the business model design of social enterprise

0

國立臺灣大學管理學院商學研究所

碩士論文

Graduate Institute of Business Administration

College of Management

National Taiwan University

Master thesis

社會企業的商業模式設計

The Business Model Design of Social Enterprise

高偉舜

Wei-Shun Kao

指導教授：陳鴻基博士

Advisor: Houn-Gee Chen, PhD

中華民國 102 年 6 月

June, 2013

i

論文摘要

社會企業是賺取利潤同時解決社會問題的組織。本論文將探討設計社會企業

商業模式所需要的商業模式區塊，並比較和一般企業商業模式設計中有何不同。

奧斯瓦爾德與比紐赫在獲利世代一書中提出了由九個商業模式區塊組成的商業模

式圖。本研究在商業模式圖的基礎上提出了三個屬於社會企業的商業模式區塊，

這三個區塊分別是「社會與環境效益」、「社會與環境成本」和「社會企業家」。

本論文應用社會企業商業模式圖對三家社會企業進行個案研究，收集次級資料並

對社會企業家進行訪談。研究結果驗證了三個新的商業模式區塊在理論與實用上

的必要性，並提出了四個社會企業商業模式的特點。

關鍵字：社會企業、社會創新、商業模式、商業模式圖、三重底線、共創、

精實創業

ii

Abstract:

A social enterprise is an organization whose aim is to find the balance between

earning profits for shareholders and creating positive impacts in society. In the

following thesis, I shall share the building blocks needed for a business model directing

towards building a social enterprise, and draw comparison to those of for-profit

enterprises. Osterwalder and Pigneur proposed nine building blocks as a universal

business model (Business Model Generation 2010). My research considers this

proposed model while also considering three additional building blocks that specifically

pertaining to social enterprise: “social and environment revenue,” “social and

environment costs,” and “the social entrepreneur.” My research uses the information

collected from three social enterprise case studies, considering the social entrepreneurs

themselves, in addition to information concerning their company documents. My result

validates the theoretical foundation and practicality for these three additional building

blocks for developing social enterprises and for supplementing additional important

considerations while starting a social enterprise.

Keywords: Social enterprise, Social innovation, Social entrepreneurship, Business

Model, Business model canvas, Triple bottom line, Co-create, Lean start-up

iii

Contents

Chapter 1: Introduction ................................................................................................. 1 1.1 Background and Research Motivation ................................................................ 1 1.2 Purposes of This Study ........................................................................................ 3

Chapter 2 Literature Review ......................................................................................... 4 2.1 Social Enterprise ................................................................................................. 4 2.2 The Business Model ............................................................................................ 8

2.2.1 Business Model Canvas ................................................................................ 9 2.3 Designing Business Model for Social Enterprise .............................................. 10

2.3.1 Non-for-profit Model .................................................................................. 10 2.3.2 Triple bottom-line business model .............................................................. 12 2.3.3 Social enterprise business model ................................................................ 14

Chapter 3 Research Method ....................................................................................... 17 3.1 Model Development .......................................................................................... 17 3.2 Research Method ............................................................................................... 18 3.3 Research Companies ......................................................................................... 20

Chapter 4 Case Study ................................................................................................. 21 4.1 ELIV .................................................................................................................. 21

4.1.1 Social Entrepreneur ..................................................................................... 21 4.1.2 Customer Segments .................................................................................... 23 4.1.3 Value Proposition ........................................................................................ 24 4.1.4 Revenue Stream .......................................................................................... 25 4.1.5 Social and Environmental Benefit .............................................................. 25 4.1.6 Channel ....................................................................................................... 26 4.1.7 Customer Relationship ................................................................................ 26 4.1.8 Key Sources ................................................................................................ 27 4.1.9 Key Activities ............................................................................................. 27 4.1.10 Key Partner ............................................................................................... 29 4.1.11Cost Structure ............................................................................................. 30 4.1.12 Social and Environmental Cost ................................................................. 30

4.2 1kg ..................................................................................................................... 31 4.2.1 Social Entrepreneur ..................................................................................... 31 4.2.2 Customer Segments .................................................................................... 33 4.2.3 Value Proposition ........................................................................................ 34 4.2.4 Revenue Stream .......................................................................................... 34 4.2.5 Social and Environmental Benefit .............................................................. 34 4.2.6 Channel ....................................................................................................... 35

iv

4.2.7 Customer Relationship ................................................................................ 35 4.2.8 Key Sources ................................................................................................ 36 4.2.9 Key Activities ............................................................................................. 36 4.2.10 Key Partners .............................................................................................. 37 4.2.11Cost Structure ............................................................................................. 38 4.2.12 Social and Environmental Cost ................................................................. 38

4.3 PUKI .................................................................................................................. 39 4.3.1 Social Entrepreneur ..................................................................................... 39 4.3.2 Customer Segments .................................................................................... 41 4.3.3 Value Proposition ........................................................................................ 41 4.3.4 Revenue Stream .......................................................................................... 41 4.3.5 Social and Environmental Benefit .............................................................. 42 4.3.6 Channel ....................................................................................................... 42 4.3.7 Customer Relationships .............................................................................. 42 4.3.8 Key Sources ................................................................................................ 43 4.3.9 Key Activities ............................................................................................. 43 4.3.10 Key Partners .............................................................................................. 43 4.3.11Cost Structure ............................................................................................. 44 4.3.12 Social and Environmental Cost ................................................................. 44

Chapter 5 Result and Discussion ................................................................................ 45 5.1 Discuss of research findings and Managerial Applications .............................. 45

5.1.1 Turn social cost into key resources. ............................................................ 46 5.1.2 Social Entrepreneur: First Follower ............................................................ 48 5.1.3 Customer relationship: value co-creation ................................................... 49 5.1.4 Customer Relationships: customer-driven design ...................................... 50

5.2 Limitations and future research ......................................................................... 52 5.2.1 Revenue stream: dividend distributed/ dividend not distributed ................ 53 5.2.2 Social entrepreneur: Sustainability issue when founder left ....................... 53

5.3 Conclusion ......................................................................................................... 54

References: ................................................................................................................. 55

v

List of tables

Table 1 Characteristics of social enterprises, responsible enterprise, and capitalist firm 4

Table 2 Social Enterprises definition, EMES .................................................................. 6

Table 3. Definitions of the nine building blocks in *business model canvas ................ 10

Table 4. Contrasting definitions and core characteristics of “social entrepreneur”. ...... 15

Table 5. Interview question set ...................................................................................... 19

Table 6. Expected revenue of ELIV in 2013 ................................................................. 25

Table 7. Social and Environmental projects of ELIV .................................................... 26

Table 8. Channels of ELIV ............................................................................................ 26

Table 9. Contents of Cambodia projects ........................................................................ 28

Table 10. Partner list of ELIV ........................................................................................ 29

Table 11. Cost list of ELIV ............................................................................................ 30

Table 12. Value creation steps of 1kg ............................................................................ 34

Table 13. Products of 1kg .............................................................................................. 37

Table 14. Partner list of 1kg ........................................................................................... 37

Table 15. Partners list of Puki ........................................................................................ 44

Table 16. Cross case report of case studies .................................................................... 45

vi

Table of Figure

Figure 1. Business model canvas.. ................................................................................... 9

Figure 2. Non-for-profit Model.. ................................................................................... 11

Figure 3. Triple bottom-line business model. ................................................................ 13

Figure 4. Social Enterprise Business Model .................................................................. 17

Figure 5. Research process ............................................................................................ 18

Figure 6. The business model of ELIV .......................................................................... 21

Figure 7. The business model of 1kg ............................................................................. 31

Figure 8. The business model of Puki ........................................................................... 39

Figure 9. Turn social cost into key resources ................................................................ 47

Figure 10. Social entrepreneur: first follower ................................................................ 49

Figure 11. Customer relationship: value co-creation ..................................................... 50

Figure 12. Customer Segment: customer-driven design ................................................ 52

1

Chapter 1: Introduction

1.1 Background and Research Motivation

Our generation is facing challenges that cannot simply be amended through

government assistance or charity efforts. Such extreme problems as climate change and

poverty require multiple solutions and should be addressed in multiple fashions. The

burgeoning field of social enterprise may be one solution. In 2006, the Nobel

Committee awarded Grameen bank, a social enterprise, and its founder Muhammad

Yunus for forward-thinking social engagement. The business model Yunus organized

provides loans to the impoverished without requiring collateral, allowing many

Bangladeshis to come out of poverty. Their success is one example of the potential that

social enterprises have in helping to solve similar social problems.

Social enterprise has gradually received the attention of business leaders, media,

and government officials from across the world. In the World Economic Forum at

Davos, various world leaders were eager to learn more about social entrepreneurs

(Elkington & Hartigan, 2008). World famous organization, Ashoka supports the efforts

of over two thousand social entrepreneurs coming from over 70 countries who were

selected as Ashoka follows. The Schwab Foundation for Social Entrepreneurship has

highlighted the leading models of sustainable social innovation, i.e. social enterprise.

Skoll Foundation also awarded more than $358 million including to investments in 97

remarkable social entrepreneurs and 80 social enterprises in the past thirteen years.

