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.

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.

It was an innocent question with good intent. The context however, was a Board meeting. The agenda item was the launch of a new facility. The Chair kindly suggested that perhaps staff might deal with this operational matter.

When the corporate world suffers from bad governance, the consequences are significant. Enron, Seimens, Thomas Cook, Carillion – just to name a few of the bigger failures.

But what about the third sector? How do we know what good or bad governance looks like?

The situation: the profile of boards in Australia and the UK

A review of the third sector in the UK – Taken on Trust: the awareness and effectiveness of charity trustees in England and Wales– provided the following snapshot:

• The average age of trustees is 62, with 8,000 aged over 75.
• 64% of trustees were men.
• 99% of trustees are white.
• 73% of trustees are recruited informally – generally by a word of mouth invitation.
• 55% of charities do not use a skills audit when recruiting.
• 30% do not run an induction for trustees.
• Only 40% of trustees have a fixed term – 60% can stay on forever.

In Australia, the recent ICDA Not-for-profit Governance Survey gave the following profile:

• 66% of board members are women.
• 43% of boards have at least one member who is from a culturally and linguistically diverse background.
• 68% of board members are aged over 50 and 27% are aged over 65.
• One in three boards do not have any system in place for reviewing their own performance.
• More than a third of board members say they did not receive a good induction.
• 50% of board members say they would benefit from governance training.
• One in ten boards do not measure success in any way and one in four do not collect any sort of performance data.
• 40% believe their board had insufficient understanding of the organisation’s finances.

The governance challenges in the third sector

While there are a few differences between boards in Australia and the UK (for example representation of women and people from diverse backgrounds), the data points to quite a few big concerns.

As one headline sums it up, governance in the third sector is ‘pale and stale’.

There is a large underrepresentation of young talent and a corresponding different worldview.

There appears to be huge opportunity to expand board representation in both countries to include CALD and BAME communities.

Organisations need to recruit, train and induct new board members on the basis of skills required – not willingness to be involved or existing contacts.

Boards need a good turnover that retains members for a term to ensure continuity, but moves members on to allow for fresh insights and dare it be said – innovation.

How we can improve: the 10 principles of good governance

Recent work completed in Australia by the Australian Institute of Company Directors and in the UK through a collaboration including Cass Business School, NCVO and the Charity Commission provide a set of principles that all Boards would do well to put in place.

These ten principles are a great place to start:

• Purpose and strategy: the organisation has a clear purpose and a strategy which aligns its activities to its purpose.
• Roles and responsibilities: there is clarity about the roles, responsibilities and relationships of the board.
• Board composition: the board’s structure and composition enable it to fulfil its role effectively.
• Board effectiveness: the board is run effectively and its performance is periodically evaluated.
• Risk management: board decision making is informed by an understanding of risk and how it is managed.
• Performance: the organisation uses its resources appropriately and evaluates its performance.
• Accountability and transparency: the board demonstrates accountability by providing information to stakeholders about the organisation and its performance.
• Stakeholder engagement: there is meaningful engagement of stakeholders and their interests are understood and considered by the board.
• Conduct and compliance: the expectations of behaviour for the people involved in the organisation are clear and understood.
• Culture: the board models and works to instil a culture that supports the organisation’s purpose and strategy.

Good governance is not only the very best option for the organisation being governed. In the sectors that care for people and planet, it is a crucial factor in making the world a better place for everyone.

The post What is good governance in the third sector? How we can do better appeared first on The Dragonfly Collective.

There is a lot to be said for ‘just doing it’. Social entrepreneurs by nature are people who have a big idea, take a risk and don’t give up. But ‘just doing it’ without appropriate planning and strategy is a dangerous approach.

Entrepreneurs are generally defined as people who take a risk, are unreasonable (don’t give up), have a big idea and make lots of money. Social entrepreneurs are generally defined as people who take a risk, are unreasonable (don’t give up), have few resources, have a big idea and make a social impact and some money.

If you are a social entrepreneur you pretty much have all the characteristics of an entrepreneur but with a social mission. And that’s where the danger lies. Having a social mission, wanting to make a social impact and believing in your product are all good reasons NOT to just ‘go and do it’.

Working for a social impact does not excuse social entrepreneurs from doing the hard work that any successful entrepreneur has had to do.

The ‘just go do it’ mentality is a dangerous piece of advice to anyone of any age wanting to start a social enterprise – a business that trades for a social purpose. Encouraging social entrepreneurs to bypass a disciplined approach to building a business utilising the insights from an MBA or a Masters of Business or any academic training of any sort, is both risky and naïve.

I have over the past twelve months worked with several social enterprises built around great ideas and led by genuinely passionate people working for change in an inequitable society. Their commitment to mission and making a positive social impact was unquestionable.

But a great idea and a passion for achieving social impact are not enough on their own.

Many of these social enterprises are now facing the heart-break of scaling things back or winding things up. These are social enterprises that had no business plan, no business case for new projects and no strategic plan. In many cases they had no position descriptions, bad governance structures and a serious lack of accountability. But in all cases they held a firm belief that because they are on the ‘right’ side and doing good work that everyone will flock to their cause and buy their product (even if they have no marketing plan or public profile).

