These slides present the major themes in an IAP course at MIT Sloan, Scaling Social Entrepreneurship. Social entrepreneurship is first defined, then the future direction of capitalism and social entrepreneurship is discussed. The SCALER Model is presented

1. SCALING SOCIAL
ENTREPRENEURSHIP
IAP 15.S59
MIT Sloan School of Management
January 2015
Robert H. Hacker
Rhhfla@gmail.com
C|305-742-8222

2. COURSE OVERVIEW
• SE DEFINED; CURRENT STATUS OF SE
• SCALER MODEL; CASE STUDY MX
• BUSINESS MODEL (OSTERWALDER/HACKER)
CASE STUDY OLPC
• ANALYSIS OF GS 10KSB

3. READINGS
• Reading: A Positive Theory of Social Entrepreneurship by Felipe Santos
• Reading: Osterwalder Business Model Canvas
• Reading: Identifying the Drivers of Social Entrepreneurial Impact:
• Reading: Scaling Social Entrepreneurship by Robert H. Hacker
• Reading: Learning to Change the World
• WEF ‘From the Margins to the Mainstream”
Reading List 2015 MIT Sloan SE

4. 10,000 SMALL BUSINESSES
Goldman Sachs10,000 Small Businesses is a $500 million investment to help small businesses create jobs and economic opportunity by providing them with
greater access to business education, financial capital, and business support services.
The program is based on the broadly held view of leading experts that greater access to this combination of education, capital and support services best
addresses barriers to growth. 10,000 Small Businesses is funded by Goldman Sachs and The Goldman Sachs Foundation.
The program is currently operating in Cleveland, Chicago, Detroit, Houston, Long Beach, Los Angeles, Miami, New Orleans, New York, Philadelphia, Salt Lake
City and nationally at Babson College. It will continue to expand on a city-by-city basis.
HOW THE PROGRAM WORKS
The program has three main components:
1. Practical Business and Management Education. Goldman Sachs 10,000 Small Businesses is contributing $200 million to program partners,
including local community colleges and business schools. Funds go towards scholarships, faculty training and technical assistance to help build the
organizations’ capacity. Students receive a practical education that focuses on skills they can apply immediately, including accounting, marketing
and human resources management.
2. Access to Capital. Goldman Sachs 10,000 Small Businesses has committed $300 million through a combination of lending and philanthropic
support to Community Development Financial Institutions (CDFIs). The investment will increase the amount of growth capital available to small
businesses in underserved communities and expand the capacity of CDFIs to deliver financing and technical assistance to small businesses.
3. Business Support Services. Small business owners often face challenges finding networking opportunities and expert advice. The initiative
provides these vital support services through partnerships with national and local business organizations, professional services firms and the
people of Goldman Sachs.
SELECTION CRITERIA
Goldman Sachs 10,000 Small Businesses is designed for business owners with limited resources who have a business poised for growth. Applicants must
demonstrate a commitment to growing their business and creating jobs within their community.
Applicants should meet the following criteria:
• Applicant must be an owner or co-owner of a business
• Business in operation for at least two years
• Business revenues between $150,000 and $4.0 million in the most recent fiscal year
• At least 4 employees (including the owner) and no more than 100
http://www.icic.org/resources-for-inner-city-ceos/10000-small-businesses

5. Social Entrepreneurship
“If your conduct is determined solely by
considerations of profit you will arouse great
resentment.”-Confucius

6. WHAT IS SOCIAL
ENTREPRENEURSHIP?
1.Non-profit organizations that apply business expertise to become
more efficient in providing and delivering their social services
2.For-profit businesses run by non-profits to help offset costs and
become independent from grants and subsidies
3.High donor control philanthropy, where donors pursue their own
personal social vision
4.Socially responsible businesses that offer innovative solutions to
persistent social, economic, and ecological problems using
market-based models
Brigitte Hoogendoorn, (2011), A Conceptual Overview of What We Know About Social
Entrepreneurship, EIM Research Reports

