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 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.

Anyone who has been around the social sector for the past 30 years should be aware of the idea of systems change – it’s not new. But there seems to be a renewed interest in it at the moment, partly through Catalyst 2030 starting up in Australia.

Changing ‘systems’ is not a quick fix. The global systems we live with have been in the making for many years through the interplay over time of political philosophy, economic theory, ideology, theology and financial practices. These are all ingredients in the world’s current major systems –neoliberalism, capitalism, fascism, communism, or socialism.

It is not possible to understand what is happening in any of these systems by looking at their individual parts. To understand what is happening we need to understand how the different parts of the system interact and affect each other, which actors are affecting the system and what motivates them.

But how do you do that?

We propose two practical ways to get to to grips with systems change: combining ‘Critical Theory’ with the ‘power and systems approach’. Through that combination we can engage with global systems at a local level. The process must involve self-reflection as much as reflection of the external system we seek to change.

Top take-aways

• Activists need to become better ‘reflectivists’, taking the time to understand the system before (and while) engaging with it.
• We need to be clear what system we want to change and if we are part of or benefit from that system.
• The legitimate starting point for systems change is emancipation – to liberate people from the circumstances that enslave them.
• Global systems are changed by action at a local level.
• What climate change, gross inequality, or poverty are for us, slavery was once to the anti-slavery movement. Systems can be changed when small cogs in a large machine start to function differently.

Position paper: what is systems change and why should we bother?

The post Position paper: what is systems change and how do we do it? appeared first on The Dragonfly Collective.

In December 2019, Ms Rose Blossom was awarded the Pride of Brent Award for its Fly Girls project, a social enterprise providing services for black women and girls in Wembley, London. Amanda Epe, a black woman, is the founder of Ms Rose Blossom. How did she do it?

Amanda was the first member of the Social Enterprise Ideas Development (SEIDs) Hub – a social enterprise incubator in London, but not as we know it. SEIDs is designed for people from disadvantaged backgrounds who have a social enterprise idea, but who the traditional social enterprise ecosystem isn’t set up to support.

The social enterprise system favours the white middle class

Social enterprises often focus on creating job opportunities for people who are living with disadvantage because they do not have sustainable income from work. The general approach is to develop opportunities that create jobs for people who are out of work. The work is provided by those with the resources – especially finance – to do so.

In the social enterprise sector access to resources – financial and otherwise – are more readily available to white middle class “heroic” entrepreneurs, who create new social businesses as a result of their access to these finances and resources.

But where are the opportunities for people with scant financial resources, no savings to invest, living day-to-day on totally inadequate welfare income, who have a business idea? With no available cash or any other resource to access the support they need to commence their own social enterprise or ethical small business as a pathway out of poverty and unemployment, where do they go?

Is it even feasible in a “business” or “impact investing” sense to consider that people living with day-to-day disadvantage and poverty could have a business idea? And that given the right support and opportunity this business idea could provide them, and others, with sustainable income from work and a secure future?

There’s a different approach – feasibility indicator one: a government inquiry

Released in August this year, the Inquiry into sustainable employment for disadvantaged jobseekers (Parliament of Victoria, Legislative Assembly, Economy and Infrastructure Committee) paints a grim picture: “… types of employment barriers experienced by jobseekers facing disadvantage will persist and are likely to intensify following the COVID-19 pandemic. Increased competition for fewer job vacancies will also make it harder for these jobseekers to gain employment”. Add to this the analysis by Deloitte Access Economics that 150,000 fulltime job losses are predicted when the coronavirus supplement ends and the grimness is confirmed.

So how to respond? The Inquiry into sustainable employment for disadvantaged jobseekers makes two relevant findings:

• Finding 52 – Social enterprises that employ jobseekers facing disadvantage provide an important stepping stone for these jobseekers to move into mainstream employment.
• Finding 54 – Assisting jobseekers from disadvantaged backgrounds to start a small business helps them gain financial independence and can lead to creating jobs and employing jobseekers from similar backgrounds.

Both these findings suggest that assisting job seekers from disadvantaged backgrounds to start a social enterprise or ethical small business will assist them to gain financial independence and can lead to them creating jobs and employing jobseekers from similar backgrounds.

