MStSI3 - Business model canvas

Key partners

Value propositions

Channels

Customer relationships

Key Resources

Key activities

Customer segments

Cost structure

Revenue streams

Business Model Canvas for social ventures

Business Model Canvas for social ventures

What is a business model? Your 'business model' describes how your organisation creates, delivers, and captures value. For a conventional business, 'value' usually refers to something which can be monetised. But, for a social venture, what we mean by value can be different, because we will want to create both monetary and social value. Here, we have taken the Strategyser canvas and added prompts for you to consider each aspect of your social venture. In your business model, we will focus on the value you are creating for customers - those who pay for your goods or services. These may be a different group to your beneficiaries. Why do I need a business model? There are two main reasons to articulate your business model: 1. So that you can critically assess it. How do you bring resources together create an offering that is of value to your customers? Articulating your business model will help to make sure you have thought through each element, and that your team are all on the same page. 2. So that you can explain it to others. Designing your business model is the first step in working up to a full business plan. You will need this to show to potential funders or investors. Your business plan will likely be very long, so having a concise business model will help you to explain the essence of it. What is the Business Model Canvas? The Business Model Canvas is a useful tool to help you articulate and clarify your business model, both within your team, and also with external stakeholders like funders. There are other 'canvases' customised for social businesses, that can be useful. We use the original Strategyzer canvas, as it is the most widely recognised, but with special consideration about how each element applies to social ventures. The Business Model Canvas does not include a space to state your social mission. We recommend you write this at the top of your Canvas to remind you of your guiding principles.

Key Partners Here we consider who you might be collaborating with and why. As in other boxes, we advise that you list potential partners as well as existing partners, so that you can identify the gaps which you would like to fill. Consider the following three reasons to partner:

• Economies of scale Partners may enable you to reach more customers.
• Reducing risk Partners may help increase the stability of the business, spreading risks by diversifying resources. They may also leverage their knowledge and experience to help you avoid costly mistakes.
• Acquiring resources Partners may share, provide you with, or help you to access resources, such as funding, technology, or personnel.

When identifying your partners and potential partners, it is worth questioning their organisational values. Do they align with your own? When the answer is no, try to be clear about why you are partnering with that organisation. Finally, consider who is not a partner. One thing this canvas omits, is a space to list your competitors. We suggest that, while thinking about your partners, you also reflect on who your competitors are, and what challenges they may pose.

Key Activities You will likely be doing many activities. Use this box to identify the most important ones. These may include:

• Producing your product
• Delivering your service
• Developing and updating your product or service
• Problem solving
• Networking and partnership building

Consider which activities are crucial to revenue generation, which are crucial to delivering your mission, and which are both.

What are your revenue streams? Your social venture will likely have multiple revenue streams, such as:

• Selling a product or service
• Charging a fee for usage
• Licensing a product
• Brokering (e.g. between organisations)
• Business to business sales
• Advertising revenue (e.g. on your website)
• Grants or charitable donations
• Debt or equity finance

What if I am giving something away? It's possible that your venture wishes to offer a product or service for free or at a reduced cost. Or, you may wish to charge differential prices to different customer segments. In these instances, a revenue stream from one product, service, or customer segment might cross-subsidise another, which operates at a loss. Alternatively, combining revenue from trading with grants or donations could also enable this. We also consider this further in your 'cost structure' segment.

Cost Structure While your social venture will be value driven rather than cost driven, it is still important to remain viable. List the different types of costs you incur. These may be:

• Fixed costs These are your steady overheads, such as insurance.
• Step-fixed costs These are fixed costs which increase when you reach a certain threshold, such as needing an additional employee or premises.
• Variable costs These go up and down, and may vary seasonally.
• Social costs These are the additional costs that social ventures incur in order to achieve a desired impact. (They may be fixed, step fixed or variable.)

Social costs are an important consideration for social ventures, as that the costs will likely be higher than for a conventional enterprise. There are a number of models to consider here:

• Work-integrated model For many ventures, their beneficiaries are their employees. These ventures may offer additional 'wrap-around' support to staff, or pay them more than the market rate.
• Ethical supply-chain modelSome ventures are making a special effort to be more sustainable. There are usually extra costs involved with sourcing sustainable materials or disposing of waste responsibly.
• Cross-subsidy model Some ventures use one product or service to subsidise another. They may be offsetting their 'social costs' by charging full price to commercial customers, while offering a reduced price or free service to beneficiaries. Revenue from grants or donations can also help in this model.

