Pin-Quan Ng
Word Count – 1,988 /PIN – 10406
Pin-Quan Ng
Subtopic: Rethinking of Corporate Social Responsibility and Social Entrepreneurship
The Call of the Social Entrepreneur: Challenges and Strategies for Developing a Social Entrepreneur Corps Introduction: Ice Cream and Social Entrepreneurship It was the first time I saw a North Korean child laugh. The ones we passed in Pyongyang were usually filing to school, or perhaps some Youth League rally, in uniform order. They wore red scarves and Great Leader pins, but not smiles. This time, I was standing in line at a soft-serve ice cream stand, and tried to practice my limited Korean with the kids there, asking “masisseoyo?” (맛있어요, is it delicious?) One girl giggled and nodded. Objectively speaking, it wasn’t all that delicious, even compared to the cheap 1 RMB Mengniu (蒙牛) brand popsicles I had just across the Chinese border, and furthermore, there was only one flavor. But she probably never tasted those before. Considering the transport infrastructure for supplying (or smuggling) frozen perishables from across the border, the cost would have been prohibitive for everyone save senior Workers Party cadres. Maybe those popsicles tasted better because of the dairy herders I met in rural Inner Mongolia when surveying microfinance clients, and thinking that my purchase supported their livelihoods. It probably didn’t: Mengniu has the greatest market share in China’s dairy sector, and the combined oligopolistic power of the dairy giants (Yili, Sanlu, Bright etc) sets the price that herders take for their milk. It is that price that often determines if they can seek medical treatment or if their child will stay in school. When the melamine contamination scandal broke later that year, and the demand for both domestic dairy consumption and exports collapsed, so did the price. I wondered how the dairy herders I visited would repay their loans – each dairy cow costs tens of thousands of RMB to purchase and maintain. The activist in me sees poverty and injustice. Yet the businessman in me also sees market opportunities and untapped demand. This is the world of the social entrepreneur: combining social awareness with business pragmatism to create sustainable solutions. Social Entrepreneurship at the Base of the Pyramid Perhaps it is easiest to see social entrepreneurship within the context of extreme underdevelopment. C.K. Prahalad of the Ross School of Business describes the world economy as a pyramid, with a small number of affluent developed-world consumers at the top, and a large base that consists of the poorest of the poor who live on less than a dollar a day 1 . Yet the base of the pyramid (BOP) is a huge and growing market, with more than four billion potential customers, which in purchasing power parity terms is bigger than the combined GDP of the top. Relative to the saturated markets of the developed world, the developing world offers new markets and profit opportunities. 1
Prahalad (2006), p. 4.
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Pin-Quan Ng
Reducing poverty is a strategic imperative in the BOP. There is no business sense in selling at price points consumers cannot afford, and if you want paying customers, you must address their needs. Consider the Microsoft Classmate laptop, the Asus EEE pc, the Tata Nano car, mobile phone banking, and microfinance. All of these affordable products and services increase productivity, especially where public transport, education, communication, and banking is inadequate. The question is: if there’s a fortune to be made in the BOP, why aren’t corporations there already? Where are all the social entrepreneurs? The Social Entrepreneur’s Toolkit The reality is that it’s not easy to survive in the BOP, let alone profit. The global economy is built on global institutions, from the rule of law, property rights, liberal democracy, liquid capital markets, and an entire ecosystem of businesses, government agencies, civil society actors, and other stakeholders that create these conditions. These institutions are usually weaker or absent at the BOP. A multinational company that has no experience in emerging markets will face severe challenges doing the simplest things, like registering a business or purchasing a site, if they do not understand local institutions. They may face unfair disadvantages against local competitors with strong political connections. They might not even be allowed to operate without local partners and joint ownership. It takes a very special skill set to work in the BOP: One must have business savvy and expertise, but one must also have local knowledge and experience specific to that location, to understand the risks and opportunities out there. Technical skill must be accompanied by social awareness. There is no shortcut to acquiring this awareness. One must often master a new language, form new friendships, and soak in the culture and history of a society firsthand. This is the skill set of the social entrepreneur. Traditionally, firms entering the BOP have taken two approaches to acquiring human capital with this skill set. The first approach is to relocate their existing staff as expatriates. The second approach is to recruit local talent and train them. These are not mutually exclusive, but they do present very different challenges. Expatriate Relocation Multinational corporations have no problem with the first condition. Most of their staff are highly educated or professionally trained in their field of business. But it is hard to attract highly experienced and skilled professionals from the business community to the most undeveloped and dangerous regions, far from the comfort and safety of expatriate gated communities, without significantly higher compensation. For long-term expatriate staff, the firm may also have to support the relocation of the entire family. An alternative is to recruit expatriate staff from international nonprofits that operate in the BOP. These nonprofits have plenty of staff with field experience and language proficiency, Page 2 of 5
Global Initiatives Symposium in Taiwan 2009
