Solving problems through social enterprise

Using the five whys to break things down

If you start thinking about all the global issues out there, you’re likely to get pretty depressed. They’re so big that you sometimes feel unable to change anything, and even if you try to change things it’s on such a small scale that it’s hard to see the impact.

Instead, take a step back from that and look at your local issues — either in your country, city or street. Now things should be looking a bit more manageable and hopefully more rewarding when it comes to getting out what you put in.

Whichever problem you end up choosing to tackle, it’s how you break it down that makes sure you are able to change it and have a wider effect, or even, a ripple effect.

Activism in action

Recently in the British news we’ve heard a lot about Greta Thunberg, an activist who started by simply refusing to go to school every Friday. This was all in protest against how corporates and governments were not safeguarding her future due to their environmental policies. Fast forward six months, and over a million students worldwide have joined in with her protest.

Sure, she is the exception to the rule, but she broke things down and looked at how she could make in impact. Instead of writing letters to large companies or the EU, or her Prime Minister, or the local Mayor, she thought about where she could make a bigger impact — at her school and in her community. She turned a problem where so many people feel helpless into one where she feels empowered. Now she’s having those talks with decision-makers, and we’ll see whether she can have any impact at that level.

Tackling your own problems

Before thinking about potential social enterprise ideas, we need to think about a few problems happening locally, as many feed into global problems. I recently asked students at my former school to name a global, national and local problem.

Here is what they came up with:

  • plastic waste
  • Brexit social divide
  • growing knife crime

Three problems that international bodies, governments, and whole civil sectors are trying to solve on a daily basis. The only way we, as individuals, can really have an impact on these is to dig further. For this we can use the 5 why method, a technique originally used by Toyota to help with rooting out faults and errors in their production and manufacturing.

Problem: Growing knife crime
Why 1: More young people carrying knives
Why 2: To protect themselves
Why 3: Scared of being mugged
Why 4: Don’t be feel safe on the streets
Why 5: Lack of police presence

Creating solutions

Now the bigger problem has been broken down into five reasons, some of which are easier to try to resolve than others as us as individuals.

For example, in order to feel safer on the streets, there could be some self-defense and conflict management training. To reduce the number of those carrying knives, there could be knife amnesty days and awareness building around the dangers of carrying your own knife. To protest or counteract the lack of police presence, there could be petitions, research on hotspots, community action to create safe routes or walking groups.

There are many ways to answer the ‘whys’ for this question, and we can do this exercise a few times to come up with different reasons.

How about social enterprise

You could argue that most of the solutions above are things that should get government funding or be delivered by the civil sector, and therefore turning them into a business idea is a lot harder.

This said, with the three models of social enterprise, there are many ways in which the above solutions could be funded.

Self-defence or similar training could be run on a profit-basis, which could then fund free training for the target audience of this problem. Kapap Academy from Singapore do just this.

The knives handed in as part of the amnesty could be upcycled into other products or resold appropriately, and the profits could go towards further amnesties or awareness days. One charity doing something similar is Steel Warriors, turning these knives into outdoor gyms.


Think about the problems that you and your community facing. Break them down individually by asking five whys, and see what solutions you can put to those smaller causes. Once you have some ideas, you can start thinking about completing your business model canvas — could it make money from trading on the market? Then you’re onto something social enterprise. If not, then you still might have a good idea for a nonprofit or charity.

Types of Social Enterprise — Embedded Models

A seamless model of impact and profit

Having previously looked at the external and integrated models, we move to the third model of social enterprise — the embedded model.

Impact and profit sources are the same

This model rarely exists unless the organisation was born as a social enterprise, as advanced planning and strategical thinking is required.

Put simply — it’s when the product or service you are offering, directly solves one of the social or environmental needs you set out to solve. Each unit or hour that you sell, has a direct positive impact which goes towards achieving your mission and vision.

It goes a lot further than the integrated model with this direct approach, as everything done is intentionally. A product design phase may have taken place to adapt or improve an existing product or service on the market to make it social enterprise appropriate.


Example 1 — Sanergy

One of my favourite social enterprises to talk about, Sanergy not only provided a simple solution to a growing problem, they went further and ensured there was a circular economy within what they do.

First off, they build what are effectively toilets in a portable style for slums and communities without toilets. These are franchised out to local entrepreneurs that can then make money in maintaining and offering them. Straight away, the toilet provides an income for an individual, whilst providing everyone else a safer, cleaner place to do their business.

