Purpose-Driven Approach to Business Model Design (Version 2.5 - May 2017)

A Purpose-Driven
Approach to
Business Model
Design
May 2017 (Version 2.5)
Poh Kam WONG
Professor, NUS Business School
Director, NUS Entrepreneurship
Centre

Outline
1. Introduction to the Purpose-DrivenApproach to
Business Model Design (Slides 3 - 17)
2. Incorporating Social Impacts into Business Model
Design (Slides 18 - 52)
3. Incorporating a Financing Model into Business Model
Design (Slides 53 - 100)
4. Moving from a Financing Model to Stakeholder Model
(Slides 101 - 122)
5. ValidatingYour Business Model (Slides 123 - 130)

What is a Business Model?
• A Business Model describes how anOrganization
creates, delivers and captures Value
• The Business Model Canvas of Osterwalder & Pigneur
provides a shared language for describing, visualizing,
assessing and designing business models

Source: Osterwalder & Pigneur
9 Building Blocks of the Business Model
by Osterwalder & Pigneur

Business Model & Profitability
• As a business model visualization tool, BMC is designed to
highlight the links between the various components of a
business model with its financial consequences (cost,
revenue)
• This is particularly important in assessing the financial
viability or profitability of any proposed business model
design

Beyond just Profitability?
However, many businesses, even for-profit organizations,
have other purposes besides profitability
• Family Business: Profitability + Family Control + Grooming
Next Generation + Upholding Family Legacy
• Consumer Cooperative: Profitability + Keeping Prices
Affordable for Members
• State-Owned Enterprises: Profitability + Local Economic
Development/Job Creation
(cont…)

• Internet/Social Media Start-Up: Subscriber/user-
base acquisition (Deferred Profitability)
• Companies with significant Corporate Social
(CSR) activities: Goodwill (deferred profitability)
Trading off Profitability Purpose with some other
purposes (temporarily or permanently)
Beyond just Profitability?
(cont.)

Profitability as secondary purpose?
This trading off of profitability with other purposes
becomes even more important for Social Impact-Driven
BusinessVentures & Non-Profits/Social Enterprises
• Social Impact as the Primary Purpose of the
Organization, Profitability/FinancialViability either
Secondary or a Means to achieve the primary purpose
• Discovering and designing Alternative Financing
Models to make up for financial shortfalls are an integral
part of the business model design process

Profit
Purpose
Moving beyond just Profit Purpose…
Financial Bottom-line

Social
Purpose
Social Cost Social Benefits
…to incorporate Social Purpose…
Social Bottom-line

+
-
Social
Purpose
… but this often leads to Trade-Off…
Financing Gap
(-)
Social Impact
(+)

Trading off Impact with FinancialViability:
An Example
Source: The Straits Times
Not just purely a pricing issue, but many components of business model have
to change substantially
• Which customer market segments to serve?
• What Product/Service will Provide the BestValue Proposition to the
chosen market segments?
Meeting the Goal of the alternative financial source (Public Financing in this
case) may impose constraints on the original purpose (e.g. Arts that are
critical of the government)

New Design Elements that need to be
Integrated
Financing Models
• A Business Model that is not profitable can still achieve financial
sustainability by finding alternative financial models
• Indeed, even for-profit businesses often need to secure alternative
financial models before achieving profitability
Stakeholder Model
• However, different financing models require, explicitly or implicitly,
different Stakeholder or Governance Structure
• Because the new stakeholder(s) have purposes of their own, which
may be different from the purpose of the focal entrepreneur or
organization, its purpose may need to be adapted to achieve
alignment with that of the stakeholder, resulting in a new Shared
Purpose

Financing
Requirements
Purpose
Trade
off
Entrepreneur
The Original Purpose of the Social
Entrepreneur may differ from those of
the Financiers…
Financiers
Social Impact

Shared
Purpose
Entrepreneur
Stakeholder
Model
… Leading to the need to develop a
new Shared Purpose that aligns the
interests of All Stakeholders
Financing
Requirements
Social Impact

SOCIAL IMPACT FINANCING
REQUIREMENTS
STAKEHOLDER MODEL
BUSINESS MODEL
SHARED PURPOSE
SOCIAL
ENTREPRENEUR
The Iterative Process of the Purpose-Driven
Business Model Design Approach

Incorporating
Social Impacts
into Business Model
Design

Self-Reflection Questions
• What is your purpose?
• How can it be measured? How do you measure if you have
achieved your purpose?