In 2012, I initiated a start-up social enterprise, which won the first prize at a social

enterprise competition in Beijing. In the beginning, the social enterprise seemed to be

promising; however, the business was suspended after a few months. When the board

later evaluated the experience, we discovered that the company, like many other

start-ups, failed to consider certain crucial factors when designing the business plan. It

2

was then when I began to consider designing a social enterprise framework to assist the

social entrepreneurs in building appropriate business plans.

3

1.2 Purposes of This Study

During the first few months of 2013, I began to work at a social enterprise

incubator and investor company in Shanghai named Transist. Many early stage social

enterprise startups lacked a good understanding of the business model. When they are

asked to present their company to investors, each side found it difficult to understand

what the other wanted or was wishing to express. Acknowledging their difficulties, a

common framework of a business model specifically designed for social enterprises is

needed. Although there are some general business model frameworks in existence, a

business model framework that is specifically designed for early stage social enterprise

is necessary.

Different from traditional business model frameworks, the business model

framework that should be redesigned is for social enterprise to satisfy the need of social

entrepreneurs. Second, the business model should be well known and applied often to

allow those investors in need to be able to acquire such model easily. The central

purpose of my thesis is to design a business model framework for social enterprise that

can be catered the social entrepreneurs.

4

Chapter 2 Literature Review

2.1 Social Enterprise

Although research and papers define the social enterprise(Defourny & Nyssens,

2010; Díaz-Foncea & Marcuello, 2012; Verreynne, Miles, & Harris, 2012), there is no

consensus on the definition of social enterprise. One recognized and rather narrow

definition is written by Professor Muhammad Yunus. According to his definition, a

social enterprise is “a non-loss, non-dividend company designed to address a social

objective within the highly regulated marketplace of today”(Yunus, 2007). Social

enterprises are distinct from a non-profit organization because they should seek to

generate a modest profit. Profit is a method to allow the business to expand its reach and

improve its products or services, all of which subsidize a specific social mission.

Table 1 shows which elements that define a social enterprise and draws

comparison between social enterprise with the socially responsible enterprises and the

capitalist firms (traditional enterprises).

Table 1 Characteristics of social enterprises, responsible enterprise, and capitalist firm

5

Note. Adapted from “Social enterprises and social markets: models and new trends,” by Díaz-Foncea & Marcuello, 2012, Service Business 6.1 (2012): 61-83.

The comparison of these factors shows that the difference between one type of

organization and another is not always significant. In addition, the absence of profits or

the presence of certain limitations on distribution is not enough to be considered a social

enterprise. It is also necessary to assume the set of values and aims that are embodied in

the business model, only with these satisfied can the business be categorized as a social

enterprise(Díaz-Foncea & Marcuello, 2012).

Social Economy Europe (2008) defines the social economy entities by their aims

and by their distinctive forms of entrepreneurship (Monzon & Chaves, 2008). They are

economic and social players active in all sectors including cooperatives, mutual

societies, associations, foundations, and social enterprises whose aims and forms agree

with the following principle:

(1) the primacy of the individual and the social objective over capital (2) voluntary and open membership (3) democratic control by the membership (4) the combination of the interests of members/users and/or the general interest (5) the defense and application of the principle of solidarity and responsibility (6) autonomous management and independence from public authorities (7) the essential surplus is used to carry out sustainable development objectives, services of interest to members or of general interest.

6

In Europe, the EMES European Research Network has developed the first academic

definitions of factors determine whether a business is a social enterprise listed in Table

2(Borzaga & Defourny, 2001).

Table 2 Social Enterprises definition, EMES

Economic and entrepreneurial dimensions of social enterprises a) A continuous activity producing goods and/or selling services b) A significant level of economic risk c) A minimum amount of paid work Social dimensions of such enterprises d) An explicit aim to benefit the community e) An initiative launched by a group of citizens or civil society organizations f) A limited profit distribution Participatory governance of such enterprises g) A continuous activity producing goods and/or selling services h) A significant level of economic risk i) A minimum amount of paid work

Note. These indicators were never intended to represent the set of conditions that an organization should meet to qualify as a social enterprise. Rather than constituting prescriptive criteria, they describe an "ideal-type" that enables researchers to position themselves in the social enterprises field.

In the U.S, Dees and Anderson (2006) have proposed to distinguish two major

schools of thought on social enterprise. The first school of thought on social enterprise

refers to the use of commercial activities by non-profit organizations in support of their

mission. The second school of thought focuses on social innovation and social

entrepreneurs(Dees & Anderson, 2006). Various foundations involved in “venture

philanthropy,” such as the Schwab Foundation and the Skoll Foundation, have

embraced the idea that social innovation is central to social entrepreneurship and have

supported social entrepreneurs.

7

The Social Enterprise Knowledge Network (Harvard Business School) wrote an

even wider definition of social enterprise. The network wrote the following:

a social enterprise is any kind of enterprise and undertaking, encompassed by

non-profit organization, for-profit companies or public sector businesses

engaged in activities of significant social value or in the production of goods

and services with an embedded social purpose(Brouard & Larivet, 2010).

From hereon after, “social enterprise” will refer to the above definition. This

definition is open and broad yet specific for the purpose necessary for constructing a

social enterprise business model. Another strong point of this definition is that social

enterprise is defined specifically in terms of other social organizations, e.g., non-profit

organizations, for-profit organizations. Defining social enterprise in this way not only is

specific but also allows for a broad and wide application. Most important, this definition

of social enterprise considers both the social value and financial value of the enterprise,

which is the key feature of social enterprise that I shall consider in this thesis.

8

2.2 The Business Model

Business model should include a company component, e.g. how a company selects

customers, defines and offers products or services, plans tasks, distributes resources,

changing over time, and makes profits (Slywotzky, 1996).Having research that focuses

on strategic outcomes use business models as vehicle for carrying out business and

keeping a business running (Mayo & Brown, 1999). In an economic perspective, a

business model is a statement records how a company makes money and sustains itself

over time(Stewart & Zhao, 2000).

Throughout this thesis, the definition of business model and other information

associated with it generally are according to the *business model canvas proposed by

Osterwalder and Pigneur (Business Model Generation 2010). Osterwalder et al. (2005)

defines a business model describes the rationale of how an organization creates, delivers,

and captures value. Osterwalder also asserts that business model is the blueprint of how

a company does business. This definition focuses on the components of a business

model that is particularly fits this research for two reasons. First, those components

facilitate the innovation and discussion of social enterprise business model among

entrepreneurs, investors and other stakeholders. Second, the business model canvas of

Osterwalder containing nine components is a good base for a business model platform

with social enterprise.

9

2.2.1 Business Model Canvas

Osterwalder and Pigneur proposed a need for a shared language for entrepreneurs

to discuss and describe their business models (Osterwalder, Pigneur, & Clark, 2010). In

their book Business Model Generation, 470 practitioners from 45 countries together

created the “Business Model Canvas” to facilitate much description and discussion on

the topic. The Business Model Canvas has been applied and tested around the world and

is already used by organizations such as IBM, Ericsson, Deloitte, the Public Works and

Government Services of Canada, and many others. Osterwalder and Pigneur proposed

that a business model could be best described through nine basic building blocks that

show the logic of how a company intends to make money. The business model canvas

and the definition of the nine building blocks are presented in Figure 1 and Table 3.

Figure 1. Business model canvas. Adapted from “Business model generation, ” by Osterwalder, Alexander, Pigneur, Yves, & Clark, Tim, 2010, Business model generation : a handbook for visionaries, game changers, and challengers, P44. Copyright © 2010 by Alexander Osterwalder.

10

Table 3. Definitions of the nine building blocks in *business model canvas Customer Segments

The Customer Segments Building Block defines the different groups of people or organizations an enterprise aims to reach and serve.

Value Propositions

The Value Propositions Building Block describes the bundle of products and services that create value for a specific Customer Segment.

Channels The Channels Building Block describes how a company communicates with and reaches its Customer Segments to deliver a Value Proposition.

Customer Relationships

The Customer Relationships Building Block describes the types of relationships a company establishes with specific Customer Segments

Revenue Streams

The Revenue Streams Building Block represents the cash a company generates from each Customer Segment (costs must be subtracted from revenues to create earnings)

Key Resources

The Key Resources Building Block describes the most important assets required to make a business model work.

Key Activities The Key Activities Building Block describes the most important things a company must do to make its business model work.

Key Partnerships

The Key Partnerships Building Block describes the network of suppliers and partners that make the business model work.

Cost Structure

The Cost Structure describes all costs incurred to operate a business model.

Note. *Business model canvas: a framework of business model consists of nine building blocks.

2.3 Designing Business Model for Social Enterprise

2.3.1 Non-for-profit Model

The “business model canvas” can also be applied to start-up businesses in addition

to other for-profit corporations (Osterwalder et al., 2010). Although the word “business”

may not be included in non-for-profit organization, the working bodies still bear and

upkeep an impressive working business model. Every organization must generate

enough revenue to cover its expenses in order to be sustainable. The major difference,

11

however, is that these organizations have one more additional source of revenue. In

third party founded NPOs, the sources of their revenue are from donations at individual,

corporate, and government levels. Figure 2 shows the business model of third party

founded NPOs.

