What value are you creating? How are you solving a problem, satisfying a need, or delivering benefits in a new way?
The Commercial Dimension
A value proposition creates value for a customer segment through a distinct mix of elements catering to that segment’s needs. Elements from the following non-exhaustive list can contribute to customer value creation: newness, performance, customization, getting the job done, design, brand/status, price, cost reduction, risk reduction, accessibility, convenience, and usability.
The Impact Dimension
A social enterprise often has two value propositions – the impact value proposition (the social value you are seeking to deliver, and what makes it attractive to customers) and the commercial value proposition (the goods and services you are producing and selling, and what makes these attractive to customers). They are ultimately linked, but separating them out for discussion can help us to see how each relates to our different customer segments… [continued below]
Professor Sarah Soule explains the goal of the value proposition block, and poses questions for you to consider as you think through strategic options for your venture. She will discuss the example of Equal Opportunity Schools, a national nonprofit organization with both earned income and philanthropic support. (2:15)
- What is the offering(s) your social venture or program will provide to your stakeholders? In the short-term? In the long-term?
- What type of service or product are you offering to the customers?
- How do your beneficiaries, partners and investors benefit?
- What is the efficacy that your offering or set of offerings delivers to the stakeholders?
- What is the market category of the product or service?
- What makes your business or offering unique?
- How will you create and maintain competitive advantage?
- How different is your social venture or program from market leaders?
- Distributed solar energy solutions that are modern, durable, reliable, affordable, battery-operated and come with a 2-year warranty [c]
- Energy cost savings [b]
- Livelihoods for entrepreneurs who start a business to bring solar to their communities [b]
- CO2 offset [i]
- Health benefits for people switching from kerosene to clean energy [i]
- Productive hours for working and studying [i]
d.light sells solar energy solutions to populations without electricity in 60+ nations.See project description and its Impact BMC
Equal Opportunity Schools
- A customized, 3-phase consulting service for high schools that helps them close their enrollment gap in 1 year [c]
- Increased rates of college admittance and success as a result of more minority and low-income students enrolled in advanced coursework [i]
Equal Opportunity Schools helps minority and low-income high school students succeed in AP and IB courses. See project description and its Impact BMC
i = Impact dimensions, c = Commercial dimensions, b = Both dimensions
More about The Impact Dimension
When social and commercial value propositions don’t align
Businesses where the social and commercial value align or reinforce each other are good cases for for-profit social enterprise: optimizing for product/market fit will prepare the organization to draw revenue from sales. However, the intended social value cannot always be generated as an added bonus to a commercial value proposition. This is the case when beneficiaries of the social value can’t support its full cost. Social benefit organizations have adopted one or more of the following approaches.
Design for extreme affordability. For example, Earthenable delivers beautiful low cost flooring (commercial proposition) which lower health hazards (social impact value proposition) in Rwandan mud huts.
Explore differentiating product/service for those willing to pay more, so you can use the additional revenue to subsidize value for those with limited ability to pay. For example Tom’s Shoes 1 for 1 model enables the company to give away a pair of shoes for every pair sold. Risks inherent to such models include losing focus on the best service to the targeted disadvantaged segment in the process of adapting activities to a different customer base. Focusing on optimizing the social value proposition is often the surest way to deliver it. For example: d.light, a producer of solar lighting designed low cost lamps for the bottom of the pyramid but decided against developing a camping light line of products which might have been a source of subsidy to donate lamps to those who can’t afford them. Those lamps might have ended up inadequate for the needs of these people.
Finally, many social benefit organizations disconnect commercial from social value proposition. For example, Assylum Access works to protect refugee rights in host countries. With no right to work, refugees don’t earn a living to buy this value proposition from the organization. Assylum Access’ commercial value proposition lies in its ability to demonstrate its impact model and sell it for replication to organizations around the world.
Optimizing one’s product/impact fit in addition to or in replacement of one’s product/market fit prepares the organization to monetize impact as a way to supplement revenue from sales.
When social impact is not the point
For most businesses social impact is not the point of the proposed value proposition. This doesn’t mean that these organizations cannot achieve significant impact along their value chain by carefully crafting their interactions with stakeholders at every level of their operations.
- Osterwalder, A., & Pigneur, Y. (2009). Business Model Generation. New Jersey: John Wiley & Sons, Inc. See pages 22-25
- Burkett, I. Using The Business Model Canvas for Social Enterprise Design. See pages 12-14
- Chang, J. Serving the Bottom of the Pyramid
- Calderon, J. The Social Blueprint Toolkit. See page 18