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Ecorl oer-al-ysb-social-business-deepening

  1. 1. Social Impact design ECOREL Erasmus Training
  2. 2. 2Yunus Social Business Understanding the Concept of Social Business a) Framing the issue b) The different social business models types c) Case studies Lecture structure
  3. 3. 3Yunus Social Business • Definition of the different social business models • A better understanding of your own Social Business Model • Guidance on how to combine your business model and your social impact: ◦ Where does you social impact fit into your Business Model Canvas? ◦ How do you integrate your profit formula with your Social Impact? • Case Studies End Result
  4. 4. 4Yunus Social Business Framing the issue: « Doing well by doing good » • Previously, giving money to do « Good » and maximising profit were seen as clearly seperated activities… • …But the world is changing: “Business must be for profit but profit must also be for purpose” Mads Kjaer, co-founder MYC4 + + New school of social entrepreneurs - - Old school corporations Old school not- for- profits Social impact potential Profit potential Social Business Models are innovative ways to “do good” AND “do well”
  5. 5. 5Yunus Social Business Social businesses bring a solution to a social or environmental issue.. …while using classic business tools to reach financial sustainability ? who what where why How Problem Definition Integration of Social impact in Business Model Canvas 1 2 2-steps approach to defining your social impact
  6. 6. 6Yunus Social Business Define the social or environmental problem you are trying to solve • Who is experiencing the problem? • Why does the problem occur? • What are the consequences of the problem? Why define my social problem? 1) helps you to make sure the solution you build is adapted to your beneficiaries 2) helps you communicate more effectively to stakeholders Example of cooking stoves in very poor and remote rural areas “Traditional cooking methods primarily use firewood or charcoal, which are polluting, expensive and hazardous” “Current cooking stoves are inefficient and consume a lot of fuel. Alternatives for new stoves are expensive” What is the problem? • Context • Industry • Scale 1 2 3 “Households living on less than $2 a day in remote areas” • Poor families spend a lot of money on fuel that cannot be spent on education or health • Smoke inhalation from old cooking stoves cause serious illness incl. childhood pneumonia and bronchitis • Traditional cooking methods produce a lot of CO2 1
  7. 7. 7Yunus Social Business Problem definition – Example in Education What is the problem? • 4/10 students in France have strong gaps upon entering secondary school • 160,000 children leave high school without a diploma • Increased inequality in learning Who? Why? Consequences? • Blue collar kids are especially impacted • Lower income neighborhoods • Not enough resources to teachers • Parents not able to support/ help children • Tutoring is expensive and increases inequalities • Children leaving school most likely to know unemployment • Exclusion from society • Increased likelihood of violence 1
  8. 8. 8Yunus Social Business Problem definition – Your turn! What is the problem? Who? Why? Consequences? 1
  9. 9. 9Yunus Social Business Here? Here? Here? 2 How does your social mission fit into your business model?
  10. 10. 10Yunus Social Business Ex “Developing a chicken farm, from which all profits are reinvested to support a local school” TOM’s shoes 2 Social business models are generally divided into 4 models Model 1: Bottom of the Pyramid (BOP) Model 2: Good jobs social businesses Model 3: Value Chain (Suppliers or Distributors) Model 4: “Give-Back” • Give access to essential / quality goods at the lowest price possible to the base of the pyramid • Key Impact driver: # customers served Ex “selling nutritious yoghurt to poor families for a few pennies” • Create good jobs or opportunities for underserved populations • Key Impact driver: # paid jobs created Ex “Employing women who have limited opportunities in remote rural areas through a handicraft business” • Create value and share it fairly along the value chain: either with suppliers or distributors • Key Impact driver: purchasing price Ex with suppliers: “buying local farmers’ production at guaranteed prices, enabling them to have a secure income” Ex with distributors: “selling production to point of sales at guaranteed prices” • Generate a margin with your business, which can then be used to finance a social work • Key Impact driver: margin
  11. 11. 11Yunus Social Business Diseases and child mortality – several cholera outbreaks, 100.000 of deaths • More than 78% of families live on less than US$ 2 a day • Cleaning products are extremely expensive in Haiti (approximately 4 to 12 USD per gallon) • Otherwise, randomly available based on NGO handouts • 67% of the population does not employ any treatment to ensure the purity of their water before drinking • 62% of households at the national level, two thirds in urban areas and nearly six in ten households in rural areas have access to a place to wash their hands • 34% do not have access to any type of rudimentary toilet or latrine Model 1 Case Study: DIGO Distribution (1/3) What is the problem? Who? Why? Consequences? Lack of access to clean water and sanitation solutions in Haiti
  12. 12. 12Yunus Social Business Model 1 Case Study: DIGO Distribution (2/3) • Digo’s products are sold for 100-110 Haitian Gourde per gallon (ca 2 USD per gallon) • Competitors are selling the same products for 300-600 HTG/ gallon (ca 6-12 USD per gallon) ◦ Competitors offer bottles or pouches in the market ◦ Their products are exclusively imported • Reasons why DIGO products are cheaper : ◦ Local production ◦ No packaging ◦ Willingness to sell low-cost! • DIGO Distribution produces and distributes affordable bleach for water purification and cleaning products to improve household sanitation, health and hygiene • 3 product lines: ◦ Chlorin ◦ Disinfectant ◦ Soap • End users bring their own bottles to points of sales and purchase their products directly from the source by fluid onces, at very cheap prices Business Activity DIGO’s products are 3 to 6x cheaper than the competition
  13. 13. 13Yunus Social Business Model 1 Case Study: DIGO Distribution (3/3) • It effectively reaches a large number of people ◦ High demand, with 99 Points of Sales opened in Haiti ◦ Plan to open 500 Points of Sales in the next 3 years ◦ Scaleable model in Haiti, ability to reach 5 Million people • It satisfies a real need and solves a tangible problem ◦ High necessity products: drinking water and hygiene • Products are designed with the customer in mind ◦ Very small quantities are available for purchase ◦ Cheap prices What makes DIGO Distribution a successful example of Model 1: Bottom of the Pyramid?
