Social Innovation and Business Models @ Diffusion Pune 2012

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"Social Innovation and Business Models" module lead by Nikhil Sareen from ISB (Diffusion Pune - 2 day residential workshop for non-profit and social enterprises)

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Social Innovation and Business Models @ Diffusion Pune 2012

  1. 1. Sponsored bySocial Innovationand BusinessModelsNikhil Sareen
  2. 2. Focus of the session• Brief discussion of concepts• Sharing of real life examples• An extremely interactive session• A dedicated Q&A session at the end
  3. 3. What is Social Innovation• Definition• Why is it important ?• How does it apply in today’s world ?• Why set up a social enterprise ?
  4. 4. Social Innovation - Definitions• Definition 1: Social Innovation refers to new strategies, ideas and organizations that meet social needs of all kinds – from working conditions and education to community development and health – and that extend and strengthen civil society.• Definition 2: Even more simply, a social innovation is an idea that works for the public good• Definition 3: Social innovation refers to innovations in those fields - education, healthcare, mobility, poverty, social exclusion, environmental sustainability, and other public goods. - which are usually deemed to fall under the responsibility of governments (the Public Sector), but which have increasingly been addressed by the Third Sector (such as charity organizations)
  5. 5. Why is Social Innovation important ?• Earlier commercial businesses and social service were distinct• Ex – Tata’s social wing, CRY etc worked solely on donations and completely relied on money being given to them, which caused problems and forced them to be heavily dependent• The next logical step was bringing innovation in order to create self sustaining entities• Hence, social innovation has become so important today
  6. 6. What is the difference between a for-profit, non-profitand social enterprise ?
  7. 7. Difference between for-profit, non-profit and social enterprise• For profits work towards maximizing shareholder value• Nonprofits came into existence because for-profits werent addressing social needs.• Nonprofits rely primarily on charitable contributions, public funding to support their programs and cover their administrative overhead.• Nonprofits are often confused with social enterprises. Over the years, nonprofits have increasingly been unable to achieve sustainability and achieve their intended purposes.• Ex: Google has created a charitable arm-Google.org-which has committed over 100 million dollars in grants and investments to advance social causes. Does this make Google a social enterprise?• To the extent that Google.org is operated as a separate entity, a case could be made that Google.org is a social enterprise but the parent company-Google-is not.
  8. 8. Difference between for-profit, non-profit and social enterprise• Social entrepreneurs build profitable business models in which doing good is an intrinsic part of the business and not just a philanthropic sideline.• Social enterprises also have a double bottom line: social impact and financial viability.• Nonprofits are often confused with social enterprises. Traditional nonprofits and citizen groups have been mainly distinguished by their benevolent intent.• In contrast, social entrepreneurs stand out by their pragmatic emphasis on getting results. The results driving the social enterprise are achieved through the revenue model.
  9. 9. Social EnterpriseA social enterprise is an organization that applies commercial strategies tomaximize improvements in human and environmental well-being, rather thanmaximizing profits for external shareholders. Social enterprises can bestructured as a for-profit or non-profit, and may take the form of a co-operative, mutual organization, a social business, or a charity organization.
  10. 10. List of Social Enterprises• Aravind Eye Hospital• BRAC• Grameen Bank• Pratham• Acumen Fund• Others
  11. 11. Social Enterprise Business Models Social enterprises apply business solutions to social problems. The ultimate goal is to achieve sustainability by enabling non-profits to support themselves financially in innovative ways instead of relying solely on grants and donations. Since there are no shareholders in a non-profit organization, the profits from the related social enterprise are completely re-invested in the work of the organization. Essential to the success of a social enterprise is an effective business model. A business model includes two key elements:• an operating strategy that includes internal organizational structure and external partnerships that are crucial for creating the organization’s intended impact; and,• a resource strategy that defines where and on what terms the organization will acquire the resources (financial and human) it needs to do its work.
