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Opportunities of social entrepreneurs

Difference of commercial enterprise and social enterprise (business model)


Social entrepreneurs are a type of business entrepreneur rather than a
separate category. Whereas typical entrepreneurs improve commercial
markets, social entrepreneurs improve social conditions.

Emphasis on Team Vs. Individual


According to the "Stanford Social Innovation Review," venture
capitalists invest in private business on the basis of a new company's
leadership team and the organization that supports it. Philanthropists, or
individuals who raise and donate money for charitable causes, are often the
primary investors in social entrepreneurs' projects. They're more likely to
gauge the viability of a project based on the individual at the helm.

Perceptions of Value
For the business entrepreneur, value lies in the profit the entrepreneur
and investors expect to reap as the product establishes itself in a market
that can afford to purchase it. To the social entrepreneur, there's also value
in profits, as profits are necessary to support the cause. Value for the social
entrepreneur lies in the social benefit to a community or transformation of a
community that lacks the resources to fulfill its own needs.

Measure of Profitability
The ventures of business entrepreneurs are always designed to turn
profits that benefit stakeholders, such as shareholders or private investors.
Social entrepreneurs also may engage in for-profit activities. However, they
often structure their organizations as nonprofits, or they donate their profits
to the causes they support.

Approach to Wealth Creation


The business entrepreneur is driven to innovate within a commercial
market, to the ultimate benefit of consumers. If successful, the innovation
creates wealth. With that said, success is gauged by how much wealth it
creates. To the social entrepreneur, wealth creation is necessary, but not for
its own sake. Rather, wealth is simply a tool the entrepreneur uses to effect
social change. The degree to which minds are changed, suffering is
alleviated or injustice is reversed represents the organization's success.

Commercial Enterprise Business Model


An organization's business model can be described with 9 basic
building blocks - the customer segments, the value proposition for each
segment, the channels to reach customers, customer relationships it
establishes, the revenue streams it generates, the key resources and key
activities it acquires to create value, the key partners and the cost structure
of the business model. Each building block is mapped out in a pre-structured
canvas, which is known as the business model canvas. The individual
elements prompt consideration of a business full scope, while the layout
encourages thought about how the pieces fit together. The business model
canvas is a strategic management and lean startup template for developing
new or documenting existing business models.

Infrastructure
Key Activities: The most important activities in executing a
company's value proposition. An example for Bic, the pen
manufacturer, would be creating an efficient supply chain to
drive down costs.
Key Resources: The resources that are necessary to create value
for the customer. They are considered an asset to a company,
which are needed in order to sustain and support the business.
These resources could be human, financial, physical and
intellectual.
Partner Network: In order to optimize operations and reduce risks
of a business model, organization usually cultivate buyer-supplier
relationships so they can focus on their core activity.
Complementary business alliances also can be considered
through joint ventures, strategic alliances between competitors
or non-competitors.
Offering
Value Propositions: The collection of products and services a
business offers to meet the needs of its customers. According to
Osterwalder, (2004), a company's value proposition is what
distinguishes itself from its competitors. The value proposition
provides value through various elements such as newness,
performance, customization, "getting the job done", design,
brand/status, price, cost reduction, risk reduction, accessibility,
and convenience/usability.
Customers
Customer Segments: To build an effective business model, a
company must identify which customers it tries to serve. Various
sets of customers can be segmented based on the different
needs and attributes to ensure appropriate implementation of
corporate strategy meets the characteristics of selected group of
clients.
Channels: A company can deliver its value proposition to its
targeted customers through different channels. Effective
channels will distribute a companys value proposition in ways
that are fast, efficient and cost effective. An organization can
reach its clients either through its own channels (store front),
partner channels (major distributors), or a combination of both.
Customer Relationships: To ensure the survival and success of
any businesses, companies must identify the type of relationship
they want to create with their customer segments.
Finances
Cost Structure: This describes the most important monetary
consequences while operating under different business models. A
company's DOC.
Revenue Streams: The way a company makes income from each
customer segment. Several ways to generate a revenue stream:
Resources the main inputs that your company uses to create its value
proposition, service its customer segment and deliver the product to
the customer.

