ifs conference 2008 jamila aman's presentation 1 social entrepreneurship and innovation

IFS Conference 2008 Jamila Aman's Presentation

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Social Entrepreneurship and Innovation

Social Entrepreneurship and Innovation


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Presented

byJamila Aman

byJamila Aman


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Workshop Purpose

• Celebrate and build on success• Outline systematic approach• Earned income

– Establish business objectives/criteria– Product development– Product screening– Risk management and readiness

• Shared services (MSO)• Venture philanthropy


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Social Entrepreneurship

• We are a world of wall builders, partitioners, and dividers of space. We long for the security of safe places. We construct these barriers in a vain attempt to control the elements, to keep the rain from dampening the fire, the wind from covering ours lives with the inevitable dust. Many of the walls we build are essential to our survival. Many, however, are not. By fortifying the unnecessary walls, we in business (for profit and not-for-profit)..huddle in the systems we have closed. The consequences: thinking decays and novelty vanishes.

• Open Boundaries- Howard Sherman and Ron Schultz1998


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Social Entrepreneurship

• Application of entrepreneurial attitudes to social sector:– Change is the norm– Embrace change– Seek change– Client focused– Shift resources from low to high productivity– Calculated risks– Create something new– Strive for Transparency


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Organisational ReadinessRisk Management


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Issues

• Fear of loss of control

• Resources – financial/human

• Risk averse culture

• Conflicting ends

• Lack of structure/governance for success


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Organizational Readiness

• Strategy

• Governance

• Human resources

• Finances

• Operations, Products and Services

• Market perspective


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Strategic Management OverviewC. Input D. Throughput A. Output

Current State

Change Management

Strategic Implementation

Annual Strategic Review and Update

Future State

5. Current State Assessment and

Business Planning

4. Objective Development

3.Strategic Priority

Parallel Process with

Key Stakeholders

2. Strategic Planning: Vision, Mission, Values

B. Feedback


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Mapping the Future

Ideal Future Vision

• Formulate dreams that are worth believing in & fighting for by meeting 3 challenges.Challenge #1. Vision Statement

Challenge #2. Mission Statement

Challenge #3. Core Values


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Ideal Future Vision

Answer all or any of the following questions:

What will put you out of business?

What is your ultimate vision of success?

What is your ideal community vision?

Answers may be - end of homelessness, hunger etc.


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Mission

What is your organization’s part in achieving the vision?

What do we produce?

Who do we serve?

How do we do it?


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Values

What do board members & employees stand for & embrace?

What are the rules?

May include integrity, transparency, entrepreneurship, innovation etc


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Strategic Priority Development

Balanced Score Card FormatConsider organizational success from more

than one perspective, for example:

Internal Business Processes

Client

Financial

Human Resources


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Strategic Priorities Financial

Answer the question:

How do you wish to appear to your owners/funders?

Client

Answer the question: How do you wish appear to your client/customer?

Internal Business Processes

Answer the question:In order to achieve your mission, what business processes must you excel at?

Human Resources

Answer the question: How do you sustain your ability to learn and grow?

Vision Mission

Values


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Earned Income


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Results in Other Ventures

• 90% of successful ventures relate to the non-profit’s mission

• Planning matters• 46% of non-profits with ventures have more than

one• 69% are profitable• Profitability is reached in 2.5 years on average• Only 10% use a spin-off – cutting edge• The largest benefit is the creation of an

entrepreneurial culture (58%)

From a survey of non-profits operating business ventures


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Systematic Approach


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Systematic Approach

• Determine organisational– Need for innovation– Purpose

• Organisational readiness and commitment• Product development

– Search for opportunities– Create new services and screening– Research, design, testing– Launch, evaluation and revision

• Portfolio approach


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Strengthens OrganisationsAchieves Mission

• Generates revenue– Unrestricted– Greater degree of control– Enables growth beyond funding base

• Supports mission and strategic plan

• Create valuable new services/SROI

• Enhances profile


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Balancing Mission and Financial Return

