Why does social enterprise work?
Is it the goodwill naturally attracted by the organization? Or the inherent passion and purpose of the founders and employees? Maybe its the evocative and emotional nature of the brand and marketing?
Whatever the individual causes of success and growth in the social enterprise sector, one aspect remains central: clear identification of stakeholders and shareholders.
Stakeholder: an independent party with whom each of those who make a wager deposits the money or counters wagered (originally a gambling term)
Shareholder: a legal owner of company shares
In the history of business and economic development, ownership was diversified around the same time labor was divided. Prior to the divisions of labor, ownership was limited to a single resource and exchanged for other necessary resources. The interdependence of ownership was incredibly high as they recognized the value of engagement and trust in a community or ecosystem.
Today, ownership is theoretically independent for a variety of reasons. Globalization creates an environment where partnerships are easier to turnover. Divisions of labor have economized interdependence, driving it to the extremes of independence and co-dependence (See independence and codependence). The massive expansion of industrialization has made a diversity of resources readily available with very little need for pursuit or negotiation.
How does social entrepreneurship fit into this?
It reintroduces a more complete view of a stakeholder ecosystem. Here are a few of the primary areas:
Macro stakeholders - society, community, environment, economy
Micro stakeholders - employees, customers, suppliers, owners/investors
Meta stakeholders - governing bodies, regulators, media
Social enterprise balances the concentration of power and influence across the ecosystem. And for some reason, human beings RESPOND to balance. This is why news of a company investing profits in environmental sustainability, employee benefits, social causes or community development goes VIRAL. When an organization decides to prioritize a less powerful stakeholder, there is almost always a viral response of trust and goodwill. It highlights a powerful principle of ROI--investment is maximized when directed toward less powerful stakeholders. It is investment in a high growth potential sector. Investment in powerful stakeholders is saturated. While the returns are more consistent, they lack growth potential. "Riskier" investments in less powerful stakeholders are far more lucrative.
The trend is catching because it is NOT a trend at all. It is a return to a logical and beneficial way of doing business and investments. Organizations are recognizing the high ROI for sustainability and balance. Communities are responding out of the awareness of profitability, not simply charity. Governments are creating new legal policy to benefit social businesses because of the recognition of societal equity.
Social Enterprises' ability to order and align the stakeholder ecosystem is a COMPETITIVE ADVANTAGE.
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