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A Purpose-Driven
Approach to
Business Model
Design
May 2017 (Version 2.5)
Poh Kam WONG
Professor, NUS Business School
Director, NUS Entrepreneurship
Centre
Outline
1. Introduction to the Purpose-DrivenApproach to
Business Model Design (Slides 3 - 17)
2. Incorporating Social Impacts into Business Model
Design (Slides 18 - 52)
3. Incorporating a Financing Model into Business Model
Design (Slides 53 - 100)
4. Moving from a Financing Model to Stakeholder Model
(Slides 101 - 122)
5. ValidatingYour Business Model (Slides 123 - 130)
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
Purpose-Driven Approach to Business Model Design (Version 2.5 - May 2017)

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Source: Osterwalder & Pigneur
9 Building Blocks of the Business Model
by Osterwalder & Pigneur
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
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…)
• 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.)

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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
Profit
Purpose
Moving beyond just Profit Purpose…
Financial Bottom-line
Social
Purpose
Social Cost Social Benefits
…to incorporate Social Purpose…
Social Bottom-line
+
-
Social
Purpose
… but this often leads to Trade-Off…
Financing Gap
(-)
Social Impact
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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
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Source: The Straits Times
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Photos: Grameen Shakti
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Reduction of health problems from
kerosene lamps
No. of empowered women entrepreneurs
No. of rural households w. electricity
Local
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No. of empowered women entrepreneurs
No. of rural households w. electricity
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• Source fiber fromTibetan herders at a fair price,
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Photo: Shokay
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Reduce Social Disruption Cost
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Traditional Livelihoods
Yak
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income
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women
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Source:
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fashionable-and-socially-responsible/
3. Women Entrepreneurs: InspiringStories from Emerging Economies
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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
• 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
• 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:

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• 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
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• Impact = the portion of the total outcome that happened as a
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would have happened anyway
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Social ImpactValue Chain for
Dialogue in the Dark
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Goal
Alignment
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- Brand
- Staff
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-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
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

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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
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earned
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reduced dependency, less stress on caretaker…
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• Process Methods are tools to track and monitor the
efficiency and effectiveness of the operational
generate outputs.
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outcomes, and attempt to prove incremental outcomes
to the next best alternative.
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by assigning a dollar value to them.
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Methodology
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period longer than acceptable by the funding agent /
stakeholder
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activity (and hence business cost) necessary to secure the
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Cost of Social Impacts Measurements
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social impact metrics, we can better
attract financing from relevant
resource owners.
(more on this later)