Strong Business Case

SECOND PRIOIRTY BUSINESS

HIGHEST PRIORITY VALUE ADDED

Weak Business Case

DON’T PURSUE PHILANTHROPY

Limited Advances Mission


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Product Development Process

Planning for Success


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Definition of a Good Idea

• Meets a significant customer need – a market• Return on investment• Risk managed • Competitive advantage

– Cost – Performance

• Leverages a strength/asset• Fits with mission/values


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Enterprises

• Mission related products or services – Same product, new market: geographic or customer– Programme related products (manuals)/services

(EAP)– Staff resources (MSO/training)– Public sector contracting

• New product/leveraging organisational strengths– Client resources (social firm)– Soft assets intellectual property (licensing/franchising)– Hard assets (rental)

• Unrelated business (Ben & Jerry’s)


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Product CreationPre-work

• Scan– Community trends and needs– Potential market opportunities – market research– Attend conferences/read magazines/annual

reports/web/etc– Assess what competitors are doing

• Scan– Internal capacities (swot)

• Leading edge networking


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Brainstorming

• Use information/knowledge/fantasy/dreams/intuition• Build on experiences of and skills/knowledge in the

organisation• Lateral thinking, scramble patterns

– e.g. pose a problem and only outrageous solutions are suggested

• Look at data for opportunities, look at it from other people’s perspectives

• Be excited, accept thoughts/play with them - have fun• Bring experts from different organisations together• Discuss with others, family, friends, associates


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Level 1 Screening CriteriaDoes the idea further your vision, mission, values and strategic priorities?

1=no, 2=partial fit, 3=full fit

Is there a potential customer benefit? 1=none, 2=some need/some customers, 3=urgent need/many customers

Are there profit potential (by third year)? 1= less than 20K, 2=more than 20 k but less than 50k, 3= more than 50k

What investment is required?1 = major investment , 2 = minor investment, 3 = achieve with current resources

Is there a champion? 1=no, 2= neutral 3=yes

Is there risk?1 = high risk (no known mitigation), 2 = medium risk (new strategies needed), 3 = low risk (strategies in place)

Scoring: each idea will have a score of 6-18


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Screening Phase 2

• Create a concept statement– Describe product– Target audience and reason for buying it– When, where, how?

• Product attractiveness– Financial results– Marketing issues and competitors– Risk factors

• Does it fit with the organisation?• Test with sample of external experts


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Screening Phase 3Feasibility Analysis and Priority Setting

– Does the product have financial potential?– How likely is the product to implemented

successfully (easy or hard)?– Is an investment required?– Is an investment justifiable in terms of

financial or mission improvement?– Does the product advance mission

and strategic priorities?


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The Success Quadrant

High

financial and social

impact

Low Potential

Consider Later

Top Priority

Continue Screening

Low


impact

Not Strategic

Do Not Consider Further

Long Term

Consider Second

Low

(Idea will be relatively difficult to implement)

High

(Idea will be relatively

easy

to implement)

Fit with Organisation


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First Set of Measures

Financial Measure Weighting 0 1 2 3

Significant customer problem 2Not a significant

need

Need that is addressed by others

reasonably well Urgent unmet needUrgent unmet need

consistent with mission

Appropriate solution 1

Do not address need as well as

competitorsAddresses need as well as competitors

Addresses need in a unique and more

effective wayAddresses need and no

one else does at allRevenue potential 1 Under £50K £50-100K £100-250K >£250KProfit potential 2 Likely loss £0-50K £50-100K >£100K

