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A Purpose-Driven Approach to Business Model Design (Version 2.6 - Mar 2018)

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The Business Model Canvas (BMC) by Alex Osterwalder and Yves Pigneur has been widely used as a tool for analyzing, designing and visualizing the business model of new and existing for-profit business ventures. However, the analytic framework of BMC is incomplete when one is trying to develop the business model for a social venture that seeks to achieve specific social impacts as a primary goal, with financial viability as a secondary, albeit important, consideration.

This presentation introduces "A Purpose-Driven Approach to Business Model Design", developed by Professor Wong Poh Kam of the NUS Entrepreneurship Centre, that puts the achievement of social impact as the primary design goal, and adapts the BMC to more effectively explore how different business models can be developed to achieve those impacts. This design approach also highlights how the financial requirements of a business model can be met with different financing models, and shows how the tensions between achieving social impacts and meeting financing requirements can be resolved through the design of an appropriate stakeholder model that generates a “shared-purpose” between the social entrepreneur and other stakeholders.

It uses concrete examples of actual social ventures to illustrate how social impacts and financial viability are achieved in practice using this purpose-driven approach to business model design. Viewers are invited to apply this holistic analytical framework to examine their own social venturing ideas, and to share their new learnings.

Find out more about what we do at http://enterprise.nus.edu.sg/entrepreneurship-outreach/social-venture-lab

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A Purpose-Driven Approach to Business Model Design (Version 2.6 - Mar 2018)

  1. 1. A Purpose-Driven Approach to Business Model Design March 2018 (Version 2.6) Poh Kam WONG Professor, NUS Business School Senior Director, NUS Entrepreneurship Centre
  2. 2. Outline 1. Introduction to the Purpose-DrivenApproach to Business Model Design (Slides 3 – 17) 2. Incorporating Social Impacts into Business Model Design (Slides 18 – 53) 3. Incorporating a Financing Model into Business Model Design (Slides 54 – 96) 4. Moving from a Financing Model to Stakeholder Model (Slides 97 – 118) 5. ValidatingYour Business Model (Slides 119 – 127) 6. Acknowledgements (Slides 128 – 135)
  3. 3. What is a Business Model? • A Business Model describes how anOrganization creates, delivers and captures Value • The Business Model Canvas of Osterwalder & Pigneur provides a shared language for describing, visualizing, assessing and designing business models
  4. 4. Source: Osterwalder & Pigneur 9 Building Blocks of the Business Model by Osterwalder & Pigneur
  5. 5. Business Model & Profitability • As a business model visualization tool, BMC is designed to highlight the links between the various components of a business model with its financial consequences (cost, revenue) • This is particularly important in assessing the financial viability or profitability of any proposed business model design
  6. 6. Beyond just Profitability? However, many businesses, even for-profit organizations, have other purposes besides profitability • Family Business: Profitability + Family Control + Grooming Next Generation + Upholding Family Legacy • Consumer Cooperative: Profitability + Keeping Prices Affordable for Members • State-Owned Enterprises: Profitability + Local Economic Development/Job Creation (cont…)
  7. 7. • Internet/Social Media Start-Up: Subscriber/user- base acquisition (Deferred Profitability) • Companies with significant Corporate Social (CSR) activities: Goodwill (deferred profitability) Trading off Profitability Purpose with some other purposes (temporarily or permanently) Beyond just Profitability? (cont.)
  8. 8. Profitability as secondary purpose? This trading off of profitability with other purposes becomes even more important for Social Impact-Driven BusinessVentures & Non-Profits/Social Enterprises • Social Impact as the Primary Purpose of the Organization, Profitability/FinancialViability either Secondary or a Means to achieve the primary purpose • Discovering and designing Alternative Financing Models to make up for financial shortfalls are an integral part of the business model design process
  9. 9. Profit Purpose Moving beyond just Profit Purpose… Financial Bottom-line
  10. 10. Social Purpose Social Cost Social Benefits …to incorporate Social Purpose… Social Bottom-line
  11. 11. + - Social Purpose … but this often leads to Trade-Off… Financing Gap (-) Social Impact (+)
  12. 12. Trading off Impact with FinancialViability: An Example Source: The Straits Times Not just purely a pricing issue, but many components of business model have to change substantially • Which customer market segments to serve? • What Product/Service will Provide the BestValue Proposition to the chosen market segments? Meeting the Goal of the alternative financial source (Public Financing in this case) may impose constraints on the original purpose (e.g. Arts that are critical of the government)
  13. 13. New Design Elements that need to be Integrated Financing Models • A Business Model that is not profitable can still achieve financial sustainability by finding alternative financial models • Indeed, even for-profit businesses often need to secure alternative financial models before achieving profitability Stakeholder Model • However, different financing models require, explicitly or implicitly, different Stakeholder or Governance Structure • Because the new stakeholder(s) have purposes of their own, which may be different from the purpose of the focal entrepreneur or organization, its purpose may need to be adapted to achieve alignment with that of the stakeholder, resulting in a new Shared Purpose
  14. 14. Financing Requirements Purpose Trade off Entrepreneur The Original Purpose of the Social Entrepreneur may differ from those of the Financiers… Financiers Social Impact
  15. 15. Shared Purpose Entrepreneur Stakeholder Model … Leading to the need to develop a new Shared Purpose that aligns the interests of All Stakeholders Financing Requirements Social Impact
  16. 16. SOCIAL IMPACT FINANCING REQUIREMENTS STAKEHOLDER MODEL BUSINESS MODEL SHARED PURPOSE SOCIAL ENTREPRENEUR The Iterative Process of the Purpose-Driven Business Model Design Approach
  17. 17. Incorporating Social Impacts into Business Model Design
  18. 18. Self-Reflection Questions • What is your purpose? • How can it be measured? How do you measure if you have achieved your purpose?