Key Resources You might have limited resources, but still be able to access other resources out there. If you don't have everything you need, that's ok. There are a number of types of capital. Take some time to consider each one in terms of what you already have, what you need to get started, or to take your venture to the next step.

• Physical capitalThis can be a building, factory or equipment. Do you own the means of production?
• Financial capitalWhat money do you have to work with, and what investment will you will need to grow?
• Human capital This is the expertise and capacity you have, or need, in your team.
• Intellectual capitalThe ideas which enable you to create value. You may wish to secure intellectual property to protect these ideas, if you have not already.
• Natural capitalDo you need access to natural space or resources?
• Political capitalThe connections or influence you have with your stakeholders. Who do you know? How might they connect with others who can help?
• Social capitalWhat sort of social capital do you have? For example if you are working with another organisation, do you need to build trust?

If you need access to resources that belong to someone else, what are the implications?

Are your customers your beneficiaries? Sometimes, for a social venture, the customer is the beneficiary. For example, your venture may be providing a safer, greener, or cheaper product, such as a solar lamp for someone who would normally use kerosene. Sometimes the customer and the beneficiary are distinct. For example, in the case of a community cafe, the customer will be the person purchasing the food and drink, while the beneficiary may be the person employed, or someone else who the surplus is used to help.

Value Proposition It's a good idea to start your Canvas in the middle, defining your venture's value proposition. Your value proposition is the unique value you offer to your customer (the person who pays). How do I define my Value Proposition? The Value Proposition Canvas is designed to help you arrive at a concise proposition. If you have not already done so, we suggest you work through this template first. You may have more than one value proposition. In which case you may find it useful to complete more than one Value Proposition Canvas.

Who are your customers? Very few ventures are reaching a mass market. It is likely that you are meeting the needs of a specific market segment. Identifying this will help you understand their needs and communicate with them. Again, consider whether your customers are your funders or beneficiaries. In a charity, or philanthropic relationship, the value will need to be framed and 'sold' to the funder. If the beneficiary is also the customer, it will be important to really understand their circumstances and how they think about the problem.

Channels How do you deliver your product or service to your customer?

• Do sales people reach your customer directly?
• Do you have online sales?
• Do you sell in shops? (your own, or others')
• Do you sell wholesale? (business to business)

Here, we must also consider the different 'Channel Phases'. Consider how you are going to communicate with customers at each phase?

1. Awareness
2. Evaluation
3. Purchase
4. Delivery
5. After sales

The Value Proposition Canvas is designed to help you arrive at a concise proposition. If you have not already done so, we suggest you work through this template first. You may have more than one value proposition. In which case you may find it useful to complete more than one Value Proposition Canvas.

How do I define my Value Proposition?

It's a good idea to start your Canvas in the middle, defining your venture's value proposition. Your value proposition is the unique value you offer to your customer (the person who pays).

Value propositions

Consider which activities are crucial to revenue generation, which are crucial to delivering your mission, and which are both.

• Producing your product
• Delivering your service
• Developing and updating your product or service
• Problem solving
• Networking and partnership building

You will likely be doing many activities. Use this box to identify the most important ones. These may include:

Key activities

It's possible that your venture wishes to offer a product or service for free or at a reduced cost. Or, you may wish to charge differential prices to different customer segments.In these instances, a revenue stream from one product, service, or customer segment might cross-subsidise another, which operates at a loss. Alternatively, combining revenue from trading with grants or donations could also enable this. We also consider this further in your 'cost structure' segment.

What if I am giving something away?

• Business to business sales
• Advertising revenue (e.g. on your website)
• Grants or charitable donations
• Debt or equity finance

• Selling a product or service
• Charging a fee for usage
• Licensing a product
• Brokering (e.g. between organisations)

Your social venture will likely have multiple revenue streams, such as:

Revenue streams

The Business Model Canvas is a useful tool to help you articulate and clarify your business model, both within your team, and also with external stakeholders like funders. There are other 'canvases' customised for social businesses, that can be useful. We use the original Strategyzer canvas, as it is the most widely recognised, but with special consideration about how each element applies to social ventures.The Business Model Canvas does not include a space to state your social mission. We recommend you write this at the top of your Canvas to remind you of your guiding principles.

What is the Business Model Canvas?

There are two main reasons to articulate your business model:

1. So that you can critically assess it.How do you bring resources together create an offering that is of value to your customers? Articulating your business model will help to make sure you have thought through each element, and that your team are all on the same page.
2. So that you can explain it to others.Designing your business model is the first step in working up to a full business plan. You will need this to show to potential funders or investors. Your business plan will likely be very long, so having a concise business model will help you to explain the essence of it.

