The Nature of Entrepreneurship

The term entrepreneur was first introduced in the 18th Century by French economists, who drew upon the word entreprendre from Old French, meaning “to undertake.” According to Jean-Baptiste Say (1803), “entrepreneurs” are value creators who shift resources from areas of lower into areas of higher productivity and yield. Although the precise definitions of the terms entrepreneur and entrepreneurship have been debated ever since, these terms have almost always been reserved for the business context. Writing in the first half of the 20th Century, Austrian economist Joseph Schumpeter (1934) suggested that entrepreneurs perform their value-creating function through innovations, the carrying out of “new combinations” (pp. 65–66), including the creation of a new good or service as well as producing and delivering an existing good or service in a new way or to a new market. Schumpeter declared: “the function of entrepreneurs is to reform or revolutionize the pattern of production” (p. 132).

More recently, leading management scholar Peter Drucker pointed out that entrepreneurs constantly search for and exploit the opportunities created by change (in technology, consumer preferences, social norms, etc.) (Drucker, 1985). Put another way, entrepreneurs have a mindset that sees the possibilities rather than the problems created by change. Howard Stevenson carried this idea further, observing that entrepreneurs pursue these opportunities without being limited by the resources they have in hand; instead, entrepreneurs mobilize resources from others to achieve their objectives (Stevenson and Gumpert, 1985).

Although these scholars were writing about business entrepreneurs, their theories—and the skills, practices, and mindset of an entrepreneur—apply equally as well in the social sector. In this way, a social entrepreneur can be thought of as one type of entrepreneur. Simply put, social entrepreneurs are entrepreneurs whose “business” (or mission) is to achieve social impact. A business entrepreneur may seek to create economic value for private benefit, whereas social entrepreneurs seek above all to create social value for the benefit of society; they measure their productivity in terms of social impact and seek a social return on investment.

Social Innovation

Proponents of the “social innovation school” assert that social entrepreneurs combine the opportunity orientation identified by Drucker, the innovation as revolutionary change agents as described by Shumpeter, and create value through new and better ways of doing things, as described by Say, although the value that the social entrepreneur seeks to create and sustain is social value. According to this view, social entrepreneurs are individuals who reform or revolutionize the patterns of producing social value, shifting resources into areas of higher yield for the benefit of society. Adherents to the social innovation school do not restrict their definition of social entrepreneurship to the nonprofit sector. Instead, the selection of legal form of incorporation—nonprofit, for profit, cooperative, or hybrid—is seen as an important tactical decision that the social entrepreneur must make when crafting the strategy for attracting resources and when considering various restrictions associated with each form of incorporation.

In a similar spirit, and building on the scholarly literature on entrepreneurship, in the widely cited “The Meaning of Social Entrepreneurship” (1998b, rev. 2001), Dees elaborates on the proposition that social entrepreneurs play the role of change agents in the social sector, seeking to create systemic changes and sustainable improvements, by:

• Adopting a mission to create and sustain social value (not just private value)
• Recognizing and relentlessly pursuing new opportunities to serve that mission
• Engaging in a process of continuous innovation, adaptation, and learning
• Acting boldly without being limited by resources currently in hand
• Exhibiting a heightened sense of accountability to the constituencies served and for the outcomes created

The Imperative of Systemic Change

One important tenet of the social innovation school is that social entrepreneurship aims to effect large scale, sustainable, and systemic change. Writing in the Stanford Social Innovation Review in 2007, Martin and Osberg argued that social entrepreneurship is characterized by three fundamental components:

• Identifying a stable but inherently unjust equilibrium that causes the exclusion, marginalization, or suffering of a segment of humanity that lacks the financial means or political clout to achieve any transformative benefit on its own
• Identifying an opportunity in this unjust equilibrium, developing a social value proposition, and bringing to bear inspiration, creativity, direct action, courage, and fortitude, thereby challenging the stable state's hegemony
• Forging a new, stable equilibrium that releases trapped potential or alleviates the suffering of the targeted group, and through imitation and the creation of a stable ecosystem around the new equilibrium ensuring a better future for the targeted group and even society at large (p. 35)

