Scaling Strategies for Social Entrepreneurs

A market approach to scaling argues that social entrepreneurs scale the impact of their enterprise by exchanging impact for resources. In this chapter, we explain how this approach expands the current understanding of contextual approaches to scaling social enterprises. We further explain how it contributes to the current literature on impact investment, particularly focusing on the relation between impact investors and social enterprises. Finally, we explain the three-phased approach to market-based scaling, how this differs from the popular concept of a business canvas, and how our three phased-approach can help teachers and practitioners create successful scaling strategies.

This chapter introduces the first step of the three phases to creating a scaling strategy. These three phases facilitate an “outside-in” perspective as, in the first phase, social entrepreneurs begin to compile their strategy by exploring actors with whom they can potentially negotiate impact in exchange for the resources needed to scale. This includes actors in the same geographical area where the social enterprise works, as well as national and international actors interested in the issues it addresses. A market approach assumes that the value of a social enterprise’s impact depends on how others evaluate impact. For example, a particular impact investor’s means of evaluating impact opens space to negotiate the amount of resources that they are willing to put toward the issue that the social enterprise is trying to tackle, and at what percentage interest. A contextual study can help social entrepreneurs map accessible sources of resources (i.e., public organizations, international nongovernmental organizations (INGOs), private companies, individual impact investors, institutional impact investors, customers, etc.). These actors have economic and/or non-economic resources and are interested in negotiating the social enterprise’s impact in exchange for these resources. The contextual study also helps social entrepreneurs understand the standards (i.e., which standards are in place and which are missing) for both financial and impact return (e.g., rates of interest, social impact indicators, etc.), and structure their negotiation and scaling strategies accordingly. Thus, phase I takes an “outside-in” approach to scaling by including an analysis of: impact, resources, standards, and negotiation.

Negotiating impact for the resources needed to scale can influence a social enterprise’s supply (how to move inputs from suppliers to the social enterprise to produce products and services), distribution (how the products and services reach the customer/beneficiary), and revenue processes (how the customer/beneficiary pays for them). On one hand, social enterprises link their operations and revenue processes by creating products and services and distributing them to their target customers. On the other hand, they link these processes via revenue systems to current and potential customers who can pay for these services. These were explored in Phase I, by listing actors with whom the social enterprise can negotiate impact for resources. Social entrepreneurs design efficient and effective operations that can help deliver the impacts that are most of interest to both potential customers or beneficiaries and impact investors. The goal is to reduce operating costs in order to design self-sustaining business models. Apart from streamlining operations, social enterprises also design a revenue process. Some choose to provide products or services to customers who can pay at least a minimal price and are positively impacted by the product or service they purchase. Others have traditional (non-impact) customers and, rather, serve beneficiaries by including them as employees or providers in their business’s value chain. In either case, social entrepreneurs must carefully design pricing and payment processes for their target customers. The elements analyzed in this phase are: supply and assets, products and services, and distribution and revenue.

Social enterprises that intend to scale through a market approach must incorporate both an impact logic and a financing logic into their organizational culture. A “logic” is a way of seeing the world. Employees of social enterprises use different logics when arguing for or against a scaling strategy—some may adhere to an impact logic, while others adhere to a financing logic. It becomes challenging for social entrepreneurs when those arguments between employees who adhere to different logics become intense, with belief standing against belief. The more social entrepreneurs intend to scale, the stronger the risk of conflicts between different logics. The reason is that the importance of the financial logic rises and, thus, so does the need to integrate this logic with the impact logic of their mission. The social entrepreneur’s challenge is to balance the social and/or environmental logic that drives the enterprise’s mission with the financing logic that enables it to scale. Social entrepreneurs work on this integration based on three elements that need to be analyzed: mission, leadership, and communication.

After having analyzed each of the elements included in Phases I, II, and III, social entrepreneurs have gathered a significant amount of information about the business model they will use to design the scaling strategy. In this chapter we provide examples of established scaling strategies that social entrepreneurs might use when developing their strategy. This list is not exhaustive, but rather illustrates examples of market-based scaling strategies that can be constructed using our proposed three-phased approach. In this light, we will analyze three different scaling strategies: co-creation in low-income contexts, collective impact, and replicating business models. This chapter introduces one example case for each of these strategies.

In this chapter, we discuss some of the challenges that instructors may face when working with the materials provided in Chapters 1–6, and introduce the didactical concept of experiential learning as a promising entry point through which to help social entrepreneurs learn new ways to scale the impact of their enterprises through a market approach. While this final chapter focuses on pedagogical tools for teaching the market approach to scaling impact, its content can be useful to both entrepreneurs and instructors. The chapter is organized as follows: first, we explore potential settings in which to teach the market approach to scaling social enterprises; second, we propose experiential learning as the pedagogical framework through which to teach the content presented in this book; third, we argue that learning the market approach to scaling via an experiential approach prepares entrepreneurs to devise innovative solutions for their most pressing challenges. We conclude by defining the various roles that an instructor adopts when teaching the market approach to scaling impact.