Social Impacts
• Conventional profit-driven businesses are measured by the
“financial bottom-line” – financial returns to shareholders
• A purpose-driven business is seeking to make certain desired
social impacts as its primary goal – a “social bottom-line” or
social returns to stakeholders
• The key to achieving those desired impacts is to have clear
metrics to measure the social outcome generated

What is a Social Enterprise?
• Social Purpose-Driven vs. Profit-Driven
• Delivering Social Impacts on an on-going, sustainable, and
scalable basis

Source: The Straits Times
Is this a Social Enterprise?

1. Serving the Needs of the Underserved
– Those who cannot afford what the market currently provides
– Those whose needs are ignored
2. Empowering the Disadvantaged with the means to help
themselves
– Creating opportunities for the productive use of their existing capability
capability
– Developing their Capability
3. Reducing a Social Bad
– Prevention,Treatment and Circular Economy (Re-use, Up-cycle)
4. Engaging the participation and cooperation of a Community of
actors in a Social Ecosystem
4 Generic Purposes of Social Enterprise

Incorporating Social Purposes into
Business Model
Community
Engagement
Capability Use
& Development
Target
beneficiaries
as customers
Social
Purpose
Social Bottom-line
Prevention,
Treatment,
Re-use

Social
Purpose
Community
Engagement
Capability
Development
Target
beneficiaries
Social
Purpose
Social Bottom-line
… and Metrics to Measure Social
Bottom-line
Prevention,
Treatment,
Re-use
+ +
+
-

• Target Beneficiary as Customers
– TheTarget Beneficiary is the Paying Customer that provides
revenue sufficient to cover at least the cost
– Key Challenge is to Reduce Cost to make the product/service
affordable to the underserved group
• “Cross-Subsidy” Models
– TheTarget Beneficiary could not pay, or pay enough to cover
cost, hence need to create value for another customer to
generate the income to cover the deficit, or find financing models
that meet the financial gap
(cont…)
Generic Social Impact Models

• TheTarget Beneficiary as Producers
• TheTarget Community as Partners, Producers and Consumers
• Hybrid Models
– Combining more than one generic way to make impacts
Generic Social Impact Models (cont.)

Photos: Grameen Shakti
• How do you provide access to affordable electricity to the
rural poor?
– 70% of Bangladesh population were not served by the
electricity grid
• How do you create jobs for the local community at the same
time?
Case Example: Grameen Shakti

Reduction of health problems from
kerosene lamps
No. of empowered women entrepreneurs
No. of rural households w. electricity
Local
Women
Affordable
electricity
Empowering
Local Women
Direct Sales &
Installation by
Local
Entrepreneurs
Off-Grid Rural
Communities
Social Business Model of Grameen Shakti (I)
Improved learning by school children
Home
Solar
System
Microcredit +
Installments

Reduce
carbon
emissions Carbon
“positive”
companies
Impact
measurement /
tracking
Emissions
brokers
Carbon Credit
Markets
Reduction in
carbon emissions
Reduction in
health problems
No. of empowered
women entrepreneurs
Increased savings
with more efficient
products
Clean
Cookstoves
Social Business Model of Grameen Shakti (II)
Microcredit +
Installments

Source:
1. Grameen ShaktiOfficialWebsite:
www.gshakti.org
2. Interview with Abser Kamal,CEO ofGrameen Shakti:
www.hedon.info/BP58GrameenShaktiInterview?bl=y
Case Example: Grameen Shakti

• Source fiber fromTibetan herders at a fair price,
enabling them to earn a sustainable living while
preserving their traditional lifestyle. (>90% of
the population struggles to survive with a per
capita income of $333 or RMB2,100 and have
limited access to quality education,
infrastructure, and healthcare.)
• Channels 1% of profit into community
development fund to further support work in
rural areas.
Photo: Shokay
Case Example: Shokay
• A socially-conscious luxury brand designing premium knitwear,
yarn and fabric from yak down, which is as soft as cashmere.

