Moving Beyond Business for Good: How Markets Can Transform Systems for Good 5 Entrepreneurial Case Studies June 2020
Executive Summary
Can you use a business model to not just to do well, but also to radically change a system? At Ashoka, the global network for the world’s leading social entrepreneurs, we’ve met hundreds of groundbreaking entrepreneurs around the world who have taught us that social businesses can be a powerful pathway to social change. Entrepreneurs we’ve learned from so far include the first free provider of Massive Open Online Courses (MOOCs) that’s registered over 12 million students, and an Indian eye care company that has provided affordable cataract surgery for over 32 million low-income patients, the majority of whom were treated for free or at minimal cost.
to deliver increased impact through a market-based approach. Why would a social entrepreneur prefer a market-based solution over one that is funded for free? There are several reasons social entrepreneurs often cite: Firstly, with the right solution, it’s possible to bring in greater capital than is possible with aid or other models. The volume of investment capital far exceeds the capacity of the donor markets.
We’ve met hundreds of groundbreaking entrepreneurs aroud the world who have taught us that social businesses can be a powerful pathway to social change.
The fact that there are successful models for market-based social impact, however, does not mean that it’s easy. Social entrepreneurs have repeatedly asked: what are practical examples they can learn from? They want examples of how to use business models to reach greater scale of social impact, or to effect systems change, in a way that doesn’t compromise their Secondly, it enables the entrepreneur original social mission. to diversify their funding sources away from philanthropy, which can be To address this challenge, we selected quite precarious. And by switching to an five social entrepreneurs from diverse earned revenue model in which they can sectors that serve as examples of marearn income directly from customers, ket-based models of systems-change. social ventures also have the potential to be more sustainable than projects that Why Does Market-Based Sysrely solely on donations for funding. tems-Change Matter? Traditional models of social impact are funded through philanthropy: an NGO raises grants and donations, and uses these to provide services for free to beneficiaries. However, social entrepreneurs often adopt business models
Thirdly , market-based-solutions can mobilize many actors as a result of engaging partners, competitors, suppliers, and consumers along a supply chain. The market is a particularly powerful way of opening up systems as, in contrast to NGOs or aid agencies, actors in the same
market begin to co-operate and collaborate with many others to solve a shared problem. Consider a platform such as M-Pesa, for example. M-Pesa is the mobile money platform through which a significant portion of transactions in Kenya are now conducted. Launched as a private service by telecoms provider Safaricom, M-Pesa has enabled millions of small businesses and vendors to move their services onto the platform, greatly improving security for small shopkeepers and reducing the risk of cash transactions. Finally, the first market mover is often also a market catalyzer. By demonstrating there is a new, untapped opportunity, they open up the possibility for many others to also participate in the marketplace and thereby accelerate the spread of a solution.
What is Market-Based Systems Change? Market-based systems change can be defined as any approach that leverages supply and demand for goods or services in order to tackle the root causes of a problem. Purpose-driven businesses can introduce new products and services into a system to create shifts that tackle the root causes of a social problem (systems-change). This can be a much more lasting solution than charity or aid which is often a short-term relief for an issue.
5 Market Failures Innovations Can Address We’ve observed five types of market-based innovations that also create social impact. These include:
1 Unaddressed Market Innovation:
these are innovations based on the realisation that there is an untapped or missing market that is not being addressed by current solutions, or is only being addressed through philanthropy when a business model could work instead. An unaddressed market, for example, can exist due to intellectual property challenges - with a producer being unable to monetize the value of the intangible asset (e.g. LightYears IP has helped create patents for more premium coffee for Ethiopian farmers and supported the Masai people in creating a trademark to ensure they are benefiting from the tourism industry). Another unaddressed market can be due to informal economies and asymmetric information, where one of the players does not know enough about the other participant in order to be able to interact with them (e.g. Indian Housing Federation find new ways to qualify workers in the informal economy who can’t prove their income for affordable housing loans) Additional examples include: Riders for Health, d.Light, NUUP, M-Pedigree, Karibu Homes
2 Pricing Innovation: these are inno-
vations based on finding a new pricing structure that enables many more people to be reached with affordable products than before. This might be through: the use of a cross-subsidy model (e.g. Aravind Eye Hospitals) where one customer group’s payments are high enough to cover the needs of
4 Supply Chain Innovation: these
a customer who can’t pay as much, a ‘Two-for-One’ model (e.g. TOMS Shoes, Warby Parker) where the purchase by one set of customers can create a donation to people who can’t otherwise afford the product, and a flip the payment model , where the way a customer buys the product is changed entirely, such as by enabling new types of products to be bought by installments or rented (e.g. Village Telco offers consumer financing for telecommunications access, Angaza, M-Kopa, and SELCO enables clean energy access by offering financing, rent-to-own, or pay-as-yougo options for solar panels). Additional examples include: Aurolab, VisionSpring Product Design Innovation: these
3 innovations involve taking a product
and radically redesigning it so that it becomes affordable to customers that would not otherwise be able to access that product Designing for affordability might be achieved by finding ways to lower cost margins or by sourcing components at a lower cost. (e.g. DripTech created a low-cost drip irrigation for smallholder farmers who can’t afford a pump by designing it to be distributed by gravity, Sound World Systems created a hearing aid for a fraction of the regular price by adapting bluetooth headset technology, and Embrace created an infant incubator to reduce child mortality at 1% of the price of traditional incubators by ensuring it can operate without electricity.) Additional examples include: d.Light, IkoToilet, FrontlineSMS, ColaLIFE
are innovations that create impact by changing a part of the network between a company and its suppliers needed to produce and distribute a specific product. These include innovations that can reach previously unreached customers by borrowing another supply chain (e.g. ColaLife distributes medicine to new parts of Africa by packaging its medicine to fit into Coca Cola crates), aggregating information that allows more ethical decisions within the marketplace (e.g. SokoWatch enables small shopkeepers at the base of the pyramid manage their inventory via a mobile app - making it possible for buyers and suppliers to plan for bulk orders), making ethical practices the norm by creating certification (e.g. GoodWeave aims to end the use of child labor by creating a certificate that recognizes child labor free carpets) or by creating brands rooted in transparency and accountability for ethical practices (e.g. Patagonia for athletic wear, Oro Verde for ethical coffee and chocolate), or by substituting supplies from unsustainable sources to sustainable sources (e.g. Canopy works with over 750 companies to change their suppliers to environmentally friendly options such as ensuring the Harry Potter series is printed on environmentally-friendly paper). Additional examples include Village Telco, Community Enterprise Solutions, Frontier Markets, and Previta.