There’s a different approach – feasibility indicator two: SEIDs Hub Wembley

In 2015, I visited a disused building in Empire Way, Wembley, London with the director of Caritas Westminster.

The building – previously an Irish Catholic Social Club – was dilapidated and run-down. “What would you do with that?” I was asked. I suggested that with a bit of work the premises would be a great space to host a social enterprise incubator – but not one of the traditional types already on offer around London.

What followed was several papers focused on options and strategy, a feasibility analysis, a business plan, several grant applications, numerous conversations and discussions with staff and board members, and key internal and external stakeholders, especially the local Wembley community.

The result was SEIDs – Social Enterprise Ideas Development – a new social enterprise hub, open for business on 1 October 2018.

SEIDs is different… and it works

The differentiator for SEIDs amongst other social enterprise “hubs” is its offer of financial support packages to people who would otherwise be excluded from access to business development and support to commence their own small business /social enterprise as a pathway out of poverty.

Since 2017 SEIDs has attracted capital funds of £600,000 to refurbish the premises in Empire Way, £230,290 from the Brent local government Neighbourhood Community Infrastructure Fund for specific programmes, £224,000 from trust and foundations to provide financial support packages, and £280,000 to underwrite operational costs from the project sponsor Caritas Westminster – in total £1.4 million, the equivalent of approximately A$2.6 million.

SEIDs Hub has 65 members after 22 months of being open for business (the last six-months impacted significantly by COVID-19). The majority of members are those who have qualified for a financial package (valued between £3,750 ? $6,700 AUD) and who are from a Black, Asian and Minority Ethnic (BAME) background – in Australia the equivalent cohort is identified as CALD – with around one-third of members self-financing their engagement with the hub. This mix of self-financing members and those on a financial support package is another “differentiator” at the hub.

What’s on offer at SEIDs?

All members have access to a physical space with individual and collective work desks, break-out space, private and group meeting rooms and a separate fully equipped training facility. Additionally, two tailored programmes are offered for those who are eligible for a financial support package: The SEIDs Pre-Start Up 12 Week Program for 15 participants delivered in partnership with the School for Social Entrepreneurs (SSE). The program offers seven free practical weekday evening learning sessions over 13 weeks, a £500 grant, and a community of other people starting up projects in Brent to meet regularly, gain peer support and work through challenges together.

The SEIDs 12-month Start Up Business Program offers up to 25 participants the tools, resources, networks and confidence to set up and develop their own business. This program is for anyone who is unemployed, on benefits or who has been struggling to find enough work and who can access a financial support package. The program offers 12 workshops, a £500 grant on completion of a viable business plan, access to specialist mentors, access to a business coach and open access to the SEIDs co-working space. The first program that commenced in September 2019, and the current program commencing this month, are fully subscribed with a waiting list for the next cohort to commence.

Both the 10-week and 12-month programs have been designed with and delivered by people from the Brent community and others who are outside that community, to ensure accessibility and appropriateness of language and content.

The learning approach and style is focused and tailored to the needs of all its members, particularly BAME (CALD), migrant and refugee communities as well as the long-term unemployed. The focus is on peer-to-peer learning in communities of trust, support and collaboration – an ecosystem or ethos different to the “traditional” social enterprise incubators/accelerators.

With few exceptions, support for social enterprise start-ups and scale-ups follows a particular pattern – a series of workshops followed by refinement of the enterprise idea and then a pitch to a panel of potential “impact” investors. This approach is entirely unsuited to people from disadvantaged communities.

The competitive pitch approach to potential investors after a series of business grooming workshops favours a particular “style” and personality profile that is more likely apparent amongst young middle-class “changemakers” than other particular cohorts of people, and difficult to negotiate for BAME (CALD), migrant and refugee communities as well as the long-term unemployed. Ashoka some years ago ditched the pitch in favour of what it now calls “informed conversations” where everyone is around a table – not one person out front competing via a pitch performance.

