social entrepreneurship_business models

8/8/2019 Social Entrepreneurship_Business Models

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Social Entrepreneruship and Business Models Page 1

SOCIAL ENTREPRENERUSHIP - BUILDING COMPETENCIES THROUGH BUSINESS

MODELS

By,

1. Prof.Vasanti Venugopal, Professor, Mount Carmel College, Bangalore

Mail id: [email protected] Ph.09845053793

2. Prof.Shinu Abhi, Assistant Professor, IFIM Business School, Bangalore

Mail Id: [email protected] Ph.9972916030

Introduction

The Nascent field of social entrepreneurship is clearly gaining momentum. This is apparent from the

increased attention in the media, growth of academic programs around the world and the prominent

awards (including 2006 Nobel Peace Prize) for acknowledged social entrepreneurs. Social entrepreneurs

owe a great deal to two trends that accelerated in the 1980s each with a different emphasis. One trend

involved social purpose organizations searching for new sources of revenue and using business methods to

support their work. The other involved private citizens creating solutions to social problems i

Therefore new questions are being raised that challenge the existing knowledge, solutions and old sectorboundaries. The window of opportunity is now open to Social entrepreneurship to introduce new models,

new way of thinking and new frameworks.

This is a challenging and new field for which review of literature was done mainly from the internet and

few articles on Harvard Business Review. The information available is in the form of case studies.

People are attracted to social entrepreneurs like Mohammed Yunus, in the same way as, Business

Entrepreneurs like Steve Jobs, to understand how these extraordinary people come up with brilliant ideas

against all odds and succeed in creating new products/service that dramatically improve peoples lives.

Purpose of the study
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This study is to explore the different models of Social Entrepreneruship and examine the suitability to

their ventures. An in depth examination of their business models reveal that based on the type of social

Entrepreneruship require appropriate business models and may not have a standard format. A study of

this nature we are sure would throw light on the strategies on viable business model / Revenue model

which are imperative for successful social Entrepreneruship.

Methodology

The researchers have used a case study approach to examine the different business models used by various

social entrepreneurs. Cases discussed are:

1. Grameen bank Microfinance

2. CRY Child Rights and You

3. SEWA - The Self- Employed Womens Association

4. Ashoka Social Ventures

5. Amul (GCMMF) : The Gujarat Cooperative Milk Marketing Federation Ltd, Anand

Literature review:

Definition of Social Entrepreneurship:

Definition of the term Social Entrepreneruship must start with the word Entrepreneurship. The wordsocial simply modifies Entrepreneruship. The word Entrepreneruship connotes a special, innate ability to a

sense and act on opportunity, combining out-of the box thinking with a unique brand of determination to

create or bring about something new to the world. ii One important differentiation is simply the motivation

with entrepreneurs spurred on by money and social entrepreneurs driven by altruism. However the truth

is that entrepreneurs are rarely motivated by the prospect of financial gain, because the odds of making

lots of money are clearly stacked against them.

Critical distinction between Entrepreneruship lies in the value proposition itself. For the entrepreneur,

anticipates serving markets that can comfortably afford new products or service and thus designed to

create financial profit. Social entrepreneur aims for value in the form of large scale, transformational

benefit that accrues either to significant segment of society at large. They target an undeserved, neglected

of highly disadvantaged population that lacks resources to achieve the transformative benefit on its own.


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Social Entrepreneruship does not mean that they shun profit making value propositions; they can certainly

generate income and can be organized as either not-for-profits or for-profits. The main difference is the

primacy of social benefit . As Professor Greg Dees of Duke University says it is the pursuit of Mission

related impact. As a result, social entrepreneurship has become so inclusive that it covers all socially

beneficial activities.

The concept of Social Entrepreneurship is still poorly defined and its boundaries overlap with other fields.

This study draws on practical examples of social Entrepreneruship to identify and elaborate on their style

of functioning.

Definition of Business Model:

A business model describes the value an organization offers to various customers and portrays the

capabilities and partners required for creating, marketing, and delivering this value and relationship capital

with the goal of generating profitable and sustainable revenue streams.

Business Model Design Template: Nine Building blocks and their relationships -

Osterwalder, 2004

Conceptualization of business models formalizes the relationship between various building blocks of the

business. Osterwalder proposed a single reference model which allows enterprise to describe their

business model as above. iii


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Major building blocks of a business model are:

1. Infrastructure

a. Core capabilities: The capabilities and competencies necessary to execute a company's business

model.

b. Partner network: The business alliances which complement other aspects of the business model.

c. Value configuration: The rationale which makes a business mutually beneficial for a business and its

customers.

2. Offering

a. Value proposition: The products and services a business offers. Quoting Osterwalder (2004), a value

proposition "is an overall view of products and services that together represent value for a specific

customer segment. It describes the way a firm differentiates itself from its competitors and is the

reason why customers buy from a certain firm and not from another."

