Category Archives: Social Business Models

For posts relating to the topic of business model designs made for social impact, some of which pertain to the Business Model Design for Social Impact course I took at Northeastern University in the Spring of 2013.

Business Model Factors for Social Venture Growth

This post is the fifth and final in a series I will be contributing for my Business Model Designs for Social Impact course at Northeastern University. This is the course’s first time being offered and it is taught by Professor Gordon K. Admodza. In this series, I will be publishing my findings on different social innovators and the business models that are allowing their inventions to reach the people most in need. As a class, we define social innovations as sustainable, pro-poor solutions. You can read the other articles in this series here.

The “hockey stick” model for social venture revenue and impact.

As our Business Model Design for Social Impact course comes to an end, we’ve closed off the semester looking into the different ways that a social venture can scale its enterprise and expand its impact to new peoples and places. Scaling (aka expanding) should be seen as the ultimate goal of any social entrepreneur or enterprise that wants to have a meaningful impact on a particular issue. If the product is innovative enough, the company strong enough, or the impact profound enough, a venture is naturally deemed fit to scale. The business model of the venture then must have the necessary components to allow for scaling to happen.

Factors designed in a business plan, such as the structure of the organization, impact measurement procedures, and sources of funding all enable a venture to scale. In the business model canvas pictured and discussed in an earlier blog, these particular factors are covered by the building blocks of the left-hand side: key activities, key partners, and key resources. Impact measurement, for example, is a key activity in the non-profit sector as wealthy donors such as the Bill & Melinda Gates Foundation require time and money to be invested in monitoring the efficacy of the programs they support. Similarly, a venture’s organizational structure acts both as a key activity and a key resource. To be a pure and world-renowned non-profit, 501(c)(3) organization, a group must file specific tax forms and provide internal reports to be audited on third-party sites such as Charity Navigator. Besides these key activities that are required of a particular organizational structure, it also acts as a key resource. Possessing a 501(c)(3) legal structure, for example, eliminates taxes and opens the doors to various forms of funding.

Hence, a business model depends on factors like these. Impact investors, a growing segment within the traditional investment markets, actively search for and select organizations to fund that have the potential to scale their enterprise to new locations and greater ambitions. However, the right side of the business model canvas also yields important factors for scaling. For example, factors for adoption of a product (discussed in the first half of the course), which include price, accessibility, and customization, are features of the customer relationships, channels, and revenue streams blocks. In a venture’s business model, steps must be taken to ensure that an offering has these factors of adoption in order to reach the poorest of the poor in the most rural of places.

Human Centered Design

This post is the fourth in a series I will be contributing for my Business Model Designs for Social Impact course at Northeastern University. This is the course’s first time being offered and it is taught by Professor Gordon K. Admodza. In this series, I will be publishing my findings on different social innovators and the business models that are allowing their inventions to reach the people most in need. As a class, we define social innovations as sustainable, pro-poor solutions. You can read the other articles in this series here.

The Human Centered Design (HCD) toolkit, developed by IDEO and funded by the International Development Enterprise (IDE) and the Bill & Melinda Gates Foundation helps give direction to aspiring social entrepreneurs. Readers are taught different strategies and best practices to effectively hear, create and deliver their social innovations.

In my Business Model Designs for Social Impact course at Northeastern University, we are using the HCD toolkit and the hear-create-deliver process to guide us in our consulting project for the semester: aiding a clean water filtration and sanitation project based in Western Africa. The organization is in need of a short-term cash infusion to help expand their production facilities and subsidize the cost of the life-saving water filters they sell to local villagers.

As a team, particular points of the HCD toolkit have been particularly helpful. Step 2 of the Hear section tells us to “recognize existing knowledge” or to think back to our individual experiences to help brainstorm possible solutions. With Project Plus One (PP1), we try to raise funds to support a health clinic in Timor-Leste, and do so by applying for specific grants or seeking partnerships with existing NGOs. Just thinking about the existing knowledge I had in this sector by working with PP1 helped come up with two different “customer segments” to raise money for the water project: grants/foundations and NGO partnerships.

Within the Create phase of the HCD process, we are learning how to use analysis frameworks to design solutions. With our project, we’ve identified five different customer segments for fund-raising (government agencies, NGO partnerships, foundations and grants, individuals and families, and corporate sponsors) and now must decide which of these is the best option for the clean water organization to pursue for funding. So many qualitative and quantitative factors come into consideration here. Here we use the HCD’s two-by-two matrix framework to help consider all points. We can plot our five customer segments across two different axis: the potential revenue available within the segment and the expected costs in order to tap into this segment (as even fundraising costs money). When the data is gathered and this two-by-two framework is complete, we can visualize how the different segments compare against each other and go move forward including qualitative factors into our decision.

