Ecorl oer-al-ysb-social-business-deepening

Social Impact design ECOREL Erasmus Training

2 Yunus Social Business

Understanding the Concept of Social Business

a) Framing the issue

b) The different social business models types

c) Case studies

Lecture structure


• Definition of the different social business models

• A better understanding of your own Social Business Model

• Guidance on how to combine your business model and your social

impact:

◦ Where does you social impact fit into your Business Model Canvas?

◦ How do you integrate your profit formula with your Social Impact?

• Case Studies

End Result


Framing the issue: « Doing well by doing good »

• Previously, giving money to do

« Good » and maximising profit

were seen as clearly seperated

activities…

• …But the world is changing:

“Business must be for profit but profit

must also be for purpose”

Mads Kjaer, co-founder MYC4

+

+

New school of

social

entrepreneurs

-

-

Old school

corporations

Old school not-

for-

profits

Social

impact

potential

Profit potential

Social Business Models are innovative ways to “do good” AND “do well”


Social businesses bring a solution to a social

or environmental issue..

…while using classic business tools to reach

financial sustainability

? who what

where why

How

Problem Definition Integration of Social impact in Business

Model Canvas

1 2

2-steps approach to defining your social impact


Define the social or environmental problem you are trying to solve

• Who is experiencing

the problem?

• Why does the

problem occur?

• What are the

consequences of the

problem?

Why define my social problem?

1) helps you to make sure the solution you build is adapted to your beneficiaries

2) helps you communicate more effectively to stakeholders

Example of cooking stoves in very

poor and remote rural areas

“Traditional cooking methods

primarily use firewood or charcoal,

which are polluting, expensive and

hazardous”

“Current cooking stoves are inefficient and

consume a lot of fuel. Alternatives for new

stoves are expensive”

What is the problem?

• Context

• Industry

• Scale

1

2

3

“Households living on less than $2 a day in

remote areas”

• Poor families spend a lot of money on fuel that

cannot be spent on education or health

• Smoke inhalation from old cooking stoves cause

serious illness incl. childhood pneumonia and

bronchitis

• Traditional cooking methods produce a lot of CO2

1


Problem definition – Example in Education

What is the problem?

• 4/10 students in France have strong gaps upon

entering secondary school

• 160,000 children leave high school without a diploma

• Increased inequality in learning

Who?

Why? Consequences?

• Blue collar kids are especially impacted

• Lower income neighborhoods

• Not enough resources to teachers

• Parents not able to support/ help children

• Tutoring is expensive and increases inequalities

• Children leaving school most likely to know

unemployment

• Exclusion from society

• Increased likelihood of violence

1


Problem definition – Your turn!

What is the problem? Who?

Why? Consequences?

1


Here?

Here?

Here?

2

How does your social mission fit into your business model?


Ex “Developing a chicken farm, from which all profits

are reinvested to support a local school”

TOM’s shoes

2

Social business models are generally divided into 4 models

Model 1: Bottom of the Pyramid (BOP) Model 2: Good jobs social businesses

Model 3: Value Chain (Suppliers or Distributors) Model 4: “Give-Back”

• Give access to essential / quality goods at the

lowest price possible to the base of the pyramid

• Key Impact driver: # customers served

Ex “selling nutritious yoghurt to poor families for a

few pennies”

• Create good jobs or opportunities for

underserved populations

• Key Impact driver: # paid jobs created

Ex “Employing women who have limited opportunities

in remote rural areas through a handicraft business”

• Create value and share it fairly along the value

chain: either with suppliers or distributors

• Key Impact driver: purchasing price

Ex with suppliers: “buying local farmers’ production at

guaranteed prices, enabling them to have a secure income”

Ex with distributors: “selling production to point of sales at

guaranteed prices”

• Generate a margin with your business, which

can then be used to finance a social work

• Key Impact driver: margin


Diseases and child mortality – several cholera

outbreaks, 100.000 of deaths

• More than 78% of families live on less than

US$ 2 a day

• Cleaning products are extremely expensive in

Haiti (approximately 4 to 12 USD per gallon)

• Otherwise, randomly available based on NGO

handouts

• 67% of the population does not employ any treatment to ensure

the purity of their water before drinking

• 62% of households at the national level, two thirds in urban

areas and nearly six in ten households in rural areas have

access to a place to wash their hands

• 34% do not have access to any type of rudimentary toilet or

latrine

Model 1 Case Study: DIGO Distribution (1/3)


Why? Consequences?

