5 Mission-Driven Business Models for Optimal Impact
In my previous blog, "Why Mission-Driven Companies Always Win" I teased you with a few examples of mission-driven companies that are hitting it out of the park. Now that you've learned profit and purpose can belong together it's time you learn how to merge them into a viable business model.
Thankfully you don't have to reinvent the wheel. I've dissected 5 of my favorite business models to help you on your path to social entrepreneurship. Ready? Let's begin!
1. Fair Trade Model
Let's first define what fair trade means. Fair trade business models emerged as a direct response to problems that arose from globalization. In it's simplest terms, fair trade is about working with marginalized producers that find themselves on the fringes of international trading systems. By implementing fair trade business models, social entrepreneurs and mission-driven companies are bridging the gap between disenfranchised producers, and the marketplace.
Fair trade models don't just apply to international commerce. Ever heard of farmers markets? Every time you buy produce at a local farmers market you are supporting the fair trade of local goods. This is fair trade in action.
Why I love This model
The fair trade model is a radically innovate way to address the imbalances in the global supply chain. However, why I really love this model is because it fuels a consumer choice movement; meaning companies need not ask "is this something that people want" but rather "how can I deliver what people want."
Additionally, fair trade models are a ripe market opportunity. Recent statistics reveal that fair trade models are a neo-liberal solution to trade problems. Basically, fair trade models work well within current capitalist systems.
In fact, there are now 1.2 million Fairtrade producers in 63 countries worldwide. The number of producer organizations has increased from 827 (2009) to 905 (end 2010) and of that, coffee is the fastest growing segment. Coffee shops such as Saint Frank are innovating the exporter-producer relationship to meet the rapidly growing demand for fair trade coffee. Saint Frank buyers pay coffee farmers enough to cover the cost of sustainable coffee production plus fair wages which empower farmers, their families, and their communities.
Finally, fair trade goods and services are certifiable! Businesses that adhere to fair trade standards can leverage an internationally recognized seal to show consumers their goods are in fact better than their competitors. Talk about a solid value proposition!
To learn more about fair trade case studies and statistics head to the World Fair Trade Organization HERE.
2. Employment Model
Intellectual capital is a still a largely untapped market opportunity. There's a surplus of talented individuals in developing countries such as Mexico, the Philippines, and India, but a competitive workforce only propagates the problem. This is where mission-driven companies come in.
Businesses can use the employment model to empower these and other groups of individuals who would normally have high barriers to employment. Here's how:
The strategies used to implement an employment model create job opportunities, rehabilitation and housing programs, and developing educational resources such as stipends, low-cost courses, and career coaching. The result is thriving economies, empowered individuals, and healthier and safer communities.
Why I love This model
The unique adaptability of this model is what's most appealing to me. Mission driven companies can choose to implement employee empowerment structures into every stage of their business or only part of it. For example, a business can create jobs that employ "unemployable populations" such as high-risk youth or low-income women, and work with organizations to arrange payment for employee housing, healthcare, and continued education. Alternatively, companies can choose to only involve themselves externally by donating a portion of their gross revenue to community programs that support education and employment .
Another reason I like this model is because it's industry agnostic. Companies that use this blueprint can range from edtech startups such as Transformify, which partners with socially responsible businesses to create virtual projects and contract jobs that promote hiring from rural areas of high unemployment, to non-profit organizations such as Libraries Without Borders, which provides free access to libraries, information and education to low-income communities.
To learn more about employment model case studies in prison systems and to download an implementation toolkit, head to NICIC.gov.
3. Crowdsourcing Model
Since it's conception, crowdsourcing models have quickly risen in popularity because of their ability to expedite processes that were once long and arduous. Product development, fundraising, and commerce have all benefitted from this new human-centric approach to business by leveraging collaboration to increase completion rates. What's more is that crowdsourcing is still positively disrupting the marketplace.
