So what’s the next step in making for-purpose business simply ‘business as usual’? We have to go to the heart of strategy and understand business model design.

In this four part blog series, we unpack the what and how of for-purpose and social enterprise business models in our new internationally recognised For-Purpose Business Model Workbook.

In parts one to three of the series we explored your impact model, your customers and your products and services. In the final part in the series, we unpack why collaboration matters, and how to balance your model.  Get your copy of the workbook.

The eight steps in for-purpose business model design

Every for-purpose business leader should be able to answer the eight core questions relating to the eight steps in for-purpose business model design:

1. What social impact will you create for which beneficiaries (what’s your theory of change, what’s your corporate strategy, and how do they link)?
2. Who are your customers and what do they want?
3. What products and services will you offer?
4. Who are your collaborators and what are the market dynamics?
5. What is your for-purpose business type/s?
6. How will you finance the model and design your pricing?
7. How will you organise your resources and design your operating model?
8. Is your portfolio streamlined and balanced?

Let’s explore steps four to eight.

Step four: understanding the market and deciding on your approach to collaboration

A fundamental difference between a for-purpose business model and a corporate business model is your approach to collaboration.

For a traditional business, the goal is to acquire and defend. For a for-purpose business, the goal is to contribute to the ecosystem so that all for-purpose businesses working to the same goal are enhancing each other’s impact. The higher the tide, the more all boats rise.

The first step is to identify all the players in the ecosystem and markets where you operate. This should include your competitors, partners or collaborators and any others that play in your space.

The second step is to map all those organisations into the power matrix. Using an excel table, give each organisation a score from 1-10 for their level of ‘interest’ and their level of ‘influence’.

• Interest = concern or care for your mission
• Influence = ability to support or resist you in delivering your mission

Once the scoring is complete, you can plot all the market players into the competitor and collaborator map below.

While this analysis will give an overview of the key competitors and external stakeholders in the marketplace there is still some more analysis that will be useful in getting your business model completed. You can find advice on tools that will help with this process on pages 28-30 of the workbook.

Step five: the 16 for-purpose business model types

Through our research and practice we have identified 16 for-purpose business ‘types’ (you can find all of them on pages 33-34 of the workbook).

The idea at this stage of the process is to use those types to generate ideas about how you might structure your for-purpose business, using the inputs from steps 1-4.

Exploring for-purpose model types is more than an academic exercise. The value of the different ‘types’ at this stage is:

• Recognition that there are a diversity of ways to achieve social impact through a for-purpose business and that there are ‘different ways to make and bake the cake’.
• Recognition that your for-purpose business may combine different ‘types’ to achieve your social impact(although fewer types is always simpler).
• Ideas and precedents that can provide a valuable ‘proof of concept’ to inform the development of your own for-purpose business.

This is the point where you should test your assumptions from steps 1-4 (strategic architecture, customers and products/services) and tweak your thinking if needed.

Step six: financing the model and designing your pricing strategy 

Step six in the process is all about answering the vital question: how will you finance the model, including designing your pricing. There are four things to consider at this point:

• Revenue model: how will you generate financial income?
• Financial projections: what revenue do you need to cover all your costs over what period of time to ensure you always have cash (cash flow is the most important element of financial projections – run out of cash and your business stops!)?
• Sources of finance: how can I avoid debt-finance, and what other funding options are available for a for-purpose business?
• Costs and price points: what will it cost you to generate revenue and subsequently what price will be sufficient to cover costs while at the same time be acceptable to your customer/markets?

Depending on whether you’re already an established for-purpose business (in which case completing this step will not be new to you) or at start-up stage (in which case you may want to see if you can get some pro bono support at this point) financial modelling tools are pretty much the same whether you are in the private, public, charity or for-purpose business sector.

For advice on pricing strategy and resources for financial modelling, check out page 36 of the workbook.

Step seven: creating your operating model

Once you have sorted the finances out, the next step is to sort out the major operational issues and answer another question: how will you organise your resources?

If you’re a start-up, this will require you to be clear about what type of legal structure you want to be and whether or not you think there may be value in registering your organisation as a charity.

This is also the point to consider your staffing model, organisational structure, legal and other legislative compliance issues, partnership and stakeholder management and a range of environmental and trade issues including:

• Health & safety
• Environmental impact
• Qualifications & skills
• Relevant legislation
• Security
• Insurance
• Terms and conditions of supply
• Waste disposal
• Contract management

At this stage you may have that line from a Coldplay song replaying over and over in your head – ‘nobody said it was easy, nobody said it would be so hard’. But the good news is, if you’ve got this far you’re nearly there!

Step eight: balancing your portfolio

Finally, you can now look at your for-purpose business model portfolio as a total package. To check that you have a financially and socially balanced portfolio we suggest you use the for-purpose impact and profitability map.

This map allows you to identify where your products/services sit on a graph that measures profitability and social impact. It’s an enhanced version of what was once called the mission/money matrix. it can be used repeatedly to check that your portfolio of activities are maximising both impact and profit.

You can see how the mapping process works on page 41 of the workbook.

Putting your for-purpose business model on the page

Now that all eight questions have been answered and the workbook tools applied, you can bring it all together with your ‘business model on a page’. It looks like this:

What to do next

The tools provided here offer a guide to developing a viable for-purpose business model, to help executive teams wanting to build a purpose-driven business.

The original motivation for creating this workbook arose from the bigger question of how to create a more sustainable and fairer economy – one where profit is an enabler of social impact, rather than profit being an end in itself. For-purpose and social enterprise business models are one way to step towards that reality.

