Scaling Social Entrepreneurship MIT Sloan Lectures 2014

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This PPT is the class notes from a four day class at MIT Sloan School of Management that I taught on how to scale a social entrepreneurship venture (SEV). The class defines social entrepreneurship and then explores two models for how to scale an SEV. The two cases and the final evaluation of One Laptop per Child, where I served as CFO for 3.5 years are not included here.

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Scaling Social Entrepreneurship MIT Sloan Lectures 2014

  1. 1. SCALING SOCIAL ENTREPRENEURSHIP IAP 15.S59 MIT Sloan School of Management January 2014 Robert H. Hacker Rhhfla at gmail dot com C|305-
  2. 2. COURSE OVERVIEW • SE DEFINED (DAY 1); CURRENT STATUS OF SE • SCALAR MODEL; CASE STUDY (DAY 2) • BUSINESS MODEL (OSTERWALDER/HACKER) CASE STUDY (DAY 3) • ANALYSIS OF OLPC (DAY 4)
  3. 3. READINGS • Reading: A Positive Theory of Social Entrepreneurship by Felipe Santos • Reading: Osterwalder Business Model Canvas • Reading: Identifying the Drivers of Social Entrepreneurial Impact: • Reading: Scaling Social Entrepreneurship by Robert H. Hacker • Reading: Learning to Change the World • WEF ‘From the Margins to the Mainstream”
  4. 4. WHAT IS SOCIAL ENTREPRENEURSHIP? 1.Non-profit organizations that apply business expertise to become more efficient in providing and delivering their social services 2.For-profit businesses run by non-profits to help offset costs and become independent from grants and subsidies 3.High donor control philanthropy, where donors pursue their own personal social vision 4.Socially responsible businesses that offer innovative solutions to persistent social, economic, and ecological problems using market-based models Brigitte Hoogendoorn, (2011), A Conceptual Overview of What We Know About Social Entrepreneurship, EIM Research Reports
  5. 5. VALUE CREATION-VALUE CAPTURE VALUE CAPTURE
  6. 6. VALUE CREATION-VALUE CAPTURE Or expand the circle
  7. 7. SEV SE Entrepreneurship
  8. 8. “CGAP, ThinkPlace, Grameen Foundation and the Citi Foundation created a workshop to focus on analyzing the shortcomings of product launches and their inability to gain market traction [for social problems]. The team of forty brainstormed numerous challenges, which included: • A lack of sufficient resources, including both staff capacity and monetary resources • The tension between creating stability and change • Internal processes that get in the way • Complex partnerships with many moving parts • User illiteracy and discomfort with technology” NextBillion.net | Getting Innovations to Market
  9. 9. “Some broad tactics that may help overcome these challenges: • Merging commercial and social needs • Increasing awareness among banks, governments and educational organizations • Identifying new markets to reduce costs and risks • Effectively utilizing big data” NextBillion.net | Getting Innovations to Market
  10. 10. “Our brainstorming sessions also led to some more unorthodox (some might say crazy) ideas to help get innovations out to market. We developed ideas around six themes: 1. Creating new architectures, 2. Working iteratively, 3. Having more effective partnerships, 4. Creating new [business] models, 5. Focusing on innovation leadership, and 6. Getting fresh perspectives” NextBillion.net | Getting Innovations to Market
  11. 11. SCALERS MODEL • • • • • • • Staffing--"the effectiveness of the organization at filling its labor needs, including its managerial posts, with people who have the requisite skills for the needed positions, whether they be paid staff or volunteers" Communicating--"the effectiveness with which the organization is able to persuade key stakeholders that its change strategy is worth adopting and/or supporting" Alliance building--" the effectiveness with which the organization has forged partnerships, coalitions, joint ventures, and other linkages to bring about desired social changes” Lobbying--"the effectiveness with which the organization is able to advocate for government actions that may work in its favor" Earnings generation--"the effectiveness with which the organization generates a stream of revenue that exceeds its expenses" Replicating--"the effectiveness with which the organization can reproduce the programs and initiatives that it has originated" Stimulating market force--"the effectiveness with which the organization can create incentives that encourage people or institutions to pursue private interests while also serving the public good" Note: Paul N. Bloom--HBS, Fuqua
