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Strategic concepts that drive the business models

of social enterprises

Eva Balan-Vnuk

Submitted in requirement for the degree of Bachelor of Management (Honours)

at the University of South Australia.

School of Management

Division of Business

University of South Australia

Submitted: November 2009

2

Abstract

Social enterprises, as outcomes of social entrepreneurship, deliver important social services

not provided by government or traditional not-for-profit organisations. They are

distinguished from not-for profit organisations by their adoption of trading activities, or

business models, to fund their primary social mission. This raises an apparently

unanswered empirical question of what these business models are, and what potential

business models might be applied to these organisations. However, the definitions of a

business model and its components presented in the literature are contradictory. As an

organisation’s business model is presumed to be driven by its strategy, this study seeks to

make explicit the strategic concepts that drive an organisation’s business model. In this

context, the research question is “what are the strategic concepts that drive the business

models of social enterprises?”.

A mixed method research approach was taken because it allows for generalisation and a

deeper understanding of social enterprises and their business models. Seventy-five social

enterprises in Australia were systematically selected from a list of 4258 not-for-profit

organisations using a definition of social enterprises derived from the literature.

Information about the trading activities, understood to be a manifestation of the business

model of each social enterprise, was taken from publicly available annual and financial

reports. Social enterprises with similar trading activities were linked together, and, using a

social network analysis software program, a concept map was generated.

Through a combination of analysis and interpretation, five distinct clusters of social

enterprises were identified from the concept map. Based on the similarity of the business

models represented in each cluster, the five strategic concepts were named: ‘safety nest’

(5% of cases), ‘expertise meets social needs’ (40%), ‘personal independence coaching’

(31%), ‘experience the cause’ (5%), and ‘wealth re-distribution’ (19%). This study

proposes that the business models of social enterprises in Australia are driven by at least

one of these five strategic concepts. Social enterprise strategists can use these five

strategic concepts to evaluate existing business models, and develop ideas for new business

models. This is a novel application of the concept mapping method.

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Statement

I declare that this thesis does not incorporate without acknowledgment any material

previously submitted for a degree or diploma in any University and that to the best of my

knowledge it does not contain any materials previously published or written by another

person except where due reference is made in the text.

All the original data collected for this thesis are available for further inspection by

contacting the researcher through the School of Management at the University of South

Australia.

Eva Balan-Vnuk

November 2009

Word length information

This Honours thesis complies with the maximum word count of 18,000 words, excluding

appendices and references.

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Table of Contents

Abstract .............................................................................................................................. 2

Statement ........................................................................................................................... 3

Word length information ................................................................................................... 3

Table of Contents ................................................................................................................. 4

Chapter 1: Introduction ...................................................................................................... 6

The research problem ......................................................................................................... 6

The research question ........................................................................................................ 7

Research method used ....................................................................................................... 7

Findings and their implications .......................................................................................... 7

Definitions of key terms .................................................................................................... 9

Flow of this thesis ............................................................................................................ 10

Chapter 2: Social Enterprises ........................................................................................... 11

The ‘third sector’ and social enterprises .......................................................................... 11

Distinction between social enterprises and not-for-profit organisations ......................... 12

Social service organisations as social enterprises ............................................................ 14

Sustainability and social enterprises ................................................................................ 15

Socially responsible corporations .................................................................................... 16

Social enterprise and social entrepreneurship .................................................................. 17

Conclusion ....................................................................................................................... 18

Chapter 3: Business Models .............................................................................................. 21

Different perspectives in the literature ............................................................................. 21

Research approach analogy ............................................................................................. 23

Business models and strategy .......................................................................................... 24

Business models and sustainability .................................................................................. 26

Conclusion ....................................................................................................................... 27

Chapter 4: Strategic Concepts .......................................................................................... 28

Philosophical basis ........................................................................................................... 28

Concepts and strategic thinking ....................................................................................... 29

Concepts as purpose or intent .......................................................................................... 30

Alternative approaches to strategic concepts ................................................................... 31

Concept identification through concept mapping ............................................................ 33

Conclusion ....................................................................................................................... 33

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Chapter 5: Research Methodology and Method ............................................................. 35

Concept mapping as a research method ........................................................................... 35

Documents as a data source ............................................................................................. 37

Identifying generalisations ............................................................................................... 38

Research method details .................................................................................................. 39

1. Decide on the selection criteria for social enterprises for this study ........................ 39

2. Select the sampling frame and method ..................................................................... 40

3. Collect information on trading activities .................................................................. 41

4. Link similar social enterprises to each other ............................................................ 42

5. Enter data into UCINET 6.0 ..................................................................................... 43

6. Generate the concept map using UCINET 6.0 ......................................................... 44

7. Name the clusters ..................................................................................................... 44

Conclusion ....................................................................................................................... 45

Chapter 6: Findings and Discussion................................................................................. 46

Interpreting the concept map ........................................................................................... 47

Validation using Girvan-Newman analysis ..................................................................... 49

Findings ........................................................................................................................... 52

Examples of social enterprises in each cluster ................................................................. 54

Cluster 1: ‘Safety nest’ ................................................................................................. 54

Cluster 2: ‘Expertise meets social needs’ ..................................................................... 54

Cluster 3: ‘Personal independence coaching’............................................................... 55

Cluster 4: ‘Experience the cause’ ................................................................................. 56

Cluster 5: ‘Wealth re-distribution’ ............................................................................... 56

Conclusion ....................................................................................................................... 57

Chapter 7: Conclusion and Recommendations ............................................................... 58

The five strategic concepts identified in this study .......................................................... 58

Contribution to the literature ............................................................................................ 59

Recommendations to social enterprise strategists............................................................ 60

Implications for further research ...................................................................................... 62

Appendix 1 .......................................................................................................................... 64

Appendix 2 .......................................................................................................................... 66

References ........................................................................................................................... 79

Chapter 1: Introduction

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The research problem

Social enterprises, a tangible outcome of social entrepreneurship (Mair & Marti 2006),

deliver social services in a manner that governments and traditional not-for-profits do not

(Borzaga & Defourny 2004; Haugh 2007). Activities that generate revenue from paying

customers are essential to social enterprises (Shaw & Carter 2007). This revenue reduces

dependence on government and donor support and allows them to achieve financial

sustainability. While these activities are predominantly referred to in the social

entrepreneurship literature as trading activities, they are also referred to as business models

(Mair & Marti 2006; Zahra et al 2009), a term more commonly used in the management

and business literature. A business model is generally understood to be a description of

how a trading organisation generates and sustains its revenue stream (Stewart & Zhao

2000). While social entrepreneurship literature calls for more insight into this area (Certo

& Miller 2008), little empirical research has been conducted into the business models of

social enterprises.

This lack of empirical research may in part be due to the confusion in the literature

regarding the term business model and its components (Osterwalder et al 2005; Shafer et al

2005). Rather than focusing on the business model, this research instead identifies the

strategy that drives an organisation’s choice of business model (Hindle 2009). This

approach provides a means of examining business models at a higher, and possibly more

useful, level of abstraction, by identifying both the implicit and explicit strategic concepts

(Metcalfe 2008) driving them. The approach is similar to clarifying an organisation’s

conceptual metaphors (Morgan 1986) or its underlying assumptions (Mason & Mitroff

1981). Typically, social enterprises report their trading activities, but neither their business

models, nor their strategies. For this reason, trading activities are examined as a

manifestation of the business model (Amit & Zott 2000).


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Analogous to the structure of a marketing plan (McDonald 1989), this study’s approach

can be compared to identifying a firm’s corporate mission (substituted by strategic

concept) that drives its marketing growth and competitive strategies (business model) by

examining its marketing activities (trading activities), where the marketing activities are a

concrete manifestation of the marketing growth and competitive strategies.

The research question

In this context, the research question is:

“What are the strategic concepts that drive the business models of social

enterprises?”

Research method used

Concept mapping (Alexander 1964) is a mixed method approach (Mingers 2001)

combining qualitative and quantitative research. Seventy-five local, national, and

international social enterprises in Australia were selected from a publicly available list of

charitable and not-for-profit organisations using systematic sampling. Selection criteria

included the percentage of revenue generated through trading activities (excluding

government contracts), and non-distribution of profit to shareholders (Bull & Crompton

2006; Hart & Haughton 2007). Information regarding the trading activities of each social

enterprise was taken from publicly available annual and financial reports. Social

enterprises considered to have the most similar trading activities were linked together, for

example the trading activities of the Bedford Group were interpreted as being similar to

those of House With No Steps and Minda Incorporated. This linking process was applied

to all cases in the sample. The links between social enterprises were analysed using the

social network analysis software program, UCINET 6.0 (Borgatti et al 2002), and the

Girvan-Newman subgroup analysis (Girvan & Newman 2002) to generate a concept map.

Findings and their implications

Five strategic concepts were identified, with each being associated with a distinct cluster of

social enterprises. The five strategic concepts were named following a careful review of

the trading activities represented in each cluster, and are presented in Figure 1.


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Figure 1 The five strategic concepts revealed by the concept map

Each node, numbered from 1 to 75 on the concept map, represents a social enterprise in

this study. For example, the Bedford Group, case 37, is located in Cluster 3, along with

House With No Steps (case 60), and Minda Incorporated (case 64).

These five strategic concepts provide a starting point to understand the business models of

social enterprises. This empirical research contributes to the literature by proposing a

theoretical generalisation that the business models of social enterprises are driven by one

of more of the five strategic concepts. An additional contribution of this research is to

provide an approach for examining the financial sustainability of social enterprises without

being distracted by the confusion surrounding business models and their interpretation.

This research enables strategists to use the five strategic concepts to develop business

model ideas at a level of abstraction that encourages creativity, thus enabling existing

social enterprises to become financially viable. For example, the Salvation Army’s

retailing of second-hand household items, suggests a business model driven by the

strategic concept of ‘wealth re-distribution’. By providing affordable accommodation, the

YMCA’s business model can be described as being driven by the concept of ‘safety nest’.


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These strategic concepts can also be used to facilitate the development of new, sustainable

social enterprises. By combining the concepts of ‘safety nest’ and ‘expertise meets social

needs’, a social enterprise may develop new trading activities, such as the creation of a

park bench that, for a small fee paid by the user, transforms into a secure sleeping pod at

night. This new and creative use of the concept mapping method does not appear to have

been previously reported in the literature.

Definitions of key terms

Definitions of key terms used in this thesis are summarised below in Table 1.

Table 1 Definitions used in this thesis

Term Definition used in this thesis

Social enterprises Social enterprises “use trading activities to achieve social goals and

financial self-sufficiency” (Shaw & Carter 2007, p. 421), may not

distribute profits to shareholders or individual stakeholders (Bull &

Crompton 2006; Hart & Haughton 2007), and are not run by

government (Leadbeater 1997; Lyons 2001).

Social enterprises are discussed in Chapter 2.

Business models The business model describes how a trading organisation generates

and sustains its revenue stream (Stewart & Zhao 2000).

Business models are discussed in Chapter 3.

Strategic concepts Concepts inform our logic or understanding of whatever object,

event or phenomenon we are thinking about, and guide our actions

(Ormerod 2006), and are a label that help us interpret or understand

something (Schon 1963).

Strategy is described as a pattern in a stream of decisions

(Mintzberg & Waters 1985).

Strategic concepts allow social enterprise strategists to explicitly

think about and label what is driving their business model.

Strategic concepts are discussed in Chapter 4.

Concept mapping Concept mapping (Alexander 1964) is a mixed methods approach

(Mingers 2001) where qualitative judgment and quantitative

analysis are integrated to create a visual network or map from

which concepts and ideas can emerge (Trochim & Kane 2007).

Concept mapping is discussed in Chapter 5.


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Flow of this thesis

Figure 2 Flow of this thesis

Chapter 4: Strategic Concepts

Chapter 5: Research Methodology and Method

Chapter 6: Findings and Discussion

Chapter 7: Conclusion and Recommendations

• What are social enterprises?

• The ‘third sector’ and social enterprises

• Distinction between social enterprise and not-for-profit organisations

• Revenue generation and sustainability

• Relationship to entrepreneurship

• What is a business model?

• Different perspectives in the literature

• Relationship to strategy

• Business models and sustainability

• What are strategic concepts?

• Philosophical basis

• Concepts inform strategic thinking

• Concepts convey intent rather than goals

• Discussion of other approaches

• Concept mapping as a mixed method approach

• Documents as the data source

• Identifying generalisations

• Research method used and data collection

• Five clusters identified

• Five strategic concepts explained

• Examples of social enterprises whose business models are driven by each strategic concept

• Contribution to the literature

• Practical application of strategic concepts for social enterprise strategists

• Implications for further research

• Research problem and question

• Research method and findings

• Definitions of key terms

• Flow of this thesis


Chapter 2: Social Enterprises

Chapter 3: Business Models


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The provision of goods and services in exchange for income is predominantly an attribute

of private enterprise. This chapter argues that social enterprises adopt business models to

provide social value and services traditionally associated with the role of government,

charities or benevolent societies. Social enterprises are part of the ‘third sector’ and are

distinguished from not-for-profit organisations and other ‘third sector’ organisations, as

well as organisations that demonstrate corporate social responsibility. While social

enterprises have been explored through social entrepreneurship literature, these terms are

not synonymous. This study will not comment on the ideological rights or wrongs of this

enterprise approach to organising social services but will rather explore the strategic

concepts that inform their business models. The term ‘business model’ will be discussed

in detail in Chapter 3, and is generally applied to for-profit enterprises. Social enterprise

literature tends to use the term ‘trading activities’ instead.

The ‘third sector’ and social enterprises

The economy comprises of three sectors: the public or government sector, the private

sector, and the social economy or ‘third sector’ (Haugh 2005). Shaw and Carter (2007)

describe the ‘third sector’ as including organisations such as charities, voluntary

organisations, churches, educational institutions, not-for-profit and community

organisations, as well as social enterprises. This ‘third sector’ is “neither publicly nor

privately controlled” (Haugh 2005, p. 2). While the form, structure and activities of these

organisations differ, they all seek to address unmet social needs. According to Lyons

(2001), organisations in the ‘third sector’, including social enterprises, promote social

change, defend traditional values and demonstrate people’s ability to work together

“without being required to by government or being lured by the hope of [personal]

enrichment” (p. 217).


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Social enterprises are becoming increasingly important to countries’ economies (Borzaga

& Defourny 2004; Haugh 2007), as these organisations deliver social services in a manner

that governments and private benefactors are not able or willing to provide. The public

sector has become overstretched, and at the same time charity and not-for-profit

organisations are increasingly unable to meet society’s changing needs (Mulgan & Landry

1995; Leadbeater 1997; Shaw & Carter 2007). While 18th century entrepreneur Robert

Owen is cited as establishing one of the first documented social enterprises (Shaw & Carter

2007), unmet socio-economic needs have encouraged an increasing number of social

enterprises to emerge globally since the late 1990s (Mulgan & Landry 1995; Emerson &

Twersky 1996; Shaw & Carter 2007). Social enterprises have been established in the UK

(Thompson et al 2000), the United States of America (Dees 1998a), Australia (Lyons

2001), and European Union (Borzaga & Defourny 2004).