Building a fairer and more just world will take all of us. Changing our economic system is a result of work that is greater than the sum of its parts. No one business, industry, or sector can do it on their own. It’s a mosaic, and all the pieces of the mosaic are crucial (with no gaps, and no overlapping pieces).

So, the question to answer is what piece of the mosaic of a fairer world will you build?

Designing a for-purpose business model is never finished. It requires constant monitoring, review and tweaking as the environment and markets change. For-purpose business models are inherently tricky to design well, particularly striking the right balance between social impact and profitability.

But therein lies the immensely rewarding opportunity: to create business models that not only balance the books, but effectively build a fairer and more just world.

For all of us.

Get your copy of the for-purpose business model workbook.

The post For-purpose business models part four: balancing your model, and why collaboration is crucial appeared first on The Dragonfly Collective.

So what’s the next step in making for-purpose business simply ‘business as usual’? We have to go to the heart of strategy and understand business model design.

In part one and two of this series we explored the need for for-purpose businesses and articulating your impact model via a strategic architecture. Part three covers your customers, what you’ll sell them and how to wrap it up in a value proposition. Get your copy of the workbook.

The eight steps in for-purpose business model design

Every for-purpose business leader should be able to answer the eight core questions relating to the eight steps in for-purpose business model design:

1. What social impact will you create for which beneficiaries (what’s your theory of change, what’s your corporate strategy, and how do they link)?
2. Who are your customers and what do they want?
3. What products and services will you offer?
4. Who are your collaborators and what are the market dynamics?
5. What is your for-purpose business type/s?
6. How will you finance the model and design your pricing?
7. How will you organise your resources and design your operating model?
8. Is your portfolio streamlined and balanced?

Let’s explore steps two and three – your customers and your products or services.

You know what impact you want to create, so how do you make it financially sustainable?

In some for-purposes businesses, the beneficiary group receiving the social impact you’re creating will have the ability to pay for the services they receive. More often than not, they won’t. This is always the case if your social impact is environmental. In this situation, a separate paying customer group is required to balance the business model.

Every for-purpose business model must have a customer group that can pay. A clear understanding of what customers want and how they want it is fundamental to a successful business model. Without creating value for customers there is no profit to generate social impact.

Step two in your for-purpose business: how to identify paying customers

This step in the process starts by brainstorming a list of potential customers. To identify potential customers, consider the strategic architecture you have developed in step one, and ask yourself:

1. What unique resources and capabilities do you have (core competencies), and who might pay to access them?
2. Who has a business need to access your audience or network that might pay for the privilege?
3. Who has a reason to pay for the social impact you create? Who already pays the financial cost of the social problem you’re addressing? (For example, if your impact is improving mental health, consider businesses that pay the cost of poor employee wellbeing through sick leave.)

Once you have identified a long list of potential customers, they should be evaluated for their potential according to the criteria in the for-purpose business target market grid (criteria below).

Start by listing all customer groups (including your beneficiary group if they are willing and able to pay). Then give them a score of 1-3 (1 being low and 3 being high) against each of the criteria:

1. Identifiable? Are there characteristics that define this customer group that you can use to put boundaries around it?
2. Reachable? Do you have the ability to access this group via your promotion and distribution channels?
3. Stable? Is this group/sector predicted to have strong future revenues / disposable income?
4. Actionable? Is this group likely to want or need the products or services you could offer?
5. Significant? Is the market size large and is there growth potential?
6. Beneficiary impact potential? Is there possibility for this customer group to help you generate social impact for your beneficiary group?
7. Mission aligned? Is there a values alignment between your vision/activities and theirs?
8. Goal fulfilment potential? What are the goals of the customers in this market and what’s the likelihood you can fulfil them?

If you want to see what the target market grid looks like you can find it on page 20 of the workbook.

Step three in your for-purpose business: how to identify profitable products & services

Once you have identified the social impact you want to create, and the highest potential customers, the next step is to explore which products and services you could offer.

You may be wondering why the customer comes before the product or service you will offer.

The traditional business start-up manuals nearly always commence with identifying your product. However, over the past three decades this approach has been turned on its head, and the development of new products has focused on customers first. Companies such as Apple, Samsung, Google and GE are just a few examples of customer-centric business models. These businesses first identify what their customers want, then identify ways to fulfil their needs, wants and requirements with the products and services that they offer.

To identify possible products and services, we use a three step process, involving three ‘business model potential maps’. The mapping process will sort your product/service ideas into three groups:

• Future-proof: products that should be future proof and therefore move into full feasibility analysis and business case.
• Revenue generation spin-out: these products/services could work as discrete projects for revenue generation, however would need to be managed separately to usual operations to avoid distraction from social impact activity.
• Sandbox: products/services that have social impact potential, but require further adaption to create financial viability.

This step requires time and focus – it’s not a quick fix approach. You can check out how the process works on pages 22-26 of the workbook.

Designing your value proposition

The analysis and data you will have pulled together in steps two and three, along with the social impact analysis in step one, provides you with the information you need to arrive at a value proposition.

To identify a value proposition, we use the following basic formulas:

Value proposition for beneficiaries: “For (beneficiaries) that need (social impact) we offer (products/services) that are (point of difference).

Value proposition for customers: “For (customers) that want (customer needs) we offer (products/services) that are (point of difference).

Note that if your beneficiaries are also your customers, you will only need your beneficiary value proposition here, as it will serve both purposes.

If you want to see how the tools work in practice, grab a copy of the workbook.

The post For-purpose business models part three: who are your customers and what will you offer them? appeared first on The Dragonfly Collective.

So what’s the next step in making for-purpose business simply “business as usual”? We have to go to the heart of strategy and understand business model design.