Yak
Generate
sustainable
income
Sales ofYarn
Shokay’s Business Model
Quality
yak yarn
Increase annual
household income of
Tibetan herders
Tibetan
herders
Distributors,
wholesalers

Reduce Social Disruption Cost
caused by Outmigration, Preserve
Traditional Livelihoods
Preserve
traditional
livelihood
Mid-30s,
sophisticated
women
Quality,
luxurious knit
fashion
products
Increase employment
opportunities for women
knitters
Generate
sustainable
income

Yak
Generate
sustainable
income
Preserve
traditional
livelihood
Mid-30s,
sophisticated
women
Sales ofYarn
Quality,
luxurious knit
fashion
products
Quality
yak yarn
Expatriate
publications
International
schools fairs
Social Media
Website
Physical stores
Consignment
Expeditions
Increase annual
household income of
Tibetan herders
Tibetan
herders
Distributors,
wholesalers
Bureau of
Animal
Husbandry
(training)
Fiber-testing
Agency
Fashion
brands, Artists
Increase employment
knitters

Yak
Generate
sustainable
income
Preserve
traditional
livelihood
Mid-30s,
sophisticated
women
Sales ofYarn
Quality,
luxurious knit
fashion
products
Quality
yak yarn
Increase annual
household income of
Tibetan herders
Tibetan
herders
Distributors,
wholesalers
Bureau of
Animal
Husbandry
(training)
Fiber-testing
Agency
Fashion
brands, Artists
Increase employment
knitters
Expatriate
publications
International
schools fairs
Social Media
Website
Physical stores
Consignment
Expeditions

Source:
1. Shokay OfficialWebsite: www.shokay.com
2. “MakingYak Wool Fashionable and Socially Responsible”, AmCham’s
Insight: http://insight.amcham-shanghai.org/shokay-making-yak-wool-
fashionable-and-socially-responsible/
3. Women Entrepreneurs: InspiringStories from Emerging Economies
and Developing Countries:
http://books.google.com.sg/books/about/Women_Entrepreneurs.html?i
d=Bk_aygAACAAJ&redir_esc=y
4. “Shokay”, ZoeWong, Cornell University:
https://www.johnson.cornell.edu/Portals/32/images/Center%20for%20S
ustainable%20Global%20Enterprise/Center%20at%20large/Shokay%20-
%20Honorable%20Mention.pdf
Case Example: Shokay

• How do you raise awareness of society towards the needs of
disadvantaged groups like the blind?
• How do you create meaningful jobs for the blind?
Workshop Group Exercise I:
DIALOGUE INTHE DARK

• What is the purpose of your social enterprise?
• How do you measure the achievement of your purpose in
terms of specific social impacts?
• Which generic business model best fits what you are trying to
achieve?
Workshop Individual Exercise I:

• Outputs vs. Outcomes
– Outputs are results from the venture that can be measured
relatively objectively
– Outcomes are the ultimate changes that one is trying to make in
the world, but which may be difficult or costly to measure
• Impact = the portion of the total outcome that happened as a
result of the activity of the venture, above and beyond what
would have happened anyway
Measuring Social Impacts

Source: Clark, C., Rosenzweig, W., Long, D., & Olsen, S. (2008). Assessing Social Impact in Double Bottom Line.
http://www.riseproject.org/DBL_Methods_Catalog.pdfc
Social ImpactValue Chain

Source: Clark, C., Rosenzweig, W., Long, D., & Olsen, S. (2008). Assessing Social Impact in Double Bottom Line.
http://www.riseproject.org/DBL_Methods_Catalog.pdfc
Social ImpactValue Chain for
Dialogue in the Dark
Inputs Activities Outputs Outcomes
Goal
Alignment
- Capital
- Brand
- Staff
- Exhibition Design
- Recruitment of
visually-impaired
-Training
- Marketing
- Conducting of
tours
- Conducting of
debriefing session
- No. of visually
impaired hired
- No. of visitors to
exhibition
- Improve
socioeconomic
conditions for the
visually-impaired
- Increased public
awareness and
empathy towards
the visually
impaired
- Increased empathy
in general
- Evaluation
and
improvement

Photo: Dignity Kitchen
• A hawker “food stall” management school for the disabled and
disadvantaged.
• Trains and provides job placement for students.
• Innovates facilities and education programmes to suit the needs of
students.
Case Example: Dignity Kitchen

Innovations that enable handicapped workers to make drinks /
prepare food
Educating the general
public to use sign
language to order
beverages.
Training. E.g. Helping the blind cashier to
“see” money
Dignity Kitchen’s Innovations
Photos: Dignity Kitchen

