Organizing Framework & Repeatable Business Models for Market Creation in Impoverished Communities
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The document discusses frameworks and business models designed to create markets in impoverished communities, drawing lessons from social entrepreneurship initiatives. It emphasizes using disruptive innovation and technology to develop sustainable solutions for challenges like lack of clean water and medical facilities in rural India. The goal is to enable social enterprises to scale effectively, improving the quality of life for underserved populations globally.
Organizing Framework & Repeatable Business Models for Market Creation in Impoverished Communities
- 1. AN ORGANIZING FRAMEWORK & REPEATABLE BUSINESS MODELS FOR MARKET CREATION IN IMPOVERISHED COMMUNITIES LESSONS FROM THE GSBI AT SANTA CLARA UNIVERSITY GLOBAL SOCIAL BENEFIT INCUBATOR (GSBI™) JAMES L. KOCH, PH.D., BILL & JAN TERRY PROFESSOR OF MANAGEMENT DIRECTOR, GSBI NETWORK & SECTOR STRATEGY UNITE FOR SIGHT GLOBAL HEALTH & INNOVATION CONFERENCE YALE UNIVERSITY| APRIL 21-22, 2012
- 2. SCALING IMPACT How could you positively influence the lives of a billion people? Government The Market Business Models and Market Mechanisms Branching A really big organization Affiliation Co-opt other organizations/ Network of networks Dissemination Viral spread / Social Movement GAME CHANGING TECHNOLOGY
- 3. TWO THOUSAND YEARS OF PROSPERITY IN WESTERN EUROPE What does this graph tell us about technology, prosperity, and justice?
- 4. APPLYING DISRUPTIVE INNOVATION THEORY n atio In nov ts into ng uc aini r prod rkets Performance st Su bette d ma g e Brin tablish e s tion rup ers Dis nd tom odel Different performance measure -E s Low t cu m rsho siness ve bu o ge t st Tar wer-co • Discount retailing o w ith l • Steel mini-mills Time on rupti ark et Dis ption N ew-M c onsum st non et e agai n Comp or e rs Time g um s in m on u n -c ons exts Company improvement trajectory c t N o on - on Customer demand trajectory N C
- 5. DISRUPTION IN HEALTH CARE Provider-Level Disruption Point-of-Care Disruption lists Performance* Performance* cia ls b spe pita d su hos an ral lists ici ans Ge ne Sp ecia hys litie s a re p faci al c ie nt erson pat ily/p rs O ut Fam on e car e a ctiti ffice pr N ur se In-o e re car f-ca om e S el In-h Community Health Workers eHealth Services / Rural Clinics Time Time *Can mean either outcomes or complexity of diagnosis and treatment Company improvement trajectory Customer demand trajectory
- 6. E-HEALTHPOINT PROBLEM: No clean water, no medical facilities, no reliable medicines in rural India SOLUTION: Provide whole solution: diagnostics, validated pharmaceuticals, clean water, telehealth
- 7. THE FORTUNE AT THE BOTTOM OF THE PYRAMID THESIS Top Billion Bottom 4 Billion • Declining growth/margins • Growing markets • Consumption (2/3 of GDP) • Non-consumption • Message “cacophony” • Market creation • Stimulate needs • Many unmet needs • Low “friction” markets • Constraints • Low transaction costs • High transaction costs • Costs of search • Marginalization • Costs of information • Access barriers • Contracts/rule of law • No rule of law • Value migration to services • Value creation • New products/new markets • Remove constraints
- 8. LEAPFROG AS A DEVELOPMENT PLATFORM
- 9. DISRUPTING UNJUST MARKET EQUILIBRIUM MINIMUM CRITICAL SPECIFICATIONS Value Creation Cost Reduction Market Penetration Innovation from below
- 10. ORGANIZING FRAMEWORK OF MARKET CREATION Technology The material system employed for providing a product or service Business Model The mechanism for providing a product or service in a manner that ensures the ongoing viability of the venture Eco-System Key actors/facets of the community that the venture interacts with (and influences) as part of delivering its products or services All driven by mission, vision, and values of social enterprise
- 11. APPLYING DISRUPTIVE INNOVATION THEORY AT THE BASE OF THE PYRAMID Decision Making Domains Localizing Establishing Interfacing Technology Business Model Ecosystems Functional Mechanisms Technology Value Firm Level and Empathy Capital Creation Customer Finance Governance Cost Extreme Unit Economics Capital Efficiency Reduction Affordability Market Left & Right Crossing the Partnering Penetration Brain Thinking Chasm
- 12. DELIVERING VALUE: LEFT AND RIGHT BRAIN THINKING Key Value Customer Customer Key Activities Partnerships Proposition Relationships Segments Key Resources Channels Cost Structure Revenue Streams Alexander Osterwalder and Yves Pigneur, Business Model Generation 2010
- 13. EXECUTING A COMPELLING VALUE PROPOSITION Value Proposition Customer Segments Cost structure Key activities Key resources Revenue streams Customer relationships Channels / distribution Key Partnerships
- 14. OVERCOMING MARKET IMPERFECTIONS HELPING MARKETS ALLOCATE RESOURCES TO SOCIETY’S PREFERRED USE Market Inefficiency Market power (buyer/seller, information, barriers) Transaction costs (access to markets) Externalities (who pays) Public goods Free riders Private opulence and public squalor Who pays for basic services: Government, industry, cooperative, family, individual Market-Oriented Motivations and Behavior Fairness in incentivized value chains Alternative rationalities to individual as purely economic agent
