Legal Form Strategies

One of the ways that social entrepreneurs innovate is by adapting existing business models and practices to socially-oriented outcomes. This has resulted in a variety of for-profit, nonprofit, and hybrid business structures that have been used by entrepreneurs to create and deliver social value, which we’ll be continuing to profile on our blog in the coming weeks.

But to us, the idea of a business model goes much deeper than a legal form. There are many variations within these forms. To date, there has been limited research on the types of models and strategies that social entrepreneurs use beyond a few broad categories. We asked ourselves: could we organize major business model differences in a way that is more useful?

In an effort to do this, we were intrigued by and have been adapting a matrix framework originally developed for the “Changes in Business Models” project at MIT headed by Thomas Malone and Peter Weil. We sought to make their matrix idea more applicable to both for-profit social ventures and nonprofit organizations at varying stages and sizes, by changing the two key dimensions. We want to get your reactions to our current version of this peer matrix, which focuses on goods delivered (instead of what they call asset types) and value added (instead of asset rights):

1. Goods Delivered – Refers to the “good” that an organization delivers to its customers or beneficiaries. These goods can be in the form of 1) physical products, 2) financial products or services, 3) human services, or 4) intangible goods such as knowledge and networking connections.

2. Value Added – Refers to the way in which an organization creates value in the process of delivering the good(s) and how the organization is linked to both the good(s) and its customers/beneficiaries. The main ways that organizations create value can be as 1) creators or producers, 2) distributors, 3) lessors or lenders, or 4) brokers of a specific good. We collapsed these four into two options, for simplicity.

Taken together, we get the eight business model types shown below:

CASE Business Models Peer Matrix – DRAFT

This is still very much a work in progress. We have used this matrix in our CASE Business Model Profiles we link to in each of our blog posts (Bull City Forward, Catchafire, Simpa Networks, and Lifeline Energy have been posted so far). We believe it can be very helpful to parse business models, especially models that operate within multiple peer groups or “types.” For example, think of Habitat for Humanity, which has built its model around blending the brokerage of new real estate parcels (physical good brokerage) with the attraction of highly organized volunteer labor (human service distribution) to build houses (physical good creation) on those parcels for people that need them. But considering their work as three models, each of which can be compared to peers and refined separately, can be useful. Also, in addition to looking for lessons from other organizations sharing your business model type(s), we believe there are other uses of the framework, including:

  • Exploring Horizontal Expansion: If you are a physical good distributor, like VisionSpring, which sells eyeglasses to BOP markets, you can look across at different kinds of complimentary goods you can add to create more impact. VisionSpring is now hiring optometrists to create a new kind of hub and spoke sales node in countries like El Salvador. They are adding a higher-quality human service component to their physical product distribution model.
  • Exploring Vertical Expansion – We’ve seen several organizations look to scale by moving effectively from the create/distribute row of adding value, to the lease/broker row. It seems that there are often potential efficiencies to be had in the second row. Mothers2mothers, a social venture in South Africa that works to prevent HIV mother-to-child transmission by developing and hiring Mentor Mothers (a human service provider in the typology), is scaling in Kenya largely through a licensing and brokering model in which they will stop delivering nearly all direct services in Kenya, but will train government and local NGOs to do the work themselves.

We Need Your Input: When you look for business model ideas now (operating efficiencies, pricing strategies contracting strategies, etc.), where do you look for possible improvements? Do you look mostly at others in your field or your local networks?

What do you think of our beginning peer matrix for business models? What type or types of business models are you operating? Is anything missing from our framework? What would you like to see us include as we develop this model further? Is it useful for you to compare your organization to others of the same type?

Is it useful to consider moving horizontally or vertically?

Do you have answers to these questions?  Want to hear what others are saying? JOIN THE CONVERSATION AT the Social Edge!

We also want to shout out a huge thanks to CASE Scholar Melissa Mehm for writing a paper this term that helped improve our thinking on the matrix.