ENTR4800 Class 3 - Business Modelling for Social Enterprise

ENTR 4800: Social Entrepreneurship

Class 3: Business Modelling for Social Enterprise

Monday, September 24, 2012

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Instructors: Elisha Muskat ([email protected]) Norm Tasevski ([email protected])

© Norm Tasevski & Elisha Muskat

Upcoming Assignments

•  Video Assignment (5%/video x2) –  3 Minutes! (evenly split between reading review and critical

analysis/opinion) –  Videos will be uploaded to socialentrepreneurship.ca the

Friday before class. –  Due date: the Thursday prior to that week’s class!

•  Live Case Write Up (15%) –  Guest speaker next week –  Documentation on their social enterprise to be emailed to

students by mid-week –  Write-up due before start of class 4

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Agenda

•  Upcoming assignments •  Centre for Social Innovation •  What are the components of a business model for

social enterprise? •  Term Assignment •  What did we learn? •  Next week

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Business Modelling for Social Enterprise…

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A Caveat…

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We will walk you through the business modeling process…

But…

We will discuss how to infuse “social”…


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A Second Caveat…

“Business Model”

“Business Form/Legal Structure”


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A Third Caveat…

“Business Model”

“Business Plan”

Business Model 1st!!! (Business Plan 2nd)

Why business model 1st and plan 2nd?

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Because…

It is a cure for “We Need a Plan-itis”


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And…

It is a Quick way to assess Profitability/Sustainability –  Why spend months building a plan if you don’t have a real

sense of profitability/sustainability? –  If your model doesn’t make money, even with the most

ideal conditions…

…STOP! (…and rethink your business model)


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One More…

It breaks down highly complex business ideas into easily digestible (and visual) chunks

–  Gets to the heart of what you need to know to:

Set Strategy

Make a Go No-Go Decision

Make Potential Investors/funders (and business partners) Happy :)

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Are small and visual (1 page with about 10 supporting pages)

Are big and complex (often 50-100+ pages)

Cover many topics (business description, financials, marketing strategy, HR strategy, Operations Strategy management team, etc, etc, etc)

Business Models

Focus on a few topics (Will you make $$? How do the pieces fit together?)

Take weeks/months to create

Take a few days (possibly hours) to create

Are necessary for investors, funders, business partners, etc

Feed the business plan!!

Business Plans


freemium!

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user networks!franchising!

web ads!

licensing!micro-finance!retail!

subscription!

nonprofit (donation)!

open-source!loyalty!

solution shops!

!

etc…etc…etc…!


Some Definitions

•  “A business model describes the rationale of how an organization creates, delivers and captures value – economic, social, or other forms of value”

Wikipedia

•  “A description of the means and methods a firm employs to earn the revenue projected in its plans. It views the business as a system and answers the question, “How are we going to make money to survive and grow?”

BusinessDictionary.com

•  “A business model describes the specific way the business expects to make money. While a business plan is on paper (lots of paper!) a business model should be small enough to stay in the heads of the owner and staff. If a business model is on paper, it should be one page, and it would be more clearly shown as a diagram than as words.”

AudienceDialogue.net 16


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Customer Segments

The “business” Side: –  Customer “Pain” –  Difference between a

“customer” and a “client”

Infusing Social:!–  Are you selling something a

disadvantaged person/community? !


Empathy Mapping


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Value Proposition (the “Offer”)

Infusing Social:!–  Are you constructing your

offer in a socially responsible way?!

The “Business” Side: –  The “value” created for

customers (in terms of products/services), and the “pain” you are alleviating

–  An exchange of value


Quick…

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What is the last thing you bought?


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Customer Utility


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Channels

The “Business” Side: –  How the customer receives

the offer/value prop –  The physical “movement” of

the offer into the hands of the customer

Infusing Social:!–  Are you delivering your offer in

a socially responsible way?!–  Are your channel partners

socially responsible?!


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Relationships

The “Business” Side: –  Personal and impersonal

interaction with the customer –  The “movement” of

information (e.g. marketing, communication)

Infusing Social:!–  Are you marketing your service

in a socially responsible way?!–  Do you have a marketing partner

that is socially responsible?!


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Revenue Streams

The “Business” Side: –  Cash!!! (specifically, how cash

flows into the enterprise) – “Money In”

–  What is the pricing model?

Infusing Social:!–  How does being “social” impact

your revenue streams?!–  Do you allocate a portion of

your revenues to a charitable purpose?!


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Key Resources

The “Business” Side: –  Assets…and how these assets

create value –  Includes human, physical,

intellectual, and financial resources

Infusing Social:!–  Do you hire from a

disadvantaged community?!–  Do you acquire certain assets

in a socially responsible manner?!


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Key Activities

The “Business” Side: –  Actions (specifically, the

actions you plan to take to generate value)

–  Both “direct” and “indirect”

Infusing Social:!–  Do you undertake “charitable”

activities?!


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Key Partners

The “Business” Side: –  People/organizations that are

integral to enabling you to do business

–  How you partner, and what you partner on

Infusing Social:!–  Do you partner with

companies/organizations that align with your core values?!

What makes a good partnership?

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Common Vision!

Discreet Missions!

Same Core Values!

A Commitment to Invest in

the Partnership!


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Cost Structure

The “Business” Side: –  Fixed costs, variable costs,

economies of scale…“money out”

–  At this stage, focus on your cost assumptions! (don’t worry about actual $$)

Infusing Social:!–  Is there a “social premium”

you are paying to deliver on your offer?!


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So…what does a completed biz model look like???


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$$ Microloans

Branches

Personal

BOP Entrepreneurs

-Branches -Brand -Capital

Lending and

collecting $$

Government

-People -Capital Costs

Interest rates


Tip…

•  Be a Business Model “Alchemist” – You need to go through the business model process many times in order to figure out which model best fits

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Break

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“Sticky Ideation”…

What we Don’t Know!

What we know!

Bridging the Gap!!(turning what we don’t know into what we know)!


What did we learn?

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