Martin and Osberg draw a strong distinction between social entrepreneurship and two other forms of social engagement—social activism and social service provision—noting that the former is an indirect form of social engagement and arguing that the latter does not set out to achieve and sustain a new equilibrium (see Figure 11.1). Acknowledging the distinctive value that each form of social engagement brings to society, Martin and Osberg note that social activists, social service providers, and social entrepreneurs may borrow and adapt one another's strategies and develop hybrid models.

The emphasis on transformational systems change, at the core of this definition of social entrepreneurship, has long been championed by Bill Drayton, who is arguably the primary driving force advancing the social innovation school of thought. In 1980, Drayton founded Ashoka, the global network of leading social entrepreneurs, and he framed its mission to find and support “outstanding individuals with pattern setting ideas for social change” (Drayton & MacDonald, 1993, p. i). Setting a high standard for those who would consider themselves social entrepreneurs, Drayton asserts: “The job of a social entrepreneur is to recognize when a part of society is stuck and to provide new ways to get it unstuck. He or she finds what is not working and solves the problem by changing the system, spreading the solution and persuading entire societies to take new leaps. Social entrepreneurs are not content just to give a fish or teach how to fish. They will not rest until they have revolutionized the fishing industry” (Leviner, Crutchfield, and Wells, 2006).

Personal Experience

Personal experience often motivates, inspires, or informs the idea generation process. Not surprising, many successful new venture ideas arise from the entrepreneur's education, work experience, and hobbies (Vesper, 1979). It is important to note that relevant experience does not have to be in the same field in which the new venture would operate. Sometimes experience and knowledge of practices in other fields can help the social entrepreneur see new ways of doing things.

Dissatisfaction with the status quo often spurs entrepreneurial creativity, prompting social entrepreneurs to look for new approaches to problems and frustrations they have encountered personally, witnessed among family or friends, or seen on the job. Some social entrepreneurs point to a “moment of obligation” a time when they were confronted by a problem or issue and realized that they had to take action, whereas other social entrepreneurs undertake an intentional, systematic search for a problem to address.

Social Needs

Sound entrepreneurial ideas respond to genuine needs. For business ventures, these are unmet or poorly met consumer needs. Likewise, social entrepreneurs would be wise to look beyond their personal preferences in the search for promising ideas, basing them on an understanding of social needs, gaps between socially desirable conditions and the existing reality. They rest on some vision of a better world and are grounded in personal values. These values can provide a sense of moral imperative that may serve as a powerful motivator for social entrepreneurs and their ideas. Calling to mind the famous quote from Robert Kennedy, social entrepreneurs are unwilling to settle for the status quo; instead, they “dream of things that never were, and ask why not?”

Although the impetus for some ventures can be traced back to an accidental discovery or serendipitous occurrence, an exciting development in the field of social entrepreneurship has been the increasing incorporation of the principles and practices of human-centered design to identify needs and wants experienced by stakeholders and to co-create appropriate solutions that are desirable, feasible, and viable given the local context. These interactive methods of needs-finding emphasize contact, observation, and empathy with end-users to develop insights that will lead to more effective solutions. In particular, the design firm IDEO and the Hasso Plattner Institute of Design at Stanford University (also known as the “d.school”) have been leading proponents of this approach that has been embraced by organizations as large as UNICEF and as small as local, grassroots initiatives.

Social Assets

Understanding the tangible and intangible assets in a community—local knowledge, social networks, cultural norms, and other resources—can lead to the development of promising ideas. Although it is important to ground ideas for new ventures in a plausible diagnosis of social needs, there is a danger of over-emphasizing the negative. Some argue that the social sector concentrates too much on needs and that better ideas emerge out of an appreciative focus on assets. The latter presents the community in a new light and may inspire creative new ideas that would not be visible if social entrepreneurs looked only at needs or “problems.”

