Difference Between Traditional And Social Entrepreneurship Approach For Designing

Analysis

Discuss about the The Social Entrepreneur for Designing.

Entrepreneurship has traditionally been defined as the process of designing, launching and running a new business, which typically begins as a small business, such as a startup company, offering a product, process or service for sale or hire, and the people who do so are called ‘entrepreneurs’. Typically there are two approached of entrepreneurship. The first approach is the traditional approach of entrepreneurship where the business is done for profitability. The second approach of entrepreneurship is social entrepreneurship. With the approach of social entrepreneurship the objective is to deliver benefits to society along with profit maximization and revenue. Shirkova (2009) concluded a model with three primary stages to the life-cycle of companies which were started by their founding entrepreneurs: the start-up stage characterized as high centralization and no formalization; the growth stage characterized by the implementation of hierarchy levels and comprising low levels of formalization; and the formalization stage comprising high formalization and low centralization levels. All these three stages are observed in traditional and social approach of entrepreneurship. 

The objective of this paper is to discuss the difference between the traditional and social entrepreneurship approach. This paper would focus on the launch of new product of a smartphone. The paper would discuss the manufacturing and supply of smartphone. For simplicity, it is assumed that the product would be introduced in Australia only and the product would be targeted to middle class consumers. The concept of social entrepreneurship is not a very old concept. Though, there are lots of cases of social entrepreneurship in the history. However, in recent times social entrepreneurship is seen an integral part of mainline business. It can be said that the businesses and corporations have started to explore the option of social entrepreneurship as they expand in domestic and international boundaries (Santos, 2012).

Certain qualities define the entrepreneur as a subset of business owner. Theorists refer to entrepreneurs alternately as individuals who initiate change and individuals who exploit in-progress change by identifying and seizing opportunities to alter the status quo, despite the risks of early adoption. Social entrepreneurs are a type of business entrepreneur rather than a separate category. Whereas typical entrepreneurs improve commercial markets, social entrepreneurs improve social conditions. Several other factors further differentiate social entrepreneurs (Grimes & McMullen, 2013).

The majority of managers working for companies with social entrepreneurship outlook stage described their challenges as the organization’s market reputation and staffing (Shirkova, 2009). In the growth stage the majority of managers described stability and market reputation as their major challenges (Shirkova, 2009). According to Shirkova (2009) in the formalization stage the majority of managers defined stability and market uniqueness as the organization’s challenges. While the three stages resemble the entrepreneurial stage, collectivity stage, and the formalization stage as defined by Daft (2015) in Russian companies the delegation of management control remained with the founding entrepreneurs instead of hired managers (Shirkova, 2009). 

There are four defining stages in the life cycle of an organization. In the entrepreneurial stage the growth of the product or service is based on the creativity of the founder (Daft, 2015).  A signal an organization is shifting from the entrepreneurial stage to the next stage, which is the collectivity stage, is the need for leadership, which can adjust the structure of the organization (Daft, 2015). Carson and Cumber (2013) recommend a succession plan once the organization survives the entrepreneurial stage. In the collectivity stage the growth employees work toward the organization’s mission; however, when a shift occurs where the informal systems are no longer sustainable and the organization needs structured processes the organization is entering the formalization stage. According to Daft (2015) the formalization stage “involves the installation and use of rules, procedures, and control systems” and top management is “concerned with issues such as strategy and planning” (p. 352).  A sign that the formalization stage is transpiring into the next phase, which is the elaboration stage, is triggered when the red tape crisis of the formalization stage needs to be revamped through a sense of collaboration and task forces (Daft, 2015). According to Carson & Cumber (2013) an organization in the elaboration stage needs reinvention or reinvigoration or else the organization will decline.

Supply (Procurement) Side of the Business

The comparison between the traditional and social entrepreneurship approach for the manufacturing and supply of smart phone in Australia can be discussed as:

The supply function is a crucial function to procure the necessary raw materials. Both the models of traditional and social entrepreneurship model would focus to achieve the best quality supplies and raw materials at minimum possible cost (Reidenbach & Robin, 2013). The differences lie in the approach of procurement. The traditional entrepreneurship would focus on profit maximization. Therefore, he or she can focus to procure the goods from large suppliers. On the other hand, the social entrepreneurship may want to procure the goods from the local suppliers so that the benefit is achieved for all the stakeholders (Lepoutre & Justo, 2013).