  19. 19. Social Impacts • Conventional profit-driven businesses are measured by the “financial bottom-line” – financial returns to shareholders • A purpose-driven business is seeking to make certain desired social impacts as its primary goal – a “social bottom-line” or social returns to stakeholders • The key to achieving those desired impacts is to have clear metrics to measure the social outcome generated
  20. 20. What is a Social Enterprise? • Social Purpose-Driven vs. Profit-Driven • Delivering Social Impacts on an on-going, sustainable, and scalable basis
  21. 21. Source: The Straits Times Is this a Social Enterprise?
  22. 22. 1. Serving the Needs of the Underserved – Those who cannot afford what the market currently provides – Those whose needs are ignored 2. Empowering the Disadvantaged with the means to help themselves – Creating opportunities for the productive use of their existing capability capability – Developing their Capability 3. Reducing a Social Bad – Prevention,Treatment and Circular Economy (Re-use, Up-cycle) 4. Engaging the participation and cooperation of a Community of actors in a Social Ecosystem 4 Generic Purposes of Social Enterprise
  23. 23. Social Cost Social Benefits Incorporating Social Purposes into Business Model Community Engagement Capability Use & Development Target beneficiaries as customers Social Purpose Social Bottom-line Prevention, Treatment, Re-use
  24. 24. Social Cost Social Benefits Social Purpose Community Engagement Capability Development Target beneficiaries Social Purpose Social Bottom-line … and Metrics to Measure Social Bottom-line Prevention, Treatment, Re-use + + + -
  25. 25. • Target Beneficiary as Customers – TheTarget Beneficiary is the Paying Customer that provides revenue sufficient to cover at least the cost – Key Challenge is to Reduce Cost to make the product/service affordable to the underserved group • “Cross-Subsidy” Models – TheTarget Beneficiary could not pay, or pay enough to cover cost, hence need to create value for another customer to generate the income to cover the deficit, or find financing models that meet the financial gap (cont…) Generic Social Impact Models
  26. 26. • TheTarget Beneficiary as Producers • TheTarget Community as Partners, Producers and Consumers • Hybrid Models – Combining more than one generic way to make impacts Generic Social Impact Models (cont.)
  27. 27. Photos: Grameen Shakti • How do you provide access to affordable electricity to the rural poor? – 70% of Bangladesh population were not served by the electricity grid • How do you create jobs for the local community at the same time? Case Example: Grameen Shakti
  28. 28. Reduction of health problems from kerosene lamps No. of empowered women entrepreneurs No. of rural households w. electricity Local Women Affordable electricity Empowering Local Women Direct Sales & Installation by Local Entrepreneurs Off-Grid Rural Communities Social Business Model of Grameen Shakti (I) Improved learning by school children Home Solar System Microcredit + Installments
  29. 29. Reduction of health problems from kerosene lamps No. of empowered women entrepreneurs No. of rural households w. electricity Local Women Affordable electricity Empowering Local Women Direct Sales & Installation by Local Entrepreneurs Off-Grid Rural Communities Social Business Model of Grameen Shakti (I) Improved learning by school children Home Solar System Microcredit + Installments
  30. 30. Reduce carbon emissions Carbon “positive” companies Impact measurement / tracking Emissions brokers Carbon Credit Markets Reduction in carbon emissions Reduction in health problems No. of empowered women entrepreneurs Increased savings with more efficient products Clean Cookstoves Social Business Model of Grameen Shakti (II) Microcredit + Installments
  31. 31. Source: 1. Grameen ShaktiOfficialWebsite: www.gshakti.org 2. Interview with Abser Kamal,CEO ofGrameen Shakti: www.hedon.info/BP58GrameenShaktiInterview?bl=y Case Example: Grameen Shakti
  32. 32. • Source fiber fromTibetan herders at a fair price, enabling them to earn a sustainable living while preserving their traditional lifestyle. (>90% of the population struggles to survive with a per capita income of $333 or RMB2,100 and have limited access to quality education, infrastructure, and healthcare.) • Channels 1% of profit into community development fund to further support work in rural areas. Photo: Shokay Case Example: Shokay • A socially-conscious luxury brand designing premium knitwear, yarn and fabric from yak down, which is as soft as cashmere.
