and he finished high school and went to college.

During his freshman year, Bill created a “guild” to teach other inner-city kids about the arts. He wanted to replicate his own life-transforming experience with Mr. Ross. He wasn’t interested in turning these kids into master craftsmen; he was interested in increasing their self-esteem and motivation to stay in school. Bill’s organization – the Manchester Craftsmen’s Guild – grew from a small row-house to a 62,000 square foot facility. Today, all of the schools in the Pittsburgh Public School System send kids to Bill’s program. Hundreds of students take courses in clay, photography, graphic design, and music. Approximately 80 percent of these kids stay in high school and get into colleges around the country. Perhaps most ingenious, Bill has created a Grammy Award winning music recording business, a food service company, and a real estate division that help support his organization. Bill is one of the great entrepreneurs having a significant impact on the lives of thousands of teenagers.

Challenges with Illness

• 12 million people in the U.S. have been diagnosed with cancer
• More than 1 million new cases of cancer are diagnosed each year
• 30% of Americans will suffer from cancer during their lifetime
• More than 10,000 children are diagnosed with cancer each year
• 52 million people are affected by mental and emotional illnesses
• Over 1 million Americans are being treated for drug and alcohol addictions

Henri Landwirth was taken to a concentration camp when he was 13 years old because he was Jewish. On numerous occasions he should have died, but he didn’t. His parents were not so lucky. After the war, Henri came to America with $20 in his pocket. He got a job in the hotel industry and worked his way up from night clerk to hotel owner. One day a “Wish Foundation” called and asked Henri if he would donate a room to the family of a girl who was dying of cancer. Henri was delighted to help. The day the family was to arrive, Henri learned that Amy had died before making the trip – it had taken too long to arrange all the free services. That day, Henri made a promise he would keep: no more children would die in America before their last wish was fulfilled.

Today, Give Kids the World is a 70-acre resort in Orlando Florida with 140 villas, restaurants, entertainment, and attractions. For one full week, these special kids and their families stay in Henri’s Village, sleep in his villas, eat in his restaurants, and visit the theme parks of central Florida – for free! The organization is funded through long-term partnerships with corporations that cater to children and families. Since its inception, Give Kids the World has welcomed more than 120,000 families from all 50 states and 74 countries. Henri is a remarkable social entrepreneur who is alleviating the suffering of families with terminally ill children.

Challenges with Poverty

• 46 million people in the United States (15%) live in poverty
• 11 million people go hungry each day; 25 million are food insecure
• Nearly 20% of all children in America are hungry or food insecure
• 2.5 million elderly don’t know where their next meal will come from
• 25% of the food we produce each year is wasted or thrown away
• 2 million men, women and children in the America are homeless

Rita Ungaro-Schiavone wanted to get involved in her community so she volunteered at her local YWCA. The director gave her a list of 11 shut-ins who had called and asked for help. The first person she visited was an elderly woman named Minnie. Rita discovered that the house was hot and dark, and that Minnie was hungry and lonely. The same was true of the other people she visited. Rita decided that these shut-ins – who were mostly elderly – needed home-cooked meals every day, plus friendship. She immediately went to work.

Rita asked members of various religious congregations to cook an extra portion of their dinner each night, put it in an aluminum TV dinner tray, and then store it in their freezer. She had volunteer drivers pick up the dinners and take them to a central freezer for later distribution. Another group of volunteers would pick up seven dinners, take them to the shut-in’s home, and visit for an hour each week. This was the birth of Aid for Friends.

Today, Aid for Friends alleviates the hunger and loneliness of isolated, homebound individuals in the five-county Philadelphia region. Meals are provided by individuals and group cooking events organized by churches, schools, boy and girl-scout troops, and other organizations. All of the services are provided free of charge. Aid for Friends has more than 16,000 active volunteers, who serve millions of meals to thousands of elderly, homebound individuals. So one compassionate woman has created a low-cost, innovative organization which has solved the hunger problem in the region.