Tag Archives: effective social enterprise

What Do I Think of Social Enterprise?

In the last five posts, I have described in detail how Bridge International Academies has created a scalable model that can profitably serve the poorest segments of the population.  They use data to make decisions, processes to ensure quality, and technology to streamline systems.  In other words, they act like a business.

This is how every social enterprise should work.  In fact, this is how every company should work.  Pilot, test, measure, implement, and repeat.  But this is not how social enterprises typically operate.  There are a few that pushing the bar and doing some really exciting work.  Nairobi happens to be a mecca for innovative social enterprises.  Sanergy, for example, was started by three MIT Sloan graduates.  They are manufacturing toilets, selling them to entrepreneurs in the slums, and collecting the waste to convert to biofuel and fertilizer.  Mobius Motors is building a car for Africa – a cheap, durable, stripped-down beast that looks like a Hummer and is specifically designed for the rough roads in the rural areas of Sub-Saharan Africa.  Healthcare companies like Penda Health, a chain of primary-care clinics, and energy companies like One-Degree Solar and Nuru Energy, understand the importance of profitability above all else.

There are other companies outside of Africa that are doing great work as well.  Aravind Eyecare in India trains healthcare professionals to perform one procedure – removal of cataracts – and have managed to lower the cost to a fraction of a percent of the normal cost of the surgery.  And Hapinoy, the chain of sari-sari stores in the Philippines, uses a hub-and-spoke franchise model to drive down operating costs for the small general stores that are so common among the poor in the country.

These social enterprises are the exception, rather than the rule.  That is largely because the term “social enterprise” is somewhat silly in my opinion.  An organization is either for-profit – focused on the bottom line – or not-for-profit – focused on the social mission.  It is true that hybrid models exist.  Good examples are Samasource, One-Acre Fund, and many microfinance institutions, which are partially subsidized, but perhaps moving toward financial sustainability.  But being firmly in one camp or the other is what separates the wheat from the chaff in this world.

The key to success as a social enterprise is to offer a product or service that is inherently a social good, and make sure that the success of the company is tied to creating the best, most competitive product, and the highest-quality service.  The reason that working for Bridge is so liberating is that there is never any question that what we are doing is a social good.  We avoid the pitfalls of other “social enterprises” because of the very nature of our business model.  As a low-cost school, we couldn’t move upmarket even if we tried, since comparatively wealthier families could easily afford better schools if they had the money to pay for it.  We can’t compromise on quality in order to increase our already-low margins because, if we do our parents will pull their kids from school and the schools will no longer be profitable.

When the profit motive is inseparable from the social mission, a “social enterprise” is liberated from the concern of mission drift.  And at that point, it ceases to become a social enterprise altogether.  It is simply a company that happens to be making the world a better place.

Needless to say, I have tremendous optimism for what Bridge is doing.  If this experiment succeeds, it will change education for the poor across the world.  Aid agencies will continue to pour money into education systems that fail the poorest students, and continue to criticize private education institutions for co-opting the public system that should be providing them.  But people are beginning to come around.  Acumen Fund just launched its education portfolio, and made its first investment with Lok Capital, an Indian impact investor, in Hippocampus Learning Centers, a for-profit chain of education institutions.  The tide is turning, and much of the credit belongs to the founders of Bridge International Academies and the hundreds of people who work in the operations, construction, research, IT, curriculum, and training teams to make the system work.

It was a difficult decision to head back to school when Bridge is on the cusp of something truly great.  I will be watching it and cheering it on from the sidelines.

If you have questions, feel free to email me at josh@developeconomies.com.