3. Customers

a. Target customer: The target audience for a business' products and services.

b. Distribution channel: The means by which a company delivers products and services to customers.

This includes the company's marketing and distribution strategy.

c. Customer relationship: The links a company establishes between itself and its different customer

segments. The process of managing customer relationships is referred to as customer relationship

management.

4. Finances a. Cost structure: The monetary consequences of the means employed in the business model.

b. Revenue: The way a company makes money through a variety of revenue flows.

While analyzing the business models the commonly asked questions are as follows: How do we create value? Who do we create value for? What is our source of competence / advantage? How do we differentiate ourselves? How do we make money? What are our time, size and scope ambitions?


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Data Analysis:

Case 1: Grameen Bank, Bangladesh Social Entrepreneur: Muhammad Yunus

Inception: The Grameen Bank (GB) was established in 1976 by Muhammad Yunus, a Bangladeshi

economic professor, and his colleagues. Yunus confronted the conventional banking system of denying

the credit facility to the poor by proving that the poor were extremely good credit risks by lending the now

famous sum of $27 from his own pocket to 42 women from the village of Jobra. Convinced that poor

borrowers might be good credit risks, they demonstrated that landless women in mutually accountable

borrower groups achieved very high repayment rates. The Grameen Bank forms small groups of five

people to provide mutual, morally binding group guarantees in lieu of the collateral. Participants have

proved to be reliable borrowers and astute entrepreneurs, raising their status, lessening their dependencyon their husbands and improving their homes and the nutrition of their children. These borrowers

developed the social development guidelines known as the Sixteen Decisions, the basis of village group

meetings throughout the Grameen system. Today, over 90 percent of the millions of microcredit

borrowers around the world are women.

Innovation: Group lending for poor people without collateral. Scale up an organization/expand

organizational capacity to serve millions of small borrowers. Grameen Bank provided small loans to 2.3

million very poor borrowers. They c atalyzed fundamental changes for poor womens role in income

generation as well as changes in micro-credit theory and practice around the world. Grameen Bank

sustained itself by charging interest on its loans and then recycling the capital to help other women. Yunus

brought inspiration, creativity, direct action, courage, and fortitude to his venture, proved its viability, and

over two decades spawned a global network of other organizations that replicated or adapted his model to

other countries and cultures, firmly establishing microcredit as a worldwide industry.

Case 2: Child Rights and You (formerly Child Relief and You, till 2005), abbreviated as CRYSocial Entrepreneur: Rippan Kapur

Inception : Founded in 1979, CRY is an Indian NGO working to secure the basic rights of underprivileged

Indian children. CRY's objective is to advocate for children's rights to survival (food and shelter),

protection (health), development (education), and participation by sensitizing the public to these issues, as


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well as by partnering grassroots initiatives that work on child rights by providing financial and non-

financial support.

Innovation : CRY had an income of Rs.40 Crores, raised though advocacy-led fund raising, through

Individual donations (84%), institution donors (8%), Events(2%), Products (2%), Interest and others

(4%). The approach of changing hearts and minds through promotional campaigns along with extensive

media coverage has been the key element of success. The range of products designed and inspired by

children tells a story about children, their rights and their incredible courage with which they surmount

deep inequalities of their lives.

Case 3: SEWA (The Self- Employed Womens Association (SEWA) Social Entrepreneur: Ela Bhatt

Inception : Founded in 1972 by Ela Bhatt, is a trade union of women who earn their livelihoods inoccupational categories that historically have been very difficult to organize - hawkers and vendors, home-

based producers, and manual laborers and service providers. Their initial programs focused on improving

the working conditions of their members through influencing the actions of local police and policy

makers. Later, SEWA provided a variety of services that were otherwise unavailable to their members.

With approximately 315,000 members, SEWA is the first and largest trade union of informal sector

workers. In addition to i t unionizing activities, SEWA has several sister institutions including a bank to

provide financial resources, an academy to provide teaching, training and research, and a housing trust

that coordinates housing activities for its members. SEWA has become an international force, working

with womens and labor movements worldwide.

Innovation: Organize women who are atomized and have little reason to cooperate for political change

and for addressing economic, social, and health issues. Build local leadership capacity to scale up

organization and movement. SEWA provides services like savings and credit, healthcare, child care,

insurance, legal aid, capacity building etc. that are important need of poor women. These services are

provided in a decentralized and affordable manner at the door steps of workers. This results in financialviability of the supportive services. SEWA does not depend totally on subsidies and grants and formed

their own cooperatives to gain operational self sufficiency.


