Case Studies: Testing and Developing Solutions

While social entrepreneurs will never take the place of government, social entrepreneurship is uniquely positioned to help government officials better address societal needs in two primary ways: (1) leveraging public and private resources and (2) testing and developing solutions.

Despite the best efforts of government, nonprofits, and individual citizens, solutions for social problems can be hard to find. As Gregory Dees notes, "With all of our scientific knowledge and rational planning, we still do not know in advance what will work effectively. Thus, progress in the social sphere depends on a process of innovation and experimentation...an active, messy, highly decentralized learning process." Given the challenges-and frequent failures-of attempts to innovate, social entrepreneurs supply a second valuable benefit to government. According to Jeffrey Robinson, assistant professor of management and entrepreneurship at New York University's Stern School of Business, "Experimentation is the value of social entrepreneurship to government. How do you break a logjam? Social entrepreneurs are often successful in figuring it out."

The three cases below provide examples of how social entrepreneurs have helped government benefit Americans by developing solutions, testing new theories, or designing new approaches to addressing social problems:

• City Year
• New Leaders for New Schools
• Benetech

City Year

Market Failure

The idea of voluntary national service-what City Year Co-Founder Michael Brown defines as "calling on America's youth to give a year or more in service to the community and country to tackle pressing domestic needs and problems" -has a long history in the United States. More than 100 years ago, philosopher William James called national service the "moral equivalent to war," suggesting that national service could be seen as an alternative to military service, serving one's country through volunteerism. More recently, during the civil rights era, many advocated social integration through service. Political leaders and commentators ranging from Senator Ted Kennedy of Massachusetts on the left to William Buckley on the right were champions of the idea . Despite considerable interest, however, national service never took off. Brown characterizes the issue as one of "passion and dissonance," and theorized that national service-like the television and home computer-was an "experiential product" that the country needed a chance to see before they would know how much they wanted it. But national service was not the kind of service for which its beneficiaries could pay. Those serving would be volunteers, unlikely to be willing to pay for a volunteer opportunity even if they had the means. Those they would serve would also have limited if any means to pay.

Transformative, Financially Sustainable Social Innovation

Setting out to create an "experiential product" that would show Americans what national service could accomplish, City Year's founders started by considering the service programs that were already in existence. The small, state-based service corps they founded tended to be focused on physical labor and often open only to low-income or high-risk youth needing professional skills. Brown and Co-Founder Alan Khazei were determined to make City Year different. They extended the time of service to a full year. They recruited "corps members" from a wide range of backgrounds, bringing together young people of different classes, races, and educational experiences. While a small portion of the work is physical, City Year's volunteers primarily focused on education and youth development, serving as mentors for children in partnership with public schools and organizing and running after-school programs and curricula on social issues including domestic violence prevention, AIDS awareness, and diversity.

In its early development, all City Year activities ran on private funding: corporations sponsored "teams" of volunteers. The decision to begin without government funds was largely a strategic one. In Brown's words, "If national service were to ignite civic energy, then citizens, private organizations, and companies needed to be engaged in its development and implementation... Rather than the creation of a new, single, ‘silo-ed' government program, national service, we and others believed, should release civic energy and therefore be rooted in citizen, nonprofit, and private sector initiative."

Societal Benefits

As City Year's privately funded model for national service gained strength, it captured the attention of the architects of two government initiatives dedicated to promoting national service: the Corporation for National and Community Service and AmeriCorps. According to Brown, "President Clinton would later say that his visit to City Year [during his 1992 presidential campaign] helped to inspire his creation of AmeriCorps by providing him with a concrete example to which he could point to show others that his vision for national service could work." City Year became one of 800 nonprofits to receive federal funding for AmeriCorps' service programs. City Year's model helped to supply government with the information it needed to create a program that now provides diverse groups of young Americans access to a wide variety of national service opportunities. These young Americans, in turn, provide services to communities in need across the country.

New Leaders for New Schools (New Leaders)

Market Failure

In school districts located in low-income communities across the United States, many students are performing below national standards-leaving them with fewer skills and lowered prospects for long-term economic success. New Leaders founder Jon Schnur observed that in the school settings that served as exceptions to this rule, strong leadership by a committed principal was a common factor. "We've never seen a great classroom without an effective teacher, and we've never seen a school driving results for all kids without a great principal. Even where you've got good teachers, they don't stay and they don't work together in the right way and ultimately collaborate in the right way without a great principal." Yet there was little focus on the recruitment, selection, or training for these essential school leaders, who "used to be largely expected by the system to be the manager of the bureaucracy and the status quo, and an operational manager keeping things running smoothly."