Figure 2. Non-for-profit Model. The recipients receive the product or service while the donors paid for the product or service. Adapted from “Business model generation, ” by Osterwalder, Alexander, Pigneur, Yves, & Clark, Tim, 2010, Business model generation : a handbook for visionaries, game changers, and challengers, P264. Copyright © 2010 by Alexander Osterwalder.

Since the 2009 financial crisis, however, individual and corporate donations have

been decreasing dramatically and freezing much over time. Ever since the beginning of

the European debt crisis, the governments of many countries across the world have

begun various austerity measures, slashing government spending on many social

programs. Some NPOs traditionaly founded by third party sponsors changes their

revenue collecting policies, changing with the times. Understanding that government

subsidies may no longer be necessarily guaranteed, they began to rely solely on third

12

party founding. However, during the recent financial crisis, these NPOs have shown to

be financially unsT and unsustainable.

Born out of this new financial era, a new business model is immerging, that is, they

are following the triple-bottom-line business model. The triple bottom-line business

model pursues its social and environmental goals simultaneously to generating revenues

without any outside sponsors or donorships (Elkington, 1998). This shows in many

ways that organizations with social or environmental goals no longer have to worry

about the changing tide of its donations and subsidies dollars.

2.3.2 Triple bottom-line business model

In 1997, British scholar John Elkington developed the concept of the triple bottom

line, which has since then revolutionized businesses, nonprofits and governments

measure sustainability and the performance of projects or policies (Slaper & Hall, 2011).

The TBL is an accounting framework that incorporates three dimensions of

performance: social, environmental, and financial performance. This framework differs

from traditional reporting frameworks as it includes environmental and social measures

that are more than often difficult to be assigned appropriate means of measurement

(Elkington, 1998)

The most significant difference between a for-profit corporation and an

organization run by the triple bottom-line business model is that the central goal of the

enterprise has changed. The goal of traditional for-profit corporation is maximizing the

shareholder’s interest. Conversely, the working goal of triple bottom-line organization

is to expand one’s range not only to account for a continued and sustainable financial

13

base but also for continued collaboration towards solving social woes and

environmental concerns.

To design a business model that well corresponds with the goal of a triple

bottom-line, the business model canvas must be expanded with two additional building

blocks, namely, “Social and Environmental Revenue” and “Social and Environmental

Costs” (Osterwalder et al., 2010). Figure 3 demonstrates the expanded business model

canvas of Triple bottom line business model.

Figure 3. Triple bottom-line business model. Beside the original nine building blocks, two new building blocks: “Social and Environmental Revenue” and “Social and Environmental Costs” are incorporated in the triple bottom-line business model.

14

In the business model framework developed in my thesis, “Social and

Environmental Revenue” and “Social and Environmental Costs” are defined and

assessed by social impact assessment (SIA) and environmental impact assessment (EIA).

"Social impact assessment includes the processes of analyzing, monitoring and

managing the intended and unintended social consequences, both positive and negative,

of planned interventions (policies, programs, plans, projects) and any social change

processes invoked by those interventions. Its primary purpose is to “bring about a more

sustainable and equitable biophysical and human environment” (Vanclay, 2003). On the

other hand, environmental impact assessment is defined as “the process of identifying,

predicting, evaluating and mitigating the biophysical, social, and other relevant effects

of development proposals prior to major decisions being taken and commitments made”

(Glasson, Therivel, & Chadwick, 1999). A business model may have possible positive

or negative impacts on the environment, consisting of the environmental, social and

economic aspects.

2.3.3 Social enterprise business model

In designing a triple bottom-line business model, one cannot neglect to describe the

most important asset of a social enterprise—people. All other factors such as channel

and value proposition are key partners are important, but none can make an organization

more successful that the cooperation and collaboration that people provide.

The social entrepreneur is a mission-driven individual who uses a set of

entrepreneurial faculties to deliver a social value to the less privileged or those in

concerned situations, all through an entrepreneurially oriented entity that is financially

independent, self-sufficient, or sustainable, or all of more than one of the above

(Abu-Saifan, 2012). The Contrasting definitions and core characteristics of the terms

15

“social entrepreneur” are sorted in Table 4.

Table 4. Contrasting definitions and core characteristics of the terms “social entrepreneur”.

Source Definition Core Characteristics

Bornstein (1998)

A social entrepreneur is a path breaker with a powerful new idea who combines visionary and real-world problem-solving creativity, has a strong ethical fiber, and is totally possessed by his or her vision for change.

• Mission leader • Persistent

Thompson et al. (2000)

Social entrepreneurs are people who realize where there is an opportunity to satisfy some unmet need that the state welfare system will not or cannot meet, and who gather together the necessary resources (generally people, often volunteers, money, and premises) and use these to “make a difference”.

• Emotionally charged

• Social value creator

Dees (1998)

Social entrepreneurs play the role of change agents in the social sector by:

• Adopting a mission to create and sustain social value • Recognizing and relentlessly pursuing new

opportunities to serve that mission; • Engaging in a process of continuous innovation,

adaptation, and learning; • Acting boldly without being limited by resources

currently in hand; • Exhibiting a heightened sense of accountability to the

constituencies served for the outcomes created.

• Change agent • Dedicated • Socially alert

Brinckerhoff (2009)

A social entrepreneur is someone who takes reasonable risk on behalf of the people their organization serves.

• Opinion leader

Leadbeater Social entrepreneurs are entrepreneurial, innovative, and “transformatory” individuals who are also: leaders,

• Manager • Leader

16

Note. From “Social Entrepreneurship: Definition and Boundaries,” by Abu-Saifan, Samer, 2012, Technology Innovation Management Review (February 2012: Technology Entrepreneurship) p.24

The interest of social entrepreneurs have to engage in their field of work stems

from their role in addressing critical social problems and their dedication in improving

the well being of society (Zahra, Rawhouser, Bhawe, Neubaum, & Hayton, 2008).

When comparing the characteristics of other entrepreneurs with social entrepreneurs,

one might notice that the ultimate goal of an entrepreneur is to create economic wealth,

whereas the ultimate priority is to satisfy their social mission. Social entrepreneurs

design their revenue-generating strategies to serve their mission directly and to deliver

social value to those deserving (Abu-Saifan, 2012).

To assist the social venture capitalist even better, evaluate social enterprise, and

help social entrepreneurs better present themselves, representing the “social

entrepreneur” through a business model canvas uniquely designed for them is

indispensible and invaluable.

(1997) storytellers, people managers, visionary opportunists and alliance builders. They recognize a social problem and organize, create, and manage a venture to make social change.

Zahra et al. (2008)

Social entrepreneurship encompasses the activities and processes undertaken to discover, define, and exploit opportunities in order to enhance social wealth by creating new ventures or managing existing organizations in an innovative manner.

• Innovator • Initiative taker • Opportunity

alert

Ashoka (2012)

Social entrepreneurs are individuals with innovative solutions to society’s most pressing social problems […] They are both visionaries and ultimate realists, concerned with the practical implementation of their vision above all else.

• Visionary • Committed

17

Chapter 3 Research Method

3.1 Model Development

Osterwalder and Pigneur's proposed nine building blocks for the universal business

model (Business Model Generation 2010). My research considers this proposed model,

while also taking into account three additional building blocks that are essential to

social enterprises: “social and environmental revenue,” “social and environmental costs”

and “social entrepreneurship.” Figure 4 is the business model canvas developed for

social enterprise.

Figure 4. Social Enterprise Business Model

18

3.2 Research Method

Case study is the study of the particularity and complexity of a single case,

building an understanding the internal and related activity within

important circumstances (Compton-Lilly, 2013). The case study method has been an

essential form of research in the social sciences and management(Chetty, 1996). It has

been used in research involving business and organizational issues, education, child

development and youth policy, family studies, international affairs, evaluation,

technology development and research on social problems (Yin, 2008).

My research utilizes three social enterprise case studies with the social

entrepreneurs and integrates secondary data from their company documents. Using the

result of my research to validate the theoretical foundation and practicality for three

additional building blocks for developing social enterprises and for supplementing

additional important considerations while building a social enterprise.

Figure 5. Research process

19

Figure 5 outlines the major steps in the process of my research process for my

thesis. I began my research through email correspondence with three founders of

social enterprises, I sent interview question sets and then we conducted oral

interviews together. Last, three individual case reports were produced and then

emailed to the interviewees for feedback and revision.

Listed below in Table 5 are the interview question set, the relationship between

questions, and the building blocks of social enterprise business model canvas.

Table 5. Interview question set Interview questions Links to the canvas 1. Can you talk about the founder of your company (background, personality, special experience etc.)? What stimulate you (or him) to found the company?

Social entrepreneur

2. What is the value proposition of your company (Visions, Goals)? (Value proposition) What services or products does your company provide?

Value proposition

3. Who are your target customers (or service receivers)? How do you approach your customer base (channel)? And how do you maintain your customer relationship?