7. SOCIAL ENTREPRENEURSHIP
A commercially sustainable, scalable solution to
a social problem
Hacker

8. VALUE CREATION-VALUE CAPTURE
VALUE CAPTURE
Note: RBT economist

9. VALUE CREATION-VALUE CAPTURE
Or expand the circle

10. SEV
Entrepreneurship
SE

11. WHEN FOR-PROFIT IS THE RIGHT
ANSWER FOR A SOCIAL ENTERPRISE
NextBillionNet has an article of the same name, “When For-profit is the Right Answer
for a Social Enterprise.”.
Guidelines for when a social enterprise should be for-profit are:
1. A commercially-driven earned-income strategy [sell product or service]
2. The potential to be high impact, high-growth [scalable]
3. A real solution to a real problem [value proposition]
4. A product or service designed to meet their customers’ needs, customs and
culture [customer need]
5. A realistic combination of price, distribution and sales to ensure their offerings
get to those that need it most at the right price. [pricing/distribution]
So, with an unrealistic combination of price, distribution and sales do a non-profit?
Of course, the question becomes "why social enterprises by default are not for-
profit”.

12. A Vote of No Confidence
“When self-made billionaire Tony Elumelu founded the foundation that bears his name, he did so with
the stated goal of proving "that the African private sector can itself be the primary generator of
economic development." The hope was that The Tony Elumelu Foundation could help spur some of that
development.
Earlier this week, Elumelu really put his money where his mouth is:
"Nigerian billionaire investor and philanthropist Tony Elumelu has committed $100 million to create
10,000 entrepreneurs across Africa over the next 10 years.
Elumelu made the commitment on Monday during a press conference in Lagos to announce the launch
of The Tony Elumelu Foundation Entrepreneurship Programme (TEEP)."
Elumelu is a champion of Africapitalism, an economic philosophy in which the African private
sector drives social and economic growth throughout the continent. Since the end of
colonialism, African state leaders have a checkered past when it comes to making decisions
compromising the continent's long-term welfare. Elumelu's $100m investment is as much a tacit
vote of no confidence in Africa's public sector as it is a philanthropic act in support the
continent's rising business class.” (Emphasis added)
Forbes

13. OTHER ALTERNATIVES
A Public Company has finally become a B Corp
In December, B Lab reached a big certification milestone: Natura, the biggest
cosmetics maker in Latin America, became the world's largest B Corp (based on
revenue and employees) and the first public company to get certified (another public
company, Rally, was certified while it was still private). Natura is valued at over $6
billion, according to Forbes.
Donate to a Corporation?
"Google CEO Larry Page has an unusual idea about what should happen to his billions
should he die. Instead of giving it to a philanthropic organization, he'd rather hand
over his cash to Elon Musk, the founder of Tesla, SpaceX, and SolarCity. In a
conversation with Charlie Rose at a TED conference on Wednesday, Page said he
wanted his money going to capitalists like Musk — those with big ideas for changing
the world.” Business Insider

14. B CORP PRINCIPLES?
• We hold these truths to be self-evident:
– That we must be the change we seek in the world.
– That all business ought to be conducted as if
people and place mattered.
– That, through their products, practices, and
profits, businesses should aspire to do no harm
and benefit all.
– To do so, requires that we act with the
understanding that we are each dependent upon
another
https://www.bcorporation.net/what-are-b-corps/the-b-corp-declaration

15. CAPITALISM'S FUTURE IS ALREADY
HERE?
“HBR Blog Network has an interesting article today, "Capitalism’s Future Is Already Here".
The thesis of the article is that we should reject Milton Friedman's dictum,"the purpose of
the corporation is to maximize shareholder returns", which first appeared in the New York
Times in 1970. This type of thinking lead to a now outdated set of management practices
according to the author because Friedman does not recognize the growing needs of society.
The focus of management should now be the customer and by serving the customer well,
you serve the shareholder's best interest. This concept was first presented by Roger
Martin. …..Yes, a corporation should always make the customer the priority and the focus of
management. (As I tell my students, if it does not affect the customer or put you out of
business, it is not an important decision.) Focusing on the customer gives the corporation
the flexibility (opening) to consider societal issues, but what is the framework for selecting
the issues?
Simon Synek of Golden Circle fame would probably say to pick the societal issues and let
the customers pick your corporation/product to identify with. The problem with this logic is
that homeless dogs and homeless children would be equally valid social objectives for a
corporation.”
from Sophisticated Finance

