Friday, July 02, 2010

Comment: US is behind the rest of the world in social business

A commentary that we found today in the Harvard Business Review echos what we believe to be true just from doing this blog: the US is way behind on social entrepreneurship. It is strange that the country that has led the way in entrepreneurship for many, many years is not successful on creating social business, companies with a goal of achieving the most social good instead of the most profit. In fact, we would guess that many in the US have not even heard of the term.

Thanks to the bloggers at Triple Pundit for drawing our attention to this commentary. Writer Timothy Ogden gives us great social business successes from the rest of the world, and some failures from the US. Ogden is an executive director at Sona Partners.

In 2009, William Kamkwamba, a teenager from Malawi, made the rounds on American talk shows and coauthored a best-selling book. The source of his notoriety? A homemade windmill that provided power and running water for his family. Kamkwamba built it from trash, using an old textbook as his only guide.

In the United States, the idea of deploying small-scale windmills had been abandoned as too expensive and horribly inefficient. In Malawi, a teenager had built one spending less money than the average American eighth-grader's weekly allowance.

Kamkwamba's story points to an unrecognized truth of social entrepreneurship and innovation. The United States isn't a leader; it's a laggard.

Consider some of the most important social innovations of the past 20 years. The modern microfinance industry was pioneered in Bangladesh and has spread to virtually every country in the world. The business model that allowed the near-universal penetration of cellular phones into poor communities was born in Bangladesh, as well.

So how does the U.S. stack up? Compare the negligible impact of One Laptop Per Child to the pioneering role of GrameenPhone in the global mobile phone revolution and the attendant gains in real income. Meanwhile Voxiva, a U.S.-founded social entrepreneurial firm, offers a complex, proprietary system to gather information from the field — a system that can cost more than $1 million to operate. But Ushahidi boasts a simple, nearly free (I just contributed to the $600 fund needed to deploy Ushahidi in Kyrgyzstan) open-source platform that was up and running in Haiti in less than 48 hours after the earthquake there. Finally, a recent report has shown that the most profitable microfranchise operations all originated in the developing world

Sure, there are examples of impressive and effective American social entrepreneurship. But, as these comparisons make clear, most world-changing innovations aren't coming from the United States.

Why? Well, for one thing, we haven't figured out how to train entrepreneurs successfully. The rates of entrepreneurship (measured by self-employment and age of operating businesses) are lower in the United States than in most other countries (even OECD countries). Despite all the money poured into various entrepreneurship-training programs, the failure rate of U.S. entrepreneurs, social or otherwise, has held largely constant for decades.

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