Change

It is common to think of entrepreneurs as creating change, but entrepreneurs are often inspired by the changes all around them. Peter Drucker has argued entrepreneurs “always search for change, respond to it and exploit it as an opportunity” (Drucker, 1985). In framing their ideas, social entrepreneurs may be stimulated by changing demographics, values, cultures, technologies, industry structures, economies, knowledge, public policies, and preferences. These changes can create new needs, new assets, or both, opening up new possibilities and prompting social entrepreneurs to generate promising new ideas.

Step 1 Summary

Personal experience, social needs, social assets, and change can stimulate promising ideas, but only if the social entrepreneur also adopts an opportunity-oriented mindset, actively looking for new possibilities to have significant positive social impact. Successful social entrepreneurs embody this “how can” attitude, particularly in the idea generation phase, as they ask themselves and the communities in which they seek to engage:

• How can we draw upon our personal experiences in seeking to achieve broad social impact?
• How can we address a particular social need or make the most of existing social assets to improve society?
• How can we capitalize on recent changes to seize new opportunities for social impact?
• How can we frame the root problems or underlying issues in a way that could lead to solutions that are desirable, feasible, and viable?
• What have others already done to attempt to address these issues, and what can we learn from those efforts?

Effective social entrepreneurs carry this orientation into the opportunity development process, engaging in continuous innovation, adaptation, analysis, and learning along the way.

Theory of Change

As we have seen, social entrepreneurs are driven by a desire to achieve results—to create social value for their primary constituents or beneficiaries, society, and the world. Underlying any promising new social venture is a carefully conceived and testable hypothesis about how the venture will achieve its intended social impact. Expressing the cause-and-effect logic by which the venture's operating model connects inputs, activities, and outputs to generate desired outcomes, this “theory of change”—also known as a “development hypothesis” in the field of international development, and variously referred to as a “social impact theory” or “theory of action”—is central to the venture's strategy and generally embodies the organization's mission and values (Guclu, Dees, and Anderson, 2002). The articulation of this theory linking action to results should include a “convincing statement of how program inputs will produce a sequence first of intermediate and then ultimate outcomes,…and some indication of the bases, in experience, for expecting a cascade of results” (Szanton quoted by Grossman and Curran, 1990). By clearly defining the venture's intended outcomes and means for achieving them, the theory also provides a precise description of the ultimate social impacts for which the organization will hold itself accountable (Campbell and Haley, 2006).

A well-articulated theory of change should also identify the critical assumptions underlying the hypothesis. We can think of these assumptions as the necessary preconditions that should hold in order for the theory of change to lead to achieving the intended impact. Considered alongside the intermediate outcomes that will jointly cause the intended impact, these assumptions complete the “if/then” logic inherent in the theory of change. Whenever possible, critical assumptions should be identified and tested prior to launching a venture by comparing the theory of change to existing relevant knowledge in the field or by doing new research and analysis. Despite their need and bias for action, social entrepreneurs should structure their actions carefully in such a way that they can test as many critical assumptions as feasible before making major, irreversible investments (McGrath and MacMillan, 1995).

To aid in developing and refining his or her theory of change, the social entrepreneur may wish to create a simple logic model that clearly identifies the specific resources or “inputs” required, the major activities of the venture, the “outputs” produced by those activities, and the “outcomes” resulting from the activities. Another useful tool is the “outcomes framework”—an inductive logic tree that illustrates the hypothesis implicit in the theory of change, the causal logic among the intermediate outcomes and ultimate intended impact, and any critical assumptions that should hold in order for the theory of change to lead to achieving the intended impact. When paired with carefully defined and objective performance measures for each intended output and outcome, logic models and outcome frameworks can become valuable tools for planning, communications, and management and should be reviewed and updated regularly.

