Ideas and Opportunities

CHAPTER 2

Ideas and Opportunities

Summary

Chapter 2 discusses how social entrepreneurs recognize opportunity and devise ideas to respond to those opportunities. The case of Boaz & Ruth in Richmond, VA is used to illustrate how one social entrepreneur’s view of conditions in her neighborhood led to creation of a new nonprofit organization that provided employment opportunities for local residents. Social entrepreneurs’ abilities to detect opportunities emerge from a combination of their backgrounds and their creativity. People’s backgrounds include the information they have access to from education, work and life experiences, and social networks, as well as the way they use the information they acquire, both the stocks of knowledge and their inherent intelligence and alertness. Creative ideas can be adaptive extensions of current practice, or completely new inventions, or anywhere in between. Social entrepreneurs can develop ideas from brainstorming, focus groups, and surveys. The case of Merkle-Domain illustrates how one particular company combines these techniques. To match ideas to opportunities, social entrepreneurs can look for human needs at every level of the Maslow hierarchy of needs. The case of honey mesquite in Kenya is used to illustrate a mismatch between ideas and needs. Signal detection theory can be used to evaluate the match between proposed ideas and actual needs / opportunities for social entrepreneurship. Opportunities may emerge from external changes, such as technology, public policy, shifts in public opinion or tastes, or demographic trends.

Lecture Outline

Martha Rollins’ Story
In the 1990s, a Richmond, VA neighborhood was in distress.
Most observers saw a high-crime district where many people were predators.
Ms. Rollins saw that there was both the need for neighborhood development and an available labor pool to set to the task.
This is an example of how social entrepreneurs recognize opportunity and generate ideas – which is the subject of this chapter.

Social entrepreneurship as a creative process
There are several steps that social entrepreneurs must go through to create social value. Recognizing opportunity recognition is only one of those steps
What is needed to recognize opportunities? There are three elements: a general background and knowledge of the situation, matched with two kinds of creativity (to generate ideas, and to convert them to opportunities).
“Background” is knowledge of unmet population needs as well as an understanding of the social circumstances of a prospective client group.
One kind of creativity is needed to generate ideas, using the insights of people with deep knowledge of the population and its circumstances.
A second (though not unrelated) kind of creativity is needed to take these ideas and convert them to opportunities.
Figure 2.1 portrays this process
The match between opportunities and ideas is critical for success in social entrepreneurship; an idea may not be “good” if it does not exploit an opportunity.

What preparation and background help to recognize opportunities?
Note that these are not mutually exclusive
Formal education in economics, sociology, business, and related disciplines equips social entrepreneurs with skills and perspectives
Work experiences bring skills that are specific to particular jobs and/or industries or service areas. For example, employment in social work would tend to produce knowledge and understanding of client needs that are not being met.
Elements of people’s life experience,such as informal learning, personal and family history, relationships, and travel, can help them recognize opportunity.
Social networks can be a very rich source of perspectives. Friends, professional associates, and people in someone’s neighborhood may provide the key understanding of an opportunity for social entrepreneurship. Moreover, through the “beta-testing” approach, a person’s social network can be a way to test out ideas that might follow from recognizing opportunities.

Utilization of information
Knowledge that helps one recognize opportunity is necessary but not sufficient as a foundation for successful social entrepreneurship.
Social entrepreneurs need to be able to use the stocks of information that they have accumulated from different sources and experiences.
Intelligence and alertness are qualities that make it easier to use this information
Practical, knowledge-based intelligence is one such quality
Emotional intelligence, empathy, and concern are other related qualities that help a social entrepreneur connect the opportunities they see to ideas for action.
Many opportunities for entrepreneurial action are based on specific circumstances and situations, so alertness, or awareness of when an opportunity arises, is another key quality.

Creativity
Generating ideas to improve the effectiveness of a system is the next stage in the social entrepreneurship process
Ideas can be adaptive or innovative. That is, they can make small or incremental changes from existing conditions (adaptive idea). Or, ideas can be more structural and wide-ranging, drawing on essentially new perspectives and orientations.
Of course, there are many kinds of creativity, and these are only two points on a spectrum of creativity possibilities
Nehemiah Corporation of America illustrates what is basically an adaptive response. Its business model is intended to eliminate a problem that arises in the normal too-and-fro of negotiation between buyers and sellers. Thus, it is facilitating home ownership by reducing a technical barrier
On the other hand, creativity may also be manifested as an innovation that redefines problems and seeks superior solutions.
Ideas driven by innovation may reject existing perspectives and seek new and riskier approaches – which are intended to create even greater impact, but are less predictable.