  33. 33. Yak Generate sustainable income Sales ofYarn Shokay’s Business Model Quality yak yarn Increase annual household income of Tibetan herders Tibetan herders Distributors, wholesalers
  34. 34. Reduce Social Disruption Cost caused by Outmigration, Preserve Traditional Livelihoods Preserve traditional livelihood Mid-30s, sophisticated women Shokay’s Business Model Quality, luxurious knit fashion products Increase employment opportunities for women knitters Generate sustainable income
  35. 35. Reduce Social Disruption Cost caused by Outmigration, Preserve Traditional Livelihoods Yak Generate sustainable income Preserve traditional livelihood Mid-30s, sophisticated women Sales ofYarn Shokay’s Business Model Quality, luxurious knit fashion products Quality yak yarn Expatriate publications International schools fairs Social Media Website Physical stores Consignment Expeditions Increase annual household income of Tibetan herders Tibetan herders Distributors, wholesalers Bureau of Animal Husbandry (training) Fiber-testing Agency Fashion brands, Artists Increase employment opportunities for women knitters
  36. 36. Reduce Social Disruption Cost caused by Outmigration, Preserve Traditional Livelihoods Yak Generate sustainable income Preserve traditional livelihood Mid-30s, sophisticated women Sales ofYarn Shokay’s Business Model Quality, luxurious knit fashion products Quality yak yarn Increase annual household income of Tibetan herders Tibetan herders Distributors, wholesalers Bureau of Animal Husbandry (training) Fiber-testing Agency Fashion brands, Artists Increase employment opportunities for women knitters Expatriate publications International schools fairs Social Media Website Physical stores Consignment Expeditions
  37. 37. Source: 1. Shokay OfficialWebsite: www.shokay.com 2. “MakingYak Wool Fashionable and Socially Responsible”, AmCham’s Insight: http://insight.amcham-shanghai.org/shokay-making-yak-wool- fashionable-and-socially-responsible/ 3. Women Entrepreneurs: InspiringStories from Emerging Economies and Developing Countries: http://books.google.com.sg/books/about/Women_Entrepreneurs.html?i d=Bk_aygAACAAJ&redir_esc=y 4. “Shokay”, ZoeWong, Cornell University: https://www.johnson.cornell.edu/Portals/32/images/Center%20for%20S ustainable%20Global%20Enterprise/Center%20at%20large/Shokay%20- %20Honorable%20Mention.pdf Case Example: Shokay
  38. 38. • How do you raise awareness of society towards the needs of disadvantaged groups like the blind? • How do you create meaningful jobs for the blind? Workshop Group Exercise I: DIALOGUE INTHE DARK
  39. 39. • How do you raise awareness of society towards the urban accessibility needs of persons with physical disabilities? • How do you create dignified jobs for persons with physical disabilities? Workshop Group Exercise II: OurCityLove https://youtu.be/Owf0qr9rsl8
  40. 40. • What is the purpose of your social enterprise? • How do you measure the achievement of your purpose in terms of specific social impacts? • Which generic business model best fits what you are trying to achieve? Workshop Individual Exercise I:
  41. 41. • Outputs vs. Outcomes – Outputs are results from the venture that can be measured relatively objectively – Outcomes are the ultimate changes that one is trying to make in the world, but which may be difficult or costly to measure • Impact = the portion of the total outcome that happened as a result of the activity of the venture, above and beyond what would have happened anyway Measuring Social Impacts
  42. 42. Source: Clark, C., Rosenzweig, W., Long, D., & Olsen, S. (2008). Assessing Social Impact in Double Bottom Line. http://www.riseproject.org/DBL_Methods_Catalog.pdfc Social ImpactValue Chain
