It’s a matter of speed and accuracy – Decentralized, responsible social enterprise!

By Lefteris Charalambous

In my opinion urbanization will be one of the predominant social forces of our generation, especially in emerging countries and it will create great challenges and tensions, especially since the speed of urbanization seems to be much greater than the speed of developing mechanisms and infrastructure to accommodate the inflow of people. We can leverage the dynamics of this phenomenon by developing a flexible yet accurate way of addressing the main infrastructure issues of these growing urban settings. The enabler to do this could be market driven but socially focused entrepreneurship.

The objectives of addressing these challenges should be clearly articulated: (1) Provide access to basic infrastructure to people, (2) Improve living standards and (3) Create a framework for economic development. The second input in this equation should always be the context. Each emerging country, specific region, city or even part of the city is a unique ecosystem that required effort to decipher and understand. Having all the above in mind, it is very difficult to imagine a concentrated central planning unit making successful decisions for this very diverse and at the same time unmapped group of urban eco-systems.

In my mind, a way to gain the extensive reach and flexibility required to address this is through decentralized entrepreneurship. The local expertise and the ability to implement the product at a small scale can be crucial in successfully addressing issues such as distribution of fresh water (similar to Sarvajal), generation of energy, recycling, basic medical care etc.

In order for this model to be successful we need to address many challenges. Firstly, we need to ensure that this form of social entrepreneurship is business focused and does not depend on charity. Given a business twist to these ventures ensures focus on efficiency and at the same time gives the right incentives to all participants (customers, company, investors) to make it sustainable. Secondly, we need to attract a lot of people with the right combination of skills. The two relevant dimensions would be business skillset (including understanding of the context, sales skills etc) and endorsement of the mission (e.g. provide water to everyone at reasonable prices). There is usually a trade-off between these two. However, if we want to scale the concept of decentralized entrepreneurship we need to find a way to increase the ideal candidates. Although a lack of both skill-sets eliminates the candidate, there should be a plan for utilizing people that are strong on only one of the two. Strong central control mechanisms (e.g. through the use of IT systems or centralization of sensitive parts of the service) could address the lack of belief to the mission while training / coaching and IT related tools can improve the business skills. Finally, we need to focus our innovation on small scale infrastructure equipment / services. The goal here is not over-performance at any cost; it is specific performance at the minimum cost.

At the end, although this approach seems to be a great way to deal with the explosive urbanization rates seen in emerging countries now, maybe developed countries also have something to learn from the flexibility of decentralized systems.

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3 thoughts on “It’s a matter of speed and accuracy – Decentralized, responsible social enterprise!

  1. By Lynsey Mengchen He

    Decentralized entrepreneurship helps address local needs and focuses on detailed problems in a diversified manner. The Sarvajal case is a good example;it has all the main characteristics that Lefteris mentioned: a business driven and talented management team. In my opinion, social entrepreneurs are different from those in pure for-profits in a way that the former tend to address social problems under a business framework. Many businesses of this kind have relatively low entry barriers, and If successful, there is a strong tendency to be replicated by other entrepreneurs both within the same area or in other places. This introduces new competition and often involves patent related problems. As we know patents could be extremely valuable for the survival of small entrepreneurial businesses.

    I remember working with a similar social enterprise called Golden Woodpecker, an entrepreneurial company that produces stationery products out of recycled material. Its vision is to raise the awareness of sustainability by encouraging single stream recycling. It is very localized and operates under a business framework. Earnings were flat for a long time, but when the company started to witness operating growth and established its own recycling network, some people saw the opportunity and built similar businesses on top of Golden Woodpecker’s effort, which it had heavily invested in during its initial stage. As a consequence, the company experienced a drop in profit margin.

    Although i quite agree with the idea of decentralized entrepreneurship, I still think it is critical to step back and look at the big picture, as Brett pointed out in the PlaNYC case. Another concern I had was regarding tax incentives and whether there is a horizontally unified policy that benefits those local entrepreneurs.

  2. There is an emerging body of work and thinking towards socially-conscious business models that may play a role in accelerating this mandate. Michael Porter amongst many others has written about ‘Creating Shared Value’, and many social entrepreneurs are pushing the boundaries for decentralized entrepreneurship. One interesting example is a consumer electronics startup called d.light design that provides off-grid solar electricity in rural areas.

    The challenge with decentralized, responsible social enterprise, in the developing world context, is first one of definitions and secondly that it appears very difficult to actually achieve significant scale and impact. In an era of over-night successes (e.g. M-pesa mobile money in Kenya) there have been very few world-beaters in the more clear-cut social enterprise space. Partly it seems that some of the needs these startups are seeking to tackle (e.g. infrastructure, education, food) are fundamentally so big that top-down input is required in addition to bottom-up activity in order to really make a dent. Another reason may also be the ability to attract enough high-quality talent to actually run these firms. What is clear is that there is almost certainly more investment money chasing these high quality social enterprises today that there are actually investment opportunities.

    • I strongly agree with how you frame the challenges that decentralized social entrepreneurship is facing. The challenge of scaling up in a fast and efficient way was the main reason that I wrote this post. I believe that leveraging multiple sources of talent will contribute to scaling up, and in this context some form of central planning or regulatory framework will be a catalyst. Along these lines I also see the shift in mindset in innovation (technical, financial and regulatory).

      If we can address the challenges you and the post identify, then maybe we will have more attractive opportunities for all the social funds available.

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