Scaling a social entrepreneurial organization

Social impact and social change
16.02.2020
Governance and human resource management in social entrepreneurial organizations
18.02.2020

Content

  1. Growth approaches for a start-up social enterprise
  2. Internal growth of existing activities
  3. External growth of existing activities
  4. Open access and dissemination of good practices
  5. Threats of expansion
  6. Activities for readers
  7. References

Growth approaches for a start-up social enterprise

The entrepreneurship process for any social venture typically follows the algorithm:

Scaling is a process of internal and external growth of the enterprise. Once you have set up and launched a successful organization, you should start thinking about the next step and how to maximize your impact even further. Scaling includes:

  • Scaling your operations for more production capacity
  • Scaling your volume output
  • Scaling your reach (by entering new markets and reaching more people with your activities)
  • Building strategic partnerships with others into broader framework of actions.

Growing your impact is not always as simple as increasing the level of operations or volume of production of goods and services. Not always the increase in those activities leads to increase in impact.

Moreover, there are many directions in which the enterprise can grow. For example, it could expand the geographic scope (work on different places) or expand the demographic scope (reaching different people).

It can also means diversifying the output with new products and services. Those approaches will lead to the expand of the breadth and depth of the impact.

Expanding the venture can happen in different ways:

  • Increasing the number of people, you reach
  • Increasing the impact, you have on each person you reach
  • Increasing the scope of your social impact, beyond the direct end users
  • Increasing your market share in your existing market
  • Adding new products or service for your existing customers
  • Entering new markets, whether new region or target population

Internal growth of existing activities

New social enterprises can grow by increasing the number of users or buyers, by developing more and more widely available outlets, offices or units. This is the most common way of growing a new social enterprise. It is a form of organic growth built on existing assets, staff and skills. Key challenges include more efficient use of resources while maintaining high product quality.

Diversification

Diversification implies using various resources and activities to produce a large range of products and services. This approach leads to both- corporate growth and a competitive advantage.
Developing new products takes time and dedication. They have to comply to the same quality standards as the products/services that are already being produced by the company. Diversity must be included as a part of the development vision, but sometimes the resources (either material, human or technology) may not allow rapid expansion via diversification.

Optimizing the distribution – maximizing the social impact

The social venture can maximize their impact by optimizing the distribution and the delivery channels that are currently in use. May be the production of goods and services is at a satisfactory level, but it still cannot reach all needed users for some reason or another. The case of Aravind eye care hospital demonstrates the classic example how important is to reach people in the remote, rural areas (via mobile hospitals) who otherwise won’t be able to have access to blind treatment and surgeries. In order to maximize the distribution, the following steps should be taken:

  • Collect feedback from existing customers and other stakeholders
  • Surveying the market of customers that have not been reached yet
  • Testing different options through small pilot samples

Maximizing the delivery – maximizing the social impact

The main techniques for maximizing deliveries are three:

  • stimulating demand together with
  • boosting productivity
  • networking with the communities that need the product
  • improving the scope of supply by reaching the most populated areas where the product is needed.

To maximize the social impact means to cover the community needs of growth and to create an appetite for novelties and changes. The main techniques for maximizing impact are three:

  • to make customers understand deeply the nature of the product/service
  • to show the quality of the product/service and at the same time to offer it at an affordable price
  • to link the product/service to a cause/mission

External growth of existing activities

Expanding also includes moving outside the venture into partnerships with others. You alone are not able to reach the entire spectrum of change that you are aiming at. The first step towards collective impact is stepping back and inviting others. Example of expanding the impact externally are creating network to lobby or advocate for social policy, or make business associations with other companies. Other way to achieve this is by franchising your activities to others, providing them with know-how and resources to do what you do.

Franchising

Franchising is a system through which goods, technologies and services are distributed on the market. It is implemented through close and continuous cooperation between entrepreneurs – the franchisee and the franchisee. The entrepreneur gives the recipients the right and at the same time assigns them the obligation to run their businesses according to its concept.

The obligations of the franchiser are:

  • Be the owner or legal user of a company name, trademark or any other special feature of the franchise network
  • Provide initial training to individual franchisees and provide them with commercial and technical support until the deadline specified in the contract.

Obligations of the franchisee:

  • To assist the franchisor in the implementation of effective management, namely to facilitate it in determining the right judgment about the achievements and the economic results;
  • Provide the franchisor or its authorized persons with access to its premises and documentation;
  • Pay franchise royalties or other type of remuneration to the franchisor (as stated in the contract)

What is Know-How?

Know-how is derived from the English “I know how to do it!”.

