These slides do given a first introduction to the topic what is social business, which approaches are there and then describe the 5 Types of Social Business . They are taken from my lecture at the FH Kufstein on Social Business Plan making. For more information on Social Business please visit my website: http://www.monon.eu/en/social-business/

1. Social Business
FH Kufstein
20. – 21.4.2018 &
27. – 28.4.2018

2. Structure of the lecture
Analytical Tools
Institutional
Theory
Systemic
Thinking
Economic / ecologic system
Agriculture
Energy
Economy
Democracy
Education
Social Business
Definitions and Types Business Plan & Pitch

3. PART II – Social Business
• What are social problems
• Schools of Social Business
• Social Business Theory

4. Social Problems Robert K. Merton
1. Social problems as discrepancy between social
values (standards / norms) and social reality
2. Caused by social factors (i.e. not earth quake)
3. Consensus about social discrepancy exception
and NOT norm (power / politics)
4. Manifest and latent problems
5. Biased perception of social problems
6. Social problems can only be a topic in societies,
which understand reality as something which
can be shaped

5. Social Problems - Blumer
• “social constructivism”
• Society defines what are social problems (not
objective / not scientific)
• What is a social problem is negotiated in
democratic discourse

6. Social Problem
• Human needs need to be
fulfilled
• Humans establish institutions
to do so
• Norms and Standards serve
the bigger mass … certain
groups or individual do not get
served by the institutions
• Complexity is every increasing
… everything is dynamic and
in constant change

7. Hypothesis

8. What is social business
• A very young academic field (20 years)
• No common definition
▫ Impact investement vs. Responsible business
• Some of the repeating elements
▫ Profit secondary / a means
▫ Mission driven
▫ Environment / humans are central

9. Two Schools
Neo-liberal: make
social work more
financially sustainable
Alternative Economic
approach: develop a
really sustainable
alternative

10. Schools of Social Business
Neo-Liberal View Transformation View
• Solution lies in commercializing
• Business should not only take care
of providing commodities but also
of solving social problems
• Solutions need scaling and financial
sustainability
• Key-words
▫ Impact Investment
▫ Scaling impact
▫ Leveraging Business
• Representatives:
▫ Michael Porter
▫ Mohammed Yunus
▫ Jaqueline Novogratz
• We have to rethink economy
• Social business (partially)
replacing traditional business
• Key-Words
▫ Transformation
▫ Sustainability (!)
▫ Human centered design
• Representatives
▫ Manfred Max-Neef
▫ Christian Felber
▫ Rob Hopkins

11. Schools of Social Business
Neo Liberal View Transformative View

12. Not CSR
Business & CSR
• Separated approach
• Social impact as topping
• Easier to implement
• Impact investment (dividend)
SOCIAL BUSINESS
• Integrated approach
• Social Impact as System
• Complex to implement
• Only Principle is revolving

13. Social Business?

14. Not NGO / business inspired GNO
NGO Business inspired NGO
• Financially not sustainable
▫ dependent on donations
▫ dependent on governmental
funds
• No sales of anything
• Having sales
▫ Not sufficient to cover
operative costs
• Else than this same like NGO

15. Social Business Theories
• Yunus
▫ from Microfinance to Social Business: 7 principles
• Zahra et al
▫ typology of social entrepreneneurs
• Kim Alter
▫ typology of organizational forms
• Christian Felber
▫ Common Good Economy
• Inge Patsch
▫ 5 Social Business Types – Start-Up

16. Grameen Family

17. Yunus‘ Context
• Lack of Government
▫ development aid
▫ „Hardcore“ Businesses
„A charity Dollar has one life a social business
dollar can be invested over and over again.“

18. Yunus‘s 7 principles
• Known for Micro-Financing
• several books on Social
Business:
▫ Creating a World Without
Poverty
• Established Grameen Family
Social Businesses

19. Few definitions
Revenue - Cost = Profit
Possible Use of profit
• Reinvest
• Create reserve funds
• Pay to shareholders  Dividend

20. Not Microfinance
Micro-Finance Social Business
•Up to USD 1000 or 2000
•Entrepreneur =owner
=beneficiary
•Micro-Size enterprises
•Family business
•Normally no salary
•Normally no employees
•Simple business models
•Goal: increase Livelihood of
Entreprenur.
•Profit: for Entreprenur
•no upper limit
•Entrepreneur = owner
≠ beneficiary
•SME & bigger organizations
•Having employees
•Fixed salary for empl. &
owner
•Also complex business
model
•Scaling possible
•Goal: solve social Problem
•Profit: reinvested

21. Zahra et al
• Typology of Social Entrepreneurs
▫ Motive and role social entrepreneurs fullfill in
society
• Subject: Individual behind an social enterprise
• Published
▫ Zahra et al: A Typology of Social Entrepreneurs in
Journal of Business Venture, Vol. 24 Sep. 2009,
519 - 532

22. Zahra – 3 Types
Social
Bricoleur
Local level
Improvise
solutions
Hard to research
Social
Constructivist
Construct &
introduce changes
Scaleable systemic
solutions
Lack in
institutions
Social
Engineers
Fracturing existing
system
Sometimes
Subversive &
illegal
Making problems
public