Distinction between social enterprises and not-for-profit organisations

Social enterprises are different to other organisation in the ‘third sector’ due to their

adoption of trading activities (Haugh 2005). Shaw and Carter (2007) elaborate and

describe the unique attribute of the social enterprise as being organised as a trading

enterprise, but with the intent to provide social services and value.

Not-for-profit organisations exist to fulfil independent public needs through community

owned services or programs that would otherwise be unmet through government services,

forming part of the ‘third sector’ (Lyons 2001). The defining characteristics of not-for-

profit organisations, as outlined by Considine (2003), are to promote a social (non-

monetary) value and not distribute profits to shareholders. Not-for-profit organisations

include charities, foundations, trusts, cooperatives, volunteer and grass roots organisations

(Lyons 2001). Typically these organisations are funded by a combination of grants,

donations, member and user fees (DiMaggio & Anheier 1990).

Emerson and Twersky (1996) argue that social enterprises are different to traditional not-

for-profit organisations because social enterprises pursue both not-for-profit (mission) and

for-profit (money) objectives and call this the “double bottom line” that a social enterprise

must balance. Ridley-Duff (2008) supports this description by stating that organisations

pursuing “twin goals of social and capital building” move toward a “social enterprise

orientation” (p. 306). Social enterprises are different because they adopt “corporate


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planning and business design tools and concepts”, practices not generally applied in the

not-for-profit sector, and focus on “bottom-line earned revenue and return on investment”

(Dart 2004, p. 415).

Four key characteristics distinguish social enterprises from not-for-profit organizations

(Alter, K 2007):

• “The earned income activity has been strategically established to create social and

or/economic value for the organization;

• A long term vision has been created for the trading activity, and it is managed as

an ongoing interest;

• A business plan sets targets for growth and revenue; and

• Qualified staff with relevant business or industry experience manage income

generating activities, rather than social mission staff who have different skills” (p.

17)

Social enterprises assign appropriately qualified staff to manage trading activities (Austin

et al 2006; Bull & Crompton 2006; Alter, K 2007). In contrast, not-for-profit

organizations may undertake some earned income activities but not necessarily have the

appropriate structure or resources in place to manage the activities as an ongoing and

critical operation. The prime focus of senior management in not-for-profit organisations is

not on earned income but on getting donations and grants.

With the exception of independently wealthy organisations such as the Bill and Melinda

Gates Foundation (2009), a key issue faced by not-for-profit organisations, is the financial

sustainability of their organisation. Heavy dependence on grants, donations and

sponsorships in difficult economic conditions in developed economies may erode or

decrease income of not-for-profit organisations (Shaw & Carter 2007). Table 2 on the

following page compares key characteristics of social enterprises and traditional not-for-

profit organisations.


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Table 2 Comparison of social enterprises and not-for-profit organisations

Characteristic Social enterprises Not-for-profit organisations

Purpose Fulfils a social mission and

generates earned income

(Emerson & Twersky 1996)

Fulfils a social mission

(Considine 2003)

Source of funding Earned income through

trading activities, plus grants,

donations or sponsorships

(Bull & Crompton 2006)

Grants, donations,

sponsorships, member or user

fees (DiMaggio & Anheier

1990)

Staff with business

experience manage the

trading activities

Highly desirable (Bull &

Crompton 2006; Alter, K

2007)

Not a high priority (Bull &

Crompton 2006; Alter, K

2007)

Senior management’s

focus on trading activities

High (Shaw & Carter 2007) Medium to low (Dart 2004)

Distribution of profits to

shareholders or individual

stakeholders

While some for-profit social

enterprises exist (Dees

1998a), this study focuses on

social enterprises that do not

distribute profits.

Prohibited due to the legal

status and structure of these

organisations (Considine

2003)

Social service organisations as social enterprises

Social enterprises provide services or programs to those who are in need or cannot pay for

such services (Mair & Marti 2006; Certo & Miller 2008). Leadbeater (1997) describes

social enterprises as a form of privatisation of social services by caring, autonomous

individuals or groups who find a creative way to provide such services.

St Vincent de Paul Society’s “Vinnies Centres” (2009b), for example, provide a market for

those with a low income to purchase second hand furniture, clothing and household goods

at an affordable price. The profits generated are used to provide resources and support

those unable to pay, for example by providing food for disadvantaged families (St Vincent

de Paul Society 2009a). Traditionally, these services would be provided as part of the role

of government, often as vouchers. Our Community Pty Ltd provides goods and services,

such as training, books and insurance to support the running of community groups and

schools, using any profits to further support the running of those communities (Our

Community Pty Ltd 2009). By setting up as social enterprises, these organisations feel

they can respond more effectively than government service providers. Governments seem

to agree, so encourage the development of these enterprises, particularly in the UK (Shaw

& Carter 2007).


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Dart (2004) and Austin et al (2006) suggest no for-profit market for the services outlined

above would normally exist. Private groups may be better positioned than governments to

provide such services due to their motivation and organisation efficiencies, especially if the

enterprise is run by those with first-hand experience of the social issue, who are not

answerable to shareholders and can maintain a flexible organisational structure (Leadbeater

1997).

It is therefore possible to imagine any social service as a potential social enterprise. The

traditional approach to address the needs of the disabled is to have public servants develop

services using resources available to governments such as taxation and legislation. As an

alternative approach, Bedford Group, established in 1945, provides supported employment

opportunities to South Australians with physical or intellectual disabilities. Services

including furniture manufacturing, cleaning services, and catering, are provided to

businesses on a commercial basis (Bedford Group 2009). Bedford Group’s mission is to

help disabled people lead active and meaningful lives (2009), and profits generated from

its trading activities are reinvested to fulfil this mission.

Sustainability and social enterprises

Trading, that is the “continuous activity producing goods and/or selling services” (Borzaga

& Defourny 2004, p. 16) to paying clients, is considered essential for survival. For this

study the presence of revenue generation through trading activity will be considered

integral to a social enterprise, as described both by scholars (Emerson & Twersky 1996;

Dart 2004; Bull & Crompton 2006) and practitioners (Boschee 1998; Alter, SK 2006).

To aid effective revenue generation, Certo and Miller (2008) suggest identifying the

business models of these enterprises as an area for further research. Organisations such as

the Grameen Bank and The Institute for One World Health have developed business

models to support their social benefit objectives (Mair & Marti 2006). Zahra et al (2009)

state that sustaining social ventures, or enterprises, requires “the use of business models”

(p. 527).

Traditional not-for-profit or social-purpose organisations may face significant risks when

balancing “double bottom line” objectives (Emerson & Twersky 1996). Dees (1998a)

posits that in the best case, pursuing trading-related revenue can be challenging due to the

existing operational and cultural orientation of the not-for-profit organisation; and in the

worst case, organisational focus on trading activities may compromise the organisation’s


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social mission. According to Foster and Bradach (2005), not-for-profit organisations may

fail to generate profits from trading activities due to conflicting objectives and lack of

business experience or perspective. To help avoid such negative outcomes, Foster and

Bradach (2005) propose a set of mission-led questions to help not-for-profit organisations

evaluate whether trading activities should be pursued. Chell (2007) believes this lesson is

equally applicable to social enterprises and agrees that while the risks outlined by Dees

(1998a) and Foster and Bradach (2005) exist, many social enterprises successfully combine

economic and social objectives. Bedford Group and St Vincent de Paul Society are two

such examples. This concern reinforces the recommendation that the trading activities of

social enterprises be managed by qualified staff with the relevant experience (Austin et al

2006; Alter, K 2007).

Foster and Bradach (2005) require that the trading activity fits in with and is acceptable to

the social enterprise’s core mission, so as to minimize cultural and operational conflict.

For example, St Vincent de Paul Society’s ‘Vinnies Centres’ (2009b), selling cheap second

hand clothes and household goods, are a logical fit with their mission to help displaced or

disadvantaged families. It would not be appropriate for St Vincent de Paul to sell alcohol

or cigarettes, even though these may possibly generate more revenue than ‘Vinnies

Centres’.

Socially responsible corporations

Organisations that demonstrate corporate social responsibility are not social enterprises

(Zahra et al 2009). Carroll (1991) describes a conceptual pyramid with four levels: the

firm must “strive to make a profit, obey the law, be ethical, and be a good corporate

citizen” (p. 43), listed in order of priority. Philanthropic activity is understood to be a

result of the for-profit organisation’s economic success, not a driving factor of the

organisation’s activities (Carroll 1991).

One of the early examples of corporate social responsibility is illustrated by the example of

Cadbury. In 1824 John Cadbury, a Quaker, began selling tea, coffee and later chocolate in

Birmingham, UK. After his retirement, his sons opened a new factory and established a

“model village” to “alleviate the evils of modern cramped living conditions” for workers

(Bryson & Lowe 2002). A more current example, Microsoft Corporation, while driven to

deliver shareholder value, aspires “to act as a good corporate citizen …[and] commit to

being a global leader in corporate social responsibility” (Microsoft 2009a), such as


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partnering with the Philippines Government to introduce technology access and computer

literacy skills to overseas Filipino workers and their families (Microsoft 2009b). For the

purpose of this study, and as supported by Zahra et al (2009), organisations that prioritise

profit generation for shareholders above philanthropy are not considered to be social

enterprises.

Social enterprise and social entrepreneurship

Social enterprises have only recently been explored through the perspective of

entrepreneurship theory and practice. The increasing academic interest in this field is

demonstrated by the publication in 2006 of a special issue of the "Journal of World

Business", focusing on social entrepreneurship and social enterprise that includes five

papers (including empirical studies and reviews of research issues) from the Academy of

Management (Christie & Honig 2006).

Dees (1998b), by describing social entrepreneurship as a “species in the genus

entrepreneurship” (p. 2), implies fundamental similarities between social and commercial

entrepreneurship. Briefly, entrepreneurs create value by finding new ways to do things or

by serving new markets (Dees 1998b) and entrepreneurs can be perceived as catalysts and

innovators behind economic progress (Schumpeter 1942). Drucker (1985) states that

entrepreneurship is not limited to the economic sphere and believes the defining element of

entrepreneurs is their capacity to “always search for change, respond to it and exploit it as

an opportunity” (p. 25). Stevenson et al (1994) posit that entrepreneurship is the “pursuit

of opportunity without regard to resources currently controlled” (p. 5).

Mair and Marti (2006) describe social enterprises as a “tangible outcome of social

entrepreneurship” (p. 37), where social entrepreneurs are practitioners who develop and

operate social enterprises (Alter, SK 2006). Peredo and McLean (2006) however argue

that engagement in a social enterprise is “not necessarily the same as being an

entrepreneur” (p. 62), supporting Pomerantz’s (2003) view that “developing new social

enterprise … is only one facet of social entrepreneurship” (p. 26). Thompson (2009)

explores this further and argues that social enterprises may not in fact be exploiting

opportunities in innovative or creative ways, generally accepted to be a key characteristic

of entrepreneurship. Thompson (2009) concludes that social enterprises “need not be run

by entrepreneurial characters” (p. 160) or behave in ways that would be understood as


18

entrepreneurial. Therefore it is not presumed or required that social enterprises in this

sample exhibit ‘entrepreneurial’ characteristics.

Conclusion

A review of the literature uncovers a general consensus regarding the focus and purpose of

social enterprises. These aspects have been discussed throughout this chapter. A summary

of the varying definitions of social enterprises is detailed in Table 3.

Table 3 Selected definitions of social enterprises (ordered by publication date)

Source Definition

Dees (1998a) “A social enterprise is commercial to the extent that it operates like a

business in how it acquires its resources and distributes its goods and

services. Few social enterprises can or should be purely philanthropic

or purely commercial; most should combine commercial and

philanthropic elements in a productive balance.” (p. 60)

Pomerantz (2003) “The key to social enterprise involves taking a business-like,

innovative approach to the mission of delivering community

services. Developing new social enterprise business ventures is only

one facet of social entrepreneurship. Another facet is maximizing

revenue generation from programs by applying principles from for-

profit business without neglecting the core mission.” (p. 26)

Peredo and

McLean (2006)

Social enterprise is “an activity commonly equated with social

entrepreneurship.” (p. 57)

Mair and Marti

(2006)

Social enterprise is “the tangible outcome of social entrepreneurship”

(p. 37), focused on creating “social value, while economic value

creation is seen as a necessary condition to ensure financial

viability.” (p. 38)

Alter (2006) Social enterprises combine “social interest and market mechanisms

to create both social and economic value with a new type of

institution”. (p. 205). Alter describes the social entrepreneur as the

practitioner and instigator of a new kind of organisation, the social

enterprise.

Bull and Crompton

(2006)

Social enterprises are “businesses with the specific purpose of

addressing ‘social’, ‘community’ or ‘environmental’ aims through a

business structure that allows them to be sustainable.” (p. 10)

Chell (2007) Social enterprises are “not-for-personal-profit enterprises [that]

comprise business activity that generate value for social ends and

wealth to enable reinvestment and sustainability of the business” (p.

18)

Shaw and Carter

(2007)

“Rather than relying on charitable donations, social enterprises seek

to use trading activities to achieve social goals and financial self-

sufficiency.” (p. 421)


19

Defourny and

Nyssens (2008)

“Social enterprises are not-for-profit organisations that provide goods

or services directly related to their explicit aim to benefit the

community, they rely on a collective dynamics involving various

types of stakeholders in their governing bodies, place high value on

their autonomy and bear economic risks linked to their activity.” (p.

204)

Ridley-Duff (2008) “An ideal form of social enterprise encompasses economic and social

goals and practices, with economic and social capital reinvested

across its stakeholder groups” (p. 307)

Thompson (2009) Social enterprises provide “business solutions to social problems”

and are “good at doing good” (p. 152)

In summary, scholars agree that social enterprises exist principally to fulfil a social mission

while engaging in trading activity. One notable anomaly is Austin et al (2006) who state

that while “a social enterprise exists to create social value” (p. 18), it “does not have any

commercial aspect to its operations” (p. 3). Curiously, this statement contradicts Austin at

al’s (2006) findings and implications for further research, where they acknowledge the

adoption of earned-income strategies by social enterprises.

The trading activities adopted by social enterprises influence their financial viability

(Zahra et al 2009). Emerson and Twersky (1996) use the term “double bottom line” to

describe the dual focus to fulfill a social mission and generate revenue to ensure financial

sustainability, a concept applied by Thompson and Doherty (2006) to illustrate the

diversity of social enterprises through eleven case studies. Consistent with other scholars,

including Pomerantz (2003), Borzaga & Defourny (2004) and Ridley-Duff (2008),

Thompson and Doherty (2006) outline the key characteristics of social enterprises:

• “Driven by a social purpose.

• Assets and wealth are used to create community benefit.

• They pursue this with (at least in part) trade in a market place.

• Profits and surpluses are not distributed to shareholders, as is the case with a

profit-seeking business.

• “Members” or employees have some role in decision making and/or governance.

• The enterprise is seen as accountable to both its members and a wider community.

• There is either a double- or triple-bottom line paradigm. The assumption is that the

most effective social enterprises demonstrate healthy financial and social returns –

rather than high returns in one and lower returns in the other” (p. 362)


20

This study argues that trading activities are an integral part of a social enterprise, and are

closely linked to its social mission. Social enterprises are not only about solving unmet

social problems, nor are they only about generating revenue. While social enterprises are

discussed in the literature within the context of entrepreneurship, social enterprises are not

always innovatively or creatively exploiting opportunities to generate revenue, and may in

fact behave in ways not considered to be entrepreneurial (Thompson 2009).

