Developing and Organizing a Viable Business Model

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Developing and Organizing a Viable Business Model

• Session 2 of the Levitt Social Entrepreneurship
  Program
• February 23, 2013

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Flow of This Mornings Session

• Introductory Dialogue and Activity
• Business Models and Their Value
• Stages of Social Venture Development
• What Is Your Venture or Initiative?
• The Two Pillars of a Viable Social Venture
  Business Model
• Program Design and Logic Model
• Core Business Model Elements
• Market
• Money
• Management
• A Quick Assessment
• Next Steps in Our Program and Process

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NO GOOD ENDING CAN BE EXPECTED IN THE ABSENCE
OF THE RIGHT BEGINNING.

• --I Ching

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Lets Talk

• What is a Business Model?
• What is a Viable Business Model?

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Stages of Development

• Opportunity Identification, Clarification, and
  Assessment
• Leads to
• Viability Assessment (or Feasibility Assessment)
• Leads to
• Business Plan Development
• But not in a single cycle linear process a
  strong venture development process will involve
  multiple iterations, gaining refinement from each
  cycle.

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Opportunity Identification/ Clarification and
Assessment

• Growing Out of Exploration of Session 1
• Asset Identification and Evaluation
• Asset Valuation
• Opportunity Identification and/or Clarification
• Opportunity Evaluation
• Opportunity Valuation
• Risk Assessment
• Result Overall Assessment of Opportunity Worth
  Further Exploration and Development

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Some Risks to Assess(from Dees et al 2001)

• Management Capacity
• Workforce Capacity
• Organizational Culture
• Organizational Infrastructure
• Enterprise Concept
• Level of Required Capitalization
• Prospects for Long-Term Funding
• Prospects for Changes in Marketplace
• Changes in Knowledge and Technology
• Stakeholder Backlash
• Competitor Response

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A Sound Business Model Integrates

• Viable and Relevant Mission and Vision (the
  social purpose)
• Real Value Proposition
• Social Value Creation Cycle (in the form of a
  logic model or theory of change)
• Resources to Finance and Fund It
• Capacity to Implement It

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Value Creation Cycle(from The Nonprofit Strategy
Revolution. David LaPiana 2008)
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Strategic Fit
Strategic FIT
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Viability Assessment

• Three Basic Elements
• Market Assessment
• Money Assessment
• Management Assessment
• Leads to Overall Assessment of Venture
  Feasibility and Viability

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The Market (Customer) Question

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Market Viability Assessment

• Builds on Assessment of Porters Five Forces
• Focus on
• Demand
• Competitive Advantage
• Differentiator(s)
• Price and Cost Structure

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Competitive Advantage (The Nonprofit Version)

• This is the ability to produce social value by
• Using a unique asset
• and/or
• Delivering outstanding execution
• We employ the perspective of Porters Five Forces
  Model to examine and understand where and how we
  fit

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Strategy vs. Reality
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Lets Talk

• Share with your colleagues
• In two minutes or less (your elevator speech)
• What is your venture or venture concept? What is
  the social venture or program initiative that you
  have determined has great potential for creating
  social value? What is the social value
  proposition and how do you expect to deliver on
  it? (or your best case scenario)

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• Key Components of
• A Well-Developed
• Program Design
• (The Social Value Proposition)

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Mission Vision

• Mission, Vision, Values
• The mission
• Continuing philosophical perspective
• Makes explicit reason for the agencies existence
• The Vision
• Is what can be accomplished by providing mission
  services
• An end state

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Strategy and the 5 Ps

• Strategy as a Plan
• Strategy as a Ploy
• Strategy as a Pattern
• Strategy as a Position
• Strategy as a Perspective

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Program Hypotheses

• A series of if-then statements
• Cause and effect (factors)
• Process
• Output
• Means-Ends continuum

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Program Hypotheses

• Development Steps
• Identify Critical Issue and Factors
• Cause and effect of each factor
• Identify resources, data and assumptions
• Brainstorm solutions
• Prioritize solutions
• Provides framework for service

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Policy and Budget

• Policy Guidance
• Communication Systems
• Client Interaction
• Financial Guidance
• What will the strategy cost?
• How will we fund the strategy?
• Is it financially feasible?