• Outputs vs. Outcomes
– Outputs = no. of handicapped participants trained, income
earned
– Outcomes = self-esteem of the participants, increased sociability,
reduced dependency, less stress on caretaker…
• Impact = net effects vs. best alternatives
Measuring Dignity Kitchen’s Impacts

• Process Methods are tools to track and monitor the
efficiency and effectiveness of the operational
generate outputs.
• Impact Methods are tools that relate outputs and
outcomes, and attempt to prove incremental outcomes
to the next best alternative.
• Monetization Methods monetize outcomes or impact
by assigning a dollar value to them.
Social Impacts Assessment
Methodology

• Acumen Scorecard
• Impact Reporting and Investment Standards (IRIS)
• Social Returns on Investment (SROI)
Examples of Social Impacts Assessment
Methodology

• Often costly and resource-intensive
• Full impact may only be captured when measured over a time
period longer than acceptable by the funding agent /
stakeholder
• Should ideally be integrated within the business model as a key
activity (and hence business cost) necessary to secure the
financing from the funding agent / stakeholder
Cost of Social Impacts Measurements

However, by having measurable
social impact metrics, we can better
attract financing from relevant
resource owners.
(more on this later)

Incorporating a
Financing Model
into Business Model
Design

Operational Financing Gap
Financing Challenges for many Social
Enterprises I – Non-Sustainable Operation
(Revenue < Cost)
Operational cost
Revenue

Financing Challenges for many Social Enterprises
II – Operationally Sustainable, but No Return on
Capital (Revenue = Cost)
Capital Financing Gap
Operational cost Revenue
Capital cost

Financing Gap =
Operational Financing + Capital Financing
Operational cost
Revenue
Capital Financing GapCapital cost

Profit < Cost of Capital
Financing Challenges for many Social
Enterprises III – Insufficient ROI (Rev > Cost,
but Profit < Cost of Capital)
Operational cost
Capital cost
Revenue

The Sustainable + Scalable Scenario
Profit > Cost of Capital
Operational cost
Capital cost
Revenue

• Business Model Canvas helps us to identify the size and nature
of the financing gap for any new venture
• To understand how a venture can meet its financing gap, we
need to complement the “Business Model” with a “Financing
Model”
– Even normal for-profit businesses have financing gap
– The challenge is more severe for “social purpose”-driven ventures
The Need for “Financing Model”

• Equity Capital
• Bank Loan
• SupplierCredits
• Customer Pre-Payment
• Bond
• Guarantees
• Etc.
Financing for Profit-Driven Business

What about Financing for
Social Purpose-Driven Business?

Varieties of Financing Models of
Impact-Driven Businesses
1. Public Funding
2. Charity
3. Volunteerism
4. Venture Philanthropy
5. Impact Investment
6. Innovation that Reduces Cost
7. Consumer Co-operatives
8. Producer Co-operatives
9. Cross-subsidization Model
10. Social Impact Bond

1. Public Funding
Operational cost
Capital cost
Revenue

2. Charity
Operational cost
Capital cost
Revenue

3.Volunteerism
Cost Revenue
Financing Gap
Volunteered Resources

3.Volunteerism
Cost Revenue
Volunteered Resources

4.Venture Philanthropy
Operational cost
Capital cost
Revenue
Capital cost

Capital cost

Cost Revenue
Financing Gap
Innovation
labour
productivity

Cost Revenue
Innovation

Capital cost

9. Cross-subsidization Model
Revenue from
Paying Customers
Cost to serve Paying Customers
Cost to serve Non-paying
Customers

• Aravind Eye Care is the largest eye care provider in the world,
with over 4 million million operations performed and 32 million
patients treated.
• Operating under a model of cross-subsidization over two-
thirds of its patients are treated for free.
Cross-Subsidy Case Example:
Aravind Eye Care System

• Lean principles in the Aravind model: process simplification,
elimination of non-value economic activities, waste reduction
and commitment to excellence in operations and customer
service.
• Conrad N. Hilton Humanitarian Prize (2010),Gates Award for
Global Health (2008), FCCI award for best private hospital in
India.
Photos: Aravind Eye Care System
Cross-Subsidy Case Example:

Post-operative
follow up
Paying eye
patients
Treatment Fees from
Paying Customers
Lions Club
International
(Training)
Community
Outreach
(screening,
education)
Training
Cost
R&D
Word-of-mouth
Non-paying,
rural poor
patients
Free screening,
education
Standardised, innovative
procedures & equipmentWHO
Education &
Training
ManufacturingSeva Foundation
(Replication)
Distributors/
Hospitals (esp
in developing
countries)
Screening
Camps/Centres
Initial set up cost
- hospital
Eye care
hospital
Low-cost
intraocular
lenses
Community
outreach
Reduction in
unemployment
# of low-income
patients treated
# reached via
screening camps
(education)
Reduction in
illiteracy
# of healthcare
workers trained

Source:
1. Aravind OfficialWebsite: www.aravind.org
2. ‘Aravind Eye Care System:GivingThemThe Most Precious Gift’,
Profs. S. Manikutty and NeharikaVohra, Indian Institute of
Management, Ahmedabad:
https://wiki.brown.edu/confluence/download/attachments/9994241/
Aravind+case.pdf?version=1
3. ‘We set prices not on our costs, but on who can afford to pay how
much’, Financial Express:
http://archive.financialexpress.com/news/-we-set-prices-not-on-our-
costs-but-on-who-can-afford-to-pay-how-much-/233536/0
Case Example: Aravind Eye Care System

Having measurable social impact
metrics can also enable the
introduction of innovative
financing models.

10. Social Impact Bond
Source: http://www.nextbillion.net/blogpost.aspx?blogid=2179

Impact Bond Investors
Impact Bond Issuer
Measureable Impact Metrics
PublicAgency
Impact BondTraders
Private Sector Prisoner
Rehabilitation Operator
10. Social Impact Bond Example

• Certificate of Measurable Impacts (positive or negative)
become tradable in secondary markets
– Impact certification agency
– Original impact credit owners
– Impact Credit traders
– Secondary Credit buyers
Financing Market for Measurable Impacts

Source: http://www.watradehub.com/node/639
Example of ImpactTrading:
Carbon Emissions

Fairtrade: Certification commands a
premium from customers

Example of Crowdfunding for “Measurable”
Social Impact

• Some purpose-driven ventures have business models that
enable them to achieve both FinancialViability AND Positive
Social Impacts – Positive Double Bottom-lines
• Even such social ventures face a trade-off between greater
profitability vs. higher impact
• Most social ventures are unable to achieve positive double
bottom-lines: they usually have business models that achieve
positive social impacts but are not financially viable; the key
challenge is to innovate their business model to achieve
positive double bottom-lines
Financing vs. ImpactTrade-offs

Financing vs. Impact Trade-off…
+
-
Social
Purpose
Financing Gap (-)
Social Impact (+)

Workshop Group Exercise II
• Kids from Poor Families are not able to develop their artistic
interests and potentials
• A Social Entrepreneur’s Idea: Run an arts enrichment class for
such kids of kindergarten / primary school-age
• Her Challenge: How to make the venture financially
sustainable and scalable?

• Many elderly women are not gainfully employed but have
good cooking skills
• A Social Entrepreneur’s Idea: Employ these women to run
cooking classes for young professionals and teenagers
• Her Challenge: How to make the venture financially
sustainable and scalable?
Workshop Group Exercise III

Moving from a
Financing Model to
Stakeholder Model

• Every form of financing brings with it a new “stakeholder”
whose “purpose” may be different from that of the
original entrepreneur’s purpose
• In considering the type of financing model, an
entrepreneur must therefore understand whether and
how his/her purpose can be “aligned” with that of the new
stakeholder(s)
– Even normal for-profit businesses have to take into
account the obligations to, and constraints by, the
“stakeholder model”
– The challenge is more severe for “social purpose”-driven
ventures
From “Financing Model” to
“Stakeholder Model”

• Bank Lender
• Angel Investor
• VentureCapitalist
• Corporate Investor
• Owner of Publicly Listed Shares
• Philanthropist
• GovernmentAgency
• Volunteer
• Corporate Sponsor
…and how does it affect the original purpose of the Entrepreneur?
What is the “Purpose” of a…

• For-Profit
– Sole Proprietorship
– Partnership
– Privately-Held Limited Company
• controlled by Founder
• where certain classes of investors have special rights
– Publicly-ListedCompany
• B-Corporation
• Non-ProfitOrganization (NPO)
– PublicCharity, Private Foundation, Association, Society,
Cooperative, etc.
• “Blended” (Hybrid) Model?
Examples of Stakeholder Models

