Thursday, September 16, 2010

Lessons in Entrepreneurship and Wealth Building from the Developing World - Knowledge@Wharton

Lessons in Entrepreneurship and Wealth Building from the Developing World - Knowledge@Wharton

Animal feed in Zambia. Cookies in South Africa. Medical records systems in Botswana. Peanut processing in sub-Saharan Africa and Latin America.

In regions scarred by intractable poverty, innovative programs to build new sources of wealth through these four businesses are providing lessons for entrepreneurs hoping to create new markets and economic opportunity. In a paper titled, "Business Models: Creating New Markets and Societal Wealth", leaders of Wharton's Societal Wealth Program (WSWP) outline the critical elements of entrepreneurial wealth building based on nearly 10 years of field research supported by Wharton alumni.

The WSWP initiatives are designed to move beyond a charitable aid model for combating poverty by creating economic enterprises that lead to self-sufficiency rather than dependency and that will have a major and lasting impact. "There are plenty of charities doing things for free. What we are attempting to do is create poverty reducing businesses," says James D. Thompson, director of the WSWP, who coauthored the paper with Wharton management professor Ian C. MacMillan.

Uncertainty is a major element of any entrepreneurial undertaking and the social wealth projects -- with the goal of improving society in addition to making money -- are all the more unpredictable. "If you're going to do something that's really going to make a difference and it's bold and highly innovative, by definition it's [also] going to be highly uncertain," MacMillan notes.

Since its launch in 2001, WSWP has been involved in 10 projects and is in the early stages of evaluating two others. The four cases highlighted in the paper represent a range of outcomes from success to termination. Many of the other six projects were disengaged or significantly altered -- a rate Thompson says is comparable to findings on typical entrepreneurial startups. "You're likely, if you follow this approach, to encounter more failures than successes," he notes.

Lessons for Entrepreneurs

According to MacMillan, entrepreneurs working in social enterprises need to maintain a sense of responsibility in addition to factoring in the many business considerations that typically go into a start-up. Failure in this environment can be measured in costs to the human spirit as well as financial terms. "You don't just rush in and say you are going to help without thinking how you will actually be of help," he points out. "Secondly, if you find that your program is not working, you need to have preplanned how to exit without doing harm or leaving people in the lurch."


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