Customer segment, Channel & Customer relationship

4. Can you talk about your key partners that you think is indispensible to your company such as your supplier, incubator, sponsor, etc.?

Key partners

5. What kind of positive social impacts and environmental impacts does your company hope to create?

Social & environmental benefit

6. Can you think of any potential social or environmental cost (or risks) you have to pay?

Social & environmental cost

7. Can you talk about your projects? Key activities 8. What kinds of resources (or capabilities) make your company different and sustainable?

Key sources

9. Can you talk about how your company generates revenues and what are the major costs?

Revenue stream & Cost structure

20

3.3 Research Companies

The target users of the social enterprise framework I have purposed are early-stage

and start-up social entrepreneurs in the greater China region. The research companies

were selected based on the following three criteria:

(1.) being social enterprise

(2.) being within its early stages of development

(3.) based in the greater China region

My thesis considers three early stage companies in the greater China region that

create financial and social value through social entrepreneurship and regard themselves

as social enterprises.

ELIV is an early stage voluntourism (i.e. volunteer tourism) company established in

2010 based in Taipei, Taiwan. A phone interview with the Executive Director Helene

Chow was conducted on February 2, 2013.

1 kg created in 2008 in Beijing, China devotes itself in making teach-assisting box

for remote schools. An in-person interview with the founder Andrew Yu was conducted

at the Transist office on March 13, 2013.

And Puki established in 2010 is a design office in Shanghai hiring deaf designers.

In-office visiting and interview with the founder Xiao Liang was conducted on April 14,

2013 at the Shanghai Social Innovation Incubation center. The business models of ELIV,

1kg and Puki are recorded in Figure 6, Figure 7 and Figure 8 in chapter 4.

21

Chapter 4 Case Study

4.1 ELIV

Figure 6. The business model of ELIV

4.1.1 Social Entrepreneur

Kevin Cheng set up ELIV to create a new path for Taiwanese to see the world in a

way different to traditional travel, work, and study abroad pathways. The new path is

international voluntourism (volunteer tourism). While engaging foreign friends, Kevin

realized a social problem: People often commit a fallacy of hasty generalization about

the people and living conditions in foreign countries, especially developing country,

mostly due to steer ignorance. For instance, when people read segmented news

concerning a particular country, they often consider the situation depicted in the new

article to be representative of the entire country. Kevin also realized this

22

misinterpretation and blatant ignorance about foreign countries was unfortunately

widely in Taiwan. Kevin’s ultimate goal is to end ignorance by providing opportunities

for people to have experiences abroad that will enlighten them and help build to an

extent a more cosmopolitan understanding of the world in Taiwan. To Kevin, people

can no longer merely understand a country through its cuisines or tourist spots on the

Travel and Living Channel, but they need hand-on experiences in places that locals

actual live like schools. Kevin believes that this method is an excellent way to end

ignorance and further build global communication and understanding.

Another social problem Kevin found is that people in developed countries cannot

feel the urgency of protecting our environment. More simply, people in the developed

world are too dependent on old habits that are now considered bad for the environment

that they are not willing to change and often cannot deal with their lifestyle. However,

understanding how people in developing countries live their life using one cup of water

a day or experiencing a desertification first-hand and the effects from it will help people

better grasp the urgency of climate change and help them to reconsider their own

lifestyle and daily routine. Kevin set up ELIV to operate international volunteering tours

for urban citizens to leave their comfort zone and enter places completely different from

what they are used to help build understanding for the urgency of climate change and

the importance of building global understanding.

Kevin believes the relative affluence of developed countries compared to the

deficiencies of third world countries well represents the avarice of man and the

inequalities still present in the world. Kevin points out that the fast development of

modern societies often coincides with the “acceptability to sacrifice the lives of others,”

“the excessive depletion of the resources,” “ignoring.” Kevin started to question the

common standard of development and self-realization. Kevin finds himself and many

23

others unsatisfied with these social trends and the continued inequality that exists

between developed and developing countries.

Kevin conceived the plan of the international voluntourism program as a method of

solving both the above social problems and various inequalities people face in

developing countries. Kevin highly esteemed his school days and international

volunteering experiences; he wants to continue the passion and sense of responsibility

to the world that he had first gained during those years in school. To Kevin, it is

important that one can utilize all the knowledge and experience one has acquired from

school and work to discover ways in which one can create positive impacts to the

society. On the other hand, accumulate wealth should not be a priority. Kevin believes

many others have the same idea as he. He believes establishing ELIV is one way in

which he can inspire others and bridge the inequality.

Kevin hope through international voluntourism tour, their customers could

understand the real appearance of other countries, realize the urgency of making a

difference to save the planets and be inspired to bridge the inequality. Kevin bears the

distinct characteristics of a social entrepreneur: sets up an innovative business model to

solve a social issue he wants to change.

4.1.2 Customer Segments

ELIV serve two groups of customers: those voluntary service tourists and those

local service recipients. On the one hand, voluntary service tourists are customer with a

purpose to do something good to the society. Customers are interested in various social

issues including inequality, environmental protection or humanity. Most of them are

unmarried Taiwanese between fifteen to thirty-five years old. Customers are mostly

with two types of mind set: the first type of customer wants to get away from routine

24

works and take a break；The second type of customer bear the idea of let me try this trip

and see what will happen.

On the other hand, those local service recipients include people in different nations:

India, Cambodia, Myanmar, Bangladesh, Vietnam, Mongolia, Gansu (China), Fiji,

Tuvalu, Kiribati, Nauru, Cook Islands, Samoa, Tonga, Vanuatu. Customers are weak

group threaten by social and environmental issues includes: lack of clean water, poverty,

lack of forestation, and need of building eco-village in impoverished areas.

4.1.3 Value Proposition

ELIV stands for Empowering Lives through Innovative Voluntourism. ELIV

provides young tourists with the choice of exploring and visiting third-world nations

and impoverished areas of the world such as Gansu (China), Cambodia, and Myanmar.

During their travels, the tourist would promise to the organization ELIV to also act as

volunteers promoting sustainable agricultural practices, teaching dental hygiene, and

other volunteer services. The organization provides both a new market of volunteer

tourism to Taiwan as well as unique educational and engagement in the third-world and

impoverished nations.

ELIV also stands for eco-living, which more specifically means, to live at means

which are closer to one’s own heart and more beneficial to the environment, stop

anticipating and take responsibility and action over environmental issues; cease

excessive consumption, take much concern about global warming; and, last, to endeavor

to bring spiritual enlightenment and hospitality to the world.

25

4.1.4 Revenue Stream

The revenue of ELIV comes from the project fee that voluntary service tourists

paid. Table 6 is a list of expected yearly project fee receivable.

Table 6. Expected revenue of ELIV in 2013 Project Name Date Quota Project Fee Cambodia project 44 2013/3/28-4/1 18 NTD 17,500 Cambodia project 45 2013/4/25-4/29 18 NTD 17,500 Cambodia project 45 2013/5/23-5/27 18 NTD 17,500 Mongolia project 9 2013/4/8-4/11 18 NTD 20,000 Mongolia project 10 2013/5/13-5/19 18 NTD 20,000 Mongolia project 11 2013/6/29-7/5 18 NTD 20,000 Cambodia project S1 2013/6/28-7/6 80 NTD 19,500 Cambodia project S2 2013/7/12-7/20 80 NTD 19,500 Cambodia project S3 2013/7/26-8/3 80 NTD 19,500 Cambodia project S4 2013/8/9-8/17 80 NTD 19,500 Cambodia project S5 2013/8/23-8/31 80 NTD 19,500 Cambodia project SL 2013/7/12-8/3 4 NTD 43,000 Cambodia project SL 2013/8/9-9/31 4 NTD 43,000 Myanmar project 4 2013/8/6-8/16 20 NTD 26,000 Myanmar project 5 2013/8/20-8/30 20 NTD 26,000 India project 6 2013/11/2-11/10 18 NTD 26,000 Note. Expected revenue of ELIV in 2013 equals 11,677,000

4.1.5 Social and Environmental Benefit

ELIV promotes a new value of happiness – reconcile with the planet, take action to

help deprived people, and re-interpret and re-evaluate the value of oneself.

By organizing international voluntourism tours, ELIV helps more and more people

gain first-hand experiences within foreign, developing nations, realize the urgency of

taking action towards protecting and preserving the planet and be inspired to bridge

people of different backgrounds and stop the inequality.

26

ELIV’s international voluntourism programs create positive impact to and deal

with social and environmental issues includes clean water, poverty alleviation,

forestation, international voluntourism, and build eco-village in impoverished areas of

the world. Table 7 lists the Social and Environmental projects of ELIV.

Table 7. Social and Environmental projects of ELIV Social projects: Environmental Protection projects: India project Cambodia project Myanmar Bangladesh Vietnam

Mongolia project Gansu (China) project Pacific islands project (Fiji, Tuvalu, Kiribati, Nauru, Cook Islands, Samoa, Tonga, Vanuatu, Taiwan)

4.1.6 Channel

ELIV reach its customers through two channels: virtual and tangible. The channel

of ELIV is listed in table 8.