According to eYeka, "As of early 2017, brands are involving the crowd at many stages of the creative process, from innovation to communications and content creation." This is a dramatic shift from previous years where crowds were only leveraged for ideation, and not more prominent roles of content creation and execution.
What this really means is that more companies are inviting crowds to influence the content they consume which serves to propel innovation and competitive advantage. Brilliant right?
Why I love This model
Crowdsourcing models give real people an opportunity to become active participants in shaping their economies and societies. By redistributing the power of choice, crowdsourcing develops new opportunities for creative expression, financial empowerment, and liberation from outdated political, social, and enterprise systems which no longer serve them. Finally, companies that implement this model tend to be more agile which helps them survive unstable conditions in the marketplace.
For a specific example of one such company read Minted's story HERE.
4. One-For-One Model
Due to well-known adopters such as Tom's and Muir, one-for-one is by far one of the most popular social models. In essence, companies implement this model by donating one product per every unit sold to individuals, communities, and organizations in need.
However, here are some important things to consider: if not implemented correctly, this model can undermine local businesses and the fundamental systemic changes that are necessary for long-term impact.
According to Michael Matheson Miller, director of PovertyCure, a group promoting entrepreneurial solutions to poverty, “the one-for-one model can undermine local producers. When communities become used to receiving free things, why would they buy locally? Also, if donations are made irregularly, local businesses cannot plan for when their businesses will face a sudden influx of free goods. Thus infrastructure support must go hand in hand with this business model in order for it to be truly effective."
Why I love This model
A new wave of conscious consumerism is on the rise. More customers are now making purchase decisions based on whether a product or service can be traced to a meaningful purpose (ahem, I'm one of them), and the one-for-one model perfectly meets this demand.
When implemented correctly, the one-for-one model can also provide immediate access to humanitarian aid in emergency situations. When combined with infrastructure development and the building up of independence in beneficiaries, this model has the immense power to advance social and economic development.
For specific examples check out this article by Sustainable Brands.
5. Open-Source Model
An open-source model shifts the financial value away from the sale of products, and instead focuses on generating revenue from services. Open-source companies generate their revenue in customer support, integration and maintenance services, help guides/tutorials, and supplemental documentation.
In the SaaS realm, software products implement this model by allowing free access to code and other programs. Additionally, these companies allow the code and hardware to be modified and shared for FREE. By doing this, mission-driven companies expedite their research and development stage which produces higher quality products.
According to Sandeep Krishnamurthy, "open-source is typically viewed as a cooperative approach to product development and hence, more of a technology model. It is typically not viewed as a business approach. However, increasingly we find that entire companies are being formed around the open source concept. In a short period of time, these companies have amassed considerable revenues."
Why I love This model
Due to their collaborative nature, open-source models help deliver technology solutions at a fraction of the cost to consumers. This is immensely vital for individuals living on the fringes of society such as low-income families and students, senior citizens, and immigrants. By making technology more accessible, these populations are able to perform basic online functions they wouldn't normally have access to such as applying for jobs, improving their skillsets, or simply communicating with family that lives far away.
For more information on the pro's and con's of open-source models read Krishnamurthy's article HERE.
How to Implement
The integration of any mission-driven business model will first require an assessment of your company and personal values. I recommend you ask yourself the following questions:
- What goal/social impact do I wish to achieve?
- Why does this cause matter to me?
- Is the selected business model a good fit for my product or service?
- Is my team on board or can I develop a team that will be supportive?
- What key resources do I currently have to implement this model?
- What key processes (systems, metrics, HR) do I currently have?
From here you'll need to develop a clear picture of your social impact theory, social venture strategy, and a beneficiary model. Remember that a good business model will have two key elements:
- operating strategy
- resource strategy
Finally, keep in mind that business model iteration is a must! A continual analysis of industry and economic forces, internal and external market environments, and consumer demand is necessary if you wish to build for long-term success.
That's it! I hope this blog helps you gain further insight into the world of social entrepreneurship. Comment below if you have any questions, or if you'd like more information on how I can help you with implementation. See you next week!