Entrepreneurship is exploding!
In the last ten years there has been a massive increase in the number of people taking the leap of starting new and innovative companies. One of the things that has driven this huge increase has been the development of business development methodologies such as Lean Startup. These new approaches allow entrepreneurs to test and validate their ideas accurately, with great speed and at very low cost.
Social Entrepreneurship is likewise exploding. Driven by entrepreneurs who are passionate about having a positive impact on the world, but who also realize that the traditional approaches to social impact don’t deliver the results they want.
In our experience working with social ventures, we have found that social entrepreneurs want to develop and apply new and innovative business models to their ventures, but lack the knowledge needed to do so. We have found Ash Maurya’s Lean Canvas to be massively useful in helping early stage social ventures, firstly to understand what a business model actually is and secondly, to provide a framework within which to understand and apply Lean Startup. However, we have also found that there are a couple of key things that are crucial to social enterprises that the Lean Canvas doesn’t account for.
In most of the literature about business model innovation, particularly around Lean Startup, the purpose of the venture is largely ignored. This is done deliberately to preserve the clarity of thinking about the business model and not confuse it with thinking about intention. It is usually assumed that your business model is intended to make money. However with social ventures, the intention of the founders is actually critical to the business model. Many of the value propositions that will be presented to the various customer segments as well as to funders/investors, will rely on a coherent and well articulated vision for the organization and a business model that delivers on it. Because of this, it is important that the purpose of the venture be clearly articulated at the start. This purpose guides the creation of the initial business model and also guides the pivots that the business model will make as it is tested.
This is crucial, as it is often this clearly defined purpose and corresponding social/environmental benefit that allows social ventures to leverage multiple streams of value, and to create more interesting and innovative business models.
2. Funding/Investment as a part of the business model
With regular startups, it is assumed that if you build a highly profitable business model, investment will follow (from Angels, VCs etc). With social enterprises, however, this is mostly not the case, because the person/organization that will fund a social venture is likely to not receive the financial return promised by the traditional startup. They are in fact investing in a promised social or environmental outcome (or a combination of profit and social/environmental outcome). Because of this, the existence of investors with the right combination of qualities needs to be validated (as well as a value proposition that appeals to them). Being unable to find someone to fund the venture poses a significant risk to the business model.
3. Accounting for the Benefit
A social enterprise needs to account for the social/environmental benefit that it produces. This is a key component of the value propositions that it presents to its various customer segments (including funders/investors) and therefore needs to be articulated as clearly and as concretely as possible. Just as revenue assumptions need to be tested and validated, so must the business model’s ability to produce the intended benefit. After all the social/environmental benefit produced is probably the key output of the business. Objectively, the output of the business model can be measured as:
(Output = Revenue – Costs + Social/Environmental Benefit)
It’s all about Community
These and other considerations form the foundation of the changes we have made to the Lean Canvas. It is our hope that with input from both the Lean Startup and Social Enterprise communities, we can continue to evolve the Social Lean Canvas. And through this evolution we aim to create a tool that will help social entrepreneurs to get clear about what their current business model actually is, and then help them to create a powerful engine of value creation that delivers on the change they want to see.
The Social Lean Canvas is adapted from Ash Maurya’s Lean Canvas (www.leancanvas.com) which is in turn adapted from Alex Osterwalder’s Business Model Canvas (www.businessmodelgeneration.com) and is licensed under the Creative Commons Attribution-Share Alike 3.0 Un-ported License.