tend to have lower compensation requirements, and are already located in the BOP – no relocation expenses incurred. However, nonprofit staff tend to have limited knowledge and skills applicable to business and industry, and also be unable to integrate themselves into corporate culture and communicate effectively with investors. Local Recruitment If one is looking for social awareness, it should be obvious that the people most aware of their society are the ones that belong to it. Locals have the most local knowledge, are already native speakers of local languages, have well-established ties to local institutions and networks, and understand how things work there. However, education has been the primary barrier to recruiting local staff to management positions. Local recruitment is at the mercy of the local education system, which in some developing countries may or may not provide the level of technical knowledge and skills that a firm may require, or the level of English proficiency needed to integrate into the firm and coordinate with global teams. Many firms from the developed world circumvent problems with the local education system by concentrating their recruitment in their own universities. They specifically target (i) naturalized citizens i.e. those whose families migrated from the BOP country and (ii) foreign nationals i.e. international students. Firms are assured of their English language proficiency and technical competence, and candidates are more likely to have local language proficiency, cultural and personal ties, and are also more likely to accept relocation to the BOP. Developing a Social Entrepreneur Corps If we believe that social entrepreneurs have the unique ability to catalyze social change in sustainable ways, then we may wish to consider how to encourage the development of social entrepreneurs. The experience of multinational firms in recruiting talent to the BOP can be instructive. We want to grow local social entrepreneurs, who know how to help their own communities best, and we also want to encourage social entrepreneurs from around the world to bring their experience and expertise to the places that need it most. Local Leadership The local recruitment strategy, for example, is extremely context-dependent. Consider if the class structure of a society is strongly related to which local university a local candidate attends, or whether he or she can study abroad. It may be that only those in the ruling class can have such opportunities. While these individuals are more likely to be in a capacity to effect change, they also have greater incentives to maintain the status quo. Those of us in the developed world should recognize the ways in which our own universities may perpetuate class structures abroad. It should be obvious to anyone in a top US university that the vast majority of foreign students come from backgrounds of privilege. If they did not, they surely would not be able to afford college tuition, or the private schooling that got them Page 3 of 5
Rethinking of Corporate Social Responsibility (CSR) and Social Entrepreneurship
Pin-Quan Ng
admitted in the first place. Those admitted on merit scholarships number only a tiny few. We should make that number much higher. However, we must also remember that firms recruit from foreign students for expatriation (as opposed to recruiting for their home staff) mainly to circumvent the inadequacies of local education systems. Our approach must therefore also be to improve local educational conditions to provide opportunities for a broader segment of society and not just the ruling class. Global Support To do so, we must better understand the nature of the education system in the BOP, and the best way is to experience it firsthand. We should therefore focus on university students and young adults. Without established careers or parental obligations, they face lower opportunity costs to spending time acquiring languages and gaining field experience, through their university coursework, study abroad programs, and internships. For some, traveling to faraway, unconventional places can even be an attraction. Foreign language curricula and subsidies play an important role here. Many universities provide opportunities to learn a second language, but language acquisition is best done through immersion. However, the financial crisis has dramatically cut the amount of grant funding and subsidies available for study abroad, at a time when we need more multilingual young leaders, not less. Furthermore, in the USA, the vast majority of Americans studying foreign languages in university focus on Spanish, French, German, and Italian, but only a tiny percentage study Arabic, Farsi, Russian, Chinese, Korean, and many other BOP languages. Most undergraduates who study abroad choose other English-speaking countries, or at least developed ones. This is understandable. When I told my classmates I was traveling to North Korea, they couldn’t understand why I would ever go there. Some of them belong to families that barely escaped the place. While I pursued fieldwork in the rural north and the southern manufacturing zones, most of my classmates who came to China for the summer chose to remain in the expatriate communities and university campuses of Beijing, Shanghai, and Hong Kong, i.e. the top of the pyramid, not the base. This is the challenge that the social entrepreneur community must address if it wishes to grow. Conclusion: Making Social Entrepreneurship Cool Successfully developing local leadership and encouraging global support needs intangible ‘soft power’ as much as ‘hard’ incentives. While we may not always be able to create financial incentives, such as new scholarships, language programs or exchanges, we can easily create the social incentives and networks to encourage students to explore social entrepreneurship. By celebrating the experiences of young social entrepreneurs, and making them just as prestigious and valued as doctors, lawyers, investment bankers and management consultants, we encourage a new generation of students to take them on as role models.
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Global Initiatives Symposium in Taiwan 2009
The Global Initiatives Symposium is a perfect example of how to catalyze social networks. The conference brings students from the BOP and the developed world together, to discuss the challenges and opportunities of our global economic transition, with a subsidy that ensures fairer representation. The friendships made here could both develop local BOP leadership and attract developed-world interest in social entrepreneurship. “Masisseo,� she said, with a smile that haunts me as I left North Korea, and the moment I crossed the Chinese border into Dandong, I bought a Mengniu popsicle. It tasted like freedom. If I can share that taste, and all those experiences, and tell others what the world of the BOP is like, perhaps they will want to see it for themselves. Perhaps they will hear the call of the social entrepreneur.
Works Cited Prahalad, C.K. 2006. The Fortune at the Bottom of the Pyramid. Wharton School Publishing.
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Rethinking of Corporate Social Responsibility (CSR) and Social Entrepreneurship
Pin-Quan Ng
Global Initiatives Symposium in Taiwan 2009