The entrepreneurial mind abhors a vacuum. Market failures, unmet demand, even the maddening lure of a blank napkin–all beckon as explicit invitations to invent. What defines an entrepreneur (as well as an entrepreneurial organization) is that relentless problem-solving approach, not the specifics of the problem itself.

We typically associate such ingenuity with the transformation of problems into lucrative, shareholder-enriching companies. But the entrepreneurs you'll meet in this story are responding to a different sort of void. It could be the absence of medical diagnostic labs in the developing world, which is driving one organization to create a portable, disposable lab that fits on a plastic card. Or it's the empty shelves of a Nepalese children's library, which inspired another man to start an education juggernaut, building nearly as many new libraries each week as Starbucks opens latte-slinging storefronts.

These problems might exist outside the traditionally defined realm of business, but the solutions are elegant, creative, and entrepreneurial to their core. They're at the heart of the third annual Social Capitalist Awards, a joint effort by Fast Company and Monitor Group, the global consulting firm, to seek out and evaluate the cream of entrepreneurial organizations in the social sector.

Like their counterparts in the profit-driven world, our 25 winning organizations–winnowed from 278 nominations with the help of 43 experts–are masters at envisioning products and services that don't yet exist, marshaling resources, and crafting solutions that deeply affect their customers. The results these nonprofit organizations deliver hinge on business acumen and often reflect strategies that their for-profit brethren would do well to imitate.

Earl Martin Phalen, the founder of winner BELL (Building Educated Leaders for Life), came face-to-face with his inspiring vacuum while still a student at Harvard Law School. Phalen and several classmates volunteered for a mentoring program in Roxbury, Massachusetts. He remembers telling the kids, most of them from low-income African-American and Latino families, that anything was possible, including going to college. But when he and his law-school buddies sat down to help the students with homework, they realized the kids were years behind academically. "We left there really devastated," he says.

Phalen, an African-American born into the state's foster-care system, decided to do something about it. With a grant of $12,500 and a promise from his adoptive parents to cover his rent if he went broke, he launched BELL, a rigorous after-school and summer program for kindergarten through sixth grade, out of his Boston living room in 1992. Today, the organization serves about 7,000 kids in four cities. Eighty-two percent of them read at grade level or better, despite having started the program typically more than a year behind in reading skills. Phalen's key insight–the need for a tightly knit web of volunteer mentors, parents, tutors, and teachers to support kids–was derived from his own experience. "That drives me," he says. "To know that somebody [supported] me, and all of a sudden, it took my life from going to jail to going to Yale."

Our winners live in that opportunity gap, in the liminal space between jail and Yale. They know that they are always just one investor, or one good idea, or one great execution plan away from making a difference in a world measured in lives changed. (And they measure that difference with a rigor that would make a bean-counter proud.)

What follows is a look at the compelling solutions that organizations like BELL have invented, refined, and scaled to stunning effect, and the impact they produce on the ground for individuals and communities. Ultimately, these Social Capitalists offer a different model for harnessing creativity. They also offer a seed of hope that the world's most intractable social problems will yet find their match in the inexorable drive of the entrepreneur.

Fixing Failed Markets

Some of the world's direst needs for technological invention go unmet because the people who would benefit are poor. PATH, based in Seattle, confronts that market failure by driving low-cost technology for the developing world through partnerships with companies, governments, and other nonprofits. Not only a Social Capitalist winner, PATH was also selected by the Schwab Foundation for Social Entrepreneurship, a partner in our competition, as an Outstanding Social Entrepreneur.

PATH's simple, life-saving solutions, such as clean birthing kits and disposable vaccination syringes that prevent reuse, belie the diligence and expertise required to produce these sorts of solutions routinely. In Zambia, where malaria causes 40% of deaths among children under age 5, PATH is part of a $35 million partnership to broaden use of simple malaria-prevention techniques such as insecticide-treated bed nets. "We think that if we can take the existing malaria-prevention tools to scale, we could reduce deaths by as much as 75% in the next three to five years," says PATH president Christopher Elias.

Then there is the "lab on a card" project, which promises one day to let health workers in poor nations diagnose the cause of a fever or diarrhea within minutes by injecting a few drops of bodily fluid into a credit-card-sized test kit. Originally funded for defense purposes to address bioterrorism, the technology is perfect for diagnosis in the developing world, which lacks labs with multimillion-dollar equipment and where patients typically can't wait overnight (or days) at a clinic for a diagnosis.