Next up, the waste is collected from all of the Sanergy toilets. This means there isn’t illegal dumping or the need to build complex infrastructure that requires a large amount of time and funds, and can lead to the upheaval of communities. Once again, this provides further jobs.

Finally, with that waste, they treat it and turn it into further products such as fertilizer that local farmers can then use instead of potentially harmful chemicals.

It goes without saying, the amount of impact Sanergy must have on the community is mind-blowing, all through leasing of toilets!

Example 2 — Grameen Bank

Grameen Bank was founded by perhaps the most well-known social entrepreneur Muhammad Yunus. They started off by offering microloans to people needing money to start or expand their business.

A fairly common service in developing countries right? Grameen Bank went many steps further to ensure it had an embedded business model.

The loans mainly target female entrepreneurs across Bangladesh, a country where in some parts women are shunned when it comes to owning or running a businesses.

Furthermore, it is a co-operative, and anyone borrowing money from GB is a member, meaning trust and participation is needed in order to successfully apply for a loan.

Finally, the interest charged on the loan is reinvested in other individuals applying for a loan. It is in this way that the simple offering of a loan, has turned into a sustainable social business where strategical decisions are influenced by those borrowing. The funds available to others across Bangladesh has grown exponentially, since there isn’t a group of stakeholders who are paying themselves bonuses.

Just like with Sanergy, the value comes directly from the ‘product’ itself — promoting equality, encouraging entrepreneurship, independence, financial literacy and economic growth.


This is social enterprise at its purest, where a problem was identified and a solution directly developed to solve the problem. Through the problem solving process, stakeholders, sustainability and impact were taken into consideration to produce a cycle that keeps giving.

Perhaps you have a social or environmental problem that you think you could solve? We would love to help you make it viable and sustainable. 

Applying the Theory of Change

Demonstrating your social enterprise’s worth

If you work for a non-profit, social enterprise or do anything that aims to have a positive social or environmental effect, then you might have thought about your theory of change.

Your theory of change should show how what you do, has an impact more far reaching than just on your customers and users. It should also show how you aim to create impact for longer than just the instance they buy your product or use your service.

It’s a strategic piece of work that can set down the foundations for your business, test your assumptions and ensure you have indicators to show the world how great you are. So let’s delve a little deeper into what’s involved.


When you started your organisation or project, you would have seen a problem you were hoping to solve. This provides your context that your theory of change relates to.

On top of this, you would have most likely stated your mission and vision. Ultimately the goals you, as an individual or group of individuals, are hoping to solve. Think of those goals again and translate them into something that we could think about measuring.

Goals / Context

For example, instead of an all reaching and broad‘Improve the lives of those affected by addiction’, we could look more specifically at ‘Decrease deaths linked to overdose’, ‘Improve the physical and psychological wellbeing of drug and alcohol users’ and ‘Improve the physical and psychological wellbeing of carers of drug and alcohol users’.

theory of change assumptions context inputs outputs outcomes context

Now we know where we’re heading, we can start looking at what we’re doing by jotting down what we activities we carry out to reach our goals. These are known as our inputs.

Inputs

In this example they could be things such as ‘Provide education about drug and alcohol at schools’, ‘run weekly meetings for addicts’ or ‘provide volunteer or job opportunities at the social enterprise.

theory of change assumptions context inputs outputs outcomes context

These inputs lead directly to an output, and they will sound very similar.

Outputs

For each educational course in a school, 30 students will receive 4 hours of information about drugs and alcohol.

For every weekly meeting, 15 individuals with an addiction will attend.

Of the volunteer/job opportunities, 3 individuals will take up this offer.

theory of change assumptions context inputs outputs outcomes context

So far, so good?

In fact many grants or contracts these days will only ask you to report this back to them with similar information, however they have become very output driven, without really thinking about the short, medium or long term impact of what they are funding. We know that it’s not just numbers that matter, but also what you’re offering and the quality of the service or product.

This is why we now think about the outcomes, some of which are easy to measure and some of which are challenging to. Furthermore, at this stage we need to think short, medium and long term in relation to what you’re doing. If you run a business, perhaps your long term could be from 10 years to a whole generation. If, on the other hand, you’re just looking at a year long pilot, then your long term could be between 3 and 5 years.

I’ll leave that up to you, and for now I’m going to focus on the outcomes for those taking up our volunteer/job opportunities, since this could be more relevant to those reading.