In this four part blog series, we unpack the what and how of for-purpose and social enterprise business models, taking the lessons from our new internationally recognised for-purpose business model workbook.

In part one of the series we explored the need to build and strengthen for-purpose businesses. In part two we cover how to design your strategic architecture with your impact model and strategy all on one page. Get your copy of the workbook.

The eight steps in for-purpose business model design

Every for-purpose business leader should be able to answer the eight core questions relating to the eight steps in for-purpose business model design:

1. What social impact will you create for which beneficiaries (what’s your theory of change, what’s your corporate strategy, and how do they link)?
2. Who are your customers and what do they want?
3. What products and services will you offer?
4. Who are your collaborators and what are the market dynamics?
5. What is your for-purpose business type/s?
6. How will you finance the model and design your pricing?
7. How will you organise your resources and design your operating model?
8. Is your portfolio streamlined and balanced?

 Let’s start by exploring step one – your impact model.

A changed theory of change

The tool we have developed in this step combines a traditional theory of change with traditional corporate strategy – leading to one “strategic architecture” for the business.

First up, what’s a theory of change?

The theory of change tool originated in the discipline of theoretical and applied development in the evaluation field in the 1950s. It was the 1955 US-based Aspen Institute’s Roundtable on Community Change that led to the publication of New Approaches to Evaluating Comprehensive Community Initiatives. In that book, Caroline Weiss popularised the term “theory of change” as a way to describe the set of assumptions that explain both the mini-steps that lead to a long-term goal and the connections between program activities and outcomes that occur at each step of the way.

Fast forward 65 years or so, and the use of a theory of change is common, especially in the international development context, the broader for-purpose sector and more recently the impact investing sector.

A theory of change is essential for the for-purpose sector because it forces you to articulate your hypothesis of how your activity will lead to the social impact that you want to achieve. This is the key area where a for-purpose business model differs from a corporate business model.

A corporate business model has three elements:

• The product/service offered to customers (value proposition).
• The way the company is organised to deliver this product and service to its customers (operational model).
• The revenue model to generate a profit (value capture mechanism).

For-purpose business models have a fundamentally different starting point to their corporate business model cousins. Rather than a focus on the customer to generate profit and maximise value for the business owners, they have a clear intentionality around a social purpose for a beneficiary (people and planet).

The intent (or purpose) of a for-purpose business model must be social/environmental impact, and have identified beneficiaries. “Beneficiary” is a broad term referring to who or what you want to impact. That could include the environment, and it could be businesses (B2B) as well as individuals (B2C).

A theory of change is the anchor for a for-purpose business model. The importance of a clear theory of change can’t be underestimated. It should become the key strategic framework for the organisation, and guide all decision-making across the business. It must be organisation-wide, rather than having separate theories of change for separate products or services.

When it’s well operationalised, your theory of change keeps your business focused on your vision and provides a safeguard against mission drift.

Why our theory of change tool is different

1. Directly integrating vision and mission

Often a theory of change is developed alongside the mission and vision and is articulated in a different way. A whole range of new words are used, which may or may not be a similar way to express what’s already in your vision and mission. This is a mistake. The mission and vision should be fundamental to the model. If the impact you’re aiming for isn’t what’s written in your vision statement, and your mission isn’t designed to directly influence the impact areas that need to change to realise your vision, something doesn’t add up. At best, you’ll be creating tangents to your vision and mission that confuse your team and make it hard to prioritise. At worst, you’ll be directing your resources away from your ultimate vision.

2. Directly integrating (and informing) organisational strategy

Too often we’ve seen a theory of change designed in isolation of business strategy. Theory of change “purists” will say that it’s important that the theory of change is stand-alone. In this situation, the strategic plan and theory of change become separate documents that don’t always speak to each other. This again causes confusion amongst staff and difficulty prioritising (what’s driving decisions, the theory of change, or the strategy?).

3. Building the theory of change from the top down

We’ve often seen attempts to develop a theory of change from the bottom up (particularly in existing for-purpose businesses that already have a range of activities in place). Similarly, we’ve seen attempts to develop a theory of change where it’s created from the top down, but existing activities are simply retrofitted into the model. This leads to missed opportunities to focus on the activities with the highest impact.

What we need is a ‘strategic architecture’ (combining theory of change and traditional corporate strategy frameworks)

To solve the problems of integrating theory of change and strategy, we’ve created a template that combines them – a strategic architecture.

It involves six steps:

• Step one – vision: What problem are you solving and what will the world look like when you’re done?
• Step two – impact areas: What changes will have occurred in the world as a result of your unique work?
• Step three – mission: How will you generate the change identified in your impact areas? What unique role do you play?
• Step four – outcomes: What needs to happen through delivery of your mission, and what changes will beneficiaries experience through your work?
• Step five – outputs (strategic goals): What are your organisational strategic goals (that will generate the outcomes you identified)?
• Step six – activities: What are the most important activities you will deliver under each strategic goal?

Note the activities here may change as your work through development of your business model, and may also change over time.

Once the strategic architecture is completed it provides an overview of the “purpose” in your for-purpose business model, and how to get there.

Tip: You’ll need to revisit your strategic architecture as you work through your business model to check back on your activities and outputs.

If you’re ready to get started, get your copy of the for-purpose business model workbook.

The post For-purpose business models part two: creating your strategic architecture appeared first on The Dragonfly Collective.

So what’s the next step in making for-purpose business simply ‘business as usual’? We have to go to the heart of strategy and understand business model design. 

In this four part blog series, we unpack the what and how of for-purpose and social enterprise business models in our new internationally recognised for-purpose business model workbook.

Part one of the series explores the need to build and strengthen for-purpose businesses.  