In general, know-how refers to knowledge and experience in the field of technology or other creative asset that can be applied by an authorized and knowledgeable team or individual.

The possession of know-how can gain economic advantages over competitors. Know-how is provided through the necessary documentation and training.

Staff training is also a widely used method of conveying know-how. Typically, this method is used when a specific practical experience is provided and when personnel need to acquire certain production habits and skills.

In some cases, the know-how is a subject to licensing and legal protection.

Franchising

  • Branding services and other industrial property, as well as know-how.
  • The franchisee can be employed, within the period specified in the contract, to apply technical and technological methods against direct or indirect payment

Franchising Specifics

The franchiser is the originator of the franchise network, consisting of the franchiser and the various franchisees, and is their long-term leader. The franchiser provides training to the franchisees.

The obligations of the franchiser are to develop a concept based on at least one pilot enterprise. The franchisee is a legal user of a company name and the organizational specifics.

The franchisee has obligations to work on the development of its franchising enterprise. It has to protect the collective interests as well as the good name of the franchise network.

Scaling through formalized relationships with other providers

  1. Affiliation with other stakeholders
  2. Government adoption
    Adoption by the government is another way to take a successful social venture and apply it at a much larger scale. The independent enterprise can demonstrate best practice in a certain area. The government can facilitate adoption of these practices and innovations for a widespread implementation.
  3. Advocacy and Policymaking
    Influencing the way things are done outside your venture, can be viewed as an ultimate step of scaling your impact. This include setting new trends and changing the behaviour of users and other stakeholders and building an advocacy platform to induce more changes even on legislative level. You may join forces with other stakeholders to lobby for policy changes or for allocation of resources on a larger societal level. Creating and disseminating knowledge is another way to spread information, ideas and know-how.

1. Affiliation with other stakeholders

New businesses can increase their social impact and grow if they form exclusive partnerships with other organizations. Those partnerships could have various forms and models of collaboration. For example, in the case of affiliation, the originator company retains its features almost entirely, while the affiliates keep their autonomy only in terms of internal work and recruitment.

2. Government adoption

Adoption by the government is another way to take a successful social venture and apply it at a much larger scale. The independent enterprise can demonstrate best practice in a certain area. The government can facilitate adoption of these practices and innovations for a widespread implementation.

3. Advocacy and Policymaking

Influencing the way things are done outside your venture, can be viewed as an ultimate step of scaling your impact. This include setting new trends and changing the behaviour of users and other stakeholders and building an advocacy platform to induce more changes even on legislative level. You may join forces with other stakeholders to lobby for policy changes or for allocation of resources on a larger societal level. Creating and disseminating knowledge is another way to spread information, ideas and know-how.

Open access and dissemination of good practices

Training and accredited courses

New social enterprises can increase their impact in the community by training other organizations and improving product quality. This may be part of officially accredited courses or more specific courses offered for a specific topic by the social enterprise team itself.

Networks designed to share good practices

The exchange of knowledge through networks can be informal as well as formalized. This include organizing forums that bring together decision makers and other stakeholders and publishing findings, results and viewpoints. It is also a way of sharing good practices.

Providing open-source materials and promoting training

Social enterprises can use their resources and experience to provide open-source materials – manuals, guides, visualizations and other training materials. This can reach a large number of organizations.

Threats of expansion

Growing the social venture presents an opportunity, but also a set of threats and is not always the best decision. Actually, growing too fast can lead you off track, presenting risks of bureaucracy, inefficiencies and increased distance between management and end frontline (employers, community, volunteers, end users. Expanding also sometimes put the quality of work at risk, resulting in long-term reductions. Growing can also strain the resources and jeopardize the viability of the enterprise, thus decreasing the chance of success. It is of an extreme importance to distinguish whether the moment is good for growth, or consolidation might be a better tactic.

Finally, the growth does not signify more impact. For example, reaching more people or producing more volume output does not necessary mean that your goals are better met, or that the changes in the societies are for good.

Information needed before scaling the operations:

  • Is your organization financially viable? Do data indicate that costs and revenues are trending in accordance with your initial financial projections?
  • Has your social impact been demonstrated? Have the results from your initial monitoring met the social impact targets you set before launching?
  • What does the feedback collected from your initial customers indicate? Is there demand for, and satisfaction with, the product or service you’re offering?
  • What will be the technical and managerial inputs required to scale? What physical and financial resources are required? Do you have these resources?
  • What strains will this place on your venture, and what investments do you need to make upfront to ensure that your organization can handle these strains?
  • Have you considered the risks of expansion? Are there different PESTEL considerations in your new market? What steps can you take to address these threats and mitigate risk?
  • Also consider what new assets might be available to you at your new sites of operations. Revisit, continue, and build on your initial co-creation process at each step of expansion. This is the number 1 investment you can make that will help ensure your success.