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Financing Model
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Design
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Revenue
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Capital (Revenue = Cost)
Capital Financing Gap
Operational cost Revenue
Capital cost
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Financing Gap =
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Model”
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00966583759617.حبوب الإجهاض في دبي | أبوظبي | الشارقة | السطوة | سعر سايتوتكCytotec يتميز دواء Cytotec (سايتوتك) بفعاليته في إجهاض الحمل، الدفع عند الاستلام سايتوتك mifepristone حبوب اجهاض الامارات تنزيل الحمل الاسقاط علاج الاجهاض تسقيط خصيم وين احصلها طريقة cytotec للاجهاض المنزلي الجنين اريد انزل طرق للاجهاض هل يوجد دواء الإجهاض في الشهر الأول الثاني بروجسترون الميفيبريستون والميثوتريكسات اطيح بغيت وين دواء دوا من كيف اتخلص الدورة الشهرية بخصم كم سعر ... mifepristone tablet - cytotec شي ينزل الحمل حبوب تطيح الجنين اشياء تنزل الجنين اطيح سايتوتيك لاجهاض للاجهاض يطيح شي يجهض الحمل حبوب تنزيل الحمل في الشهر الثاني الأول حبوب اجهاض الحمل في الشهر الثاني الأول المجهضات الطبية الميفيبريستون والميثوتريكسات ميسوبروستول والتخلص من النزيف ما بعد الولادة. وهو يحتوي على المادة الفعالة ميزوبروستول. يتوفر حبوب سايتوتك للبيع في الدمام، الرياض، جدة، ومكة المكرمة. حيث يسهل الحصول علىها عبر رقم واتساب أو 00966583759617، ويقدم المورد تسليمًا شخصيًا باليد بأسعار تنافسية. تبحث العديد من النساء في المملكة العربية السعودية عن سايتوتك كخيار بديل للعمليات الجراحية التي تكلف الكثير من الوقت والمال، وتحمل مخاطر صحية عالية. يمكنك الآن الحصول على الحبوب الآمنة والفعالة باستخدام اجهاض سايتوتك للبيع في الامارات العربيه المتحده العين دبي ابوظبي ، هناك حبوب اجهاض سايتوتك المتوفرة بنسبة خصم تصل إلى . تعتبر حبوب اجهاض سايتوتك الحل الفعال والسريع لعلاج مشاكل الحمل الغير مرغوب فيه. نحن نتميز بسرعة التوصيل وتوافر حبوب اجهاض سايتوتك في الامارات العربيه المتحده العين دبي ابوظبي . نحن نقدم خدمة طبية مميزة لبيع حبوب اجهاض سايتوتك للبيع في الامارات العربيه المتحده العين دبي ابوظبي ، وهي تعتبر الحل الأمن والفعال للإجهاض. حبوب اجهاض سايتوتك في الامارات العربيه المتحده العين دبي ابوظبي تضمن الأمان والفعالية العالية. احصل على حبوب اجهاض سايتوتك بسهولة وسيتم توصيلها إليك في الامارات العربيه المتحده العين دبي ابوظبي . لا توجد أي تأثيرات جانبية ويمكن الدفع عند استلام الحبوب مباشرة. يمكن شراء سايتوتك في الامارات العربيه المتحده العين دبي ابوظبي من خلال سبلة البيع والشراء. لنتحدث اليوم عن بيع حبوب سايتوتك للإجهاض في الامارات العربيه المتحده العين دبي ابوظبي . في الامارات العربيه المتحده العين دبي ابوظبي ، يمكننا الحصول على حبوب الإجهاض بشكل قانوني وآمن. سنقدم تفاصيل أكثر لفهم أفضل لتأثير حبوب اجهاض سايتوتك والطرق الآمنة التي يتعين على الأفراد اتباعها عند استخدام هذه الحبوب. نحن نقدم حبوب الإجهاض في الامارات العربيه المتحده العين دبي ابوظبي .يتم توصيل حبوب الإجهاض سايتوتك بسرية تامة إلى جميع مدن الامارات العربيه المتحده العين دبي والطرق الآمنة التي يتعين على الأفراد اتباعها عند استخدام هذه الحبوب. نحن نقدم حبوب الإجهاض في الامارات العربيه المتحده العين دبي ابوظبي .يتم توصيل حبوب الإجهاض سايتوتك بسرية تامة إلى جميع مدن الامارات العربيه المتحده العين دبي ابوظبي ولدينا سايتوتك الأصلي من إنتاج شركة فايزر. لشراء حبوب سايتوتك في الامارات العربيه المتحده العين دبي ابوظبي تواصل معنا عبر الواتس اب او الاتصال هاتفيا✙❇ ❈ ((!!௵[© ) حبوب إجهاض للبيع في رأس ... The حبوب سايتوتك في دبي،حبوب00966583759617 الاجهاض للبيع في الامارات والسعودية وعمان ... — حبوب سايتوتك للبيع في الامارات ومصر السعوديةحبوب سقع

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4 In what stage does a startups comes in ? 5 Pros and Challenges 6 Pitchwoks Venture Client Program for Startups 
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6. Innovation that Reduces Cost
Cost Revenue
Financing Gap
Innovation
labour
productivity
6. Innovation that Reduces Cost
Cost Revenue
Innovation
7. Consumer Co-operatives
Capital cost
Operational cost Revenue
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Capital cost
Operational cost Revenue

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7. Consumer Co-operatives
Operational cost Revenue
8. Producer Co-operatives
Capital cost
Operational cost Revenue
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9. Cross-subsidization Model
Revenue from
Paying Customers
Cost to serve Paying Customers
Cost to serve Non-paying
Customers
• 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
• 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
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

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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
Having measurable social impact
metrics can also enable the
introduction of innovative
financing models.
10. Social Impact Bond
Source: http://www.nextbillion.net/blogpost.aspx?blogid=2179
Impact Bond Investors
Impact Bond Issuer
Measureable Impact Metrics
PublicAgency
Impact BondTraders
Private Sector Prisoner
Rehabilitation Operator
10. Social Impact Bond Example

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• 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
Source: http://www.watradehub.com/node/639
Example of ImpactTrading:
Carbon Emissions
Fairtrade: Certification commands a
premium from customers
Example of Crowdfunding for “Measurable”
Social Impact

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• 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
Financing vs. Impact Trade-off…
+
-
Social
Purpose
Financing Gap (-)
Social Impact (+)
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?
• 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

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Moving from a
Financing Model to
Stakeholder Model
• 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”
• 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…
• 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

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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
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
Solution: Hybrid Model
Hybrid model – non-profit free distribution (EmbraceGlobal)
combined with for-profit commercial sales (Embrace Innovations)
Photos: Embrace
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.

