Lecture 9

lecture 9 is about:

1.Strategy in Social Enterprises

2.Business Models to Tackle Grand

Challenges

1. Legal Format:

   • On one end, there are Private Companies that are designed to distribute profits to their shareholders.

   • On the other end, there are Nonprofit Organizations that reinvest any surplus back into their mission instead of distributing it.

2. Business Model:

   • The Market Model includes organizations that sell goods or services. These can range from "pure" businesses focused solely on profit to B Corps and social enterprises that balance profit with social impact.

   • Non-market models include entities that rely on donations, subsidies, and other forms of funding. These can be "pure" nonprofits focused entirely on social impact or "Yunus" social businesses (named after Muhammad Yunus, the founder of Grameen Bank and a pioneer of social business) that operate with a mission to solve social problems through business methods.

The arrow in the middle shows the continuum from organizations that focus solely on profit to those that focus solely on social impact. B Corps and social enterprises sit in the middle, aiming to achieve both profit and social impact. "CSR" refers to Corporate Social Responsibility, where even profit-focused businesses engage in social good efforts.

A social enterprise is a business primarily focused on achieving a social or environmental mission, rather than just making a profit. These enterprises reinvest most of their profits back into their social objectives, involving community and stakeholder engagement in their operations. They operate independently of the government and can be found in various sectors, addressing issues such as employment, community development, and environmental sustainability. Their goal is to create positive social impact through their business activities.

A Yunus Social Business, named after Nobel Peace Prize laureate Professor Muhammad Yunus, is a unique type of social enterprise that follows specific principles set out by Yunus. These businesses are designed to solve social problems using business methods. Here are the key characteristics:

1. Addressing Social Issues: The primary objective is to address and solve a social problem. This could range from healthcare, education, and environmental sustainability to access to clean water and financial services for the underserved.

2. Financial and Operational Sustainability: While these businesses aim to be profitable, the profits are not distributed to the owners or shareholders. Instead, any financial surplus is reinvested in the business to increase its social impact.

3. No Dividend: Investors may recoup their original investment amount over time, but no dividend is paid beyond this return of capital.

4. Environmentally Conscious: These businesses are often environmentally conscious, incorporating sustainable practices into their operations.

5. Pro-Poor Business Models: They frequently focus on providing goods and services to, or creating employment opportunities for, the poorest sections of society.

Yunus Social Businesses are distinct from other forms of social enterprises in that they are entirely focused on solving social problems through business means, without the distribution of profits to shareholders. This model reflects Professor Yunus's philosophy that businesses can serve as a means to address social issues, not just profit-making entities.

A B Corp, or Benefit Corporation, is a for-profit entity that integrates social, environmental, and community welfare into its core mission, alongside profit-making. These corporations are legally required to consider the impact of their decisions on various stakeholders, including workers, customers, and the environment. B Corps must meet high standards of social and environmental performance, accountability, and transparency, and are certified by the nonprofit B Lab. The certification is rigorous and allows stakeholders to identify companies committed to positive social and environmental impact. B Corp status is both a certification and a legal status in some regions, emphasizing a broader commitment beyond just generating profit.

A pure nonprofit organization is dedicated solely to charitable, educational, scientific, or religious activities without engaging in for-profit ventures. These organizations are characterized by their non-profit motive, often holding tax-exempt status. They typically rely on donations, grants, and fundraising for funding and are governed by a board of directors or trustees. A significant reliance on volunteerism is common, and all surplus funds are reinvested into their mission, focusing on public benefit rather than profit distribution. Unlike social enterprises or B Corps, pure nonprofits do not blend their social objectives with commercial activities, maintaining a strict focus on their altruistic goals.

A non-market encompasses economic and social activities that occur outside the traditional market system. It includes government-provided services like education and healthcare, volunteer work, household tasks like childcare, barter systems, and gift economies. These activities are not driven by profit or market prices but are based on principles like altruism, reciprocity, or government intervention. Non-market activities also involve public goods, which are available to all and not diminished by individual use. While significant for societal welfare, these activities are often not measured by traditional economic metrics like GDP.

1. Vertical Axis (Ease of Value Spillovers): This axis differentiates between the extent to which the social benefits created by the business automatically affect the broader community ("Automatic") versus those that require deliberate intervention to achieve social impact ("Contingent").

2. Horizontal Axis (Beneficiaries): This axis classifies the beneficiaries of the social business into either customers (people who directly pay for the product or service) or non-customers (people who benefit without directly paying, often due to inability or unwillingness to pay, or difficulty to access).

Based on these axes, four types of social business models are identified:

• "Market" Hybrid: These businesses automatically provide social value to paying customers through their products and services, such as providing access to basic needs.

• "Bridging" Hybrid: These target non-customers and automatically create social value, like services that match jobs for people with disabilities, benefiting those who may not directly pay for the service.

• "Blending" Hybrid: These require intervention to create value and serve paying customers, such as microfinance institutions that require active involvement to provide loans to small entrepreneurs.

• "Coupling" Hybrid: These also require intervention and target non-customers. An example would be work integration social enterprises that actively work to employ and integrate marginalized groups into the workforce.

In simple terms, this typology helps to understand how different social business models create and deliver value, whether they do so automatically or through active efforts, and whether they serve paying customers or beneficiaries who do not directly pay for the services.

differentiated business model:

Products and services sold are unrelated to products and services provided to the beneficiaries

UNICEF sells postcards but helps with other services

pollination business model:

Product/service sold to community at large has embedded social value (positive value spillovers)

Communication development for children

marketplace business model:

Facilitation of supplier-customer connection, usually through online platform

Farmer support

employment business model

Beneficiaries are part of the value creation process

refugee-run restaurant in Arroios

Newspaper sales by homeless

bottom of the Pyramid (BoP) business model:

Products or services targeting beneficiaries with very limited resources are redesigned to reduce COGS, and price and allow access to disenfranchised group

Bank for the poor

Microfinancing

cross-subsidization business model:

Product or service sold to the community at large is the same provided to beneficiaries, who pay a lower price

fees for service market place:

Product or service provided to beneficiaries, but sold to a third party (municipality, public institution, foundations, companies)

Going back to own primary school to teach

While both canvases have overlapping elements like key activities, value proposition, and customer relationships, the Social Business Model Canvas places more emphasis on the social or environmental impact and how surplus revenue is reinvested to further these goals

What difference is the social business making?

What social impact measures is the social business using?