Table 8. Channels of ELIV Virtual Website: http://www.elivtw.com/

Facebook: http://www.facebook.com/elivtw Tangible Campus recruiting: National Taiwan

University (Northern Taiwan), Feng Chia University (Central Taiwan)

4.1.7 Customer Relationship

ELIV’s customer relationship belongs to the category of Co-creation. ELIV engage

customers to assist with the operation of volunteering works such as tree planting or

orphanage building. ELIV invites customers to do volunteer service and thus create

value for local people in need and themselves.

27

4.1.8 Key Sources

The key resource to make ELIV’s business model operate is human resource. The

tour guides of ELIV possess critical intellectual resource— their international volunteer

experiences. ELIV is in a “human influence human’ industry, like a cram school,

customers are looking for a quality guide or tutor who can give the customers great

impact. Therefore, tour guides of ELIV have the capability to inspire their group

members. Moreover, tour guide of voluntarism should possess the capability of dealing

with emergencies, which are more complicated than emergencies in normal tour,

because voluntourism is usually organized in impoverished nations that face extreme

situations. Therefore, tour guide of ELIV possess the capability to take good care of

their group members and to well-communicate with those local service receivers whose

personal and culture value is very different to Taiwanese.

4.1.9 Key Activities

International Voluntourism tour is the key activity of ELV, take the Cambodia

project for example:

In the Khmer Rouge rule of Cambodia, lots of Cambodian intellectuals were

massacred causing serious fault of agriculture knowledge and technology. Although

Cambodia’s land and climates are arable, fertile land became waste ground in Cambodia

because famers lacked the basic knowledge and technology to make best use of nature

resources. The program in Cambodia sponsored by ELIV helps to bring Taiwan’s basic

agricultural technology to Cambodia. Trained volunteers will help the local villagers

make better use of fertile land, use organic compost and plant vegetables farming

methods, which allot for five to six harvests per year. ELIV devoted to transform the

waste lands in an environmental friendly way and alleviate the poverty. In 2011 and

28

2012, ELIV organized 35 volunteer service tours in Cambodia. Villages served such as

Leang Dai were transformed into basic agriculture centers. Once lateritic wastelands are

now flourished with spinach.

Through decades of war, the terrors left behinds by the land mines scattered across

the country, and other widespread issues such as poverty and a rampant AIDS endemic,

Cambodia’s society still faces many issues influenced by the countries’ past. Moreover,

Cambodia’s orphan population continues to grow. Without providers, these Cambodian

orphans are forced to beg or forage through trash dumps for food and necessities. On

the other hand, people on the other side of the world often have excess unused pens,

notebooks, and even intact clothes that we no longer wear in our closet. The mission of

ELIV is to make good use of these resources and bring necessities to the local students.

ELIV also organize field trip to visit the world culture heritage –Angkor Wat.

Participants will be inspired by the sea of change in Cambodia: a once strong

civilization journey into an impoverished nation. Participants will also experience the

extreme contrast of lively tour groups and local famers lived in the poverty line at the

same place. Table 9 is an example of the itinerary of Cambodia project.

Table 9. Contents of Cambodia projects Cambodia project Date Route Day 1 After arrived Cambodia from Taiwan, we make a home visit to the

local Cambodian family to understand the living standard of locals and know those service recipients. Participants will observe the local lives personally and interact with the locals face to face in order to understand why they are here in Cambodia. At night, we will allocate necessities such as stationeries into small bags together, small bags ready to be distributed in local elementary schools.

Day 2 Provide emergency assistance to damaged household destroyed by

29

heavy rains. Repair and reconstruct house of emergency distress families. Promote Taiwan’s sustainable agricultural practices at the same time.

Day 3 Continue promote Taiwan’s sustainable agricultural practices in the morning and distribute necessities in local elementary schools in the afternoon. The participants will be divided into 4 groups to educate local students topics include dental hygiene, culture, environmental protection and group exercise.

Day 4 Continue promote Taiwan’s sustainable agricultural practices in the morning and distribute necessities in local elementary schools in the afternoon. The participants will be divided into 4 groups to educate local students topics include dental hygiene, culture, environmental protection and group exercise.

Day 5 Field trip to world culture heritage—Angkor Wat and back to Taiwan.

Note. The itinerary of Cambodia project shows the daily operation activities of a n international voluntourism tour.

4.1.10 Key Partner

The key partners of ELIV are local corresponding organizations in the third-world

nations where the voluntary service is provided. Table 10 lists the partners of ELIV.

Table 10. Partner list of ELIV Partner Corporate project Cooperate matters NPO-Green Life Mongolia project ELIV cooperate with

Green Life to plant tree in Mongolia.

NPO-ARB India project ELIV cooperate with ARB to improve the *Dalits living in India.

Ling Jiou Mountain Buddhist Society

Myanmar project ELIV cooperate with Ling Jiou Mountain Buddhist Society to improve the Burmese living in Myanmar.

Note. *Dalits: a designation for a group of people traditionally regarded as untouchable in India.

30

4.1.11Cost Structure

Except the personnel cost, the costs of construction material in impoverished

nations dominate the main proportion of cost structure in ELIV. The costs of ELIV are

sorted in table 11.

Table 11. Cost list of ELIV Fixed Cost Personnel salary, R&D for new project Variable Cost Material of construction in impoverished

nations, tree seedlings in forestation

4.1.12 Social and Environmental Cost

Voluntourism sometimes incurs a negative social cost: Some local might make the

local children dress up poorly in order to win the sympathy of tourists. In this way, the

voluntourism might end up impeding the progress of the local village. However, in

ELIV’s business model, it avoids this cost by building eco-orphanage, orphanage with

its own vegetable garden to provide foods, to shelter those children and enable them to

feed themselves to break the vicious circle of poverty.

31

4.2 1kg

Figure 7. The business model of 1kg


In remote villages in Yunnan, students have little access to things such as

extracurricular books or such necessary items as school supplies like erasers or pencil

sharpeners. In the past, kindhearted tourists occasionally have left stationery or money

for these children. One tourist, in particular, Andrew began to wonder if he could find a

means of encouraging more tourists to help those needy children especially those in

more remote and impoverished areas. Motivated by the social values advocated by

Wikipedia, an idea was given shape and Andrew drew plans to create a similar social

gesture, leveraging the power of crowd to solve social problems, in particular, issues

directly associated with poverty.

32

In 2004, Andrew launched a project called 1 kg on the internet. His plan was

straightforward. The project he started encourages tourists to bring certain items such as

children’s novels or stationary in their travel luggage, and then pass along these onto

remote schools and impoverished children in need along their trip. To obtain optimal

efficiency, Andrew launched the 1 kg website with namely two services. The first of

which was to collect data on the beneficiaries of the program, and the second was to

connect participants with beneficiaries. Andrew acknowledged that, although the help or

supplies that one kind tourist may provide to a school is not much, the sum that all of

the participating tourists can provide is great. Besides, all such kind guests are—no

matter their size—have a certain immeasurable value.

Travel lovers recognized Andrew’s idea in no time. In the first year alone, tourists

coming from more prosperous areas in China such as Guangzhou, Shanghai, and

Beijing organized more than twenty voluntary trips to such impoverished areas in China

as Guizhou, Yunnan and Guangxi. More than 200 volunteers participated these initial

projects and more than 10,000 items of stationery and more than 3,000 books were

donated.

Andrew felt excited about this good response to his website, nonetheless, still

recognized that much still needed to be done. One schoolteacher in Guizhou is reported

to have said that “the [problem of a] lack of material[s] can be overcome, but the real

problem [are] the backwards ideas and lag on information” (sic) (Wen 2004). Andrew

realized that the 1 kg project to fulfill these needs must serve both the material and

intellectual needs. In other words, the transport of knowledge and skills to those areas in

need also need to become a service in which volunteers could participate. Andrew

believes that children of impoverished places should also be given the opportunity to

understand the world around them and broaden their own knowledge bases. Andrew

33

also believes that travelers can interact with these children, passing on important ideas

and knowledge.

In 2005, Andrew modified part of the guidelines for items to bring provided to

volunteer travelers. He suggested that, for one, travelers should bring paper for letters

and a stamped envelope with return address, so that the children and the tourists can

keep in touch with each other and share ideas.

Numerous NGOs in China closed down or suffered because of lack of capital and

donation since the start of the financial crisis. 1 kg was not an exception. In 2008,

Andrew was not able to make payroll to his employees for 3 month because the funding

for which they applied never arrived. At times, Andrew felt helpless and frustrated.

Andrew pulled through, however. After that, Andrew registered 1 kg as a for-profit

company, allowing it to operate for-profit projects to support its non-profit goals. This

transformation not only solved the regulation problem but also secured sustainability of

funding.


Many of the customers of 1 kg are corporations that are interested in CSR; in order

words, corporations will pay 1 kg to design the 1 kg box for disadvantaged children.

Andrew explained that this business model’s customer segment is quite different from

normal companies because the payers and receivers are different. Even schools that only

received 1 kg box are characterized as their customers. Now 1 kg serves more than 1700

schools in China and organizes 14 social projects this year.

