Lecture 7: Scaling impact Flashcards
(19 cards)
Why do new ventures want to grow?
Primarily to drive revenue and profit generating motives, but also;
- Generate revenue and profits to repay debts or investments made during startup stage
- Survival today and success tomorrow
- Meet increasing market demand (demand side)
- Reduce material costs due to higher volumes (supply side)
- Increase profitability (economies of scale - reduced per unit variable costs / spread fixed costs over more units )
- Economies of scope – multiple product or service offering, activities with the same resources
- Reduce competition by capturing market share – Brand leadership
- Increase sector/ market share and through product/service diversification
- Control market pricing
- Continually create increased shareholder value
- Increase or creates access to specific (unique or valuable) partners
- Access to human resources (skills, knowledge, experience…)
- Access to financial resources (less expensive, longer term… investments)
- Social, cultural, political influence, industry and institutional norms
What are strategic opportunities for growing? (6)
- Increased domestic market share (economies for scale/scope, brand recognition)
- Internationalization and Foreign Direct Investment
- Diversification (product/service)
- Merger & Acquisition (external growth)
- Licensing model ( IP / processes)
- Joint Ventures / Alliances
What does scaling up mean?
Delivering more benefits to the same beneficiary group such that a greater number of users receive the same type of benefit.
This is also referred to as the quantitative approach
What is scaling out?
Widening the types or scope of impacts and in this way expanding the number of beneficiaries served.
This is also referred to as the qualitative approach
What are the 3 main barriers to growth according to Davies et al. 2019?
- value based barriers
- business model barriers
- institutional barriers
What 3 different value based barriers are there according to Davies et al 2019?
- Ethical value differences:
Misalignment of impact mission-based values can lead to limiting the number/types of available partners ( funders / distributers…) - Growth philosophy:
Growth should not be at the expense of the impact mission - Ethical principles:
Social and environmental fairness is required from supply chain and other partners to manage (minimize) negative externalities caused by them.
What 3 different BM barriers are there according to Davies et al 2019?
- Access to finance:
The dual mission is incongruent with the return on investment required by
commercial capital, yet the commercial growth of an established social
enterprise to further social impact is less appealing to social financiers than the creation of new social enterprises - Access to human capital:
Governance model leads to reinvestment. Employee remunerations and rewards are lower than normal market rates. Thus, recruitment and retention is more difficult. - Identify authenticity:
Finding and retaining suitable, stable supply chain partners to prevent compromising on mission authenticity.
What 2 institutional barriers are there according to Davies et al 2019?
- Consumer culture:
…commercial ventures have a benefit-to-customer message. …, social enterprises have a benefit-to-distant-others message. Challenges lie in creating customer awareness, and in mobilizing / activating customers to act / buy even when prices are higher and perceived customer value may thus be lower. - Business norms:
Investors, banks and other institution are still more familiar with commercial enterprises, their risks and rewards. Traditional practices, risk aversion and a lack of knowledge create difficulties for social enterprises seeking to raise finance.
In what 3 ways can we respond to the value based, business model and institutional barriers?
- Value-based decision making:
Develop shared Value-based Partnerships, that incorporate congruence between different value systems as the enduring principle that underpins contractual relationships. - Leveraging Social mission:
… seek to raise finance from impact investors and social finance committed to supporting social change. The pursuit of social mission is a pre-requisite for accessing social finance, and thus social finance is not accessible to commercial ventures. - Anchoring:
Creating close connections with local communities and industry can help
to increase awareness and change attitudes.
What business model related SEE growth challenges are there besides the barriers? (5)
- Success in a SEE niche does not translate to larger or other customer segments
- Highly personalized (customized products/services) local focus, unique resources, location based (tours, experience-based services)
- Coordination complexity (management, operational data, supply chain…)
- Supply side factors: access to human, material resources, transport infrastructure…
- Access to finance
What non-business model related SEE growth challenges are there besides the barriers? (4)
- Not all founders want to grow their business (psychological)
- Founder / Founding team skills, capabilities, network scope
- Regulations (laws, permits, institutional norms, worker and environmental protection…)
- Governance structure, increased stakeholder participation and influence
What is horizontal integration in the context of SEE growth?
Acquiring another organization to grow and deliver the impact
What is organic growth in the context of SEE growth?
simply increasing impact by - growing the size of the organization
Name 4 ways to actively spread your (the firms) impact?
- Social franchising – replicate business model across multiple locations or geographies
- Support and provide (business model) knowledge, training, advise to other organizations, enterprises
- Create more awareness and influence consumer and business attitudes - dissemination,
- Stimulate institutional and regulatory change – lobby and campaign, build networks, alliances
What are the 5 challenges un achieving small firm growth according to Hynes 2009?
- Access to finance and investment
- A lack of understanding of the concept of a social enterprise by financial and non-financial stakeholders and the general public
- Pricing of services and managing cash flow
- Problems in recruiting and retaining staff
- Personal issues in managing the changing form of the social enterprise
In what 3 business forms did Shaw and Carter (2007) classify social entreprises?
- not for profit
- for profit
- hybrid
According to Shaw and Carter (2007) to what is the challenge between priorities for commercial and impact mission related goals when trying to scale an enterprise related?
the willingness to “trade-off” one for the other
the way that entrepreneurs who lead social enterprises make tradeoffs in adjusting their BM and prioritizing between social and financial goals is a …
is a critical factor in determining the degree to which their enterprise will scale
What did some research find about the likelihood of an entrepreneur growing the social entreprise?
Some research seem to indicate that entrepreneurs who prioritized financial goals over social ones were more likely to grow their social enterprises and achieve greater impact
