Choose a high catalysis factor (HCF) model
Social Impact Business Modelling Principles no. 2
As a social change-maker, you measure success by both the breath and the depth of the impact you make. The more people you reach, the better you perform on both indicators. We all have limited time, resources and knowledge. On the long run, the impact of the momentum you enable will always outweigh the benefits of the change you personally make.
By focusing on catalysing change, a social business could improve more lives. This is why I call business models geared towards enabling others high catalysis factor (HCF) models. Four different examples of HCF models are presented below for consideration. I hope impact organisations might benefit from using them to reflect on their own ability to enable change.
Prevention-focused business models
Human suffering is usually a symptom of underlying complex socio-economic problems. We need emergency systems to ease acute pain, but these systems will always be reactive and therefore imperfect and ineffective.
On the long run, prevention systems yield better results. Preventive models aim to eliminate the root cause of a problem. Think of vaccination, a typical prevention system. Despite the fact that not everyone vaccinated would necessarily contract the disease without it, the overall cost of vaccination to society, both in terms of lives and resources, is significantly lower than not vaccinating and treating the victims.
Following on the example above, a reactive business model for preventable disease treatment in Africa would be to send more doctors. A better, preventive model would be to build vaccination centres. Finally, a HCF preventive model would focus on addressing underlying logistical, technical, political or social barriers to vaccination, such as solving problems of clean syringe access and waste management for the existing immunisation network (1). This third model aims to enable more efficient use of resources already deployed for prevention (instead of creating a parallel prevention system, like the new network of vaccination centres).
Business models for initiating institutional change
The institutional framework of a country defines the political, legal, financial and socio-economic environment citizens live in. These structures create very powerful and often subconscious mental habits guiding our daily life; they are frames of reference for right and wrong. In some cases, like which side of the road is the ‘right’ one to drive on, the habit has little consequence. Others, like who has the right to drive, have major impact; think for example how your life would change if you didn’t have the right to drive.
Changing the framework — like lifting the ban on women driving — is not easy and the final impact is uncertain. But when it works out, it can have profound consequences for both individuals and for society as a whole (2). Changes in regulation, taxation, school leaving age, the statutory minimum wage or mandatory immunisation policies can be formidable levers to creating better living conditions.
Organisations advocating for institutional change can have a very high catalysis factor if they pull on high impact levers. Take the example of the International Chamber of Commerce advocating for facilitating the processing of humanitarian relief shipments at national borders. In their business case document, they raise the example that some goods not on the approved list of relief items might be held on the border and never make it to where needed. Imagine how many lives, how much wasted effort could be saved just by updating that list.
Advocacy of this kind requires specific strategies and therefore a special business model. Atalanta is a great example of a small, private advocacy business. To succeed, a similar organisation might need more influence and networks than money. It will need smart negotiators on the team, not fundraisers. They will spend their resources on research, not on relief. Their value proposition will be a high-risk, high-reward one. Their target customers will be politicians, industry leaders and other advocacy groups; they will need to focus on designing solutions that those customers would want to buy into.
Business models to directly service other change making organisations
The previous two models focused on enabling by eliminating barriers and creating opportunities. A different, but just as useful business model is to directly service other change-making organisations and create a supportive ecosystem. The social sector is finally catching up on what James F. Moore heralded in 1993 and the for-profit world already has an increased awareness of: cooperative networks create better solutions than standalone organisations.
Focusing on what could be your best contribution in the context of an ecosystem is likely to yield a completely different value proposition and business model than attempting to save the world on your own. You will be looking for gaps in the value chain instead of trying to build the full end to end system on your own.
An example to illustrate this is +Acumen. The business model of Acumen.org, the parent company, is to invest patient capital in social enterprises. In their own words, they are a “venture capital fund for the poor”. With time, they noticed a gap in the value chain: there were insufficient capability building tools and opportunities for the social entrepreneurs they were supporting financially. The resulting lack of business acumen impacted the productivity of the whole ecosystem. Acumen.org decided to create a spin-off company with a business model targeted to bridge the capability gap and +Acumen was born.
‘Best value guaranteed’ business models
Another great way of indirect enabling is direct support of individuals so that they can take charge and improve their own lives. In fact, according to the charity evaluation group, GiveWell, this is the ‘best bang for your buck’ approach.
The following broad business model guidelines can be derived from GiveWell’s recommendations to achieve high impact with high certainty:
- Overseas over local impact models: more lives can be saved with the same amount of money in developing than in developed countries.
- Functional over exploratory models: eradicating the root causes of poverty is long-term, exploratory research just like curing cancer. The same way as in cancer research, investments are high risk: there are a lot of dead ends. If you want to promise your customers with certainty that you are improving individual lives, opt for a direct impact poverty alleviation model instead.
- Building capability over building solutions: in most cases, communities themselves know best how to solve a problem in a way that is easy to adapt and works for them on the long run. The best help from the outside is to remove barriers and provide tools, not to dictate a particular solution. An interesting and extreme example is Sugata Mitra’s “Hole-in-the-Wall” project, which enables children to teach themselves and each other.
Finally, here are some great (and completely free) resources to assess, evaluate and innovate your business model and improve your catalysis factor:
Business Model Canvas (BMC): developed by Osterwalder, an industry-agnostic tool for business modelling widely used by social enterprises as well
The field guide to Human Centred Design: a detailed playbook with many practical tools for designing solutions that work
GiveWell’s cost effectiveness model: a model constantly updated, completely transparent, for measuring social impact per dollar spent.
Business models for social enterprise: a free course from +Acumen with great content; also gives detailed guidance and practical workshop plans for learning to use the above mentioned BMC specifically in the social sector.
(1) The Pan African Medical Journal. 2017;27 (Supp 3):12. doi:10.11604/pamj.supp.2017.27.3.12127
(2) Thwink.org: Solving Difficult Large-scale Social Problems with Root Cause Analysis
