Deshpande on Entrepreneurship-Part 25: Why capacity building is important in the social impact sector?

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Desh Deshpande

By Desh Deshpande

(Editor’s note: This is Part-25 of the weekly video column with philanthropist and serial entrepreneur Desh Deshpande, with excerpts from his book “On Entrepreneurship and Impact.” This column appears every Monday.)

Desh Deshpande

Capacity building is a necessary condition for you to succeed in the social impact sector. Unfortunately, this is not well understood and probably one of the main reasons for failure in this sector.

In for-profit entrepreneurship, the story is straightforward.

If you are serving people with disposable income. People will buy your product if you address a need that hasn’t been fulfilled. The distribution channels are well developed.  If it is a consumer product you can use channels like Amazon or Walmart to distribute the product. If you develop a product that meets a need, you have a winner in the making.

In the social impact sector, it is a different story.

You are trying to help those who are less fortunate, people who don’t have disposable income. In fact, they may not be actively looking to spend their money on a solution.

For example, let’s look at access to clean water.

There are enough benefits to using clean water that people should be motivated to buy it if you made it available for a few pennies a day. However, even a few pennies are precious for those who live on a few dollars a day.   Convincing people and getting them to buy into the value of clean water is not an easy task.

You need an economic model that provides an entrepreneur the opportunity to build a profitable business by convincing people of the benefits of clean drinking water and then selling it to them. To do so you need to both educate the entrepreneur about the opportunity as well as provide them with the tools to be successful. Even though their customers might be relatively poor, the entrepreneur can support him or herself by addressing the needs of several hundreds of small consumers. As the entrepreneur is local, their own needs are typically modest and they might still make two or three times the income of their customers.

Ideas with positive impact can easily scale to reach millions by building such capacity in the field and by educating potential entrepreneurs,.

What happens in most instances instead is that people come up with good solutions, but have no easy way to get it out to the people who need it. The missing link in the equation is the capacity-building infrastructure and the necessary new business models that will create a class of local entrepreneur to serve the people and disseminate the solution.

This takes time.

It takes time as you need to grow this capacity from within the community you are trying to serve. This involves identifying people who have the potential and hunger, but lack the education and support to grow as entrepreneurs.

Without this locally-grown capacity that acts as the distribution channel, the burden is on the entrepreneur or the organization to take their solution to the potential beneficiaries or customers at the bottom of the pyramid. It’s nearly impossible to create a scalable, sustainable business model with this approach.

If your quest is to create long-term positive change, building capacity at the grassroots level should be your first step.

(About Desh Deshpande: During his entrepreneurial career spanning over three decades, Gururaj “Desh” Deshpande has built several companies. He has injected his passion for innovation and entrepreneurship into a number of social impact initiatives in India, the USA and Canada. He has been recognized for his entrepreneurial accomplishments by many institutions including being named co-chair of President Obama’s National Advisory Council on Innovation and Entrepreneurship. He currently also serves as a Life Member of the MIT corporation. He resides in Boston together with his wife, Jaishree.)

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