You have now heard quite a bit about the business model canvas. And how it can be applied to developing your own business model. We're lucky to have here today, Ted Ladd, who is adjunct professor at the Hult Business School, and who has developed the social business model canvas. He will talk to us about his experiences in using the business model canvas, and also why he thinks it's necessary to further develop that model for our specific purposes. Ted, I'm happy to have you here today. Please, could you introduce yourself, and tell us a little bit about the work you have been doing with the business model canvas? >> My name is Ted Ladd, I am a professor at the Hult International Business School, on its San Francisco campus. And I just returned from teaching in the summer program at the Copenhagen Business School. I have taught social entrepreneurship for the last five years to graduate students, and we use the business model canvas from Osterwalder and Pigneur extensively. In order to help our students become social entrepreneurs and to envision, test, and then implement their social ventures. The first step in this is to recognize what a business model is. It's the logic by which an entrepreneur creates and captures value. It's not the product. Indeed it's everything outside of the product. In the middle of the business model canvas you'll see one element that's for a value proposition. That's not the features, the functions, the colors of the product or the service that you want to offer. That is the core benefit that the customer will receive by using this particular product or service. And then everything else around the business model is an extension of that. What customers do you intend to serve? How are you going to get the message to them that the product or service exists? And then how are you going to get the product or service in their hands? What partners do you require in order to make this business happen? What are the cost structures and revenue streams that are possible with this venture? So the business model canvas and its nine elements form the core foundation of envisioning this business. The genius of the business model canvas is that this is all now in one graphic. These are the nine elements that hundreds of experts, Osterwalder and Pigneur got 470 some odd co-authors. That they concluded that these are the nine elements that you should put into a business model. So this is a prescriptive model. And, in a single graphic, this is a demonstration, graphically, that all of the elements of a business model are interrelated. If you're going to change one item of the business model, you need to recognize that it's going to have ripples through all of the other elements. And perhaps you could even infer that the elements that are graphically located closer to the item that you're changing, are going to change the most. For example, if you're going to change the channel that you use, if you look at the business model canvas. That may mean that the customer segments, the customer relationships, the value proposition and the revenue streams will change the most. Those happen to be the items that are geographically proximate to the channel on a business model canvas. Now I am an advocate of the business model canvas, so I conducted some research where I wanted to understand how the business model canvas was being used by social entrepreneurs on the ground. And to do this I wanted to first start with a specific sector. And in my case there are 4 billion people in the world who are living at the base of the world's economic pyramid on less than $2 a day. And of those 4 billion people, 1.6 billion lack consistent access to energy. Electricity for light, for heat, for cooking, for radios, for charging cellphones. And I wanted to look at entrepreneurs who have created private businesses that generate revenues selling off-grid distributed electricity to some of these 1.6 billion people. They were located around the world. They were predominantly in east Africa and in India, but they are on several other continents. I spoke with 30 of them via Skype and did interviews. And the first realization that I had or that they delivered to me is that there are several elements of the business model canvas as we typically use it in the developed world that don't quite fit to what these social entrepreneurs were actually doing. So in the process of doing this research, what I found is that I needed to add a few elements. And perhaps even reconfigure the layout of the business model canvas, to create a social venture canvas, that you'll find a link to on your course page. A couple of notes here and then some examples from that canvas. The first is that once you start bringing in additional pieces, this all of a sudden stops being something that's specific to a business model, and it starts to get into a larger framework. This means that we're perhaps pushing the typical academic definition of a business model beyond its contemporary understanding. Let's recognize that, and do it anyway. So the additions that I had noted. The first, for example, would be government regulation. In many social ventures they're operating in places where there perhaps is no government regulation or if there is, it is precarious and perhaps dynamic. It's moving, so an entrepreneur needs to understand what is the existing regulation, and what could happen to the regulation if the entrepreneur is successful. Quick war story, one entrepreneur working in the Middle East was creating power plants. And he worried that if he built a power plant to serve rural villages, that the local government would come in, recognize that the villagers loved this electricity. And would therefore lower the price that he could charge. They would regulate a lower price, perhaps even below his costs but he has a stranded asset. He cannot pull up this power plant, it is already built, it is in the ground. So in order to try and assuage his concerns over that, he borrowed money from local banks who could exercise political pressure on the local government, to ensure that the prices did not go too low, so that he would be unable to pay back local banks. In other words, in his estimation of his business model, he recognizes that the government regulation could change. And that would jeopardize his capacity to have a sustainable business and he took steps in order to confirm that that didn't happen. Another example of the addition that I have made to the Osterwalder and Pigneur business model canvas, is the affected harm and the affected benefit. As you're walking through the canvas, we all as social entrepreneurs need to recognize that our goal is to leave the local community better off, than when we found it. So we need to explicitly recognize the affected harm, the pre versus post benefit we're going to create. We also need to recognize that even if we have good intentions, we're going to create problems. People who are selling distributed electricity in India for example, through networks of women have found that they're empowering women and that's usually a good thing. There's a net benefit to the women in terms of education level and power and authority. But there are also some deleterious consequences from that, for example in their family dynamics, that can sometimes lead to domestic violence. A social venture canvas needs to recognize that there are possible consequences. That doesn't invalidate the reason for creating the venture, it does however require some explicit planning upfront. I've also borrowed in the social venture canvas several different ideas that come from the lean canvas, which is another variant on the business model canvas. It comes from Ash Maurya and a book he wrote called Running Lean, where he, for example, advocates that any entrepreneur start with a conc- explicit conceptualization of the problem that you're trying to solve. And that you keep that in mind all the time by attaching that to your canvas. These are some of the additions that I have made to the business model canvas and to the lean canvas. And that I hope that you find it useful in your social entrepreneurship course.
