What was the social entrepreneur hoping to achieve

The entrepreneur is attracted to this suboptimal equilibrium, seeing embedded in it an opportunity to provide a new solution, product, service, or process. The reason that the entrepreneur sees this condition as an opportunity to create something new, while so many others see it as an inconvenience to be tolerated, stems from the unique set of personal characteristics he or she brings to the situation — inspiration, creativity, direct action, courage, and fortitude.

These characteristics are fundamental to the process of innovation. The entrepreneur is inspired to alter the unpleasant equilibrium. Entrepreneurs might be motivated to do this because they are frustrated users or because they empathize with frustrated users. Sometimes entrepreneurs are so gripped by the opportunity to change things that they possess a burning desire to demolish the status quo. The entrepreneur thinks creatively and develops a new solution that dramatically breaks with the existing one.

Each found a completely new and utterly creative solution to the problem at hand. Once inspired by the opportunity and in possession of a creative solution, the entrepreneur takes direct action.

Rather than waiting for someone else to intervene or trying to convince somebody else to solve the problem, the entrepreneur takes direct action by creating a new product or service and the venture to advance it. Of course, entrepreneurs do have to influence others: first investors, even if just friends and family; then teammates and employees, to come work with them; and finally customers, to buy into their ideas and their innovations.

Entrepreneurs demonstrate courage throughout the process of innovation, bearing the burden of risk and staring failure squarely if not repeatedly in the face. This often requires entrepreneurs to take big risks and do things that others think are unwise, or even undoable. Finally, entrepreneurs possess the fortitude to drive their creative solutions through to fruition and market adoption.

No entrepreneurial venture proceeds without setbacks or unexpected turns, and the entrepreneur needs to be able to find creative ways around the barriers and challenges that arise. Smith had to figure out how to keep investors confident that FedEx would eventually achieve the requisite scale to pay for the huge fixed infrastructure of trucks, planes, airport, and IT systems required for the new model he was creating.

FedEx had to survive hundreds of millions of dollars of losses before it reached a cash-flow positive state, and without a committed entrepreneur at the helm, the company would have been liquidated well before that point. What happens when an entrepreneur successfully brings his or her personal characteristics to bear on a suboptimal equilibrium?

He or she creates a new stable equilibrium, one that provides a meaningfully higher level of satisfaction for the participants in the system. The new equilibrium is permanent because it first survives and then stabilizes, even though some aspects of the original equilibrium may persist e.

Its survival and success ultimately move beyond the entrepreneur and the original entrepreneurial venture. It is through mass-market adoption, significant levels of imitation, and the creation of an ecosystem around and within the new equilibrium that it first stabilizes and then securely persists.

Once the users saw the new equilibrium appearing before their eyes, they embraced not only Apple but also the many competitors who leaped into the fray. In relatively short order, the founders had created an entire ecosystem with numerous hardware, software, and peripheral suppliers; distribution channels and value-added resellers; PC magazines; trade shows; and so on.

Because of this new ecosystem, Apple could have exited from the market within a few years without destabilizing it. The new equilibrium, in other words, did not depend on the creation of a single venture, in this case Apple, but on the appropriation and replication of the model and the spawning of a host of other related businesses.

In Schumpeterian terms, the combined effect firmly established a new computing order and rendered the old mainframe-based system obsolete. In the case of Omidyar and Skoll, the creation of eBay provided a superior way for buyers and sellers to connect, creating a higher equilibrium.

In each case, the delta between the quality of the old equilibrium and the new one was huge. The new equilibrium quickly became self-sustaining, and the initial entrepreneurial venture spawned numerous imitators. Together these outcomes ensured that everyone who benefited secured the higher ground. If these are the key components of entrepreneurship, what distinguishes social entrepreneurship from its for-profit cousin?

First, we believe that the most useful and informative way to define social entrepreneurship is to establish its congruence with entrepreneurship, seeing social entrepreneurship as grounded in these same three elements. Anything else is confusing and unhelpful. To understand what differentiates the two sets of entrepreneurs from one another, it is important to dispel the notion that the difference can be ascribed simply to motivation — with entrepreneurs spurred on by money and social entrepreneurs driven by altruism.

The truth is that entrepreneurs are rarely motivated by the prospect of financial gain, because the odds of making lots of money are clearly stacked against them. Instead, both the entrepreneur and the social entrepreneur are strongly motivated by the opportunity they identify, pursuing that vision relentlessly, and deriving considerable psychic reward from the process of realizing their ideas.

Regardless of whether they operate within a market or a not-for-profit context, most entrepreneurs are never fully compensated for the time, risk, effort, and capital that they pour into their venture. We believe that the critical distinction between entrepreneurship and social entrepreneurship lies in the value proposition itself.

For the entrepreneur, the value proposition anticipates and is organized to serve markets that can comfortably afford the new product or service, and is thus designed to create financial profit. From the outset, the expectation is that the entrepreneur and his or her investors will derive some personal financial gain. The social entrepreneur, however, neither anticipates nor organizes to create substantial financial profit for his or her investors — philanthropic and government organizations for the most part — or for himself or herself.