Defining and refining a theory of change is a dynamic process that blends creativity and out-of-the-box thinking with concrete analysis and assessment of results. Social entrepreneurs should regularly test and, if necessary, revise their theory of change to assure they are pursuing a worthwhile opportunity and are on track to achieving their ultimate intended impact. Since social impact is so hard to measure and many social entrepreneurs aim for long-term, sustainable lasting impact, the testing process can take significant amounts of time. Having a clearly articulated theory of change and performance measures helps make the testing process more systematic and timely.

Business Model

In addition to a compelling theory of change, every worthwhile opportunity needs to be supported by a plausible business model. Every venture—whether commercial or social—has an implicit business model that indicates how the venture creates, distributes, and captures value. In many cases, social entrepreneurs are most creative and add the greatest value in the design of their business model—they employ a wide range of options for structuring their ventures, acquiring capital, pricing their services, paying their workers, and coming to terms with suppliers—all in the pursuit of creating and maximizing social value.

For the social entrepreneurial venture, the business model includes two key elements:

1. An operating model that includes internal organizational structure, activities, and external partnerships that are crucial for creating the organization's intended impact
2. A resource strategy that defines where and on what terms the organization will acquire needed resources (financial and human capital, facilities, equipment, supplies, technology, and other tangible or intangible resources)

These two elements of the business model work closely together to bring the theory of change to life. In this sense, the business model is essentially the conduit through which a social entrepreneur converts inputs into outcomes. It determines the organization's financial and talent needs, the extent and nature of dependence on different resource providers, and the efficiency with which resources are converted into impact, which factors into the social return on investment.

Regardless of how effective an innovation is at achieving impact, the business model must be “sustainable” over the period of time required to achieve widespread, lasting impact. If the business model is not capable of being scaled or replicated, widespread impact will be impossible to achieve. If the business model is not aligned with the mission and intended impact of an organization, the organization may be sustained and it may scale, but its ultimate impact will be undermined. This can even be a problem for for-profit social ventures that discover their mission impact would be better served through activities and costs that cannot be adequately covered by their revenues.

Operating Model

A fundamental component of the business model, the operating model describes how the theory of change will be implemented in practice. It is a combination of specific activities, structures, and support systems that are designed to work together to bring about the intended impact.

In developing an operating model, the first step is to trace a chain of activity from inputs to outcomes, identifying every step that is necessary in between. These direct productive activities will usually need to be supported by administrative functions, such as accounting, human resources, fundraising, and so on. When all of these elements are put together, the result looks similar to the “value chain” in a business (see Figure 11.3), a concept introduced by strategist Michael Porter (1985) as a tool for analyzing potential sources of competitive advantage for a firm.

This framework can be used to identify the major activities through which a social entrepreneurial venture can create or enhance social value. Social entrepreneurs may create social value at any of the steps in this process. For example, microfinance institutions such Grameen Bank create social value by making loans to people who otherwise would not have access to the capital they need. Perhaps Muhammad Yunus's most important innovation was to eliminate the requirement of assets as collateral for loans, an insurmountable barrier to the poor; instead Yunus created peer-lending groups, small groups of women borrowers from the same village who meet regularly, support each other, and share responsibility for repayment of loans made to anyone in the group, thus pooling risk and increasing return.

Fair trade organizations such as Ten Thousand Villages create social value in how and from whom they purchase the goods they sell. Other social ventures, such as Greyston Bakery and Homeboy Industries, create value through employing disadvantaged populations. Some, such as Triangle Residential Opportunities for Substance Abusers (TROSA) engage their beneficiaries in earned revenue ventures as a form of rehabilitative therapy and to foster job skills needed for reintegration in the community, thus increasing likely social impact. With hospice care, the social value is inherent in the design of the value or service. Through their distribution chains, both KickStart and VisionSpring harness the powerful incentives of small business ownership to sell foot-operated water pumps and deliver eye care services and products in rural villages in developing countries.