5 New Marketplace Innovations:
these innovations are creating new marketplace mechanisms where people can come together to exchange value where they were not able to
Case Studies
previously, or where they are not able to exchange value at greater scale and efficiency. Online platforms, the sharing economy, or crowdfunding have all been some of the critical enablers of these new marketplaces. (e.g. Alison. com has enabled employers and over 12 million students receive practical job training via an online learning platform, Donorschoose.org has enabled over 3 million donors help meet the supplies needs of teachers in their classrooms and Kiva.org has helped provide over $1.3 billion to the underserved in affordable loans in over 80 countries.) Additional examples include: Previta, Village Telco, Kickstarter, Couchsurfing, Timebank, and peer to peer lending platforms serving the bottom of the pyramid.
5 Case Studies on MarketBased Systems Change Being able to create innovations that can create social impact while remaining market-based is a journey. Five case studies are offered as a way to better understand the key decisions, lessons learned, and pitfalls avoided in order to reach impact. Case studies include:
• Alison - First Free Massive Open
Online Learning Platform, Designed to Meet Modern Job Needs Serving 12 million registered learners and 2 million graduates read case study
“Few challenges can be fixed by any individual. We need to think of scale from the outset. We need to think about sustainability. We need to stop talking in silos. We need a real shakeup.” • Aravind Eye Hospital
particularly indirect impact, which is especially critical if relying on donors as an additional source of funding • Being aware of the strengths and weaknesses of open source - it allows a venture for build trust in a project and engage partners quickly, but can also make it more difficult to find • FrontlineSMS investors that share the same vision. Saving Lives through SMS Downloaded over 200K times by citizen • Being patient. It’s not feasible to open up without first establishing your marorganizations in over 190 countries read case study ket-based solution, and it takes time to reach a more open model that can enable systems change • Toast Ale Brewing with Fresh Surplus Bread. Why Opening Up is Critical to Scale Catalyzing a Movement Against Food Waste If a social entrepreneur’s focus is Model adopted by international brewers in Brazil, South Africa, and Ireland systems change, it’s vital to open up. Exread case study plained masterfully in On Innovators and Pinballs, opening up is to “scale through the indirect inspiration or motivation of • VillageTelco copycats and competitive responses that Making telecommunications accessibuild on, extend, and sometimes even reble to the last mile place the initial pioneer.” In other words, Over 7,500 devices sold to provide lowa single company by itself is unlikely to cost wireless access points read case study create the amount of change needed to address the size of problems in urgent need of solutions - opening up is a key to Lessons Learned social impact at scale. Lessons learned and pitfalls to avoid While opening up seems scary for cited by the entrepreneurs included businesses - we’ve encountered social the importance of: entrepreneurs who have found that • Putting free or affordable access as opening up can maintain or even somea core company value and goal, since times improve their financial bottom innovation that brings down cost is good for business and creating greater line, and radically increase the scale of social impact they can create. As Frontimpact • Choosing investors wisely to ensure lineSMS founder Ken Banks describes, “few challenges can be fixed by any individual. they match your social impact goals We need to think of scale from the outset. We and stage of growth • Looking for pathways to scale beyond need to think about sustainability. We need to stop talking in silos. We need a real shakeup.” growth such as open-source consultation and replication, training, and Join us in exploring the journeys of five consulting, developing trainings for such social entrepreneurs and consider trainers, and outreach and education ways you can shake up your approach campaigns. to impact through two critical levers: • Having a shared-vision to create leveraging market-based solutions and partners, not competitors • Investing in ways to measure impact, opening up. Eliminating Needless Blindness Treating over 4.1 million outpatient visits a year; replicated by over 320 hospitals in 27 countries read case study
Acknowledgements ❏
The authors are “Reem Rahman, Olga Shirobokova, Odin Mühlenbein, Nadine Freeman and Mark Cheng for Ashoka Globalizer”
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“Made possible by the support of SDC-Hystra. Interviews with Ken Banks (FrontlineSMS), Michael Feerick (Alison), Steve Song (VillageTelco), Dr. Devendra (Aaravid Eye Care Systems), and Tristram Stuart (toast Ale). Creative Commons creativecommons.org/licenses/by-sa/4.0 Licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.