  14. 14. 14Yunus Social Business Back to the BMC: Where does the social impact fit in Model 1? Customers: Increased focus on understanding your customers, who are also your beneficiaries Typical Challenges of Model 1: Product Fit, Product Costs, and Distribution 1 2 Cost structure: Building a cost structure which allows you to sell cheap while being financially sustainable
  15. 15. 15Yunus Social Business Women strive for financial independence in order to access essentials such as healthcare and clean water, and to afford schooling for their children • Especially challenging for women to secure safe employment • Problems of insecurity and violence against women make it harder for them to earn an income • Haitian culture unaccustomed to persons with disabilities in the workforce • Women in Thiotte, an area where KE sources Castor Oil • Disabled population are also vulnerable Model 2 Case Study: Kreyol Essence (1/3) What is the problem? Who? Why? Consequences? Haiti is still recovering from the devastating 2010 earthquake and is suffering from 40% unemployment
  16. 16. 16Yunus Social Business Model 2 Case Study: Kreyol Essence (2/3) Business Activity KE produces locally and exports its products • Kreyol Essence is an agribusiness that manufactures and distributes an array of luxury beauty products anchored around its signature product, the Palma Christi: Haitian Black Castor Oil • KE sources organic and unrefined castor oil harvested and produced in Haiti. KE can derive a broad product line of quality hair and beauty products from this oil • Kreyol Essence has a factory on the ground . It caters to women and focuses on women hires • 8 lines of products launched with several SKUs, including pure castor oil, scented castor oil, pomades, body creams, hair masks, soaps and candles • Products are sold on Kreyol Essence’s website and through retailers • Presence in Haiti, USA, Canada, France and Nigeria • KE aims to further distribute its products in the US through a network of spas and health clubs, local retailers and small businesses
  17. 17. 17Yunus Social Business Model 2 Case Study: Kreyol Essence (3/3) What makes Kreyol Essence a successful example of Model 2: “good jobs”? 2015E 2016E Direct jobs 24 36 Indirect jobs 129 183 Total 153 219 • Local employment created • Examples of Direct Jobs: o Production workers (oil, soap, candles and bottling) o Bottle fulfillment o Administration o Account services and call center • Employment for specific underserved populations o Women are specifically targetted in hiring process: fair, safe and stable employment o These women would not be able to have income sources without Kreyol Essence opportunities
  18. 18. 18Yunus Social Business Back to the BMC: Where does the social impact fit in Model 2? Key resources: Your employees, who are also your beneficiaries Castor Oil, which is the raw material Typical Challenges of Model 2: Access to high margin markets 1 2 Revenue Streams: Ensuring recurring revenues in order to pay employees regularly
  19. 19. 19Yunus Social Business Small producers have no visibility on their sales, and are not able to save any money or provide for their children’s futures Highly volatile potato prices and difficult conditions for suppliers in the open markets Farmers who are especially vulnerable: • Farmers who lack resources to make their plots of land productive • Farmers who don’t own land to grow their crops or have been displaced by violence Model 3 Case Study: Campo Vivo (1/3) What is the problem? Who? Why? Consequences? Difficult for small potato producers in Colombia to make a stable living from their potatoes’ crops
  20. 20. 20Yunus Social Business Model 3 Case Study: Campo Vivo (2/3) • Campo Vivo buys the harvest from the farmers and is responsible for finding commercialization paths that reduce the impact, in a minimum percentage, of open market sales. • Campo Vivo also provides support to farmers: • Technical assistance for increased productivity • Links to a social network of fellow producers • Coaching on Entrepreneurial skills to help them better manage their business Business Activity Focus of the Business Model: Commercial Strategy . Institutional 50% Retail-QSR 30% Open Market 10% POTATO Small producer Campo Vivo
  21. 21. 21Yunus Social Business Model 3 Case Study: Campo Vivo (3/3) What makes Campo Vivo a successful example of Model 3: Value Chain - Suppliers? • It benefits small producers by offering them a stable channel through which to sell their products ◦ Guaranteeing stable prices. By signing forward contracts with McCain and other institutions, +50% of harvest is guaranteed at set price; ◦ Producers by themselves would not be able to sign these contracts ◦ Continuous and constant income to families. • It provides additional support and assistance to help producers improve ◦ Campo Vivo farmers have yields which are higher than the national average in Colombia