Photo: Embrace
• Embrace has developed an innovative, low-cost infant warmer
for vulnerable babies in developing countries.
• Given the customer segment, Embrace initially chose to go the
non-profit route – selling products at low price with only
margin “profits” to be reinvested back into the business.
Case Example:
The Hybrid Model of Embrace

But:
• Underestimated capital required to go from concept stage to
manufacturing stage, as well as costs associated with
management and time required to fundraise
• Foundations were not ready to take risks during early stages of
development (and preferred to fund health care delivery not
development)
• 80% time spent on fundraising
• Difficulty in using raised capital for operations, salaries,
inventory management
• Even if they went down the purely for profit model,
governments and hospitals on the ground were not inclined to
work with them
Case Example:
The Hybrid Model of Embrace

Solution: Hybrid Model
Hybrid model – non-profit free distribution (EmbraceGlobal)
combined with for-profit commercial sales (Embrace Innovations)
Photos: Embrace

Embrace Global:
• Owns the intellectual property for the infant warmer technology and
licenses it to the for-profit organization, which pays a royalty for each
unit sold. It accepts philanthropic contributions (for distribution to
NGO partners to reach the poorest communities and develop
educational programs to promote newborn health)
Embrace Innovations:
• Raises its funding from venture capitalists and impact investors to
fund the capital intensive work of research and development,
manufacturing, clinical testing, and establishing the sales and
distribution infrastructure to sell the product to customers who can
afford to pay for it.

Benefits:
• Allows them to leverage private capital, in addition to
Philanthropy, and serve all segments of the market with their
product

Intellectual
Property
Low-cost
portable, reusable
warming tech
Portable Baby
Warmer
Initial Integrated Business Model
Reduction in neonatal hypothermia
Reduction in infant
mortality
Increased
employment
Public Health
Organizations
Product
development
Regulatory
Approval
Paying
mothers
Field partners
(NGOs)
NGO field
workers
Manufacturing &
Distribution Cost
Operations,
Manpower Cost
Product
Development
NGO field
partners
BabyWarmer
for Hospital
ClinicalTrials

Low-cost
portable, reusable
warming tech
Portable Baby
Warmer
For-Profit Business Model (Embrace Innovations)
Public Health
Organizations
Product
development
Regulatory
Approval
Paying
mothers
Manufacturing &
Distribution Cost
Operations,
Manpower Cost
Product
Development
BabyWarmer
for Hospital
ClinicalTrialsIP Royalty
Payment

Intellectual
Property
Low-cost
portable, reusable
warming tech
Portable Baby
Warmer
Non-Profit Business Model (Embrace Global 501 (c))
Reduction in neonatal hypothermia
Reduction in infant
mortality
Increased
employment
Public Health
Organizations
Field partners
(NGOs)
NGO field
workers
Manufacturing &
Distribution Cost
Operations,
Manpower Cost
IP
Management
NGO field
partners
BabyWarmer
for Hospital
Donor
Outreach

Financing Requirements:
Product development,
Clinical trials
Founder’s Purpose:
Save the lives of low birth
weight and premature infants
by distributing an
inexpensive and effective
infant warmer
Embrace
Innovations:
For-profit
Model
Stakeholder
Model:
Equity
investments
from impact
investor
Shared Purpose:
Sale of infant
warmers to
customers who
can afford it
Stakeholder
Purpose:
Commercial sale of
effective and
innovative infant
warmers
Financial Impact:
Generate profits
that contribute (as
royalty payments)
to fund Embrace
Global’s activities

Financing Requirements:
Healthcare Delivery/
distribution channels to
income mothers;
and Training
Save the lives of low birth
weight and premature infants
by distributing an
inexpensive and effective
infant warmer
Stakeholder
Model:
Philanthropi
c donations
for service
delivery
Shared Purpose:
Distribution of
innovative infant
warmers to low
income
population and
provide access to
healthcare and
create
employment
Stakeholder
Purpose:
Distribution/sale of
effective and
innovative infant
warmers to low
income/vulnerable
populations
Social Impact:
1. 144,000 infants
reached
2. 4,400 health
workers trained
3. 9,200 mothers
educated
Embrace
Global:
Non-profit
Model
IP Royalties from
Embrace
Innovations

