The Social Enterprise Formula

A masterclass on how to rethink social enterprise is set to run at this year’s Melbourne Knowledge Week

As co-founder and CEO of StartSomeGood, Tom Dawkins knows a thing or two about starting, running and growing social enterprises. As part of Melbourne Knowledge Week, he’s sharing his learnings with a Masterclass called The Social Enterprise Formula – a breakdown of the what, why and how of social enterprise. 

Dawkins describes the “formula” as something that starts with getting an understanding of what a social enterprise actually is. 

“I think people tend to think of social enterprise as being a type of structure but a social enterprise is less about a type of organisation and more of a way of being in the world,” Dawkins told Pro Bono News. “It’s less about are you ‘being’ a social enterprise and more about are you ‘doing’ social enterprise.” 

He said that to explain social enterprise, he breaks it down into two distinct income models – those with redistributive impact and those with embedded impact. 

“Redistributive impact means that the business is creating a surplus, which has been dedicated to social good. An example could be that a percentage of profit made goes to an external organisation,”  he said. “Embedded models are more about having impact embedded into the business from day one. Irrespective of what happens or even if the business makes a profit.”

Dawkins said he’s much more inspired by embedded impact-driven social enterprises.

“I think they hold the true promise of the social enterprise sector,” he said. 

“Redistributed social enterprises are really just a new spin on philanthropy. They’re not a new spin on business because their role, as they see it, is to maximise profits. And that’s because their impact is created through their profits. So they’re stuck in profit maximising where the only way to increase their impact is to make more profit. It’s really just business as usual.” 

Dawkins said that while the social enterprise sector continued to focus on the question of how to make money, it should also be considering the impact it had along the way. 

“That’s what embedded social enterprises are doing,” he said. “They’re taking responsibility for maximising the  good and reducing the bad from their business activities, which is why I think they’re set up to succeed in the future.” 

When discussing how social enterprises can build an embedded impact model, Dawkins gives four examples: 

• create jobs for people who would otherwise be excluded from the mainstream labour market – those with an intellectual or physical disability, recently arrived migrants and refugees and those who’ve recently left prison; 
• create access to products and services in new ways. For example, the social enterprises in Africa who are creating apps to give the unbanked access to financial services;
• build a product or service that is fundamentally making you better. For example, a financial literacy product or an education-focused service; and
• create something that’s better for the planet. For example, making swimwear out of single-use plastic. 

The four phases of social enterprise 

As part of his masterclass, Dawkins discusses the four phases of social enterprise and his thoughts around how society moves through them. 

The first being what Dawkins calls “niche social enterprise” or “social enterprise 1.0”. 

“This is where people have had to sacrifice something in order to do the right thing,” he explained. “That could be choosing to shop in the local organic supermarket, which costs a bit more and isn’t as convenient as the local big supermarket. These types of places have been around forever but, depending on what you read, they’ve never managed to get more than 10 to 15 per cent of the marketplace.  

Phase two he refers to as “competitive advantage social enterprise” or “social enterprise 2.0” and states that as being the phase we’re currently in. “This is where a business can demonstrate that it’s as convenient, as valuable, as well-priced as its competitor but better on impact,” he said. “For these social enterprises their purpose and impact is what really shines out.” 

The third phase of social enterprise is the “systemic advantage”, which is a phase that will require significant policy shifts. For example, putting a price on carbon and a price on pollution. 

The fourth phase will be the “new normal”. 

“This is when the whole concept of social enterprise will somewhat disappear. We won’t need the idea anymore because it will just be what we consider a business to be,” Dawkins said. “In this new normal, a business will care about paying attention and being responsible to its stakeholders, customers, community and future generations. We can then move our collective attention away from having to point out the positive social outliers, the social enterprises, and focus on the negative outliers – the anti-social enterprises.” 

To learn more about the social enterprise formula register for Dawkin’s free Melbourne Knowledge Week session here.