The card employs "microfluidics," which miniaturizes the necessary chemical reactions, making the process both faster and possible with tiny sample amounts. PATH has worked with a company called Micronics Inc., the University of Washington in Seattle, and Washington University in St. Louis to adapt the technology to illnesses common in the developing world and to redesign the card so it can withstand harsh storage and transport conditions. Field trials are expected within two years.

Across the globe, Phalen's BELL program is addressing a market failure of a different sort: a lack of consistent educational support for low-income kids in the United States. What makes the program so successful? Many students stick with it from kindergarten through sixth grade, getting seven years of mentoring, academic support, and exposure to positive role models during critical development years. Volunteer mentors, who include doctors, lawyers, and community leaders, reflect students' own cultural backgrounds. The program divides students into clusters of eight to maximize individual attention. And the screening process for teachers and tutors is extremely rigorous.

The results: All 20 of the students in BELL's first class went on to college. And on a personal level, there are stories like that of Robert Berryman II, a third grader at Mattahunt Middle School outside Boston. Robert has mild autism, as well as attention-deficit disorder and delayed speech skills. He entered the program at BELL two years ago–and in the time since, his father, Robert Sr., has noticed drastic changes.

"He's opened up more," Berryman says. "Before, he wouldn't talk. Now, you have to say, 'Robert, wait a minute please.' " Robert, wearing a bright white polo shirt and a grin, still has some speech troubles, but he is eager to answer questions, looking a visitor directly in the eye. "I like doing homework," he says, adding that his favorite school activity is tackling the narrative "story problems" in math class.

Berryman marvels as he watches his son. "Specialists, they say this isn't the same child," he says.

Crafting Elegant Solutions

Heifer International was founded in 1944 by a former relief worker who began sending milk cows overseas to give hungry people devastated by war a source of ongoing sustenance rather than a handout: "Not a cup, but a cow" was the idea. In the more than 60 years since, it has evolved into a powerful, integrated, and rapidly growing development model that promotes ecologically sound agricultural strategy, poverty alleviation, and gender equity in 50 countries by giving families livestock (or the means to buy it) and teaching them how to use that gift to enhance their livelihoods.

Key to Heifer's success is the requirement that each family "pass on the gift" by giving the offspring of an animal to another needy family. On average, that gift is passed on for more than six livestock generations, helping lift entire communities out of poverty, says Tom Peterson, Heifer's vice president of communications and marketing. "We visited a village in Mexico in the mid-1990s where Heifer had done some work a decade earlier," he recalls. "And this community was still passing on the gift. We met the man who had been given the original cow, and by then, he had 17 cows and a small dairy-farm business."

Before any project begins, or any animal or seed is donated, Heifer first requires a proposal from a group that already has organized for change. When floods caused by El Ni–o wiped out crops near the Portoviejo River valley in northwest Ecuador in 1998, Emilio Posligua Salvatierra and others from his community needed aid to rebuild. But the group had to conceive a plan and get the community to support it.

Posligua Salvatierra, then 25, admits that "at first, not everyone wanted to be involved. Many thought we were crazy." You can hardly blame them. The plan included unfamiliar ideas such as the implementation of "geomembranes," a woven mesh designed to prevent land erosion. Plus, as with all new projects, Heifer mandated that aid recipients agree to farm organically and commit to community improvement. Seven years later, though, Posligua Salvatierra's organization has grown to include 250 families and offers literacy programs and health seminars in addition to technical training on farming.

In nearby Cotacachi, Luis Alfredo Haro, 77, and his wife, Rosa, 63, have received Heifer loans and technical training to expand and improve their small farm. They have bought guinea pigs and materials to build a pen. In return they agreed to plant alfalfa to feed the animals, then use their manure for fertilizer. The guinea pigs are sold at the local market. The bargain has worked out well. The increase in crop yield is crucial in helping the Haros feed themselves, their daughter, and her 12 children. Rosa describes Heifer's role in her family's survival succinctly: "We never thought we could get this kind of help," she says. "If it weren't for Heifer, we'd have nothing at all."