Investment required 1Major investment

>£100K

Large amount of funding required -

£25-100KModest funding

required - <£25KCould achieve with existing resources

Investment financial payback 1 None >3 years 1-3 years First year

Rating

Product A


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Second Set of Measures

Success Measure Weighting 0 1 2 3

Fit with mission/ values 2Contrary to

mission Not a fit Partial fit Yes

Similar products in the market 2Many similar product exist

Few similar product exist, and cutomers

are satisfied

Few similar product exist, but customers

are not saitsfied No similar products exist

Stage of development 2 Conceptual Defined ideaDeveloped marketing

planBusiness plan thought

out

Spin-off effects 1

Negative impact on organisation

reputationNo impact beyond

initiativePositive impact on

organisation

Strong positive impact on organisation and

community

Risk 2 High risk Low / Medium riskManageable risk

(strategies to address) No risk

Existing skills 1Significant skill

gap

Skills are readily available through

partnersCan address skills with

modest training Have the skills already

Competitive advantage 2Competitive

disadvantage

No significant difference from

competitors

Good value proposition but can be

matchedSustainable unique solution with niche

Partnership opportunity 1 No likely partners

Believe there are partners, but not sure

whoPossible partnerships but unclear of interest

Likely partners exist and are interested

Inhibiters 1

Significant cultural or other change

required

Some inhibiters which may be difficult

to address

Some inhibiters, but likely to be able

address No significant inhibiters

Rating

Product A


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High


impact

Low


impact

Low

(Idea will be relatively difficult to implement)

High

(Idea will be relatively easy to implement)

Product A

Str

engt

h of

Ide

a

Fit with Organisation


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Screening Phase 4Business Planning


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Benefits of Writing a Business Plan

• Refines the idea

• Writing it down makes it real

• Creates a framework for making the idea happen

• Method of external communication

• Internal due-diligence tool


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Guidelines for Successful Plans

• Aim for a maximum of no more than twenty pages in the main body of the plan

• Be as brief and crisp as possible when explaining your idea and strategy

• Quantitative

• Specific

• Cover what investors are looking for

• Address risk and exit


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Business Plan Format

• Cover Page and Executive Summary• Description of the business• Industry and Market Analysis• Marketing, Communications and Sales Plan• Management and Operations / Launch Plan• Risk Assessment and Contingency Plan• Exit Strategy• Financial Plan for Your Venture• Supporting Documents


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After That….

• Development• Testing• Launch

Entrepreneur


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Organisational Structure


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Why Separate?

• Different cultures/ends• Shield non-profit from business risk• Raise external capital • Enhance focus on non-core markets

without compromising non-profit’s purpose or funding


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Structure

Non-profitOrganisation

IntellectualProperty

Operational Support

PurchaseOf

Service

EnterprisesHoldings

Business

Business

Business

Business

Investors


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Transition

• Clean break, separate entities

• Share resources, purchasing services

• Conflict of interest

• Sharing management

• Compensation

• Share purchasing

• Transition plan and monitoring


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Relationship With Non-profit

• Customer/vendor/owner (major shareholder)

• Separate companies – consistent vision

• Some price concessions to keep charity as a customer and meet mission

• Mutually beneficial for Enterprises to succeed

• Negotiated and governed by contract


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Significant Key To Success

• Foster a dynamic, success generating, entrepreneurial ethos

• Provide support to staff who are:• Creative • Innovative• Entrepreneurial• Productive• Successful• Aspiring


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Partnerships, Alliances Mergers, Acquisitions


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• Working together– Creating efficiencies– Enhancing quality

• Allowing for a focus on services

• Supporting social enterprise


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Context

• Pressure to create efficiencies

• Enormous duplication


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One Approach - MSO

• A management service organisation (MSO) is an integration that includes the creation of a new organisation in order to integrate administrative and fundraising functions, and thus to increase the administrative efficiency and effectiveness of participating organisations. It may include co-location.


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Benefits

• Enhances quality, strengthens organisation• Generates revenue: cost savings/profit• Frees management time• Keep up• Enhances profile/reinforces advocacy partnering• Reduces risk• Entrepreneurial spirit• Supports mission and strategic plan


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Examples of Savings and Quality Enhancement

• Procurement– Average 26%, Up to 50% on certain items– One organisation – 32% savings (equivalent

of a 1 FTE freed up for the organisation)

• Finance/HR/IT– Higher quality, more comprehensive service– Potential for savings/minimally breakeven

• Fundraising –access to focused expertise at low cost


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MSO Possibilities


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Process

• Creative/interactive/inclusive

• Full participation of the stakeholders, leading to a strong sense of ownership

• Mentoring

• Idea creation and implementation process

• Systematic


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Way Forward

• Initial meeting/test concept• Research/interviews/preliminary assessment• Workshop/obtain commitment to the

process • Business feasibility and priority setting• Stakeholder meeting/commitment• Business planning and communication• ‘Partner’ meeting/buy-in• Launch/build scale• Add products• Add members/customers


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Process

• Refine Business Plan with Trustees

• Council support - letter of intent - £1.25M

• Identify other markets

• Discussions with other potential partners

• Fundraising

• Commitment from Trustees to MSO

• Launch MSO Early 06


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One Final Thought


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The acid test for shared services (Tom Peters)

• Are we good enough to sell this service on the open market?

