The term ‘business model’ has become a buzzword in many organizational contexts. Who hasn’t heard yet of sayings like ‘Social enterprises need a business model to become more financially independent’ or We’re gonna have to change our business model if we want to remain successful’.
Maybe we can start with the definition of a business model? The most simple definition of business model is given by Gassmann, Frankenberger & Csik in ‘The Business Model Navigator’, the authors of the ‘Magic Triangle
Another very well-known instrument the Business Model Canvas from Osterwalder & Pigneur. They argue that we need “a business model concept that everybody understands, one that facilitates description and discussion. The challenge is that the concept must be simple, relevant and intuitively understandable, while not oversimplifying the complexities of how enterprises function.” They define a business model as:
Both business model instruments, as well as some derivatives and new concepts, are discussed in this learning.
Maybe, as a social entrepreneur, you noticed that business models always talk about profit? From the definitions above you can even deduce that the purpose of a business is to make profit, and maybe this even causes friction because you are concerned with social impact? If so, we completely understand. It took us some time as well to align the concepts of social impact and profit. And don’t worry, we’re not the only ones struggling with this integration. For example, there is a group of entrepreneurs who prefer to talk about benefit rather than profit. And also, did you know that the hybrid business is gaining momentum, and more and more research is being done on it?
Just to say, if you feel some friction we completely understand. And we hope you will persevere and join us in building the bridge between traditional business models and social work. It doesn’t matter if you start from a classic profit-oriented business, or from a social organization. Real innovation often lies in uniting opposites, and that is what social entrepreneurs do. Social entrepreneurs bridge ideologies, they focus on societal impact. And we acknowledge that it asks for multi-disciplinarity. Not only in skills but also in perspective. Social enterprises are hybrid organisations and need a multidisciplinary approach.
Innovation has always been an instrumental factor in driving growth and competitiveness in business, but in most industries today it is no longer sufficient to focus on product innovation. Although quality products and services remain as ever of great importance, empirical research has shown that business model innovation carries a greater potential for success than mere product or process innovation.
Wondering about the difference between product innovation and business model innovation? Business model innovation differs from product/service innovation in that it significantly affects at least two of the four components of who-what-how-why. Whereas product innovation only changes the what. Not yet clear at this moment? Don’t worry, after you finish the first topic on the Magic Triangle, it becomes obvious.