The Disruptors 2: How Social Entrepreneurs Lead and Manage Disruption

2018

INTRODUCTION

WHAT COULD BUSINESS LEARN FROM SOCIAL ENTERPRISE?

Our world needs social entrepreneurs. We need their vision, their passion, their energy and their commitment to making a difference. So, here at GIBS, we were only a little surprised at the success of the first volume of The Disruptors , published in 2016. Still, we didn’t really anticipate the global interest expressed in the extraordinary individuals who were profiled there.

People were talking about social enterprise; they were paying attention to social entrepreneurs, and maybe even dreaming their own dreams of making a difference. The book also stimulated conversation on the value of social enterprise to both the social and economic sectors.

In putting together this sequel, we hope to build on that success by enriching the descriptions of the organisations that social entrepreneurs create, and in so doing, to extend the conversation to the business sector. We have asked ourselves, What could business learn from social enterprise? and it turns out the answer is: quite a lot, actually.

This book comprises three main parts. Part I explores how the social entrepreneur evolves as a leader – first in ideas, then opportunities and finally in gathering resources. Anthony Wilson-Prangley’s analysis highlights the kinds of leadership tensions that social entrepreneurs experience as they lead the way in creating the social enterprise.

In setting up Technovera, Neo Hutiri used design thinking to come up with a disruptive solution to the problem that patients face in queuing for hours to have their chronic medication dispensed. His story demonstrates how visionary social enterprise leaders apply their experience to solve social problems in a novel way. Perhaps most importantly, he demonstrates that when you run a social enterprise, you have to be willing to change shape, to lead your business in new directions until you find the breakthrough solution.

Bandile Dlabantu’s Khepri Biosciences turns flies into animal feed, thereby improving human food quality and protecting the environment from pollution. Bandile feels the weight of his responsibility to his employees, to customers and to the planet, but persists in pursuing his vision of a sustainable business. His product is clever and much in demand, but resources for growth are incredibly scarce. This means bootstrapping: a term referring to the activities of most entrepreneurs when they have no access to resources. They use what they have to develop their vision – often quite literally creating something out of nothing.

Gill Whittington-Banda, together with her husband Ian, founded Muthi Futhi, a community-based co-operative-style social enterprise. Gill’s persistence in the face of personal and business difficulties, as well as her commitment to employees and beneficiaries, seem unshakeable – like her disruptive vision to bring African herbal medicines into global markets. The business model has changed over time as new opportunities have arisen but the organisation’s mission is unwavering.

Part II of this book explores how the social enterprise evolves as an organisation – applying disruptive business models in pursuit of new opportunities and resources at the same time as maintaining focus on the guiding mission of the organisation. Dr Dorothy Ndletyana also considers the management practices that encourage innovation and the governance processes that manage risk, all while relentlessly pursuing sustainability and impact.

The Women’s Development Businesses is an impressive institution with an exceptional track record, arguably funding more women-owned micro-enterprises than many other institutions in the country while simultaneously investing in listed companies in multiple sectors and helping to grow the economy as a whole. It is a business model with muscle, exemplifying the social enterprise’s ability to straddle the profit-making and impact-producing sectors of the economy.

Ian Sanne’s Right to Care provides unique insight into a relatively rare phenomenon – the multinational diversified social enterprise – and leads us to question the accepted wisdom that social enterprises are by nature small, localised and generally without the prospect of growth. Ian’s vision and capacity for disruption are breath-taking, not least because he has, over a long period of time, brought a large and diverse set of stakeholders along with him. Ian’s empowering management style models the management of complexity in a difficult environment.

Like many social entrepreneurs, Cheri Scholtz initiated her startup, PETCO, with enormous energy and passion to make a difference, but not much experience in the industry she was entering. While this may have increased the associated risk, it also enabled Cheri and her partner to think outside the box (or perhaps we should say, outside the PET bottle) and to disrupt the industry completely. Cheri credits her diverse and committed board with PETCO’s achievements in job creation and environmental protection, thereby highlighting the importance of good governance to social enterprise success.

Part III considers the social enterprise as a product of the context in which it is located. Dr Caren Scheepers offers unique insight into the challenge of responding to the dynamism in which most social enterprises operate. The process of opportunity identification and realisation in extremely resource-constrained contexts is considered, as well as the need to maintain organisational ambidexterity in responding to customer and beneficiary needs. In such contexts, there is an acute need to actively manage stakeholder engagement, which further adds to managerial complexity.

The social entrepreneur’s disruptive desire to change the status quo is evident in the story of Mark Solms and the establishment of Solms-Delta. In general, social enterprises tend to be complex organisations, made so by the need to maintain diverse stakeholder relationships and to build flexible business models capable of pursuing resources wherever they may emerge. This complexity represents significant challenges for management. But social enterprises like Solms-Delta persist, often against all odds.

Dr Dulcy Rakumakoe explains the U-Care Medical Centre as being in the space between expensive private health care and over-crowded public health care – a gap that social enterprises often set out to fill. Even though she is doing good, Dr Dulcy has a clear idea of the business principles related to customer service, pricing and profit margins that make any enterprise viable and sustainable. U-Care Medical Centre is an exemplar of the results that are achievable when purpose and profit are combined.

There is something about Fred Swaniker and Chris Bradford, co-founders of the African Leadership Academy, that is larger than life. It is their dream, the dream they made real. It has taken a long time to get to this point – working to make this dream grow and last well into the future. Social enterprises often take a longer time to mature than for-profit businesses because they are arguably hungrier for resources, and as a result, are harder to start and grow. But when you read about the African Leadership Academy’s achievements and dreams, I think you will agree that it is worth it.

