The viability of social and commercial entrepreneurships

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Commercial and social entrepreneurships apply creative and innovative activities to achieve and sustain strategic goals. The product of individuals or organisations such ventures may operate locally or globally. The viability of each type of entrepreneurship may however, vary in its importance to the core business. This paper aims to present relevant theories to compare and contrast the issue of viability in a social and economic sense for both social and commercial entrepreneurship. The strategic aims of the Grameen Bank of Bangladesh will be compared with those of the Commonwealth Bank of Australia to illustrate the similarities and differences of a commercial and social entrepreneurship. By examining this aspect of responsible leadership, the reader will come to appreciate the degree of importance of viability to the entrepreneurship's strategic success.

Commercial entrepreneurship integrates creativity, innovation and continued profitability to maximise gains and stakeholder's wealth. From a behavioural theory perspective, commercial entrepreneurship is exhibited when individuals or organisations: embrace risk to facilitate change; create added value through sensitive creative thinking; apply new technological concepts; and maintain a degree of competitive advantage (Douglas 2004; Buchholz & Rosenthal 2005). Similarly, social entrepreneurships embrace risks, while striving to utilise creative activity and innovation to maximise the use of resources for sustainable change (Martin & Osberg 2007). In contrast however, the core purpose of a social entrepreneurship is to ultimately drive and create enduring social value rather than maximising profits (Austin, Stevenson & Wei-Skillern 2006; Martin & Osberg 2007). Hence, both forms of entrepreneurship take risks to implement change, embrace creativity and innovation, and strive to succeed. The difference is that one form strives for wealth maximisation, the other to further social advancement.

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Entrepreneurships engage responsible leadership to deliver strategic targets. Responsible leadership is the continuous process of influencing a group of people to make a positive contribution towards achieving set objectives, using acceptable means (Tesone & Pizam 2009; Doh & Stumpf 2005; Robbins, Millett & Waters-Marsh 204). From a behavioural theory viewpoint, responsible leaders continually engage with their followers to motivate productive and ethical outcomes within the operating environment. This approach to leadership builds on an earlier defined model by Rosenthal (cited in Droege 2005) of Higher-Order Strategy (HOS) where, through a sequence of conscious perceptions and thought processes, solutions are created, evaluated, corrected and implemented (Carruthers 2007; Gennaro 1996; Rosenthal 2004). Appendix 1 presents the various HOS leadership categories according to Tesone and Pizam (2009). Rosenthal (cited in Droege 2005) contends that internal or external intervention and experiences can increase self-awareness and develop a higher level of leadership style. The progression begins at a lower-level survival platform where the leader relies on basic survival characteristics and moves a transactional style and ultimately a transformation style where the social wellness of the followers is paramount. A parallel can be drawn between progressions through HOS with the increase in importance of the Stakeholder Theory. Responsible leadership however has evolved from a more ethical viewpoint. Rather than leaders pursuing the easiest, least costly and greatest wealth creating solution, responsible leadership aims for ethical and sustainable decisions and strategies.

Commercial entrepreneurships seek to utilise resources effectively in answering the needs of consumers, while maximising the wealth of its owners. According to Smith (1986), there is an invisible hand which guides a business to produce the most profitable product in an efficient market. To achieve a competitive advantage, Porter (1985) suggests adopting a strategy to maximise the value of resources, including labour and finance. In answering the call of the consumer, successful business leaders use creative and innovative strategies and change- management to seek out the most viable opportunities (Rose, Gordon & Hattingh 2010). Thus, resources are utilised efficiently to reap the greatest financial rewards.

In contrast, a social entrepreneurship will generate a product to meet humanitarian needs and the economic viability may be an incidental consequence of the activity. Social entrepreneurship as a theory therefore contradicts the premise proposed by Smith and functions with a mission to address the social problem rather than to make profits for owners and investors (Austin, Stevenson & Wei-Skillern 2006). For example, in Bangladesh, the Grameen Bank was established in 1983 to provide small, long-term loans to traditionally high-risk customers (Grameen Bank 2010). The core purpose of the Grameen Bank is to reduce poverty in Bangladesh by financing small loans to otherwise high risk customers, such as those in poverty, women, and beggars (Grameen Bank 2010). This strategy directly contrasts with that of an Australian leading bank, the Commonwealth Bank of Australia (CBA).

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Despite the recent global financial crisis, the CBA has implemented innovative procedures and adopted creative policies to continue in a profitable manner. In its 2010 annual report, the CBA announced a $5 664 million net profit after tax, a 20% increase on its previous year (CBA 2010). During this period, the bank had '(u)ndertaken various risk optimisation strategies … (to reduce) risk exposure levels' (CBA 2010, p. 14). Such strategies aim to strengthen the banks position and deliver greater future profits. To remain viable, it is in the Bank's interests to continue delivering profits to shareholders, however, consideration is also given to the value of retaining its customer base. Therefore, CBA must also consider the social value of its customers together with other stakeholders, when considering economic viability. According to the Stakeholder Theory put forward by Freeman (cited in Elias & Cavana n.d.), stakeholders of a business each have an impact and a degree of power contributing to that business' success. In applying this theory to the CBA as a commercial entrepreneurship, the bank would cease to function if customers were exploited to a point of financial exhaustion. The CBA recognises the social value of its clients and the products it provides them in light of other stakeholders' needs. It therefore incorporates a degree of consideration for the humanitarian aspect when assessing viability of operations. This would manifest itself in the bank's policies for loan approvals and dealing with defaults. The CBA have recognised that refinements to their risk management framework will widen their customer base and reduce adverse risk while returning adequate rewards and growth (CBA 2010).

Viability then is considered a social and economic factor. The viability of operations for any entrepreneurship must meet its core concepts both in an economic and social way. It is in this way that responsible leadership has developed. The degree to which these aspects are weighted however will differ. Appendix 2 illustrates the author's evaluation of the importance of economic and social viability between a commercial and social entrepreneurship. The author contends that commercial entrepreneurships requires 80% economic viability, while social entrepreneurships have a 20% weighting Socially, commercial entrepreneurships bear the inverse with a 20% weighting of importance, compared to an 80% weighting for a social entrepreneurship.

In conclusion, commercial and social entrepreneurship has been compared illustrating their similarities and differences. Comparison was made between the Grameen Bank of Bangladesh with the Commonwealth Bank of Australia. Both banks fund loans. The difference is in their strategic targets. While one strives to maximise investor's wealth and maintain a sustainable business, the other endeavours to break the poverty cycle of a country. In each example, the entrepreneurships employ innovative and creative methods to remain sustainable by adopting a responsible leadership approach to maintain varying degrees of viability. It is through responsible leadership that commercial and social entrepreneurships balance the maximisation of shareholders' wealth with the satisfaction of and responsibility to their customers needs while remaining viable.