For-purpose business is here to stay

You know an idea is taking off when the buzz words around it start to emerge. Shared value. Conscious consumerism. ESG. Sustainability. Conscious capitalism. Social enterprise. Social business. BCorp. There are now even roles called Chief Purpose Officers.

These are all forms of for-purpose business. And it’s taking off.

Corporate organisations are answering the call to make more than just profit 

The corporate world is facing a transitional moment where the conversation about ethical and sustainable business is shifting from ‘why’ to ‘how’.

The likes of the Economist and the Financial Times have started running stories advocating for a rethink of capitalism. Not so long ago 180 of the world’s biggest companies overturned three decades of orthodoxy to pledge that their firms’ purpose was no longer to serve their owners alone, but customers, suppliers and communities too.

According to Deloitte Insights the main measure of success in the eyes of CEOs has shifted to the impact on society, including income inequality, diversity and the environment.

One recent example is diagnostic technology company Mologic that has just become a social enterprise. The CEO said the transition was “a deliberate, logical and natural step for a company focused on delivering affordable diagnostics and biotechnology to places that have been left underserved by the relentless pursuit of profiteering”.

As Paul Polman said recently, “for 50 years, every business leader in market-based economies has been trained in one core ideology – that the purpose of business is to serve only the shareholder … this mantra is wildly unfit for today’s world and is ultimately self-defeating. We must kill the old philosophy. The sooner we understand this, the better.”

The time for change is upon the corporate world.

Charities are searching for more sustainable sources of income

From the other side of the economy, there is a growing challenge for charities to generate income beyond traditional fundraising and grants.

Global research from CAF showed that last year around a third of charities could continue for less than 6 months without additional support and around half said that they could last for less than a year. Even after lockdowns have eased, around 3 in 5 (58%) expect to see a continued loss of income sources.

Charities in all countries had to reduce services while experiencing an increase in demand for their support. The research showed that charities in most countries see the only option as looking for alternative funding sources and generating their own trading revenue.

The time for change is upon the charity world.

The good news – there’s a solution, and it’s called for-purpose business

As the Financial Times has stated, ‘this is certainly a moment’. But the key question is, what comes next?

The answer lies in the grey space in between the two sides of the ideological argument – the corporate capitalist model and the traditional charity model. It’s both/and. And it’s called for-purpose business.

It’s time for a mash-up. Organisations with the heart of a charity and the head of a corporate. These businesses use creative market-driven strategies to tackle critical social issues.

They are hybrids. They blend the commercial logic of the corporate sector with the social impact logic of the third sector. They are the practical vehicle for building an organisation that can deliver both profit and purpose.

For-purpose businesses run like normal businesses that make a profit, but also have a social or environmental mission. The social mission is embedded right across the businesses into production processes, products, culture, and relationships with employees, suppliers and customers.

It’s their position in the grey space between the corporate and charity sector that gives for-purpose businesses so much potential.

BUT – running a for-purpose business isn’t easy …

Balancing profit and purpose in practice is really tricky – arguably much harder than running a traditional business where the main metric is profit.

The problem is that traditional corporate business models fail to deliver the purpose imperative that drives the existence of organisations in the for-purpose sector. At same time for-purpose organisations that focus on their purpose imperative can often find themselves struggling to make their business model profitable.

The world of start-up for-purpose models has often been one that embraces that slogan made famous by a shoe company – just do it! Back of the envelope, business model on a page and cartoon style start-up guides are just some of the ways this ethos has developed.

Unfortunately, this has led to serious failures. And for the for-purpose businesses that disappear, we never get the chance to learn from their experience.

How do we solve this problem? We need to understand for-purpose business models

There are already thousands of for-purpose businesses around the world. But we need more of them. And we need the existing ones to scale. For that to happen, we need to go right to the heart of strategy and understand the business models that make them sustainable.

Business guru Michael Porter told us that the essence of strategy is choosing a unique and valuable position rooted in systems of activities that are difficult to match. It’s the business model that answers the question of ‘how’. It’s the lynch pin between strategy and operations.

Yet while for-purpose businesses face unique challenges and tensions that make business model development more complex, there’s an absence of ‘ready-to-wear’ business models for reconciling the tensions between social and commercial goals.

At The Dragonfly Collective we’ve experienced the challenges of for-purpose business first hand – as Directors, Board members, consultants and trainers. What we found was a lack of tools and guidance around building for-purpose business models.

So, we spent two years drawing on our four decades of practical and academic experience to develop a for-purpose business model workbook. And we’re gifting it to the for-purpose sector, because we want to see the sector grow.

Unlike other tools such as the social business model canvas, the workbook provides templates and guidance behind each step of the process.

Over the coming weeks we’ll unpack specific aspects of the workbook in Pro Bono to guide people through the process.

Let’s prove that there’s a better way to do business. Call it conscious capitalism, for-purpose business, social enterprise – it doesn’t matter. Just get started. There’s no time to lose.

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The post For-purpose business models part one: the what and why appeared first on The Dragonfly Collective.

We left Australia in 2013 to explore social innovation, social enterprise and systems change in the UK and Europe.

What we found was a mature impact sector. There are multiple well-established specialist intermediaries that produce hundreds of tools and resources, and an event and conference schedule that no one could keep up with. There are sector specific funding bodies, a maturing social impact investing marketplace and emerging financial models like community shares. There’s a legal entity tailored to the social enterprise model. While Government could always be more engaged, there are well developed campaigning efforts that see new government money flowing and supportive policy in place.