23. Kim Alter – 4 Lenses

24. Sustainability in Alter‘s Model

25. Business Program Integration
Career Disha
Nepal
QMILK
VHS
Bhaktapur
VAUDE
Sarangi
Restaurant
Caritas –
Schenk eine
Ziege

26. Alter‘s models

27. Social Responsible Business

28. Responsible Business
Vaude Göttin des Glücks

29. Merging Alter‘s approach and CGE

30. Type A – Customer Oriented

31. Desirable achievements
• Products meets fundamental
human needs (Max-Neef)
• Product designed
environmentally friendly
• Product contributes to the
sustainable development goals
• Products made for / accessible
to disadvantages customers
• Pricing and distribution
environmentally & socially
friendly
• Ethical communication &
product information system
• Cooperation with businesses
from the same field

32. What can be solved through Type A
• Access to basic commodities
which improve live
▫ Requires willingness to pay
(no merit goods)
▫ Requires ability to pay
(financial stability of
beneficiary)
• Where do commodity serve the
fundamental human needs
Commodity
Fundamental
Human Need

33. Fundam
ental
Human
Needs

34. 4 Levels of
• BEING:
▫ Attributes (Nouns)
• HAVING:
▫ Norms, Institutions,
Mechanisms
• DOING
▫ Actions (Verbs)
• INTERACTION
▫ Location / Millieus
▫ De: Befinden
Es: estar

35. Types of Needs
Category 1 Category 2 Category 3
Sufficiency Affluence Luxury
Simple life Good life Excess
Basic Needs Elective Needs Status Symbols

36. Satisfiers
https://www.youtube.com/watch?v=FyT9TMlzC6s

37. Satisfiers
Violators
Synergic
SingleInhibiting
Pseudo

38. Violators
Supp.
Satisfier
Targeted
need
Impairs
Arms race Protection Subsistence,
Affection,
participation
Cencorship Protection Creation,
identity,
freedom
Bureaucracy Protection Understandin
g, Affection,
Participation,
Creation,
Identity,
Freedom

39. Pseudo-Satisfiers
Supp.
Satisfier
Need
Stereotypes Understanding
Prostitution Affection
Charity Subsistence
Fashion & Fads Identity
Soft drinks* Subsistence

40. Inhibiting
Supposed
Satisfiers
Need met Inhibited
needs
Paternalism Protection Understandin
g,
Participation,
Freedome,
Identity
Autoritarian
Classroom
Understanding Participation,
Creation,
Identity
Commercial
Television
Leisure Understandin
g, Creation,
Identity

41. Single Satisfiers
Satisfier Need
Curative
Medicine
Subsistence
Insurance System Protection
Ballot Participation
Sports Spectacles Leisure
Nationality Identity
Guided Tours Leisure
Gifts Affection

42. Synergetic Satisfiers
Satisfier Primary
Need
Stimulate
d Needs
Breastfeeding Subsistence Affection,
Protection,
Identity
Educational
Games
Leisure Understanding,
Creation
Self-managed
food production
Subsistence Understanding,
Participation,
Creation,
Identity,
Freedom
Direct
Democracy
Participation Protection,
Understanding,
Identity,
Freedome

43. Satisfiers and Type A Social Business
• A Social Business should not have ANY
▫ Violators
▫ Pseudo-satisfiers
▫ Inhibiting satisfiers
• Ideally a Social Business has a majority of
synergetic satisfiers

44. Limitation / Risks
• Does the customer “demand”
your product / service or is it a
merit good?
▫ Awareness Campaigns
▫ Drug rehabilitation
▫ Basic health care
• Are you able to produce
cheaper than others without a
lack in quality?
• Was the need served through
the field of “social norms”
(Ariely) before?
▫ If yes: what will change if you
commodify it?
price
supply demand

45. A - Customer Oriented Examples
Karnali Miteri Udhyog Refugees Work.at

46. Type A Restaurant
Modalities
Robin Hood Restaurant
Madrid
• Serves breakfast and lunch for
free to poor
• Serves dinner at night for
paying clients
• Overlapping Type E?
▫ No because it is integrated

47. Type B – Employment Oriented

48. Employing “socially”
• Work as means to fulfil
fundamental human needs
▫ Not only subsistence
▫ Creation
▫ Identity
▫ ….
• Give meaning to people
• The context matters
▫ Social security system
▫ Degree of poverty
▫ public perception

49. Measuring the impact
• Scale of employment
▫ Measure in: Full time employment in percentage
of affected people reached
• Investment vs. salary
▫ Ratio (no benchmark yet)

50. What can be solved through it
• People with disabilities
▫ different infrastructure
• Employing hard to employ groups:
▫ Competitiveness?  Precht
• Bring employment to “dead” regions
▫ Market access?
• Work as dignity / empowerment and not just
means
▫ Internal structures

51. Desirable Achievements
• Employee-oriented
organizationa structure
• Payment perceived as fair and
ensures good life (working
poor)
• Fair income distribution
• Fair working time distribution
• Encourage ecological
behaviour and healthy lifestyle
of employees
• Democracy & transparency