As Daft (2015) noted, in the first stage of supply or procurement, people management is informal for social entrepreneurship. However, this is not the case with traditional form of entrepreneurship. There is a high degree of buy-in to the organization’s purpose, and people are willing to make sacrifices and work long hours so that the organization can succeed. As organizations mature and the company become more formalized and hierarchical, people management changes profoundly.  As the organization grew, the traditional entrepreneurship perspective shifts from an informal decision-making process to one that relied heavily on formal policies and procedures.  One reason for such a change is because as the organization grows, management simply can’t continue to make decisions on a case-by-case basis.  It would take too much time.  Another reason is that organizations need to ensure they are treating everyone fairly and consistently (Dion, 2012). Formalized policies and procedures become necessary protect both the organization and its employees. 

The traditional entrepreneurs would want to use the cheap labor so that its cost of operations could be minimized. On the other hand, the social entrepreneurs may look for the avenues where it can generate the employment opportunities for maximum people (Knutsen & Brock, 2014). Overall, the utilization of strategic planning techniques has brought great benefits to social entrepreneurs. The manufacturing process of social entrepreneurs could be similar to the manufacturing process of a non-profit organization. An NPO has a different type of life cycle versus a for-profit.  In an NPO, the first stage is the idea stage. Under this stage, there is no organization.  The visionary contributes the resources necessary but at this point it is simply a vision or passion that can incubate for months or even years (Male, n.d.). During the second stage of the startup phase, a small group of people helps to solve the issue or develop a program. The people are focused on developing a mission. Many groups do not pass this phase. They may stay at the level of neighborhood watch groups, neighborhood associations, or cultural art groups etc. (Male).  The third phase is the growth phase. This is when people understand that money must be incorporated because the expectations exceed the resources of people, time, talent etc. (Male).  The fourth phase is the governance/maturity phase.  Here there must be a development of staff, board meetings, and more money is needed (.  The last stage is the institutional phase. During this phase, the CEO becomes less involved and operates as more of a manager in a decentralized system while the board focuses on the mission, public policy, etc. (Male).

Manufacturing Side of the Business

In the manufacturing side of the business, the focus of social entrepreneurship is on team and the focus on traditional form of entrepreneurship could be on individual. The manufacturing side of the business in traditional form of entrepreneurship would have a lot of emphasis on machine and automation (Miller & Grimes, 2012). The social entrepreneurship may also focus on optimization. However, social entrepreneurship may focus more on sustainability and employment opportunities.

The key differences between the social and the traditional form of entrepreneurship can highlighted as below:

Social	Traditional	Combined (Both)
Seek to solve the business problem through social outlook	Seek a financial return on the investment	Risk the capital to get positive returns on investment
In most of the cases, the social entrepreneurship may not have a clear of define exit strategy	In most of the cases, the traditional entrepreneurship would have a clear and define exit strategy	The common thing is the objective of growth and development
The capital markets are not very well developed for social entrepreneurs	The capital markets are mostly well developed for social entrepreneurs	The capital markets are defined by fast moving, nimble and agile strategies

The difference between the traditional and social entrepreneurship for different parameters can be highlighted as:

Parameter	Social	Traditional
Profitability	The social entrepreneurship has an underlying objective of profitability but it is not the only thing. For example, the social entrepreneurship approach for smartphone manufacturing would focus to increase the reach and penetration of smartphone in the country.	The focus on profitability is relatively high in traditional approach of entrepreneurship as compared to social entrepreneurship. For example, the traditional approach of smartphone manufacturing would focus on maximum profitability
Sustainability	The focus on sustainable business practices is high	There is focus on sustainability. However, the prime goal is profit maximization, it could be followed by sustainability
Reach	The focus is to increase the reach of smartphones in the Australian region	The focus is not on maximum reach but on maximum profitability
Long term orientation/ vision	There could be absence of long term orientation or vision	The business would have a clear understanding of long term vision and objectives.

