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Social Entrepreneurship: The Way to Public Sector Efficiency May Be Through Private Sector Insights

02/06/2015 04:21 pm ET | Updated Apr 07, 2015

In a recent piece in Forbes, "Four Things We Can Learn From Social Entrepreneurs," Antonino Vaccaro draws distinctions between traditional, "for-profit" entrepreneurs and social entrepreneurs. One distinction, Vaccaro believes, is that social entrepreneurs approach markets as the means not the goal. "When starting a social venture, entrepreneurs see the problem first and then use the markets as a way to solve it, and not the other way around," he writes.

I agree. And I will extend the point further. Because there is an increasing focus on achieving scale, it is worth recognizing that for services such as health care and education, markets are the only viable alternative to the public sector. The NGO sector is another option, but it is seldom a viable pathway to scale - for example, the 3.3 million NGOs in India provide less than 1% of the country's health care. If we are to achieve scale, we need cost-efficient solutions. The private sector is a testing ground for such solutions - weeding out inefficient and unproductive strategies - and developing entrepreneur-driven, market-based operations that provide insights into strategies for achieving scale elsewhere.

The basic principles for efficiently implementing scaled operations are quite similar in both the private and public sectors. But in practice, the public sector is currently no match for the efficiency of the private sector, despite subsidies in the form of taxpayers' money flowing back to the public sector. One crucial difference is that the public sector rarely uses metrics for day-to-day implementation, and that one difference, when combined with its monopoly structure, often explains why it functions below par.

Markets, through their links with the monetary system, generate reliable evidence of various process outputs on a continuous, ongoing and even real-time basis. Having access to such information is valuable for quick management interventions in any large system with so many moving parts. In fact, an important reason why the private sector works more efficiently than the public sector in almost all parts of the world is this availability of quick metrics generated at arm's length. Solutions can be found before the problems exact any serious damage.

The public sector suffers from a serious lack of any similar feedback mechanism. There are no quick metrics available that will assist in implementation. Or worse, the metrics that exist are dubious because the person providing the care is also charged with developing the metrics -- this conflict of interest renders the evidence unreliable. Academic advances in the metrics field have led to various international organizations helping the public sector, with the focus on evaluation of impact--often spread of years and done on a sample basis. These evaluations are important, but they do little to help develop systems of quick metrics that provide feedback for each constituent component of a program.

Last year, I was in Cebu, Philippines for the Global Conference on Social Franchising for Health. It is one of few spaces where those of us that run health-related social franchises can challenge each other to think a little differently. I was struck by the general feeling that entrepreneurship needs to confine itself to opportunities outside the public sector.

In the underserved communities where my organization, World Health Partners, works, it often falls on local governments to provide basic health care to the poorest of the poor. This wasn't always the job of government. But in the last century, the global community has largely agreed that healthcare is a basic human right, and therefore, offering it is a social good and a public service.

Yet, governments in low- and middle-income countries are stretched. The public health systems are understaffed and underfunded. Quality and accessibility of care are major concerns. And though there has been a recent push to commit more resources to the public health sector, some basic management mechanisms remain missing, leading to major barriers to improving impact at the community level.

This is where we come in.

WHP began by engaging with private entrepreneurs and developing technologies that are appropriate and cost-efficient for the village-level health system. Cost-consciousness and utility are major hallmarks of private entrepreneurship and WHP had to work within those parameters to make its services attractive to the potential entrepreneurs whom we hoped to enroll in our programs.

After years of work in the field, now that our model for provider engagement and our technologies have been stress-tested in some of the poorest parts of India, WHP is moving in the direction where the collective expertise gained from the entrepreneurial model is being made available to the public sector. This will complete WHP's strategy of a total market approach, a term bandied about for a decade and more, but limited so far in its implementation.

There are many other great examples of this kind of work. In Papua New Guinea and in South Africa, there are organizations working hand-in-hand with regional public health authorities to offer healthcare that the public health system alone cannot provide. In return, the public health system is contributing resources to support these services.

Some may ask, why not focus entirely on supporting expansion of services in the public health sector?

In some well-resourced countries, universal healthcare through the public sector has worked well. But in resource-poor countries, quality of care and infrastructure to deliver high-quality care remains a challenge. If we want to find health care solutions now, not in 10 or 20 years, then we must focus on solutions for the total health market. This means being willing to apply private sector insights to public sector initiatives and investing in all sectors that are capable of delivering cost-efficient healthcare services.