Lack of access to clean water and sanitation

solutions in Haiti



• Digo’s products are sold for 100-110 Haitian Gourde per

gallon (ca 2 USD per gallon)

• Competitors are selling the same products for 300-600

HTG/ gallon (ca 6-12 USD per gallon)

◦ Competitors offer bottles or pouches in the market

◦ Their products are exclusively imported

• Reasons why DIGO products are cheaper :

◦ Local production

◦ No packaging

◦ Willingness to sell low-cost!

• DIGO Distribution produces and

distributes affordable bleach for

water purification and cleaning

products to improve household

sanitation, health and hygiene

• 3 product lines:

◦ Chlorin

◦ Disinfectant

◦ Soap

• End users bring their own bottles

to points of sales and purchase

their products directly from the

source by fluid onces, at very

cheap prices

Business Activity DIGO’s products are 3 to 6x cheaper than the competition



• It effectively reaches a large number of people

◦ High demand, with 99 Points of Sales opened in Haiti

◦ Plan to open 500 Points of Sales in the next 3 years

◦ Scaleable model in Haiti, ability to reach 5 Million people

• It satisfies a real need and solves a tangible problem

◦ High necessity products: drinking water and hygiene

• Products are designed with the customer in mind

◦ Very small quantities are available for purchase

◦ Cheap prices

What makes DIGO Distribution a successful example of Model 1: Bottom of the Pyramid?


Back to the BMC: Where does the social impact fit in Model 1?

Customers:

Increased focus on

understanding your

customers, who are

also your

beneficiaries

Typical Challenges of Model 1: Product Fit, Product Costs, and Distribution

1

2

Cost structure:

Building a cost

structure which allows

you to sell cheap

while being financially

sustainable


Women strive for financial independence in

order to access essentials such as healthcare

and clean water, and to afford schooling for

their children

• Especially challenging for women to secure safe

employment

• Problems of insecurity and violence against women

make it harder for them to earn an income

• Haitian culture unaccustomed to persons with

disabilities in the workforce

• Women in Thiotte, an area where KE sources Castor

Oil

• Disabled population are also vulnerable

Model 2 Case Study: Kreyol Essence (1/3)


Why? Consequences?

Haiti is still recovering from the devastating

2010 earthquake and is suffering from 40%

unemployment



Business Activity KE produces locally and exports its products

• Kreyol Essence is an agribusiness that

manufactures and distributes an array of

luxury beauty products anchored around

its signature product, the Palma Christi:

Haitian Black Castor Oil

• KE sources organic and unrefined

castor oil harvested and produced in

Haiti. KE can derive a broad product line

of quality hair and beauty products from

this oil

• Kreyol Essence has a factory on the

ground . It caters to women and focuses

on women hires

• 8 lines of products launched with several SKUs,

including pure castor oil, scented castor oil,

pomades, body creams, hair masks, soaps and

candles

• Products are sold on Kreyol Essence’s website and

through retailers • Presence in Haiti, USA, Canada, France and Nigeria

• KE aims to further distribute its products in the US

through a network of spas and health clubs, local

retailers and small businesses



What makes Kreyol Essence a successful example of Model 2: “good jobs”?

2015E 2016E

Direct jobs 24 36

Indirect jobs 129 183

Total 153 219

• Local employment created

• Examples of Direct Jobs: o Production workers (oil, soap, candles and bottling)

o Bottle fulfillment

o Administration

o Account services and call center

• Employment for specific underserved populations o Women are specifically targetted in hiring process:

fair, safe and stable employment

o These women would not be able to have income

sources without Kreyol Essence opportunities



Key resources:

Your employees, who

are also your

beneficiaries

Castor Oil, which is

the raw material

Typical Challenges of Model 2: Access to high margin markets

1

2

Revenue Streams:

Ensuring recurring

revenues in order to

pay employees

regularly


Small producers have no visibility on their

sales, and are not able to save any money or

provide for their children’s futures

Highly volatile potato prices and difficult conditions

for suppliers in the open markets

Farmers who are especially vulnerable:

• Farmers who lack resources to make their plots of land

productive

• Farmers who don’t own land to grow their crops or have

been displaced by violence

Model 3 Case Study: Campo Vivo (1/3)


Why? Consequences?

Difficult for small potato producers in Colombia

to make a stable living from their potatoes’

crops



• Campo Vivo buys the harvest from the

farmers and is responsible for finding

commercialization paths that reduce the

impact, in a minimum percentage, of

open market sales.

• Campo Vivo also provides support to

farmers:

• Technical assistance for increased

productivity

• Links to a social network of fellow

producers

• Coaching on Entrepreneurial skills

to help them better manage their

business

Business Activity Focus of the Business Model: Commercial Strategy

.

Institutional 50%

Retail-QSR 30%

Open Market 10%

POTATO

Small

producer Campo

Vivo



What makes Campo Vivo a successful example of Model 3: Value Chain - Suppliers?