Why do I need a business model?

Your 'business model' describes how your organisation creates, delivers, and captures value. For a conventional business, 'value' usually refers to something which can be monetised. But, for a social venture, what we mean by value can be different, because we will want to create both monetary and social value. Here, we have taken the Strategyser canvas and added prompts for you to consider each aspect of your social venture. In your business model, we will focus on the value you are creating for customers - those who pay for your goods or services. These may be a different group to your beneficiaries.

What is a business model?

If you need access to resources that belong to someone else, what are the implications?

The ideas which enable you to create value. You may wish to secure intellectual property to protect these ideas, if you have not already.

Intellectual capital

What sort of social capital do you have? For example if you are working with another organisation, do you need to build trust?

Social capital

The connections or influence you have with your stakeholders. Who do you know? How might they connect with others who can help?

Political capital

Do you need access to natural space or resources?

Natural capital

This is the expertise and capacity you have, or need, in your team.

Human capital

What money do you have to work with, and what investment will you will need to grow?

Financial capital

This can be a building, factory or equipment. Do you own the means of production?

Physical capital

You might have limited resources, but still be able to access other resources out there. If you don't have everything you need, that's ok. There are a number of types of capital. Take some time to consider each one in terms of what you already have, what you need to get started, or to take your venture to the next step.

Key resources

Sometimes, for a social venture, the customer is the beneficiary. For example, your venture may be providing a safer, greener, or cheaper product, such as a solar lamp for someone who would normally use kerosene. Sometimes the customer and the beneficiary are distinct. For example, in the case of a community cafe, the customer will be the person purchasing the food and drink, while the beneficiary may be the person employed, or someone else who the surplus is used to help.

Are your customers your beneficiaries?

Customer relationships

• Do sales people reach your customer directly?
• Do you have online sales?
• Do you sell in shops? (your own, or others')
• Do you sell wholesale? (business to business)

Here, we must also consider the different 'Channel Phases'. Consider how you are going to communicate with customers at each phase?

1. Awareness
2. Evaluation
3. Purchase
4. Delivery
5. After sales

How do you deliver your product or service to your customer?

Channels

When identifying your partners and potential partners, it is worth questioning their organisational values. Do they align with your own? When the answer is no, try to be clear about why you are partnering with that organisation. Finally, consider who is not a partner. One thing this canvas omits, is a space to list your competitors. We suggest that, while thinking about your partners, you also reflect on who your competitors are, and what challenges they may pose.

• Economies of scale: Partners may enable you to reach more customers.
• Reducing risk: Partners may help increase the stability of the business, spreading risks by diversifying resources. They may also leverage their knowledge and experience to help you avoid costly mistakes.
• Acquiring resources: Partners may share, provide you with, or help you to access resources, such as funding, technology, or personnel.

Consider the following three reasons to partner:

Here we consider who you might be collaborating with and why. As in other boxes, we advise that you list potential partners as well as existing partners, so that you can identify the gaps which you would like to fill.

Key partners

Very few ventures are reaching a mass market. It is likely that you are meeting the needs of a specific market segment. Identifying this will help you understand their needs and communicate with them. Again, consider whether your customers are your funders or beneficiaries. In a charity, or philanthropic relationship, the value will need to be framed and 'sold' to the funder. If the beneficiary is also the customer, it will be important to really understand their circumstances and how they think about the problem.

Who are your customers?

Customer segments

The ideas which enable you to create value. You may wish to secure intellectual property to protect these ideas, if you have not already.

Cross-subsidy model

What sort of social capital do you have? For example if you are working with another organisation, do you need to build trust?

Ethical supply-chain model

The connections or influence you have with your stakeholders. Who do you know? How might they connect with others who can help?

Work-integrated model

Social costs are an important consideration for social ventures, as that the costs will likely be higher than for a conventional enterprise. There are a number of models to consider here:

These are the additional costs that social ventures incur in order to achieve a desired impact. (They may be fixed, step fixed or variable.)

Social costs

These go up and down, and may vary seasonally.

Variable costs

These are fixed costs which increase when you reach a certain threshold, such as needing an additional employee or premises.

Step-fixed costs

These are your steady overheads, such as insurance.

Fixed costs

List the different types of costs you incur. These may be:

While your social venture will be value driven rather than cost driven, it is still important to remain viable.

Cost structure