Transformative, Financially Sustainable Social Innovation

New Leaders was founded to test the hypothesis that putting resources towards selecting, training, and supporting principals who are committed to meeting high standards-even for children in the toughest neighborhoods with access to the fewest resources-will have a positive impact on students and ultimately the entire school's performance. Through a highly competitive process, New Leaders identifies educators whose values and skills suggest they can "lead and build schools' cultures to drive high expectation for all kids," and trains them to lead high-performing schools. Applications to the program are numerous; only approximately 6 percent of applicants are selected each year. Those chosen spend an intensive year as "residents" in an urban school, and then receive placement assistance and ongoing support as they take the reins as principals in schools of their own. Through partnerships in several large city school districts, New Leaders' no-market approach is supported in part by public funds, in the form of the salaries that their residents and principals receive from the school district where they work. These public funds are supplemented by the support of several long-term philanthropic donors, who cover the costs of screening, selecting, training, mentoring, and providing ongoing support to their principals.

Six years of experience now show that their initial hypothesis-that a committed, supported, high-quality principal could transform student performance-has proven true. New Leaders presently operates in nine cities across the nation: New York City, District of Columbia, Chicago, Memphis, Oakland, Baltimore, New Orleans, Prince George's County (MD), and Aspire Public Schools (CA). New Leaders-trained principals lead as many as 25 percent of the students in those districts. Approximately 95 percent of people who train with New Leaders take on school leadership roles-80 percent as principals-compared with fewer than half of principal trainees becoming principals in other, more traditional programs. Their schools show an improvement in student test scores. Across the 2004-2005 and 2005-2006 academic years, 100 percent of schools led by New Leaders principals for at least two consecutive years achieved notable increases in student achievement, with 83 percent achieving double-digit gains. Average student achievement gains ranged from 14 to 22 percentage points by city over the two-year period. The organization is currently striving "to recruit and place enough people to provide 25 percent of the new urban principals needed in the U.S. by 2012."

Societal Benefits

New Leaders provides an example of how social-entrepreneurial experimentation, when successful, can produce new practices that, once they've been tested and honed, government can take up to benefit Americans. New Leaders was able to take on the initial costs and risk of testing out its theory that principals trained to be great leaders can build high-performing schools. Now, city governments across the country are looking to New Leaders as a model. Some have brought New Leaders to their cities, while others have started their own principal-leadership programs, based on New Leaders' approach, in order to provide their students with the highest-quality education possible.

Benetech

Market Failure

Twenty years ago, if a blind person wanted to read printed text not available in Braille, depending on the help of someone else was just about the only choice. The best available technology for a blind person to read printed text, a machine the size of a clothes dryer with a five-figure price tag, was an unrealistic and unaffordable option for accomplishing daily tasks like browsing a newspaper or looking over a piece of mail. The technology for creating an affordable, portable machine existed. However, the potential customer base, blind individuals and their employers, was too small to promise a traditional return on investment. As a result, technology investors were unwilling to take the risk to develop such a product.

Transformative, Financially Sustainable Social Innovation

Benetech was founded as a low-profit-market approach to ensuring the development of technology that promises to have a high social value despite low potential for generating a typical return on investment. As Founder Jim Fruchterman explains, "The last 18 years have been great years for the computer industry. Computers have gotten faster, better, cheaper, smaller, lighter, brighter. What we've done is essentially ridden the back of that industry to say: ‘How can we take advantage of these high-performance low-cost platforms and turn them into effective tools for people with disabilities?'" The company's first product, the Arkenstone Reading Machine, makes use of the optical character recognition (OCR) technology found in scanners, and can be used with a personal computer to scan and read text aloud.

At a cost of less than $2,000, the Arkenstone Reading Machine quickly found a larger customer base than originally predicted. In addition to blind individuals and their employers, people with learning disabilities and government agencies that serve the disabled, including the U.S. Department of Veterans Affairs, began purchasing the product. This unexpected, expanded customer base helped to generate millions of dollars in revenue annually, and ultimately led to the sale of the reading machine and the Arkenstone brand to a for-profit distributor of disabilities products. The machine is now in its fourth release and remains an industry-leading product.

The Arkenstone Reading Machine provides an example of how a low-profit-market approach can eventually develop a market that could be served by a traditional for-profit approach. In Benetech's case, selling the reading machine to a for-profit distributor once there was a sufficient market has enabled the organization to fund the development of other socially valuable technology solutions, without being constrained to those projects with high potential for significant profitability.

Societal Benefits

Benetech was able to test and ultimately develop a self-sustaining solution to a problem caused by a market failure that government was unable to address. Its inexpensive reading machine, tested in the early stages by accepting below-average returns, ultimately ended up creating a new and profitable market, in addition to serving the thousands of Americans who previously were unable to read printed text on their own. Among Benetech's customers was the U.S. Department of Veterans Affairs, which was able to better meet the needs of disabled Americans.