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Social Innovation and Business Models Nikhil Sareen Sponsored by

Social Innovation and Business Models @ Diffusion Pune 2012

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"Social Innovation and Business Models" module lead by Nikhil Sareen from ISB (Diffusion Pune - 2 day residential workshop for non-profit and social enterprises)

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  • 1. Sponsored bySocial Innovationand BusinessModelsNikhil Sareen

2. Focus of the session Brief discussion of concepts Sharing of real life examples An extremely interactive session A dedicated Q&A session at the end 3. What is Social Innovation Definition Why is it important ? How does it apply in todays world ? Why set up a social enterprise ? 4. Social Innovation - Definitions Definition 1:Social Innovation refers to new strategies, ideas and organizations that meet socialneeds of all kinds from working conditions and education to community developmentand health and that extend and strengthen civil society. Definition 2:Even more simply, a social innovation is an idea that works for the public good Definition 3:Social innovation refers to innovations in those fields - education, healthcare, mobility,poverty, social exclusion, environmental sustainability, and other public goods. - whichare usually deemed to fall under the responsibility of governments (the Public Sector),but which have increasingly been addressed by the Third Sector (such as charityorganizations) 5. Why is Social Innovation important ? Earlier commercial businesses and social service were distinct Ex Tatas social wing, CRY etc worked solely on donations and completelyrelied on money being given to them, which caused problems and forced themto be heavily dependent The next logical step was bringing innovation in order to create self sustainingentities Hence, social innovation has become so important today 6. What is the difference between a for-profit, non-profitand social enterprise ? 7. Difference between for-profit, non-profit and social enterprise For profits work towards maximizing shareholder value Nonprofits came into existence because for-profits werent addressing social needs. Nonprofits rely primarily on charitable contributions, public funding to support theirprograms and cover their administrative overhead. Nonprofits are often confused with social enterprises. Over the years, nonprofitshave increasingly been unable to achieve sustainability and achieve their intendedpurposes. Ex: Google has created a charitable arm-Google.org-which has committed over 100million dollars in grants and investments to advance social causes. Does this makeGoogle a social enterprise? To the extent that Google.org is operated as a separate entity, a case could be madethat Google.org is a social enterprise but the parent company-Google-is not. 8. Difference between for-profit, non-profit and social enterprise Social entrepreneurs build profitable business models in which doing good is anintrinsic part of the business and not just a philanthropic sideline. Social enterprises also have a double bottom line: social impact and financialviability. Nonprofits are often confused with social enterprises. Traditional nonprofits andcitizen groups have been mainly distinguished by their benevolent intent. In contrast, social entrepreneurs stand out by their pragmatic emphasis on gettingresults. The results driving the social enterprise are achieved through the revenuemodel. 9. Social EnterpriseA social enterprise is an organization that applies commercial strategies tomaximize improvements in human and environmental well-being, rather thanmaximizing profits for external shareholders. Social enterprises can bestructured as a for-profit or non-profit, and may take the form of a co-operative, mutual organization, a social business, or a charity organization. 10. List of Social Enterprises Aravind Eye Hospital BRAC Grameen Bank Pratham Acumen Fund Others 11. Social Enterprise Business ModelsSocial enterprises apply business solutions to social problems. The ultimate goalis to achieve sustainability by enabling non-profits to support themselvesfinancially in innovative ways instead of relying solely on grants and donations.Since there are no shareholders in a non-profit organization, the profits from therelated social enterprise are completely re-invested in the work of theorganization.Essential to the success of a social enterprise is an effective business model. Abusiness model includes two key elements: an operating strategy that includes internal organizational structure and externalpartnerships that are crucial for creating the organizations intended impact; and, a resource strategy that defines where and on what terms the organization willacquire the resources (financial and human) it needs to do its work. 12. Social Enterprise Business Models (Cont)A social enterprise can be integrated with the non-profit