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Developing and Organizing a Viable Business Model

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Developing and Organizing a Viable Business Model Session 2 Levitt Social Entrepreneurship Program January 25, 2014 Workshop 2: Aaron Levitt Social Entrepreneurship ... – PowerPoint PPT presentation

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Title: Developing and Organizing a Viable Business Model


1
Developing and Organizing a Viable Business Model
  • Session 2
  • Levitt Social Entrepreneurship Program
  • January 25, 2014

2
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
  • Strategic Development
  • Core Business Model Elements
  • Market
  • Money
  • Management
  • Next Steps in Our Program and Process

3
NO GOOD ENDING CAN BE EXPECTED IN THE ABSENCE
OF THE RIGHT BEGINNING.
  • --I Ching

4
(No Transcript)
5
Lets Talk
  • What is a Business Model?
  • What is a Viable Business Model?

6
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.

7
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

8
Managing Risk?
  • Traditional
  • Insurable
  • Personal Liability
  • Property
  • Financial
  • Investments
  • Debt
  • Returns
  • Uncertainty

9
Decision Model
10
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

11
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

12
Value Creation Cycle (from The Nonprofit Strategy
Revolution. David LaPiana 2008)
13

Strategic Fit
Strategic FIT
14
Viability Assessment
  • Three Basic Elements
  • Market Assessment
  • Money Assessment
  • Management Assessment
  • Leads to Overall Assessment of Venture
    Feasibility and Viability

15

The Market (Customer) Question
16
Market Viability Assessment
  • Builds on Assessment of Porters Five Forces
  • Focus on
  • Demand
  • Competitive Advantage
  • Differentiator(s)
  • Price and Cost Structure

17
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

18
Strategy vs. Reality
19
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)

20
  • Key Components of
  • A Well-Developed
  • Program Design
  • (The Social Value Proposition)

21
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

22
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

23
(No Transcript)
24
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

25
Program/Product/Services
  • What services will you provide?
  • This is an obvious question, but one that
    requires detail and specificity. In addition to
    describing the services, you must also outline
    the service delivery pattern.
  • At what times of the day will you provide the
    services? Will the services be provided on site
    or at a remote location?

26
Market
  • Who will you sell this to?
  • Who is the target market for the program?
  • Understanding the demographics of the target
    market will inform marketing strategies, pricing,
    and service delivery. For example if you will be
    providing clinical services, your price will be
    influenced by reimbursement schedules of
    third-party payers. Additionally, it is
    important to clarify if the target market demands
    the services, or are you providing services that
    will require you to create awareness. The two
    scenarios will require differing marketing
    approaches.

27
Implementation
  • How will these services be delivered and sold?
  • Is this place-based, or Internet-based, or some
    combination?
  • Where will the actual business be located and
    what kinds of facilities will be needed?

28
Capacity/HR
  • Who will manage and who will staff the
    enterprise?
  • This decision is grounded in the internal
    assessment.
  • How many people will you need, and will you hire
    new staff or use (or redeploy) existing staff?
  • Implicit in this discussion is the issue of
    capacity. If you use existing staff, what
    additional capacities will you need to develop?
  • If you hire new staff, what will you pay them
    (e.g., comparable to nonprofit salaries or to
    for-profit market rates)?

29
Program Design
  • Inputs
  • Client
  • Staff
  • Material resources
  • Facilities
  • Equipment

30
Program Design
  • Throughput
  • Service Definition
  • Service Task
  • Method of Intervention
  • Outputs
  • Unit of service
  • Service completion
  • Quality

31
Outcomes
  • Numeric Counts
  • Standardized Measures
  • Level of functioning scales
  • Client satisfaction

32
These Add Up to Become a 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

33
Return to Viability Assessment
  • Three Basic Elements
  • Market Assessment
  • Money Assessment
  • Management Assessment
  • Leads to Overall Assessment of Venture
    Feasibility and Viability

34
Money Viability Assessment
  • Initial Consideration of
  • Revenue Potential
  • Investor Potential
  • Available Capital

35
To Integrate These Compass Points Dual Bottom
Line Matrix
36
Management Viability Assessment
  • Mission Compatibility
  • Core Competencies
  • Venture Capacity (including complexity)
  • Core Constituents or Stakeholders

37
Structure
  • How will the program be structured?
  • Will the venture be a program of the existing
    organization or will the venture be a separate
    subsidiary?

38
Structural Options
  • Social enterprises typically take one of three
    general forms (Alter, 2009)
  • the social enterprise is constituted as a
    discrete organization,
  • the social enterprise is part of the
    organization, or
  • the social enterprise is a subsidiary or
    affiliate of the organization.
  • Consider legal implications

39
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
  • o successfully deliver social value

40
Alters Hybrid Practitioners
  • Nonprofit with Income-Generating Activities
  • Cost Recovery
  • Earned Income
  • Social Enterprise
  • Socially-Responsible Business
  • Corporation Practicing Social Responsibility

41
Purely Philanthropic to Purely Commercial
Traditional Nonprofit Nonprofit with Income-Generating Activities Social Enterprise Socially Responsible Business Corporation Practicing Social Responsibility Traditional For-Profit
Mission Motive Stakeholders Accountability Income Reinvested in Social Programs or Operational Costs Mission Motive Stakeholders Accountability Income Reinvested in Social Programs or Operational Costs Mission Motive Stakeholders Accountability Income Reinvested in Social Programs or Operational Costs Profit-Making Motive Shareholder Accountability Profit Redistributed to Shareholders Profit-Making Motive Shareholder Accountability Profit Redistributed to Shareholders Profit-Making Motive Shareholder Accountability Profit Redistributed to Shareholders
42
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?
43
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.

44
Wrap-Up For the February Workshop
  • Develop and Clarify Your Logic Model (complete
    the form)
  • 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, and Renz) as needed to
    help

45
  • Questions?
  • Comments?
  • Clarifications?
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