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• Finances
• What will it cost?
• Direct?
• Indirect?
• Is there revenue?
• Who will pay for the program?
• Do we have the capacity to financially manage?
• Implementation
• What do we need to do to start the program?
• Where will we provide the service?

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Objectives

• Provide short-term and long-term outlook
• Intermediate results Immediate impact or change
• Final results The long-term impact or ultimate
  change
• Should be stated in measurable terms
• Time frame
• Target of change
• Results

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Outcome Objectives

• Service Result
• Flow from the problem analysis
• Establish criteria for numbers served
• Multiple outcomes for a strategy or program

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Process Objectives

• Target program actions
• Establish milestones necessary to meet
  intermediate outcomes
• Focus on internal activities

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Group Work
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Program Design

• Inputs
• Client
• Staff
• Material resources
• Facilities
• Equipment

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Program Design

• Throughput
• Service Definition
• Service Task
• Method of Intervention
• Outputs
• Unit of service
• Service completion
• Quality

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Outcomes

• Numeric Counts
• Standardized Measures
• Level of functioning scales
• Client satisfaction

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These Add Up to Becomea Logic Model

• A very useful device to plan and explain
• Your assumptions and expectations for how you
  expect to link
• Inputs, which will support
• Activities, which will lead to
• Outputs, which will add up to
• Outcomes, which will result in
• Long-term Outcomes
• and Community Impact

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Take A Few Minutes

• Please take about ten minutes to sketch out the
  basic logic model that explains the process by
  which your social venture or initiative will
  accomplish the outcomes that will result in
  social value and community impact.

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Return to Viability Assessment

• Three Basic Elements
• Market Assessment
• Money Assessment
• Management Assessment
• Leads to Overall Assessment of Venture
  Feasibility and Viability

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Money Viability Assessment

• Initial Consideration of
• Revenue Potential
• Investor Potential
• Available Capital

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To Integrate These CompassPoints Dual Bottom
Line Matrix
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Management Viability Assessment

• Mission Compatibility
• Core Competencies
• Venture Capacity (including complexity)
• Core Constituents or Stakeholders

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Social Venture Planning

• In other words, social venture planning is the
  process by which we plan and articulate how we
  will integrate
• Money
• Market
• Management
• To successfully deliver social value.

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The Summary Key Elements of Feasibility or
Viability Assessment
1. Explain the Venture
2. Market research on potential customers
3. Desire and Need for Product or Service
4. Assets and Capacity (including management, personnel, facilities, competence) 5. General Business/Revenue Model and Pricing Strategy
6. Preliminary Financial Information Start-Up Costs and Time needed to begin to generate revenue Start-up capital needs and availability Pro Forma/ Financial Projections (including estimates of revenues needed to break- even and timing to break even)
7. Discussion of feasibility Mission relevance Risk acceptability Competitive capacity Quality quality assurance Feasible for your organization now?
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Lets Do A Quick Assessment

• Take about ten minutes to work alone or with your
  work group, if you have one, to take a look at
  the Quick Market Test and then complete the
  Quick Market Test Scorecard.
• After you have completed this, we will invite
  observations about the topics where you know the
  most and the topics where you will want to engage
  in further research and analysis.

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Move to a Business Plan?

• If the venture is deemed feasible
• Build on all of the information of the
  feasibility assessment.
• Add depth to each of the elements of the
  feasibility assessment to create a business plan.

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Wrap-Up For the March Workshop

• Meet and Begin to Work With Your Coach
• Develop and Clarify Your Logic Model (complete
  the form)
• Use the Worksheet Sets 4 and 5 (from the book,
  Venture Forth) to gather and organize your data
  to begin to assess the feasibility or viability
  of your venture.
• Read the materials on financial viability
  assessment in preparation for next workshop,
  which will focus on Funding and Financing Your
  Social Venture
• Contact your Levitt Program facilitators and
  advisors (Laufer, Helm, Andersson, and Renz) as
  needed to help you and your coaches to progress
  in the development of your social venture.

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• Questions?
• Comments?
• Clarifications?