Similarities Between Social Enterprises and For-Profits

This post is the third in a series I will be contributing for my Business Model Designs for Social Impact course at Northeastern University. This is the course’s first time being offered and it is taught by Professor Gordon K. Admodza. In this series, I will be publishing my findings on different social innovators and the business models that are allowing their inventions to reach the people most in need. As a class, we define social innovations as sustainable, pro-poor solutions. You can read the other articles in this series here.

The Business Model Canvas, designed by Alexander Osterwalder, helps businesses and even social enterprises frame their business models. Click the image to zoom in.

Social enterprises are quickly definable as businesses with social good in mind. However, unlike most 501(c)3 not-for-profit companies, social enterprises operate with a business mindset. The Aravind Eye Care System and the Grameen Bank (I touched upon them in an earlier post), are examples of such enterprises — they work to support the poor but also do so while generating incredible revenues and profits. 

In order to become a highly effective social enterprise, the company as a whole must adopt a business mindset. Social enterprises, like any typical for-profit business, regularly and thoroughly study their cost structures and revenue streams (pictured above in the bottom portion of Alexander Osterwalder’s Business Model Canvas). Breaking even is, after all, what keeps a business financially sustainable and for both for-profits and social enterprises, effective strategy in these segments is what will make or break you.

For-profits and social enterprises both also work extensively on their key partner relationships. Good partners can provide investment capital and valuable business-to-business services. In the social enterprise space, it is especially important to have the right partners. Oftentimes, you are attempting to penetrate undeveloped markets in foreign countries, and like any corporation, you need to have the right partners to support your understanding of the area so you can design and market your value proposition effectively.

 

 

Social Innovations Require Social Entrepreneurs

This post is the second in a series I will be contributing for my Business Model Designs for Social Impact course at Northeastern University. This is the course’s first time being offered and it is taught by Professor Gordon K. Admodza. In this series, I will be publishing my findings on different social innovators and the business models that are allowing their inventions to reach the people most in need. As a class, we define social innovations as sustainable, pro-poor solutions. You can read the other articles in this series here.

A great product is only as a great as the person behind it. The person is the one who can make sense of the product, who can convince others to want it, and who can find the right distribution channels to fulfill the resulting demand. Consider the iPhone. While its introduction to the market took the cell phone industry by storm, ultimately, it was the person behind it all that enabled its explosive growth. The iPhone was not the first smartphone. It was not the first phone to have WiFi or a touch screen or that could play music. It was simply the first phone to have all these features and be desired by the entire world. This is in great part due to the man behind Apple, Steve Jobs, who through his charisma and unrelenting passion to innovate, convinced the world that the iPhone was “revolutionary”, “beautiful”, and even “amazing zippy”. If it were not for the man always seen in the black turtle neck, where would the iPhone be today?

Steve Jobs made computers cool when they were once only desired by geeks.

The same principle can be seen in the social sector (things designed to do good for society). Behind every successful social innovation has been a great social entrepreneur.

A social innovation is any innovation tailored for social impact. While not necessarily a never-before-seen invention, an innovation can be many things. It can be the careful application of a business model to enable the poor to afford high-quality eye care in India (see Aravind, one of the world’s greatest social enterprises). It can be the idea of loaning small amounts of money (a system called microfinance) to poor people who have no established lines of credit and not requiring collateral (see Grameen Bank, winner of the 2006 Nobel Peace Prize). A social innovation can take any form, but whatever it may be, it is designed with the community in mind and a need to be met.

A social entrepreneur, then, is the driver of the social innovation. In both of the examples mentioned above, a strong-willed, risk-taking person led these companies to the the heights they achieved. The Aravind Eye Hospital was led by a retired ophthalmologist named Dr. Govindappa Venkataswamy (Dr. V), who fought against the pain of his crippling rheumatoid arthritis to personally go on and conduct blindness curing operations to over 100,000 Indians. The Grameen Bank similarly was the manifestation of Muhammad Yunnus’ commitment to lift Bangladeshis out of poverty, something he was all too aware of after growing up in a country severely debilitated by poverty.

Dr. V of the Aravind Eye Hospital lived his life motivated by the compassion to help others. That desire drove his business to affect the lives of millions.