  43. 43. Source: Clark, C., Rosenzweig, W., Long, D., & Olsen, S. (2008). Assessing Social Impact in Double Bottom Line. http://www.riseproject.org/DBL_Methods_Catalog.pdfc Social ImpactValue Chain for Dialogue in the Dark Inputs Activities Outputs Outcomes Goal Alignment - Capital - Brand - Staff - Exhibition Design - Recruitment of visually-impaired -Training - Marketing - Conducting of tours - Conducting of debriefing session - No. of visually impaired hired - No. of visitors to exhibition - Improve socioeconomic conditions for the visually-impaired - Increased public awareness and empathy towards the visually impaired - Increased empathy in general - Evaluation and improvement
  44. 44. Photo: Dignity Kitchen • A hawker “food stall” management school for the disabled and disadvantaged. • Trains and provides job placement for students. • Innovates facilities and education programmes to suit the needs of students. Case Example: Dignity Kitchen
  45. 45. Innovations that enable handicapped workers to make drinks / prepare food Educating the general public to use sign language to order beverages. Training. E.g. Helping the blind cashier to “see” money Dignity Kitchen’s Innovations Photos: Dignity Kitchen
  46. 46. • Outputs vs. Outcomes – Outputs = no. of handicapped participants trained, income earned – Outcomes = self-esteem of the participants, increased sociability, reduced dependency, less stress on caretaker… • Impact = net effects vs. best alternatives Measuring Dignity Kitchen’s Impacts
  47. 47. • Process Methods are tools to track and monitor the efficiency and effectiveness of the operational generate outputs. • Impact Methods are tools that relate outputs and outcomes, and attempt to prove incremental outcomes to the next best alternative. • Monetization Methods monetize outcomes or impact by assigning a dollar value to them. Social Impacts Assessment Methodology
  48. 48. • Acumen Scorecard • Impact Reporting and Investment Standards (IRIS) • Social Returns on Investment (SROI) Examples of Social Impacts Assessment Methodology
  49. 49. Useful References (I)
  50. 50. Useful References (II)
  51. 51. • Often costly and resource-intensive • Full impact may only be captured when measured over a time period longer than acceptable by the funding agent / stakeholder • Should ideally be integrated within the business model as a key activity (and hence business cost) necessary to secure the financing from the funding agent / stakeholder Cost of Social Impacts Measurements
  52. 52. However, by having measurable social impact metrics, we can better attract financing from relevant resource owners. (more on this later)
  53. 53. Incorporating a Financing Model into Business Model Design
  54. 54. Operational Financing Gap Financing Challenges for many Social Enterprises I – Non-Sustainable Operation (Revenue < Cost) Operational cost Revenue
  55. 55. Financing Challenges for many Social Enterprises II – Operationally Sustainable, but No Return on Capital (Revenue = Cost) Capital Financing Gap Operational cost Revenue Capital cost
  56. 56. Operational Financing Gap Financing Gap = Operational Financing + Capital Financing Operational cost Revenue Capital Financing GapCapital cost
  57. 57. Profit < Cost of Capital Financing Challenges for many Social Enterprises III – Insufficient ROI (Rev > Cost, but Profit < Cost of Capital) Operational cost Capital cost Revenue
  58. 58. The Sustainable + Scalable Scenario Profit > Cost of Capital Operational cost Capital cost Revenue
  59. 59. • Business Model Canvas helps us to identify the size and nature of the financing gap for any new venture • To understand how a venture can meet its financing gap, we need to complement the “Business Model” with a “Financing Model” – Even normal for-profit businesses have financing gap – The challenge is more severe for “social purpose”-driven ventures The Need for “Financing Model”
  60. 60. • Equity Capital • Bank Loan • SupplierCredits • Customer Pre-Payment • Bond • Guarantees • Etc. Financing for Profit-Driven Business
  61. 61. What about Financing for Social Purpose-Driven Business?