This study adopts Shaw and Carter’s (2007) concise definition, that social enterprises “use

trading activities to achieve social goals and financial self-sufficiency” (p. 421). This

definition reflects the importance of trading activities for social enterprises. While the

term ‘trading activity’ is applied in social enterprise literature, in this study the term

‘business model’ will be used. Chapter 3 will define and discuss the term ‘business

model’, and distinguish it from trading activities.


21


This chapter defines business models as the manner in which a trading organisation

generates and sustains its revenue stream (Stewart & Zhao 2000), and concludes that

business models are one representation of an organisation’s strategic priorities, principles

or concepts. While the business model literature is contradictory and confuses business

models with strategy, scholars agree that an organisation’s financial sustainability is

dependent upon its business model.

As discussed in Chapter 2, the social enterprise literature tends to use the term ‘trading

activity’ instead of ‘business model’. Due to an increase in venture capital funding for

social enterprises, Certo and Miller (2008) argue that “a new business model” (p. 270) has

been created and suggest further research in this area. According to Zahra et al (2009),

sustaining social ventures, or social enterprises, “requires … the use of business models”

(p. 527). Dart (2004) adds that social enterprises become legitimate by adopting particular

business models. What these particular business models are, or what they are driven by,

does not appear to have been explored in the literature. In order to clarify the approach of

this research, an analogy with marketing planning literature is provided. In addition,

conflicting definitions of business models, and the relationships between the business

model, an organisation’s strategy, its trading activities, and its sustainability will be

discussed.

Different perspectives in the literature

Researchers struggle to agree on a clear definition of business models. Osterwalder et al

(2005), after conducting a thorough literature review, observe tremendous variance in the

interpretation and application of the term ‘business model’. Various definitions are

provided by the literature, with some examples provided in Table 4.


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Table 4 Some definitions of the term ‘business model’ (ordered by publication date)

Source Definition

Timmers (1998) “An architecture for the product, service and information flows,

including a description of the various business actors and their

roles; a description of the potential benefits for the various business

actors; and a description of the sources of revenues.” (p. 2)

Mahedevan (2000) “A business model is a unique blend of three streams that are

critical to the business. These include the value stream for business

partners and the buyers, the revenue stream, and the logistical

stream.” (p. 59)

Stewart & Zhao

(2000)

“A business model is a statement of how a firm will make money

and sustain its profit stream over time.” (p. 290)

Amit & Zott (2001) “A business model depicts the content, structure, and governance

of transactions designed so as to create value through the

exploitation of business opportunities.” (p. 511)

Porter (2001) “The definition of a business model is murky at best. Most often, it

seems to refer to a loose conception of how a company does

business and makes money” (p. 73)

Betz (2002) An abstraction identifying how a business profitably makes money.

(p. 21)

Chesbrough &

Rosenbloom (2002)

“A successful business model creates a heuristic logic that connects

technical potential with the realization of economic value.” (p. 529)

Hindle (2004) “A well-articulated plan for turning effort into profit using

identified resources and stakeholders” (p. 275)

Seddon et al (2004) A business model is the “abstraction of a firm’s strategy” (p. 440).

Morris et al (2005) “A business model is a concise representation of how an

interrelated set of decision variables in the areas of venture

strategy, architecture, and economics are addressed to create

sustainable competitive advantage in defined markets.” (p. 727)

Osterwalder et al

(2005)

A business model is like the detailed “blue-print of how a company

does business” (p. 2) and the “translation of … strategic positioning

and strategic goals into a conceptual model that explicitly states

how the business functions” (p. 2).

Shafer et al (2005) The business model represents an organisation’s “core underlying

logic and strategic choices for creating and capturing value within a

value network” (p. 204)

While most definitions agree that the business model is a description or representation,

exactly what it describes or represents is not consistent. The lack of any one dominant

definition and hence coherent research may contribute to this situation (Osterwalder et al

2005). List’s (2005) examination of the literature concurs there is “confusion between the

business model and business plan [and] no instructive examples” (p. 24). The term


23

‘business model’ has been used synonymously with ‘revenue model’ in the management

literature, for example by Zott and Amit (2009 in press). Osterwalder et al (2005) report

that the term ‘business model’ is interpreted at different levels of abstraction, ranging from

very high level, such as the strategy or mission of an organisation, to the detailed

operational level. Amit & Zott’s (2001) development of a business model framework

overcomes this confusion by examining an organisation’s trading activities as a

manifestation of the business model. Hence trading activities can reveal the business

model of an organisation. Stewart and Zhao’s (2000) straightforward definition, that a

business model describes how a trading organisation “will make money and sustain its

profit stream over time.” (p. 290), will be used in this study.

Research approach analogy

In order to clarify and justify the interpretation of the relationship between social

enterprises (refer to Chapter 2), business models (this chapter) and strategic concepts (refer

to Chapter 4), it may be useful to consider the structure of the marketing plan as analogous

to the research approach taken in this study, where the marketing plan comprises different

levels of abstraction. In the literature on marketing planning, an organisation’s corporate

mission (high level of abstraction) drives its marketing growth and competitive strategies

(intermediate level of abstraction), and hence its marketing activities (as a manifestation)

(McDonald 1989, p. 116-117). A simplified pictorial representation of the components of

the marketing plan adapted from McDonald (1989) (Figure 3) provides a way for thinking

about this study’s approach by interpreting the organisation at different levels of

abstraction.

Analogous to the structure of the marketing plan that incorporates different levels of

abstraction, this study identifies the strategic concepts (high level of abstraction) that drive

the business models (intermediate level of abstraction) of social enterprises by examining

trading activities as a concrete manifestation of the strategic concept and business model in

place. This approach deals with the ambiguity surrounding business models and is

consistent with Amit and Zott’s (2001) examination of business models through an

organisation’s trading activities and other identifiable, measurable factors. In comparison,

the definition, elements and composition of an organisation’s marketing growth and

competitive strategies are well-established, therefore such an approach is unnecessary in

the marketing planning context. While depicted here in a linear fashion, feedback between


24

marketing plan components, as well as between strategic concepts, business model and

trading activities, is acknowledged.

Figure 3 Research approach analogy

As this study intends to examine business models at a higher level of abstraction, this

chapter argues that an organisation’s strategy drives its business model, and hence its

trading activities, just as an organisation’s corporate mission informs its marketing growth

and competitive strategies, and hence marketing activities.

Business models and strategy

Much of the business model literature draws heavily on definitions and theories of strategy

provided by Ansoff (1965) and Porter (Porter 1996, 2001). Chesbrough and Rosenbloom

(2002) for example, in their discussion of the evolution of strategy and how it relates to

business models, draw on Ansoff’s (1965) theory requiring strategy development at every

level of the organisation, as strategy provides “rules for decision [making] under partial

ignorance” (p. 121). Ansoff (1965) argues that it is not enough to have one central strategy

as this does not provide enough guidance to account for situations that can occur at all

levels of an organisation, and suggests the need for layers of strategic rules at each level of

an organisation.

This study assumes that strategic rules applied at the operational level inhibit flexibility

and creativity. Rather something more abstract is required of strategy, that is, to provide


25

high level guidance to an organisation’s activities. Therefore, Ansoff’s (1965) definition

of strategy is not compatible with this study’s interpretation of strategy driving the

business model.

Porter’s (2001) definition of strategy has been adopted by other academics who discuss

business models, such as Seddon et al (2004). Porter (2001) posits that the terms ‘strategy’

and ‘competitive advantage’, have been replaced with the term ‘business model’ especially

for Internet players. Porter (2001) claims the term’s “murky” definition leads to “faulty

thinking and self-delusion” (p. 73) by managers because having a business model is not

enough for a company to be successful. In this respect, this study agrees that the terms

‘strategy’ and ‘business model’ are not synonymous.

Shafer et al (2005) define a business model as representing an organisation’s “core

underlying logic and strategic choices for creating and capturing value within a value

network” (p. 204). This definition suggests the need to explain the logic of interpreting

which business models are appropriate and this is related to its strategic choices.

Using the analogy of the construction of an architecturally designed home, Shafer et al

(2005) describe the relationship between a strategy and the business model: future

homeowners discuss with an architect how they wish to live (the strategy). The architect

creates a detailed floor plan based on the homeowners’ choices to turn their vision into

reality (the business model). Osterwalder et al (2005) agree, as the business model is the

“translation of … strategic positioning and strategic goals into a conceptual model that

explicitly states how the business functions” (p. 2). Hindle’s (2009) conceptual framework

of the entrepreneurial process suggests that the strategy selected by the entrepreneur

influences the business model, allowing for feedback.

Hindle’s (2009) conceptual framework and Shafer et al’s (2005) definition can be applied

to the music industry. Illegal downloads and the distribution of music on the Internet have

been described as “life-threatening to the [music] industry” (Premkumar 2003, p. 89).

New business models are required to ensure the music industry survives (Premkumar

2003). Examples of potential new business models, such as revenue generation through

online advertising to offset members’ subscription costs, and the establishment of online

retail stores, are provided. These new business models appear to be driven by an implicit

strategic concept of the industry needing more “anti-piracy” revenue activities. The

business models proposed by Premkumar (2003) would seem to address the music


26

industry’s intent to reduce consumers’ ability to access music for free. This example

highlights that the evaluation of a particular business model can only be made if the

strategy or strategic concept is clearly articulated. Strategic concepts will be discussed in

detail in Chapter 4.

Seddon et al’s (2004) integrated use of the terms ‘strategy’ and ‘business model’ can also

be applied to the music industry. Seddon et al (2004) compare Porter’s (1996) definition

of strategy with definitions of business model across a broad section of literature, and

conclude that the two terms may be interpreted in similar ways. Seddon et al (2004)

perceive business models as the “abstraction of a firm’s strategy that applies to more than

one firm” (p. 440), whereas strategy is described as unique to each firm due to its specific

competitive environment. This interpretation of strategy seems strange; cannot firms have

similar strategies? Seddon et al’s (2004) distinction between strategy and business models

is not compatible with the definitions discussed previously in this section, and is not the

interpretation that will be used in this study. Seddon et al (2004) imply that “anti-piracy”

is a strategy unique to an individual firm, where in fact this strategic concept can apply to

the entire music industry. This researcher instead takes the view of Hindle (2009), Shafer

et al (2005) and Osterwalder et al (2005) that the strategy, as identified by strategic

concepts, drives an organisation’s business model and hence its trading activities.

Business models and sustainability

Mahadevan (2000), Morris et al (2005) and Shafer et al (2005) reflect on the role of the

business model to enable an organisation’s financial sustainability. This is also applicable

to social enterprises. Mahadevan (2000) argues that an organisation’s “long-term

viability” (p. 59), or sustainability, largely depends on the cohesiveness of its business

model. Morris et al (2005) posit that to achieve financially sustainable there must be

internal consistency, or ‘fit’, between the internal components of the business model, as

well as external consistency to ensure the appropriateness of the business model to the

organisation. For social enterprises, their business model, and hence trading activities,

must ‘fit’ with their social mission. As argued in Chapter 2, St Vincent de Paul Society’s

‘Vinnies Centres’ are proposed to be a logical fit with its mission to help disadvantaged

families (St Vincent de Paul Society 2009a). It would not appear consistent for St Vincent

de Paul Society to sell goods to the highest bidders such as second-hand dealers, even

though this activity would possibly generate more revenue than the ‘Vinnies Centres’.


27

Shafer et al (2005) argue that as the survival, or sustainability, of all for-profit

organisations is directly linked to the ability to create and capture value, then all these

organisations require a business model. As financial sustainability is an area of concern to

social enterprises, then business models must also be applicable to these types of

organisations.

Conclusion

In conclusion, the broad cross-section of literature that addresses the term ‘business model’

is neither consistent nor conceptually clear. Through a brief exploration of the term in the

management and business literature, the term ‘business model’ has been used

synonymously with ‘revenue model’ (Zott & Amit 2009 in press), ‘business planning’

(List 2005), and ‘strategy’ (Seddon et al 2004), and has been conceptualized at various

levels of abstraction, as critiqued by Osterwalder et al (2005). This creates a level of

confusion regarding the exact definition of the term ‘business model’, and the role it plays

to represent an organisation’s strategy to create and capture value (Shafer et al 2005;

Hindle 2009). This study adopts Stewart and Zhao’s (2000) definition of the business

model informing how a trading organisation generates and sustains its revenue stream, as

well as Amit and Zott’s (2001) approach, where trading activities are examined as a

manifestation of an organisation’s business model.

The concept of business models has been applied to social enterprises (Certo & Miller

2008; Zahra et al 2009). In this study, the business model is understood to be driven by the

organisation’s strategy or strategic concept, and informs the organisation’s trading

activities. This can be compared to the marketing planning process (McDonald 1989),

where an organisation’s corporate mission (strategic concept) drives its marketing growth

and competitive strategies (business model) and hence its marketing activities (trading

activities). Strategic concepts will be explained in more detail in Chapter 4.


28


In this study, strategic concepts allow researchers and social enterprise strategists to

explicitly think about and label what informs or drives the business model of social

enterprises. Due to the conceptual inconsistency in the literature regarding business

models and research approach analogy discussed in Chapter 3, articulating the implicit or

explicit strategic concepts that drive the business models, and hence trading activities, of

social enterprises, appears to be more useful than identifying specific business models.

However, care must be taken to identify the strategic concept at the appropriate level of

abstraction. For example, many social enterprises seem to use the concept of ‘respect’ to

drive decision making. However this concept may not provide enough direction to design

a business model. This chapter explains what is meant by strategic concepts, its

philosophical basis, comparison with other management approaches, and an explanation of

how these strategic concepts might be identified.

Philosophical basis

The term “conception” (Ormerod 2006, p. 898), shortened to concepts, is being used partly

because of its clear philosophical and moral basis as provided by the American Pragmatists

(such as Peirce 1878). Pragmatism, as described by Ormerod (2006), is an epistemology

designed to objectively account for different interpretations of reality. It is seen as being

particularly useful to help decide how to act in response to complex social phenomena

where many viewpoints and perspectives exist. Ormerod’s (2006) examination of the

history of pragmatism identifies Charles Saunders Peirce (1839 – 1914), as the founder of

pragmatism, which Peirce described as a philosophy of meanings or interpretations. This

is relevant here because what is sought in this study is an interpretation of what guides the

business models of social enterprises.

Using logic as a starting point, Peirce argues that what is logical depends on what prior

conceptions, or concepts, are in use from prior experiences. As described by Ormerod


29

(2006), Peirce’s approach was based on wanting to extend scientific, empirical inquiry, but

with a focus on making explicit peoples’ prior conceptions (concepts). In addition,

Peirce’s “pragmatic principle” (Ormerod 2006, p. 898) explains that our conception

informs our logic or understanding of whatever object, phenomenon or event we, or

organisational strategists, are thinking about, and therefore guides our actions. The same is

assumed for business logic, and the logic behind business models.

The idea of ‘concepts’ and ‘conceptions’ has been adopted in management literature.