Instead, the social entrepreneur aims for value in the form of large-scale, transformational benefit that accrues either to a significant segment of society or to society at large. This does not mean that social entrepreneurs as a hard-and-fast rule shun profitmaking value propositions. Ventures created by social entrepreneurs can certainly generate income, and they can be organized as either not-for- profits or for-profits.

Muhammad Yunus, founder of the Grameen Bank and father of microcredit, provides a classic example of social entrepreneurship. Unable to qualify for loans through the formal banking system, they could borrow only by accepting exorbitant interest rates from local moneylenders.

More commonly, they simply succumbed to begging on the streets. The women repaid all of the loan. Yunus found that with even tiny amounts of capital, women invested in their own capacity for generating income. With a sewing machine, for example, women could tailor garments, earning enough to pay back the loan, buy food, educate their children, and lift themselves up from poverty.

Grameen Bank sustained itself by charging interest on its loans and then recycling the capital to help other women. Yunus brought inspiration, creativity, direct action, courage, and fortitude to his venture, proved its viability, and over two decades spawned a global network of other organizations that replicated or adapted his model to other countries and cultures, firmly establishing microcredit as a worldwide industry.

The well-known actor, director, and producer Robert Redford offers a less familiar but also illustrative case of social entrepreneurship. In the early s, Redford stepped back from his successful career to reclaim space in the film industry for artists. Redford was struck by a set of opposing forces in play. He identified an inherently oppressive but stable equilibrium in the way Hollywood worked, with its business model increasingly driven by financial interests, its productions gravitating to flashy, frequently violent blockbusters, and its studio-dominated system becoming more and more centralized in controlling the way films were financed, produced, and distributed.

At the same time, he noted that new technology was emerging — less cumbersome and less expensive video and digital editing equipment — that gave filmmakers the tools they needed to exert more control over their work. Seeing opportunity, Redford seized the chance to nurture this new breed of artist.

Redford structured Sundance Institute as a nonprofit corporation, tapping his network of directors, actors, writers, and others to contribute their experience as volunteer mentors to fledgling filmmakers.

Social entrepreneurs use a business model that combines profitability with purpose — they find investment , generate profit and then donate some or all of that profit to a project that benefits people or the planet. In addition, a social entrepreneur will be keen to take stock of their business impact across the board. Whatever the destination of their funds, social enterprises tend to examine the environmental, social and ethical impact of their business operations, aiming to limit harm and do good wherever possible.

Has a core aim of giving back to society. Is able to generate its own profit. Is sustainable. Is ethical. Social entrepreneurship isn't always an easy thing to do. So why do social entrepreneurs donate their profits to social causes? And what appeals to them about social entrepreneurship?

Younger generations have shown a commitment to building and buying from businesses that have a positive impact on society. When social entrepreneurs start a business they hope to generate enough money to meet their pay check. But another driving motivation is improving the quality of life of others and making a difference to the world. In living their social entrepreneurship dream, social entrepreneurs get to build a fulfilling career with meaning and purpose.

Consumers are increasingly aware of not just what they are buying but who they are buying from. And that percentage gets even higher for consumers under the age of Muhammad Yunus is a social entrepreneur who won a Nobel Prize for his work developing the Grameen Bank. The bank provides small, affordable loans to people living in poverty.

Mycoskie is another high profile social entrepreneur and the founder of TOMS. From the very beginning, he developed the brand with a focus on social causes. Nowadays, you can buy a product from TOMS and a third of the profit generated will go to support organisations invested in social change.

These are community led initiatives, driving change from the ground up. The third social entrepreneur on our list is Debbie Sterling. Sterling recognised that women were hugely underrepresented in STEM science, technology, engineering and mathematics careers and so created GoldieBlox.

Popular Courses. Careers Career Advice. What Is a Social Entrepreneur? Key Takeaways A social entrepreneur is interested in starting a business for the greater social good and not just the pursuit of profits.

Social entrepreneurs may seek to produce environmentally-friendly products, serve an underserved community, or focus on philanthropic activities. Social entrepreneurship is a growing trend, alongside socially responsible investing SRI and environmental, social, and governance ESG investing.

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This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. Related Terms Impact Investing Impact investing aims to generate specific beneficial social or environmental effects in addition to financial gains. Learn about impact investments here.

Learn how to become one and the questions you should ask before starting your entrepreneurial journey. Socially Responsible Investment SRI Socially responsible investing looks for investments that are considered socially conscious because of the nature of the business the company conducts.

What Is Green Investing? Green investing consists of investment activities that focus on companies or projects committed to the conservation of natural resources. Green Fund Green funds invest only in sustainable or socially conscious companies while avoiding those deemed detrimental to society or the environment.

What Are Factors of Production? Factors of production are the inputs needed for the creation of a good or service, these include labor, entrepreneurship, and capital. Partner Links. Related Articles. Investopedia is part of the Dotdash publishing family.