What we have learnt

We have discovered many women and men are excluded because of their financial circumstances from access to social start-up support. We have also discovered that given the opportunity, they can be the authors of their own change, their own story and successfully deliver a social enterprise or ethical small business that rivals any other.

Given the impact of COVID-19 on the current and future levels of unemployment and disadvantage in Australia a SEIDs project would appear to fill a significant gap in the “social”, “for-purpose”, “impactful”, “changemaking” sector. It would generate more and more opportunities for the Ms Rose Blossoms of the world to take charge of their own futures.

We would love to hear from anyone interested in getting involved in exploring Australian opportunities.

The post Why we need a different type of social enterprise hub in Australia 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.

Not-for-profit sector, for-purpose sector, impact economy, social enterprise sector, social businesses, ethical enterprises, conscious capitalism, social progress sector, difference-makers, changemakers, the social economy – these are all terms used to deliberately position a particular type of organisational, economic and social activity and differentiate it from the broader political-economic context of “market-driven for-profit capitalism”.

But does this proliferation of terms, words and language for the sector, in order to define itself as not “market-driven for-profit capitalism”, matter? Does it strengthen the sector(s) and provide a clear identity, or does it confuse and disintegrate?

One clear fact is that when it comes to “market-driven for-profit capitalism” there is no confusion about what it is or isn’t.

Whether it is Friedrich August von Hayek, Milton Friedman, Margaret Thatcher, Tony Abbott or any of the captains of capitalism, the language is clear. Free markets, small government, deregulation, privatisation and individual responsibility sum up the neoliberal ideology – the only responsibility of business is to increase its profits. As Milton Friedmanproclaims: “the only responsibility business has is to its shareholders… businessmen that take seriously their responsibilities for providing employment, eliminating discrimination, avoiding pollution… are preaching pure and unadulterated socialism”.

There is no confusion in the language describing the for-profit sector. Therefore it has no difficulty identifying its purpose or intended impact. It has a clear identity.

Identity in its simplest form is widely framed by the two common questions used when we’re asked to describe ourselves – what is your name and what do you do? The reply creates an instant “identity”. Language not only expresses identities but also constructs them, argues David Evans in his work Language and Identity.

“My name is David” and “I am a bus-driver” generates an almost immediate identity for David the bus-driver.

Imagine if in response to these two most commonly used questions to frame a person’s identity the answer given was: “My name is Mary, and Francis, and Mia and Zara, and I am a tractor-driver, nurse, sailor, window-cleaner and dentist”. Politeness would usually inhibit the observation that there may be a confusion of identity here.

It is hard to argue against the premise that a broad connection exists between language and identification. Language defines the group that we belong to, our status in the social stratification, and also determines the power we hold in our society. Our social identity is created by our language and also our future possibilities are framed by language. Language plays a major role in determining who we are and what we do.

Recently I was contacted by a person who wanted advice about how to set up a social enterprise as a “for-purpose, for-profit charity”. When I explained that perhaps the ACNC might have some issues with this description, the response was, “Well I’m new to this and I am very confused by the language used to describe what it is I think I want to do”.

This prompts the question: do the multitude of terms used to differentiate the not “market driven for-profit capitalism” sector strengthen the identification of that activity, or do they confuse, disintegrate and weaken its impact?

One could argue that the proliferation of terms to describe the sector allows for diversity, and each of these descriptions are pieces of a bigger picture.

One might also argue that there is no problem with the terms currently in use.

While we don’t want to argue over semantics (let’s just get on with it and do the job), language and its power of identification shouldn’t be ignored. When language divides and disintegrates, when it creates confusion of identity and purpose it is worth asking the question: what language might identify the not “market driven for-profit capitalism” sector in order to consolidate its identity, both for those embedded within it, and for those who look at it with scepticism?

Let’s consider some of the terms in use.

Take not for profit. No matter what anyone does under this identity, if they never make a profit (or more politely, a “surplus”) they don’t exist anymore. Perhaps “not-for-shareholders” might be a better but more clumsy identification?

Take for-purpose organisations. Name any for-profit company, charity, social club, farmers’ market or week-end lemonade stand that doesn’t have a purpose?

Take the impact economy. Even McDonalds has an impact – indeed a global impact.

