Editor’s note: This post originally appeared on the Calvert Foundation blog. NextBillion is proud to welcome Calvert Foundation as a Content Partner. Check out past posts, additional links and more information about Calvert Foundation here.
Transformative goods and services provide life-changing opportunities to people. These include basic needs like food, water, income, and shelter, as well as opportunities like education and business capital. In a previous blog, I took a humble step in categorizing social enterprises as providers of transformative, comfort, and/or aspirational goods and services. In this post, I’ll make an attempt to categorize transformative social enterprises by what kind of an impact they create.
The problem at the base of the pyramid is most often not the absence of needed goods and services, but rather difficulties in accessing them. Social enterprises are an exciting prospect because they have the potential to address this challenge. At their core, successful businesses are profitable, sustainable, and scalable, and it is no different for social enterprises. When they are successful, social enterprises can be a source of hope for serving the billions living in poverty today. But how do we measure the products of their work? Can we say that one form of social entrepreneurship is impactful?
To help rank the goods/services that transformative social enterprises provide, I propose a spectrum ranging from 0-10. Zero is a matter of life and death—it represents a situation where a person does not have the basics to survive. Ergo, products and services addressing needs at points close to 0 help a person meet basic survival needs. Ten represents a more comfortable situation, one where basic needs like food and shelter are met. An example might be access to a loan to start a small business.
For the sake of argument, let’s assume that a social enterprise addressing needs closer to 0 (food/water, etc.) on the spectrum will have higher impact than one catering to something nearer 10 (education/access to credit, etc.). To put this spectrum to practice, we’ll divide it into three segments (1-3, 4-7, and 8-10) and discuss them individually.
Successful enterprises operating in range 1-3 create the greatest impacts. They address survival needs by providing basic services for their beneficiaries. These include clean water, shelter, basic food items, and medical assistance against life threatening illnesses. Narayana Hrudayalaya (NH) is a hospital in India that fits very well into this category. Founded by Dr. Devi Prasad Shetty, NH performs thousands of cardiac surgeries every year with payment structures tied to the patient’s ability to pay. Using this model, it uses surpluses earned from full-paying customers to finance surgeries for people who cannot afford the procedure at full price.
Enterprises operating in range 4-7 address a different set of needs. The goods/services these organizations provide aren’t necessary for survival, but do contribute to individual wellbeing. Access to a range of healthy foods instead of merely enough food to survive is an example. Similarly, businesses that fall into the 4-7 range would also provide basic primary care in addition to the emergency care provided by NH. In case of housing, enterprises in this range will provide amenities like running water and a flush toilet.
The last segment ranges from 8-10. Enterprises in this range provide products and services that are borderline comfort products. Education would fall in this category for me. While not essential, I still find it transformative. It is an opportunity for people to change the course of their lives by enhancing skills and breaking mental barriers.
I find it difficult to place organizations whose sole mission is to create jobs and income. One could argue that these organizations fall anywhere on the spectrum depending on how the income they generate is used. For example, if their beneficiaries use this income for needs ranging from 1-3 like water and basic shelter, then that is where I would put them. Similarly, if their beneficiaries are using it to meet educational needs then I would place them higher up in the spectrum.
I began this blog by saying that the problem at the base of the pyramid usually isn’t the absence of goods and services, but rather their inaccessibility. This very reason forms the basis of my hierarchy for social enterprises in the transformative segment. The more basic the need, the harder it is for an enterprise to develop a business model that is profitable, sustainable, and scalable. This is because people who need these basic services are exceptionally poor. In order to meet their demand, the social enterprise has to be exceptionally creative, and determine ways to stay profitable while creating social good. It is this ability of organizations like NH that make them among the best.
The purpose of this blog is not to provide answers but rather to promote discussion. I’m curious to know your opinions. First, do you think this is a fair way to categorize social enterprises? Can we say that a provider of cardiac surgery has a higher impact than a primary care provider? Second, is it okay to compare health care providers with educators using the spectrum I suggested, or are we comparing apples to oranges? Lastly, have I got this all wrong—do you think that social enterprises will not meet certain needs, that there are certain things that people should have the right to have irrespective of cost? If you think so, at what point on the spectrum should we draw the line?