  12. 12. Social Enterprise Business Models (Cont)A social enterprise can be integrated with the non-profit organization in one of several ways:Embedded:• The enterprise and the social program are one and the same. The business is created to serve clients (central to the mission)• The principles characteristic of the two types of enterprise have merged at the levels of strategy and executionIntegrated:• The business activities overlap with the social programs and the business is created as a funding mechanism and to expand/enhance the mission of the organization• The flow of benefits becomes bilateral as resources are exchanged and learning becomes mutualExternal:• Social and business activities are separate and may or may not be related to the mission of the organization and the business is created mainly as a funding mechanism to support social activities• the relationship is one-sided, as one between a charitable donor and a recipient; there are no elements of integrated strategies or management functions.
  13. 13. Social Enterprise Business Models (Cont)• Social enterprises can be classified by their mission orientation, by the level of integration between non-profit social programs and for-profit business, and by their intended target markets.• Three stages can be distinguished in the process of integration between profit-oriented and non-profit businesses. They largely correspond to the philanthropic, transactional, and integrative collaboration.At the external stage, the relationship is one-sided, as one between a charitable donor and a recipient; there are no elements of integrated strategies or management functions.At the integrated stage, the flow of benefits becomes bilateral as resources are exchanged and learning becomes mutual.At the embedded stage, the principles characteristic of the two types of enterprise have merged at the levels of strategy and execution such that social programs are managed with the efficiency typical of private business, and for-profit projects are designed with responsibility and care for others
  14. 14. Social Enterprise Business Models (Cont) If there are 3 types of mission-orientation, 3 types of integration between not-for profit and for-profit activities, and 5 types of target markets, there would be 3×3×5 = 45 possible combinations. However, mission-orientation and type of integration are highly correlated, and a business unrelated to mission should not count as a social enterprise. This reduces conceivable combinations to 2×5 = 10. According to the logical structure of social relations, H (x, y, L), x = social enterprise, y = target population (or beneficiaries), L = goods or services transacted on markets on which they are otherwise traded, and H is the specific model that results from the combinations between the three arguments. The options have been further consolidated into 9 fundamental types of business models for social enterprises which are feasible and indeed widely implemented
  15. 15. Social Enterprise Business Models (Cont)
  16. 16. Social Enterprise Business Models (Cont) Model ExampleEntrepreneur Support model Micro lending on the Grameen model has facilitated the emergence of a new class of business owners in less developed countriesMarket intermediary model Handicraft organizationsEmployment model Providing work opportunities in landscape, cafes, printing, or other businessFee for service model Membership organizations, museums, and clinicsLow income client as market Healthcare, utility programsCooperative model Bulk purchasing, collective bargaining (union), agricultural coops, credit unionsMarket linkage model Import-export or broker servicesService subsidization model Consulting, counseling, employment trainingOrganizational support model Similar to service subsidization– implement any type of business that leverages assets
  17. 17. Social Enterprise Business Models (Cont) Business Model How it works Examples Key Success FactorsEntrepreneur support Sells business support Microfinance Appropriate training for to its target population. organizations, the entrepreneur consulting, or tech supportMarket intermediary Provide services to Supply cooperatives like Low start-up costs, clients to help them fair trade, agriculture, allows clients to stay access markets. and handicraft and work in their organizations community Employment Provide employment Disabilities or youth Job training opportunity and job organizations providing appropriateness and training to clients and work opportunities in commercial viability then sells its products or landscape, cafes, services on the open printing, or other market. business
  18. 18. Social Enterprise Business Models (Cont) Business Model How it works Examples Key Success Factors Fee-for-service Selling social services directly Membership Establishing the to clients or a third-party organizations, museums, appropriate fee structure payer. and clinics vis a vis the benefitsLow-income client Similar to fee-for-service in Healthcare Creative distribution terms of offering services to (prescriptions, systems, lower clients but focuses on eyeglasses), utility production and providing access to those who programs marketing costs, high couldn’t otherwise afford it. operating efficiencies Cooperative Provides members with Bulk purchasing, Members have common benefits through collective collective bargaining interests/needs, are key services. (union), agricultural stakeholders, and coops, credit unions investors
  19. 19. Social Enterprise Business Models (Cont)Business Model How it works Examples Key Success FactorsMarket linkage Facilitates trade relationships import-export, market Does not sell clients’ between clients and the research, and broker products but connects external market. services clients to markets Service Sells products or services to an Consulting, counseling, Can leverage tangiblesubsidization external market to help fund employment training, assets (buildings, land, other social programs. This leasing, printing services, employees) or intangible model is integrated with the etc. (expertise, non-profit organization; the methodologies, or business activities and social relationships) programs overlap.Organizational Similar to service Similar to service Similar to service support subsidization, but applying the subsidization– subsidization. external model; business implement any type of activities are separate from business that leverages social programs its assets
  20. 20. Grameen Danone• What is Grameen Danone ?• How did it come into being ?• How does it sustain as a social enterprise ?• Other projects ?