Schon (1963) declares there “are no things without concepts” (p. 8), and this includes

observations, perceptions, data and objects. Concepts are not the thing itself; they are

instead a label or description of the thing in question (Schon 1963). For example, ‘quality’

is a concept that helps us understand or interpret something, but is not itself a thing. While

we may think that the word ‘flower’ is a thing, it is in fact a concept that allows us to

communicate in general about the seed and fruit producing parts of plants. Concepts allow

an appropriate level of abstraction to describe what drives an organisation’s business

models.

Concepts and strategic thinking

Mintzberg and Waters’ (1985) definition of strategy as “a pattern in a stream of decisions”

(p. 257) can help explain strategic concepts. Concepts are seen to inform strategy and

strategic thinking. Mintzberg and Waters (1985) propose a continuum within which

strategies are formulated, ranging from deliberate to emergent in nature, and present

several case studies to illustrate how strategies can either be driven by clear intentions from

senior management, or emerge due to external factors. The most effective method for

strategy formulation is for managers to both “direct [activities] in order to realize

intentions while at the same time respond to an unfolding pattern of action” (Mintzberg &

Waters 1985, p. 272). In this study, strategic concepts inform strategic thinking, rather

than planning, and will be interpreted from the visible ‘patterns’ resulting from strategic

thinking, namely the trading activities of social enterprises. This study therefore adopts

Mintzberg and Water’s (1985) more cognitive definition of strategy, rather than the more

prescriptive approach proposed by Ansoff (1965), discussed in Chapter 3.


30

Concepts as purpose or intent

Popular management theory has focused more on an organisation’s outputs, for example

goals and objectives, than inputs, such as strategy formulation. Bartlett and Ghoshal’s

(1994) example of Komatsu, a construction equipment manufacturer in Japan, illustrates

the value of seeking out the underlying concepts that drive an organisation. Operating

under the objective to “catch up with and surpass Caterpillar” (p.83), seemingly inspired

by Locke et al’s (1990) goal theory, sales at Komatsu had declined and creativity

stagnated. Managers were challenged to think about how to improve sales, and a new

corporate purpose called “Growth, Global, Groupwide” was developed. This articulation

of the company’s strategic intent or concept, rather than an explicit output or goal, allowed

Komatsu to increase sales significantly, including a 40% growth from the non-construction

equipment business that had languished as a result of Komatsu’s obsession with Caterpillar

and its focus on output. This example demonstrates that strategic concepts, articulated at

the appropriate level of abstraction, perform the dual function of providing guidance at a

high level to all employees, as well as allowing employees to creatively and successfully

identify new opportunities for growing Komatsu’s business. This resulted in a new

business model, as well as new trading activities, for Komatsu.

As this example highlights, focusing on a specific goal or objective can restrict an

organisation’s success (Deci 1992), whereas identifying a strategic intent or concept allows

for flexibility and growth. Supporting Deci’s (1992) argument, Mintzberg (1994) states

that “the most successful strategies are visions, not plans” (p. 107) that can adapt to

changing environments. He believes that strategic planners in organisations inappropriately

focus on analysis, whereas true strategic thinking is fundamentally about synthesis,

involving “intuition and creativity” (Mintzberg 1994, p. 108). This study acknowledges

Mintzberg’s (1994) and Weick’s (2006) concerns about the development of strategy, and

proposes that strategic concepts can be creatively and imaginatively applied to represent an

organisation’s strategy. In contrast, goal theory (Locke et al 1990) and the management by

objectives approach (Drucker 2001) are perceived to be ex post, and do not provide a level

of abstraction that allows for employee empowerment and flexibility.

This raises the question of how many strategic concepts is enough or appropriate. Miller’s

(1956) research into the “magical number seven” suggests that humans have an inbuilt

limitation to the amount of knowledge or information we can contain at one time. Drawing

on Miller’s (1956) research, human beings appear to deal with information by chunking it


31

into five to seven parts. We label these chunks of information, most commonly by

articulating or rephrasing them “in our own words” (p. 95). This is a trick to help us

remember what is most important. This study proposes a range of approximately five to

seven strategic concepts as sufficient to describe the key drivers of business models of

social enterprises.

Alternative approaches to strategic concepts

In the strategic management literature, strategic concepts have been discussed in the guise

of ‘frames’ (Kaplan 2008), ‘sensemaking’ (Weick et al 2005), ‘mind-sets’ (Gosling &

Mintzberg 2003), metaphors (Schon 1963; Morgan 1980), values (Wiener 1988), and

underlying assumptions (Mitroff et al 1979). These will now be compared to strategic

concepts as understood in this study, particularly in relation to their level of abstraction and

applicability to organisations.

The management psychology literature uses the term ‘frames’ (Kaplan 2008) for an

approach thought to be similar to strategic concepts but with some important differences.

The term ‘frames’ implies individual interpretations, not the language-based, societal

conceptions of the pragmatists. Kaplan’s (2008) model describes how individuals attempt

to transfer their own cognitive frames into the collective frame of the organisation. She

defines frames as “the means by which managers make sense of ambiguous information

from their environments” (p. 729). The collective frame Kaplan (2008) mentions seems

similar to what is being called strategic concepts here. While frames address the

appropriate level of abstraction that is sought in this study, they are principally used to

understand the perspectives of individuals and groups within an organisation, not an

organisation as a whole. For this reason, the term ‘frames’ will not be used.

Gosling and Mintzberg (2003) explore the idea of ‘mind-sets’ as a way to help managers

be successful. Managers are required to synthesise and integrate conflicting insights and

concerns “from different mind-sets into a comprehensible whole” (Gosling & Mintzberg

2003, p. 54). They describe a ‘mind-set’ as being similar to a frame of mind, and suggest

that managers think of them as “mind-sights” (p.56) or perspectives. Gosling and

Mintzberg (2003) believe the five ‘mind-sets’ they identify, such as the reflective, analytic,

and worldly, can help managers better understand and navigate their world. ‘Mind-sets’

are similar to Kaplan’s (2008) ‘frames’ as these apply to an individual, not an organisation.

The term ‘mind-set’, therefore, will not be used in this study.


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Sensemaking (Weick et al 2005) fills an important gap in organisational theory, as it

allows people and organisations to convert circumstances into a situation that is understood

explicitly in words and allows for future action. Sensemaking is described as a way for

people to deal with ambiguity, search for meeting, settle for plausibility and move on. This

study argues that strategic concepts provide a means of sensemaking, through the

clarification and articulation of something that was previously unclear and chaotic. This

also fits with Mintzberg’s (1994) description of strategy as a “pattern in a stream of

decisions” (p. 272), where sensemaking helps organisations make sense of these decisions,

resulting in strategic concepts that inform strategy and actions.

Kuhn’s (1979) identification of the paradigm as a means to describe alternate realities

aligns with strategic concepts. Morgan (1980) uses this as the foundation for exploring the

concept of metaphors. Metaphors are clearly similar to concepts (Morgan 1980), as they

help human beings understand the world, and by creatively applying metaphors to a

situation, greater insight and understanding of the scenario can be achieved (Morgan

1980). Morgan (1986) classically uses the metaphors of machines, organisms and theatre

to think about organisations, respectively converted into the concepts of mechanised,

organic and theatrical. The key distinction between a metaphor and a concept is that a

concept does not create a picture in our minds in the evocative way that a metaphor does.

This study argues that the strong mental picture a metaphor creates may in fact inhibit

creativity, whereas strategic concepts are more abstract, allowing for flexibility and

creativity, while still following a central theme. Therefore, the term ‘metaphor’ will not be

used.

Wiener (1988) posits that values guide organisational goals and strategies, and that “proper

values…contribute to organizational effectiveness” (p. 536). While values are important to

organisations (Peters & Waterman 1982), they do not appear to provide enough guidance

for an organisation to determine what it should or should not do. It appears difficult to

connect an organisation’s values, such as “innovative, compassionate, authoritative,

transparent, and independent” (Oxfam Australia 2008, p. 1) to its strategic concept, its

business model, or even its trading activities. Given this difficulty with values, this study

instead focuses on identifying strategic concepts that drive the business models of social

enterprises.


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Mitroff et al (1979) emphasise the importance of synthesizing multiple viewpoints to

develop strategy, and propose that this can best be achieved by uncovering underlying

assumptions. That is, to identify and articulate the real driving forces that influence

strategy formulation. For example, is the organisation driven by agility, quality or

reliability? Only by explicitly uncovering these assumptions can a unified strategy and

approach be taken, as each assumption will influence strategy formulation, which in turn

influences actions. This thinking is closely tied to Pierce’s (Ormerod 2006) philosophy of

pragmatism acknowledging multiple interpretations of a situation or object. By explicitly

exploring the different assumptions (conceptions) that managers hold, Mitroff et al (1979)

argue that the essence of a problem and its “basic definition” (p. 584) can be explored and

help the decision maker convert a “problematic situation into an opportunity” (p. 584).

This approach is similar to the use of strategic concepts in this study, where trading

activities are examined to articulate what drives the business models of social enterprises.

Concept identification through concept mapping

Strategic concepts can be identified through a concept mapping process. The process can

be compared to Mitroff et al’s (1979) suggestion discussed above that the assumptions held

by different managers be explored to emerge a problem’s definition. In this study, the

trading activities of social enterprises were identified, organisations with similar trading

activities were linked to each other, and a concept map was generated using the social

network analysis software program, UCINET 6.0 (Borgatti et al 2002).

The resulting concept map, which clusters social enterprises based on the similarity of their

trading activities, allowed the strategic concepts that drive these organisations’ business

models to emerge and be named. This study argues that identifying the strategic concepts

that drive the business models of social enterprises is more useful and meaningful than

identifying ‘frames’ (Kaplan 2008), ‘mind-sets’ (Gosling & Mintzberg 2003) or metaphors

(Morgan 1980). This is due to the generation of the concept map, a visual representation

of the strategic concepts that are revealed.

Conclusion

As understood in this study, strategic concepts drive patterns (Mintzberg 1994) in

organisational activity, to provide input to strategic thinking, and hence the resulting

activities of an organisation, including its business model and trading activities. While


34

‘frames’ (Kaplan 2008), ‘mind-sets’ (Gosling & Mintzberg 2003), ‘sensemaking’ (Weick

et al 2005), metaphors (Schon 1963; Kuhn 1979; Morgan 1980), values (Wiener 1988) and

underlying assumptions (Mitroff et al 1979) all bear some similarities with strategic

concepts, and could be adopted, key differences exist. Drawing heavily on Pierce’s

(Ormerod 2006) philosophical basis of pragmatism, strategic concepts in this study are

intended to identify the ‘conception’ that drives the business models of social enterprises.

This study argues that strategic concepts provide an appropriate level of abstraction to

allow an organisation to articulate what its core activity is without being prescriptive as to

the specific activities that should be undertaken. This level of abstraction provides

guidance to employees and members of an organisation, allowing them the flexibility and

empowerment to be creative where required. In comparison, an organisation’s values,

such as ‘dignity’ or ‘peace’ are seen as too abstract and provide little guidance as to the

execution of an organisation’s activities. Specific plans, such as ‘sell t-shirts’, are too

concrete and restrictive, limiting flexibility. Strategic concepts articulate the principle or

intent driving an organisation’s activity, and in this study are used to describe the drivers of

business models of social enterprises. The next chapter will describe the research

methodology and method applied in this study.


35


This chapter will explain and justify the methodology driving the collection of first hand

empirical evidence and the analysis which lead to the thesis that social enterprises use

particular strategic concepts to inform their business models. The question of

generalisation will also be addressed. This chapter will outline the steps taken to collect

and analyse evidence from publicly available annual and financial reports. Trading

activities were identified from these documents and analysed using concept mapping.

Comparison is an essential part of all research, and a consistent feature of social research

(Ragin 1987). Case studies, clinical trials, experiments and longitudinal studies use

comparisons to allow researchers to make interpretations that contribute to knowledge.

Where applicable, comparative research can apply statistical methods to validate or support

comparisons. A mixed method approach (Mingers 2001) to analyse comparisons is

concept mapping (Trochim & Kane 2007), where qualitative statements or ideas are

gathered, sorted and displayed on a network map to demonstrate connections between the

statements. This map can be quantified. This comparative approach was considered

appropriate for this study to compare the business models of social enterprises to identify

underlying strategic concepts. Recognising that some research methods are more

applicable to certain situations than others, the mixed method research design can “provide

a more comprehensive outcome” (Mingers 2001, p. 245). By combining qualitative and

quantitative research methods, this study proposes to reveal more useful results.

Concept mapping as a research method

Concept mapping, while used generically to describe the representation of ideas in network

form, for this purpose is considered a type of integrated mixed methods (Greene et al

1989). The key strength of concept mapping is the integration between qualitative and

quantitative methods, where qualitative information can be represented quantitatively, and

quantitative analysis is enhanced by qualitative judgement (Trochim 2001). Qualitative


36

research captures and discovers meaning in social reality through words and pictures,

allowing concepts and ideas to emerge (Neuman 2006). Quantitative techniques generate

maps and data displays to represent the relationships between the ideas and illustrate a

conceptual framework (Trochim & Kane 2007).

Concept mapping is used as a research method across various disciplines. Some recent

examples include the development and prioritization of a research agenda to promote

participation in sporting activities in the United States (Brownson et al 2008) and to

explore the concepts of learning used by school leaders (Pegg 2007). Johnsen et al (2000)

use concept mapping to quantitatively evaluate qualitative data. This method is seen as

appropriate to this study where the goal is to uncover the strategic concepts driving

business models of social enterprises.

Concept mapping in the traditional form as outlined by Trochim and Kane (2007) is used

to conceptualize ideas and display the interrelationships between these ideas in six steps:

1. preparation by identifying the focus, sampling frame or participants;

2. generation of ideas through brainstorming or statement identification by participants;

3. structuring the statements through a sorting or ranking process into groups;

4. representation of the statement groups onto a map using various software programs and

techniques;

5. interpretation of the maps to conceptualize the issue or problem; and

6. use of the concept maps for action, measurement or evaluation (Trochim & Kane

2007).

While most frequently used in groupwork, Trochim and Kane (2007) believe concept

mapping is also suitable for the analysis of statements extracted from other sources, such

as documents or interviews.

Trochim and Kane (2007) recommend analysis and mapping of data through

multidimensional scaling, however in this study network mapping analysis will be used.

Through the application of Alexander’s (1964) idea networking into modern network

analysis software, Metcalfe (2007) proposes that it is possible to conceptualise the

connection between numerous idea statements. To illustrate and analyse the

interrelationships between the social enterprises in this study, a concept map will be

generated using the social network analysis software program UCINET 6 (Borgatti et al

2002). The concept map generated in this study is shown and discussed in Chapter 6.


37

Coviello (2005) discusses the value of UCINET 6.0 (Borgatti et al 2002) in combining

network analysis with more classic qualitative approaches, as it allows comparisons

between multiple in-depth, qualitative case research. However, Coviello (2005) warns

researchers not to oversimplify the results of their qualitative research by relying too

heavily on the statistical analysis, as the quantitative element forms only part of the

understanding generated by the research. Trochim and Kane (2007) emphasise that despite

advances in technology, qualitative interpretation is critical to retain the integrity of the

concept mapping process.