These are wonderful and inspiring stories, but they are also backed up by some interesting facts. The first Survey of Social Enterprises in South Africa (SSESA) was designed and implemented by The GIBS Enterprise Development Academy in partnership with the Bertha Centre at the University of Cape Town, funded by the Government of Flanders, and the SAB Foundation. The study was conducted over the course of 2016 and 2017, with 453 respondents who answered 36 questions about the nature and operations of their social enterprises. The findings provide fascinating insight into who South African social enterprises are and what they do. You’ll find infographics pages at the beginning of each Part of this book that highlight some of the key findings of the study.

The study confirmed that social enterprises are purpose-driven. They either prioritise their social and environmental mission or strike a balance between purpose and profit.

Perhaps surprisingly, social enterprises pay their own way. The majority of the organisations in the sample are not dependent on grants and donations, as demonstrated by the finding that no grants or donations had been received in the previous 12 months and that less than a quarter of their income was from grants or donations. And perhaps because of this independence, social enterprises are sustainable: they have been operating for more than three years, with the majority in operation for more than five years, even though they are not dependent on grant funding for their survival.

Social enterprises go where others can’t or won’t. They focus on meeting basic needs in local communities, operating in the Education, Health and Housing sectors, and are local, community-based in scope. The majority of respondents in the study were involved in either developing skills or promoting education and literacy as well as health and well-being. The focus is often on particular disadvantaged groups, such as children and the youth, or supporting women and the elderly or improving a particular community.

Social enterprises trade at the bottom of the pyramid. Three quarters of all respondents sell goods or services and were most likely to describe their customers as disadvantaged consumers, middle-income consumers or small businesses. In this study, respondents tended to describe their beneficiaries as being from the local community in which they operate or comprising particular groups of people. The mean number of beneficiaries that responding organisations serve per month is 412, with a median of 53.

Although they are focused on creating impact, social enterprises are business-like and dynamic. Over the past 12 months, respondents in this sample regarded their ability to serve existing customers as an achievement. For many, they had improved product/service quality and prepared a business plan. Around half of all respondents had expanded the number of beneficiaries they served, entered a new and important partnership with another organisation or launched new products and services.

Social enterprises involve stakeholders in decision-making. Stakeholders, such as beneficiaries, are involved in decision-making and governance in half the organisations in the sample, often through advisory boards, the board of directors, or a community trust.

Social enterprises measure their impact. Internal monitoring and learning systems had been established internally in many of the organisations in the sample, with some producing integrated reports relating to social and environmental impact. There must be a disconnect as donors complain of the inability of social enterprises to measure their social impact, and yet 67 per cent of the respondents measure their impact regularly as part of their internal evaluation and planning processes.

Social enterprises are innovative. Respondents in the study agreed that innovation had made their enterprises more effective, allowing them to serve more beneficiaries, and deliver better-quality products and services. For many, innovation allowed better profits than other similar organisations, and permitted them to operate at a lower cost.

Social enterprises are job creators. The organisations in the sample are more likely to employ people on a full-time, permanent basis than to use contract/temporary or volunteer workers. The vast majority of social enterprises in this sample employ between one and 50 people, with the mean number of employees being 29,5 and the median eight people.

Social enterprises are small but growing. In this study, only 12 per cent of respondents have an income exceeding R1 million. However, they are growing, with over 65 per cent reporting growth exceeding inflation in the last 12 months.

Social enterprises reinvest surpluses in the enterprise. Most of these organisations do not make a profit or surplus, although around one fifth of them do. Those that do make profits tend to reinvest them in the further growth and development of the enterprise, rather than paying dividends to shareholders.

Social enterprises value corporate social investment. When it comes to rating the importance of these sources of income, corporate social investment (CSI) is ranked highest, followed by government entities and charitable foundations, ahead of the sale of products and services. The importance of CSI to South African social enterprises is relatively distinctive in this context.

Social enterprises are optimistic. Most respondents expected their organisations to grow at a rapid rate in the next 12 months. This growth is to result in increases in services to existing beneficiaries, as well as the launch of new products and services and the attraction of new customers.

Social enterprises need resources. However, respondents indicated that this growth could be inhibited by their ability to access financial and physical resources as well as by their own management of financial resources. Respondents also felt challenged by macro-environmental conditions and by skills shortages.

In South Africa, the opportunity to make social impact is abundant, since social enterprises are ideally placed within local communities to reach under-served beneficiaries and to trade with customers that other institutions might not be willing or able to engage with. Social enterprises also have the ability to create jobs in the communities in which they operate. However, resources are scarce: social enterprises struggle to access appropriate funding and physical resources, even as the data demonstrates that both public and private sectors play a role in supporting social enterprise. In the face of this resource scarcity, social enterprises are innovative in the products and services they develop and deliver and the way in which they operate. Strengthening the ecosystem is likely to have a significant impact on the current and future development of social enterprise in South Africa, to the benefit of all its people. We invite you to be inspired to make a difference too.

PART I

THE SOCIAL ENTREPRENEUR AS LEADER

TECHNOVERA / NEO HUTIRI

THE ATM FOR MEDICINE

Waiting for hours in a queue to get his chronic medication, Neo Hutiri, a young engineer turned entrepreneur, found a way to build a better system that can help people live better lives.

The young man sits in the back row of the busy government clinic, waiting to begin the slow, shifting procession from seat to seat, from sickness to the hope of healing. Ahead of him, beyond the bustle of shuffling feet, murmured conversation and babies fretting in arms, lies