In this article we interview Nafis Nazri, currently CEO of Nation Building School, a youth development platform that has empowered 4000 youths in Malaysia, and is the Co-Founder of Luminary, a social enterprise that designs solar off grid solutions that help provide clean water to rural communities. He also consults other Malaysian organisations on their Social Impact and Community Empowerment initiatives. His previous corporate experience includes a management consultant at a big four firm and a data analyst at a HR consulting firm.
A: In your own words how would you explain the social business model to someone who has limited understanding of this type of model?
N: In my own words, basically you apply a business model to a social solution. You apply a business model to it for long term prospect and financial stability. At the end of the day it depends on the business model you have, how you operate, what partnerships you have, what is crucial for you to achieve your vision. Secondly, is what resources are needed to execute your operating strategy. These two are things I’d outline to anyone looking at a social business model. There are 3 different paths to how a social business model can present itself.
Embedded. The enterprise you are doing is the same. Example: You hire people from vulnerable positions but your customers are pure business transactions. Integrated. Ex: Your business activities overlap with your social activities. You need to generate the money to expand your organisation’s mission. External : Your business side and social side are separate, the business is generated to fund social activities.
A: Could the external model be similar to traditional businesses that are CSR heavy?
N: Yeah they are similar.Your social and business activities are not related at all. Your business side is just to provide funds. Another example is how you do activities that generate money and manage to split the revenue to go back to your beneficiaries.
A: That gives social innovators a lot of leeway to select a model. It’s hard to see why anyone would start a traditional business nowadays since social businesses have so much more heart.
N: It depends, since some businesses are for pure profit, but it is definitely better to have a social impact embedded in our business. A good social business model makes it so that the community around them flourishes. It’s low risk, and there are multiple long term benefits. For example, Taobao villages were created because there were enough rural villagers in China that were opening up online shops for their products. There are 708 Taobao villages in China. They sell furniture, OEM products, shoes etc. They started off creating the products themselves in their own villages. To show just how powerful the addition of e-commerce was to these people, Alibaba defines a Taobao village as a village that generates 1.5million USD in e-commerce sales annually. These people created economic privileges for themselves from their villages.
A: So we have your explanation of what a social business model is. Now how does one determine which SBM is right for them?
N: It comes down to two different standpoints. First, evaluate the work you are doing from a social standpoint. For a social value standpoint, you need to know what the needs of your beneficiaries are, from your value chain to the end results. Second, look at it from a business standpoint, figure out your inputs, your activities, and how you will make money.
Let’s say my activities are selling at-home science projects for low income areas, maybe a platform or design for an affordability model is better. For example, I sell the products online, the revenue then in some way goes back to the students/ppl. It really depends how you analyse your inputs. The money you can make from the activities you do.
A: Now lets say someone already has a social business model, but they would like to scale to an international level? How would you recommend they scale?
N: If your social enterprise hasn’t fully covered the local market, then don’t go international. Unless you know locally the market is saturated or you know the adoption rate locally is low and you know international adoption is higher, then you can go international. If our business model is already set up in a way that can go anywhere in the world and can operate there, then that’s good. If you are able to identify the needs of the international beneficiaries, you need to know the criteria of your beneficiaries. Do your market research on the social value for other countries. You need to know if you are going into the same market as you are operating in now. Look into the Ansoff method.
Market penetration = existing products in existing markets Market development = existing products in new markets Product development = product modification/ new products in existing markets Diversification = new products in new markets
Also keep in mind that when you scale your business, your culture that your company starts out with will scale too. If there are internal battles, your scaling will be hindered, and development will be stopped. It’s counterproductive. A: Thank you for all of your insight, we have just 2 more questions! As innovators build their team and network, what kind of stakeholders do you need to know to sustain development?
N: Depends on your value chain. What kind of value does this stakeholder bring? What role do they play? If you don’t know what role they play, they might be deadweight. If they don’t bring value, they might be redundant, taking more than what they are supposed to give.
Looking at what stakeholders can bring value you can look at five broad categories.
1: Your users and customers. Without them, there’s no one buying = no source of income. You need to really know your users and customers to accelerate your development. What’s better is if they generate more value for you by themselves. A great example is TikTok, where they allow so much freedom for the users to generate content and value for the app/company. Another shining example is TeachForMalaysia. They have their fellowship program, to apply to teach as a teacher in low-access areas. The fellowship gives the teachers ownership to take innovative action to teach in those areas. The result is many new nonprofits start from there. 100%Project, a crowdfunding platform for teachers came from one such fellowship. There are so many other orgs that came from TeachForMalaysia, which links back to user generated value.
2: Your people who work in the organization. They of course should be bringing immediate value in helping manage this business but you can also map out their own career progress for added longer term value. They would like to know where they are heading, to make sure that they continue growing and can focus on themselves and the company simultaneously.
3: Your beneficiaries. Most important is you have to touch base, be able to measure impact, able to come back and ask if there’s anything wrong, able to ask them how to advance and develop. See if you can expand vertically and horizontally. Horizontally means expand to reach other beneficiaries in the same area or neighbouring area.
4: Intermediaries, like your suppliers and distributors.
5: Your funders are obviously bringing value in a very traditional sense.
A: Last question! What parts of a SBM are more likely to fail compared to a traditional business model?
N: I rank the consumer relationship first. It’s about understanding what your customers and beneficiaries want. Most of the time you will fail in understanding the consumer, but it’s alright to fail slightly here, at the consumer relationship part. Next is consumer benefit, how does your product help solve the consumers problems. It’s better if you fail in these two parts rather than fail in other parts. This is why market research is most important. Surveys, focus groups, one-on-one interviews and then you would be more well equipped to know best what your consumers really want.
Ex: AirBnB. They went from Silicon Valley to New York, they offered photography services to their customers. They learnt how their consumers behaved, and what they wanted. From the users, they figured out what a star rating for them would look like. If you have been thinking of starting your SE for a couple months, you just have to do it. Don’t be afraid. Everyone might have an idea, but you have to make it happen. Just do it. There’s no other way to know than to try. It’s better to have failed and learned, than to not know if you would have failed. Find the balance in being realistic and idealistic. Do not be afraid of failure.