Documents as a data source

Scott (1990) believes that documents can be a valuable source of knowledge and

information for social research when handled carefully, and that methodological issues that

relate to document analysis apply to other sources of social research evidence. Quality of

the evidence is critical, otherwise conclusions based on that document may be flawed

(Scott 1990). Scott (1990) outlines four criteria that researchers should adopt to ensure

that the evidence used is of the highest possible quality:

1. establish the authenticity of the evidence;

2. evaluate the credibility of the evidence;

3. ensure that the evidence is representative; and

4. check that the meaning contained within the evidence is clear and comprehensible, for

both literal and interpretative understanding.

Scott (1990) emphasises meaning and interpretation as fundamental to social research.

Historically, document analysis was the realm of the historian. Scott (1990) discusses that

written documents have in the past been perceived as superior to other sorts of evidence,

primarily because written documents were stored carefully and therefore generally

survived. Scott (1990) defines a document as an artefact where the text or pictures are the

key feature and purpose, including advertisements, invoices, and oil paintings.

In this study, documents in the form of websites and official reports of social enterprises

were analysed to identify trading activities. It is understood that the Chief Executive

Officer or senior management will have approved the content of the website and official

reports, and therefore the content is interpreted as an official and true reflection of the

organisation and its trading activities.


38

Identifying generalisations

This research intends to collect empirics that can be generalised. Williams and Tsang

(2008) describe generalisation as an important yet complex methodological issue. They

explore and critique contradictory definitions of generalization, drawing on Hume’s

“problem of induction”. Sloman and Lagnado (2005) state Hume’s definition of inductive

reasoning as the ability to “apply current evidence or logic to novel conclusions about the

unknown” (p 95). While knowledge of causal relations is based on prior experience, Hume

(Sloman & Lagnado 2005) demonstrates its inadequacy by reasoning that even if we

perceive similarities between cases we can reasonably expect that a case in the future could

be dissimilar to previous cases. Therefore, Hume (Sloman & Lagnado 2005) concludes

that the inductive act of generalisability is not justified.

Williams and Tsang (2008) propose a solution to Hume’s problem by claiming that we

may continue to apply inductive inference on the basis of a strong inference; this inference

must be based on a large enough number of observations that have resisted best efforts to

falsify them. Williams and Tsang (2008) evoke Popper (1969) to require generalisation to

be a well justified conjecture, and therefore propose a five type classification for

generalisation that will be used here. This is based on their argument that conjectures from

theory are deductions and not generalisations. Williams and Tsang’s (2008) classification

of generalisation includes:

1. theoretical generalisations based on generalizing from research findings to theory;

2. within-population generalisation which is closest to statistical generalisation;

3. cross-population generalisation;

4. contextual generalisation where populations exist in different contexts; and

5. temporal generalisation where generalisations are made across populations and time.

This study examines the conjecture that particular strategic concepts inform the business

models of social enterprises. This study collects and analyses data in order to make a

theoretical generalisation (2008) about the strategic concepts of social enterprises. Further,

this study proposes an empirical generalisation that similar strategic concepts may drive

other sustainable social enterprises.


39

Research method details

Seventy-five local, national and international social enterprises in Australia were selected

using a random sampling process, and their trading activities identified. Each social

enterprise was linked to other social enterprises with the most similar trading activities. A

concept map was generated using the social network analysis software program UCINET

6.0 (Borgatti et al 2002) that allowed the researcher to identify five distinct clusters. Each

cluster was named.

The seven steps that were taken are discussed below in detail:

1. decide on the selection criteria for social enterprises for this study

2. select the sampling frame and method

3. collect information on trading activities

4. link similar social enterprises to each other

5. enter data into UCINET 6.0

6. generate the concept map using UCINET 6.0

7. name the clusters

1. Decide on the selection criteria for social enterprises for this study

Initially using convenience sampling (Neuman 2006, p. 220), twelve social enterprises

already known to the researcher were identified. The process of identifying and qualifying

these organisations as social enterprises helped to clarify the selection criteria that was then

applied to the sampling frame. The criteria will be discussed shortly.

Few empirical studies on social enterprises are reported in the literature. Peredo and

McLean (2005) investigate social enterprises in Israel but do not include their selection

criteria. Thompson and Doherty’s (2006) characteristics of social enterprises discussed in

Chapter 2 are not specific enough for use in this study. The criteria in this study have been

adopted from studies on social enterprises conducted in the UK (Bull & Crompton 2006;

Hart & Haughton 2007), and are summarised in Table 5. If an organisation did not meet

one of the criteria listed below, it was excluded from this study.


40

Table 5 Social enterprise selection criteria

Selection criteria Explanation

The organisation must

have a website.

The Internet is a common way for organisations to provide

information to potential supporters and clients. It is expected

that social enterprises wish to be visible and accessible to the

public. It is also presumed that the website content has been

approved by the organisation’s senior management.

The organisation is not a

government department.

Government bodies are not social enterprises (Leadbeater

1997; Lyons 2001).

The legal status of the

organisation prohibits

profit distribution.

This organisation has a social mission and directs profits to

achieve the social mission (Hart & Haughton 2007). For-

profit social enterprises also exist however are not included in

this study due to the difficulty in accessing their financial data.

The organisation must

generate at least $1m total

income per annum.

Revenue is generated through a combination of fundraising,

grants, sponsorship and trading activity. This indicates the

importance of trading activity to the sustainability of the

organisation (Bull & Crompton 2006).

At least 20% of the total

income, or more than

$1m, must be generated

from trading activities,

excluding government

contracts.

A social enterprise’s trading activity is continuous and

necessary for the financial viability of the organisation to fulfil

its social mission over time (Bull & Crompton 2006). Bull

and Crompton (2006) set benchmarks for earned income

revenue in the UK at 50% for established social enterprises,

and 25% for emerging social enterprises, with revenue

generated from government contracts considered as earned

income. In this study, as funds from the government were not

always clearly labelled as grants or for contract fulfilment,

government revenue was excluded. Therefore the benchmark

for revenue generated from trading activity was set 20% or

more of total revenue.

Note that the researcher searched for the trading activities of each organisation as a

manifestation of the business model in place. Refer to Chapter 3 for details.

2. Select the sampling frame and method

Seventy-five social enterprises were selected using a combination of convenience and

systematic sampling (Neuman 2006, p. 230). This is considered an appropriate and

sufficient number of cases to create a robust concept map (Trochim & Kane 2007). Each

social enterprise was numbered from one to seventy-five to allow easy identification for

the remaining analysis.


41

Over 700,000 charitable and not-for-profit organisations operate in Australia (Lyons 2001),

including sporting organisations, religious groups, community groups, as well as social

enterprises and charities. This study conjectures that organisations with a social mission

want to make their work known to the public. Yellow Pages Australia was selected as the

sampling frame from which to select up to one hundred social enterprises for this study,

presumed to be a representative and accessible source of potential social enterprises in

Australia. Three lists selected from the Yellow Pages Australia directory including 1739

organisations in the category “Charities and Charitable Organisations” (2009a), 2226

organisations in the category “Disability Services and Support Organisations” (2009b), and

293 organisations in the category “Organisations—Disadvantaged Groups Aid” (2009c).

To select one hundred social enterprises from the Yellow Pages Australia list of 4258

organisations, a sampling interval of forty-two was calculated as a “quasi-random selection

method” (Neuman 2006, p. 230). The specific criteria outlined above were used. If an

organisation did not meet the criteria, the next organisation in the list was reviewed until an

appropriate organisation was identified. Upon reaching the end of the three Yellow Pages

Australia lists, sixty-three social enterprises had been identified.

Based on the selection criteria, many organisations were excluded from this study. From

the 4258 organisations in the Yellow Pages Australia lists, a total of 1481 organisations

were systematically reviewed in order to select sixty-three social enterprises. In some

cases, more than one hundred consecutive organisations were screened before a social

enterprise was identified. A significant number of organisations did not have a website,

and many with trading activities were excluded due to the lack of financial information.

3. Collect information on trading activities

Information gathered for each social enterprise included:

• type of trading activity or activities undertaken by the social enterprise,

• percentage of total revenue generated from the trading activity or activities,

• total dollar amount generated from each trading activity, and

• statements that illustrated the organisation’s purpose for undertaking the trading

activity or activities.

An annual or financial report was collected for each social enterprise, where available.

Information about the trading activities of each social enterprise is listed in Appendix 3.


42

4. Link similar social enterprises to each other

The concept map makes it possible to cluster social enterprises with similar trading

activities and allows commonalities and differences between the organisations to be

explored in a rich way. Rather than allocating social enterprises into predetermined

categories, the categories emerged from an analysis of the concept map.

Each social enterprise was linked to other social enterprises, or cases, based on the

similarity of their trading activities, starting from the first social enterprise in the list, to the

last one. Using the example of the first social enterprise in the list, Activ Foundation Inc.,

the process taken was as follows:

Table 6 Description of the linking process

Step Process Example

1 Identify the trading

activities of the first case

or social enterprise in the

list

The primary trading activity of Activ Foundation Inc.

was identified as “commercial services that provide

supported employment opportunities for the disabled”

(21% of the annual revenue or $11m).

2 Identify cases with

similar trading activities

Screen each consecutive case in the list to identify those

with the most similar trading activities to the first case.

3 Record those cases with

similar trading activities

Cases 10, 18, 35, 37, 41, 50, 60 and 64 were recorded as

having similar trading activities to Activ Foundation

Inc.

4 Identify the trading

activities of the second

case in the list

Continue the process as outlined above for cases 2 to

75. This is therefore a one-way linking process from

the first case to the last.

Each social enterprise was on average linked to two other social enterprises in the list. The

challenge in linking social enterprises to each other was to maintain an appropriate level of

abstraction. If too many social enterprises were linked together, by using broad criteria, no

distinct clusters would emerge in the concept map, and all cases would be deemed to be

similar. On the other hand, if the trading activities were seen as unique and specific to

each social enterprise, not enough social enterprises would be linked together, there would

be many isolates, and no clear clusters would emerge.

The links made between the social enterprises in this sample are listed in Appendix 2.

Examples of trading activities used to imagine links between social enterprises included:

care and support services to the disabled or aged, training courses, retail shops (online or

physical), and commercial services providing supported employment opportunities.


43

5. Enter data into UCINET 6.0

The list of links between all the social enterprises in the study was entered into an

interaction matrix in the social network analysis software, UCINET 6.0 (Borgatti et al

2002). In a spreadsheet format (see Figure 4) the links between social enterprises were

identified as a number ‘1’, with ‘0’ indicating no link.

Figure 4 UCINET interaction matrix to enter linking data

For example, in column 1, the number ‘1’ was inserted in the cells on rows 10, 18, 35, 37,

41, 50, 60 and 64 to reflect the connection between Activ Foundation Inc. (the first social

enterprise in the list) and eight other social enterprises in the sample. Column ‘2’

represented the second social enterprise, Anti-Cancer Council Victoria, and rows 9 and 66

were filled with ‘1’ to link this social enterprise with Diabetes Australia and Oxfam

Australia respectively. This process was completed until column 75 was reached and all

links had been entered in the appropriate rows. The software program automatically

populated all the empty cells with ‘0’.


44

6. Generate the concept map using UCINET 6.0

A concept map was generated from the interaction matrix using NetDraw, a quantitative

analysis incorporated in the social network analysis software program UCINET 6.0

(Borgatti et al 2002). The NetDraw algorithm creates a visual network of the nodes and

their relationship to each other by grouping together the nodes that are most linked to each

other. The algorithm converts the interaction matrix into the network diagram by best

positioning the nodes given their interconnections. In this study, this means that social

enterprises with the most similar trading activities are positioned close to each other on the

concept map, while those with different trading activities are positioned further away from

each other. Using the software program Mage (Borgatti et al 2002), a three dimensional

image of the concept map was also generated. This rich view of the network allows easier

identification of distinct clusters. These clusters were later distinguished by conducting a

Girvan-Newman (Girvan & Newman 2002) community structure analysis as provided in

UCINET 6.0 (Borgatti et al 2002). The concept map generated in this study revealed five

clusters, discussed in detail in Chapter 6.

7. Name the clusters

As discussed in Chapter 4, Schon (1963) defines concepts as a label or description of ‘the

thing in question’, with language acting as a short-hand to help us internalise and deal with

‘the thing in question’. Everything we conceive we label with a concept, and Schon (1963)

notes that certain situations can be conceived in a multiple ways, reflecting Pierce’s

(Ormerod 2006) philosophy of pragmatism. Concepts make our life easier, as otherwise

we would need a unique name for every individual entity in our world, and it would be

virtually impossible to communicate (Smith & Medin 1981). For example, the concept of

‘flowers’ allows people to say they received flowers, instead of listing each individual

flower in a bouquet, for example, rose, daisy, and so on.

Smith and Medin (1981) state that concepts “capture the notion that many objects or events

are alike in some important respects” (p. 1), and are “critical for perceiving, remembering,

talking and thinking about objects and events in the world” (p. 1). For example, while

flowers share common characteristics such as petals, sepals and stamens, they come in

many colours, shapes and numbers. The collective label of ‘flower’ allows people to

conceive these in an abstract, collective way. In this study, by giving each cluster a name

that the researcher believes best represents the strategic concept driving the business


45

models of social enterprises in that cluster, the researcher has constructed meaning that

others can use and interpret. Naming has interpretive, sociological importance (Valentine

1998), and the researcher acknowledges that others may choose a different name to

describe each strategic concept.

Conclusion

Seventy-five social enterprises were identified and collected through a combination of

convenience sampling (the first twelve cases) and systematic sampling (the remaining

sixty-three cases) (Neuman 2006) over a three week period. This number is sufficient to

create a robust concept map (Trochim & Kane 2007). Criteria to select social enterprises

were adapted from benchmarks identified in two studies conducted on social enterprises in

the United Kingdom (Bull & Crompton 2006; Hart and Haughton 2007). 1481

organisations from the total list of 4258 were reviewed, and their websites scanned to

identify them as possible social enterprises. The documents of potential social enterprises

were then checked against pre-set criteria. If acceptable, details of the trading activities

were extracted. The linking procedure, used to connect social enterprises with similar

trading activities required an appropriate level of abstraction and consistency. The linking

data was entered into the social network analysis software program UCINET 6.0 (Borgatti

et al 2002) and a concept map was generated. Five clusters were revealed. The

interpretation and findings relating to these clusters are discussed in Chapter 6.


46


This chapter argues that the visual representation of cases in a concept map allows

interpretation of the strategic concepts that drive the business models of social enterprises.

The concept map presents the social enterprises in clusters that are interpreted by the

researcher and analysed by the software program UCINET 6.0 (Borgatti et al). The key

advantage of the concept map is that it is possible to see where each case, or social

enterprise, is located on the map, relative to the clusters, and to each other. A three

dimensional image of the concept map was generated using the Mage (Borgatti et al 2002)

function to allow the researcher to more easily identify distinct clusters. These clusters

were confirmed by conducting the Girvan-Newman community structure analysis (Girvan

& Newman 2002) in UCINET 6.0 (Borgatti et al 2002).

Initially six clusters were identified however after reflecting on the key attributes of the

trading activities within each cluster, this was reduced this to five clusters. This analysis

led to the creation of a descriptive and short name for each cluster. The process to identify

the five clusters will now be discussed in more detail, and examples of social enterprises in

each cluster will be presented.