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Solution: Hybrid Model
Benefits:
• Allows them to leverage private capital, in addition to
Philanthropy, and serve all segments of the market with their
product
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
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
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

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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
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
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
• 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

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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
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
• 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
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

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SOCIAL IMPACT FINANCING
REQUIREMENTS
STAKEHOLDER MODEL
BUSINESS MODEL
SHARED PURPOSE
SOCIAL
ENTREPRENEUR
Purpose-Driven Business Model Design
Process
Wong Poh Kam
Financing
Requirements:
Founder’s Purpose:
Stakeholder
Model:
Shared Purpose:
Stakeholder Purpose:
Social Impact:
Wong Poh Kam
Purpose-Driven Business Model
Design Template
• 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
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

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• 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
How NOT to Launch a New Business:
The Case ofWebvan (1996-2001)
Photo: Webvan
Purpose-Driven Approach to Business Model Design (Version 2.5 - May 2017)
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

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• 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
• 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
Acknowledgements
The extensive assistance of Ms Prisca Lim and Ms Ng Su Fen in
the development of this workshop material are gratefully
acknowledged.
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 downloadable 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

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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
Our Supported SocialVentures
An Asia-wide competition for social enterprises that is open to the public,
identifying and providing multi-dimensional support for new 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
About Prof.Wong Poh Kam
• Professor at NUS Business School researching & teaching
Technology Entrepreneurship & Innovation Management
• Director at NUS Entrepreneurship, overseeing NUS Enterprise
Incubator (NEI), which provides seed-funding, incubation and
mentoring services to NUS-related start-ups
• Co-founded three companies in Malaysia in the 1980s

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• Active Angel Investor in high tech startups in Singapore, Silicon
Valley, China and India; Founding chairman of BusinessAngel
Network Southeast Asia (BANSEA) & BAF Spectrum (an angel
investment fund co-invested by S’pore Government); limited
partner of iGlobe PlatinumVC Fund
• 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
About Prof.Wong Poh Kam
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
Twitter: www.twitter.com/pohkam
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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Purpose-Driven Approach to Business Model Design (Version 2.5 - May 2017)

