Social entrepreneurship can be difficult for beginners.
Indeed, hundreds of social businesses worldwide make a difference. This section of our website covers a few!
As you might expect, every social enterprise has its mission, value proposition, and, most importantly, business model. However, understanding how companies create, deliver, and capture value takes time and effort. We’ve been there—it’s confusing and time-consuming.
We compiled a list of social enterprise business models to help aspiring changemakers learn more. As you’ll see, they’re abstract conceptual structures. They may help you learn business modeling and choose the best project path.
Social business models
We have yet to study this topic—quite the opposite. Business modeling research has increased recently. Thus, the Internet is full of insightful content on the topic.
Business Model Zoo, a Cass Business School project, was our choice. Dr. Baden-Fuller and his team identified four business model pathways for business development: product, solution, matchmaking, and multi-sided. These categories apply to most startups and organizations, including social ones.
The following sections briefly explain and provide examples of social enterprise model types for each category.
Product model
The product model is the most specific category. Product model companies sell (or rent) standardized products/services to a customer segment and get paid. B2C or B2B, the logic is the same.
Social entrepreneurs using a product model sell/rent to their beneficiaries. Thus, customers are beneficiaries. It’s called the “beneficiary as customer model” because of that. Beneficiaries buy/rent a product, buy a one-time service, or subscribe to an ongoing service.
Solution model
Despite its significant differences, a Solution model may resemble the previous Model. The company sells directly to consumers. Instead of standard products/services, it customizes them.
In a solution model, a company develops a product/service with each customer. It requires first engaging customers to collect their needs and unmet desires. Value proposition design follows.
Social entrepreneurship has solution models. The “cooperative model” and “beneficiary as business owner model” are typical solution models. Again, beneficiaries and customers overlap.
Matching Model
Matchmaking firms match buyers and sellers. It balances supply and demand. The firm provides transactional value under this Model.
Matchmaking can be difficult. The company must create a physical or digital platform (the “marketplace”) and ensure that both segments meet simultaneously. It then charges transaction fees to capitalize on the value created.
Matchmaking models in the social sector are trickier. This cluster has two main subcategories for clarity. The “market intermediary model” involves the enterprise physically connecting beneficiaries with markets interested in their products/services as an intermediary or re-seller. The “platform as an intermediary model” connects complementary segments (buyers and sellers, fundraisers and donors, Etc.) via online platforms.
sided Model
The multi-sided Model concludes. A multi-sided model offers products, services, and solutions to different segments. Even though each target creates different value, one side usually benefits from the other’s transactions.
Social entrepreneurship uses multi-sided models. Most common:
“Customer segment cross-subsidization model”: the firm sells the same product/service to customers and beneficiaries. One pays, and the other gets it for free or at a discount. This subcategory includes “one-buy, one-give” models.
– “product line cross-subsidization model”: the firm sells two products/services to customers/beneficiaries. Again, the first segment pays; the other gets it free or at a discount. This cluster includes “freemium” models.
“Cross-subsidization with parent company model” means the social enterprise only funds its parent company. The parent organization uses enterprise profits to serve beneficiaries and fulfill its social impact mission.
“Donation model” = similar to the previous Model. The social enterprise donates its profits to a separate social organization, not a parent company. This organization uses the funds to improve society.
“Employment model”: the firm trains and employs beneficiaries, then sells products/services to conscious customers (sometimes willing to pay premium prices to generate impact).
What’s next?
This is a preview of social enterprise business models. We collected data from case studies to help aspiring changemakers gain confidence.
Our “Social Business Case Studies” section discusses how social enterprises and social businesses create, deliver, and capture value. We also examine each company’s business model framework. Check this section often!