47

Interpreting the concept map

The initial concept map, shown in Figure 5 below, visually illustrates the similarity

between the trading activities of the seventy-five social enterprises in this. Cases that are

closer together have similar trading activities, such as cases 60, 62, 63 and 70 at the bottom

section of the map. Cases that are further apart from each other, such as case 32 in the top

right hand corner, and case 71 in the bottom left hand corner of the map, have different

trading activities. The concept map generated by using NetDraw in UCINET 6.0 (Borgatti

et al) calculates the position of each case based on the number of linkages entered in the

interaction matrix. Note that the lines connecting the cases are of equal length however as

this is a two dimensional view of the concept map, some lines appear to be longer or

shorter.

Figure 5 Concept map generated by UCINET 6.0

The two and three dimensional views available in UCINET 6.0 (Borgatti et al) were used

to identify distinct clusters of social enterprises. The clusters are shown in Figure 6 and

each cluster is described in the order in which it was initially identified by the researcher in

(Table 7).


48

Figure 6 Concept map with the researcher’s initial clusters

Table 7 How the researcher initially identified each cluster

Cluster How each cluster was identified

1 One tightly clustered group of cases appears to be positioned at the bottom

centre of the map, anchored by cases 60 and 70 in the centre.

2 Another identifiable cluster appears clustered around cases 48 and 53.

3 Cases 49, 28, 32 and 25, located at the top right hand corner of the map, appear

to form a separate cluster.

4 The three dimensional image of the map using Mage (Borgatti et al 2002)

allowed the researcher to distinguish another small cluster in the lower left hand

corner of the two dimensional map comprised of cases 68, 22, 73 and 71. This

cluster was not distinguishable on the two dimensional map. Case 57 does not

appear to fit in this cluster, given that it is linked to case 14.

5 Another smaller cluster appears to be displayed in the lower right hand corner

of the two dimensional view, bounded by cases 36 and 4, including cases 29,

72, 74, 33 and 19.

6 Due to the seemingly equal spread of cases in the top left corner of the concept

map, it was conjectured that these cases may form a large cluster (Cluster 6).

The two and three dimensional views do not present any locus to this cluster.


49

As all the social enterprises are linked to at least one other social enterprise, there were no

isolates. Several social enterprises are linked to just one or two others in the sample. For

example, moving clockwise from the bottom of the map, cases 57, 71, 3, 9, 65, 38, 40, 25,

52 and 51 are linked to only one other social enterprise. Based on the review of the two

dimensional and three dimensional views, six clusters appear to have emerged.

Validation using Girvan-Newman analysis

Girvan-Newman (2002) analysis of the concept map quantitatively verified the number of

clusters, and the size of each cluster. This statistical analysis identifies the “community

structure” (p. 7821) of a network by recognising that communities exist within larger

networks. Girvan and Newman (2002) posit that by identifying these communities,

understanding of the network itself can be increased. While the traditional method of

hierarchical clustering, which weights the nodes based on how tightly connected they are,

can be useful, nodes that are weighted more weakly may be inaccurately classed as isolates

and not form part of the cluster to which they belong (Girvan & Newman 2002). Rather

than focus on links between nodes that are most central to each cluster or community,

Girvan and Newman (2002) identify the edges, or vertices between nodes, that are least

central, or “between communities” (p. 7822). The algorithm calculates the “betweenness

for all edges in the network” (p. 7823) in an iterative statistical process that identifies the

community structure based on boundaries established by the nodes’ connections to each

other (Girvan & Newman 2002).

This study conjectured that around five to seven clusters would emerge (Miller 1956). For

this reason, the Girvan-Newman community structure analysis was set to statistically

identify five to seven clusters. The result of this analysis is displayed in Figure 7, with

cases in each cluster appearing in a different colour and numbered for ease of reference.


50

Figure 7 Concept map with six calculated clusters

The Girvan-Newman statistical analysis (Girvan & Newman 2002) suggested six distinct

clusters which correspond closely with the qualitative assessment. Each cluster is

discussed in Table 8.

Table 8 Clusters identified using Girvan-Newman analysis

Cluster Clusters identified using Girvan-Newman analysis

1 Girvan-Newman analysis confirmed the presence of this distinct cluster (cases

28, 32, 49 and 25) that is quite separate from all the other cases in the sample.

2 Girvan-Newman analysis suggests these cases belong together, whereas the

researcher conjectured, based on the two and three dimensional views, that this

could be seen as two separate clusters.

3 The analysis confirmed this tightly connected cluster.

4 The analysis confirmed this small cluster that was only visible using the three

dimensional view.

5 This cluster was not distinguishable as no clearly visible locus is present, the

Girvan-Newman analysis will be used.

6 As with Cluster 5, this cluster was not distinguishable as no clearly visible locus

is present. The Girvan-Newman analysis will be used.


51

The next step was to carefully review the types of trading activities present in each cluster

to identify the common element linking the social enterprises in each cluster. Based on

this qualitative interpretation, each cluster was given a name that was thought to best

reflect the key attributes of the strategic concept that drives the business model of social

enterprises in that cluster.

Importantly, while Cluster 2 is characterised by services trading, and Cluster 6 by product

trading, these activities are driven by the same strategic concept of ‘developing expertise’.

For this reason, these clusters were merged to form the new Cluster 2. This reduces the

number of clusters from six to five. The concept map showing the final five clusters is

shown in Figure 8 below, and summarised in Table 9.

Figure 8 Concept map with the final five clusters


52

Table 9 Summary of the five clusters

Cluster Number of cases Percentage of total cases

1 4 5%

2 30 40%

3 23 31%

4 4 5%

5 14 19%

Findings

This study has found that the strategic concepts driving the business models of social

enterprises in Australia can be clustered using the following five strategic concepts. These

are named in order of cluster number:

Table 10 Descriptive and short name for each strategic concept

Descriptive name Short name Example

Provide a safe place to stay overnight or store

belongings, or use revenue from providing

accommodation to fund other social programs.

‘Safety nest’ YMCA,

YWCA

Develop specific expertise and skills that address

specialised, unmet gaps in the market (either product

or service).

‘Expertise

meets social

needs’

Deaf Society

of NSW

Provide people with disabilities supported

employment opportunities, leisure activities, help

them learn and live independently; or help those with

a disadvantage to participate as full and functioning

members of society.

‘Personal

independence

coaching’

Bedford

Group,

BoysTown

Engage clients, members or supporters to interact

directly with the cause to motivate them to get

involved or provide other support (time, skill or

money).

‘Experience

the cause’

National Trust

of Australia

(Victoria)

Source, re-use or distribute physical goods that help

address a social need or gap.

‘Wealth re-

distribution’

St Vincent de

Paul Society

It is thought that many, if not all, business models of social enterprises in Australia are

driven by one or more of these five concepts. The concept mapping method revealed five

strategic concepts and a visual description of the relationship between the social enterprises

in this sample. Importantly, as illustrated by the concept map, these clusters are not

mutually exclusive, nor hierarchical. While the cluster ‘expertise meets social needs’

could be perceived as a generic concept applicable to all social enterprises, identifying five


53

concepts is more useful to social enterprise strategists, as will be discussed in Chapter 7.

The short name for each strategic concept will be used in further discussion.

The concept map displaying the short name for each strategic concept, and percentage of

cases in each cluster, is displayed below in Figure 9.

Figure 9 The five strategic concepts revealed by the concept mapping method


54

Examples of social enterprises in each cluster

Examples of social enterprises in each cluster are provided to better illustrate the strategic

concepts. For the full list of social enterprises in each cluster, and financial information

about the trading activities of each organisation, refer to Appendix 2.

Cluster 1: ‘Safety nest’

The strategic concept of ‘safety nest’ appears to drive the business models of the four

social enterprises in this cluster. This cluster was easily distinguishable in the two

dimensional view of the concept map, and the revenue generating activities are quite

different to the rest of the sample, as indicated by their distance from other social

enterprises on the concept map.

Table 11 Social enterprises in the ‘safety nest’ cluster

# Social Enterprise Trading Activity

49 Interact Australia Profits generated from operating the 4.5 star Marrakesh Resort

Apartments fund programs for the disadvantaged (Interact

Australia 2009).

32 YMCA Australia YMCA provides 3.5 star “safe, affordable accommodation”

(2009) with rooms not filled made available to homeless people

or those in need of short term accommodation at a reduced rate.

28 YWCA $5.7m, 31% of total annual revenue was generated through its

hotels and conference facilities (2008) and makes unfilled rooms

available to those in need, similar to the YMCA.

25 Sunshine Coast

Health Foundation

$619K (40% of its annual revenue) was generated through car

park fees for hospital staff and visitors (2008, p. 9). By offering

a safe, convenient place for people to park their cars, Sunshine

Coast Health Foundation provides a sort of ‘safety nest’.

Cluster 2: ‘Expertise meets social needs’

The cluster ‘expertise meets social needs’ was created by merging two clusters (Clusters 2

and 6 as per Figure 8), therefore the cases do not appear to be close together. The clusters

were merged as it was determined that the business models of social enterprises are driven

by developing expertise to address specific social needs. Thirty social enterprises, or 40%

of this sample, fall within the ‘expertise meets social needs’ cluster. Several social

enterprises are linked to only one other social enterprise, indicating a high level of

diversity of the type of expertise developed. Examples are provided in Table 12.


55

Table 12 Social enterprises in the ‘expertise meets social needs’ cluster


29 Deaf Society of

NSW

Expertise in communication and interpretation services for the

deaf or hearing impaired generated $1.1m (2008).

69 Baptist

Community

Services (BCS)

Through its expertise in providing aged care services, $32m

(20% of its total annual revenue) was generated from residents

living in BCS retirement villages and from services provided to

clients living in their own home (2008).

74 Royal Life Saving

Society (Aust) NT

Branch Inc.

This organisation has the expertise and knowledge to provide

fee-based first aid training courses to the public and generated

55% of its annual income by providing such training (2008).

Cluster 3: ‘Personal independence coaching’

The strategic concept of ‘personal independence coaching’ can be used to describe Cluster

3, the second largest cluster in the sample. Twenty-three social enterprises form this

densely connected cluster, and operate similar business models. In comparison with other

clusters, the number of between-case links in Cluster 3 is very high.

Table 13 Social enterprises in the ‘personal independence coaching’ cluster


37 Bedford Group $9.4m, or 23% of its total revenue in 2008, was generated

through commercial services that provide those with a disability

supported employment in areas including packaging, assembly

and landscaping (Bedford Industries Inc. 2008). Tasks are

broken into manageable blocks that those with an intellectual or

physical disability can accomplish, and staff support and coach

these people. Bedford Group provides development options,

leisure activities, and supported accommodation. All these

activities generate revenue for the social enterprise (2008).

60 House With No

Steps

Based in New South Wales and Queensland, this is one of the

most highly linked-to cases in this cluster. House With No Steps

generated $16m from trading activities including a bakery,

tourist attraction, and recycling, established to provide supported

employment for people with disability (2008).

5 BoysTown BoysTown helps disadvantaged children and youth connect with

the community (2008, p. 3). $6.6m, or 12% of its annual revenue

was generated through commercial services established to

provide young, disadvantaged people with work experience, an

employment reference, and mentoring to help them enter and

stay in the workforce (2008, p. 39). More than 70% of its

revenue was generated from the BoysTown lottery (2008, p. 39),

with profits are used to operate services (BoysTown 2009).


56

Cluster 4: ‘Experience the cause’

The strategic concept of ‘experience the cause’ is given to the four social enterprises in

Cluster 4, with the business models represented in this cluster quite different to others in

this sample. This cluster was clearly visible in the three dimensional view of the concept

map.

Table 14 Social enterprises in the ‘experience the cause’ cluster


73 National Trust of

Australia (Victoria)

$3.4m (34%) of its annual revenue was generated by providing

access to and tours of beautiful historic gardens and houses

(2008, p. 22) to tourists, wedding parties and film crews.

68 Art Gallery of

South Australia

Fees for special art exhibitions and art-related events subsidise

the purchase and restoration of artwork (2008).

71 Australian Wildlife

Conservancy

Fees charged for tours of the bush are directed towards the

preservation of endangered wildlife (2008).

22 Scouts Australia

(NSW)

25% of its revenue ($2.1m) was generated through activities

undertaken and paid for by children and young people who

participate in “a wide range of fun, constructive and

challenging activities” (2009).

Cluster 5: ‘Wealth re-distribution’

The business models of social enterprises in Cluster 5, positioned close together in the

concept map, appear to be driven by the strategic concept of ‘wealth re-distribution’.

While the specific trading activities are diverse, ‘wealth re-distribution’ appears to describe

what drives the business models represented in this cluster.

Table 15 Social enterprises in the ‘wealth re-distribution’ cluster


24 St Vincent de Paul

Society

“Vinnies Centres” selling cheap second hand items generated

21% or $31.6m in 2008 (St Vincent de Paul Society 2008).

11 Foodbank

Australia Ltd

Foodbank forms “food alliances” to ensure a reliable, sustainable

supply of foodstuffs to charities. A nominal handling fee

equivalent to 17% of the food’s retail price that helps “welfare

agencies to stretch their limited budgets” (2008, p. 5) generated

71% of its revenue ($895,000) (2008).

67 RSPCA WA The retail shops and animal shelter sales generate 27% of

RSPCA WA’s annual income (2008).


57

Conclusion

This chapter described the process taken by the researcher to identify and name the five

strategic concepts that drive the business models of social enterprises in this sample.

Through interpretation of two and three dimensional views of the concept map generated

by UCINET 6.0 (Borgatti et al 2002), and the aid of Girvan-Newman community structure

analysis (Girvan & Newman 2002), five distinct clusters were identified. A descriptive

and short name for each strategic concept was developed, and examples of social

enterprises in each cluster were discussed.

The five clusters identified are neither mutually exclusive nor hierarchical, and all social

enterprises in this study are interconnected, as illustrated by the concept map.

Using the findings of this study, in Chapter 7 the researcher presents recommendations for

strategists of social enterprises to validate their existing business models, or creatively

develop new ones. Contribution to the literature and implications for further research are

also proposed.


58


This study named five strategic concepts that drive the business models of local, national

and international social enterprises in Australia. Using a mixed method approach (Mingers

2001) combining qualitative and quantitative research, annual and financial reports of

social enterprises were interpreted and analysed to identify each organisation’s trading

activities. Social enterprises were linked to each other based on the similarity of their

trading activities. The concept mapping method generated a visual network of the social

enterprises and their interrelationships. Five clusters of social enterprises linked by their

trading activities were identified and named to provide a collective label to explain the

business models within each cluster. This study’s contribution to the literature is

discussed, as well as recommendations to social enterprise strategists, and implications for

further research.

The five strategic concepts identified in this study

This study identified five strategic concepts that drive the business models of social

enterprises in Australia:

• ‘Safety nest’

• ‘Expertise meets social needs’

• ‘Personal independence coaching’

• ‘Experience the cause’

• ‘Wealth re-distribution’

These concepts can be thought of as the conceptual or strategic drivers behind each

organisation’s business model. It is thought that all the business models of social

enterprises in Australia may be placed under one or more of these concepts. This study

proposes that identifying five strategic concepts is useful (Miller 1956) as these may help

social enterprise strategists evaluate existing as well as explore new business models.


59

Identifying just one or two strategic concepts may inhibit creativity, while identifying eight

or more strategic concepts may create unnecessary confusion.