If not, why are we “buying” from ourselves when nobody else would buy it from us?


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Venture Philanthropy

High Engagement Giving


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What is Venture Philanthropy?

Capital and human resources invested in charities by various types of investors in search of a social return on their investment. VP involves a high engagement over many years with fixed milestones and tangible returns and exit achieved by developing alternative, sustainable income.


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Venture Philanthropy

Investing In

Programmes Services

Infrastructure Commercial VenturesSocial Enterprise


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Elements

• Capital for growth, reliable money• Human resource expertise/strategic coaching• Partnering internally and externally• Performance centred, results orientated• Long term, exit strategy to sustainability• Business case/plan • Business to business presentation• Management, board, cash management, impact


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Venture PhilanthropyPriority

• Significant problem

• Appropriate solution

• SROI

• Enthusiasm/being with a winner

• Impact/building on success

• Innovative and entrepreneurial

• Fit with your values/vision


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VP Benefits – A US ExampleWhat Funders and Grantees Say

• Partnering• Reliable, long term grant money• Improved organisational capacity, better:

– Evaluation systems– Marketing business and strategic planning– Fundraising

• Improved organisational performance/growth• For every $1 invested, $3 gained in expertise


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UK VP ActivitiesJust Beginning

• Funds– World-in-Need– Impetus– Laidlaw/Ryan

• Corporate Involvement– Shell– Diageo

• EU VP Association

• Examples– Charity Technology

Trust– Plan International– Tomorrow’s People– Help the Hospices


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Investor Motivation

• Apply knowledge/intellectual stimulation

• High engagement

• Joy of giving

• Image enhancement

• Social return on investment

• Corporate social responsibility

• Help business units achieve their goals


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Case Study: Corporate Venture Philanthropy

Diageo plc– Small number of very high engagement initiatives– Directly led to the creation of Tomorrow’s People– Board and management support– Measurement and accountability

• SROI evaluation• Communication of value to stakeholders in community

– Exit strategy in long term


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Case Study: Strategic Partnerships

New Profit, Inc.– Modelled after a venture capital fund– Significant support to few investments– CEO coach from Monitor Group– Board of Directors position– Portfolio manager– Access to other resources


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Trade Association Driven Fund

Social Equity Fund– Created by trade association to further its

business objectives– Special purpose fund managed by the trade

association using VP principles– Invests in charities in a competitive fashion –

an market place for innovation– Mechanism for member organisations to act

as high engagement donors


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Trends

• Increased/new capital and expertise

• Impact on/leverage with other funders

• VP model will evolve

• Impact on charity behaviour


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Increased Capital

• New philanthropic giving - people or corporations who may otherwise not be philanthropic

• Opening up opportunities beyond CSR departments to access funds/expertise from the various business units

• Increase the level of commitment of existing donors, reinvigorating and advancing mature funding relationships

• Success stories will lead to expansion in Europe


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Leverage Outside Of Movement

• Traditional grant makers will adapt some of the principles of the movement

• Increase in the acceptability of infrastructure funding

• Traditional grant makers will co-invest with venture philanthropists

• Venture philanthropy due diligence/investment will act as a positive signal to other grant makers

• Venture philanthropists will provide services to support other grant makers


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Evolution Of The Model

• Partnering in a true sense - working within the mission of the organisation as opposed to driving the mission

• Social return on investment evaluation will continue to be applied, leading to more efficient practices

• Increase in investing in mission-based social enterprise/trading for a FROI/SROI


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New Capital Structures

• Funders will create blended fund portfolios – diverse funders, joint working

• Charities will lead the creation of captive funds in support of their mission


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The OrganisationalStrategic Plan