34


Through three simple steps—pass, exchange and share—1 kg not only provides the

travel experience value for its tourist customer, but also creates a positive virtuous cycle

between travelers, students and corporations. Table 12 elaborates the value creation

steps of 1kg.

Table 12. Value creation steps of 1kg Pass Travelers take stationaries or books while they travel to remote area, and

then pass those supplies to schools or students. Exchange During the trip, travelers exchange ideas and knowledge with children

face-to-face, broaden each other’s horizon, inspire each other’s imagination, and build each others confidence.

Share After the trip, traveler share their experience and school demands on the 1 kg website to motivate more people to join 1 kg model. In addition, as more people pay attention to 1 kg project, more corporations would be willing to pay for designing and manufacturing 1 kg box.


On one hand, enterprises with good corporate social responsibility cover the

expense of designing and manufacturing 1 kg box. On the other hand, however, schools

may apply for those 1 kg boxes with no costs to them. Andrew mentioned that

manufacturing generates no profit under this model; profit is mainly generated through

other steps in the design and creative process of the 1 kg box.


1 kg inspired the many people to visit elementary school in remote villages delivers

goods and knowledge, fulfilling the demand of many remote schools. 1 kg leverages the

power of social network to mobilize volunteers to serve more than 1,000 remote

35

elementary schools in China. Each moth, volunteers with little instruction organize

more than 30 social activities including volunteerism, donation and supporting

education.

The 1 kg model solves the insufficiency of education resources in remote areas of

China. Moreover, the 1 kg box program changes the ways in which we educate the

children providing hands-on activities and interaction and communication with others.

Currently, 1 kg dedicates to design the toolkit to design educational activities to benefit

village students.

Besides making positive impact to students in small village, the 1 kg model also

brings impact for those voluntary travelers. While broadening children's horizons and

inspiring children's imagination and confidence, voluntary travelers are also inspired

and motivated by those kids they have helped.

4.2.6 Channel

Most corporate customers simply reach 1 kg through their company websites to

design 1 kg box; both 1 kg box applicants (the school customer) and those sending these

boxes apply online.

4.2.7 Customer Relationship

1 kg considers its relationship with its customers highly valuable, and the company

uses Ries’s principle of lean start-up in research and development. According to the

principle, one should esteem that customer feedback during product development,

recognizing it as an integral part of the startup process. One of the benefits of the

principle is it ensures that the producer does not invest time designing features or

services that consumers do not show interest in (Ries, 2011).

36

Andrew understands that many NPOs or Social enterprises design their product or

services first before finding a sponsor (customer) to sponsor the activities. This way

often fails because they often ignore what in which customers are actually interested.

Thus, those NPOs or Social Enterprise often end up spend too little time and efforts to

design their products or services well and spend too much time persuading sponsors or

customers to pay for the bill. However, 1 kg coheres to the principle of finding sponsors

(customers) first and then designing services or products accordingly, allowing 1 kg to

spend more time on designing good products and services.

4.2.8 Key Sources

One key resource of 1 kg is its ability to design products that are appropriate with

customer wants and needs. Different from other design company, 1 kg emphasizes

empathy-embedded design. Andrew and his designers often make on-spot investigation

in remote villages and schools to understand the true needs of students. Andrew points

out that owning to lack of empathy and field study, many young entrepreneurs not only

design business models similar to each other but are also carrying out products and

services not suited well for their users.


Ordered by corporate customer interested in CSR, 1 kg designs 1 kg boxes, which

are toolkits used to facilitate volunteer teachers to perform a specific educational

activity. The box consists of all material need for the activity and an operating guide.

Table 13 shows the boxes designed by 1kg.

37

Table 13. Products of 1kg

Drama box Reading box

Painting box

Handwork box

Painting box refill

Handwork box refill

4.2.10 Key Partners

The key partners of 1 kg can be categorized by three: local partners, corporation

partners and media partners. Table 14 lists the partners of 1kg.

Table 14. Partner list of 1kg Local organization Besides rely on volunteer travelers to deliver report the

demand of schools, 1 kg also cooperates with local NGOs or NPOs to deliver and receive information.

Corporation Corporation desired to do CSR cooperate with 1 kg to design 1 kg box.

Media Media platforms that interested in reporting social-related helps promote 1 kg through their platforms.

38


Owing to leverage the power of volunteers, 1 kg is able to reduce human costs on

delivering its product. Moreover, many volunteer creates content on its social network

platform also reduces 1 kg marketing costs. 1 kg’s main cost is the design fee it pays to

its designers.


There is a risk with the 1 kg model of wasting resources if schools use those boxes

recklessly or arbitrarily. In order to solve this problem, 1 kg monitors the use of 1 kg

boxes they send. For example, schools may only apply four boxes in the first round.

Next, the schools have to certify that all boxes were properly used so they may apply

additional boxes.

Many people who want to be a change agent perhaps may not able to identify the

true social problem, because they only hear the problem from someone else or see the

news of social issues on television. Thus they tend to think out similar value proposition.

Therefore, 1 kg encourages change agents to leave their comfort zone and walk into

remote villages. 1 kg facilitates those change agents to live in the remote schools to see

the true face of remote schools so change agents would be able to identify the true

demand of education resources.

39

4.3 PUKI

Figure 8. The business model of Puki


The founder of Puki, Xiao Liang, used to work for an advertising company. Xiao

Liang learned sign language and met many deaf students in the process of participating

in an experience session at a sign language student club at local schools, where he was

asked to deliver a design course. Xiao Liang, a very ambivalent man used his

experiences and knowledge he gained from those deaf students he met to contribute to

both to those in need and to society.

Xiao Liang is a person bold and audacious enough to practice his ideas regardless

of what consequences or thoughts others may think of him. For example, he resigned

from a lucrative job at a marketing company, entering a non-profit organization to

40

pursue his great dream of marketing a non-profitt organization (NPO). The NPO Xiao

Liang worked for had been commissioned a design case by the government. At the time,

the NPO did not have a design team, so Xiao Liang out-sourced the case to the deaf

students he knew from the deaf school he previously visited. To his surprise, the

outcome of the design is acclaimed by his peers and all-round well received. Xiao Liang

recognized that, although many of the graduates from design schools for the deaf were

all-round outstanding students, the job opportunities which these graduates had a

available were very limited or often unrelated to the specification of the students. Xiao

Liang knew that such outstanding students, despite her inability to hear, deserved more

hopefully future. Xiao Liang founded a design company that employs deaf designers to

ameliorate this problem, creating job opportunities for these outstanding applicants.

In the early stages of founding Puki, Xiao Liang’s idea proved much more

successful than he had originally thought, attracted much talent. In the beginning, Xiao

Liang only had bare ideas, without proper resources and partners. Nonetheless, he

carried on designing his company logo and printed his business cards. Xiao Liang

presented the preceding and his ideas to Ding Li, vice director of a social enterprise

incubator called NPI. Ding li was immediately attracted to Puki’s social innovation

concept. Simultaneously, NPI’s Nest project was also recruiting social enterprises

providing serviced to the disabled. NPI provides incubation service and office space to

those enterprise partners chosen. With Ding li’s approval and the service provided by

the NPI, Xiao Liang successfully founded Puki in the Shanghai Social Innovation

Incubation Park.

Xiao Liang founded a social enterprise, instead of an NPO. The distinguishing

benefit is that a social enterprise can generate its own source of income and profit. And

benefit of starting Puki as a social enterpise is that Xiao Liang would not be limited by

41

several laws and formalities set by the government and various foundations that would

slow and hinter Xiao Liang for achieving his ambitions with Puki.


Originally, Puki planed to have a target customer audience like that of other NPOs

with a design outsourcing demand to be their target customer. However, since more

than 80 percent of Puki’s customers are for-proft enterprises, this was not the case. Xiao

Liang draws comparison, noting that, although for NPO customers, what prices Puki

charge are usually higher than other street printing stores, for enterprise customers, on

the other hand, prices are considerably lower for their comparable quality. Puki is more

popular for corporate customers than NPO customers; most of Puki’s corporate

customers can be placed into the three following categories: the pharmaceutical industry

(e.g. Sanofi-Aventis, Johnson, etc.), Banking Industry (e.g. DBS), and foundations.


Puki hired many deaf designers, with 75 percent of Puki designers being deaf. This

employment stategy allows Puki to provide design services for customers, while at the

same time providing employment opportunities to those qualified deaf persons, thus

aiding towards alleviating one area of social inequality.


Puki’s revenue is mainly generated and collected through various designing service

fees. With these services fees, Puki has been able to break more than even with its

42

yearly revenue is approximately 800 thousand RMB, accumulating a profit is that is

about 20 percent costs.


In addition to creating job opportunities in design offices, Puki also provides a free

training program for deaf students called “1+1.” Puki also matches deaf students with

internship opportunities of major companies.

Besides creating job opportunities for the qualified deaf persons inside the

company itself, Puki also furnishes opportunities outside the company. Puki provides

320 hours of skill training related programs and over 150 hours of career training

programs. Although only about 50 percent of deaf applicants are actually taken up as

employees, Xiao Liang believes that the opportunity of “building the self-confidence for

deaf people” is much more important than the efficiency of creating jobs.

