SOCIAL ENTREPRENERUSHIP - BUILDING COMPETENCIES THROUGH BUSINESS MODELS

By, 1. Prof.Vasanti Venugopal, Professor, Mount Carmel College, Bangalore Mail id: vasantivenu@rediffmail.com Ph.09845053793 2. Prof.Shinu Abhi, Assistant Professor, IFIM Business School, Bangalore Mail Id: shinuabhi@ifimbschool.com 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 problemsi Therefore new questions are being raised that challenge the existing knowledge, solutions and old sector boundaries. 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 people‘s 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 Women‘s 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 word social 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 dependency on 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 catalyzed fundamental changes for poor women‘s 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 CRY Social 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 nonfinancial 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 Women’s Association (SEWA) Social Entrepreneur: Ela Bhatt

Inception: Founded in 1972 by Ela Bhatt, is a trade union of women who earn their livelihoods in occupational categories that historically have been very difficult to organize - hawkers and vendors, homebased 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 it 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 women‘s 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 financial viability 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 world’s leading social entrepreneurs—men and women with system changing solutions for the world‘s 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.

Ashoka‘s global strategic partners are McKinsey & Company, Hill & Knowlton and Latham 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 federated into 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 cooperative 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 Grameen Bank Muhammad Yunus Provide group-based loans for poor and marginalized people to develop income generating activities 1. CRY Rippan Kapur Advocate for children's rights to survival (food and shelter), protection (health), development (education) Charges interest on its loans and then recycling the capital to help other women. Raised though advocacy-led fund raising and exceptional promotional campaigns Value Proposition Innovation in Business Model

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2. 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.

3. Ashoka

Bill Drayton

Ashoka search the world for leading social entrepreneurs and at the launch stage, provide a living stipend, allowing them to focus fulltime 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.

4. 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 world‘s 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 selfsufficiency. 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‖ Roger L.Martin & Sally Osberg, ―Social Entrepreneruship- a case of definition‖ 2007, Stanford Social

ii

Innovation review
iii iv

http://en.wikipedia.org/wiki/Business_model 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
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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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