  • 1. A Purpose-Driven Approach to Business Model Design May 2017 (Version 2.5) Poh Kam WONG Professor, NUS Business School Director, NUS Entrepreneurship Centre
  • 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 - 52) 3. Incorporating a Financing Model into Business Model Design (Slides 53 - 100) 4. Moving from a Financing Model to Stakeholder Model (Slides 101 - 122) 5. ValidatingYour Business Model (Slides 123 - 130)
  • 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
  • 5. Source: Osterwalder & Pigneur 9 Building Blocks of the Business Model by Osterwalder & Pigneur
  • 6. 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
  • 7. 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…)
  • 8. • 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.)
  • 9. 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
  • 10. Profit Purpose Moving beyond just Profit Purpose… Financial Bottom-line
  • 11. Social Purpose Social Cost Social Benefits …to incorporate Social Purpose… Social Bottom-line
  • 12. + - Social Purpose … but this often leads to Trade-Off… Financing Gap (-) Social Impact (+)
  • 13. 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)
  • 14. 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
  • 15. Financing Requirements Purpose Trade off Entrepreneur The Original Purpose of the Social Entrepreneur may differ from those of the Financiers… Financiers Social Impact
  • 16. 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
  • 17. SOCIAL IMPACT FINANCING REQUIREMENTS STAKEHOLDER MODEL BUSINESS MODEL SHARED PURPOSE SOCIAL ENTREPRENEUR The Iterative Process of the Purpose-Driven Business Model Design Approach
  • 19. Self-Reflection Questions • What is your purpose? • How can it be measured? How do you measure if you have achieved your purpose?
  • 20. 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
  • 21. What is a Social Enterprise? • Social Purpose-Driven vs. Profit-Driven • Delivering Social Impacts on an on-going, sustainable, and scalable basis
  • 22. Source: The Straits Times Is this a Social Enterprise?
  • 23. 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
  • 24. 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
  • 25. 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 + + + -
  • 26. • 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
  • 27. • 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.)
  • 28. 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
  • 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. 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
  • 31. 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
  • 32. 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
  • 33. • 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.
  • 34. Yak Generate sustainable income Sales ofYarn Shokay’s Business Model Quality yak yarn Increase annual household income of Tibetan herders Tibetan herders Distributors, wholesalers
  • 35. 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
  • 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 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
  • 37. 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
  • 38. 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
  • 39. • 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
  • 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. • 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. 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. 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. 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. 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. • 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. • 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. • Acumen Scorecard • Impact Reporting and Investment Standards (IRIS) • Social Returns on Investment (SROI) Examples of Social Impacts Assessment Methodology
  • 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. However, by having measurable social impact metrics, we can better attract financing from relevant resource owners. (more on this later)
  • 53. Incorporating a Financing Model into Business Model Design
  • 54. Operational Financing Gap Financing Challenges for many Social Enterprises I – Non-Sustainable Operation (Revenue < Cost) Operational cost Revenue
  • 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. Operational Financing Gap Financing Gap = Operational Financing + Capital Financing Operational cost Revenue Capital Financing GapCapital cost
  • 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. The Sustainable + Scalable Scenario Profit > Cost of Capital Operational cost Capital cost Revenue
  • 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. • Equity Capital • Bank Loan • SupplierCredits • Customer Pre-Payment • Bond • Guarantees • Etc. Financing for Profit-Driven Business
  • 61. What about Financing for Social Purpose-Driven Business?
  • 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. Social Impact Bond
  • 63. 1. Public Funding Operational cost Capital cost Revenue Operational Financing Gap Capital Financing Gap
  • 64. 1. Public Funding Operational cost Capital cost Revenue Operational Financing Gap Capital Financing Gap
  • 65. 1. Public Funding Operational cost Capital cost Revenue
  • 66. 2. Charity Operational cost Capital cost Revenue Operational Financing Gap Capital Financing Gap
  • 67. 2. Charity Operational cost Capital cost Revenue Operational Financing Gap Capital Financing Gap
  • 74. Capital cost 5. Impact Investment Operational cost Revenue
  • 75. Capital cost 5. Impact Investment Operational cost Revenue
  • 77. 6. Innovation that Reduces Cost Cost Revenue Financing Gap Innovation labour productivity
  • 78. 6. Innovation that Reduces Cost Cost Revenue Innovation
  • 79. 7. Consumer Co-operatives Capital cost Operational cost Revenue
  • 80. 7. Consumer Co-operatives Capital cost Operational cost Revenue
  • 82. 8. Producer Co-operatives Capital cost Operational cost Revenue
  • 83. 8. Producer Co-operatives Capital cost Operational cost Revenue
  • 85. 9. Cross-subsidization Model Revenue from Paying Customers Cost to serve Paying Customers Cost to serve Non-paying Customers
  • 86. • 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
  • 87. • 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
  • 88. 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
  • 89. 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
  • 90. Having measurable social impact metrics can also enable the introduction of innovative financing models.
  • 91. 10. Social Impact Bond Source: http://www.nextbillion.net/blogpost.aspx?blogid=2179
  • 92. Impact Bond Investors Impact Bond Issuer Measureable Impact Metrics PublicAgency Impact BondTraders Private Sector Prisoner Rehabilitation Operator 10. Social Impact Bond Example
  • 93. • 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
  • 94. Source: http://www.watradehub.com/node/639 Example of ImpactTrading: Carbon Emissions
  • 95. Fairtrade: Certification commands a premium from customers
  • 96. Example of Crowdfunding for “Measurable” Social Impact
  • 97. • 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
  • 98. Financing vs. Impact Trade-off… + - Social Purpose Financing Gap (-) Social Impact (+)
  • 99. 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?
  • 100. • 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
  • 101. Moving from a Financing Model to Stakeholder Model
  • 102. • 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”
  • 103. • 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…
  • 104. • 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
  • 105. 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
  • 106. 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
  • 107. Solution: Hybrid Model Hybrid model – non-profit free distribution (EmbraceGlobal) combined with for-profit commercial sales (Embrace Innovations) Photos: Embrace
  • 108. 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.
  • 109. Solution: Hybrid Model Benefits: • Allows them to leverage private capital, in addition to Philanthropy, and serve all segments of the market with their product
  • 110. 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
  • 111. 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
  • 112. 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
  • 113. 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
  • 114. 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
  • 115. 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
  • 116. • 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
  • 117. 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
  • 118. 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
  • 119. • 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
  • 120. 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
  • 121. SOCIAL IMPACT FINANCING REQUIREMENTS STAKEHOLDER MODEL BUSINESS MODEL SHARED PURPOSE SOCIAL ENTREPRENEUR Purpose-Driven Business Model Design Process Wong Poh Kam
  • 122. Financing Requirements: Founder’s Purpose: Stakeholder Model: Shared Purpose: Stakeholder Purpose: Social Impact: Wong Poh Kam Purpose-Driven Business Model Design Template
  • 123. • 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
  • 124. 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
  • 125. • 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
  • 126. How NOT to Launch a New Business: The Case ofWebvan (1996-2001) Photo: Webvan
  • 128. 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
  • 129. • 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
  • 130. • 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
  • 131. Acknowledgements The extensive assistance of Ms Prisca Lim and Ms Ng Su Fen in the development of this workshop material are gratefully acknowledged.
  • 132. 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 downloadable 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
  • 133. 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
  • 135. An Asia-wide competition for social enterprises that is open to the public, identifying and providing multi-dimensional support for new 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
  • 136. About Prof.Wong Poh Kam • Professor at NUS Business School researching & teaching Technology Entrepreneurship & Innovation Management • Director at NUS Entrepreneurship, overseeing NUS Enterprise Incubator (NEI), which provides seed-funding, incubation and mentoring services to NUS-related start-ups • Co-founded three companies in Malaysia in the 1980s
  • 137. • Active Angel Investor in high tech startups in Singapore, Silicon Valley, China and India; Founding chairman of BusinessAngel Network Southeast Asia (BANSEA) & BAF Spectrum (an angel investment fund co-invested by S’pore Government); limited partner of iGlobe PlatinumVC Fund • 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 About Prof.Wong Poh Kam
  • 138. 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 Twitter: www.twitter.com/pohkam 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