Once the social entrepreneur has identified all key activities in the value chain, she must make structural decisions, such as choosing a form of incorporation and defining the division of labor and coordination of activities. Social entrepreneurs may choose to incorporate their venture as a nonprofit organization, a for-profit social venture, or a hybrid that may combine two or more corporate entities; this decision may be based on a number of factors, including the desired sources of capital. A for-profit form of incorporation (proprietorships, partnerships, corporations, limited liability companies, and cooperatives) will be necessary if the social entrepreneur seeks to tap into private capital markets for investment funds, whether at or below market rate of return (Dees and Anderson, 2003).

The major labor division question concerns what the new venture should do and control versus what could be left to affiliates, partners, suppliers, contractors, or providers of complementary services. This decision should be driven largely by the importance of the activity, the presence or lack of competencies and efficiencies within the organization, and the value of maintaining control over it.

Finally, social entrepreneurs should consider the support systems that may need to be in place to assure effective and efficient social value creation, including systems for monitoring organizational performance and assessing outcomes, as well as intangible support systems such as the organization's culture.

With these pieces in place, the operating model should allow social entrepreneurs to trace a plausible and specific causal path through a chain of activities, structures, and support systems to the intended social impact. As with the theory of change, any proposed operating model will rest on assumptions that may be tested before anyone can say that the operating model is likely to be effective.

Resource Strategy

Whether in business or in the social sector, an operating model cannot begin to create value unless it is aligned with and supported by a viable resource strategy. At the most fundamental resource level, the social entrepreneur needs people (including their skills, knowledge, contacts, credentials, passions, and reputations) and things (including everything from office space to patents). Unlike business entrepreneurs, in the social sector, entrepreneurs may acquire both people and things with or without using money.

In developing a resource strategy, social entrepreneurs must first identify resource requirements; these may be deduced from the proposed operating model, along with performance and growth objectives. Resource needs cannot be determined without a specific operating model in mind that converts the resources into the capabilities necessary to create the intended social impact efficiently and effectively. Of course, as the idea is refined and tested, the original operating model may need to be adjusted to fit the realities of resource mobilization.

Next, social entrepreneurs must determine how best to mobilize the resources required through one or more of the following options: building partnerships or alliances, attracting donations, and paying for the resources.

Although some partnerships may be desirable as part of the operating model, others are driven more by resource considerations. When resources are scarce or hard to mobilize, as is often the case during the start-up stage, it may be wise to build resource-based partnerships with others that have (perhaps underutilized) resources of the kind required. However, social entrepreneurs should carefully consider benefits, costs, and risks of any partnership, particularly if it is not ideal from the operations point of view.

Social entrepreneurs may also attempt to acquire resources through volunteers and in-kind donations, which can reduce the cash needed to achieve social impact. Some organizations, such as Habitat for Humanity, rely heavily on volunteers and in-kind donations for core activities. Other social entrepreneurs have decided that operational effectiveness requires paying for key resources. For example, whereas most youth mentoring organizations typically rely on volunteers, Friends of the Children, winner of the Purpose Prize for 2009, has challenged that model, arguing that the use of paid mentors for at-risk kids leads to better social outcomes.

Even for those things that are purchased, social entrepreneurs can sometimes offer below-market compensation or seek discounts. For example, many organizations have been able to attract and retain high-quality workers with below-business-market wages, perhaps due to the personal satisfaction that people get from working for a cause that is deeply meaningful to them. Also, social ventures may qualify for discounted prices on equipment, supplies, services, professional fees, and so on, although the pool of available resources may be limited and the quality of services provided at reduced cost may be lower than desirable.

Finally, when considering the acquisition of costly equipment and facilities, social entrepreneurs must also decide whether they will purchase outright or whether they will simply rent or lease. When risk is high, renting or leasing is typically the optimal option.

