Social Entrepreneurship and Innovation

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Social Entrepreneurship and Innovation
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Presented

• byJamila Aman, Executive Director
• Northwood Neighbourhood Services

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Remember

• A bad idea with a champion is better than a good
  idea without a champion

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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) Management Service
  organization
• Venture philanthropy, why social enterprise

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Social Entrepreneurship

• Why Social Enterprise?
• To generate an restricted revenue
• To use an restricted revenue for advocacy) the
  forbidden word)
• To use revenue from social enterprise it for
  programs/ services that are hard to cell to donor
  agencies
• To create social purpose enterprises

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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 Overview
D. Throughput
A. Output

• C. Input

Current State
Strategic Implementation
Annual Strategic Review and Update
Future State
Change Management
5. Current State Assessment and Business Planning
Parallel Process with Key Stakeholders
2. Strategic Planning Vision, Mission, Values
4. Objective Development
B. Feedback
3.Strategic Priority
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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 organizations 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 Format
• Consider 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?
Internal Business Processes
Client
Vision Mission Values
Answer the question In order to achieve your
mission, what business processes must you excel
at?
Answer the question How do you wish appear to
your client/customer?
Human Resources
Answer the question How do you sustain your
ability to learn and grow?
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Earned Income
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Results in Other Ventures

• 90 of successful ventures relate to the
  non-profits 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
• Enhances profile

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Balancing Mission and Financial Return
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Product Development ProcessPlanning 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 (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 Jerrys)

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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 peoples perspectives
• Be excited, accept thoughts/play with them - have
  fun
• Bring experts from different organisations
  together
• Discuss with others, family, friends, associates
• Generate a list of opportunities e.g. Northwood
  case

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Level 1 Screening Criteria

• Does the idea further your vision, mission,
  values and strategic priorities?
• 1no, 2partial fit, 3full fit
• Is there a potential customer benefit?
• 1none, 2some need/some customers, 3urgent
  need/many customers
• Are there profit potential (by third year)?
• 1 less than 20K, 2more 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?
• 1no, 2 neutral 3yes
• 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
Fit with Organisation
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First Set of Measures
Product A
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Second Set of Measures
Product A
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Product A
Strength of Idea
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-profits purpose or funding

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Structure
Non-profit Organisation
Business
Business
Business
Intellectual Property
Enterprises Holdings
Business
Operational Support Purchase Of Service
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 PossibilitiesManagement Service Organization
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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 09

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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 PhilanthropyHigh 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 Ventures Social 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
• 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
• VP Association

• Examples
• Charity Technology Trust
• Plan International
• Tomorrows 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 Tomorrows 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 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

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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

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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 Organisational Strategic Plan
Internal Marketplace
ORGANISATIONAL EXPERTISE
Funds Portfolio
BUSINESS PLANNING Extra capacity expertise
Capital Innovation Fund
Revolving Innovation Fund
INVESTOR EXPERTISE
Endowment Innovation Fund
INVESTOR
bidding
investment
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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
• 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, social return on investment

• 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
• 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 Learning's

• 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 from venture
philanthropy or Social Enterprise to your
Organisation?Remember a bad idea with a champion
is better than a good idea without a champion !!!!
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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 Enterprisewww.cedworks.com
• Centre for Social Innovationwww.socialinnovation.
  ca

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More Great Resources

• Toronto Enterprise Fundwww.torontoenterprisefund.
  ca
• Aperio Consultingwww.aperio.ca
• Andrew Horsnell Associateswww.AndrewHorsnell.co
  m
• Canadian Social Entrepreneurs Networkwww.csen.ca
• npEnterprise Forum, www.npEnterprise.net
• Sustainable Enterprise Resource
  Centrewww.sustainabilityincubator.com

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More Great Resources

• Canadian Conference on Social Enterprisewww.socia
  lenterprise.ca
• Business and Sustainable Developmentwww.bsdglobal
  .com
• Canadian Centre for Social Entrepreneurshipwww.bu
  s.ualberta.ca/ccse/
• Canadian Business for Social Responsibilitywww.cb
  sr.ca
• Sustainable Enterprise Academywww.sustainableente
  rpriseacademy.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, OntarioL4T 3K4 Direct
416-618-3041 jaman_at_northw.ca http//www.northw
.ca