indev308 class 3 - business modelling for social entreprise

INDEV 308: Intro to Social Entrepreneurship

Class 3: Business Modelling for Social Enterprise

Monday, May 16, 2011

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Instructors: Norm Tasevski ([email protected]) Karim Harji ([email protected])


Agenda

•  Centre for Social Innovation •  What did we learn – Last Week? •  What are the components of a business model for

social enterprise? •  What did we learn – Today? •  Next week

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Last Week – What did we learn?

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Business Modelling for Social Enterprise…

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A Caveat…

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When we business model for social enterprise, we focus on the “business”, not the “social”…

But don’t worry, we will come back to the “social” later…


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A Second Caveat…

“Business Model”

“Business Form/Legal Structure”


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A Third Caveat…

“Business Model”

“Business Plan”

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

Why business model 1st and plan 2nd?

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Because…

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


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And…

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

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

ideal conditions…

…STOP! (…and rethink your business model)


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One More…

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

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

Set Strategy

Make a Go No-Go Decision

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

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

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

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

Business Models

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

Take weeks/months to create

Take a few days (possibly hours) to create

Are necessary for investors, funders, business partners, etc

Feed the business plan!!

Business Plans


Our Goal for Today

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We’ll be designing a business model for…


freemium!

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user networks!franchising!

web ads!

licensing!micro-finance!retail!

subscription!

nonprofit (donation)!

open-source!loyalty!

solution shops!

!

etc…etc…etc…!


Some Definitions

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

Wikipedia

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

BusinessDictionary.com

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

AudienceDialogue.net 17


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Customer Segments

What you need to care about is… –  Customer “Pain” –  Difference between a “customer” and a “client”


Empathy Mapping


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Who are Grameen Bank’s customers?

What does their Empathy map look like?


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Value Proposition (the “Offer”)

What you need to care about is… –  The “value” you are creating for customers (in terms

of products/services), and the “pain” you are alleviating

–  An exchange of value


Quick…

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What is the last thing you bought?


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Customer Utility


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What is Grameen Bank’s value proposition?


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Channels

What you need to care about is… –  How the customer receives the offer/value prop –  The physical “movement” of the offer into the hands

of the customer


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How does Grameen Bank “touch” its customers?


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Relationships

What you need to care about is… –  Personal and impersonal interaction with the

customer –  The “movement” of information (e.g. marketing,

communication)


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What relationships has Grameen Bank made with its customers?


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Revenue Streams

What you need to care about is… –  Cash!!! (specifically, how cash flows into the

enterprise) – “Money In” –  Pricing models


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How does Grameen Bank bring in cash?

Break

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Key Resources

What you need to care about is… –  Assets… –  …and how these assets create value –  Includes human, physical, intellectual, and financial

resources


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What are Grameen Bank’s key assets?


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Key Activities

What you need to care about is… –  Actions (specifically, the actions you plan to take to

generate value) –  Both “direct” and “indirect”


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What are Grameen Bank’s key activities?


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Key Partners

What you need to care about is… –  People/organizations that are integral to enabling

you to do business –  How you partner, and what you partner on

What makes a good partnership?

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Common Vision!

Discreet Missions!

Same Core Values!

A Commitment to Invest in

the Partnership!


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Who does Grameen Bank partner with?


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Cost Structure

What you need to care about is… –  Fixed costs, variable costs, economies of

scale…“money out” –  At this stage, focus on your cost assumptions! (don’t

worry about actual $$)


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What does Grameen Bank’s cost structure look like (in simple terms)?


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So…how does your Business Model for Grameen Bank compare???


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$$ Microloans

Branches

Personal

BOP Entrepreneurs

-Branches -Brand -Capital

Lending and collecting $$

Government

-People -Capital Costs

Interest rates


Tip…

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

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“Sticky Ideation”…

What we Don’t Know!

What we know!

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


What did we learn?

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Next Week

•  Deliverable: The “revenue” side of your business model (and your motivations, mission, vision and values)

•  Readings

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