Social Entrepreneurs and Traditional Entrepreneurs: A Comparative Analysis
~By Om Patro
Entrepreneur. (än-trə-p(r)ə-ˈnər). Etymology: A loanword borrowed from French. The word is derived from the French verb “entreprendre” which means “to undertake,” where “entre” and “prendre” are derived from Latin which means “between,” and “to take” respectively. ‘Entrepreneur’ also has a resemblance to the Sanskrit word ‘anthaprerna’ which means self-motivation. One might wonder though, what constitutes an entrepreneur and what tasks are ‘undertaken’ by one. More so, what is the relationship between being an entrepreneur and self-motivation?
Entrepreneurs: The Mavericks of Progress:
An entrepreneur is an individual who creates a new business and bears its risks whilst reaping its benefits. I would deem entrepreneurs as the vanguards of civilization, whose primary objective is to innovate, bea wellspring of unique ideas, goods, and services, and attempt to fill a certain void in the marketplace with those ideas and innovation.
Changemakers for the Good: The Social Entrepreneur
A social entrepreneur runs a business for the greater social good, which impacts the community in a positive way. They strive to use their entrepreneurial dexterity to palliate certain community-oriented problems while balancing innovation, market orientation, and community well-being. They’re incentivized by the need to minimize social inequities and bring about a net positive change as opposed to profit. Work areas for such entrepreneurs include child welfare, healthcare, volunteering for NGOs, and a multitude of other social enterprises.
Difference between Entrepreneurs and Social Entrepreneurs:
Most businesses are rooted in transactions i.e. goods are exchanged for credit. An Entrepreneur primarily focuses on getting a monetary return for the goods that they sell. Entrepreneurship, thus, is the ability to generate a profit. When that profit is only used to improve the lives of the founders, owners, and stakeholders, it’s a form of business entrepreneurship. However, if the profit is used to improve social well-being, it is called social entrepreneurship. A business enterprise requires a leader with a high Intelligence quotient, whereas a social enterprise requires one with both a high emotional and intelligence quotient to run the organization. A true social entrepreneur should run their business with a positive impact on society, workers and the community while profit does not form a primary part of business considerations. Although traditional entrepreneurship has the ability to pursue a broad range of activities, corporate decision making is usually justified by making long term shareholder value which may or may not include social well-being. Social entrepreneurship differs from traditional entrepreneurship in its approach, that is the pursuance of a societal goal rather than pursuing a profit, which might be seen as inconsistent with fiduciary responsibilities (under the view of traditional entrepreneurship).
The rapid rise of social entrepreneurship has not been stymied by its nascence. Its intended scope is not fully explored yet, and devising appropriate evaluative methods to assess its effectiveness is a challenge in itself. A large section of impacts evade quantization. Moreover, there exist perceptual differences as to the extent of such impacts themselves. Traditional entrepreneurs rely on quantifiable methods to evaluate their efficacy which includes financial indicators, market share, customer gratification and quality.
Another key difference between entrepreneurs and social entrepreneurs is that social entrepreneurs attempt to maximise social returns and let financial returns take a hit whenever necessary. Traditional entrepreneurs pander to the obsolete and inefficacious “corporate social responsibility” approach, only after having generated healthy profits.
In traditional entrepreneurship, venture capitalists invest in businesses on the basis of a company’s track record, public image, the calibre of the leadership and check the organisation supporting it. However, in social entrepreneurship, people can raise or donate money in the form of charity or grants, on the basis of viability of the project as gauged by the individual behind the project/cause.
Entrepreneurs in the commercial sector often prioritise the environment and society by donating money to non-profit organisations or getting involved in businesses that use non-hazardous materials and practices, while treating their employees with dignity and respect. Although these efforts are admirable, they only tangentially address social problems. In contrast, social entrepreneurs focus on generating revenue that directly supports their social mission. They develop businesses to find innovative solutions to social problems, serving as agents of change within society. While social entrepreneurship shares some similarities with traditional business, there are key differences in priorities and objectives. Business entrepreneurs prioritise making profitable investments that avoid harm to society and the environment. In contrast, social entrepreneurs prioritise investments that will benefit society and the environment and generate financial returns that can further support their social cause.
Overall, while there may exist some overlap in the customer bases of social and traditional enterprises, social enterprises companies often have a specific target audience that is passionate about their social or environmental mission, while traditional entrepreneurship companies may have a broader customer base focused on meeting specific needs or desires.
Traditional entrepreneurship operates in well-established markets with a lot of customers. A prime focus on profitability makes it a lot easier for them to succeed in those markets. This focus allows them to become increasingly scalable and reach out to a broader number of people.
An example of a traditional entrepreneurship venture is Amazon. Founded by Jeff Bezos in 1994, Amazon started as an online bookstore but later expanded into selling a wide range of products, including electronics, clothing, and groceries. Amazon’s primary objective is to maximize shareholder value by generating profits and increasing market share.
An example of a social entrepreneurship venture is TOMS Shoes. Founded by Blake Mycoskie in 2006, TOMS Shoes is a for-profit company that operates on a “One for One” business model. For every pair of shoes sold, TOMS donates a pair of shoes to a child in need. TOMS Shoes’ primary objective is to create a positive social impact by improving access to basic needs like shoes, while also ensuring financial sustainability.
The contrast between these two examples lies in their objectives. Amazon is focused on maximising profits and market share for the benefit of shareholders, while TOMS Shoes is focused on creating social impact by addressing a specific need in the community. Additionally, while Amazon is a for-profit company that does not have a specific social or environmental mission, societal concerns lie at the core of the business model of TOMS shoes.
Conclusion:
Social entrepreneurs and traditional entrepreneurs maintain varied approaches. Although both are highly motivated by the pursuit of disrupting the status quo, their missions and approach differs significantly. Traditional entrepreneurs are driven to innovate from within the competitive commercial market , to the ultimate benefit of the customers. To the social entrepreneur, wealth creation is treated as being ancillary to social change. A major portion of that wealth is then used as fuel to the everlasting pyre of social change that they have harnessed.
Their barometer of success is not limited to monetary considerations. The number of minds that have changed, suffering mitigated and injustice reversed to function as key indicators of success. These factors contribute to the organization’s success.
