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 NYU’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.” 

Both Benetech and New Leaders for New Schools provide examples of social entrepreneurs helping government benefit Americans by developing solutions, testing new theories, or designing new approaches to addressing social problems.

Benetech

Market Failure
Twenty years ago, the best available technology for a blind person to read printed text was a machine the size of a clothes dryer with a five-figure price tag. It was an unrealistic and unaffordable option for accomplishing daily tasks like browsing a newspaper or looking over a piece of mail. Although the technology for creating an affordable, portable machine existed, 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. 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 large customer base. 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 expansive 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, an example of how a low-profit-market approach can eventually develop a market that could be served by a traditional for-profit approach.

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 while serving the thousands of Americans—veterans in particular—who previously were unable to read printed text on their own.

Next week: Testing & Developing Solutions continued - New Leaders for New Schools

Transformative, Financially Sustainable Innovation
ITNAmerica provides rides in private cars available 365 days a year, 24 hours a day, with “door-through-door” service using a combination of paid and volunteer drivers. Taking a limited-market approach, ITNAmerica charges a nominal one-time membership fee of $35 and about 50 percent of the cost of a taxi for each ride. Payments must be made for every ride, but no money changes hands in the vehicle. Seniors fund personal transportation accounts in advance and receive a monthly statement by mail.

In embarking on an ambitious five-year growth strategy, ITNAmerica has been efficient in leveraging private resources. According to founder Katherine Freund, “We have a very flexible approach to resources. We say money is one kind of resource, but there are other kinds of assets that have economic value. And if we can find a way to capture different kinds of economic value, then we can use those resources also to pay for rides.”   Volunteer drivers make up about 40 to 60 percent of the driving team. This helps the organization keep costs manageable, and offers seniors a way to subsidize the cost of their own rides. Many of the volunteers who are over the age of 60 contribute their own volunteer driving time through ITNAmerica’s Transportation Social Security program, building up credits in their personal transportation accounts for their own future use while they are still safe and healthy to transport others. Family members also supply volunteer time and make in-kind contributions of their driving credits to their relatives who are using the service. Seniors may trade their personal vehicles when they are no longer able to use them and apply the liquidated equity to fund their personal transportation accounts. The donated vehicles are often used to deliver rides.

Societal Benefits
ITNAmerica has developed a highly efficient model that ultimately funds itself. When the organization starts an affiliate program in a new city, it limits the amount of public funding it accepts to 50 percent or less of the capital necessary. Moreover, no public funds may be used for day-to-day operations, because ongoing use of public funds crowds out the development of the private community support so essential for long-term sustainability. Freund explains, “Most of the resources for transportation are private. If you don’t have a model that is built to access them, then you’ll fall into the pattern of being one of many providers in a turf war over the public dollars.”  She notes that while many social problems require ongoing public support, senior transport—which targets a population willing and able to pay modest fees—is not one of them. Once ITNAmerica affiliates reach their full capacity, the public funding that helped to get them started can be directed to other needs. As a result, ITNAmerica leverages minimal initial support from government to meet the transportation needs of older Americans across the country.

Learn how KaBOOM! has leveraged public and private resources to build nearly 2,000 new playgrounds in underserved communities.

Next week: How social entrepreneurship helps government Part II: Testing & Developing Solutions

As new contributors in the realm of social problem solving, social entrepreneurs have come to serve as resources for government as it addresses social problems to improve the lives of Americans. As Citizens Schools Co-founder and CEO Eric Schwarz explains, “The best social entrepreneurs have great results. Government is looking at ways to get results at low costs. Social entrepreneurs can help them achieve this. They can test new ideas and innovations, and partner with government to bring successful ones to scale.”

Government leaders continually face pressures to allocate limited tax revenues to address pressing societal needs, and many have achieved a great degree of success. While social entrepreneurs will never take the place of government, conversations with social entrepreneurs and experts in the field suggest that social entrepreneurship is uniquely positioned to help government officials better address societal needs. Specifically, the social entrepreneurs interviewed help government improve the lives of their constituents in two primary ways: (1) leveraging public and private resources and (2) testing and developing solutions.

Leveraging Public and Private Resources: ITNAmerica
Because of their focus on financial sustainability, social entrepreneurs identify and utilize new and existing resources, both financial and nonfinancial, to help them address social problems. Often this means that social entrepreneurs are able to implement solutions to social problems on a wider scale that have previously been too costly. At times, social entrepreneurs also end up shifting costs from public budgets to private resources, thus freeing up government tax revenue to address other needs.

Market Failure
ITNAmerica provides a good example. Too often, older Americans must choose between their safety and their mobility—between continuing to drive as their abilities decline or remaining homebound and dependent on others after giving up their cars. Prior attempts to address this problem have failed to fully meet the needs of their target senior consumers. Senior transportation programs, often government funded, have typically relied on attempts to convince older people to ride buses or subways; on organizing volunteers to pick up vanloads of seniors for group trips; or offering rides to a handful of specific destinations, such as medical appointments. Finding these options insufficient, many seniors continue to drive when they are no longer fit to operate a vehicle, or become increasingly housebound as they restrict their own driving and become dependent on favors from family and friends. As ITNAmerica Founder Katherine Freund explains, “Depending on the private automobile for transportation is inadequate for years before people actually stop driving. And then people who do stop driving outlive that decision by about ten years. It’s a very big problem because of the aging of the population. There are more older people. There are more older people living longer. There are more older people outliving the ability to drive longer. You can see if you multiply those things together you come up with a pretty big social problem.”

Next week: Leveraging public & private resources, continued:  ITNAmerica’s solution