4.3.6 Channel

Puki’s main channel is its platform at the Shanghai Social Innovation Incubation

Park.

4.3.7 Customer Relationships

Xiao Liang considers customer relationships with Puki structurally relatively

passive. Most of customers were already aware of Puki when they visited Puki’s

location at the Shanghai Social Innovation Incubation Park. Many customers come to

Puki on their own regard, recognizing its value and desiring business intercourse with

them.

43

4.3.8 Key Sources

The key resources of Puki are the deaf talents that they recruit. Despite having

certain restrictions due to their disability, deaf designers often have the outstanding

talent to stay concentrated on what they are designing. To some extent, Puki’s special

mission to employ qualified deaf applicants is a type of social innovation, turning a

commonly seen disadvantage into an inside business advantage. Puki solves the

obstacle they face employing deaf persons by do not taking creative projects that require

listening and speaking abilities, but rather taking graphic design and layout designs

projects where the high concentration advantage can be fully taken actualized.


The primary business activity of Puki is design. Puki’s team is equipped with one

third hearing and two-thirds deaf designers. Their enterprise provides design servicea

comprise: (1) “brand management communication,” (2) “graphic design,” (3) “corporate

image design,” (4) “exhibition planning and implementation,” and (5) “web pages and

multimedia design.”

4.3.10 Key Partners

The most important partner of Puki is its incubator-NPI, who support Puki with

space and business opportunities. Other partners include consultants, foundations and

deaf schools. Table 15 lists the partners of Puki.

44

Table 15. Partners list of Puki Incubator and Consultant NPI, British Council, ECSEL Financial support Foundations Deaf School Shanghai University of Applied

Sciences/Special Education Department of the University of Xuhui District Amateur


Puki’s main costs are, one, the salary of its designer and, two, office rent.


Xiao Liang believes that everything has two sides: Puki is no exception. Puki’s

model, on one hand, creates many job opportunities for deaf persons and credited with

social innovation and value, but, on the other hand, there is much controversy whenever

Puki lays off designers, naturally as many are deaf. The public regards Puki as a

chartable and responsible organization, yet there are persistent negative responses to the

layoffs. Puki being a social enterprise, however, lay-offs are a necessary part of

maintaining Puki. These negative responses are partly due to a lack of understanding of

the ways in which social enterprises function. Xiao Liang furthers this mentioning that

most social enterprises highly depended on their founders, and often many social

enterprises cannot be as well maintained and sustainable once the founder of the

enterprise leaves.

45

Chapter 5 Result and Discussion

5.1 Discuss of research findings and Managerial Applications

Listed below in table 16 is the cross case report of all the case studies concerned in

my thesis. The purpose of this table is to indicate the feasibility of adapting the social

enterprise business model canvas to the research companies.

Table 16. Cross case report of case studies

ELIV 1 kg Puki Social Entrepreneur

Customer Segment

• Voluntary service tourists • Local service recipients

• Corporations interested in CSR • Schools

• Corporations with design outsourcing need

Value Proposition

• Exploring& visiting third-world nations • Volunteer services

• Pass-exchange-share cycle

• Design service by the deaf

Revenue Stream

• Project fee paid by tourists

• Design fee from corporations

• Design service fee

Social & Environmental Benefit

• Clean water • Poverty alleviation • Forestation • Build eco-villages

• Deliver goods & knowledge to remote schools

• Job opportunity for the deaf • Training program for deaf students

Channel • Website • Campus recruiting

• Website • Shanghai Social Innovation Incubation park

Customer Relationship

• Co-creation • Customer-Driven design

• Through NPI

Key Resources • ELIV tourist guide • Empathy-embedded design

• Deaf designer’s talent to stay

46

concentration Key Activities • International

Voluntourism tour • Design 1 kg box • Design service

Key Partners • Local organizations • Local partners • Corporation partners • Media partners

• Incubators& consultants • Deaf schools

Cost Structure • Personnel cost • Construction cost

• Design fee paid to designers

• Office rental • Designer's salary

Social & Environmental Cost

• Impeding the progress of local villages

• Not identify the true need of users • Use boxes recklessly

• Layoff deaf designers • Sustainability

Based on literature review and case studies, I discovered that, although social

enterprise and other forms of enterprise share many common points, there are still at

least four distinct features unique to social enterprise. The four features I found are

explained further below along with the related pictographs 5.1.1 to 5.1.4. These distinct

features have confirmed my thesis. For one, that there is a practical need for three

additional building blocks for developing and other important considerations related to

social enterprise; and, second, that there is a theoretical need to approach social

enterprise differently from other types of enterprise.

5.1.1 Turn social cost into key resources.

One feature of social enterprise business model is that one can turn social cost or

liability into key resources. In other word one can turns a disadvantageous situation into

an advantageous one. In the case study of Puki, for example, Puki has the obstacle of

making good use of employments the hearing impairments. Puki is able to overcome

this disadvantage rather extraordinarily, realizing the advantage deaf employees possess,

being able to stay concentrated for long periods of time without distraction. In other

47

words, the disability of being deaf is commonly regarded as disadvantage and a social

cost, giving deaf persons multiple obstacles to finding employment; however, the Puki

model turns these this disadvantage or social cost into Puki’s key resource for success

by utilize the special abilities deaf employees possess, realizing their potential. Figure 9

shows the business model pattern of turning social cost into key resources. The

managerial application of turning any disadvantageous situation or social cost into

something advantageous is a special feature of social entrepreneurship. Social

entrepreneurs are able to take idle assets or resources in the society and apply them into

a business model that is creating revenue.

Figure 9. Turn social cost into key resources

48

5.1.2 Social Entrepreneur: First Follower

The first follower, person who is the first to support a social entrepreneur, is often

the most crucial to the further development and creation of the full social enterprise

business model. In the case study of ELIV, the joining with Helene was highly

important to ELIV’s further existence and development. Helene was a senior lawyer

working in renowned law firm before she met the founder of ELIV, Kevin, on a

volunteering tour of India. Kevin was a recent college graduate at that time. Despite

much passion and knowledge, Kevin lacked the necessary experience and resources to

build on his vision of the social enterprise - ELIV. At the tail of their tour, Kevin

expressed his concerns to Helene, explaining that his inability to continue his dream of

ELIV. He was exhausted and lacked proper capital and resources. Helene was moved by

Kevin’s passion and the vision and dream of ELIV. She quit her current position and

joined ELIV, bringing with her various knowledge and experience. With Helene’s help,

together they were able to restore the dream Kevin originally conceived.

In many ways, the first supporter, or follower, is as important to the development

and prosperity of a social entrepreneurship as is its founder. Helene’s joining ELIV is an

excellent example. Helene helps transform Kevin into someone to be considered a

leader of a movement. She supported his vision with the necessary business knowledge

and experience. For the success and prosperity of a social enterprise, the founder of a

social entrepreneurship needs the necessary support and knowledge that a first follower

provides. Moreover, the skill and resources of the first follower also play an important

role in early stage social enterprise. Figure 10 shows the business model pattern of first

follower. The managerial implication of the first follower theory is that it is important

for the entrepreneur to seek out and encourage the first follower to support his or her

49

entrepreneurial goals, as first followers are crucial equal participants in building the

social enterprise.

Figure 10. Social entrepreneur: first follower

5.1.3 Customer relationship: value co-creation

Many social enterprises seek or leverage co-creation to provide the services. In the

case of ELIV, for example, the value creation process is not exclusive to staff members

themselves but also includes their customers----those tourists volunteering on various

trips connected with ELIV. Although many web-based service providers also use

co-creation for service and content out-put, social enterprise is especially suited for

leveraging co-creation; specifically, social enterprise with a social value or purpose can

motivate volunteers to co-create services. The managerial application of co-creation is

that social enterprises can apply the concept of volunteer management to leverage

50

co-creation with volunteers.

Moreover, the definition of value of social enterprises is different from that of

for-profit enterprises: only regard the financial value. Incorporated the concept of triple

bottom line, social enterprises also consider ecological and social value. Figure 11

shows the business model pattern of value co-creation. The managerial applications of

value co-creation is that social enterprises should well-communicate with their customer

and, most important of all, co-define value with their customers.

Figure 11. Customer relationship: value co-creation

5.1.4 Customer Relationships: customer-driven design

In the 1 kg case study, the common conception known as push strategy that one

must first design a product before selling on the market was reversed commonly, having

proved ineffective and wasteful. 1kg enquires of customer wants before designing any

51

products -- a process known as pull strategy. For many NPOs and foundations, the

production of products are more or lest related to the amount of funding they acquire

from various donators and government services. As a result, their product production

and services offered are often arbitrary to the wants or needs of their customer base;

they provide their products or services in a push strategy. Social enterprises, on the

other hand, run on limited recourses and as a necessary result must allocate their

resources prudently and wisely in a pull strategy format in order to the necessary

generate revenue crucial to their continued existence and development.