Take conscious capitalism, championed by John Mackey, the co-CEO of Whole Foods Market, in a book published in 2014 with the sub-title Liberating the Heroic Spirit of Business. Conscious capitalism acknowledges that while free-market capitalism is the most powerful system for social cooperation and human progress, people can aspire to achieve more – like community social responsibility and adding stakeholders to shareholders. The problem is that Pepsi & Co is identified as a company combining “performance with purpose” and an example of conscious capitalism because they are investing in drinks that are healthier for customers. Is that conscious capitalism, or a pivot to meet changing consumer demands in order to continue to maximise profits and shareholder value?

Take social enterprise/business. Now here is arguably a point of difference that clarifies identity. A social enterprise (or social business) in simple terms is a business that trades for a social purpose. Social enterprises are businesses that trade to intentionally tackle social problems, improve communities, provide people access to employment and training, or help the environment. Yet even within this bubble of clarity there are repetitive and ongoing attempts – led mostly by the peak social enterprise body in England – to water down the definition, generating further confusion of identity. The move by Social Traders in Australia to certify social enterprises and Social Enterprise Scotland to be clear on what a social enterprise is not, is to be welcomed both by those in the sector and those outside it.

Given all this individual language to identify the sector as “not market-driven for-profit capitalism”, is there a collective integrated option that can be applied at the macro level and include all the various descriptions at the micro level? Is there a term that reduces confusion and provides a clear frame for articulating an alternative social-political-economy?

A collective term used widely in Europe, but that appears to be used in a limited way in Australia is the social economy.

The social economy is used by practitioners (and academics) to describe all the activities that collectively put people before profits. It collectively identifies those activities that invest in people, in their capacities and creativity, and empowers them, creating quality jobs and providing training as well as prioritising social objectives.

As in the free market economy where enterprises are meant to generate a profit, this is also true for the social economy. But the point of differentiation in a social economy is that profit gained goes toward meeting social objectives, not primarily toward generating individual wealth. Wealth is more evenly distributed with direct benefit for the many, not just the few. By prioritising social objectives, the social economy contributes in an innovative way to tackling social, economic and environmental needs in society that have been overlooked or inadequately addressed by the private or public sectors.

Most importantly the social economy includes all those actors and activities that work for an alternative economic reality to that of free market neoliberal capitalism, including all those activities that could be called “for purpose”, “impact sector” and “ethical enterprises”, along with social enterprises, cooperatives, owner-employed businesses with a social purpose, as well as self-employed women and men who use their entrepreneurial skills to lift themselves and others out of poverty.

Importantly it is more than a description of a single activity within an economy. It seeks to collectively combine all elements of a social economy from the supply chain through to the end customer into one complete mosaic – a social economy. This is a consumer-led movement where people intentionally embrace across their business models a joined up “movement” from supply to end product.

Engaging and participating within the social economy means purchasing with a purpose as well as selling for a purpose. A simple example is choosing to purchase from a social enterprise even though that cost might be greater than in the general market. The purchasing provides the economic stimulus to drive the social economy with its social objectives generating greater benefit for more and more people, not just the few.

More importantly the social economy provides an integrated marketplace that combines an alternative socio-economic reality with a joined up social movement and a shared language as well as rich content for all its stakeholders – creating new opportunities for dialogue, negotiation, and ideas that can improve outcomes for the social economy itself.

An integrated use of language with a single collective identity allows a range of actors across the sector to identify as one, in order to maximise the potential of their activities generating a significant impact with a purpose – a viable, collective, alternative marketplace to neoliberal capitalism and one that achieves mission and redistributes profits that benefit people and planet.

Identity is realising who we are at a personal level and also at a community level. To make such identification, language has been a salient feature of group membership and social identity.

Rather than confusing those of us embedded within the “social economy”, and even as a mechanism to generate collaboration rather than silos that compete, integrating identity will make the sector stronger. It will reduce confusion for those whose scepticism is facilitated by a disintegrated use of language. Clarity will also provide a powerful identity to describe a viable alternative to market-driven capitalism.

First featured in Pro Bono Australia

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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

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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.