Case Studies: Defining Social Entrepreneurship

As trends have pushed the traditional roles of the three sectors to blur, their nexus has provided fertile ground for the growth of social entrepreneurship. As scholar Alex Nicholls from Oxford University's Skoll Centre for Social Entrepreneurship explains, social entrepreneurship is not defined by its organizational form but "is best understood as a multi-dimensional and dynamic construct moving across various intersection points between the public, private, and social sectors." By blending some of the social and economic responsibilities traditionally associated with each of the three sectors, social entrepreneurship may take the form of a nonprofit, business, or government initiative.

The three key components of social entrepreneurship - response to market failure, potentially transformative innovation, and financial sustainability - can be further understood through the following three case studies:

• Resolve to Stop the Violence Program (RSVP): no-market approach
• Triangle Resident Options for Substance Abusers, Inc (TROSA): limited-market approach
• Outside the Classroom: low-profit market approach

Resolve to Stop the Violence Program (RSVP): A No-Market Approach to Reducing Recidivism

Market Failure and Approach

The United States has one of the highest incarceration rates in the world. According to a 2005 BBC report, U.S. recidivism rates are also high-at about 60 percent throughout the nation. While reducing these rates would produce significant societal benefits in terms of reducing the overall prison population, cutting down on incarceration costs, and ultimately ending up with more productive citizens, there is little hope of a market-based solution to meeting this need. Delivering rehabilitation programs to prisoners does not provide an opportunity to generate profit.

RSVP, a San Francisco-based government initiative housed in the city's sheriff department, provides an example of a social-entrepreneurial initiative addressing a no-market opportunity. The prisoners who are the beneficiaries of its intensive rehabilitation program have no ability to pay for it.

Transformative Innovation

When Sunny Schwartz determined to start the first correctional program in the country to adopt a restorative-justice approach to reducing recidivism, she was already working with violent offenders at a San Francisco County prison and had grown dissatisfied with traditional approaches to prisoner rehabilitation: "It was clear that we weren't reaching most people in any kind of sustained, pro-social way." With the support of San Francisco Sheriff Michael Hennessey, Schwartz put together a diverse planning committee of former offenders, crime victims, and community leaders to participate in the development of the RSVP model: "We had victims' rights advocates. We had formerly abusive men and gang members. We had orthodox rabbis, Baptist ministers, atheists. We had deputy sheriffs from line staff to upper echelon. And then we had the usual stakeholders-probation and people on the bench."

The resulting program differs from the usual approaches, which tend to focus either on punishment for the crime or rehabilitation of the offender, by encouraging and teaching offenders to take responsibility for their crimes. While some elements of RSVP programming resemble what might be found in typical rehabilitation programs-English and GED classes, parenting programs, and substance abuse treatment-the program also includes a class that teaches offenders to experience empathy for those who have been harmed by violence. Victims of crimes work with former offenders, community members, business organizations, and other stakeholders to develop the curriculum used for these classes, and to participate as trainers. When offenders are released from prison, many participate in an "internship" program and receive employment training while performing restorative acts in the community. Those who are successful eventually return to the prison as facilitators of RSVP sessions. Additionally, some of the victims of the RSVP participants also become advocates and work with RSVP.

The results that RSVP's innovative programming has generated thus far indicate that the organization is on its way to developing a rehabilitation method for violent offenders that has the potential to transform current practices in U.S. prisons and change beliefs about what is possible when working with prisoners. An independent, quantitative evaluation of RSVP found that the average annual incidence rate for fights and other forms of in-prison violence for their program participants is essentially zero, as compared with 28 in a traditional "lock-up" prison setting-even though the participants sleep in open dorms. Further, offenders who participated in the program for at least eight weeks had a 46 percent lower rate of re-arrest for violent crime than those who served their time in a traditional jail. This difference increased to 83 percent for those who completed at least 16 weeks of the program.

The organization is currently looking for ways to take its methods to other parts of the country. To date, jurisdictions in Austin, Texas, and Westchester County, New York-in addition to several local high schools-have approached RSVP for advice on replicating the program; organizations from New Zealand, Poland, and Mexico have begun to replicate the RSVP model as well.

Financial Sustainability

For no-market approaches like that of RSVP, achieving financial sustainability requires full subsidies in order to start and maintain the initiative. One option in no-market conditions is to work within the government, where public funding is available. RSVP, whose staff is made up entirely of public employees, provides an example of this. Based on its results, the program was able to secure predictable funding in the form of a line item in the City of San Francisco's budget.