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Case 4: Ashoka Innovator for the Public, Social Entrepreneur: Bill Drayton

Inception: Ashoka is the global association of the worlds leading social entrepreneurs men and

women with system changing solutions for the worlds most urgent social problems. Since 1981, Ashoka

has elected over 2,000 leading social entrepreneurs as Ashoka Fellows, providing them with living

stipends, professional support, and access to a global network of peers in more than 60 countries. Ashoka

search the world for leading social entrepreneurs and at the launch stage, provide these entrepreneurs

Ashoka Fellows a living stipend for an average of three years, allowing them to focus full-time on

building their institutions and spreading their ideas. They also provide the Fellows with a global support

network of their peers and partnerships with professional consultants.

With their global community, Ashoka develops models for collaboration and design infrastructure needed

to advance the field of social entrepreneurship and the citizen sector.

Innovation : Ashoka believes that the growth of a global citizen sector begins with the work of individual

social entrepreneurs. These entrepreneurs drive the sector forward, responding to new challenges and

changing needs. They are rooted in local communities but think and act globally. Askoka is registered as

not-for-profit organization in the United States.

Financed by individuals, foundations and business entrepreneurs from around the world. Ashoka

does not accept funding from government entities. Individual and institutional endowment funds

provide for Ashoka's long-term stability.

Ashoka has forged strategic partnerships with leading global companies, to provide management,

communications, finance, and other expertise to the citizen sector. In turn, Ashoka and its vast

network share knowledge and opportunities with business partners, expanding the horizons of

these pioneering businesses and the people who work for them.

Ashokas global strategic partners are McKinsey & Company, Hill & Knowlton and Latha m and

Watkins. Ashoka also has relationships with the International Senior Lawyers Project (ILSP) and

Ernst & Young.

The success of their more than 20-year partnership is grounded in each organization's devotion

to the collaborative process, which reaches across continents and draws upon an abiding

commitment to promote the culture of pro bono globally, working towards a world in which all


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individuals and communities may access legal recourse, civil rights and equal protection under

the law.

Case 5: Amul: The Gujarat Cooperative Milk Marketing Federation Ltd, Anand (GCMMF) Social

Entrepreneur: Dr. Varghese Kurien

Inception : Kurien also set up GCMMF (Gujarat Cooperative Milk Marketing Federation) in 1973 to sell

the products produced by the dairies. It is the largest food products marketing organization of India. Dairy

Cooperatives in Gujarat have created an economic network that links more than 2.8 million village milk

producers with millions of consumers in India and abroad through a cooperative system that includes

13,141 Village Dairy Cooperative Societies (VDCS) at the village level, affiliated to 13 District

Cooperative Milk Producers Unions at the District level and GCMMF at the State level. These

cooperatives collect on an average 7.5 million litres of milk per day from their producer members, more

than 70% of whom are small, marginal farmers and landless labourers and include a sizeable population of

tribal folk and people belonging to the scheduled castes.

The turnover of GCMMF (AMUL) during 2008-09 was Rs. 67.11 billion. It markets the products,

produced by the district milk unions in 30 dairy plants, under the renowned AMUL brand name. The

combined processing capacity of these plants is 11.6 million litres per day, with four dairy plants having

processing capacity in excess of 1 million Litres per day. The farmers of Gujarat own the largest state of the art dairy plant in Asia Mother Dairy, Gandhinagar, Gujarat - which can handle 2.5 million litres of

milk per day and process 100 MTs of milk powder daily. During the last year, 3.1 billion litres of milk

was collected by Member Unions of GCMMF. Huge capacities for milk drying, product manufacture and

cattle feed manufacture have been installed. All its products are manufactured under the most hygienic

conditions. All dairy plants of the unions are ISO 9001-2000, ISO 22000 and HACCP certified. GCMMF

(AMUL)s Total Quality Management ensures the highest quality of products right from the starting point

(milk producer) through the value chain until it reaches the consumer.

Innovation: The Gujarat Cooperative Milk Marketing Federation Ltd. cannot be viewed simply as a

business enterprise. It is an institution created by the milk producers themselves to primarily safeguard

their interest economically, socially as well as democratically. Business houses create profit in order to

distribute it to the shareholders. In the case of GCMMF the surplus is ploughed back to farmers through

the District Unions as well as the village societies. This circulation of capital with value addition within


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the structure not only benefits the final beneficiary the farmer but eventually contributes to the

development of the village community. This is the most significant contribution the Amul Model

cooperatives, of which, the Federation is the apex body, has made in building the Nation.

The Amul Model is a three-tier cooperative structure . This structure consists of a Dairy Cooperative

Society at the village level affiliated to a Milk Union at the District level which in turn is further federatedinto a Milk Federation at the State level. The above three-tier structure was set-up in order to delegate the

various functions, milk collection is done at the Village Dairy Society, Milk Procurement & Processing at

the District Milk Union and Milk & Milk Products Marketing at the State Milk Federation. This helps in

eliminating not only internal competition but also ensuring that economies of scale is achieved. As the

above structure was first evolved at Amul in Gujarat and thereafter replicated all over the country under

the Operation Flood Programme, it is known as the Amul Model or Anand Pattern of Dairy

Cooperatives.

