Unit 4

Social Entrepreneurship
Developing a Social Venture Sustainability Model
 Developing a Social Venture Sustainability Model

Learning Objectives
• 1) Explain the concept of business model.
• 2) Define the sustainability model of a social venture.
• 3) Explain how social ventures can sustain themselves.
• 4) Build a social venture sustainability model.

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 Developing a Social Venture Sustainability Model

• Understanding the Business Model

• Defining a Business Model
• Refers to a firm’s plan or diagram for how it competes, uses its resources,
structures its relationships, interfaces with customers, and creates value to
sustain itself on the basis of the profits it earns.
• Represents the logic of a firm’s value creation.
• Rationale of how a firm will create, deliver, and capture value.

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 Developing a Social Venture Sustainability Model

• Understanding the Business Model (cont’d)

• Importance of a Business Model
• A business model helps a firm to determine the configuration of activities
necessary to add value to the customer.
• Helps determine which activities are necessary and which ones are peripheral.
• Helps conceptualize the firm as an interrelated set of strategic choices.
• A business model has elements of both operational effectiveness and strategy.

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 Developing a Social Venture Sustainability Model

Understanding the Business Model (cont’d)

Table 1. Business Model and Product Market Strategy
Business Model Product Market Strategy
A structure template of how a focal firm transacts with Pattern of managerial actions that explains how a firm achieves and
Definition customers, partners, and vendors. It captures the Pattern maintains competitive advantage through positioning in product markets
of the firm’s boundary spanning connections with factor
and product markets
How to connect with factor and product markets? What positioning to adopt against rivals
Which parties to bring together to exploit a business What kind of generic strategy to adopt cost leadership and/or
opportunity, and how to link them to the focal firm to differentiation?
enable transactions(what exchange mechanisms to
Main Questions Addressed adopt?)
What information or goods to exchange among the When to enter the market?
parties, and what resources and capabilities to deploy to
enable the exchanges?
How to control the transactions between the parties, and What products to sell?
what incentives to adopt for the parties? What customers to serve?
Which geographic markets to address?
Focal firm and its exchange partners. Firm
Unit of Analysis Focus Externally oriented: Focus on firm’s exchanges with Internally/externally oriented: focus on firm’s activities and actions in light
others of competition.

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 Developing a Social Venture Sustainability Model

• Components of a Business Model

Table 2. The Four Components of a Business Model
Revenue Sources Cost structure drivers Investment size Critical success
factors
All revenue streams a The cost structure of a Amount and timing of Elements that have the
particular business model business model (fixed, investment to produce greatest impact on the
will produce, and the variable, recurring, etc.), positive cash flow, firm’s becoming profitable.
source, size, significance, relative importance, and including cash required for
and growth potential of how it may change over startup and working capital.
each. time.

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 Developing a Social Venture Sustainability Model

• Social Venture Sustainability Models

• Process of creating, delivering, and capturing value for all stakeholders involved
in the social venture.
• Helps answer the following question:
• How would the social venture be sustainable while successfully addressing a
particular social need?
• The social value proposition is the bundle of services that the social
enterprise proposes to its customers both beneficiaries and sponsors.

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 Developing a Social Venture Sustainability Model

• Building Social Venture Sustainability Models

• Developing a business model consists of creating the content, structure, and
governance of transactions designed to create value through the exploitation of
business opportunities.
• Two parameters in building business models:
• 1) design elements
• 2) design themes.

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 Developing a Social Venture Sustainability Model

• Building Social Venture Sustainability Models (cont’d)

• Design elements include:
• 1) Content (What activities should be performed?)
• 2) Structure (How should they be linked and sequenced?)
• 3) Governance (Who should perform them and Where?).

• Design Themes include:

• Novelty
• Lock-in
• Complementarities
• Efficiency.

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 Developing a Social Venture Sustainability Model

• Building Social Venture Sustainability Models (cont’d)

Framework provides insight by :
Giving business model design a language, concepts, and tools
Table 3. Models An activity
Highlighting business model design as a key managerial/entrepreneurial task
System Design framework.
Emphasizing system-level design over partial optimization

Design Elements
Content What activities should be performed?
Structure How should they be linked and sequenced?
Governance Who should perform them and where?

Design Themes
Novelty Adopt innovative content, structure or governance
Lock-In Building in elements to retain business model stakeholders
Complementarities Bundle activities to generate more value
Efficiency Reorganize activities to reduce transaction costs

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 Developing a Social Venture Sustainability Model

• Building Social Venture Sustainability Models (cont’d)

Table 4. Designing an effective business model
Customer Value Proposition Profit Formula Key Resources Key Processes
Target customer Revenue model Needed to deliver the customer value As well as rules, metrics, and norms, that
Job to be done to solve an important problem How much money can be made price x proposition profitability. Might include: make the profitable delivery of the customer
or fulfill an important need for the target volume. Volume can be thought of in terms of . People value proposition repeatable and scalable.
customer market size, purchase frequency, ancillary . Technology/products Might include:
  sales, etc. . Equipment . Processes: design, product
Offering   . Information Development, sourcing,
Which satisfies the problem or fulfills the Cost structure . Channels Manufacturing, marketing,
need. How costs are allocated: includes cost of key . Partnerships, alliances hiring and training,
This is defined by not only what is sold but assets, direct costs, indirect costs, economies . Brand information technology
also how it is sold. of scale.
  . Rules and metrics: margin
Marginal model requirements for
How much each transaction should net to investment, credit terms,
achieve desired profit levels. lead times, supplier terms
   
Resource velocity . Norms: opportunity size
How quickly resources need to be used to needed for investment,
support target volume. Includes lead times, approach to customers and
throughput, inventory turns, asset utilization, channels
and so on.
 

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 Developing a Social Venture Sustainability Model

• Building Social Venture Sustainability Models (cont’d)

• Social ventures generate income through several means:
• Guiding questions in building a social venture sustainability model:
• 1) Those who receive the service pay.
• 2) Third parties with vested interest pay.
• 3) Others pay indirectly.

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 Developing a Social Venture Sustainability Model

• Designing a Social Venture’s Sustainability Model (cont’d)

Table 6. Social Business Model Canvas
Key Stakeholders Key Activities Value Proposition Customer/Beneficiary Customer/Beneficiary
Relationships Segments
Who will help the social venture Identify the key activities to What problem is the social venture
implement its business model? perform to accomplish the social solving? What types of relationships to Who are the beneficiaries or
Governments mission.  How will solving this problem have develop with beneficiaries who do customers of the social venture?
Foundations an impact? not pay for the service and those Who are those beneficiaries who
Other companies   who pay for the service? would not pay but still receive the
  service?
  Who are those beneficiaries who
will pay?
Key Resources   Channels
What resources are needed to How to reach the beneficiaries
perform the different activities? and/or customers?
 How to acquire these resources?
Cost Structure Revenue Streams
Identify cost areas How would revenue be
What activities will cost the generated?
most? Grants/donations/earned income
Surplus

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 Reading
• Students should read chapter 6 from the book to enhance their
further understanding.
• https://online.vitalsource.com/#/books/9781136655937/epubcfi/6/32%5B
%3Bvnd.vst.idref%3DfC06_chapter%5D!/
4/2/14/8/24%5Btab6_6%5D/4/6/2/2%400:100

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