These two entrepreneurs, like any around the world, took risks and identified opportunities for unmet problems. They act as a “marriage broker between what is desirable from an economic point of view and what is possible from a technological point of view” (economist Burton Klein, 1977). But what makes an entrepreneur social, is a deep-rooted motivation to improve society. A social entrepreneur may, for example, sell their high-tech water-filter for the smallest possible profit in order to get their life-saving product out to the highest number of people. The motivation to do so comes from a social entrepreneur’s background or context. In Dr. V or Muhammad Yunnus’s cases, these men came from developing countries and witnessed firsthand the devastation of poverty. The reasons to dedicate their lives to implementing social innovations was first-nature to them. A social entrepreneur could also be a person from a rich country who simply was exposed to a problem and had the compassion to try and fix it.

The pairing of social entrepreneurs and social innovations is necessary in order to impact the greatest number of people. While a technology, vaccine, or food crop might be genius in design, the implementation and distribution of the solution can sometimes actually be the most difficult problem to address, especially in the developing world. Methods and technologies developed at American universities or businesses in isolation of the communities they are meant to serve will find great trouble in reaching their target population. In the developing world, infrastructure, education, and financing are all tremendously lacking. It takes a great social entrepreneur, committed to a project, who understands a community’s way of living and can navigate the difficult terrain of a rural community, to deploy the social innovation and realize its potential for impact.

MDG 7C: Safe Drinking Water

This post is the first in a series I will be contributing for my Business Model Designs for Social Impact course at Northeastern University. This is the course’s first time being offered and it is taught by Professor Gordon K. Admodza. In this series, I will be publishing my findings on different social innovators and the business models that are allowing their inventions to reach the people most in need. As a class, we define social innovations as sustainable, pro-poor solutions.

Throughout the 2013 Spring semester, I will be working as a consultant for a company working in the clean water and sanitation space along with a team of six taking a Business Model Design course at Northeastern University. This company we are supporting, like many others around the world, are pursuing one of the most life-saving social missions in the developing world. It is summarized as goal 7C of the United Nations Millennium Development Goals: “halve, by 2015, the proportion of the population without sustainable access to safe drinking water and basic sanitation.” As millions die each year due to waterborne illnesses, researchers and entrepreneurs around the world are looking for solutions that can save lives. The following is a review of some of the names tirelessly working away at this problem along with a brief summary of the business models that allow their work to be sustainable.

Clean vs. dirty water. Image copyright of Pure Home Water.

Clean vs. dirty water. Image copyright of Pure Home Water.

First off, two of the biggest names in clean water movements are charity: water and water.org. These are primarily aid organizations with heavy celebritysupport. They run some of the most effective philanthropic social media campaigns and by doing so, are able to raise millions of dollars that have been invested in water well and deposit construction projects around the developing world. The construction of such projects are done by partnering organizations based in the communities at stake.

While the above groups are primarily advocacy and fundraising based, other organizations are innovating on the technology front. LifeStraw is a ‘point-of-use’ technology that literally acts as a straw to be used when drinking dirty water right from the source, such as from a river stained by pollution or animal excrement or a water well that lacks proper insulation. LifeStraw’s business model includes receiving funding from major NGOs to distribute their product for free in the developing world, while also marketing their product to people of the first world who hike and camp outdoors.

The second element of this Millennium Development Goal is to provide basic sanitation to the developing world. Because the concept and possibility of sewage systems as we picture them in the first world are currently unfeasible to build in many rural developing communities, it is very normal for human and animal waste to be ‘deposited’ in back yards or by water sources. Flooding, for example, can then lift this waste and mix it in with the same water sources that people are drinking from. Because waste is toxic and filled with bacteria, the international community has recognized that investments must be made into sanitation infrastructure in developing communities. Some of the world’s most famous philanthropists, such as Bill Gates through the Bill and Melinda Gates Foundation, have invested in sanitation projects aimed at tackling this issue. One such project the Gates support is a solar-powered toilet designed by California Institute of Technology professor Michael Hoffman. Solar energy is harnessed to power an electrochemical reactor which breaks down waste and creates fertilizer or energy that is recycled to power the flushing mechanism on the toilet. The toilet uses no outside water source and produces no pollutants. No plans have yet been released regarding this group’s business model.

These are just some of the hundreds of brilliant innovators around the world using technology, business, or systems-based approaches to solve the world’s most pressing demands. Their impact  on lives saved can be seen in the numbers. According to the World Bank, 1.6 billion people gained access to clean drinking water from 1990 to 2006, making Millennium Development Goal #7 one of only two goals (out of eight super-goals) that will have been achieved by the UN-mandated deadline of 2015. The work is not complete, however, as 2.5 billion people still lack basic sanitation and 8%  of the world’s population — eight in one hundred people — will still not have access to clean water by 2015.