Based on these decisions, social entrepreneurs should estimate the cash needs for their ventures and begin to identify plausible sources of funding. Although many social entrepreneurs would love for their ventures to be “self-sufficient,” charging customers enough to cover all the operating costs (as occurs in the private sector) is often not optimal from the point of view of creating social impact. Although third-party payers (such as government agencies or corporations) may be found to cover costs, in many domains in which social entrepreneurs operate, revenues gained from service fees and contracts will fall short of what is needed to have the desired impact. In these cases, the resource strategy must include a plausible fundraising plan. However, social entrepreneurs must be vigilant about selecting cash income streams that do not pull the venture away from its core mission.

In summary, the social entrepreneur should craft the resource strategy based on assumptions about resource requirements and methods of meeting them, asking questions such as:

• How many staff and volunteers will be necessary for successful service delivery?
• Can the venture attract and retain staff with the requisite skills at the proposed levels of compensation? Can it recruit, train, and effectively manage the required volunteers?
• Will projected in-kind donations come with too many strings attached or have serious operating costs?
• Who may pay for the venture's activities? Who may be willing to donate to subsidize it? Will revenue sources be aligned with the mission?

Although some of the assumptions embedded in the model may be highly plausible based on past experience, social entrepreneurs should carefully identify those uncertain assumptions to which the resource strategy is most sensitive and make sure they are tested and adjusted as the venture rolls out. The various dimensions of nonprofit finance and resource development are addressed by the chapters in Part Four of this volume, and the chapters in Part Five address the challenges of recruiting, retaining, and motivating both staff and volunteers.

As with the rest of the process of social entrepreneurship, developing an attractive resource strategy requires creativity, especially given the intense competition for funding in the social sector. In some instances, an innovative resource strategy might even drive, or significantly impact, the social venture's operating model. However, a resourceful approach does not undermine the effectiveness of the business model and ultimate social impact of the venture. In fact, the most attractive resource strategies actually enhance social impact.

Business Model Summary

There are numerous ways by which a social entrepreneur may create social value. In designing a social venture, the social entrepreneur has a wide range of options for structuring their ventures, acquiring capital, pricing their services, paying their workers, and coming to terms with suppliers. In exploring these various options, it may be helpful to consider the Social Enterprise Spectrum illustrated in Figure 11.4 (Dees 1996, 2001).

This spectrum describes the full range of options available to social entrepreneurs, from purely philanthropic to purely commercial, with many variations in between. Philanthropic methods are involved anytime an organization falls short of the far right side on at least one dimension of the spectrum, indicating some form of subsidy or sacrifice. Excluding purely philanthropic or purely commercial ventures is not a major sacrifice in scope because very few social-purpose organizations exist at either extreme (Dees and Anderson, 2006).

Ultimately, the selection of a business model should be made upon careful reflection on the following questions:

• Does the business model use resources efficiently and effectively?
• Will it attract sufficient resources to achieve the intended social impact?
• How well does it fit with the ecosystems in which you want to operate?
• Is it sufficiently robust and scalable?
• Are the incentives in the business model aligned with your theory of change?

It is important to note that no single business model is best for all social entrepreneurs in all settings. Potential trade-offs and risks have to be assessed on a case-by-case basis, and the operating model may need to be adjusted accordingly. However, designing an effective business model is an essential part of the creative learning process of crafting, testing, and refining the hypotheses and assumptions inherent in the social entrepreneur's theory of change. This process of learning and refinement should continue well after the launch of the venture as the social entrepreneur gains experience and as the venture is affected by changes in the ecosystem in which it operates.

Ecosystem Players

Just as biological ecosystems are made up of complex webs of interrelated organisms, social ecosystems operate in much the same way. Social entrepreneurs get help from some individuals and organizations, give help to others, fend off threats from others, and compete with still others. To assist social entrepreneurs in identifying and mapping all of the relevant ecosystem players and the roles that they play, Bloom and Dees (2008) recommend dividing the players into six roles:

• Resource providers, including providers of financial, human, knowledge, networking, and technological resources, and any brokers or intermediaries that channel these resources to those who want them. Resource provides may include third-party payers, donors, volunteers, and workers, anyone who must voluntarily participate in the venture in order for it to be successful. Social entrepreneurs must have a plausible value proposition for each group of resource provider.
• Competitors, including organizations that compete with the social entrepreneur's organization for resources as well as those that compete to serve the same beneficiaries.
• Complementary organizations and allies, including organizations or individuals who facilitate a social entrepreneur's ability to create impact, such as partners who perform critical steps in the social entrepreneur's theory of change, individuals and organizations supporting the same cause, and those providing important complementary services.
• Beneficiaries and customers, including clients, patients, customers, and others who benefit from social entrepreneurs' activities, whether or not the ultimate beneficiaries interact directly with the organization.
• Opponents and problem makers, including organizations and individuals who contribute to the problems social entrepreneurs are addressing, undermine the ability of the organizations to achieve and sustain their intended impact, or oppose their efforts politically.
• Affected or influential bystanders, including players who have no direct impact now, but who are affected by the social entrepreneur's efforts—especially those who could be harmed if the social entrepreneur succeeds and those who can be turned into allies or resource providers if convinced of the benefits of the social entrepreneur's efforts—or those who could influence her success, either positively or negative, such as members of the media.

Bloom and Dees note that these categories of ecosystem players are dynamic and not mutually exclusive (2008). Organizations may play more than one role or may switch over time; paradoxically, the same organization can be both an ally (for example, when it comes to advocating for legislation to serve the same cause) yet also a competitor (for example, when vying for limited funding). As in for-profit industries, new players may enter the ecosystem at any time, posing new threats or presenting opportunities for the social entrepreneur and her venture to benefit.

Environmental Conditions

Biological ecosystems are made up not only of other organisms, but also of environmental conditions (such as soil, weather, sunlight, and water) that have a significant impact on the type of organisms that can exist, as well as on their relationships with one another. So, too, with social ecosystems, although organizations and people can, in turn, influence the environmental conditions and bring about change within the social ecosystems of which they are a part. To aid social entrepreneurs in identifying relevant changes or trends that can influence their ability to create and sustain the intended social impact, Bloom and Dees (2008) identify four sets of environmental conditions that should be considered by the social entrepreneur:

• Politics and administrative structures, including rules and regulations—and the processes and procedures for adopting, enforcing, and reforming these rules—along with the political dynamics of the jurisdictions in which social entrepreneurs operate, including potential sources of public support or resistance.
• Economics and markets, including the overall economic health of the regions in which social entrepreneurs operate and seek resources, as well as the region's distribution of wealth and income, economic prospects, levels of entrepreneurial activity, and relevant markets.
• Geography and infrastructure, including not only the physical terrain and location, but also the infrastructure that social entrepreneurs count on for transportation, communication, and other operating needs.
• Culture and social fabric, including the norms and values, important subgroups, social networks, and demographic trends of the people living in the area. For example, many microfinance institutions and global health initiatives target women in hopes of achieving greater social and economic impact for the women and their families. However, local cultural norms about the role of women in the economy may pose significant challenges and present promising opportunities for the social entrepreneur.

Mapping the Ecosystem

Although the relevant features of the ecosystem will vary from venture to venture and will depend on the specifics of the venture idea, including the theory of change and the business model, most social entrepreneurs will make crucial assumptions about their markets, the industry structure, the political environment, and the culture. In studying and making assumptions about the ecosystem in which they operate, social entrepreneurs may choose to construct a simplified ecosystem map illustrating the key ecosystem players and environmental conditions, noting key relationships and trends, and anticipating potential changes that may positively or negatively affect their ability to achieve the desired social impact. Mapping the ecosystem in this way is a dynamic process that may yield significant strategic insights (Bloom and Dees, 2008).