Source:
1. Embrace OfficialWebsite: http://embraceglobal.org/
2. “Embrace: Deciding on a Hybrid Structure”, Stefanos Zenios, Lyn
Denend, Amy Lockwood, Stacey McCutcheon, Global Health –
Innovation Insight Series, 2012: http://csi.gsb.stanford.edu/embrace-
Case Example: Embrace

• Explicit Statement of the Purpose of the Organization to benefit
society and the environment in specific ways in addition to
making profit
• A New Legal Form of Company (“Benefit”Corporation) recognized
in many states in the US that expands the fiduciary duty of
directors to require them to consider non-financial stakeholders
as well as the financial interests of shareholders.This gives
directors and officers of such purpose-driven businesses the
legal protection to pursue an additional purpose and consider
additional stakeholders besides profit.
• Clear Metrics to Measure the Outcomes that areAligned with
the Stated Purpose (B-Corp Certification)
The B-Corporation

Plum Organics is a healthy baby food company.
Campbell, the publicly-traded parent company,
was supportive of Plum Organics move to re-
incorporate legally as a BenefitCorporation,
which protects the board of directors and
officers from shareholders who might want to
sue the company for pursuing a social agenda
instead of making money for investors.
Plum Organics:A Benefit Corporation
within a publicly-traded company
Plum’s public benefit is “to deliver nourishing, organic food to our
nation’s little ones and to raise awareness and advancing solutions
for childhood hunger and malnutrition in the United States.”
Photo: Campbell Soup Company

What is a Good Social
Enterprise Model?
A Feasible Business Model
that delivers the
Desired Social Impacts
in a
Financially Sustainable and
Operationally Scalable way

• Start with a clearly stated purpose and a set of impact metrics to
measure purpose achievement
• Use the Business Model Canvas to explore feasible and viable
business models to achieve the desired impacts
• Explore the financing gap-impact trade-offs, and find a
Stakeholder Model that is aligned with the Social ImpactAND
Financing Model
• Where necessary, adjust original purpose to achieve a Shared
Purpose that is aligned with the Stakeholder Model needed to
meet the financing gap
The complete purpose-driven business
model design framework for social
entrepreneurs

Key Partners Key Activities
Key Resources
Value Propositions Customer
Relationships
Channels
Customer
Segments
Cost Structure Revenue Streams
Negative Social Impact Reduced Positive Social Impact Created
Wong Poh Kam, adapted from ‘The Business Model Canvas’ by Business Model Foundry AG available at
http://www.businessmodelgeneration.com/downloads/business_model_canvas_poster.pdf under the Creative Commons Attribution-Share Alike 3.0
Unported License, http://creativecommons.org/licenses/by-sa/3.0/ . It can be reused under the same CC-Attribution-Share Alike 3.0 Unported License.
SocialVenture Business Model Canvas

SOCIAL IMPACT FINANCING
REQUIREMENTS
STAKEHOLDER MODEL
BUSINESS MODEL
SHARED PURPOSE
SOCIAL
ENTREPRENEUR
Purpose-Driven Business Model Design
Process
Wong Poh Kam

Financing
Requirements:
Stakeholder
Model:
Shared Purpose:
Stakeholder Purpose:
Social Impact:
Wong Poh Kam
Purpose-Driven Business Model
Design Template

• ProblemValidation
– What social problems are you trying to solve?
– Who has these problems?
• SolutionValidation
– Does your proposed solution meet the needs?
– Is your solution feasible?
– Is your solution financially viable?
ValidatingYour Business Model

Guess
Guess
Guess
Guess
Guess
Guess
Guess
Guess
Guess
GuessGuess
Business Model is nothing more than GUESSES…
Key Partners Key Activities
Key Resources
Value Propositions Customer
Relationships
Channels
Customer
Segments
Cost Structure Revenue Streams
Negative Social Impact Reduced Positive Social Impact Created

• LEAN-STARTUP Philosophy
– Rapid Iterative Learning
– Low Cost Search, Agile Engineering, Fail Fast & Early
• “GET OUT OFTHE BUILDING”
– Talk to PotentialTarget Beneficiaries
– Talk to Potential Customers & Partners
• TEST and REVISE your guesses
– Which guesses are invalidated?
– What new guesses can be generated from the insights learned?
– Is a major PIVOT needed?
• OnlyWrite Detailed Business Plan after theValidation Phase
Validating your Business Model Guesses