organization in one of several ways:Embedded: The enterprise and the social program are one and the same. The business is created to serveclients (central to the mission) The principles characteristic of the two types of enterprise have merged at the levels of strategyand executionIntegrated: The business activities overlap with the social programs and the business is created as a fundingmechanism and to expand/enhance the mission of the organization The flow of benefits becomes bilateral as resources are exchanged and learning becomes mutualExternal: Social and business activities are separate and may or may not be related to the mission of theorganization and the business is created mainly as a funding mechanism to support social activities the relationship is one-sided, as one between a charitable donor and a recipient; there are noelements of integrated strategies or management functions. 13. Social Enterprise Business Models (Cont) Social enterprises can be classified by their mission orientation, by the level ofintegration between non-profit social programs and for-profit business, and by theirintended target markets. Three stages can be distinguished in the process of integration between profit-orientedand non-profit businesses. They largely correspond to the philanthropic, transactional,and integrative collaboration.At the external stage, the relationship is one-sided, as one between a charitable donor and a recipient; there are no elements of integrated strategies or management functions.At the integrated stage, the flow of benefits becomes bilateral as resources are exchanged and learning becomes mutual.At the embedded stage, the principles characteristic of the two types of enterprise have merged at the levels of strategy and execution such that social programs are managed with the efficiency typical of private business, and for-profit projects are designed with responsibility and care for others 14. Social Enterprise Business Models (Cont) If there are 3 types of mission-orientation, 3 types of integration between not-for profit and for-profit activities, and 5 types of target markets, there would be 335 = 45 possible combinations. However, mission-orientation and type of integration are highly correlated, and a business unrelated to mission should not count as a social enterprise. This reduces conceivable combinations to 25 = 10. According to the logical structure of social relations, H (x, y, L), x = social enterprise, y = target population (or beneficiaries), L = goods or services transacted on markets on which they are otherwise traded, and H is the specific model that results from the combinations between the three arguments. The options have been further consolidated into 9 fundamental types of business models for social enterprises which are feasible and indeed widely implemented 15. Social Enterprise Business Models (Cont) 16. Social Enterprise Business Models (Cont)ModelExampleEntrepreneur Support model Micro lending on the Grameen model has facilitated the emergence of a new class of business owners in less developed countriesMarket intermediary modelHandicraft organizationsEmployment model Providing work opportunities in landscape, cafes, printing, or other businessFee for service modelMembership organizations, museums, and clinicsLow income client as marketHealthcare, utility programsCooperative modelBulk purchasing, collective bargaining (union), agricultural coops, credit unionsMarket linkage model Import-export or broker servicesService subsidization modelConsulting, counseling, employment trainingOrganizational support model Similar to service subsidization implement any type of business that leverages assets 17. Social Enterprise Business Models (Cont) Business ModelHow it works ExamplesKey Success FactorsEntrepreneur supportSells business support Microfinance Appropriate training for to its target population.organizations,the entrepreneur consulting, or tech supportMarket intermediaryProvide services to Supply cooperatives like Low start-up costs,clients to help them fair trade, agriculture, allows clients to stay access markets.and handicraft and work in theirorganizationscommunity Employment Provide employmentDisabilities or youthJob trainingopportunity and job organizations providing appropriateness and training to clients and work opportunities in commercial viabilitythen sells its products orlandscape, cafes,services on the openprinting, or other market. business 18. Social Enterprise Business Models (Cont) Business Model How it works Examples Key Success Factors Fee-for-serviceSelling social services directlyMembershipEstablishing theto clients or a third-party organizations, museums, appropriate fee structurepayer. and clinicsvis a vis the benefitsLow-income clientSimilar to fee-for-service inHealthcareCreative distribution terms of offering services to(prescriptions,systems, lowerclients but focuses oneyeglasses), utilityproduction andproviding access to those who programs marketing costs, high couldnt otherwise afford it. operating efficienciesCooperativeProvides members withBulk purchasing,Members have commonbenefits through collectivecollective bargaininginterests/needs, are key services.