- 15. OVERCOMING MARKET IMPERFECTIONS HELPING MARKETS ALLOCATE RESOURCES TO SOCIETY’S PREFERRED USE Making markets more just and inclusive Markets respond to rich, not poor Value of non-market production Relative returns f (value creation v. value appropriation) Questions How do market imperfections impact your venture? How would you overcome these imperfections? Poverty premium as arbitrage
- 16. ACCESSING PATIENT CAPITAL
- 17. LEGAL STRUCTURE AND ORGANIZATION LIFE STAGE Leveraged Non-profit For-profit Social Business Hybrid Social Business
- 18. FINANCING HYBRID SOCIAL ENTERPRISE OPTION Investors Banks: * Commercial Loans * Equity Social Investors: Foundations: Social Investors: * Equity * Social Loans (PRI) * Grants Foundations: Social Venture Funds: Foundations: * Mission Related Equity * Social Loans * Grants Entities For-Profit Entity Not-For-Profit Entity Hybrid Social Enterprise
- 19. IMPACT CAPITAL & INVESTMENT READINESS Commitment Potential for Social Impact • BoP •Quality of Life for the Poor • Market Solution •Cost Effectiveness (BACO) • Ambition to Scale •System Change (transformative) Financial Sustainability Management Capacity • Financial Plan •CEO/Entrepreneur • Cost Recovery •Management Team • Sustainability •Management Information System • Grants v. Loan (cash flow) •Governance Potential to Scale • Market Risk (socio-political) • Output Growth How are these criteria different than • TAM (> 1 million) conventional V.C. criteria?
- 20. IT CAN BE DONE We are witnessing the gradual evolution of a new category of organization, one that reflects a “rationality” that is better suited to the realities of underserved communities than profit maximizing models
- 21. SOCIAL BENEFIT PROGRAMS GOAL Enable social enterprises to scale, creating systemic change for the poor. Innovation Entrepreneurship Social Capital STUDENT AND FACULTY ENGAGEMENT
- 22. OUR GLOBAL IMPACT Helped more than 140 social entrepreneurs build sustainable, scalable business models to benefit the lives of more than 74 million people worldwide. 93% of ventures are still operating and 55% are scaling.
- 23. E-HEALTHPOINT PROBLEM: No clean water, no medical facilities, no reliable medicines in rural India SOLUTION: Provide whole solution: diagnostics, validated pharmaceuticals, clean water, telehealth
- 24. HUSK POWER SYSTEMS PROBLEM: 125,000 villages “off the grid” in India, leaving 480 million without electricity SOLUTION: 45 million metric tons of rice husks could light 145,000 villages
- 25. SOLAR SISTER PROBLEM: No mechanism to distribute solar powered lanterns to the >500 million people in Africa without electricity SOLUTION: An Avon-style network of “Solar Sisters” provides livelihoods and light to families
- 26. SUMMARY SUCCESS FACTORS FOR SUSTAINABILITY AT SCALE Applying disruptive innovation theory Value creation and cost reduction Localizing technology to fit target market segments Establishing a scalable business model for market penetration Mission aligned incentives, shared value, and empowerment Addressing market imperfections to enable systemic change Accessing the right capital for your organizational life stage Organizational capabilities that increase investment readiness
- 27. THANK YOU WWW.SCU.EDU/SOCIALBENEFIT TWITTER.COM/CSTSSCU FACEBOOK.COM/CSTS.SCU
- 29. ENERGY MAP
- 30. IMPACT CAPITAL
Editor's Notes
- #3: Note: Difference between value appropriation v. value creation or social impact as criteria. Social enterprise as a means of providing essential services and a nuclei for empowerment and economic growth
- #11: Empirical regularities reflect the rationality of social entrepreneurs.
- #22: Center aims to help through 3 programs GSBI signature program: sustainable, scalable businesses that serve as nuclei for economic growth, including accelerating access to capital Frugal innovation lab. Appropriate—rugged, affordable, simple—for the “base of pyramid” communities which are emerging markets Social capital or impact investing to accelerate ventures scaling Student and faculty engagement in all of these social benefit programs Switch innovation and entrepreneurship
- #23: The GSBI is now in its 10 th year and metrics are compelling by any standards. Make most VCs proud. Social entrepreneurs not always non-profits. Earned income models often more sustainable and scalable than contributed revenue. Overview
- #26: 1.5B people live off the electricity grid $1 Trillion market
- #27: Note: Key concept here is stakeholder theory/value (v. shareholder value)
- #30: Around the world, social entrepreneurs are pioneering methods to bring affordable renewable energy to these underserved customers. While they currently serve only a fraction of the existing market, the technologies and business models they are developing have the potential, if successfully scaled and replicated, to serve almost everyone. This site is designed to help you better understand energy delivery for customers underserved by traditional markets, and the technologies and business models being used to help empower the bottom billions. Best practices in technology and business model innovation http://energymap-scu.org