16. A BETTER VIEW
• “As they built their businesses against obstacles, all three leaders evolved
a passionate belief that their firms needed to be major contributors to
solving the problems which had kept their countries and people poor
compared to the West.”
• "There are those with whom I don't agree…who say our job is to run
industry, and to hell with corporate social responsibility or philanthropy.
We have to take care of all stakeholders—I say customers, vendors,
employees, shareholders, and the society in which you work. You can't
produce a bad quality and high cost product and then say, 'I go to the
temple and pray' or that 'I do charity'; that's no good and that won't last,
because that won't be a sustainable company. You have to run the best
possible company. That's your primary job as a businessman. But in
addition you have to take care of the society in which you operate, which
enables you to earn that money.” Rahul Bajaj
http://hbswk.hbs.edu/item/7702.html

17. RESEARCH SHOWS
• Socially responsible corporations have:
– Better ROI
– More motivated employees
– More loyal customers
• According to a 2011 Harvard study of 180 large U.S. companies, the stock
price of companies with robust CSR programs outperformed those with
a low CSR commitment by 65 percent over an 18-year period (1992-
2010.)
• Social responsibility increases shareholder returns, but we need more
evidence
• It is much harder to operate this way, but “customer experience” helps
Image: Social Earth

18. ANALYSIS
“CGAP, ThinkPlace, Grameen Foundation and the Citi Foundation
created a workshop to focus on analyzing the shortcomings of product
launches and their inability to gain market traction [for social
problems]. The team of forty brainstormed numerous challenges,
which included:
• A lack of sufficient resources, including both staff capacity and
monetary resources
• The tension between creating stability and change
• Internal processes that get in the way
• Complex partnerships with many moving parts
• User illiteracy and discomfort with technology”
NextBillion.net | Getting Innovations to Market

19. TACTICS
“Some broad tactics that may help overcome these challenges:
• Merging commercial and social needs
• Increasing awareness among banks, governments and educational
organizations
• Identifying new markets to reduce costs and risks
• Effectively utilizing “big data”
NextBillion.net | Getting Innovations to Market

20. TAKEAWAYS
“Our brainstorming sessions also led to some more unorthodox (some
might say crazy) ideas to help get innovations out to market. We
developed ideas around six themes:
1. Creating new architectures [??]
2. Working iteratively [Is there capital to be iterative?]
3. Having more effective partnerships
4. Creating new [business] models
5. Focusing on innovation leadership, and [innovation has to be
commercialized?]
6. Getting fresh perspectives”
NextBillion.net | Getting Innovations to Market
“Business architecture--a blueprint of the enterprise that provides a common understanding of the organization and is used to
align strategic objectives and tactical demands” Object Management Group

21. SCALERS MODEL
• Staffing--"the effectiveness of the organization at filling its labor needs, including its
managerial posts, with people who have the requisite skills for the needed positions,
whether they be paid staff or volunteers"
• Communicating--"the effectiveness with which the organization is able to persuade key
stakeholders that its change strategy is worth adopting and/or supporting"
• Alliance building--" the effectiveness with which the organization has forged partnerships,
coalitions, joint ventures, and other linkages to bring about desired social changes”
• Lobbying--"the effectiveness with which the organization is able to advocate for
government actions that may work in its favor"
• Earnings generation--"the effectiveness with which the organization generates a stream
of revenue that exceeds its expenses"
• Replicating--"the effectiveness with which the organization can reproduce the programs and
initiatives that it has originated"
• Stimulating market force--"the effectiveness with which the organization can create
incentives that encourage people or institutions to pursue private interests while also
serving the public good"
Source: Paul N. Bloom—Fuqua School of Business