Contribution to the literature

Generating revenue from paying customers is an integral component of social enterprises

(Shaw & Carter 2007), so their business models have been identified as an area for

potential research (Certo & Miller 2008). Given the definitional problems of business

models, this study has focused on the conceptual drivers behind these business models.

Rather than identify and describe the detail of the business models of specific social

enterprises, this study argues that it is more strategic and useful to focus on a higher level

of abstraction. This study draws on similar approaches, such as surfacing underlying

assumptions (Mitroff et al 1979) or conceptual metaphors (Morgan 1986) in organisations,

however this approach appears not to have been previously applied to social enterprises.

This study proposes that identifying the strategic concepts that drive the business models

of social enterprises is more useful than focusing on individual business models.

This empirical study proposes a theoretical generalisation (Williams & Tsang 2008), that

the business models of social enterprises in this sample are driven by one or more of the

five identified strategic concepts. The study’s empirical generalisation (Williams & Tsang

2008) is that these five strategic concepts can be used to explain the business models of

social enterprises not included in the sample. The five strategic concepts provide a starting

point to understand the business models of social enterprises. Secondly, these concepts

provide a way of thinking about potential business models for those seeking to establish

new social enterprises.

Concept mapping, a mixed method approach (Mingers 2001), does not appear to have been

applied to social enterprises. The identification of the five strategic concepts that drive the

business models of social enterprises demonstrates the value of illustrating qualitative

interpretation of organisations as a network that can be quantitatively evaluated using

network analysis. This approach to structuring organisational attributes and to concept

mapping may be used by other researchers to understand different aspects of organisations

and their strategies.

The criteria used to select the social enterprises (see Chapter 5) included in this study may

be used and validated by other researchers. This represents a novel and useful application

of the literature review combined with a close reading of the annual and financial reports


60

of social enterprises in Australia. Further qualification of the proportion of revenue

generated from trading activities may be required, as the selection of either 20% of total

revenue, or minimum $1m, was determined by the context of this study. Government

contracts were not considered as trading activities in this study due to the difficulty in

establishing this information. The figures used in this study seem appropriate, as the UK

studies required a minimum of 50% generated from trading activities, including revenue

from government contracts (Hart & Haughton 2007).

The five strategic concepts named in this study can also act as a prompt for creative

development of new business model ideas. Examples of this process are provided below

as a recommendation to social enterprises strategists. This appears to be a new application

of the concept mapping method.

Recommendations to social enterprise strategists

This research is considered to be of practical use to the strategists of existing or potential

social enterprises. Dees (1998) and Foster and Bradach (2005) mandate a consistent ‘fit’

between the business model and social mission of the organisation. Socially driven

organisations must carefully evaluate whether the existing or proposed business model is

congruent with the social mission, and proactively minimise operational and cultural

conflict. Foster and Bradach’s (2005) list of mission-led questions may help here. Internal

consistency, or ‘fit’, between an organisation’s business model and mission, as well as

external ‘fit’ to the marketplace, contribute to an organisation’s financial sustainability

(Morris et al 2005). The five strategic concepts allow social enterprise strategists to reflect

on both of these requirements for ‘fit’.

The five strategic concepts can be applied in at least three further ways. Firstly, an

established social enterprise may identify the strategic concept that seems to drive their

organisation’s business model, and hence trading activities. By articulating the strategic

concept most applicable to their organisation, social enterprises may be able to think more

conceptually and strategically about their present and potential business models. Equally,

a not-for-profit organisation that does not generate a significant percentage of revenue

through earned income activities, but intends to transform itself into a social enterprise,

may also benefit from using the concepts to think about how best to enter the marketplace,

in a way that ‘fits’ with their organisation. Due to the level of abstraction, the strategic

concepts allow members at all levels of an organisation to generalise about the type of


61

business model they have or might adopt while allowing for flexibility and creativity in the

detail of how these are executed. For example, if a social enterprise articulates its strategic

concept as ‘expertise meets social needs’ then it may reflect on exactly what that expertise

is, and how it might extend its business model to take advantage of that expertise. The

strategic concept acts as a conceptual anchor to think about alternative intentions for the

organisation, as illustrated by the example of Komatsu (Bartlett & Ghoshal 1994).

Secondly, these five strategic concepts can be used by those wishing to establish a social

enterprise to help develop new business model ideas. For example, a group planning to

establish a social enterprise to assist African immigrants arriving in Australia may use

them to identify revenue generating opportunities. The group can identify potential

business models inspired by each individual strategic concept. Possible options triggered

by thinking about each of the concepts for this African immigrants group may include:

• Develop expert knowledge about the types of culture shock that Africans may

experience and develop counselling programs and materials to help them settle into life

in Australia (‘expertise meets social needs’).

• Based on expert knowledge of African cultures, develop training courses and

workshops for schools to educate young people about the value of other cultures and

illustrate how Africans and other immigrants contribute to society (‘expertise meets

social needs’).

• Sell handicrafts or food made by African immigrants (‘wealth re-distribution’).

• Establish a museum or venue where African artefacts, history, stories, music,

photographs, traditional dress and other items are displayed and charge a fee for the

public or schools to visit (‘experience the cause’).

• Establish a restaurant or café that sells African food and provide African cooking

classes delivered by immigrants (‘experience the cause’).

• Acquire or lease a building to provide accommodation, and reserve a proportion of

rooms for recently arrived African immigrants who stay at a reduced rental rate for a

period of time before they find their own accommodation (‘safety nest’).

Through this creative process that draws on each of the five strategic concepts, the group

may identify which business model ideas are viable, whether they have the appropriate

resources and skills to implement these business models, and whether these are congruent

to the group’s social mission.


62

A possible third application of the concept map is for social enterprises to also consider

business models inspired by combining two or more strategic concepts. This can be called

‘idea-driven thinking’ or ‘focused thinking’, as ideas are generated by creatively merging

two or more concepts. For example, by reflecting upon the combination of ‘experience the

cause’ and ‘expertise meets social needs’, a social enterprise may coordinate holiday

packages to visit conflict areas in Africa. In this way, potential sponsors may gain more

empathy for African immigrants. Or by combining the concepts of ‘experience the cause’

and ‘wealth re-distribution’, a social enterprise may charge a fee for tours of organic farms

that encourage participants to establish their own organic gardens, and provide a venue for

excess produce to be swapped, such as my excess lemons for your excess spinach or eggs.

This new and creative use of the concept mapping method is a contribution apparently not

previously applied in the literature.

Implications for further research

An alternative to the use of publicly available annual and financial reports, as used here, is

a survey or in-depth interviews. However, these approaches have their own

epistemological problems. The alternatives were not used here also because of the limited

time frame available to conduct this six month study by one researcher. It is thought that

the best way to gain insights into the existing and potential business models of social

enterprises is through in-depth qualitative interviews with the Chief Executive Officer of

both successful and unsuccessful social enterprises locally, nationally or globally. This

information could be used to validate the strategic concepts identified in this study, and

provide additional information about the thinking behind specific business models.

The legal status of social enterprises included in this study, where profit distribution to

individual stakeholders or shareholders is prohibited, meant that social enterprises run as

for-profit enterprises were excluded. The primary reason for excluding for-profit social

enterprises was due to the lack of publicly available financial data about the trading

activities undertaken. Future studies, using in-depth qualitative interviews may overcome

this barrier to collecting the required information.

While this study has identified five strategic concepts, alternative clusters may emerge if a

different sample were used, perhaps including social enterprises from outside Australia, or

if trading activities were linked together differently. Future research that attempts to

distinguish the drivers of business models included in the ‘expertise meets social needs’


63

cluster may yield interesting, alternative strategic concepts. However, the researcher

proposes that the five strategic concepts identified in this study provide a useful set of

concepts for thinking about any social enterprise.

New business models can also emerge from between-cluster strategic concepts. This

would be an example of potential creative thinking that this study has not addressed

empirically. In addition, extending the definition of the strategic concepts found here may

also inspire new types of business models. These may provide areas for further research.

In response to the considerable confusion in the literature over the term ‘business model’

(Osterwalder et al 2005), this study identified five strategic concepts that drive the business

models of social enterprises. It therefore did not investigate the specifics of the business

models of social enterprises. Future research may define and then evaluate the business

models used by social enterprises.

Appendix 1

64

Appendix 1

An evidence map presents the key questions and arguments and indicates where the

evidence can be found within this thesis. These questions have been outlined in Figure 10.

Appendix 1

65

Figure 10 Evidence map for this thesis

Is this problem relevant? (See

Chapters 1 and 7)

Social enterprises have business models

(See Chapters 2 and 4)

What are strategic concepts? (See

Chapter 3)

How are social enterprises different to not-for-profit

organisations? See

Chapter 2)

Where is the evidence? (See literature evidence in Chapters 2, 3 and 4, and

empirical evidence in

Chapters 5 and 6)

Strategic concepts drive business models (See

Chapters 3 and 4)

Strategic concepts provide an appropriate

level of abstraction

(See Chapter 3)

What are social enterprises? (See Chapter

2)

Strategic concepts can help social enterprises

brainstorm new business models (See Chapter 7)

The mixed method approach provides a more comprehensive

research outcome (See Chapter 5)

Does document interpretation and analysis produce

valid evidence? (See

Chapter 5)

What is a business model? (See Chapter 4)

How is the concept map created and interpreted? (See

Chapters 5 and 6)

Strategic concepts can be identified through concept

mapping (See Chapters 3, 5 and 6)

What are the criteria used to select social enterprises

in this study? (See

Chapter 5)

Strategic concepts drive

the business models of

social enterprises

Appendix 2

66

Appendix 2

Five strategic concepts were identified from the concept map generated in this study.

Figure 11 displays the five strategic concepts and percentage of cases in each cluster. The

trading activity details of each social enterprise are listed in Table 17.

Figure 11 Five strategic concepts identified from the concept map

Appendix 2

67

Table 17 lists the seventy-five social enterprises selected and analysed in this study, grouped by cluster in descending order of case number, with

details about each trading activity, revenue per activity, website address and the links made between the social enterprises. The ‘Links’ column

indicates which other social enterprises have similar trading activities, as interpreted by the researcher.

Table 16 List of all social enterprises in this study, grouped by cluster in descending order (14 pages) Cluster Case Name of social enterprise Trading Activity (in order of revenue generated) and Website Links

1 "Safety nest" 25 Sunshine Coast Health Foundation

(1) Rental (car park fees) [$619K; 40%] Total 2008 Revenue $1.53m http://www.healthfoundation.com.au/

49

1 "Safety nest" 28 YWCA (1) Hotel accommodation [$5.2m; 28%] (2) Conference facilities / food / beverage [$550K; 3%] Total 2008 Revenue $18.6m. 31% generated through social enterprises http://www.ywcansw.com.au/

32, 49

1 "Safety nest" 32 YMCA Australia (1) Hotel accommodation [$8.2m; 4%] (2) Child care services [$34.3m; 16% - combined govt grants & fees] (3) "Other" including training, health centres, op shops [$37m; 18%] (4) Retail sales (online store) [$1.9m; 1%] Total 2008 Revenue $205m (service activities revenue combines govt grants & fees) http://www.ymca.org.au/

49

1 "Safety nest" 49 Interact Australia (1) Hotel accommodation (Marrakesh Resort) (2) Training courses and accreditation 100% of profits directed to community services (no revenue information available); some programs also funded by govt grants http://www.interactaust.com.au/

58

Appendix 2

68

Cluster Case Name of social enterprise Trading Activity (in order of revenue generated) and Website Links

2 "Expertise meets social needs" (originally Cluster 2)

4 Autism Queensland (1) Professional development & training courses [$492K; 5%] (2) Services for autistic children / families [$413K; 4%] (3) Membership & other fees [$166K; 2%] Total 2008 Revenue $10.2m http://www.autismqld.com.au/index.html

20, 29, 36, 72, 74


15 Life Care (Churches of Christ Life Care Inc)

(1) Aged care services incl. residential care, retirement living, community services [$6m; 23%] Total 2008 Revenue $26.5m http://www.lifecare.org.au/

17, 53, 58, 69


17 Melbourne Citymission (1) Client services (aged care, disability, children) & residents fees [$3.17m; 8%] Total 2008 Revenue $39.6m http://www.melbournecitymission.org.au/about.html

26, 43, 45, 48, 53, 59


19 Our Community Pty Ltd (1) Training and accreditation (2) Membership fees to Institutes 100% of revenue from trading activities (no govt support, no donations) Total 2008 Revenue unknown http://www.ourcommunity.com.au/

33, 72, 74


26 UnitingCare NSW.ACT (1) Aged care services incl. residential care, retirement living, community services [$109m; 25%] (2) Rental (commercial buildings) [$4m; 1%] (3) Children's services (child care) [$2.9m; >1%] (4) Family services (activities, support) [$611K; >1%] (5) Corporate programs [$246K; >1%] Total 2008 Revenue $431.5m, 26% generated through commercial activities http://www.unitingcarenswact.org.au/

34, 40


29 Deaf Society of NSW (1) Interpreting & communication services for the deaf [$1.1m; 19%] (2) Education and training [$205K; 4%] Total 2008 Revenue $5.7m, 23% generated through commercial activity http://www.deafsocietynsw.org.au/index.html

36, 59

Appendix 2

69



33 Action on Disability within Ethnic Communities Inc

(1) Training and workshops [$250K; 15%] (2) Conference facilities - minimal [$110K; 7%] Total 2008 Revenue $1.6m, 22% from commercial activities http://www.adec.org.au/

72, 74


36 Autism Spectrum Australia (1) Services to autistic children (special schools, assessments, psychology services) $3.2m; 10%] Total 2008 Revenue $32.5m http://www.autismspectrum.org.au/

52, 59, 69, 72


40 CatholicCare (previously Centacare)

(1) Care and support services (aged, disabled) (2) St Patrick's Business College fees Combined revenue $6.3m (19% of total $20.3m) http://www.centacare.org/

n/a


43 Eastern Access Community Health Inc.

(1) Care and support services (community) [$1.3m; 5%] Total 2008 Revenue $27.9m http://www.each.com.au/en/

48, 53, 69


45 E.W. Tipping Foundation (1) Care and support services (disabled) [$3.2m; 20%] Total 2008 Revenue $16m http://www.tipping.org.au/

47, 48, 53, 59


47 Hartley Lifecare (1) Care and support services (disabled) [$844K; 19%] (2) Hall Markets revenue (stalls / entry fees) [$200K; 4%] Total 2008 Revenue $4.39m http://hartley.org.au/index.html

48, 53


48 Homecare Plus (Division of ParaQuad SA)

(1) Care and support services (aged, disabled) 100% of revenue from trading activites, no govt grants or donations http://www.pqasa.asn.au/index.php?page=homecare-plus

59


52 Belconnen Community Services Inc

(1) Child care fees [$4.6m; 48%] Total 2008 Revenue $9.62m http://www.bcsact.com.au/index.php

n/a


53 Mecwacare (1) Aged care services (residential, respite, nursing) [$10.9m; 40%] Total 2008 Revenue $27.5m http://www.mecwacare.org.au/

58, 69

Appendix 2

70



58 Little Company of Mary Health Care

(1) Private hospital care [$456m; 67%] Total 2008 Revenue $682m http://www.lcmhealthcare.org.au/

n/a


59 Spinal Cord Injuries Australia (1) Care and support (for disabled) [$1.25m; 23%] (2) Accommodation (for disabled) [$78K; 1%] Total 2008 Revenue $5.5m http://scia.org.au/