Conclusion

Much like biological organisms, organizations evolve and progress through various stages of existence from birth to death.  The four major phases of an organization’s life span include the entrepreneurial, collectivity, formalization, and the elaboration stages (Daft, 2015).  As organizations progress through the various life cycle stages, the organization’s characteristics evolve.  In infancy or the entrepreneurial stage, organizations are typically survival oriented and production is typically limited to single focus projects (Su, Baird, & Schoch, 2015).  As organizations progress towards “middle-age” structures become more formalized with highly defined labor roles.  With maturation, organizations typically expand products and services and benefit from increased innovation through personnel engagement (Gray & Tam, 2016).  Finally, in the elaboration stage organizational leaders seek to create team initiatives to streamline bureaucratic constraints that emerged during the maturation process. The above paper discusses the manufacturing and the supply for the development of a smartphone in Australia.

The entrepreneurs can also take a hybrid approach wherein they stock to the benefits of both the approaches of traditional entrepreneurs and social entrepreneurs. In the hybrid model that removes the over bureaucratized management to a small hands-off approach in regards to departments within the company itself in an effort to help return it to its entrepreneurial roots. This method can either harm the company or perhaps plummet it further into chaos and crisis.  It is an effort to help department’s turnover products faster.  In the smartphone industry, one of the most single important characteristics to competitiveness is the value of time (Kimble and Bourdon, 2013). This move can either make or break the company. 

In the case of social entrepreneurship, an internal system must be devised that outlines exactly what will be used to monitor the sequence of growth or demise associated with the development of that organization.  Leadership development must also be a part of the assessment process to improve organizational efficiency and effectiveness. 

References

Daft, R. L. (2015). Organization theory and design (12th ed.) Mason, OH: South-Western, Cengage Learning.

Dion, M., 2012. Are ethical theories relevant for ethical leadership?.Leadership & Organization Development Journal, 33(1), pp.4-24.

Grimes, M.G., McMullen, J.S., Vogus, T.J. and Miller, T.L., 2013. Studying the origins of social entrepreneurship: compassion and the role of embedded agency. Academy of management review, 38(3), pp.460-463.

Kimble, C., & Bourdon, I. (2013). The Link Among Information Technology, Business Models, and Strategic Breakthroughs: Examples from Amazon, Dell, and eBay. Global Business & Organizational Excellence, 33(1), 58-68.

Knutsen, W., & Brock, K. (2014). Introductory essay: From a closed system to an open system: A parallel critical review of the intellectual trajectories of publicness and nonprofitness. Voluntas: International Journal Of Voluntary & Nonprofit Organizations, 25(5), 1113-1131

Lepoutre, J., Justo, R., Terjesen, S. and Bosma, N., 2013. Designing a global standardized methodology for measuring social entrepreneurship activity: the Global Entrepreneurship Monitor social entrepreneurship study. Small Business Economics, 40(3), pp.693-714.

Male, R (n.d.) Life Cycles of Nonprofit and Nongovernmental Organizations. Retrieved from https://www.omniportal.org/ECCToolkit/Resource%20Development%20Richard%20Male/Life%20Cycle%20of%20Nonprofit%20Organization%2010.09.pdf on December 11, 2016

Miller, T.L., Grimes, M.G., McMullen, J.S. and Vogus, T.J., 2012. Venturing for others with heart and head: How compassion encourages social entrepreneurship. Academy of management review, 37(4), pp.616-640.

Reidenbach, R.E. and Robin, D.P., 2013. Some Initial Steps Toward Improving the Measurement of Ethical Evaluations of Marketing Activities. InCitation Classics from the Journal of Business Ethics (pp. 315-328). Springer Netherlands.

Santos, F.M., 2012. A positive theory of social entrepreneurship. Journal of business ethics, 111(3), pp.335-351.

Shirkova, G. (2009). Organisational life-cycle. The characteristics of development stages in Russian companies created from scratch. Journal For East European Management Studies, 14(1), 65-85.