In addition, most NPOs or foundations that receive government funding are strictly

mentored by those government bodies from which services were provided. Under these

circumstances, however, the government oversight is usually cumbersome and fails to

serve the need of such disadvantage groups; in this regard, NPOs and foundations lack

the flexibility to make a change. The flexible services constructed specifically to

customers that social enterprises are able to provide are due to their financial

independence from donors and government bodies. Figure 12 shows the business model

pattern of customer-driven design.

The managerial application of customer-driven design is that social entrepreneurs

should best follow Rie's lean startup approach towards solving e limited resource

problem most social entrepreneurships face. That is, specifically, to eliminate wasteful

practices and increase value producing practices during the product development phase.

The major basis of this principle is so that startups can have a more attainable success

rate without requiring a large number of outside funding, elaborate business plans, or

the perfect product. Another important lesson for social entrepreneurs is that customer

feedback during product development is integral to the lean startup process and further

52

ensures that the producer will not vainly invest time designing features or services that

consumers do not necessarily want or need.

Figure 12. Customer Segment: customer-driven design

5.2 Limitations and future research

The case studies selected are representative of early stage social enterprises located

in the greater China region. Due to time and resource constraints, my research only

covers three social enterprises. In the future, as researchers utilize even more case

studies to gather information and data on more social enterprises in even more locations,

this business model framework will be more conclusive and comprehensive.

While gathering data on the case studies I oversaw, the social entrepreneurs

mentioned some issues in my social enterprise business model framework. These

various issues with my current framework are listed in sections 5.2.1 to 5.2.2. I hope

53

that these issues can inspire future researchers to make the business model of social

enterprise more comprehensive.

5.2.1 Revenue stream: dividend distributed/ dividend not distributed

During the interview with ELIV, Helene and I discussed whether social enterprise

should distribute dividends. According to the British council’s definition, social

enterprise should not distribute dividends but rather choose to reinvest instead. Many

social entrepreneurs in the field, however, such as Helene from ELIV and Ben from

Transist believe that social enterprises should be allowed to distribute dividends to

make incentives for talented youth to join their organization. This issue will not be

further discussed in this thesis. I await future studies to investigate further an even more

comprehensive analysis as well as a possible solution to this problem.

5.2.2 Social entrepreneur: Sustainability issue when founder left

During my interview with Puki, Founder Xiao Liang mentioned his concern for the

issues of sustainability and manpower. He said that Puki might be closed if he decides

to leave his position in the case he decides to further his studies abroad. Social

enterprise often relies heavily on the founder’s passion to keep working. It is more than

often the case that once the founder leaves, the social enterprise faces serious problems,

with no one interested in becoming the successor. The solution to this problem perhaps

may be of interest for future researchers to address.

54

5.3 Conclusion

During the process of building the business model framework for early stage social

enterprise in the greater China region, I encountered many social entrepreneurs and

other players in the social enterprise field. Of whom, there were impact investors and

social enterprise incubators. I was glad to learn that the development of social enterprise

in greater China region is continuously growing and prospering. Twelve building blocks

forms the business model proposed in this thesis. Three early stage social enterprises:

ELIV (Taipei), 1 kg (Beijing) and Puki (Shanghai) are chosen as case studies used to

build this business model framework. Four distinctive features of social enterprise

model are found based on the case studies. Last, two issues were mentioned for future

researchers to consider and analyze.

55

References:

Abu-Saifan, Samer. (2012). Social Entrepreneurship: Definition and Boundaries.

Technology Innovation Management Review(February 2012: Technology

Entrepreneurship).

Austin, James, Stevenson, Howard, & Wei-Skillern, Jane. (2006). Social and

commercial entrepreneurship: same, different, or both? Entrepreneurship theory

and practice, 30(1), 1-22.

Borzaga, Carlo, & Defourny, Jacques. (2001). The emergence of social enterprise (Vol.

4): Routledge.

Brouard, François, & Larivet, Sophie. (2010). Essay of clarifications and definitions of

the related concepts of social enterprise, social entrepreneur and social

entrepreneurship. Handbook of research on social entrepreneurship, 29-56.

Chetty, Sylvie. (1996). The case study method for research in small-and medium-sized

firms. International small business journal, 15(1), 73-85.

Compton-Lilly, Catherine. (2013). Case study is the study of the particularity and

complexity of a single case, coming to understand its activity within important

circumstances. Qualitative Methods in the Social and Behavioral Sciences, 54.

Dees, J Gregory. (1998). Enterprising nonprofits. Harvard business review, 76, 54-69.

Dees, J Gregory. (2007). Taking social entrepreneurship seriously. Society, 44(3),

24-31.

Dees, J Gregory, & Anderson, Beth Battle. (2006). Framing a theory of social

entrepreneurship: Building on two schools of practice and thought. Research on

social entrepreneurship: Understanding and contributing to an emerging field,

1(3), 39-66.

56

Defourny, Jacques, & Kim, Shin-Yang. (2011). Emerging models of social enterprise in

Eastern Asia: a cross-country analysis. Social enterprise journal, 7(1), 86-111.

Defourny, Jacques, & Nyssens, Marthe. (2010). Social enterprise in Europe: At the

crossroads of market, public policies and third sector. Policy and Society, 29(3),

231-242.

Díaz-Foncea, Millán, & Marcuello, Carmen. (2012). Social enterprises and social

markets: models and new trends. Service Business, 6(1), 61-83.

Elkington, John. (1998). Cannibals with forks : the triple bottom line of 21st century

business. Gabriola Island, BC ; Stony Creek, CT: New Society Publishers.

Elkington, John, & Hartigan, Pamela. (2008). The power of unreasonable people: How

social entrepreneurs create markets that change the world: Harvard Business

School Press.

Glasson, John, Therivel, Riki, & Chadwick, Andrew. (1999). Introduction to

environmental impact assessment: principles and procedures, process, practice,

and prospects: Routledge.

Grassl, Wolfgang. (2012). Business models of social enterprise: A design approach to

hybridity. ACRN Journal of Social Entrepreneurship Perspectives, 1(1).

Heckl, Eva, Pecher, Ingrid, Aaltonen, Satu, & Stenholm, Pekka. (2007). Study on

Practices and Policies in the social enterprise sector in Europe. Vienna: Austrian

Institute for SME Research (Study on behalf of the European Commission, DG

Enterprise & Industry).

Low, Chris. (2006). A framework for the governance of social enterprise. International

journal of social economics, 33(5/6), 376-385.

Maglio, Paul P, & Spohrer, Jim. (2008). Fundamentals of service science. Journal of the

Academy of Marketing Science, 36(1), 18-20.

57

Mayo, Michael C, & Brown, Gordon S. (1999). Strategic Planning: The Business Model:

Relied upon for years, the traditional business model is on shaky ground. Ivey

Business Journal, 63, 18-23.

Monzon, José Luis, & Chaves, Rafael. (2008). The European social economy: concept

and dimensions of the third sector. Annals of Public and Cooperative Economics,

79(3-4), 549-577.

Osterwalder, Alexander, Pigneur, Yves, & Clark, Tim. (2010). Business model

generation : a handbook for visionaries, game changers, and challengers.

Hoboken, NJ: Wiley.

Ries, Eric. (2011). The Lean Startup: How today's entrepreneurs use continuous

innovation to create radically successful businesses: Crown Pub.

Slaper, Timothy F, & Hall, Tanya J. (2011). The triple bottom line: what is it and how

does it work? The Indiana Business Review, 86(1), 4-8.

Slywotzky, Adrian J. (1996). Value migration: How to think several moves ahead of the

competition: Harvard Business Press.

Spear, Roger, Cornforth, Chris, & Aiken, Mike. (2009). The governance challenges of

social enterprises: evidence from a UK empirical study. Annals of Public and

Cooperative Economics, 80(2), 247-273.

Stewart, David W, & Zhao, Qin. (2000). Internet marketing, business models, and

public policy. Journal of Public Policy & Marketing, 287-296.

Vanclay, Frank. (2003). International principles for social impact assessment. Impact

assessment and project appraisal, 21(1), 5-12.

Verreynne, Martie-Louise, Miles, Morgan P, & Harris, Candice. (2012). A short note on

entrepreneurship as method: a social enterprise perspective. International

Entrepreneurship and Management Journal, 1-16.

58

Yin, Robert K. (2008). Case study research: Design and methods (Vol. 5): SAGE

Publications, Incorporated.

Yunus, Muhammed B. (2007). Creating a world without poverty: Social business and

the future of capitalism: PublicAffairs.

Zahra, Shaker A, Rawhouser, Hans N, Bhawe, Nachiket, Neubaum, Donald O, &

Hayton, James C. (2008). Globalization of social entrepreneurship opportunities.

Strategic entrepreneurship journal, 2(2), 117-131.

Zhao, Weibing, Ritchie, JR, & Echtner, Charlotte M. (2011). Social capital and tourism

entrepreneurship. Annals of Tourism Research, 38(4), 1570-1593.

the business model design of social enterprise

Small Business & Entrepreneurship

social entrepreneurship

social innovation

social entrepreneursthemselves

social enterprises

business model canvas

social enterprise case

designing business model

social andenvironment