The Social Value Generator Guide
In designing the Social Value Generator, we wanted to focus on understanding the particularities of social businesses and to define the essential areas for building impact business models.
Thus, we defined that in the Social Value Generator the deep analysis of the problem was essential. Unlike other types of businesses, in the case of impact businesses the identification and analysis of the problem to be solved (as well as its causes) is the identified opportunity. Thus, the use of the Social Value Generator must always begin with the identification of the problem and its causes, answering the questions:
- What is the central problem to be solved?
- Who suffers most from the identified problem?
- How big is the problem?
- What are the main causes you want to address?
- Are there alternative solutions that seek to minimize the effects of the problem? If so, what is the dominant one?
- Why is the dominant solution doesn’t solve the problem?
As an example of the importance of deeply understanding the problem we want to solve, we can mention “Evidence Action,” a US nonprofit organisation that wanted to reduce school failure in Africa. After some research they realised that the high dropout rates were due to a high absenteeism caused by a very high prevalence of ascaridosis (commonly known as worms). With a treatment costing around 50 cents per child, they can now solve one of the main causes of the problem, increasing school success and generating a multiplier effect in the country’s economy.
After analysing the problem and identifying the “target segments” we proceed to the Value Proposition. Here we have to answer the question:
- What is the expected value generated for the target segment / beneficiaries affected by the identified problem?
It may seem strange to think of a value proposition even before we focus on the solution, but here the important thing is to really define what value we want to create.
It is also crucial to have a value proposition focused on a specific set of beneficiaries. There are rare cases where a solution focuses on more than one beneficiary. A second value proposition will be discussed later when discussing the importance of the economic model.
As an example, we can talk about SPEAK, a Portuguese impact startup that defined its value proposition as the creation of an opportunity to learn a local language and to establish interpersonal relationships among different immigrant communities in a given city.
Note: It is very important to build the solution based on the identified problem and value proposition — focusing a business impact on a product / service and not on the identified problem can prevent the identification of potential solutions.
Finally we came to the Solution. At this moment we know in depth the problem we want to solve, we have a value proposition that we want to create for our beneficiaries and for other potential stakeholders and therefore we have all the elements to develop a solution that really generates impact.
We begin by describing the solution by answering the question:
- How does the recommended solution work?
Often the design of a new solution starts from the analysis of the bottlenecks and failures of the dominant alternative solution, improving its weakest points.
The solution results from the identification of the main activities generating the value identified in the proposed value.
Once the solution is considered, it is time to reflect on which stakeholders can also benefit or have an interest in the project, since they can later have a role in the economic model of the project. Each stakeholder involved will have after benefiting from a clear value proposition that will keep him interested in developing his role in the long run. Here two questions are essential:
Are there other key stakeholders who can benefit from solving the identified problem?
- What value do you want to generate for these key stakeholders?
Returning to the SPEAK case, for other stakeholders, whether they are companies, local people, organisations that work with migrants, embassies or municipalities, the value proposition is the opportunity to learn foreign languages with native teachers at lower cost than the market standard.
This exercise allows monetising various effects on potential stakeholders that are not necessarily the target audience. Example: reduction of school absenteeism can have an effect on the state budget, and the ministry of education may be willing to internalize this effect by investing in an impact initiative. At this stage it is essential:
- Map all effects;
2. Map potential stakeholders and the potential for internalising effects;
3. Build a second value proposition for potential stakeholders to engage.
The definition of a sustainable economic model is essential. So it is very important from the first day to know how to give answers to the following questions:
- What revenue can be generated?
- What abundant resources can be used?
- Are there key stakeholders available to pay for the impact generated?
Defined the solution and your economic model is the time to move on to the last three blocks.
The first of the three is Impact. Here it is essential to define impact assessment indicators and a way to monitor them. Indicators are crucial to ensure that the proposed value is being implemented.
- What are the key impact indicators to monitor?
- How do we intend to monitor them?
These indicators can be quantitative or qualitative, and the important thing is that there is a clear way to monitor them and that their analysis is relevant to the analysis of the project’s contribution within the context of the social problem.
Next comes Innovation. It may be surprising to include a block for innovation, but we believe that to develop the best solution for the problem we are trying to solve, we need to identify from day one what makes us better than the key alternative solutions. The questions to be answer are:
- How does this solution differ from what already exists in the market?
- What are the comparative advantages?
The answer to these questions helps us to plan the present, but also to identify the factors that will allow the solution to grow in the future.
Finally, we have the growth and the question:
- What is the growth and dissemination model of the solution?
Going back to the example of SPEAK, today it is possible to see that this social business is growing through the development of a social franchising.
At this stage it is crucial to make a survey of potential intrinsic bottlenecks and strategies to overcome them. This exercise allows us to design a strategy and a growth model based on: (1) the innovation of the initiative by comparison with the dominant alternative solution; (2) their intrinsic growth challenges.
After this long explanation of the 10 blocks of the Social Value Generator, please don’t forget that this are just hypotheses that need to be validated. Influenced by Eric Ries’ Lean Startup we always look at the Social Value Generator as a work (always) in progress where we place a series of hypotheses that have to be validated, with interviews, field visits and a lot of experimentation.
Our experience as social entrepreneurs, and as mentors of social entrepreneurs, is that the initial plans rarely materialize, but that planning is always critical. The Social Value Generator helps you think about the key points of creating an impact business, but the entrepreneur needs to keep on reflecting on ways to improvement.