69


69 Baptist Community Services (BCS)

(1) Care and support (aged, disabled, disadvantaged) [$32m; 20%] (2) Assistive technology / meals for aged or disabled [$10m; 6%] Total 2008 Revenue $160m http://www.bcs.org.au/Default.aspx

n/a


72 Stride Foundation (1) Training & education (to young people, schools) [$209K; 17%] (2) Resource sales / membership [$86K; 7%] Total 2008 Revenue $1.2m http://www.stride.org.au/

74


74 Royal Life Saving Society (Aust) NT Branch Inc.

(1) Training & education (first aid) [$554K; 55%] Total 2008 Revenue $1m http://www.royallifesaving.com.au/www/html/186-nt-website-home-page.asp

n/a


7 CanDo4Kids (1) Retirement villages residents' fees (2) Assessment clinic & products (3) Accreditation & training (4) Internet Service Provider Combined revenue $4.1m (47% of total in 2008) Total 2008 Revenue $8.7m http://www.cando4kids.com.au/Home/tabid/35/Default.aspx

34, 39, 53


27 Wesley Central Mission (1) Commercial printing business (sold in June 2008) [$3.7m; 9%] (2) Client services (support, activities, care) [$3.3m; 4%] (3) Commercial services (supported empl) (ceramics, café) - minimal Total 2008 Revenue $41.4m http://www.wesley.org.au/welcome.htm

39, 54

Appendix 2

71



30 ParaQuad NSW (1) Services for clients (care, support for paraplegic and quadraplegic) [$14.3m; 45%] (2) Retail sales (online / delivery) of health related products [$6.9m; 22%] (3) Commercial revenue (supported empl) - minimal Total 2008 Revenue $31.3m, 67% generated through service & commercial activity http://www.paraquad.org.au/index.html

55, 39


34 St Laurence Community Services

(1) Accommodation and support services (aged and disabled) [$5.8m; 17%] (2) Commercial services (supported empl) (paper services) [$700K; 2%] Total 2008 Revenue $34m http://www.stlaurence.org.au/default.asp

44


38 Florey Neuroscience Institute (Brain Research Institute)

(1) Commercialisation of research through collaboration [$1.4m; 8%] Total 2008 Revenue $17.9m http://www.brain.org.au/index.html

54


39 Care Connect (1) Telecare Connect (assistive technology) consultancy and contract [$2.8m; 14%] (2) Support and service fees (aged, disabled, families) [$400K; 2%] Total 2008 Revenue $20.3m http://www.careconnect.org.au/

42, 54, 55


42 Novita Children's Services (1) NovitaTech assistive technology sales (for disabled) [$2.1m; 11%] (2) Lotteries/Bingo [$2.1m; 11%] Total 2008 Revenue $12.4m http://novita.org.au/Default.aspx?p=1

n/a


54 Northcott Society (1) Mobility equipment sales [$1.5m; 7%] (2) Conference & function centre [$606K; 3%] Total 2008 Revenue $20.3m http://www.northcott.com.au/index.php

65, 66


55 Independence Australia (formerly ParaQuad Victoria)

(1) Care and support (paraplegic and quadraplegic) [29%; actual sales unknown] (2) Retail (health care products) profits from Independence Australia Health Solutions Total 2008 Revenue unknown http://www.paraquad.asn.au/

n/a

Appendix 2

72



65 BEST Community Development

(1) Commercial revenue (printing, café, conference facilities) [$2.4m; 19%] Total 2008 Revenue $12.6m http://www.bestcd.org.au/about-best-community-development.php

n/a

3 "Personal independence coaching"

1 Activ Foundation (1) Commercial services (supported empl) (product manufacturing, assembly, packaging, textiles, property care) [$11m; 21%] (2) Services for the disabled (care, support) [$3.68m; 7%] (3) Transport services for the disabled [$1.65m; 3%] Total 2008 Revenue $54.4m http://www.activ.asn.au/

10, 18, 35, 37, 41, 50, 60, 64


5 BoysTown (1) Lottery [$41m; 73%] (2) Commercial cleaning services [$6.6m; 12%] Total 2008 Revenue $56.4m http://www.boystown.com.au

47, 70, 75


10 Endeavour Foundation (1) Commercial services (supported empl) [$21.8m; 18%] (2) Lotteries [$16.7m; 14%] (2) Services for the disabled [$10.1m; 8%] Total 2008 Revenue $119.2m http://www.endeavour.com.au/index.asp

18, 31, 35, 41, 56


12 Royal Society for the Blind (1) Commercial services (supported empl) (packaging, assembly) (2) Retail sales (online / physical shop) low vision aids Combined revenue 12% of total contributing to a surplus of $1.6m in 2007/08 http://www.rsb.org.au/index.html

18, 20, 60


14 Kidney Health Australia (1) Lottery [$3.84m; 40% including some donations] (2) Management fees (customer service centre) [$458K; 5%] Total 2008 Revenue 9.6m http://www.kidney.org.au/

42, 57, 70, 75


18 Nadrasca (1) Commercial services (supported empl) (packaging, assembly, printing, timber processing) [$1.8m; 21%] (2) Fees for activities (for disabled) $443K; 5%] (3) Rental income from residents $193K; 2% Total 2008 Revenue $8.56m http://www.nadrasca.com.au/index.htm

41, 50, 60, 61, 62, 64

Appendix 2

73



20 Vision Australia (Royal Blind Society of NSW)

(1) Retail sales (online / physical shop) low vision aids (2) Consultancy to corporations / groups (Access Advice, low vision friendly websites, training courses) (3) Commercial services (supported empl) (packaging, logistics, warehousing) Combined revenue $8m (9% of total) Total 2008 Revenue $88m http://www.visionaustralia.org/

37, 60, 61, 62, 63, 64


31 Spastic Centre of NSW (1) Raffle [combined with bequests $14.8m; 23%] (2) Services to clients (care, support for people with cerebral palsy) [$$3.6m; 5%] (3) Commercial services (supported empl) - minimal [$678K; 1%] Total 2008 Revenue $64.5m http://www.thespasticcentre.org.au/

44


35 Australian Foundation for Disability (AFFORD)

(1) Commercial services (supported empl) (packaging, assembly, garment hangers) [$7.6m; unknown %] (2) Lottery [$1m; unknown %] Total 2008 Revenue not detailed in Annual Report http://www.afford.com.au/

56, 70


37 Bedford Group (1) Accommodation, support and activities services (for disabled) [$12m; 30%] (2) Commercial services (packaging, assembly, catering, cleaning, egg farm, landscaping) [$9.4m; 23%] (3) Lotteries [$2.3m; 5% - includes fundraising] Total 2008 Revenue $39.8m http://www.bedfordgroup.com.au

44, 50, 60, 64


41 Barossa Enterprises (1) Commercial services (supported empl) (Woodwerx, packaging) [$1.8m; 60%] (2) Accommodation and care (disabled) [$300K; 10%) Total 2008 Revenue $3m http://www.barossaent.com.au

46, 56, 62, 63, 70


44 Scope (Vic) Ltd (1) Care and support services (disabled) [$4.5m; 7%] (2) Commercial revenue (supported empl) (food processing) [$2m; 3%] Total 2008 Revenue $64.5m http://www.scopevic.org.au

55, 61, 64

Appendix 2

74



50 Karingal (1) Commercial revenue (supported empl) (landcare, industrial, packaging, catering) [$3.69m; 8%] (2) Care and rent (disabled) [$2.27m; 5%] Total 2008 Revenue $42.5m http://www.karingal.org.au/index.aspx/from=icon/

60, 61, 62, 63


51 Learning Links (1) Lottery (Charity Housie) [$3.9m; 39%] (2) Care, support and assessment fees (children in need) [$1.7m; 17%] Total 2008 Revenue $9.9m http://www.learninglinks.org.au/index.htm

75


56 Phoenix Society (1) Commercial revenue (supported empl) (printing, assembly, packaging, timber products, industrial services) [$8.6m; 62%] (2) Lottery [$1.4m; 10%] Total 2008 Revenue $13.7m http://www.phoenixsoc.org.au/

70


57 Royal Institute for Deaf and Blind Children

(1) Rainbow Lottery [$4.66m; 13%] (2) Retail (online shop) [$2.15m; 6%] Total 2008 Revenue $35.9m http://www.ridbc.org.au/index.asp

n/a


60 House With No Steps (1) Commercial revenue (supported empl) (tourism, gift shop, avocado and macadamia farms, Aussie Biscuits) [$16m; 23%] (2) Lotteries (Art Union) [$5.9m; 9%] (3) Care, accommodation (disabled) [$2.9m; 4%] Total 2008 Revenue $68.8m http://www.hwns.com.au

61, 62, 63, 64, 73


61 Valmar Support Services ltd (1) Commercial revenue (supported empl) )Taskwrights, Pinecome Recycling, Pinecome Timber Recovery, Butter Factory Café) (2) Care and support services (disabled) Combined revenue $1m; 14% Total 2008 Revenue $6.85m http://www.valmar.com.au/index.html

62, 63, 64

Appendix 2

75



62 Westcare Incorporated (1) Commercial revenue (supported empl) (printing, safety garment manufacturing, packaging, food packaging) [$5.1m; 69%] (2) Accommodation (disabled) [$523K; 7%] Total 2008 Revenue $7.34m http://www.westcare.com.au/

63, 64


63 Kurrajong Waratah (1) Commercial revenue (supported empl) (recycling, catering, commercial laundray, timer processing) (2) Accommodation and care (disabled) Combined revenue $6.3m; 45% Total 2007 Revenue $14m (2008 Annual Report unavailable) http://www.kurrajongwaratah.org.au

70


64 Minda Incorporated (1) Accommodation and lodging (disabled) [$3.5m; 8%] (2) Commercial revenue (supported empl) (packaging, environmental care, furniture, nursery, laundry & cleaning service, catering) [$1.9m; 3%] (3) Repite care (disabled) [$522K; 1%] Total 2008 Revenue $44.4m http://www.minda.asn.au/

n/a


70 Access Industries for the Disabled Ltd

(1) Lotteries (Art Union) [approx $1.8m] (2) Commercial revenue (supported empl) (packaging, health products packaging, commercial laundry, timber products, light engineering & fabrication, commercial sewing, outdoor furntiture) [unknown] Total 2008 Revenue unknown, however only 20% funded by govt grants http://www.accessindustries.com.au/

n/a


75 Epilepsy Action Australia (1) Lottery [$2.3m; 52%] Total 2008 Revenue $4.4m http://www.epilepsy.org.au

n/a

Appendix 2

76


4 "Experience the cause"

22 Scouts Australia (NSW) (1) Membership fees [$1.65m; 13%] (2) Camps and activity centre revenue [$1.5m; 12%] (3) Retail sales (physical shop) scouting, activity and camping equipment [$1.1m; 9%] Total 2008 Revenue $12.5m http://www.nsw.scouts.com.au/

68, 73


68 Art Gallery of South Australia (1) Retail (physical shop) (art related, café) [$949K; 6%] (2) Entry Fees & Facilities Hire [$564K; 4%] Total 2008 Revenue $15.7m http://www.artgallery.sa.gov.au/agsa/home/

73


71 Australian Wildlife Conservancy

(1) Tours (education, awareness) [$1m; 6%] (2) Accommodation & facilities (camping) [$604K; 3%] Total 2008 Revenue $16.7m http://www.australianwildlife.org/Home.aspx

73


73 National Trust of Australia (Victoria)

(1) Tours, access to properties (weddings, filming) [$3.4m; 34%] (2) Retail (farm produce, gift shop sales) [$1.6m; 16%] (3) Rental accommodation [$190K; 2%] Total 2008 Revenue $9.9m http://www.nattrust.com.au/

n/a

Appendix 2

77


5 "Wealth re-distribution"

2 Anti-Cancer Foundation (1) Retail sales (online / physical shop) [$1.735m; 6%] Total 2008 Revenue $43m http://www.cancervic.org.au/

9, 66


3 Australian Red Cross (1) Retail sales (online / physical shop) [$16.5m; 11%] (2) First aid training courses ($10.6m; 7%] (3) Lottery / raffle [$5.6m; 4%] (4) Rental (commercial) [$4m; 2%] Total 2008 Revenue $150m http://www.redcross.org.au/default.asp

67


6 Brotherhood of St Laurence (1) Retail (recycled clothing stores) [$14.7m; 31%] (2) Commercial services (cleaning, landscaping, security) [$4.8m; 10%] Total 2008 Revenue $48.7m http://www.bsl.org.au/main.asp

8, 21, 23, 46, 67


8 City Misssion (1) Retail (recycled clothing stores) [$2.6m; 43%] (2) Rental income (buildings) [$460K; 7%] Total 2008 Revenue $6m http://www.citymission.org.au/index.html

21, 23, 24, 26


9 Diabetes Australia (1) Retail sales (NDSS commision) [$3.9m; 45%] (online / physical stores) [$1.25m; 14%] (2) Membership fees [$1.44m; 17%] Total 2008 Revenue $8.47m http://www.diabetesqld.org.au/

n/a


11 Foodbank Australia Ltd (1) Fees for coordination and distribution of food [$895K; 71%] Total 2008 Revenue $1.24m http://www.foodbank.com.au/default.asp?id=1,41,,45

13, 16


13 Helping Hand Group (1) Source and coordination auctions of unique memorabilia (2) Art framing business 100% of revenue from trading activities (no govt support, no donations) http://www.helpinghand.com.au/

16, 66

Appendix 2

78



16 Meals on Wheels SA (1) Preparation and distribution of food [approx $6m; 80%] Total 2008 Revenue calculated from information available on the website http://www.mealsonwheelssa.org.au/index.php

n/a


21 Salvation Army (1) Retail (recycled clothing stores) [$66.3m; 28%] (2) Residents' contribution fees (rental, care) [$8.8m; 4%] Total 2008 revenue $231m http://www.salvationarmy.org.au/SALV/HOMEPAGE/HOME.html

23, 24, 66


23 The Smith Family (1) Nonwoven textile commercial manufacturing (ie BlueSky insulation, cleaning cloths for Jif) (2) Retail sales (physical shops) Combined revenue $2.6m (5% of total $51.6m) http://www.thesmithfamily.com.au/site/page.cfm

24, 66


24 St Vincent de Paul Society (1) Retail sales (Vinnies Centres of Charity) [$31.6m; 21%] (2) Client contributions (care, support) [$10.7m; 7%] Total 2008 Revenue $151.2m http://www.vinnies.org.au/home-sa

42, 46


46 Good Samaritan Industries (1) Retail (recycled clothes; supported empl) [58% of total revenue] (2) Commercial revenue (supported empl) (packaging, industrial cloths) [10% of total revenue] Total 2008 Revenue not listed on website; no annual report http://www.goodsamaritan.com.au/

n/a


66 Oxfam Australia (1) Retail (online / physical shops) [$10.7m; 18%] Total 2008 Revenue $59m http://www.oxfam.org.au/

67


67 RSPCA WA (1) Retail (physical shops / shelters) [$1.35m; 27%] (2) Training (dogs) [$150K; 3%] (3) Inspectorate services [$50K; 1%] Total 2008 Revenue $5m http://www.rspcawa.asn.au/

68

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