There is a continuum of SE concepts
Given that ideas may be in part adaptive and in part innovative, socially-driven entrepreneurship may feature:
Invention, referring to all new ideas.
Extension, which is a shift or change or adaptation of existing ideas
Or, it may be a synthesis – combining new and existing
Thus, innovation and adaptation are effectively two different points on a continuum or spectrum of ideas

Idea generation
This section of the chapter addresses ways in which social entrepreneurs look for additional perspectives to help them generate ideas.
Brainstorming
This is a well-known and often-used technique in many team and group settings.
Brainstorming tends to produce many ideas in a short time.
But, not all of them are practical innovations or adaptations
Focus groups
These help explore what actual potential consumers might actually want
Focus groups can explore specific issues more intensively – but they are limited by the number of perspectives
Focus groups may or may not be representative of the population that is best informed about the opportunity
Surveys
Surveys provide broader – and therefore better representation of the target population
But, there is a limit to how much detail a survey can provide
Surveys have their own methodological challenges

Linking opportunities and ideas
Opportunities for SE exist where there are unmet needs – this corresponds to demand for services.
Ideas that could be put into action represent the ways that social entrepreneurs may respond with programs and activities – which is a supply side orientation to SE.
Linking supply and demand approaches asks if there is a match between a social entrepreneur’s idea and a need
According to Maslow, people address their needs in order, from the most basic physiological needs to higher order needs
If this is true (and this hierarchical approach is widely accepted), then social entrepreneurs can recognize when lower level needs have not been met
Figure 2.4 portrays this hierarchy

Signal detection theory
This section discusses the prospects for success when entrepreneurs detect opportunities and devise ideas to match them
The match between them is portrayed in Table 2.1 as two binary / dichotomous choices:
An opportunity does exist or it does not
An idea is proposed or it is not
Thus there are four possibilities
Only in the case that an opportunity exists and a valid idea emerges is a successful venture likely to result
In two other cases, there are either missed opportunities, or an unsuccessful venture
The case of no good opportunity and no good idea is also a fit – no resources were wasted in devising a response to an opportunity that wasn’t there

Therefore, strategies for success in matching opportunities with ideas are:
Pure idea generation, to have a large pool of ideas to draw on
Evaluate all possible ideas, and screen out the ones that don’t have potential as ventures
Another approach is to focus on opportunities and needs first (to develop knowledge), and then generate ideas second
Avoid missed opportunities – these have the biggest opportunity cost

Opportunities often originate in external forces
This is similar to the external forces approach for environmental analysis that is used often in teaching management, entrepreneurship, and business strategy
That is, there are factors that are macro-level, affecting multiple sectors and service areas
Technological change, e.g., using the internet for political fundraising, as in the case of Howard Dean in 2004 and numerous presidential candidates in 2007 and 2008.
Raising contributions on the web is now a common technique among nonprofit organizations
Change in public policy, e.g., Bush administration initiatives created opportunities for faith-based groups.
The tax advantages of the nonprofit sector, as well as the requirement for public disclosure of nonprofit organizations’ finances, are both consequences of public policy.
Change in opinion, e.g., anti-war movements, from Vietnam to Iraq
Similar changes in opinion were critical in building the environmental movement in the 1970s.
Changes in tastes, e.g., higher education adapts to student interests.
In addition to education, socially entrepreneurial arts organizations often track the evolving tastes and preferences of their patrons to seek opportunities to satisfy them further.
Demographic changes, which can include births, deaths, immigration, and emigration. (e.g. by serving Mexican immigrants and helping assimilate.)
A demographic change that creates opportunity for social entrepreneurs is the combination of the large population of aging baby boomerswho also have longer life expectancy. This creates opportunities for organizations that serve seniors.

Responses to in-chapter questions and end-of-chapter case questions

Questions on Merkle-Domain

1) What are some reasons that Merkle-Domain doesn’t routinely use focus groups to develop ideas for their clients?

Answer:Focus groups are particularly appropriate when there is a strong likelihood of getting key insights that will apply to the bulk of the population being studied. Because Merkle-Domain’s business is in the direct mail field, the people receiving their materials will most likely constitute a very large population. Recall that direct mail usually gets a very small percentage response – but is typically sent to a big enough pool of possible donors that even small responses can be a success. A second factor is that the company gets its client directly involved in generating ideas by using the brainstorming process described in the case. The case also notes that when it comes to micro-level issues such as specific language, focus groups are a preferred way to improve their products.