Some of the things I learnt in my time there were:

1. In a crowded marketplace where everyone shares the same vision, partnerships are a game-changer.
2. Without intermediaries that speak for the sector, bring it together and support it to grow, the sector will stay small and vast amounts of innovation would never happen.
3. Enabling the sector to speak in one voice, with a shared ‘brand message’ is the best way to get engagement with audiences beyond the sector itself.

My UK and European experience was invaluable – a defining time both personally and professionally (more on the wider learnings in another blog). But after seven years it was time to come home.

We landed back in Australia just as COVID hit. Despite the more than unusual and challenging times, what we found was a social enterprise sector full of energy, optimism and action. A sector with talented and passionate people doing inspiring work – game-changers, risk-takers, and never-give-up-ers. My kind of people.

It’s been a privilege to be welcomed back home to the Australian sector with such open arms and to join the fabulous Social Traders team. It’s been quite surreal being stuck behind a computer screen. But in every new conversation (tech failure or not!) I’ve left feeling inspired and energised by what’s possible for the social enterprise sector here.

The Australian social enterprise sector has a different opportunity to the UK. Australia’s sector is more emergent and the intermediary market that supports it is less crowded. And that’s exactly why it’s exciting.

Rather than creating a marketplace with overlapping offers and competing campaigns, we can grow together in a more coherent and more impactful way. We can shape the market strategically and collectively.

We all want to see a future world where social enterprise is business as usual. For me, it’s my career purpose.

In the wake of COVID, now is the time to be bold. For social enterprise to claim and celebrate its role in building an economy that is fairer, more just and more sustainable.

We all know that social enterprise was made for this. It’s a ready-made solution that’s been breaking disadvantage and changing lives for decades. It’s not socialism or charity. It combines profit and purpose in one business model, using the market to create impact.

Now is the time for the social enterprise sector to unite, organise and build on its past success. If we don’t make the most of this unique moment in history, we will look back and wish we were braver, bolder and more ambitious.

Most important, now is the time for us to work together. We’ll never achieve the scale of impact that Australia needs if we don’t combine and align all our talents, efforts and experience. And we’ll definitely never achieve it if we work at odds with each other.

We are an ecosystem. Like a mosaic, we all hold a piece, but it takes all of us to create the complete picture – to be more than the sum of our parts.

I have loved rediscovering that there’s a strong spirit of collaboration in Australia. In only my first four months, there have been a string of new collaborations forming with a long-term ambition to build a strong social enterprise ecosystem for a fairer Australian economy.

It’s a pivotal moment for the Australian social enterprise sector. It feels like a key point in the next phase of the sector’s evolution, building on the foundations in place. What we do now will shape the sector for the next decade and beyond. Let’s build a market where our efforts reinforce each other, so social enterprise can claim its place as a crucial part of our economy.

I can’t wait to see what we can achieve together.

What a time to be home.

The post Never a better time to come home to the Australian social enterprise sector appeared first on The Dragonfly Collective.

Now is the time for social enterprise.

If we’re going to see more of social enterprises, and more of them growing, we need to go right to the heart of strategy and understand the business models that make them work.

We researched best practice on social enterprise business model design, and produced the social enterprise business model toolkit. It’s based on a review of 92 international journal articles and interviews with leaders of social enterprise peak bodies in the UK that support over ten thousand social enterprises. 

Social enterprise business model toolkit – three part blog series

“I have been in the social enterprise sector for 20 years and have never read such a good introduction to the issues faced by social enterprises and those that start them!” – UK social entrepreneur 

“In all the research I have done, the best guide to set up a social enterprise has been your publication.” – Australian social entrepreneur

Blog #1: the why and what

Part one sets out the core components of any successful social enterprise, and picks apart the trade-offs you’ll need to manage when it comes to governance, operations, management, stakeholder management or strategic decision making.

Blog #2: the 16 social enterprise business model types

Part two explored the four social enterprise business model categories and the 16 social enterprise model types. There is no magic formula (sorry!), but the types are designed to spark ideas for how you might refresh or build your own social enterprise business model.

Blog #3: the seven steps to social enterprise business model design 

Part three explores seven steps to consider when pivoting or building a social enterprise business model. There are plenty of tools and tips along the way.

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Download the complete social enterprise business model toolkit

The post Social enterprise business models appeared first on The Dragonfly Collective.

In the previous two parts of this series, we covered the components of a social enterprise business model, the trade-offs that have to be managed and the 16 social enterprise model types. Part three of the series explores seven steps to consider when pivoting or building a social enterprise business model with tools and tips along the way.

The seven questions for social enterprise executives

There are seven steps to building or pivoting a social enterprise business model. They are based on seven questions every social enterprise executive should be able to answer:

1. What social impact do you create for which beneficiaries?
2. Who are your customers, what do they want, and how do you structure the value proposition?
3. What products and services can you offer that achieve the best balance of profit and social impact?
4. What are your business model options, and how many should you run?
5. How do you finance the model?
6. How do you organise your resources to deliver profit and social impact?
7. Is your product and services portfolio balanced?

Step one: what social impact will you create, for which beneficiaries?

The first step (and it must come first), is to identify the social impact you hope to create – the change you want to see in the world. This sounds obvious, but it’s amazing how many social enterprises gloss over this step.

This is primarily about deciding on your beneficiaries – who or what you want to impact. Beneficiaries could include the environment, and it could be B2B or B2C.

The best way to capture your intended social impact is in a theory of change. We have created a theory of change tool for defining your purpose that integrates your vision and mission and strategic goals. That means you’ll end up with just one visual that shows on one page why you exist, how you’ll deliver impact and what your strategic goals are.

This should become the key piece of strategic infrastructure for your organisation, and guide all decision-making across the business.