• It benefits small producers by offering them a stable

channel through which to sell their products

◦ Guaranteeing stable prices. By signing forward

contracts with McCain and other institutions,

+50% of harvest is guaranteed at set price;

◦ Producers by themselves would not be able to sign

these contracts

◦ Continuous and constant income to families.

• It provides additional support and assistance to

help producers improve

◦ Campo Vivo farmers have yields which are higher

than the national average in Colombia



Key Partners:

Increased focus on

understanding your suppliers

(or distributors), who are also

your beneficiaries

Typical Challenges of Model 3: Access to markets and end user, Supply Chain

1

2

Channels:

Understand what role

you can play in the value

chain to benefit your

suppliers


Quality and availability of education is very poor,

affecting the future of children in Haiti

Unemployment can be as high as 85% of the

population, families often times cannot afford to pay

much and schools have difficulties to survive

• 90% of schools must rely solely on enrollment fees

• Nearly 50% of school age children don’t go to school.

Model 4 Case Study: Léogâne Poultry (1/3)


Why? Consequences?

Léogâne is a seaside town in Haiti. The town

was at the epicenter of the 12 Jan 2010

earthquake, and was catastrophically affected,

with 80-90% of buildings damaged, of which

schools.



Business Activity Business Model: Fill a gap in the local market

• The business will rear chicken and

produce ready-for-sale poultry products.

o A poultry farm with a production

capacity of 7,000 chicken and its

own slaughterhouse

o The chicken are prepared and

packaged at Leogane Poultry’s

facility before being sent out to a

cold storage.

• The company will be the only poultry

production firm in the area that sells

prepared chicken meat

• Value proposition: The presence of the farm in

Léogâne will allow customers to purchase poultry in

the area rather than having to travel long distances.

• Key customers: Families, restaurants and hotels,

shops and retailers, churches, orphanages and

NGOs in the La Gonâve area and its surroundings.

• The revenue of the poultry farm is used to

financially support four schools in surrounding

areas and assisting families that do not have the

economic capacity to fund their child’s education.



What makes Leogane Poultry a successful example of Model 4: “Give Back”?

• The chicken farm’s first purpose is the financial

support of a social cause: 4 schools and

education help to families

o The profit of the poultry farm will subsidize

the budgets of these schools, allowing over

600 children to receive better quality

education

o The business helps to pay salaries of

teachers and other employees in the 4

schools



Key Partners:

Your partner (school, librariy,

non-for-profit) is your

beneficiary. Its mission is a

social cause. The partner has

limited resources

Typical Challenges of Model 4: Governance (money flows), Scalability

1

2

Cost and revenues:

Create enough profit to

cover some of the costs

faced by the beneficiary

in its social mission

2


Closing thoughts

• Most often, there are overlaps between the 4 Social Business Models:

o DIGO Distribution is an example of overlap between Model 1 and Model 3. DIGO’s

secondary goal is also to empower the owners of the small ‘points of sales” in their

business, thus empowering their distributors (model 3 – distributors).

o Kreyol Essence not only creates jobs, it also provides a stable market for small, very

poor producers of castor oil. Hence in this case study, there is an overlap between

Model 2 (Good Jobs) and 3 (Value Chain)

o Leogane poultry supports a school (model 4), but also creates employment (model 2)

• However, most successful social business models start by focusing one type of

beneficiary

o Once the primary goal is successful, other secondary beneficiaries can be

looked at in more depth

28 Yunus Social Business 28

Your turn!

• What social model does your business mostly focus on?

• Where is your impact on the BMC?

• What challenges can you face?

29 Yunus Social Business 29

Reading List

• Innovating for Shared Value : http://www.philoma.org/docs/2013_2014_Valeur_actionnariale_a_partagee/Pfitzer_and_co_-_HBR_-_Innovating_for_shared_value.pdf

• http://www.businessmodelgeneration.com/downloads/business_model_canvas_poster.pdf

• Social Business Model Canvas : http://sehub.stanford.edu/sites/default/files/Social%20Business%20Model%20Canvas_1.pdf

• KaBoom! Case Study for Social Enterprises : http://monitorinstitute.com/downloads/what-we-think/kaboom/KaBOOM_Case_Study.pdf

• Business Model for SE Design : https://mbs.edu/getmedia/91cc0d01-3641-4844-b34c-7aee15c8edaf/Business-Model-for-SE-Design-Burkett.pdf

http://www.businessmodelgeneration.com/downloads/business_model_canvas_poster.pdf



http://monitorinstitute.com/downloads/what-we-think/kaboom/KaBOOM_Case_Study.pdf




