When I use the term Social Profit, people are surprised still. While I thought it was possible, a little time on the web reveals that I didn’t invent this term. It is at least a decade old. I love the term and use it regularly. I don’t think there is much value in describing yourself by what you are not. I don’t think the efforts to differentiate social impact from profit making, are altogether useful. There is a difference of course, but what about the similarities? When we are comfortable with the concept of social profit and financial profit, we can be comfortable to put the profit motive at the heart of a business model, even those that are not exclusively interested in creating value for shareholders. Creating value for more stakeholders, including shareholders and society, is still about net added value i.e. “profit”. This strong imperative can drive innovation, enterprise and investment.
Strategic thinking after 2008
When the Business Model Canvas was introduced through Alexander Osterwalder’s work in 2008, I thought of it as a breakthrough for facilitating strategic thinking. Strategic thinking is a more comprehensive approach than strategic planning. The use of a visual tool, based on interconnected fundamental building blocks, enables very useful disciplines to be included strategic processes e.g. design thinking, systems thinking and social profit.
Within a couple of years I had become a practitioner, using this tool, to support entrepreneurial thinking in unexpected places – with exciting results. The tool remains incredibly versatile and with a tweak in the thinking, it can be used in many different ways without it needing to be adapted. Strategy is increasingly complex, arguably never more so when tackling societal problems or realising new and useful opportunities in the way the world is connected and works these days. We continue to need to make the time for better thinking.
A robust Social Impact Model at the heart of a Business Model
Social profit, fair-profit business models, such as those at the heart of social enterprises, need more than just an additional row added here, or a phrase changed there. The Theory of Change concept, the unique Outcome and Impact Measurement used to reveal the social profit, the unique Collaboration needed to deliver Systemic Impact, they can all fit into a sustainable business model as one of its Key Resources. We propose that a really well designed Social Impact Model, can be integrated into a sustainable business model as one of the Key Resources, while influencing and impacting on the other fundamental building blocks. When this is understood it is possible to build more sustainable business models, and therefore more impactful Social Profit enterprises. This deserves a bit more time thinking, more time designing, prototyping and testing and then the conscious transition from Social Impact Mode over into the Business Model.
The Social Impact Model Canvas
This article introduces Social Impact Models and a canvas, to reinforce and support the thinking required to integrate social profit into a sustainable business model. We have designed this to be a bolt-on or “pre-stage” to the Business Model Canvas rather than a replacement. If a Social Impact Model is all you require (such as to support a funding application process) it can stand alone. Like the Business Model Canvas, it can be used in different ways, including in reverse to understand a Social Impact Model for example or find the gaps in it.
We believe anyone interested in achieving a social profit, whether through a business model or other means, can benefit from a visual approach, based on interconnected fundamental building blocks. While the design is then rooted in knowledge and learning, it is far from an academic exercise and avoid intellectualising and theorising – instead it is practical. We have been testing and refining this approach since mid 2015. We are now investing in ways that technology platforms can produce value propositions for different users. We invite you to join us to do that.
Here is the canvas.
Adding value to the Business Model Canvas (BMC)
From the outset, we considered the BMC to be a benchmark. We drew up on nearly a decade of experience working with organisations on Monitoring and Evaluation (M&E). This is a blend of art and science, that seeks to find out and demonstrate whether or not theories of change actually become change and real impact. We coupled this with another decade’s experience of enabling entrepreneurs to develop more sustainable enterprises. Not everyone is comfortable with “M&E” so we hope it is useful if we call it “Measurement”. Please substitute Measurement for M&E if this floats your boat.
Our focus on adding value to the Business Model Canvas nudged us away from too much focus on impact measurement tools, methodologies and approaches emerging to do that. Again, this is to avoid theorising, or an academic debate about these. The choice of SROI, LM3 or other approach is a tactical one. We believe the missing link is more effective strategic thinking, and social impact strategy to inform those tactical choices, not least because they can command a high level of resources. It is in this context that those tools will do their best, and choosing the wrong tool at the wrong stage of development, can be an expensive mistake. We also believe that what we really need is to build systems which scale, and deliver systemic impact at scale. At this level, economies of scale and additional crowding-in effects, make measuring impact more useful and straightforward and may be less reliant on complex tools and methods.
The fundamentals of a Social Impact Model, which are an almost direct lift from a sustainable Business Model are,
- Key Partnerships
- Key resources for measurement
- Cost Structure for measurement
- Key Beneficiaries
- Key Activities
Delivering impact systemically and at scale is inevitably going to place the onus on the enterprise to work towards this with others. That creates the need for Key Partnerships. These add to the Key Partnerships in the Business Model. Same rules apply, too many relationships to manage and decisions may need to include reducing this in some way. Thought needs to be given to how to develop the most appropriate cooperation, collaboration or coproduction relationship with these partners. Measuring impact requires proprietary resources, and carries costs. Therefore, the resources for measuring the social profit, and the cost of doing this, are connected to the Key Resources in the business model, and affect its bottom line. Many organisations consider Measurement as a necessary evil, as just an overhead. Developing measurement systems in the context of a Social Impact Model, can help an organisation design an efficient Measurement System. This effective Measurement System is more accurately integrated as one of its Key Resources. If this proves a Theory of Change works, then the result is potentially valuable intellectual property. Key Beneficiaries are more closely connected to Key Customer Groups, and in some social impact models, they may be the same the commercial customers of the business. Some of the activities involved in achieving social profits become Key Activities in the business model and again, in some cases there is a direct overlap.
The fundamentals of the Social Impact Model which are an indirect and and influential fit into parts of the Business Model are,
- Key Problem
- Key Outcomes
- Pursued Impact
The Key Problem, Outcomes and Impact are most likely to be directly or complementary to a valid Value Proposition and Customer Relationship or Experience. It is likely that in a fair-profit enterprises, Revenue Streams will also be dependent or linked to this Theory of Change, or more specifically the logical connection between a problem, inputs, outputs, outcomes and impact. Where this can be as “lean” and interconnected as possible, the narrative and profit motive of the fair-profit enterprise will be clear and powerful. Therefore in this case there is the minimum trade-off required to achieve an equilibrium between its priorities and multiple bottom lines – between its two models. When a team has completed a Social Impact Model using this methodology, it can use the linkages outlined here, to “pre-load” its business model and carry on from there. The same recommendations about planning how to prototype and test these features for real apply. Like any business, all parts of its business model, including the Social Impact Model components, need to be validated and then scaled.
We incorporated Simple Canvas Design Limited, to prototype and test the model in different formats, to explore how technology could enable wider value propositions and to commercialise some of the thinking. A number of value propositions have been validated at different levels including,
- SIMPLE Canvas enables teams to visualise, collaborate, and design a Social Impact Model and integrate this into a more sustainable Business Model.
- SIMPLE Canvas facilitates common ground in communications between enterprises and stakeholders e.g. between enterprises and their funders, between social profit and commercial enterprises.
- SIMPLE Canvas can transform communication and decision making within large organisations by reinventing business planning, budgeting and improving management information at board level.
- SIMPLE Canvas can transform application processes and integrate these into the design of the funding programmes themselves using the same language.
- SIMPLE Canvas can be used diagnostically to enable exit and investment readiness, research and development project design and support commercialising prototypes of social innovation.
A product of building on the benchmark set by the Business Model Canvas, is that it is possible to develop a Social Impact Model using many of the same facilitation and design tools using for BMC – therefore without adding complexity, while achieving a more sophisticated insight into Business Models. Whether using empathy maps or pressure testing tools, these work for both models, because both models are rooted in finding and creating Value.