MGTS7308 - Social Enterprise and Not for Profits Session 9 – Customer & Beneficiary Perspective How many of you have found the Dr Anna Krzeminska & Prof Andreas Heinecke

Prof. Andreas Heinecke 1988 Foundation of Dialogue in the Dark, Germany 1998, Stevie Wonder Vision Award, New York 2005, First Ashoka Fellow in Western Europe 2006, German Entrepreneur Award (Category Sustainable Entrepreneurship) 2007, Outstanding Global Social Entrepreneur by the Schwab Foundation, Geneva 2008, Member of the World Economic Forum’s Global Agenda Council on Social Entrepreneurship 2009, Dragon Award for the category “Business with Conscience”, Dalian China 2011, Professor of Social Business at the European Business School, Germany

Weekly Schedule – Part 2 Stages 1 & 2: Establishing Scope & Mapping outcomes Stages 3 & 4: Valuing impact, understanding investment Stages 1–3: Focus on Customers/ Beneficiaries (Andreas Heinecke) Stages 1–4: Specifying Inputs and key activities Contextualising Social Impact & Stage 5 (?) Groups present their results Groups submit their reports, students submit their reflection piece and peer evaluation

Mindfulness Gratitude Start by relaxing and focus on your breath for 10 breaths Then follow my instructions

Agenda Andreas on Customer & Beneficiaries in Social Enterprises Social Return of Investment (SROI) Stages 1-3: focus on stakeholders and customers & beneficiaries in particular Group Work

Beneficiary/Customer Perspective Who will buy the product, beneficiaries? Why is this solution better or meet an unfulfilled need?

6 stages in the SROI process – today Stages 1-3 with focus on customers & beneficiaries Establishing scope and identifying key stakeholders. It is important to have clear boundaries about what your SROI analysis will cover, who will be involved in the process and how. Mapping outcomes. Through engaging with your stakeholders you will develop an impact map, or theory of change, which shows the relationship between inputs, outputs and outcomes. Evidencing outcomes and giving them a value. This stage involves finding data to show whether outcomes have happened and then valuing them. Establishing impact. Having collected evidence on outcomes and monetised them, those aspects of change that would have happened anyway or are a result of other factors are eliminated from consideration. Calculating the SROI. This stage involves adding up all the benefits, subtracting any negatives and comparing the result to the investment. This is also where the sensitivity of the results can be tested. Reporting, using and embedding. Easily forgotten, this vital last step involves sharing findings with stakeholders and responding to them, embedding good outcomes processes and verification of the report.

Stakeholders in Stage 1 of the SROI Identifying key stakeholders: defined as people or organisations that experience change or affect the activity, whether positive or negative, as a result of the activity being analysed Consider principles of materiality and transparency Make sure to connect stakeholder outcomes to activities

Stage 1: Identifying key stakeholders - Example

List Activities to Accomplish Stakeholders in Stage 2 of the SROI Resources Start with Resources Activities List Activities to Accomplish Outputs Results Expected Social Value Outcomes Achieved Social Impact Long Term Outcome Physical Human Capital Technological Financial Informational Processes Tools Events Technology Product of Program Activities Changes to: Behavior Knowledge Skills Intended Impact It’s about connecting the outcomes you identified to your stakeholders and to customers & beneficiaries in particular! Have you considered all important customers and beneficiaries? The Theory of Change model was inspired by Carol Weiss (1972) when she researched small steps lead to long term goal attainment. For more information on the theory of change, go to www.theoryofchange.org

Profit generator model Three Models Framework (Venturesome) Profit generator model Has no direct social impact Make a profit and then transfer all or some of that profit to another activity that does have a social impact CSR Trading subsidiaries of charities Thank you Water Trade-off model Does have direct social impact, but manages a trade-off between producing financial return and social impact Fair Trade Microfinance Lock-step model Not only has a direct social impact but also creates financail return in direct correlation to the social impact The Big Issue Aravind Wind farms Organic veggie boxes Models Two and Three fundamentally differ from Model One because the social impact of these firms is integral to the business model itself. In other words, even if a Model Two or Model Three type firm fails to achieve any financial return, it will still have some social impact by virtue of its trading activity (eg disabled people are employed, farmers in Africa do make more margin for their crops, the financially excluded do get access to capital etc). At Venturesome, we are regularly contacted by entrepreneurs and organisations seeking investment in Model One businesses, where the profits (if any) are to be used to fund work with a social purpose. We are investors primarily seeking social impact (albeit through using instruments that provide a financial return), and so find Model One propositions more demanding to assess. In Models Two and Three, the risk of not achieving social returns is mitigated by the possibility of getting some money back. In Model One, no social return at all can be achieved until a profit has been made. Yes No What is the relationship between customers & beneficiaries in your cases’ models? Can you increase the social impact by decreasing the financial returns? Source: (Based on Venturesome, 2008)

Profit generator model Summary of Models Profit generator model Service Subsidization Organizational Support Entrepreneur Support Trade-off model Fee for service Low income Per per use No frills Employment Demand-led training Paraskilling Market Intermediary Contract Production Deep Procurement Marekt Linkage Cooperative Model Lock-step model

Stakeholders in Stage 3 of the SROI Developing outcome indicators Collecting outcomes data Establishing how long outcomes last Putting a value on the outcome

Connecting Outcomes to Stakeholders

Establishing Duration Examples

Valuation Examples

Adapt your work in the SROI Impact Map excel sheet! Group Work Revisit your work for Stages 1- 3 of the SROI Analysis with a particular focus on customers and beneficiaries Stage 1: Identifying relevant Stakeholders: Have you considered all relevant customer and beneficiary groups? Which operational model are your cases? Ideally both subjective and objective indicators Stage 2: Mapping outcomes (Theory of Change) How do the outcomes within your scope relate to your stakeholders and to customers and beneficiaries in particular? What is the relationship between customers and beneficiaries in the operational models of your cases? Stage 3: Valuing outcomes Have you connected all outcomes and their valuation to stakeholders and customers and beneficiaries in particular? Revisit your duration estimations and valuations Adapt your work in the SROI Impact Map excel sheet!