2) The case describes a free-wheeling brainstorming session, in which ideas are generated but no final decisions on campaign material are reached. Why wouldn’t it be better to narrow the possibilities down in the initial meeting?

Answer: In loosely-structured activities like brainstorming sessions, it is more critical to create a large set of possible ideas than it is to reach a firm conclusion. A brainstorming session often doesn’t provide participants with every important piece of information that is needed for a good final decision. Participants in Merkle-Domain’s initial brainstorming sessions do not include the client, who is the ultimate decision-maker who will purchase the recommended campaign.

3) What standard statistical techniques might Merkle-Domain use to compare the test panel response to the validation panel response? Why do they use such large samples?

Answer:A relatively simple test of means would determine if the two panels generated results that were not only different, but were far enough apart that the difference could not be attributed to random chance. These tests might be framed as “analysis of variance” or ANOVA, or a t-test. If a given mailing piece will be used to raise money from millions of people, the expense is sufficient to justify additional investment in comparing the two best possible mailers.

Questions on Rubicon Programs, Inc.

1)What background would you need on your team to properly develop this idea?

Answer:Generally, “background” is knowledge of unmet population needs as well as an understanding of the social circumstances of a prospective client group. To develop this idea, you would benefit from expertise in the fields of mental health assessment, community health, government policies regarding contracting and funding, and on how to successfully deliver programs that benefit Rubicon’s client population. This background could be from experience as a member of the community being served, from training, and/or from prior work experience with Rubicon.

2)Is this new venture idea an adaptive social enterprise, an innovation, or both? Explain.

Answer:Naturally, it has elements of both. It is adaptive in that it is another way to achieve Rubicon’s mission of delivering supportive services to help people and community build asset. Further, it extends a new service opportunity to individuals who it may have served before in other ways. But data entry is a new service for Rubicon to offer, and calls for more planning and training. It is quite different from baking and landscape services, activities where Rubicon has experience.

3)Where in Maslow’s hierarchy would you place this idea? What needs have to have been previously met with the clients to make the new venture a potentially successful idea?

Answer: All clients will have individually met their needs at one stage or another. Therefore, it can help to meet the needs of later stages in a different way for each client. This idea could be seen as helping poor people earn money to support themselves and their families, to meet safety and security needs. For some clients, the skills required for data entry also pose self-esteem and cognitive challenges that help in their development. To the extent that data entry work is teamwork, it offers belongingness to workers who have felt marginalized.

4)What is the source of this opportunity?

Answer: As described in the case, a prominent source of opportunity for Rubicon is a new government mandate requiring that some of this data entry work be contracted to the private sector. This is a change in public policy.

Questions on Co-Abode

1) Is Co-abode an innovation or adaptation or a combination of both? Explain.

Answer: This appears to be much more innovation than adaptation. Few organized social networks provide information to single parents, though they often have access to other sources of information. The method of matching prospective room-mates through a web site seems to be a new mix of apartment rental search engines and landlord-tenant matching, combined with dating service matching. At the time it was conceived, in 2001, all such uses of the internet were relatively novel.

2) What are potential threats to this organization, and how can they be resolved?

Answer: One notable threat is that the donations from members do not provide enough cash flow to meet the on-going needs of the operation. In that event, Co-abode would need to look for alternative sources of money, such as generating revenue sales of other services to the same members, or seeking outside subsidies (grants and donations) to keep operating. Another area of threat is that the kind of service that Co-abode provides does get incorporated into the person-to-person matching services of regular real-estate rental software sites, or becomes easy enough for people to do using services such as craigslist.com. Another threat comes from the risk that some of the matches they have made between pairs of single mothers have turned out badly, and Co-abode could be sued. Co-abode can defend against this threat through web-site language about how users need to be careful, disclaimers that members must accept, and by purchasing insurance.

3) How does the idea of Co-abode fit into Maslow’s hierarchy of needs?

Answer: Co-abode’s members are a segment of the population that is vulnerable because of an unsafe or unstable or low-quality housing and home life. Co-abode’s services are targeted very clearly at helping those members meet (first) their safety and security needs and (second) their belongingness needs.

Homework and class activity questions

Homework Question 1)In addition to focus groups and surveys, what are some other sources of datathat social entrepreneurs can use to identify areas of need? Give examples of how these sources could be used if the concern that a social entrepreneur wants to explore is affordable housing, and the two populationsof concern are in a rural agricultural community and in urban areas.