Questions to ask yourself to develop your theory of change strategic framework:

• What is your purpose? What change do you want to see in the world?
• What needs to happen to bring about your vision?
• What unique role do you play in influencing the impact areas you identified (your mission)?
• Who do you need to reach to influence the impact areas (your beneficiaries)?
• What needs to happen for you to achieve your mission (strategic goals)?

Tool: theory of change framework (available on page 37 of the toolkit).

Step two: who are your paying customers, and what do they want?

Every social enterprise model must have a customer group that can pay. Many social enterprises don’t spend enough time thinking about who their target customers are and tailoring the offer.

Customers could include government funders or philanthropists (who are both different types of customer, but rather than buying a product they are ‘buying’ social impact). In some cases the beneficiaries will also be the customers.

A clear understanding of what customers want and how they want it is fundamental to a successful businesses model. Without creating value for customers there is no profit to generate social impact.

To identify potential customers, ask yourself:

• What unique resources and capabilities do you have, and who might pay to access them?
• Who has a business need to access your beneficiary audience or network?
• Who has a reason to pay for the social impact you create?
• Who already pays the financial cost of the social problem you’re addressing?

Tool: target market prioritisation grid (available on page 40 of the toolkit).

Step three: what products and services will you deliver?

Many social enterprises start with this step – an idea for something to create/sell. It’s important this step comes after step one and two.

Once you have identified the social impact you want to create, the beneficiaries you need to reach and the highest potential customers, the next step is to explore which products and services you could offer.

This step starts with brainstorming a long list of potential products and services that meet the needs of beneficiaries and/or customers (not just your first idea). This should take into account the core capabilities and resources you already have that you could draw on to meet those needs.

Each of the options should then be evaluated according to six criteria:

• Customer benefits: degree of potential benefit to customers.
• Implementation effort: degree of effort/difficulty to implement.
• Revenue potential: anticipated level of income and profit.
• Beneficiary impact: anticipated impact on beneficiaries (according to criteria in the theory of change).
• Synergies: extent it complements existing services/capabilities.
• Wider system potential: level of complementarity with existing sector products/services, and partnership opportunities.

Tool: social enterprise model map (available on page 42-43 of the toolkit). 

Step four: which social enterprise models should you use?

Step four looks at how you can organise and combine the products or services you want to offer to your beneficiaries and customers.

Review the 16 social enterprise model types (explained in part two of this series). For each social enterprise model, ask yourself:

• What would it look like for us if we were to implement this model?
• How could it help us to meet the needs of beneficiaries and customers, and deliver the products and services we identified in step three?

Parallel or integrated value propositions?

Here you will need to decide whether you can integrate your value proposition for customers and beneficiaries in one, or whether they will need separate parallel value propositions.

Creating parallel value propositions involves engaging with the market (customers) to cross-subsidise social activity (for beneficiaries) through multiple types of disconnect activity. This can be achieved through structural separation, for example by splitting a social enterprise into a charity and a trading company.

Creating an integrated value proposition involves linking commercial activity directly to the social mission. Social impact is generated as a result of trading activity.  Profitability can rise significantly by shifting the model from acquiring funds for the social mission to generating revenues with the social mission. This involves finding a way to build beneficiaries into the offers for customers, so that social impact and profit are generated simultaneously.

Ask yourself:

• Are the needs of customers and beneficiaries similar enough to be combined in one value proposition, or are they separate?

How many models to run?

You can select multiple models or combine models.

On the one hand, it is devilishly difficult to operate multiple business models because it creates greater complexity, requires broader organisational skills and greater employee flexibility.

On the other hand, there are situations when a social enterprise may need to address multiple customer groups in different ways. Parallel business models such as this work well when they are mutually reinforcing (when the models are complements not substitutes).

As a rule of thumb, fewer models is simpler.

Ask yourself two questions to decide when to operate multiple business models:

• How many critical assets do the models share (the more, the better the chance of success)?
• How many shared capabilities and resources will result from the operation of the models (the more, the better the chance of success)?

Step five: how will you finance the model?

Once you have decided on your beneficiaries and identified customers, you’ll need to work on your financial model. This includes your revenue model, financial projections, sources of finance, costs and price points.

This step is about determining how to generate enough revenue to cover the costs of delivering social impact.

Step six: how will you organise your resources?

The final component of the social enterprise model is your operational model. This involves deciding on your legal structure, staffing, partnerships, environmental approach and your supply chain.

Step seven: is your overall business model streamlined and balanced?

The final step is to look at your social enterprise model portfolio in the round as a total package. Of the models you want to operate, check that you will end up with a financially and socially balanced portfolio. This step is only relevant if you are operating more than one model or product/service.

For your full suite of products and services, ask yourself:

• Is there a balance between those that generate profit and those that are break-even or loss-making?
• Is there a balance between those that generate high social impact, and those that generate lower social impact (but high profit)?

Tool: social impact and profitability map (available on page 53 of the toolkit).

Summary

Social enterprise models are more important than ever in the Covid-19 recovery phase as new market opportunities emerge and community needs change.

The toolkit offers a starting point to developing a viable social enterprise model, to help executive teams wanting to build a purpose-driven business. There is no magic formula, and business model design always requires strong contextual knowledge and lots of creativity and imagination.

Designing a social enterprise model is never “finished”. It requires constant monitoring, review and tweaking as the environment and markets change. It is recommended that each of the seven steps be completed on a regular basis, built into the organisational strategic planning cycle.

Social enterprise models are inherently tricky to design well, particularly striking the right balance between social impact and profitability. But therein lies the immensely rewarding opportunity: to create business models that not only balance the books, but effectively build a fairer and more just world.

For all of us.