Editor's Notes

  1. Others: Crowdfunding, micro-funding, social impact bond
  2. Simpa Networks
  3. Simpa Networks
  4. Simpa Networks
  5. Simpa Networks
  6. Non-profit While transitioning from a prototype to a market ready product Embrace achieved it’s greatest fundraising success from philanthropic donations from high net worth individuals (not foundations, as they weren’t willing to take risks). However, the donors wanted to channel their money into health care delivery and not product development, clinical trials and pilot testing, financing for which was big gap. However, an advantage of the non-profit model was that more local partners and hospitals (along with the donors) wanted to work with them if they were a non-profit and not a profit making entity. For- profit In order to scale and to achieve greater sums of money in forms of equity investments Embrace turned towards private investors who would be seeking a financial return on their innovative product. Funds were channeled into improving the product, R&D, and clinical trials. But it became difficult for Embrace to justify targeting low/small market and customer segments that are not commercially attractive. Yet the founders wanted the product to be as accessible to as many people as possible, even if that required heavy subsidization. In this for-profit model, financing healthcare delivery to low income populations remained a gap. Hybrid The nonprofit arm 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. The nonprofit accepts philanthropic contributions so it can purchase warmers and donate them to NGO partners to reach the poorest communities and develop educational programs to promote newborn health, with a focus on hypothermia. The for-profit arm raises its funding from venture capitalists and impact investors to fund the capitalintensive 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 Zenios, Stefanos, Lyn Denend, Amy Lockwood, and Stacey McCuthceon. "Embrace : Deciding on a Hybrid Structure." Global Health - Innovation Insight Series (2013): n. pag. Stanford Graduate School of Business, May 2013. Web.
  7. Non-profit While transitioning from a prototype to a market ready product Embrace achieved it’s greatest fundraising success from philanthropic donations from high net worth individuals (not foundations, as they weren’t willing to take risks). However, the donors wanted to channel their money into health care delivery and not product development, clinical trials and pilot testing, financing for which was big gap. However, an advantage of the non-profit model was that more local partners and hospitals (along with the donors) wanted to work with them if they were a non-profit and not a profit making entity. For- profit In order to scale and to achieve greater sums of money in forms of equity investments Embrace turned towards private investors who would be seeking a financial return on their innovative product. Funds were channeled into improving the product, R&D, and clinical trials. But it became difficult for Embrace to justify targeting low/small market and customer segments that are not commercially attractive. Yet the founders wanted the product to be as accessible to as many people as possible, even if that required heavy subsidization. In this for-profit model, financing healthcare delivery to low income populations remained a gap. Hybrid The nonprofit arm 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. The nonprofit accepts philanthropic contributions so it can purchase warmers and donate them to NGO partners to reach the poorest communities and develop educational programs to promote newborn health, with a focus on hypothermia. The for-profit arm raises its funding from venture capitalists and impact investors to fund the capitalintensive 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 Zenios, Stefanos, Lyn Denend, Amy Lockwood, and Stacey McCuthceon. "Embrace : Deciding on a Hybrid Structure." Global Health - Innovation Insight Series (2013): n. pag. Stanford Graduate School of Business, May 2013. Web.