52. Limitations / Risks
• Which product can be
produced?
▫ Can you compete with
machine production?
• High investment in making
employees productive
▫ Initial training
▫ Special equipment
•

53. B – Employment Oriented Examples
Mondragon Corporation Seeing Hands

54. Type B Restaurant
Method Dialoge in the dark
• Employs blind people
• Guest experiences blindness

55. Type C – Supplier Oriented

56. What can be solved through it
• Improving competition of small scale producers
▫ Agriculture
▫ Handicrafts
• Promote Regions / Rural Areas
▫ Overlapping Type D / type A
• Reduce transaction
▫ Create direct links
▫ Product information instead of advertisment
• Make supply chains transparent

57. Desirable Achievements
• Regional, ecological and social
aspects and alternatives are
considered
• Active examination of impact
of procured product & services
• Basic structure for conditional
pricing

58. Excursion: Transaction Costs
“In order to carry out a market transaction it is
necessary to discover who it is that one wishes to
deal with, to inform people that one wishes to deal
and on what terms, to conduct negotiations
leading up to a bargain, to draw up the contract, to
undertake the inspection needed to make sure
that the terms of the contract are being observed,
and so on.”
Coase, 1961

59. Excursion: Principle Agent theory
Assumption Consequences
• In market transactions
• Principles hire agents to
perform an activity
• Information is asymmetrical
▫ Agents have insider
knowledge
• Principle as well as agent act
in self-interest
▫ Hidden agenda
• Principle not optimally
participating in market
transactions
▫ To little payment for
suppliers
▫ To high prices for clients
▫ Unnecessary / wrong
products for clients
• No transaction
▫ Lower welfare for all

60. Principle-Agent-Theory in Type C SB
• Small suppliers have high
transaction costs (Coase)
• Suppliers therefore require
intermediaries to access the
market
• Those intermediaries are the
agents
• Intermediaries often have a
monopoly (i.e. cafe mafia)
• Customers do not have a
choice of intermediaries
▫ Fair electronics
▫ Big five in food

61. Special cases of Type C
Sharing economy Cooperatives
• Supplier = individuals
• Supported by technology
• Suppliers = members =
customers
• Democratic structure
• Local proximity
▫ Knowing each other
personally

62. Limits and overlapping
Type A – customer oriented With Type D - environmental
• In comparison
• Focusses more on the impact
on the supply side of the chain
(in case of conflict)
In comparison
• More focus on the

63. C – Supplier Oriented Examples
Fair Phone Food Coops

64. Restaurant Type C
Methodology Nobelhart & Schmutzig
• Cook only with local
ingredients
▫ Not even olive oil, lime or
anything else …
• Cooking according to the
harvesting calendar
▫ Winter … work with
• The whole animal / vegetable
is eaten
▫ Not only the filet or the root
• They know every supplier in
person

65. Type D – Environment Oriented

66. What can be solved through it
• Reduce the footprint of a type
of product / service
• Encourage more
environmentally friendly
behaviour

67. The story of Stuff

68. Life Cycle Assessment

69. Desirable Achievements
• Producing goods and services
more environmentally friendly
• Encourage environmentally
friendly behaviour of
employees
• Product designe cradle-to-
cradle
• Sufficiency-active design for
ecological use
• Active communication of
environmental aspects to
customers

70. D – Environmentally Oriented Examples
Cloud & Heat Livin Farms

71. Type D Restaurant
Methodology Flour + water
• Heating and cooking with local
wood
• Local organic food
• Member of the zerofoodprint
network

72. Type E – Service Subsidization Model

73. Desirable outcomes
• Enterprise existing for the sake of subsidizing
social activities
• All profit is
▫ Reinvested or
▫ Invested in social project
• High transparency and democratic elements to
include the beneficiaries

74. Limitation / Risks
• Integration of mission in business
• Transparency of financial flows
• Limitation
▫ Subsidization = profit (100 % ?)
▫ Social operations need to run from the profit
▫ Small scale social projects
 One time investments (i.e. new school building)
 No or low fixed cost (i.e. club work)

75. E: Service Subsidization Examples
Higher Ground (trafficking)
Dharma Doo (various
projects)

76. Type E - Restaurant
Methodology
Sarangi Restaurant,
Kathmandu
• Vegetarian Restaurant
• Tourist Center of Nepal
• Has Sarangi Music
performance
• All profit goes to develop the
Ghandarba Community

77. Tentative Distribution of Social
Businesses in Nepal
7
15
4
2
3
3
7
2
4
2
Tentative distribution of Social Business in Nepal
Type A – Customer Type B - Employment Type C - Supplier Type D - Environment Type E - Society
inside KTM-
Valley: 31
outside KTM-
valley: 18

78. Beyond the reach of social business
• Merit goods
• Lack of Infrastructure
▫ Roads
▫ electricity
• Systemic Problems
▫ Poverty through interest rates
▫ Conflicts and armed violence
• Problems purely on the social sphere (i.e.
discrimination
▫ Discrimination

79. Upcoming next weekend
• Think about a social problem you would like to
solve.
▫ You should be familiar with the problem
▫ You should have a certain idea about the business