How NOT to Launch a New Business:
The Case ofWebvan (1996-2001)
Photo: Webvan

Customer
Discovery
Phase 1
Author
Hypothesis
Phase 2
Test
Problem
Hypothesis
Phase 4
Verify, Iterate &
Expand
Phase 3
Test
Product
Hypothesis
ToValidation
Source: Steve Blank
Business ModelValidation

• Financing ModelValidation
– What is the initial financing shortfall?
– What is the path to financial sustainability?
• StakeholderValidation
– Who can provide the financing?
– How can their purpose be aligned with yours?
Validating your Financing and Stakeholder
Model

• Use the Purpose Driven BM Design Framework to visualize…
– your purpose
– the business model to use to realize your desired social
impacts
– the financing requirements you face
– the stakeholder model you should have to meet the
financing requirements
• Now, get out of the building to test and validate your models!
Workshop Individual Exercise II

Acknowledgements
The extensive assistance of Ms Prisca Lim and Ms Ng Su Fen in
the development of this workshop material are gratefully
acknowledged.

Feedback and Suggestions
• Your Feedback and Suggestions for improvement are greatly
appreciated. Please kindly send any query or suggestions for
improvement to pohkam@nus.edu.sg
• This presentation is downloadable from
enterprise.nus.edu.sg/entrepreneurship-outreach/social-venture-
lab/knowledge and www.socialventurechallenge.asia/resources
• A collection of case studies using the SocialVenture Business Model
Canvas will also be available on both
• If you are interested in contributing your own case examples, please
contact pohkam@nus.edu.sg

To jumpstart our Social Entrepreneurship Support programme, NUS
Entrepreneurship Centre (NEC) partnered the Grameen Creative Lab
(GCL) in March 2011 to establish the Grameen Creative Lab@NUS
initiative. 2 years later, it was renamed as SocialVenture Lab@NUS.
SocialVenture Lab@NUS promotes and incubates innovation-based
social ventures in Singapore that have the potential to generate
scalable, sustainable social impact. It achieves this through a whole
host of events, initiatives and incubation support programmes and
services.
About SocialVenture Lab @ NUS

An Asia-wide competition for social enterprises that is open to the public,
identifying and providing multi-dimensional support for new social ventures, as well
fostering a culture of social entrepreneurship in Asia. For more information on the
competition, please visit: www.socialventurechallenge.asia
DBS-NUS SocialVenture Challenge Asia

About Prof.Wong Poh Kam
• Professor at NUS Business School researching & teaching
Technology Entrepreneurship & Innovation Management
• Director at NUS Entrepreneurship, overseeing NUS Enterprise
Incubator (NEI), which provides seed-funding, incubation and
mentoring services to NUS-related start-ups
• Co-founded three companies in Malaysia in the 1980s

• Active Angel Investor in high tech startups in Singapore, Silicon
Valley, China and India; Founding chairman of BusinessAngel
Network Southeast Asia (BANSEA) & BAF Spectrum (an angel
investment fund co-invested by S’pore Government); limited
partner of iGlobe PlatinumVC Fund
• Member of several Government Investment Panels & Committees
(PSD’sTEC Program, SPRING Singapore’sTECS POC/POV Grants,
Expert Group on Entrepreneurship Policy, IP Hub Masterplan Sub-
Committee, Sub-Committee on Innovation & Enterprise)
• Initiated SocialVenture Lab@NUS in 2011 to incubate Innovative
Social Enterprises
About Prof.Wong Poh Kam

Name: Prof.Wong Poh Kam
Email: pohkam@nus.edu.sg
Office: NUS Enterprise, 21 Heng Mui Keng
Terrace, Level 5
CV:
http://www.bschool.nus.edu.sg/staff_profile/cv.a
sp?ID=174
Twitter: www.twitter.com/pohkam
Facebook: www.facebook.com/pohkam
Linkedin: www.linkedin.com/in/pohkam
AngelList: http://angel.co/poh-kam-wong
Downloadable publications:
http://nus.academia.edu/PohKamWong
My Contact Details

Purpose-Driven Approach to Business Model Design (Version 2.5 - May 2017)

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