Sunday, February 17, 2008

The Power of Unreasonable People

Tonight I finished reading John Elkington and Pamela Hartigan’s book The Power of Unreasonable People: How Social Entrepreneurs Create Markets That Change the World. The title of the book was inspired by a quote from George Bernard Shaw, who said “The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man.” In their book, Elkington and Hartigan share numerous examples of unreasonable people who fail to face reality but instead believe that “the impossible takes a little longer.”

After surviving 34 pages of preface and introductory material (unreasonably long, if you ask me), I was rewarded with an engaging introductory course on Social Entrepreneurship 101. In Chapter 1, the authors introduce three social enterprise business models to which they refer throughout the book:

Model 1: Leveraged Nonprofit Ventures – Funded primarily by governments, foundations, and individual donations, these ventures provide goods or services to economically vulnerable people for whom the goods or services would otherwise but unattainable. The beneficiaries assume some ownership in the initiatives, thus enhancing long-term sustainability. Leveraged nonprofit ventures have no realistic prospect of profit.

Model 2: Hybrid Nonprofit Ventures – Goods or services are sold at a marginal profit to underserved populations, with profits typically reinvested into identifying and serving new markets. Additional funding comes from public and/or private sources, generally in the form of grants, to fund marketing, product development, or other overhead.

Model 3: Social Business Ventures – For-profit entities focused on social missions, these businesses generate profits with the intent not to maximize financial returns but instead to benefit low-income groups. Their for-profit status makes it easier for social business ventures to take on debt and equity, though they must find investors who are willing to balance financial and social returns.

After developing their framework, Elkington and Hartigan dive into numerous examples of successful social enterprises that follow the various models. Many of their case studies highlight recipients of Fast Company’s Social Capitalist Awards. For example, Social Capitalist winner Room to Read is highlighted as an example of a Model 1 Leveraged Nonprofit Venture, while KickStart is touted as an exemplary Model 2 Hybrid Nonprofit Venture. Grameen Bank, which shared the 2006 Nobel Peace prize with its founder Muhammad Yunus, is likely the best known example of a Model 3 Social Business Venture (however, as a for-profit venture, Grameen Bank is not eligible for the Fast Company Social Capitalist Award).

As one who far prefers practice to theory, I appreciate Elkington and Hartigan’s concluding chapter, in which they provide suggestions on how people can apply the principles discussed throughout their book. Social entrepreneurs are encouraged to develop scalable and replicable ideas, to collaborate with others, to close the pay gap in order to attract and retain top talent, and to be prepared for some failures in their quest to accomplish unreasonable goals. Governments are asked to provide tax incentives to spur social entrepreneurship. Businesses are urged to share their knowledge and human resources. And educational institutions are advised to expose students to entrepreneurship and to provide research on the field.

The Power of Unreasonable People is a thought-provoking and inspiring introduction to the world of social entrepreneurship. I highly recommend it to dreamers who have been told their idealistic goals are unreasonable, to realists and cynics who are intimidated by the scale of the world’s problems, and to anyone who hopes for a better world.


NTemple said...

Thanks for this Ryan - mine's on the way from Amazon....looks interesting, and has been featured heavily in media over here in the UK (Guardian, Economist etc).

rustichappiness said...

Hi Ryan, thanks, a great summary of the 3 models. Are you on Twitter? Would like to follow. Thanks!