In summary, an ecosystems framework can help social entrepreneurs in many ways, including:

• Imparting a deeper understanding of an organization's theory of change by making the environmental conditions and relationships on which the organization depends more visible, possibly leading to a revision of that theory
• Mapping the resource flows into and within the ecosystem, revealing constraints, bottlenecks, and underused sources, perhaps suggesting alternative resource strategies for the organization
• Identifying new operating partnerships, perhaps with complementary organizations, that fall short of systemic change but that promise to enhance the social entrepreneurs' impact by increasing the coordination of otherwise independent players
• Determining the minimum critical environmental conditions required for an organization's operating model to be successful and using that information to guide the social entrepreneur's efforts to take the model into new areas
• Developing different operating models for different ecosystems, or a more robust operating model that works in a variety of different ecosystems (Bloom and Dees, 2008, p. 53)

As social entrepreneurs flesh out the three core elements of their opportunities, they will inevitably make assumptions about their ecosystem or operating environment. The potential success of the venture depends largely on whether the assumptions accurately represent the context. Thus, a promising opportunity must fit with the characteristics of its environment. However, in the social sector as in the business world, windows of opportunity may close as quickly as they open.

Windows of Opportunity

Since ecosystems are dynamic, it is also helpful for social entrepreneurs to be sensitive to the window of opportunity, the time frame in which conditions are expected to be favorable for pursuing a given opportunity. In studying the conditions necessary for social entrepreneurship, respected nonprofit scholar Paul Light has asserted that such windows of opportunity are rare, cannot be predicted, tend to occur in great punctuations when the demand for change reaches a tipping point, emerge when entry costs are low, open and close quickly, favor competition over collaboration, and appear to the special few (Light, 2008, p. 203).

Social entrepreneurs may have better chances of success if they can take advantage of windows that are opening and that will stay open long enough for the venture to have its intended impact. Changes in the ecosystem or other external conditions may increase or decrease receptivity to new ideas, or may affect the viability of a proposed business model, thus opening or closing the window of opportunity. Such changes include the growth or decline of the social need being addressed, the number of people affected by the need, the visibility of the need and expected media coverage, perceptions of urgency or relative importance by key resource providers, levels of satisfaction with existing approaches, technological changes, changes in public policy, and popular trends or fashions in relevant fields (Guclu, Dees, and Anderson, 2002).

Personal Fit

As social entrepreneurs develop their ideas into worthwhile opportunities, they also have to be sensitive to personal fit. Even if they have identified an attractive opportunity, it may not be a good opportunity for them when assessed in relation to other options. Before seeking to launch a social venture, aspiring social entrepreneurs should conduct an honest self-assessment, asking themselves:

• Do I have the time, energy, fortitude, commitment, and determination required to coordinate ambitious social impact goals with scarce income sources and to satisfy excess need for services with an over-stretched staff and limited time?
• Do I have healthy support systems and strong personal and professional networks that can help me forestall and/or handle the burnout that not infrequently accompanies launching and managing an entrepreneurial venture?³
• Do I have the skills, expertise, credibility, credentials, contacts, and assets needed to launch this venture? Can I attract a strong team to help compensate for any critical shortcomings?
• Is this the right time in my life to pursue this kind of opportunity? Are there career and family or other personal considerations that must be taken into account?

New ventures of any sort are tremendously demanding. Social ventures are even more so. Ultimately, aspiring social entrepreneurs would be wise to pursue only opportunities that fit their personal commitment, qualifications, income requirements, and stage in life, embarking on their entrepreneurial journey with full awareness of the risks involved.

Step 2 Summary

In order to determine whether a promising idea can be transformed into an opportunity worthy of serious pursuit, it is essential for the social entrepreneur to articulate a compelling theory of change and a plausible business model. Developing a plausible business model requires designing an effective operating model and crafting a viable resource strategy. These pieces must fit together, and the assumptions embedded in them must be credible given the environment in which the social entrepreneur intends to operate. Finally, the requirements of the venture must fit the commitment, qualifications, and life stage of the entrepreneur considering it. When all these elements are feasible and aligned, the chances for success are relatively high and those involved can make a more informed estimate of the potential for social impact.