Internal Marketplace

ORGANISATIONALEXPERTISE

Funds Portfolio£

Capital Innovation

Fund

Revolving Innovation

Fund

Endowment Innovation

Fund

BUSINESS PLANNINGExtra capacity + expertise

INVESTOREXPERTISE

INVESTOR

biddinginvestment


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Changes In Charitable Organisation Behaviour

• Charities will proactively encourage venture philanthropy and create venture philanthropists – creating an internal market

• Increased emphasis on social return on investment will encourage a more efficient use of resources

• Increased familiarity with business language and practices


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Screening Criteria

• Significant problem/appropriate solution/SROI

• Good strategy, business plan, exit strategy• Good management team• Do the numbers make sense?• Enthusiasm/being with a winner

– Building on success– Innovative and entrepreneurial– Fit with your values/vision


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SROI Elements

• Issue/problem• Solution (product/service)• Investment required• Desired outcomes

– Client– Organisation/enterprise– Stakeholder/investor desired outcomes

• Data management/evaluation• Social and financial return on investment

– Social enterprise financial performance/value– Cost savings/gains to government– Client

Sources of information– Roberts Enterprise Development Fund– New Economics Foundation


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Strategic Issues

• Develop criteria in partnership

• Trust, partnering and control

• Due diligence and fit

• Innovation and risk taking

• Organisational readiness

• Cultural differences

• Exit and sustainability


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Process with a Charity

• Product development/feasibility study• Finalise programme/infrastructure/commercial

selection and internal fund structure• Finalise readiness issues and solutions/plans• Prepare business cases and business plans• Research, preparation and training • Launch, implementation and evaluation• Networking and business to business

presentation• Follow-up and negotiation


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Identifying Potential Investors

• Current supporters and their networks– Existing member/donor database– Member/donor networks– Staff/volunteer knowledge

• Research – Competition– Rich lists– Trusts– Media– Investor groups– Companies

• Demographic identification and analysis• Networking/interviews/feasibility testing


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Business Case(Two Pages)

• Quote

• Problem/market

• Solution/business idea– Right strategy– People to make it work– Exit/sustainability

• SROI/FROI

• The organisation and its desirability


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Success Factors in Obtaining The Investment

• Is the proposal convincing?• Did the unique value come through? • Is the proposal customer driven?• Was it credible? Was it enthusiastic?• Would you remember the presentation? Was the

presentation style compelling?• Did it catch your attention in the first minute?• Was the “ask” or proposal clear?


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Key Learnings

• Build on current network, donors and investors

• Research the investor• Focus on and engage the investor, think

laterally• It is a sales process• Be patient/persistent, it could take up to 2

years• It is partnering, be organisationally ready


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How would you apply earned income/MSO/venture philanthropy

to your Organisation?


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Some Great Resources…

Fraser Valley Centre for Social Enterprisewww.centreforsocialenterprise.com

Social Enterprise Alliancewww.se-alliance.org

Social Venture Network, www.svn.org Social Venture Partners, www.svpi.org Centre for Community Enterprise

www.cedworks.com Centre for Social Innovation

www.socialinnovation.ca


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More Great Resources…

Toronto Enterprise Fundwww.torontoenterprisefund.ca

Aperio Consultingwww.aperio.ca

Andrew Horsnell & Associateswww.AndrewHorsnell.com

Canadian Social Entrepreneurs Networkwww.csen.ca

npEnterprise Forum, www.npEnterprise.net Sustainable Enterprise Resource Centre

www.sustainabilityincubator.com


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More Great Resources… Canadian Conference on Social Enterprise

www.socialenterprise.ca Business and Sustainable Development

www.bsdglobal.com Canadian Centre for Social Entrepreneurship

www.bus.ualberta.ca/ccse/ Canadian Business for Social Responsibility

www.cbsr.ca Sustainable Enterprise Academy

www.sustainableenterpriseacademy.com Net Impact, www.netimpact.org www.GreenBiz.com www.greenleaf-publishing.com


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Yippy! We Are Done!


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Jamila M. Aman

4330 Brandon Gate Drive Mississauga, Ontario

L4T 3K4

Direct: 416-618-3041

[email protected]

http://www.northw.ca