  62. 62. Varieties of Financing Models of Impact-Driven Businesses 1. Public Funding 2. Charity 3. Volunteerism 4. Venture Philanthropy 5. Impact Investment 6. Innovation that Reduces Cost 7. Consumer Co-operatives 8. Producer Co-operatives 9. Cross-subsidization Model 10. Crowdfunding 11. Social Impact Bond
  63. 63. 1. Public Funding Operational cost Capital cost Revenue Operational Financing Gap Capital Financing Gap
  64. 64. 1. Public Funding Operational cost Capital cost Revenue Operational Financing Gap Capital Financing Gap
  65. 65. 2. Charity Operational cost Capital cost Revenue Operational Financing Gap Capital Financing Gap
  66. 66. 2. Charity Operational cost Capital cost Revenue Operational Financing Gap Capital Financing Gap
  67. 67. 3.Volunteerism Cost Revenue Financing Gap Volunteered Resources
  68. 68. 3.Volunteerism Cost Revenue Financing Gap Volunteered Resources
  69. 69. 4.Venture Philanthropy Operational cost Capital cost Revenue
  70. 70. Capital cost 4.Venture Philanthropy Operational cost Revenue
  71. 71. Capital cost 4.Venture Philanthropy Operational cost Revenue
  72. 72. Capital cost 5. Impact Investment Operational cost Revenue
  73. 73. Capital cost 5. Impact Investment Operational cost Revenue
  74. 74. 6. Innovation that Reduces Cost Cost Revenue Financing Gap Innovation labour productivity
  75. 75. 6. Innovation that Reduces Cost Cost Revenue Financing Gap Innovation
  76. 76. 7. Consumer Co-operatives Capital cost Operational cost Revenue
  77. 77. 7. Consumer Co-operatives Capital cost Operational cost Revenue
  78. 78. 8. Producer Co-operatives Capital cost Operational cost Revenue
  79. 79. 8. Producer Co-operatives Capital cost Operational cost Revenue
  80. 80. 9. Cross-subsidization Model Revenue from Paying Customers Cost to serve Paying Customers Cost to serve Non-paying Customers
  81. 81. • Aravind Eye Care is the largest eye care provider in the world, with over 4 million million operations performed and 32 million patients treated. • Operating under a model of cross-subsidization over two- thirds of its patients are treated for free. Cross-Subsidy Case Example: Aravind Eye Care System
  82. 82. • Lean principles in the Aravind model: process simplification, elimination of non-value economic activities, waste reduction and commitment to excellence in operations and customer service. • Conrad N. Hilton Humanitarian Prize (2010),Gates Award for Global Health (2008), FCCI award for best private hospital in India. Photos: Aravind Eye Care System Cross-Subsidy Case Example: Aravind Eye Care System
  83. 83. Aravind Eye Care System Post-operative follow up Paying eye patients Treatment Fees from Paying Customers Lions Club International (Training) Community Outreach (screening, education) Training Cost R&D Word-of-mouth Non-paying, rural poor patients Free screening, education Standardised, innovative procedures & equipmentWHO Education & Training ManufacturingSeva Foundation (Replication) Distributors/ Hospitals (esp in developing countries) Screening Camps/Centres Initial set up cost - hospital Eye care hospital Low-cost intraocular lenses Community outreach Reduction in unemployment # of low-income patients treated # reached via screening camps (education) Reduction in illiteracy # of healthcare workers trained
  84. 84. Source: 1. Aravind OfficialWebsite: www.aravind.org 2. ‘Aravind Eye Care System:GivingThemThe Most Precious Gift’, Profs. S. Manikutty and NeharikaVohra, Indian Institute of Management, Ahmedabad: https://wiki.brown.edu/confluence/download/attachments/9994241/ Aravind+case.pdf?version=1 3. ‘We set prices not on our costs, but on who can afford to pay how much’, Financial Express: http://archive.financialexpress.com/news/-we-set-prices-not-on-our- costs-but-on-who-can-afford-to-pay-how-much-/233536/0 Case Example: Aravind Eye Care System
  85. 85. Having measurable social impact metrics can also enable the introduction of innovative financing models.
  86. 86. 10. Example of Crowdfunding for “Measurable” Social Impact
  87. 87. 11. Social Impact Bond Source: http://www.nextbillion.net/blogpost.aspx?blogid=2179
  88. 88. Impact Bond Investors Impact Bond Issuer Measureable Impact Metrics PublicAgency Impact BondTraders Private Sector Prisoner Rehabilitation Operator 11. Social Impact Bond Example
  89. 89. • Certificate of Measurable Impacts (positive or negative) become tradable in secondary markets – Impact certification agency – Original impact credit owners – Impact Credit traders – Secondary Credit buyers Financing Market for Measurable Impacts
  90. 90. Source: http://www.watradehub.com/node/639 Example of ImpactTrading: Carbon Emissions
  91. 91. Fairtrade: Certification commands a premium from customers
  92. 92. • Some purpose-driven ventures have business models that enable them to achieve both FinancialViability AND Positive Social Impacts – Positive Double Bottom-lines • Even such social ventures face a trade-off between greater profitability vs. higher impact • Most social ventures are unable to achieve positive double bottom-lines: they usually have business models that achieve positive social impacts but are not financially viable; the key challenge is to innovate their business model to achieve positive double bottom-lines Financing vs. ImpactTrade-offs
  93. 93. Financing vs. Impact Trade-off… + - Social Purpose Financing Gap (-) Social Impact (+)
  94. 94. Workshop Group Exercise II • Kids from Poor Families are not able to develop their artistic interests and potentials • A Social Entrepreneur’s Idea: Run an arts enrichment class for such kids of kindergarten / primary school-age • Her Challenge: How to make the venture financially sustainable and scalable?