22. A PRINCIPLE!
• People acting in their self-interest such that
they serve the public good

23. MOVEMENT
“As a leader, you are alone — and accountable for the
needs of the whole. The whole is the product. And you’re
making it. You own it. And you succeed and fail by it…
True creative leaders recognize that they live and die by
their team.”
John Maeda
"That puts pressure on us to create other activities that
they [customers] can do, events, activism. They are really
looking at us more as a movement than as a company.”
[Customer experience]
Blake Mycoskie, FounderToms Shoes

24. MEXICO CITY
One of the major problems in Latin America is a high drop out rate amongst
students, which in some countries begins with graduation from primary
school.
In classic economic development thinking this problem has many dimensions:
• Political--unemployed youth can be easily encouraged to protest or join
criminal enterprises
• Social--uneducated youth are likely to enter a life of poverty
• Cultural--uneducated youth frequently come from minority groups
• Structural--uneducated, unemployed parents tend to have children with
the same future
• Economic--uneducated youth provide no economic contribution and may
become a burden on the society
As you can hopefully see, this drop out problem can be analyzed in quite a
complex way and the solutions developed typically incorporate this
complexity to be responsive to all the objectives.

25. MEXICO CITY
On the other hand consider the simple but elegant solution used
by Mexico City’s Education Secretary Mario Delgado Carrillo.
In the program's three year history the drop out rate has decreased
from 20 to 6 percent and grades have also improved.
What did Delgado do?
[Paid the students directly to go to school. Nothing more.]

26. WHY SE REQUIRES ITS OWN BUSINESS
MODEL
• IF SE IS JUST ENTREPRENEURSHIP DIRECTED
AT SOCIAL PROBLEMS, WHY DO WE NEED TO
CONSIDER DIFFERENT BUSINESS MODELS?
• BECAUSE THE MARKETS LACK TRADITIONAL
RESOURCES, WHICH REQUIRE DIFFERENT
EMPHASIS IN BUSINESS MODEL

27. HACKER SE BUSINESS MODEL
• Partners
• Customer segments
• Sales strategy
• Distribution
• Pricing
• Value proposition
• Capital

28. BUSINESS MODEL
• PARTNERS
– GOVERNMENT (AGENCY)
– LOCAL FOUNDATIONS (EXISTING OR NEW)
– PRIVATE SECTOR COMPANIES
– UNIVERSITIES
– FAITH-BASED ORGANIZATIONS
– MULTI-LATERALS (SOME FOUNDATIONS)

29. BUSINESS MODEL
• DISTRIBUTION
– ARMY
– WORLD FOOD PROGRAM (UN)
– PRIVATE SECTOR COMPANIES
– CSR (CELLULAR, CONSUMER PRODUCTS)

30. BUSINESS MODEL
• CAPITAL
– FOR-PROFIT
– “BIGGEST LOCAL PROBLEM”
– MICRO-FINANCE

31. OLPC

32. OLPC TAKEAWAYS
• CREATED A MOVEMENT—1:1 COMPUTING IN
SCHOOLS
• UNLEASHED MARKET FORCES—INTEL,
MICROSOFT, HP, DELL, ETC.
• FOCUS ON MISSION (xELECTRICITY, xOPEN
SOURCE, xSUNLIGHT READABLE)
• BUILD IN EVALUATION UPFRONT

33. GS 10KSB

34. GS
• PROBLEM—HOW TO MAKE SMBs GROW
• SOLUTION—COMMUNITY COLLEGES,
BABSON, COMMUNITY DEVELOPMENT
BANKS, ICIC AS PARTNERS;
• APPROACH: EDUCATING,
ADVISORS/MENTORING, CAPITAL ACCESS FOR
SMBs