Social Enterprise Business Model


The Social Business Model Canvas is a tool for creating a solid business
model around your social enterprise. It's also a collaborative tool that helps
you communicate different business models with your stakeholders and
brainstorm new ones. It explores new areas which include:
Beneficiary segments
Social and customer value proposition
Impact measures
Surplus
Areas in which social entrepreneurs find and create opportunities
Social enterprises operate in a complex environment. Some may be
competing against fully commercial businesses and some against state
subsidized services. Social enterprises tend to gather around niche markets
to which their hybrid business models are best suited and where competition
from the state and market is less forceful. It may therefore be helpful to try
and identify niche areas where greatest opportunities for social enterprise
may exist and, incidentally, where the efforts and resources of social
enterprise promoters may be most justified and most useful.

The types of market niche filled by social enterprises include:


Markets serving the very poor, where business margins are low and
risks tend to be high. In some sectors, such as microfinance, there is
on-going debate as to whether a fully commercial operation can fulfill
the needs of the poorest client groups more effectively than modified
NGO models. Though clearly commercial microfinance has pushed the
frontiers of financial inclusion, there is still consensus that hybrid
models are needed to reach the poorest of the poor. In the health
sector, a niche clearly exists for hybrid service models in areas where
state provision is lacking and ability to pay full market prices is not
widespread in the community. Examples of social enterprises in the
study which are operating in this market niche include:
o Micro-clinics run in low income areas (Access Afiya, Viva Afiya)
o Selling affordable irrigation tools to poor, smallholder farmers
(Kickstart)
Other new and challenging markets where high costs may be incurred
to stimulate demand and create new opportunities due to the need to
overcome stigma, acclimatize clients to more complex technology,
challenge perceptions that services should be provided by the state. It
is possible that such conditions may not be permanent (e.g. stigma
against people living with HIV/AIDS reduces so that special efforts to
target and serve such clients are no longer necessary). Most social
enterprises surveyed, however, are dealing with relatively intractable
social problems where the barriers to mainstream business are long
term. Examples of social enterprises in the study which are operating
in this market niche include those:
o mothers2mothers (m2m) recruits new HIV-positive mothers who
had recently been through the Prevention of Mother to Child
Transmission process (PMTCT) and hired them for a one to two
year period to mentor, educate and support pregnant women in
similar situations.
o Make more smallholder farmers more prosperous by giving them
access to the financing and training they need to increase farm
productivity (One Acre Fund).
o Providing counselling services to people living with HIV/AIDS and
other socially marginalised groups (New Light, CCHCPS).
o Providing microinsurance products to farmers (Kilimo Salama).
Microinsurance products are typically very hard to sell to low
income clients on a fully commercial basis because of lack of
familiarity with insurance concepts.
o Providing relatively intensive support for farmers to adopt new
and unfamiliar crop cultivation techniques (KCT potatoes).

Management of infrastructure which the state no longer has the


resources to maintain and operate but which would be hard to operate
on a fully commercial basis. Though only one example was covered in
the survey, there are many examples of state transfer of assets to
management by nonstate entities in Vietnam, including management
of rice milling equipment by agricultural cooperatives and canal
systems by Water User associations. These organisations operate as
social enterprises, charging fees for service to cover operating and
maintenance costs. Examples of social enterprise from the study
operating in this market niche include those:
o Managing the operation and maintenance of irrigation canal
systems (Huu Duc cooperative).

Markets for products producing environmental benefits but which may


not be fully commercially competitive. Clearly, many environmentally
beneficial business lines are fully commercially viable. Others however,
will continue to be marginal and remain particularly suitable for hybrid
social enterprise models. Examples of social enterprise from the study
operating in this market niche include those:
o Setting up production and marketing of certified, organic
vegetable products (VRAT Company). In many markets, organic
vegetable production may be fully commercially viable but in the
context of the Vietnamese domestic vegetable market, certified
organic production remains highly marginal.
o Producing organic fertiliser from crop waste (Huong Hoa Cassava
Starch Factory). This process makes use of waste from cassava
flour production and generates income for the factory. However,
it require support from a DFID Challenge Fund to make the initial
investment in the plant required.
o Training poor farmers to reduce use of chemical pesticides (Real
IPM). Integrated pest management is a profitable option for large
scale farmers but the companys efforts to promote the
technique amongst smallholders requires on-going subsidy.
o Messy Bessy promises all-natural, worry-free cleaning products
which keeps harmful chemicals your of your life, and also
provides employment for young adults who have survived abuse,
trafficking and poverty.

It may seem counterintuitive to suggest that these more difficult and


marginal markets constitute opportunities for social enterprise but this
highlights the issue that social enterprises are not well placed to compete
with mainstream business in more competitive markets.