Today Amul is a symbol of many things -of high-quality products sold at reasonable prices, of a vast co-

operative network, of the triumph of indigenous technology, of the marketing savvy of a farmers'

organization. Above all, it has emerged as the most successful model of dairy development.

An Analysis of Business Models of Social Enterprises

Case Name of the

Social

Entrepreneur

Value Proposition Innovation in Business

Model

Grameen

Bank

Muhammad

Yunus

Provide group-based loans for poor

and marginalized people to develop

income generating activities

Charges interest on its loans

and then recycling the capital

to help other women.

CRY Rippan Kapur Advocate for children's rights to

survival (food and shelter),

protection (health), development

(education)

Raised though advocacy-led

fund raising and exceptional

promotional campaigns


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SEWA Ela Bhatt Largest trade union of informal

sector workers

Build local leadership

capacity to scale up

organization and movement.

SEWA does not depend

totally on subsidies and grants

and formed their own

cooperatives and charges for

these services.

Ashoka Bill Drayton Ashoka search the world for leading

social entrepreneurs and at the

launch stage, provide a living

stipend, allowing them to focus full-

time on building their institutions

and spreading their ideas.

Ashoka has forged

strategic partnerships with

leading global companies,

to provide management,communications, finance,

and other expertise to the

citizen sector.

GCMMF

(Amul)

Dr.Varghese

Kurien

Cooperative Milk Federation Organized marketing and

distribution networks by

eliminating middlemen.

Conclusion

What these case studies and many other entrepreneurial initiatives all over the globe have in common is

that they challenge the status quo and our conventional thinking about what is feasible. Often, the

complexity, scale, and scope of the worlds environmental and social problems and challenges seem

overwhelming, tempting us to resign ourselves and doubt the capabilities of our institutions to improve

things. Nevertheless, inspired entrepreneurs have shown us new paths and solutions, basing their designs

on local needs rather than on the centralized assumptions of large institutions about what needs to be done.

Social Entrepreneruship has thus attracted the attention of academia, international organizations, charities,


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and corporations, in efforts to better understand the phenomenon and to replicate and scale some of the

new models and processes for value creation. iv

Social Entrepreneurs and New Business Models:

Social entrepreneurship creates new models for the provision of products and services that caters to

society at large, by creating new business models to serve the poor directly to basic human needs that

remain unsatisfied by current economic or social institutions. Like business entrepreneurship, Social

Entrepreneruship recognizes and acts upon what others miss: opportunities to improve systems, create

solutions, and invent new approaches. Venkataraman (1997), studying traditional entrepreneurship, sees

the creation of social wealth as a by-product of economic value created by entrepreneurs. In Social

Entrepreneruship, by contrast, social value creation appears to be the primary objective, while economic

value creation is often a by-product that allows the organization to achieve sustainability and self-sufficiency. In fact, for Social Entrepreneurship, economic value creation, in the sense of being able to

capture part of the created value in financial terms, is often limited, and mainly because the customers

may be willing but are often unable to pay for even a small part of the products and services provided.

Social Entrepreneruship creates novel business models, organizational structures, and strategies for

brokering between very limited and disparate resources to create social value. It therefore relies on

individuals who are exceptionally skilled at mustering and mobilizing resources: human, financial, and

political.

Bibliography:

i Vasanti Venugopal, 2009 Ongoing PhD Thesis on Social Entrepreneruship ii Roger L.Martin & Sally Osberg, Social Entrepreneruship - a case of definition 2007, Stanford Social

Innovation reviewiii http://en.wikipedia.org/wiki/Business_model iv Christian Seelosa, Johanna Mairb, Social entrepreneurship: Creating new business

models to serve the poor , Sustainable Strategies Consulting Group, C/ Topazi 5B, 08012 Barcelona,

Spain , IESE Business School, Avda. Pearson 21, 08034 Barcelona, Spain

Donald Kuratko and Richard Hodgetts Entrepreneurship Cengage (Thomson)

Robert Hisrich and Michael Peters - Entrepreneurship Tata McGraw Hill
http://en.wikipedia.org/wiki/Business_modelhttp://en.wikipedia.org/wiki/Business_modelhttp://en.wikipedia.org/wiki/Business_modelhttp://en.wikipedia.org/wiki/Business_model


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Zimmerer and Scarborough Essentials of Entrepreneurship and Small Business Management -

Pearson

Entrepreneurship-New Venture Creation - David H.Holt - Prentice Hall India

Entrepreneurship Development-Small business Enterprises - Poornima Charantimath -Pearson Education

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