The post Reimagining your social enterprise business model post Covid-19 (part three): the seven steps appeared first on The Dragonfly Collective.

A three part blog series covering our NEW social enterprise business model toolkit

After the shakeup of Covid-19, many of us will be in crisis and survival mode. But now is also the time to be thinking about the future and recovery phase. There will be new market opportunities as services and products are reimagined, new needs from our communities, and a more open space for business models with purpose as we question an economic system that valued GDP above all else.

We researched best practice on social enterprise business model design, but other than the social business model canvas, there wasn’t much out there. So we did our own research and produced the social enterprise business model toolkit. It’s based on a review of 92 international journal articles and interviews with leaders of social enterprise peak bodies in the UK that support over ten thousand social enterprises. 

In part one, I shared the components of a social enterprise business model and the trade-offs that have to be managed.

Part two of the series explores the four components of a social enterprise business model and the 16 social enterprise model types. There is no magic formula (sorry!), but the types are designed to spark ideas for how you might refresh or build your own social enterprise business model.

The four social enterprise model categories

There are four basic business model types that explain the different ways that value is created and captured in corporate organisations. These are described in the Business Model Zoo developed by Cass Business School. In the social enterprise business model toolkit, each of these business model types has been adapted to apply to social enterprises.

Product social enterprise models

Product social enterprise models involve a standardised product sold to customers, who are also beneficiaries (generally at a more affordable price). In this model the value proposition for customers and beneficiaries is integrated – social impact and profit are delivered simultaneously.

Solutions social enterprise models

Solutions social enterprise models involve a customised solution developed with a customer. In this model the beneficiary is also the customer (paying a standard or reduced rate). It differs from the product model because the social enterprise engages with the customer/beneficiary about their needs and then provides an integrated solution – it tends to be service delivery. In this model the value proposition for customers and beneficiaries is integrated – social impact and profit are delivered simultaneously.

Matchmaker social enterprise models

Matchmaker social enterprise models use brokerage to connect customers and beneficiaries. Income is usually created through a fee based on ‘trades’ between the two groups. The model relies on generating trust. Value is created by reducing the search effort for customers and offering a marketplace to beneficiaries or subsidised access to support services from the brokering social enterprise. In this model the value proposition for customers and beneficiaries is parallel – social impact and profit are delivered separately through different customer/beneficiary markets.

Multisided social enterprise models

Multisided models involve brokerage between three parties. The social enterprise establishes a set of relationships between previously disconnected but complementary customers and beneficiaries. In this model the value proposition for customers and beneficiaries is parallel – social impact and profit are delivered separately through different customer/beneficiary markets.

The beneficiaries receive products or services at below cost, paid for by customers who gain from the ‘consumption’ of the beneficiary group (for example, delivery of social impact or enhanced CSR credentials). The model generally relies on ‘conscious’ customers paying a premium for services that include delivery of social impact.

The 16 social enterprise model types

Across each of these four business model types, a review of 92 international journal articles identified 16 types of social enterprise business models. These types can be adapted and combined, so are designed to spark ideas about how your business model might shift in response to Covid-19.

Summary

While there is no magic formula for social enterprise business model design, these 16 social enterprise model types offer ‘ready to wear’ models as a starting point for combining profit and social impact. Business model design in practice however, will always require strong contextual understanding, along with creativity and imagination.

Part three in this series will cover seven steps to consider in social enterprise model design.

The post Reimagining your social enterprise business model post Covid-19 (part two): the 16 social enterprise model types appeared first on The Dragonfly Collective.

A three part blog series covering our NEW social enterprise business model toolkit

After the shakeup of Covid-19, many of us will be in crisis and survival mode. But now is also the time to be thinking about the future and recovery phase. There will be new market opportunities as services and products are reimagined, new needs from our communities, and a more open space for business models with purpose as we question an economic system that valued GDP above all else.

We researched best practice on social enterprise business model design, but other than the social business model canvas, there wasn’t much out there. So we did our own research and produced the social enterprise business model toolkit. It’s based on a review of 92 international journal articles and interviews with leaders of social enterprise peak bodies in the UK that support over ten thousand social enterprises. 

In this first of a three-part series, we set out the core components of any successful social enterprise, and pick apart the trade-offs you’ll need to manage when it comes to governance, operations, management, stakeholder management or strategic decision making.

A moment of opportunity: why now is the time for social enterprise

One thing Covid-19 has made abundantly clear (if it wasn’t already) is that our economy is not working. Small governments, diminished welfare systems and free markets left to dictate our way of life have left us vulnerable.

There has been lots of commentary about how after such a seismic black swan moment, we will not and cannot return to the way things were.

We knew this already. In 2019 the likes of the Economist and the Financial Times started running stories advocating for a rethink of capitalism. At the same time 180 of the world’s biggest companies overturned three decades of orthodoxy to pledge that their firms’ purpose was no longer to serve their owners alone, but customers, suppliers and communities too.

From the other side of the economy, there is growing interest from charities in generating income beyond traditional fundraising and grants. More are now looking to social enterprise models as a way to create trading revenue.

As we rebuild our economic system, we need social enterprises more than ever.

There are already thousands of social enterprises around the world. If we’re going to see more of them, and more of them growing, we need to go right to the heart of strategy and understand the business models that make them work.

Quick recap: what is a social enterprise?

Traditionally society was organised into three parts: the private sector, the government sector and the charity sector. But there is a grey space in between: the social enterprise sector.

Social enterprises are hybrids. They blend the commercial logic of the corporate sector with the social impact logic of the third sector and create a mash-up. They are the practical vehicle for building an organisation that can deliver both profit and purpose.

