Skip to 0 minutes and 7 seconds Business Model Canvas (BMC) is a framework which has been widely used to describe a business model.
Skip to 0 minutes and 16 seconds In the center of BMC, Value Proposition is located, which proposes to deliver specific value to customers. And the value proposed should be differentiated.
Skip to 0 minutes and 34 seconds For example, let’s assume that you are an owner of a local pizza restaurant.
Skip to 0 minutes and 42 seconds Let’s assume that you say your pizza is made with fresh ingredients and has the best taste in the town. More than likely, every other local restaurants would say the same thing, and customers will have no specific reason to choose your place over other places. Domino Pizza says something different. They just say “30 minutes or free”, emphasizing fast delivery. If you are hungry, where are you going to order? If you prefer hot pizza upon delivery (as most customers do), which store are you going to call? Your value proposition should be differentiated from your customer’s perspective. But you cannot satisfy various needs of diverse customers all at once.
Skip to 1 minute and 51 seconds Instead, you may want to focus on a specific Customer Segments that is a group of customers who share certain characteristics such as demographics, psychographics, and/or purchase which is called target customers. Now you need to think about how to access to your target customers, which is called Channel. You can sell your products (goods, services, ideas) to your customers through offline channels like a department store, discount store and/or online channels like Amazon, your own website/app and so on. Once your target customers buy your products, you need to think about how to build a long-term relationship with them which is called Customer Relationship Management CRM.
Skip to 2 minutes and 56 seconds You can think of various strategies such as a loyalty program to lock in your customers, transforming them into your friends/fans. You also need to think about your Revenue Stream. You can choose from diverse pricing options. For example, You can charge per order. Or you can offer a subscription system or a membership model. Then your cash inflows will be generated. So far we discussed the market side of the BM (business model). Now let’s think about the operation side of the BM.
Skip to 3 minutes and 38 seconds Note that your value proposition is a promise to your customers. To keep your promise, you need to think about your Key Activities. For example, you need to think about sourcing the raw materials, hiring people, making products, managing inventories, delivering products to your customers, providing A/S, managing complaints, and so on. To perform such activities, you need Key Resources. These include financial, human, and technological resources. As a venture, you usually don’t have all the resources needed to perform key activities. Therefore, you need Key Partners who will provide necessary resources, making a bigger pie. When you use up such resources by yourself or with your partners, it will incur cash outflows, that is costs.
Skip to 4 minutes and 47 seconds By looking at Cost Structure, you can figure out where you can save some money and where you should focus your resources to make your customers happy about their purchases. By considering both the market side (Revenue Streams) and the operation side (Cost Structure), you and your investors can assess your performance because your profit can be computed by deducting the cost from revenue. Investors will evaluate your profit potential and decide whether they will invest in your business or not. Indeed your other stakeholders such as employees or partners will also take a look at your financial value proposition that is profit potential to decide whether they will work with you or not.
Skip to 5 minutes and 48 seconds So far we discussed key features of Business Model Canvas (BMC). Now let’s talk about social venture’s business model, that is, Social Business Model Canvas (SBMC). SBMC is not much different from BMC. Yet, two distinct elements can be observed when it comes to SBMC. First, your business model should have both financial and social value proposition. Again, financial value proposition means profit potential, which will be important for any types of investors. However, you also need social value proposition, which describes what kind of social problems you aim to resolve through your business. Indeed social value proposition distinguish between social ventures and conventional ventures.
Skip to 6 minutes and 57 seconds Second, you should evaluate your performance based on two dimensions- profit and impact. Because social ventures pursue both financial and social values, whether such values are realized through your business, and if so, how much profit and impact have been made should be evaluated. In so doing, you may realize where you should put more resources to achieve your missions, goals, and objectives. Again, the problem is how to measure and manage impact. As you know, profit is easy to compute. But impact is usually very complex, which has diverse dimensions. We need to think about a number of important issues such as “How to identify key performance indicators KPIs?”, “How to measure them?”, “How often and by whom?”, and so on.
Skip to 8 minutes and 11 seconds You may want to revisit what we discussed in Week 2, which would provide useful guidance to addressing those questions. In the following sections, we will discuss interesting cases of social ventures in Korea. Please examine those cases by using SBMC framework and share your thoughts and ideas on how to further improve their social business model.
Social Business Model Canvas
Let’s talk about social venture’s business model.
Social Business Model Canvas (SBMC) is not much different from BMC. Yet, three distinct elements can be observed when it comes to SBMC. First, Social Business Model should have both financial and social value proposition. Second, BM only cares about customers who benefit from your products/services and pay for them. However, in SBM, both beneficiaries and payers should be analyzed and appropriately addressed. Third, social enterprises should monitor and evaluate their performance based on two dimensions- profit and impact.
In the following sections, we will discuss interesting cases of social ventures in Korea. Please examine those cases by using SBMC framework and share your thoughts and ideas on how to further improve their social business.
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