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Strategies for being a more responsible social entrepreneur
By MIT Sloan Management Review

Sunday MBA provides ideas on running better businesses and succeeding in the modern workplace, this week from MIT Sloan Management Review.

Many companies with corporate social responsibility programs strive to scale their contribution to solving the world’s social problems such as poverty, environmental concerns, and inadequate health care. These companies can learn from a special breed of social entrepreneur, called “social scalers.’’

Like social entrepreneurs, social scalers focus on market-based solutions that do not consume the resources of donors and government agencies. But social scalers go well beyond the social effects normally achieved by social entrepreneurs. They address issues on a national or global scale.

Strategies of social scalers

Social scalers work where markets do not. Albina Ruiz, a social entrepreneur from Peru, is an example. Ruiz grew up in the Amazon region of Peru. When she moved to Lima to study, she was shocked at the trash in the streets. One day, she noticed that people living on the garbage piles were collecting trash to sell it and earn a little money. She found the solution to cleaning up the city.

She would train people in recycling to make their collection efforts more effective. The poor would become professionals who could sell their products to recycling companies, thus increasing their income. Albina transformed the social problem of trash into a business opportunity. She then transformed poor people into entrepreneurs who could sell a viable product.

Social scalers eliminate the “middleman’’ role of the nonprofit. They cease to be an intermediary between beneficiaries and donors, and instead link them directly by transforming them into sellers and buyers.

The next step is to scale up into a national or global effort that focuses on changing the rules of the game. Albina Ruiz and her “clean city’’ initiative lobbied for a law that would legalize recycling as a profession, making recyclers eligible for social benefits. With this law in place, low-income recyclers became formal workers, stimulating many others to enter the new profession.

What companies can learn from social scalers

To scale their contribution to ­address the world’s social problems, companies can learn from the social scalers’ “recipe’’:

Rules. Most social entrepreneurs act within the existing rules of the nonprofit sector. Similarly, in most companies, the standard rule for helping to address the world’s social problems is a budget for corporate social responsibility activities.

Companies can act like social scalers by changing the rules in order to magnify their power. For instance, FIFCO, a Costa Rican brewery and retailer, tied compensation of managers to their performance on three dimensions: economic, ecological, and social.

Engage. Jorge Gronda, a gynecologist in northern Argentina, felt the public health system was failing to help the poor, so he created a network of private doctors. Doctors had an incentive to participate. Instead of attending to one or two patients a day, at a high price and with a delay in payment from insurers, Gronda’s system enabled doctors to see several patients a day, each at a very low price but with immediate payment.

Create. All companies use marketing to understand customer needs and advertising to create demand, and then link demand to supply. What is special and different about social scalers is they create demand where distribution channels and supply chains are either under-developed or nonexistent; in short, they create markets and build infrastructure and institutions to serve them.

Impact. Most social entrepreneurs focus on local impact. Many corporate social responsibility ­investments start very small and ­receive a bigger budget if they ­succeed. To follow the example of social scalers, companies could start with scaling as the end goal.

Perceive. Social entrepreneurs typically focus on local solutions. Social scalers, on the other hand, perceive opportunities to scale up.

Execute. Social entrepreneurs typically focus on the formation and growth of a single organization. Companies who follow social scalers, on the other hand, could focus on creating, transforming, and managing various organizations needed to scale social progress.

By becoming “corporate social scalers,’’ companies can turbocharge the efforts to help solve the world’s massive social problems.

This article is adapted from “What Companies Can Learn From Social Scalers’’ by Urs Jäger and Vijay Sathe. Copyright 2015 MIT Sloan Management Review. All rights reserved.