(union), agriculturalstakeholders, and coops, credit unions investors 19. Social Enterprise Business Models (Cont)Business ModelHow it worksExamples Key Success FactorsMarket linkageFacilitates trade relationships import-export, marketDoes not sell clients between clients and the research, and broker products but connects external market.services clients to markets Service Sells products or services to an Consulting, counseling, Can leverage tangiblesubsidization external market to help fund employment training, assets (buildings, land, other social programs. This leasing, printing services, employees) or intangible model is integrated with the etc. (expertise, non-profit organization; the methodologies, orbusiness activities and social relationships)programs overlap.Organizational Similar to serviceSimilar to service Similar to service support subsidization, but applying thesubsidization subsidization.external model; businessimplement any type of activities are separate from business that leveragessocial programs its assets 20. Grameen Danone What is Grameen Danone ? How did it come into being ? How does it sustain as a social enterprise ? Other projects ? 21. Role of the for-profit organizations in setting up successful social enterprises Why is their role very important ? How do they fit in ? Can for-profit organization set up social enterprises ? Some examples ? 22. Transition from a non-profit to a social enterprise Is it possible ? If yes ? How ? How can this be achieved ? Challenges ? Some examples ? 23. Acumen Fund Acumen Fund was incorporated on April 1, 2001, with seed capital from theRockefeller Foundation, Cisco Systems Foundation and three individualphilanthropists. Since then its network of investors and advisors has grown toinclude a wide range of individuals and organizations who share our belief inusing entrepreneurial approaches to solve the problems of global poverty. Mission is to create a world beyond poverty by investing in social enterprises,emerging leaders, and breakthrough ideas. Vision is that one day every human being will have access to the critical goodsand services they need includingaffordable health, water, housing, energy, agricultural inputs and services sothat they can make decisions and choices for themselves and unleash their fullhuman potential. This is where dignity starts not just for the poor but foreveryone on earth. 24. Acumen Fund (Cont)Acumen Funds presence around the world: 25. Acumen Fund (Cont)Acumen Funds presence around the world:Portfolios of investments: Agriculture Education Energy Health Housing Water 26. Acumen Fund (Cont)Acumen Fund Projects in India: (A total of 17 investments in India) Avani Bio Energy Drishtee Husk Power Systems Spring Health d.light design Ziqitza Health Care Limited Orb Energy Edubridge 27. Acumen Fund (Cont)Ziqitza Health Care: ZHL operates the Emergency Medical Response (Ambulance)Services under two models:1) Dial 1298 for Ambulance: This model works on principle of cross subsidywherein the Ambulances are owned by ZHL and are made self sustainable bycharging the end user a charge which differ basis on the choice of the destination.The principle of cross subsidy is used wherein: Full charge to a patient going by choice to a private hospital. Subsidized charge to a patient going by choice to a government / municipalhospital. Free service to accident victims, unaccompanied unconscious individuals andvictims of mass casualty incidents 28. Acumen Fund (Cont)2) Dial 108 in Emergency (popularly called 108 model): This model is in public private partnership (PPP) with State Governments, this could be either free to patient or on a user fee as per the contract with State Government. The service is provided to emergency victims. Currently ZHL is operating 860 Ambulances across the state of Bihar, Rajasthan, Punjab, Mumbai, Kerala and Odisha. 29. Acumen Fund (Cont)Drishtee Drishtee establishes kiosks that offer affordable Internet access, consumerproducts and community services to rural Indian villages. Local entrepreneursmanage these kiosks. The Drishtee network is vast, with more than 14,000entrepreneurs registered to date and kiosks operating in three states. Offerings include computer education, English education, e-governance,health check-ups, and a wide range of consumer goods such as groceries,cosmetics, mobile phone recharge coupons, and rechargeable torches andbatteries. With Acumen Funds investment, Drishtee is increasing the number and reachof the entrepreneurs and expanding its health-related services. 30. Book Recommendations Building Social Business - Muhammad Yunus The Blue Sweater Jacqueline Novogratz 31. THANK YOUMy Contact Details:Nikhil SareenIndian School of Business (ISB), [email protected]