  21. 21. Role of the for-profit organizations in setting up successful social enterprises• Why is their role very important ?• How do they fit in ?• Can for-profit organization set up social enterprises ?• Some examples ?
  22. 22. Transition from a non-profit to a social enterprise• Is it possible ? If yes ? How ?• How can this be achieved ?• Challenges ?• Some examples ?
  23. 23. Acumen Fund Acumen Fund was incorporated on April 1, 2001, with seed capital from the Rockefeller Foundation, Cisco Systems Foundation and three individual philanthropists. Since then its network of investors and advisors has grown to include a wide range of individuals and organizations who share our belief in using entrepreneurial approaches to solve the problems of global poverty.• Mission is to create a world beyond poverty by investing in social enterprises, emerging leaders, and breakthrough ideas.• Vision is that one day every human being will have access to the critical goods and services they need – including affordable health, water, housing, energy, agricultural inputs and services – so that they can make decisions and choices for themselves and unleash their full human potential. This is where dignity starts – not just for the poor but for everyone on earth.•
  24. 24. Acumen Fund (Cont)Acumen Fund’s presence around the world:
  25. 25. Acumen Fund (Cont)Acumen Fund’s presence around the world:Portfolios of investments:• Agriculture• Education• Energy• Health• Housing• Water
  26. 26. Acumen Fund (Cont)Acumen Fund Projects in India: (A total of 17 investments in India) Avani Bio Energy Drishtee Husk Power Systems Spring Health d.light design Ziqitza Health Care Limited Orb Energy Edubridge
  27. 27. Acumen Fund (Cont)Ziqitza Health Care: ZHL operates the Emergency Medical Response (Ambulance)Services under two models:1) Dial 1298 for Ambulance: This model works on principle of cross subsidy wherein the Ambulances are owned by ZHL and are made self sustainable by charging the end user a charge which differ basis on the choice of the destination. The principle of cross subsidy is used wherein:• Full charge to a patient going by choice to a private hospital.• Subsidized charge to a patient going by choice to a government / municipal hospital.• Free service to accident victims, unaccompanied unconscious individuals and victims of mass casualty incidents
  28. 28. Acumen Fund (Cont)2) “Dial 108 in Emergency” (popularly called 108 model): This model is in public private partnership (PPP) with State Governments, this could be either free to patient or on a user fee as per the contract with State Government. The service is provided to emergency victims. Currently ZHL is operating 860 Ambulances across the state of Bihar, Rajasthan, Punjab, Mumbai, Kerala and Odisha.
  29. 29. Acumen Fund (Cont)Drishtee Drishtee establishes kiosks that offer affordable Internet access, consumer products and community services to rural Indian villages. Local entrepreneurs manage these kiosks. The Drishtee network is vast, with more than 14,000 entrepreneurs registered to date and kiosks operating in three states. Offerings include computer education, English education, e-governance, health check-ups, and a wide range of consumer goods such as groceries, cosmetics, mobile phone recharge coupons, and rechargeable torches and batteries. With Acumen Funds investment, Drishtee is increasing the number and reach of the entrepreneurs and expanding its health-related services.
  30. 30. Book Recommendations• Building Social Business - Muhammad Yunus• The Blue Sweater – Jacqueline Novogratz
  31. 31. THANK YOUMy Contact Details:Nikhil SareenIndian School of Business (ISB), HyderabadNikhil_Sareen2013@pgp.isb.edu

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