[SOUND] [MUSIC] Business Model is basically the engine of your organization. It's what drives your activities, it's the financial model. It's the interaction that you have with key stakeholders, customers, clients, donors and your business model can significantly affect the way that you work and your ability to achieve your social impact. It's going to force you to ask questions like how do you drive revenue? What kind of activities does that revenue support? Who are your customers? How do you attract them? What are people actually willing to pay for? How much will they pay for it? What kind of activities will that revenue support? Are you making money? Are you losing money? These are all the kinds of questions that your business model will help you understand. Why is the business model important? Well number one, it affects how you grow. Different kinds of business models are more or less conducive to rapid growth, broad geographic growth versus local growth and some business models are more flexible than others. Number two, the way you design your business model affects what you actually do from the core activities of your organization to who you're going to hire, who your stakeholders are, how you spend money, what you invest in? And number three, some business models really are better suited to social enterprise than others. They help organizations to better balance mission and money, they promote innovation, they foster risk taking and rapid growth. Social enterprises as a category are defined by a few key traits. Number one, they're defined by impact. So in social enterprises, we expect that social impact is at least as important as financial sustainability, so that's a given. Number two, social enterprises also have a higher commitment to innovation. We're really looking for organisations that are outperforming the status quo, they're delivering significantly better social impact options than what we might have seen to date. And so we're looking for business models that are going to support that innovation, encourage it to flourish and grow as the organization moves on. The third trait of social enterprise is sustainability. We're looking for organizations that have some financial health, that are robust, that are not struggling from month to month to try to bring in enough revenue to support their activities. So in the social enterprise world, we're looking for business models that can really promote financial sustainability, that help bring revenue in, in a way that allows the organization to invest in things like innovation. And so some business models are much better at financial sustainability than others. And finally, scalability. In the social enterprises movement, there is a really heavy tendency towards organizations that at least have the capability to scale. And so scale can take many different types of form. it could be that someone else is just copying your idea, or it could be franchise model or centrally controlled model. In any case, there are some business models that are much better suited to scale. And so in the world of social enterprise, we're looking for business models that promote innovation, support impact, are very financially sustainable and are conducive to scale. The last thing I want to talk about is a shift in assumptions that's going on with the arrival of the social enterprise world. As we look at the social enterprise spectrum, we think about non-profits and for-profits, a lot of us have pretty traditional notions about what a non-profit does, what a for-profit does. Well as social enterprises gained speed, a lot of those assumptions have actually started to change. For example, in the for-profit world, in social enterprise, profit maximization is no longer the primary goal. In for-profit social enterprises, social impact is the primary purpose, and the profit making engine of the company actually supports that. And so profit maximization is actually evaluated in the context of the social impact that goes alongside it. Another big shift in for-profit social enterprises is that shareholders are no longer the sole beneficiary. In traditional businesses, they're really the only stakeholder and everything is evaluated on its impact to shareholders. Well in the social enterprise world, we're now shifting to more of a stakeholder approach. That broadens the aperture and takes many more and different type of individuals and stakeholders into account. And we'll talk more about that later. So let me give you an example of a for-profit social enterprise. This is D.Light. Their mission as a company, is to deliver affordable solar energy solutions to the 2 billion people around the world without access to reliable energy. So they created the company to solve this social problem and everything else that they do has to feed into that solution. Their impact to date is impressive. They've sold over 8 million solar light and power products in 62 countries and have improved the lives of over 40 million people. Their goal is to reach 100 million people by 2020 and they're doing this with a for-profit business, producing various different kinds of solar powered illumination solutions, making money but also doing that in a context of achieving their social impact. On the non-profit side of the spectrum, there's been a shifted assumptions too. So in the non-profit world, of course, everyone takes the commitment to social impact and mission as a given. And so the shift in the social enterprise world has had a lot more to do with financial model and the way that organizations are funded. There's a much greater expectation around generating unrestricted and sustainable funding. And why is that? Well, in the non-profit social enterprise, what we're looking for is innovation and scale and things that traditional non-profits are really not well positioned to do. A big reason for that was the nature of their business model and their funding and so now, many more non-profits in the social enterprise world are looking for ways to generate unrestricted funding that is much more sustainable and so you see a lot of earned income models. But generally in the non-profit world, the shift that's taking place in terms of the assumptions about how non-profits work in the social enterprise spectrum, the social enterprise space, is allowing the non-profits to invest more in things that would be traditionally considered overhead like team, infrastructure, invest more in R&D, allow the organization to take more pivots and be more nimble and flexible as they pursue innovations. So let me give you an example of a non-profit social enterprise. This is CTC International, and the problem they wanted to solve was income generation for very low income women in a small city in Kenya. So they could have started with a direct relief program or purely philanthropic support for these women. But instead, the entrepreneurs that started CTC International came up with the idea of creating a factory where they could employ these women to make goods that they knew, the founders of CTC knew they could sell at Whole Foods Market in the United States and other locations around the world. And so they created the L.I.F.E line. And now the revenue that comes in from the L.I.F.E. line products that are made in these factories and in other locations around Kenya, now supports additional innovation and R&D efforts by CTC International. So for example, a couple of years ago, they actually opened the very first coffee shop in that city using, in part, revenue that was generated from the L.I.F.E. line products. And so this form of earned income allows CTC to be much more flexible and innovative and also more sustainable as a non-profit than they would have been if they had just been relying on philanthropic contributions. [MUSIC]