In reality, the ‘just do it’ advice makes a nice tweet, but will only get you so far. And the issues that social enterprises are seeking to address are too important to risk failure because of poor planning.

There are many possibilities for social entrepreneurs to develop their ideas into great social enterprises that meet mission goals, make a serious social impact and achieve a trading surplus from which the business can be grown, extending its reach and impact. But to suggest this can be achieved by ‘just doing it’ is nothing more than a nice piece of rhetoric that needs to be carefully considered.

We need to take a ‘both/and’ approach here, where a healthy dose of passion and energy for making a social impact is tempered with sound business planning, to give a new venture the best chance of success.

Why send social enterprises to the wall just because those in the social sector assume they can be excused from working through the same disciplines as for-profit entrepreneurs? Too many great ideas fade in the social sector because of bad advice, and this piece of advice – ‘just go do it’ – needs to be put out to pasture.

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He also said women should remain silent in ‘church’. And astonishingly some people still take this advice seriously!

But back to the ‘empty yourself’ advice.  What does that have to do with strategic planning?

What would it mean for a strategic planning process if it began with something akin to a ‘mind enema’? An emptying of all the noise and clutter, the chatter and unconscious yet chosen meanings, the assumptions and presuppositions, from the deepest parts of the mind?

In a crude sense, a collective ‘emptying’ as a precursor to strategic planning might just expel or expose all the corporate ‘crap’ that so often is the ‘elephant in the room’. This could provide space for an open canvas where fresh thinking could be used to paint innovative futures.

This ‘emptying’ process should not be passive or esoteric navel gazing. It should be a hard-edged honest assessment and reflection at a personal and corporate level about power, worldviews, fears, self-esteem, hubris and the political, theological and ideological commitments that can blinker and blind new insights and innovative future options.

This would be a difficult process for almost any organisation, but you would think that faith-based NGOs might be more amenable to this process. Sadly this is not my experience. And this makes the concept of a ‘mind enema’ at the commencement of a strategic planning process even more appropriate for faith-based NGOs where the ‘voice of God’ can so easily be confused with one’s own voice and self-interest, whether as directors or managers.

There are many ways in which to undertake such a process at the commencement of strategic planning. We believe it is an essential element of strategic planning and provides an opportunity for strategic reflection to proceed strategic planning. It could be useful for individuals as well as organisations.

Empty yourself – unencumber your mind – and you may be surprised that as all sorts of tightly held notions pass away, a new vibrant and fresh way of moving into the future may have the freedom to emerge.

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In Australia not-for-profits are generally in receipt of significant taxation concessions on the basis that they exist for the relief of poverty and destitution and have a mission to alleviate disadvantage and address systems that trap people in dependency.  They proclaim a moral mission.

The word moral is used in many ways – mostly as an accusation against someone who has not played by the ‘Hollywood rules of engagement’ or contravened the rules of Christendom (often the two are confused). At an organisational level, it seems fair to assume that in proclaiming a ‘moral’ mission one has a ‘moral’ imperative to achieve that mission. To achieve that it could be argued that strategic planning and critical reflection are two ‘moral’ imperatives for the not-for-profit sector, as crucial tools in delivering on that mission.

Strategic planning in many not-for-profits is rarely fully utilised as a tool for strategic reflection. Many organisations use strategic planning to fill in tables and identify tasks – more like a task list or job schedule – than fully utilising the time to consider the major strategic questions they face both as individuals within a not-for-profit and as a collection of individuals that make up the organisation.

Who we are shapes and forms our worldview. Jeffrey Skilling the former CEO of Enron (now in prison) said “strategic planning is worthless. The only people that do it are the ones who don’t know how to make money.” There is no question that Mr Skilling had a clear worldview – a set of values and commitments that shaped his view of who he was and what Enron should be.

Our worldview shapes how open or closed we are to new ideas and ways of doing things. Our worldview prioritises things for us. We bring with us all sorts of presuppositions and assumptions when we engage in any process of planning – for many, the assumption that planning is itself a waste of time – like our friend from Enron.

The meanings we choose that inform our actions are directly embedded in the worldview we all have and our unconscious acceptance of the worldviews we hold inevitably determines how we ‘do business’.

Can we make the assumption that the Enron worldview is not one that has infiltrated the not-for-profit sector?

Strategic (and critical) reflection is one tool to guard against the worldview that strategic planning is useless.  Critical thinking and analysis about why we choose the meanings we do and how they affect the performance of our organisations (and indeed the way we live our lives and the effect that has on others who are struggling in society) is an essential tool in unmasking systems and structures that promote injustice and dilute the achievement of mission and vision.

Critical  (and strategic) thinking is also an essential tool in unmasking the systems and assumptions (the worldviews and the unconscious commitments) that often can keep organisations from excellence in customer service and delivery.

In fact unconscious worldviews and presuppositions can be the very enemy of innovation, planning and the development of new models of service delivery that achieve the ‘moral’ mandate of not-for-profits in creating better systems and opportunities for those ‘living with destitution and poverty’.

Simply put if you are going to claim the moral high-ground as a not-for-profit, you need to make sure you have the relevant tools and processes in place to maintain that ground. Critical strategic reflection and strategic planning are both essential tools for non-profits – one could even argue they are ‘moral’ imperatives.

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