You’ve had a chance to know the concept of social need and the different areas where we can generate positive social impact, which is the raison d’être of all social business.
Now we will enter the tool that will enable long-term sustainable and positive social impact: the business model. First, however, it is important to identify what is the business concept that we want to implement. To advance the construction of our business model,
it is imperative that previously we have answered a number of questions: what model of governance do we want to establish? Will workers be co-owners of the social business? Do go want to implement a vertical or horizontal structure? What will be our organizational culture? These are all questions that help us set our global model of social business, which necessarily affect the business model. To begin developing this business model in the first place, it is important to identify a business opportunity, a space in the market covered or not “half covered”. The most important thing to know if this is a business opportunity is to identify the added value that we can provide with respect to existing solutions for a given problem.
For this task, it is important to observe deeply and make questions about the problem. Once we determine that there is a business opportunity, it’s time to develop this business model. Every company relies on a model of what we call economic viability of business model; it is defined as how the company captures, creates and delivers value. If we stand firm in the field of classical business, the value we are talking about is the economic kind. However, in the context of social business, the economic value must always be accompanied by social, environmental and / or cultural value. In order to discover how we can build business models to transform social needs, we will use a tool called CANVAS.
Through this painting and its nine dimensions closely interrelated, lays the basis for future social business. There are many ways to explain how to structure a business model with positive social impact. We have chosen once very practical; using a real-life example of social business, we will see how business viability and social impact can go hand in hand and reinforce each other. First, identify our customer segments, groups of people or organizations who run our value proposition. It is important to be concise in defining our clients, identifying their main features.
Additionally, within the category of customers, we differentiate between users, those who use the product or service you offer, payers, those who are willing to pay for that product or service and opinion leaders, those who must necessarily convince our value proposition in order to get it to users and payers. In some business models they coincide while others will differentiate them. We’ll see now the case of the social business Urban Time, born under the umbrella of a social entity, Germina Foundation, with the mission to promote continuous training of young people at risk of social exclusion through a first job opportunity in educational leisure sector.
Urban Time distinguishes between five key customer segments: schools (prescribers), families (payers) children and young people (users), public administration (payers) and large companies (payers). In the choice of the customer segments there is implicit a balance between economic sustainability and social impact. To provide quality employment for young people, it is necessary to develop stable and continuing activities, the ones offered to schools and public administration. However, such activities generate very tight margin that makes difficult the sustainability of the social business. So they need to find a client with the ability to pay a higher price for an activity with added value. Those clients are large companies that buy sporadically but generate higher margins.
Once we have identified our customer segments, it is time to define for each of them the value proposition that we do; that means what benefits transmits the lead to get our products or services. It is not just define the product or service, but to highlight the intangible values transmitted. Urban time offers a value proposition for each of its target audiences. Just keep in mind that in order to make the service attractive to everyone, it is necessary to understand why different targets want to buy you, what are the variables that make them choose your supply and not the competition’s.
In this regard, Urban Time knows that the message we must convey to the families is not the same as to be transmitted to children. Families buy the services of Urban Time because of their knowledge and experience in teaching and incorporating values such as civility as a transversal element in all its activities. The children, however, want to do the activities offered by Urban Time because they are fun and fashionable. As you see, segments and customer value proposition are closely linked. Through these two dimensions, we will explore how to transmit this value to various target audiences. Firstly, you must identify for each customer group, which channels of communication, distribution and marketing you will use to promote and deliver the value proposition.
Next, define what relationship you will keep with the different segments. In this sense, the case of Urban Time is also illustrative. The services offered by the social business should be accessible and be located close to the target audience. In the case of schools, therefore, the activities are carried out in their own school grounds, so that children have a safely access once they finish their lectures. The relationship with both the school and the families and children should be close and warm, paying attention to each child individual needs thus adding value to the service and ensuring loyality. So far we have defined the value we generate, to whom we deliver and how we do it.
Now it is time to identify the different methods through which we can capture value for our social business: the revenue streams.
If we place ourselves in the context of social businesses, we see that there are two different kinds of value we can import: economic value and social value (knowledge, experience, social support..). In the case of urban time apart from the amount of money they receive for services, also captures the social value that bring all the children who go through the various activities they carry out, using their experience and perspective to incorporate added value to the project. Now we enter the innermost part of the business model; how social business generates the expected value. Therefore, it is necessary to identify the key activities of our social business, those through which we guarantee the added value of our project.
Both commercial activity and the execution of the services, in the case of Urban Time, shall be of a very high quality in order to generate confidence in the client immediately. To achieve this, it is very important to accompany young workers in their learning process and management activities, empowering them and making them agents of their own change. Therefore, we identify two key activities in its business model, which mixed economic sustainability and social impact. Once we have identified our key activities, it is time to determine what are the key essential resources we need to develop these activities.
For example, Urban Time could not generate its activities without all the material necessary to develop specific urban activities such as parkour, graffiti, skateboarding…All this material is essential in order to offer a quality service. Then, what should we consider in this case? The cost that may involve certain key resources if we need to acquire them. The calculation of these elements will allow us to define the investment need of the social business. Now it’s time to think about those people and organizations that can help us strengthen our economic viability and / or maximize our positive social impact. The key allies can help us in the development of our key activities, in obtaining the necessary key resources and in reaching our customer segments.
It is also important to think about what we can offer them in return; for a partnership to be established, the two parties have to draw some benefit, either material or intangible. In the case of Urban Time, a key ally is the city council, which facilitates public spaces where they can develop different urban activities safely. In return, the social business contributes to the reduction of youth unemployment in the territory. We have almost completed our business model! Finally, it’s time to define our cost structure, which means we have to identify those elements that represent an important weight in our current spending (people, supplies, rentals, purchase of raw materials…). The main cost of Urban Time, which is a service company, is its staff.
It is important to note also that, as social businesses, it is very possible that we assume additional costs in order to generate he positive social impact expected. Specialized staff (psychologists and social workers, for example), local and organic raw materials … are some of the elements that can increase expenditure items. Once the business model with positive social impact has been generated, it’s time to validate the different hypotheses that we have been doing. How our potential customers are willing to pay the value that we offer? Seems appropriate our value proposition? The channels we have chosen are the most appropriate? What about the relationship we want to establish?
To find out, we can use surveys and interviews and the information we obtain will be useful to iterate our business model. That means we will have to adjust it to the reality of the market. As we see, the business model is dynamic and will change depending on the context.