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Our Insights 14 Jun 2008

Social Entrepreneurs Create Markets that Change the World

By John Elkington and Pamela Hartigan

It is clear that the world faces epochal challenges – from outright conflict, terrorism, and weapons of mass destruction; to poverty and hunger; to the threat of global pandemics and, perhaps the biggest issue of all, climate change. But, tackled in the right way, today’s crises will lead to tomorrow’s solutions, and the size of the potential market opportunities is staggering.

There are an estimated 4 billion low-income consumers, constituting a majority of the world’s population, and they make up what is called the “base of the (economic) pyramid,” or BOP. An ever-expanding body of research is exploring how to use market-based approaches to “better meet their needs, increase their productivity and incomes, and empower their entry into the formal economy.” BOP markets are far from small: it is estimated, for example, that the BOP market in Asia (including the Middle East) is made up of 2.86 billion people with a total income of $3.47 trillion. In Eastern Europe it is estimated at $458 billion; in Latin America, $509 billion; and in Africa, $429 billion. In total, these markets are thought to be worth some $5 trillion.

But how can mainstream business, financial, and political leaders best come to grips with these emerging trends in value creation? Three answers immediately spring to mind. First, they can experiment with new business models, as much of the BOP literature suggests. Second, as leading business thinkers have long argued, a can-do attitude is much more likely to succeed than don’t-do, won’t-do, or can’t-do mind-sets. And, third, it makes sense to track down, study, and work alongside can-do and we-can-work-out-how-to-do-it innovators and entrepreneurs who are already hard at work on developing real-world solutions. That is what we have been doing since the turn of the millennium—identifying, studying, networking, and supporting some of the world’s most successful social and environmental entrepreneurs. The results can be found in our new book, The Power of Unreasonable People, just published by Harvard Business Press.

But, first, a word or two about our title. “The reasonable man adapts himself to the world,” playwright George Bernard Shaw once said, whereas “the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.” By this definition, not only are most of the entrepreneurs described in the following pages unreasonable—many have actually been dubbed “crazy,” even by family and friends—but a large slice of the future may hinge on their success in spreading their apparently unhinged ideas and business models.

So where can such changes and change agents be found? Time and again during periods of extraordinary volatility, disruption, and change, the best place to look for clues to tomorrow’s revolutionary business models is at the fringes of the current dysfunctional system, so that’s where we headed. The journey has taken us from the mainstream to the margins—from the Alpine meetings of the global elite in Davos and gatherings of social entrepreneurs in places like São Paulo to the festering waste dumps of Bangladesh; from top business schools to violence-torn countries in the Middle East and HIV-plagued communities across Africa. In the process, we believe that we have found clues to the ways in which all businesses—large or small, corporate or entrepreneurial—will operate in tomorrow’s markets

So where can we find social entrepreneurs? The answer is everywhere, although certain countries and regions tend to turn up more than their fair share. When, a few years ago, we analyzed the list of Schwab Foundation entrepreneurs, a rough head count showed the continents falling into the following sequence, from the most entrepreneurs to the least:

The greatest concentration of Asian social entrepreneurs is found in the Indian subcontinent. Three countries of the four in the region—India, Pakistan, and Bangladesh—are well represented. There are many reasons for this high level of activity, including the political problems that the region has suffered since its partition in the 1940s, the sheer scale of the poverty-related dilemmas that have dogged these countries, and the extraordinary number of natural disasters that have affected them—including the tsunami of late 2004.

Next stop, Latin America. Again, there are many reasons why social entrepreneurship has taken root in the region. Apart from population pressures, widespread poverty, and growing environmental problems, governments there have historically been weak, corrupt, and ineffective. To try to fill the vacuum, many of the churches in these countries have encouraged entrepreneurial solutions to social problems. If you run down the Schwab Foundation’s worldwide list of outstanding entrepreneurs, the largest number from any single country outside the United States (with twenty) comes from Brazil (with nine).

It may seem surprising, given the economic wealth of North America overall, to learn that the United States had the most number of social entrepreneurs in the Schwab Foundation listing, but the facts speak for themselves. You find such entrepreneurs everywhere in the United States, from the high-tech world of Silicon Valley to the many Native American reservations and their sometimes Third World living conditions. An example of the latter is the First Nations Development Institute, founded by Rebecca Adamson, a Cherokee, which has spearheaded a cultural paradigm shift in Native American communities, encouraging entrepreneurship instead of passivity. It’s true that many American social entrepreneurs target the rest of the world’s problems, but a surprising number are also focusing on homegrown issues. They include people working to support the growing numbers of elderly as well as those fighting to protect the interests of independent workers, from nannies and taxi drivers to software designers and consultants.

So what makes some countries and regions more successful in spawning social entrepreneurs? It is a combination of major challenges (as in the Indian subcontinent), relatively weak governments (though the United Kingdom and the United States are exceptions), a culture that encourages or at least doesn’t stall entrepreneurship, and favorable legal and tax regimes. Over time, we expect countries around the world to become much more focused on developing the conditions that encourage and support these unreasonable people, these market-creating social and environmental entrepreneurs.

This article originally appeared in Idéia Socioambiental.

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