  12. 12. MEXICO CITY One of the major problems in Latin America is a high drop out rate amongst students, which in some countries begins with graduation from primary school. In classic economic development thinking this problem has many dimensions: • Politics--unemployed youth can be easily encouraged to protest or join criminal enterprises • Social--uneducated youth are likely to enter a life of poverty • Culturally--uneducated youth frequently come from minority groups • Structural--uneducated, unemployed parents tend to have children with the same future • Economic--uneducated youth provide no economic contribution and may become a burden on the society As you can hopefully see, this drop out problem can be analyzed in quite a complex way and the solutions developed typically incorporate this complexity to be responsive to all the objectives.
  13. 13. MEXICO CITY On the other hand consider the simple but elegant solution used by Mexico City’s Education Secretary Mario Delgado Carrillo. Mexico City pays a student $45 per month to stay in school and up to $65 per month if their grades are As or Bs. Payments are direct to the student through a bank card. In the program's three year history the drop out rate has decreased from 20 to 6 percent and grades have also improved.
  14. 14. HEALTH PROBLEM • DIABETES • SOLUTIONS?
  15. 15. HEALTH PROBLEM • DIABETES • SOLUTIONS – CURE – MEDICATION – EARLY DIAGNOSIS – CHANGE BEHAVIOR “incentives that encourage people or institutions to pursue private interests?”
  16. 16. OSTERWALDER BUSINESS MODEL • • • • • • • • • KEY PARTNERS KEY ACTIVITIES KEY RESOURCES VALUE PROPOSITION CUSTOMER RELATIONSHIP CHANNELS CUSTOMER SEGMENTS COST STRUCTURE REVENUE STREAMS
  17. 17. OSTERWALDER BUSINESS MODEL Infrastructure • • • Key Partners: Who are your key partners/key suppliers? Which key resources do you acquire from them? Which key activities do partners perform? Key Activities: What key activities do your value propositions/ distribution channels/ customer relationships/ revenue streams require? Key Resources: What key resources do your value propositions/ distribution channels/ customer relationships/ revenue streams require? Offering • Value Propositions: What value do you deliver to the customer? Which customer problem are you helping to solve? What bundles of products/services are you offering to each customer segment? Which customer needs are you satisfying? Customers • • • Customer Relationships: What type of relationship does each of your customer segments expect you to establish and maintain with them? Which ones have you already established? How are they integrated with the rest of your business model? How costly are they? Channels: Through which channels do your customer segments want to be reached? How are you reaching them now? How are your channels integrated? Which ones work best/are most cost-efficient? How are you integrating them with customer routines? Customer Segments: For whom are you creating value? Who are your most important customers? Finances • • Cost Structure: What are the most important costs inherent in your business model? Which key resources/key activities are most expensive? Revenue Streams: How much are your customers really willing to pay? What are they currently paying for such a service? How are they currently paying? How would they prefer to pay? How much does each revenue stream contribute to overall revenues?
  18. 18. BUSINESS MODEL • • • • • Partners Customer segments Sales strategy Distribution Pricing • Value proposition • Capital • Human resources • Competition
  19. 19. BUSINESS MODEL • PARTNERS – – – – – – GOVERNMENT (AGENCY) LOCAL FOUNDATIONS (EXISTING OR NEW) PRIVATE SECTOR COMPANIES UNIVERSITIES FAITH-BASED ORGANIZATIONS MULTI-LATERALS (SOME FOUNDATIONS)
  20. 20. BUSINESS MODEL • DISTRIBUTION – – – – ARMY WORLD FOOD PROGRAM (UN) PRIVATE SECTOR COMPANIES CSR (CELLULAR, CONSUMER PRODUCTS)
  21. 21. BUSINESS MODEL • CAPITAL – FOR-PROFIT – “BIGGEST LOCAL PROBLEM” – MICRO-FINANCE
  22. 22. OLPC

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