Innovative business models for social entrepreneurship aim to balance profit generation with positive social impacts, from improving existing models to exploring novel avenues for radical disruption.
Business models are structures or blueprints used by companies to bring value to customers and clients, including social entrepreneurs who prioritize impact over profits in their strategies.
Service Subsidization Organization
This model provides products and services to two distinct audiences (customers and beneficiaries), wherein one pays and one gets for free or discounted rate – for instance Aravind Eye Care’s famed “one buy, one give” model which allows patients to pay what they can afford while offering surgery for everyone who shows up.
Social entrepreneurs must devise a plan for operating their entity while still reaping healthy financial returns. To achieve this goal, they must identify mechanisms that perpetuate problems while devising an actionable business plan to create positive change.
Service subsidization organization models tend to be integrated, where business activities and social programs overlap in terms of assets, operations, income and sometimes program attributes. TOMS famously built its business around their one-for-one shoe donation model; other companies have since replicated this approach as part of their philanthropic endeavors. Profit generated from selling product or services into markets is used to fund social programs; or alternatively reinvest it for further growth or fulfilling mission requirements.
Organizational Support Organization
Organizational Support Theory suggests that employees develop an overall impression about whether their employer values their contributions, cares for them and satisfies socioemotional needs. This general perception of organizational support (POS), increases employees’ felt obligation to help reach its goals while fueling expectations that improved performance will be recognized and rewarded. Under one model for organizational support this business activity takes place within a separate for-profit subsidiary company which channels profits back into a nonprofit parent organization for social programs or operating expenses.
Direct Sales Organization
Social entrepreneurs strive to bring change to the world through environmentally-friendly products, underserved communities and charitable activities in their own unique ways. Some start new ventures while others join existing social enterprises that align with their passion and goals.
Direct sales is often employed when using this approach to business; companies sell directly to customers without using intermediaries such as retailers or wholesalers as middlemen. By providing strong customer relations through representatives who build personal rapport with buyers, companies may also establish stronger customer bonds and create stronger customer relations overall.
Companies can choose either single-level models, where representatives earn commission by selling products directly, or multi-level ones, where salespeople recruit other sellers as part of their team. Direct sales is often an attractive choice for small businesses trying to reduce indirect costs by bypassing indirect channels of distribution.
Social entrepreneurs employ innovative business models to address specific social challenges. A great example is Alloysius Attah, a social entrepreneur who developed FarmerlineExternal link:open_in_new an SMS text messaging service providing farmers with weather forecasts, market prices and information about new farming techniques.
Market Intermediary Organization
Market intermediary social enterprises buy client-made products directly or on consign, add value through production and marketing assistance, and sell them at higher margin markets at a mark-up price. Earned income is used both to cover business costs as well as support services related to product development, marketing, credit, etc. Examples of market intermediary enterprises include craft marketing cooperatives as well as fair trade organizations.
Under this model, a social enterprise acts as a “signposter” for small firms by helping them find market opportunities and providing technical support and marketing advice to partners of small firms. Ideally, this approach should be both scalable and sustainable; its key benefits include helping small firms make informed choices about which markets to pursue while providing access to reliable market information that allows them to compete more effectively with smaller rivals with lesser knowledge in those markets. It also reduces their need to rely on external sources like government agencies for market information.
Matchmaking Organization
Matchmaking businesses operate similarly to market intermediaries in that they connect buyers and sellers without owning or touching any part of what’s being bought and sold, charging commissions or listing fees from both parties involved in each deal. Airbnb, Uber and Expedia are some notable companies which utilize this business model successfully.
Social sectors also utilize matchmaking in different forms, for instance a trade fair organizer may use it to add extra value for exhibitors by setting up meetings between them and potential customers beforehand – this practice is commonly known as business matchmaking or speed dating.
Matchmaking models are widely utilized during regional innovation ecosystem facilitation activities to assemble effective teams. Matchmaking experts such as project managers or HR specialists often make the call as to which participants should be paired up; digital tools may assist this process, such as matching team members based on skills; however, sometimes technology does not suffice when matching participants from various industries or organizations with complementary characteristics.