  95. 95. • Many elderly women are not gainfully employed but have good cooking skills • A Social Entrepreneur’s Idea: Employ these women to run cooking classes for young professionals and teenagers • Her Challenge: How to make the venture financially sustainable and scalable? Workshop Group Exercise III
  96. 96. Moving from a Financing Model to Stakeholder Model
  97. 97. • Every form of financing brings with it a new “stakeholder” whose “purpose” may be different from that of the original entrepreneur’s purpose • In considering the type of financing model, an entrepreneur must therefore understand whether and how his/her purpose can be “aligned” with that of the new stakeholder(s) – Even normal for-profit businesses have to take into account the obligations to, and constraints by, the “stakeholder model” – The challenge is more severe for “social purpose”-driven ventures From “Financing Model” to “Stakeholder Model”
  98. 98. • Bank Lender • Angel Investor • VentureCapitalist • Corporate Investor • Owner of Publicly Listed Shares • Philanthropist • GovernmentAgency • Volunteer • Corporate Sponsor …and how does it affect the original purpose of the Entrepreneur? What is the “Purpose” of a…
  99. 99. • For-Profit – Sole Proprietorship – Partnership – Privately-Held Limited Company • controlled by Founder • where certain classes of investors have special rights – Publicly-ListedCompany • B-Corporation • Non-ProfitOrganization (NPO) – PublicCharity, Private Foundation, Association, Society, Cooperative, etc. • “Blended” (Hybrid) Model? Examples of Stakeholder Models
  100. 100. Photo: Embrace • Embrace has developed an innovative, low-cost infant warmer for vulnerable babies in developing countries. • Given the customer segment, Embrace initially chose to go the non-profit route – selling products at low price with only margin “profits” to be reinvested back into the business. Case Example: The Hybrid Model of Embrace
  101. 101. But: • Underestimated capital required to go from concept stage to manufacturing stage, as well as costs associated with management and time required to fundraise • Foundations were not ready to take risks during early stages of development (and preferred to fund health care delivery not development) • 80% time spent on fundraising • Difficulty in using raised capital for operations, salaries, inventory management • Even if they went down the purely for profit model, governments and hospitals on the ground were not inclined to work with them Case Example: The Hybrid Model of Embrace
  102. 102. Solution: Hybrid Model Hybrid model – non-profit free distribution (EmbraceGlobal) combined with for-profit commercial sales (Embrace Innovations) Photos: Embrace
  103. 103. Solution: Hybrid Model Embrace Global: • Owns the intellectual property for the infant warmer technology and licenses it to the for-profit organization, which pays a royalty for each unit sold. It accepts philanthropic contributions (for distribution to NGO partners to reach the poorest communities and develop educational programs to promote newborn health) Embrace Innovations: • Raises its funding from venture capitalists and impact investors to fund the capital intensive work of research and development, manufacturing, clinical testing, and establishing the sales and distribution infrastructure to sell the product to customers who can afford to pay for it.
  104. 104. Photos: Embrace Solution: Hybrid Model Benefits: • Allows them to leverage private capital, in addition to Philanthropy, and serve all segments of the market with their product
  105. 105. Intellectual Property Low-cost portable, reusable warming tech Portable Baby Warmer Initial Integrated Business Model Reduction in neonatal hypothermia Reduction in infant mortality Increased employment Public Health Organizations Product development Regulatory Approval Paying mothers Field partners (NGOs) NGO field workers Manufacturing & Distribution Cost Operations, Manpower Cost Product Development NGO field partners BabyWarmer for Hospital ClinicalTrials
  106. 106. Low-cost portable, reusable warming tech Portable Baby Warmer For-Profit Business Model (Embrace Innovations) Public Health Organizations Product development Regulatory Approval Paying mothers Manufacturing & Distribution Cost Operations, Manpower Cost Product Development BabyWarmer for Hospital ClinicalTrialsIP Royalty Payment
  107. 107. Intellectual Property Low-cost portable, reusable warming tech Portable Baby Warmer Non-Profit Business Model (Embrace Global 501 (c)) Reduction in neonatal hypothermia Reduction in infant mortality Increased employment Public Health Organizations Field partners (NGOs) NGO field workers Manufacturing & Distribution Cost Operations, Manpower Cost IP Management NGO field partners BabyWarmer for Hospital Donor Outreach