Triangle Resident Options for Substance Abusers Inc. (TROSA): A Limited-Market Approach to Long-term Substance-Abuse Treatment

Market-Failure and Approach

A major gap exists in the United States between the needs of low-income people suffering from substance abuse and the treatment programs available to them. While addiction is a problem that people can suffer from for years or even decades, few public programs offer more than 30 days of treatment. Since this population has little ability to pay even for short-term treatment, markets have left the need for long-term care for substance abusers unaddressed.
The North Carolina-based nonprofit TROSA takes a limited-market approach to addressing this problem. The organization has developed a model that makes it possible for its beneficiaries to help cover a portion of the costs of the services they receive.

Transformative Innovation

TROSA provides a two-year residential treatment program, which includes counseling, education, and what Founder Keith Artin calls vocational therapy: "everything from someone learning a very specific trade-like getting a truck license-to basic on-the-job work ethics." While the programming alone is a highly innovative approach to substance abuse treatment, equally innovative is TROSA's model for delivering this program to its residents at no financial cost. Residents "pay" for the services they receive by working in either the operations of the program itself-helping with food preparation, transportation, and administration-or in one organization's many businesses, including TROSA Moving, TROSA Lawn Care, and TROSA Furniture and Frame Shop.

Financial Sustainability

As with many limited-market opportunities, the challenge is making this program financially sustainable, as the vast majority of those in need of long-term treatment for substance abuse have little ability to pay for such services. TROSA's model addressed this challenge by using revenues earned from their business ventures to cover more then two-thirds of TROSA's operating needs. The organization fills the remaining gap with support from other predictable funding sources.

Outside the Classroom: Identifying a Low-Profit Market for Drug and Alcohol Awareness on College Campuses

Market Failure and Approach

Each year, 1,700 college students in the United States die from alcohol- related causes. Colleges and universities have long focused on hosting guest speakers and alcohol-free social events to address the problem, but the market has failed to produce a more effective solution.

The for-profit organization Outside the Classroom set out to fill this need through a low-profit-market approach. The organization knew that a profitable market existed for its Web-based curriculum, yet several factors limited that market. An Internet-based curriculum designed to be administered to the entire student population was not a product that colleges and universities were accustomed to paying for. Additionally, all of the potential purchasers, public and private colleges and universities, operate as nonprofit organizations. While the potential for profitable sales did exist, it did not promise quick or substantial returns for early investors.

Transformative Innovation

Recognizing that drinking and drugs are commonly represented as a standard part of the U.S. college experience in American music, movies, and advertisements, Outside the Classroom Founder Brandon Busteed set out to change that perception. The organization's innovation is a curriculum designed to educate entire campus populations, in order to influence not only individuals' choices but campus culture as a whole.
In six years since its first sale of its Web-based curriculum, Outside the Classroom has begun to change the way some colleges and universities think about alcohol and drug abuse prevention. During the 2006-2007 academic year, approximately 25 percent of first-year college students across the nation completed the Outside the Classroom's web training. Early results have been promising: an independent study examining the efficacy of Outside the Classroom's programming found that students who had used its online prevention program, AlcoholEdu, experienced 50 percent fewer negative consequences related to alcohol-blackouts, hangovers, missed classes, physical fighting, unprotected sex, damaging property, and driving drunk-than those who did not.

Financial Sustainability

Like most social-entrepreneurial initiatives with a low-profit-market approach, Outside the Classroom faced its biggest challenge in its start-up phase. During that period, the organization was initially turned down by dozens of grant makers and relied on patient angel investors to cover the significant up-front costs for creating a curriculum and developing a market for it. As angel investor Ed Roberts, Professor of Management of Technology at MIT's Sloan School of Management, recalls, "When I invested in Outside the Classroom, I was doing it primarily as a socially good act, with little faith that I would ever see a return on my investment. The idea was highly speculative as to whether or not it would work and have any real impact. But I wanted to join my friend Howard Anderson in assisting this cause in which he strongly believed. I now see that often times allowing underdeveloped but potentially socially meaningful markets to grow can produce good returns, both in regard to the original social purpose as well as from an investor's financial perspective." The financial backing of investors who understood that their support had the potential of creating social benefit in addition to generating profits ultimately provided Outside the Classroom with time to do both. Today, Outside the Classroom has captured 25 percent of the college and university market, and some six years after initially lending their support, investors are now seeing their first returns.