Social enterprises run like normal businesses that make a profit, but also have a social or environmental mission. The social mission is embedded right across the businesses into production processes, products, culture, and relationships with employees, suppliers and customers.

It’s their position in the grey space between the corporate and charity sector that gives social enterprises so much potential.

We need more of them. And we need the existing ones to scale and grow. For that to happen, we need to understand the business models that make them sustainable.

Social enterprise business model design: combining profit and purpose in practice

A social enterprise business model is a lot like a traditional corporate business model, but with one main difference. A corporate business model has three elements: the product/service offered to customers (value proposition), the way the company is organised to deliver this product and service to its customers (operational model), and the revenue model to generate a profit (value capture mechanism).

Social enterprise models have a fundamentally different starting point to their corporate business model cousins. Rather than a focus on the customer to generate profit and maximise value for the business owners, they have a clear intentionality around a social purpose for a beneficiary.

Rather than the purpose of strategy being to create and sustain competitive advantage (in order to make higher profits), the primary purpose of strategy for a social enterprise is to deliver social impact. That means social enterprises have a fourth component in their business model: the ‘social impact model’ that describes how social impact is generated and drives all business decisions.

For social enterprise, profitability is an enabler for social impact. For corporate businesses social impact (if any) is an enabler of profit. Rather than making profit the mission, social enterprises aim to make their mission profitable. This fundamentally impacts the way strategic choices are made, and business models are designed.

The trade-offs that need to be balanced

Running a social enterprise with the dual goals of profit and purpose is arguably far more complicated than traditional business. Social enterprises need to create unfamiliar combinations of activities not found in traditional business strategy.

There are greater complexities in social enterprise governance, operations, management, stakeholder management and strategic decision making.

These challenges make it even more crucial to have a sound business model at the heart of your social enterprise. Part two and three of this series explain the business model types and the tools to help design them.

Summary

Our economy needs social enterprises more than ever, to create a new economy post Covid-19 that delivers value beyond GDP.

But it’s hard to find ‘ready-to-wear’ business models that enable the dual purpose of profit and social impact to be achieved.

The good news is that there are a number of social enterprise models that have been shown to work. In part two of this series we’ll explore them in detail and share examples – hopefully sparking ideas for how you might refresh or start-up your own social enterprise business model.

The post Reimagining your social enterprise business model (part one): the why and what appeared first on The Dragonfly Collective.

As a marketeer I’ve always been fascinated with behavioural science and how to change the values and beliefs that drive our behaviours.

So far, the only time I’ve seen a real change in beliefs is when someone experiences an issue for themselves. It’s about lived experience, or human to human connection that makes the issue tangible and personal.

Having come from a family that struggled financially, I have the benefit of that lived experience. The knowledge that poverty is not so much a practical challenge, but an emotional one. The shame, helplessness and stress it causes are far more dangerous symptoms than not having food on the table.

It’s that lived experience that drives me and my commitment to building a more equal economy where no one has to live in poverty.

The thing about something like poverty or inequality, is that it’s not contagious. So it’s easy to ignore. It’s something that happens to other people, in other places.

On the other hand, Coronavirus could impact any of us. Rich or poor. Young or old. Black, white or something in between.

World leaders and movie stars have caught the virus. People with steady jobs were stood down overnight. Flourishing industries have been brought to their knees. Some of the richest nations have the highest number of cases.

Coronavirus has equalised us.

Coronavirus has reminded us all that we are all human.

It’s that knowledge – the fear that this could impact me and the people I care about – that has driven us to completely change the way we live our lives. We have seen behaviour change on a worldwide scale, practically overnight.

Therein lies an opportunity. Our society and economy has been upended. We can choose to take this moment to rediscover our shared humanity and use it to shape what we create on the other side of the pandemic.

If we can hang on to our shared humanity as we emerge from the crisis, I hope our collective empathy will grow.

We have unfortunately seen some disgusting examples of people capitalising on this crisis to the detriment of others. Corporate CEOs standing down their staff without pay while they retire to their mansions. Airlines quadrupling the price of flights for people that just need to get home. Fraudsters offering fake testing for the virus as a way to enter people’s homes and steal.

But we have seen so many more examples of hope, support and kindness. From live streaming of concerts, to parents continuing to pay their fees when schools have closed, to Woolworths offering jobs to Qantas staff, to (dare I say it) the conservative government’s fiscal stimulus packages that prioritises the most vulnerable.

Humans have an amazing innate drive to go out of our way to look out for each other. But for some reason, when we put on suits and enter board rooms, we tend to forget our shared humanity. The ‘us and them’ separation blinds us to the view from outside the boardroom walls.

But through this crisis, we are all as vulnerable as each other. We all need to work together and do our bit to get to the other side.

I hope the result of working together and building our empathy will be a commitment across our economy to strengthen the structures that give everyone the opportunity and support to live a decent and dignified life.

Structures like a bigger and more respected social enterprise ecosystem, so that the majority of businesses in our economy are social enterprises that put the health of people and our planet above profit.

Structures like a more expansive safety net – one that provides benefits that any politician themselves feels they could reasonably live on.

Structures like new partnerships (of equals) between the corporate and third sectors, that allow for cross-pollination of skills, experience and resources to increase the ability of both sectors to deliver more social impact.

We can’t let this crisis go to waste.

Let’s use this experience to remind ourselves that when it comes down to it, we are all one global tribe. We all depend on each other. And that when everyone is taken care of, we all benefit.

We have a once in a generation opportunity to hit the reset button on our economy and our society. Let’s use it wisely. And with empathy.

The post Could this crisis create the empathy we need to build a fairer society? appeared first on The Dragonfly Collective.