  108. 108. Financing Requirements: Product development, Clinical trials Founder’s Purpose: Save the lives of low birth weight and premature infants by distributing an inexpensive and effective infant warmer Embrace Innovations: For-profit Model Stakeholder Model: Equity investments from impact investor Shared Purpose: Sale of infant warmers to customers who can afford it Stakeholder Purpose: Commercial sale of effective and innovative infant warmers Financial Impact: Generate profits that contribute (as royalty payments) to fund Embrace Global’s activities
  109. 109. Financing Requirements: Healthcare Delivery/ distribution channels to income mothers; and Training Founder’s Purpose: Save the lives of low birth weight and premature infants by distributing an inexpensive and effective infant warmer Stakeholder Model: Philanthropi c donations for service delivery Shared Purpose: Distribution of innovative infant warmers to low income population and provide access to healthcare and create employment Stakeholder Purpose: Distribution/sale of effective and innovative infant warmers to low income/vulnerable populations Social Impact: 1. 144,000 infants reached 2. 4,400 health workers trained 3. 9,200 mothers educated Embrace Global: Non-profit Model IP Royalties from Embrace Innovations
  110. 110. Source: 1. Embrace OfficialWebsite: http://embraceglobal.org/ 2. “Embrace: Deciding on a Hybrid Structure”, Stefanos Zenios, Lyn Denend, Amy Lockwood, Stacey McCutcheon, Global Health – Innovation Insight Series, 2012: http://csi.gsb.stanford.edu/embrace- Case Example: Embrace
  111. 111. • Explicit Statement of the Purpose of the Organization to benefit society and the environment in specific ways in addition to making profit • A New Legal Form of Company (“Benefit”Corporation) recognized in many states in the US that expands the fiduciary duty of directors to require them to consider non-financial stakeholders as well as the financial interests of shareholders.This gives directors and officers of such purpose-driven businesses the legal protection to pursue an additional purpose and consider additional stakeholders besides profit. • Clear Metrics to Measure the Outcomes that areAligned with the Stated Purpose (B-Corp Certification) The B-Corporation
  112. 112. Plum Organics is a healthy baby food company. Campbell, the publicly-traded parent company, was supportive of Plum Organics move to re- incorporate legally as a BenefitCorporation, which protects the board of directors and officers from shareholders who might want to sue the company for pursuing a social agenda instead of making money for investors. Plum Organics:A Benefit Corporation within a publicly-traded company Plum’s public benefit is “to deliver nourishing, organic food to our nation’s little ones and to raise awareness and advancing solutions for childhood hunger and malnutrition in the United States.” Photo: Campbell Soup Company
  113. 113. What is a Good Social Enterprise Model? A Feasible Business Model that delivers the Desired Social Impacts in a Financially Sustainable and Operationally Scalable way
  114. 114. • Start with a clearly stated purpose and a set of impact metrics to measure purpose achievement • Use the Business Model Canvas to explore feasible and viable business models to achieve the desired impacts • Explore the financing gap-impact trade-offs, and find a Stakeholder Model that is aligned with the Social ImpactAND Financing Model • Where necessary, adjust original purpose to achieve a Shared Purpose that is aligned with the Stakeholder Model needed to meet the financing gap The complete purpose-driven business model design framework for social entrepreneurs
  115. 115. Key Partners Key Activities Key Resources Value Propositions Customer Relationships Channels Customer Segments Cost Structure Revenue Streams Negative Social Impact Reduced Positive Social Impact Created Wong Poh Kam, adapted from ‘The Business Model Canvas’ by Business Model Foundry AG available at http://www.businessmodelgeneration.com/downloads/business_model_canvas_poster.pdf under the Creative Commons Attribution-Share Alike 3.0 Unported License, http://creativecommons.org/licenses/by-sa/3.0/ . It can be reused under the same CC-Attribution-Share Alike 3.0 Unported License. SocialVenture Business Model Canvas
  116. 116. SOCIAL IMPACT FINANCING REQUIREMENTS STAKEHOLDER MODEL BUSINESS MODEL SHARED PURPOSE SOCIAL ENTREPRENEUR Purpose-Driven Business Model Design Process Wong Poh Kam
  117. 117. Financing Requirements: Founder’s Purpose: Stakeholder Model: Shared Purpose: Stakeholder Purpose: Social Impact: Wong Poh Kam Purpose-Driven Business Model Design Template
  118. 118. • ProblemValidation – What social problems are you trying to solve? – Who has these problems? • SolutionValidation – Does your proposed solution meet the needs? – Is your solution feasible? – Is your solution financially viable? ValidatingYour Business Model
  119. 119. Guess Guess Guess Guess Guess Guess Guess Guess Guess GuessGuess Business Model is nothing more than GUESSES… Key Partners Key Activities Key Resources Value Propositions Customer Relationships Channels Customer Segments Cost Structure Revenue Streams Negative Social Impact Reduced Positive Social Impact Created