  22. 22. 22Yunus Social Business Back to the BMC: Where does the social impact fit in Model 3? Key Partners: Increased focus on understanding your suppliers (or distributors), who are also your beneficiaries Typical Challenges of Model 3: Access to markets and end user, Supply Chain 1 2 Channels: Understand what role you can play in the value chain to benefit your suppliers
  23. 23. 23Yunus Social Business Quality and availability of education is very poor, affecting the future of children in Haiti Unemployment can be as high as 85% of the population, families often times cannot afford to pay much and schools have difficulties to survive • 90% of schools must rely solely on enrollment fees • Nearly 50% of school age children don’t go to school. Model 4 Case Study: Léogâne Poultry (1/3) What is the problem? Who? Why? Consequences? Léogâne is a seaside town in Haiti. The town was at the epicenter of the 12 Jan 2010 earthquake, and was catastrophically affected, with 80-90% of buildings damaged, of which schools.
  24. 24. 24Yunus Social Business Model 4 Case Study: Léogâne Poultry (2/3) Business Activity Business Model: Fill a gap in the local market • The business will rear chicken and produce ready-for-sale poultry products. o A poultry farm with a production capacity of 7,000 chicken and its own slaughterhouse o The chicken are prepared and packaged at Leogane Poultry’s facility before being sent out to a cold storage. • The company will be the only poultry production firm in the area that sells prepared chicken meat • Value proposition: The presence of the farm in Léogâne will allow customers to purchase poultry in the area rather than having to travel long distances. • Key customers: Families, restaurants and hotels, shops and retailers, churches, orphanages and NGOs in the La Gonâve area and its surroundings. • The revenue of the poultry farm is used to financially support four schools in surrounding areas and assisting families that do not have the economic capacity to fund their child’s education.
  25. 25. 25Yunus Social Business Model 4 Case Study: Léogâne Poultry (3/3) What makes Leogane Poultry a successful example of Model 4: “Give Back”? • The chicken farm’s first purpose is the financial support of a social cause: 4 schools and education help to families o The profit of the poultry farm will subsidize the budgets of these schools, allowing over 600 children to receive better quality education o The business helps to pay salaries of teachers and other employees in the 4 schools
  26. 26. 26Yunus Social Business Back to the BMC: Where does the social impact fit in Model 4? Key Partners: Your partner (school, librariy, non-for-profit) is your beneficiary. Its mission is a social cause. The partner has limited resources Typical Challenges of Model 4: Governance (money flows), Scalability 1 2 Cost and revenues: Create enough profit to cover some of the costs faced by the beneficiary in its social mission 2
  27. 27. 27Yunus Social Business Closing thoughts • Most often, there are overlaps between the 4 Social Business Models: o DIGO Distribution is an example of overlap between Model 1 and Model 3. DIGO’s secondary goal is also to empower the owners of the small ‘points of sales” in their business, thus empowering their distributors (model 3 – distributors). o Kreyol Essence not only creates jobs, it also provides a stable market for small, very poor producers of castor oil. Hence in this case study, there is an overlap between Model 2 (Good Jobs) and 3 (Value Chain) o Leogane poultry supports a school (model 4), but also creates employment (model 2) • However, most successful social business models start by focusing one type of beneficiary o Once the primary goal is successful, other secondary beneficiaries can be looked at in more depth
  28. 28. 28Yunus Social Business 28 Your turn! • What social model does your business mostly focus on? • Where is your impact on the BMC? • What challenges can you face?
  29. 29. 29Yunus Social Business 29 Reading List • Innovating for Shared Value : zer_and_co_-_HBR_-_Innovating_for_shared_value.pdf • _poster.pdf • Social Business Model Canvas : Canvas_1.pdf • KaBoom! Case Study for Social Enterprises : think/kaboom/KaBOOM_Case_Study.pdf • Business Model for SE Design : 4844-b34c-7aee15c8edaf/Business-Model-for-SE-Design-Burkett.pdf