Source: Chahine, 2016

Activities for readers

1. Watch the video

Christine Clifford: Selling the Invisible: Four Keys To Selling Services: https://www.youtube.com/watch?v=4HdA924aqbM

Answer the question: What are the three reasons why people would buy/include/use your product or service?

2. Start a research

What kind of groups will you include in your research to understand the customers’ attitude to your product/service? Describe the groups and justify your choice.

3. Watch the video

Jenifer Willing: How Can “Traditional” Business Use Partnerships to Scale and Create Social Impact? http://youtu.be/fOprCKDHPks

4. Answer the question

What/Who inspires you? Describe this phenomenon/personality.

Which of its/her/his qualities do you possess? Make a list.

5. Start a research

Identify and study other entrepreneurs and organizations that are working in the business field that you are interested in. Explore their products and services. Make lists of the most useful and useless components of products / services.

Self-assessment test “Scaling a Social Entrepreneurial Organization”

  1. What means the term “scaling of the SE start-up?
    a) Scaling is a situation of expansion of search of enterprise’s product
    b) Scaling is a starting period of better celling.
    c) Scaling is a process of internal and external growth of the enterprise
    d) Scaling is a program for internal development of the team
  2. How to use “know-how” for scaling the SE start-up?
    a) The SE use know-how to create training open access resources
    b) The SE use know-how to growth the social impact to social change
    c) The SE use know-how to take evidence-based decisions
    d) The SE use know-how to formalize relationships with the concurrence
  3. The diversification is:
    a) process of variation of activities and resources
    b) situation of transfer of knowledge
    c) redistribution of resources
    d) development of five-years plan
  4. Can we use franchising and open resources at the same time to grow the enterprise?
    a) Yes, both approaches complement each other and everybody can use the special methodology of SE.
    b) Yes, open sources can be used in trainings
    c) No, if the SE team manage franchising companies to growth, the open resources will reveal know-how of SE.
    d) No, in situation of franchise the open resources open training will increase competition

References and self-study resources

Ahlert, D., Ahlert, M., Duon Dinh, H.V., Fleisch, H., Heußler, T., Kilee, L. & Meuter, J., 2008. Social Franchising: A Way of Systematic Replication to Increase Social Impact, Bundesverband Deutscher Stiftungen, Berlin.

Bradach, J., 2003. Going to Scale The Challenge of Replicating Social Programs, Stanford Social Innovation Review, vol. 1, pp. 19–25.

Capacity (2008) Social Enterprise: A childcare solution for London? Available at http://www.capacityltd.org.uk/docs/Social_Enterprise_Report.pdf Accessed 4 January 2012. Dees
Dees, J.G., B.B. Anderson & J. Wei-Skillern, 2004. Scaling social impact, in Stanford Social Innovation Review, vol. 1, pp. 24–32

Hoogendoorn, B., E.Pennings & A. Thurik, 2010. What do we know about social entrepreneurship; an analysis of empirical research, in International Review of Entrepreneurship, vol. 8, no. 2, pp. 71–112

Lyon, Fergus and Fernandez, Heather, 2012. Strategies for Scaling Up Social Enterprise: Lessons from Early Years Providers, Social Enterprise Journal, vol.8, doi 10.1108/17508611211226593 http://www.esiiproject.eu/moduli/modulo-5/unit-1/?lang=bg

Martin, R.L. and Osberg, S. (2007), “Social entrepreneurship: The case for definition”, in Stanford Social Innovation Review, vol. 5, no. 2, pp. 27–39.Google Scholar

Nicholls, A. (2006) ‘Playing the Field; A New Approach to the Meaning of Social Entrepreneurship’, Social Enterprise Journal, Vol. 2, No. 1, pp. 1-5.

Pirson, M.& G.Bloom, 2011, Dancing with Wolves? Social Entrepreneurship Between Promise and Challenge for the Business School and the 21st Century University”, SSRN: http://ssrn.com/abstract=1925868.

Santos, F., 2009, A Positive Theory of Social Entrepreneurship, INSEAD, Barcelona.

Tracey, P. and Jarvis, O. (2007) ‘Toward a Theory of Social Venture Franchising’, Entrepreneurship: Theory & Practice, Vol. 31, No. 5, pp. 667-685.

Waitzer, J.M.P. & R. Paul, , 2011. Scaling Social Impact: When Everybody Contributes, Everybody Wins, in Innovations: Technology, Governance, Globalization, vol. 6, no. 2, pp. 143–155.