  120. 120. • LEAN-STARTUP Philosophy – Rapid Iterative Learning – Low Cost Search, Agile Engineering, Fail Fast & Early • “GET OUT OFTHE BUILDING” – Talk to PotentialTarget Beneficiaries – Talk to Potential Customers & Partners • TEST and REVISE your guesses – Which guesses are invalidated? – What new guesses can be generated from the insights learned? – Is a major PIVOT needed? • OnlyWrite Detailed Business Plan after theValidation Phase Validating your Business Model Guesses
  121. 121. How NOT to Launch a New Business: The Case ofWebvan (1996-2001) Photo: Webvan
  122. 122. HowTony Hsieh, Founder of Zappos, Did it Photo: Zappos
  123. 123. Customer Discovery Phase 1 Author Hypothesis Phase 2 Test Problem Hypothesis Phase 4 Verify, Iterate & Expand Phase 3 Test Product Hypothesis ToValidation Source: Steve Blank Business ModelValidation
  124. 124. • Financing ModelValidation – What is the initial financing shortfall? – What is the path to financial sustainability? • StakeholderValidation – Who can provide the financing? – How can their purpose be aligned with yours? Validating your Financing and Stakeholder Model
  125. 125. • Use the Purpose Driven BM Design Framework to visualize… – your purpose – the business model to use to realize your desired social impacts – the financing requirements you face – the stakeholder model you should have to meet the financing requirements • Now, get out of the building to test and validate your models! Workshop Individual Exercise II
  126. 126. Acknowledgements The extensive assistance of Ms Prisca Lim and Ms Ng Su Fen in the development of this workshop material is gratefully acknowledged.
  127. 127. Feedback and Suggestions • Your Feedback and Suggestions for improvement are greatly appreciated. Please kindly send any query or suggestions for improvement to pohkam@nus.edu.sg • This presentation is accessible from enterprise.nus.edu.sg/entrepreneurship-outreach/social-venture- lab/knowledge and www.socialventurechallenge.asia/resources • A collection of case studies using the SocialVenture Business Model Canvas will also be available on both • If you are interested in contributing your own case examples, please contact pohkam@nus.edu.sg
  128. 128. To jumpstart our Social Entrepreneurship Support programme, NUS Entrepreneurship Centre (NEC) partnered the Grameen Creative Lab (GCL) in March 2011 to establish the Grameen Creative Lab@NUS initiative. 2 years later, it was renamed as SocialVenture Lab@NUS. SocialVenture Lab@NUS promotes and incubates innovation-based social ventures in Singapore that have the potential to generate scalable, sustainable social impact. It achieves this through a whole host of events, initiatives and incubation support programmes and services. About SocialVenture Lab @ NUS
  129. 129. Some of Our Supported SocialVentures
  130. 130. Organised by NUS Enterprise and DBS Foundation, the DBS-NUS SocialVenture Challenge Asia is an Asia-wide annual competition for social enterprises that is open to the public, providing multi- dimensional support for social ventures, as well fostering a culture of social entrepreneurship in Asia. For more information on the competition, please visit: www.socialventurechallenge.asia DBS-NUS SocialVenture Challenge Asia
  131. 131. About Prof.Wong Poh Kam • Professor inTechnology Entrepreneurship & Innovation Management at NUS Business School • Senior Director at NUS Entrepreneurship Centre and Director, NUS Overseas Colleges • Awarded “Entrepreneur of theYear (Educator Category)” by the World Entrepreneurship Forum in 2015 • Co-Curator ofWorld Economic Forum (WEF)’s Entrepreneurship Transformation Map • Member of Competition Commission of Singapore (CCS)
  132. 132. • Active Angel Investor in high tech startups in Singapore, Silicon Valley, China and India; Founding chairman of BusinessAngel Network Southeast Asia (BANSEA) & Asian BusinessAngel Forum (ABAF); advisor of iGlobe PlatinumVC Fund and investor of Angels of Impact • Member of several Government Investment Panels & Committees (PSD’sTEC Program, SPRING Singapore’sTECS POC/POV Grants, Expert Group on Entrepreneurship Policy, IP Hub Masterplan Sub- Committee, Sub-Committee on Innovation & Enterprise) • Initiated SocialVenture Lab@NUS in 2011 to incubate Innovative Social Enterprises in NUS and Singapore • Initiated DBS-NUS SocialVenture Challenge Asia in 2014 About Prof.Wong Poh Kam
  133. 133. Name: Prof.Wong Poh Kam Email: pohkam@nus.edu.sg Office: NUS Enterprise, 21 Heng Mui Keng Terrace, Level 5 CV: http://www.bschool.nus.edu.sg/staff_profile/cv.a sp?ID=174 Facebook: www.facebook.com/pohkam Linkedin: www.linkedin.com/in/pohkam AngelList: http://angel.co/poh-kam-wong Downloadable publications: http://nus.academia.edu/PohKamWong My Contact Details

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