Trafficking in books rather than livestock, First Book has built a similarly elegant model that has put more than 35 million children's books into kids' hands since its founding in 1992. Its technology-driven distribution channel uses donated warehouse space and exploits inefficiencies in the publishing industry to deliver cheap or free children's books to more than 15,000 community-based literacy programs, while delivering real value and even profits to its corporate partners.

The organization's most recent innovation is First Book Marketplace, a Web site that connects publishers to the buying power of its network of nonprofits. First Book arranges and purchases whole press runs of children's books, which it then sells at discounted rates–and earns between 20 and 50 cents per book sold. Publishers get both access to new consumers and guaranteed sales up front. "There's profit, the books are nonreturnable, and it gives us market penetration in a market that we hardly touched before," says Susan Katz, president and publisher of HarperCollins Children's Books, who says she anticipates selling several hundred thousand books through Marketplace each year. "What's not to like?"

First Book cofounder and president Kyle Zimmer expects that Marketplace will eventually generate 30% of her organization's total revenue. She's planning expansion on other fronts as well. First Book is reaching out to the rest of the 300,000 literacy groups not already in its network through an online registry in hopes of expanding its customer base. It's all about filling more of that void. "Eighty percent of preschools serving this population of children do not have age-appropriate books," Zimmer says. "It's a whole new pie in terms of consumer market for us to serve and connect with our corporate partners."

Tuning a Social Change Engine

If there is one thing social entrepreneurs know, it is the power of entrepreneurship to unleash human potential. New Community Corp. was founded in Newark, New Jersey, in the wake of the 1967 riots, which killed 23 people, caused $15 million in damages, and left the city's central ward in tatters. Originally focused just on providing low-income housing, New Community has extended its reach to virtually every aspect of life: education, housing development, job training, senior services–it even runs a popular jazz club. Teaming up with local businesses and universities, New Community is the city's ninth-largest private employer.

Homeless with a 4-year-old daughter in 1998, Renee Wilson, 44, initially came into New Community's fold through Harmony House, a transitional program providing shelter, job training, and child care. About three years ago, she became interested in nursing while reading up on diseases when a friend who was HIV-positive became progressively sicker. "That's when my heart really went out," she says. Starting off as a certified nursing assistant for New Community's nursing home, she realized she eventually wanted to become a registered nurse.

Now living in her own apartment with her daughter, Wilson admits that through the nursing program, she has become a different person. "I was a spoiled brat. I grew up in one of the best homes, went to college for two and a half years, but somewhere along the line, I got sideswiped. Thank God I made it back."

ACCION International, a founder of the microfinance movement, helps the poor become entrepreneurs. It has built a network of microlending institutions, many of which it founded. These self-sustaining lenders provide poor clients with loans as small as $100 to start businesses.

In Los Olivos, a suburb north of Lima, Peru, rapid change is under way. On a hot day in October, the sun beats down from a bleached-out sky. Unpaved roads are lined with cement block houses in various stages of construction. People build as they have money to buy supplies, so unfinished buildings stand as testaments to their ambition.

Edelmira Epifania, 55, is a resident of Los Olivos and a customer of Mibanco, a microfinance institution in ACCION's network with more than 135,000 active borrowers. She has worked all her life, often juggling more than one job. But it wasn't always enough to support her four children, and her husband's construction work wasn't always steady.

So she took out her first loan of 300 nuevo soles (less than $100) with Mibanco eight years ago to buy a food cart and supplies. During the day, she'd sell hamburgers and salchipapas (a dish of cut-up hot dogs mixed with potatoes) before heading to a night job at a hospital. Four and a half years later, she had saved enough money to buy a plot of land and start building a drugstore, Las Boticas 24 Horas. Why a drugstore? "There wasn't one around at the time," she says. "I wanted to be the first."

Today, Epifania runs Las Boticas 24 Horas with occasional help from her children. She sleeps in the back room, and there's a bell outside to signal when a customer comes calling, at whatever hour. Most of the money she earns goes into paying for the college education of her children.

Years ago, Epifania's father had his own cart, selling fruits and vegetables off the side of the road, and his income was barely enough to get by, let alone to send his children to college or own a business. Asked what her father, now deceased, would think about her owning a store, she blushes, her eyes dropping low, a wide smile breaking out.

When she looks up again, tears well up as she says, "He'd have been very happy."

Reporting by Alyssa Danigelis, Jena McGregor, Michael A. Prospero, and Jennifer Vilaga.