Outcomes

Short term — better and more structured routine, less likely to commit minor offences, unlikely to drink/use during the working day
Medium term — improved social skills, improved self-confidence, work ready, open to coming off unemployment benefits, new and better friendships outside of old ‘circles’
Long term — employed elsewhere, stronger personal relationships outside of old circle, no offending, not drinking/using or in control of drug/alcohol use

theory of change assumptions context inputs outputs outcomes context

You can now see that we have completed the bulk of our theory of change. We have looked at what we are going to do, how we are going to do it, and the effect over time we hope it to have on its users. One thing still remains, and that is our assumptions.

In everything we do, we assume that people will react a certain way, we predict that doing x will lead to y, and that we will achieve our goals. In both the business world and social sector, this doesn’t always happen, which is why we need to analyse our assumptions to make sure we don’t trip up.

We can look at our assumptions between each stage, and when we ask ourselves these questions, we can then strengthen what we are offering.

Have you ever heard of the NGO that gave out laptops to a village in Sub Sahara Africa, only to later find they were being used as paperweights? They’d made a lot of wrong assumptions — that the locals needed laptops, knew how to use them and had the power to run them, and ultimately didn’t reach their goal. Let’s not make the same mistake!

Assumptions

Inputs to Outputs

  • Users want to volunteer/work
  • Users want that sort of volunteer role/job position
  • Users will turn up as agreed to volunteer/work

Outputs to Outcomes

  • Users at a stage in recovery where reduction of using is possible
  • Users stick to the schedule given
  • Users will be physically/psychologically able to volunteer/work full time

Outcomes to Goal

  • Job secured leads to improve physical and psychological wellbeing
  • Job secured doesn’t lead to a return to old habits
theory of change assumptions context inputs outputs outcomes context

In this example, I have limited the assumptions for each stage, however it is important to list as many as possible and answer them prior to starting your project or organisation. The ones that are easier to answer can be removed when you feel you have adequately answered or countered it.

Putting together your theory of change should always be done with a wide range of stakeholders, to help combat these assumptions and really define what will work.

When I was part of setting up the social enterprise we used service user involvement to define how it would work that would make it more attractive to potential volunteers and employees. We involved them in the visual identity, branding, product list, product selection, setting of hours, role allocation and so much more.

They felt ownership from the beginning, which ensured many of our assumptions were solved. We offered flexible shifts, a relaxed work ethic, smart uniforms, suitable perks and everyone was trained to be a barista. They grew with confidence, made new friends, solved old problems and broke their own prejudices as well as fought stigma against addiction.

One only lasted a few months, he shared his views that it wasn’t right for him, not hands on enough and he didn’t want to be in that location. Others moved on to other jobs, and one or two still work their part time today.

The theory of change helped us take an idea, and turn it into reality to meet our goals. It’s not a complex thing to do, it doesn’t take weeks to do, and will really help you connect to your cause.

Give it a go and feel free to share what you’ve done or let us know if you’d like some help putting it together – michael@ensoco.co.uk

Originally posted at https://medium.com/@michaelfreersplit/applying-the-theory-of-change-e1f0f570ec12

How much profit should go towards your goal?

Reinvest, spend or share the wealth

A key element which puts the social into social enterprise is the way you spend your profits. Out with the idea that only shareholders or investors should benefit from the hard work of your company. Instead, it’s now time to invest in the wider community.

However as you navigate the literal world of social enterprise you will see a range of regulations or recommendations. Here we look at what exists in terms of asset locks, commitments and suggestions.

Legal structures, definition or certification

Community Interest Company (CiC), United Kingdom

Over in the UK, you can legally register as a social enterprise, locally known as a CiC. Once registered, the asset lock and dividend cap come into place. These ensure that the profit is either retained within the company or used to meet its social or environmental goals. This currently stands at 65%, meaning the rest can be paid out as dividends to the traditional shareholders or investors.

Social Traders definition, Australia

With no legal structure in Australia, things aren’t as clear cut as in the UK. Therefore many turn to the definition used by Social Traders in their FASES report, where it states that the majority of profit/surplus must be reinvested. Given that a majority can be 50.01%, any company that does this, either through reporting or constitutional locks can be classes as a social enterprise

Benefit Corporation, United States

Not to be confused with Certified BCorp, the Benefit Corporation is a legal structure with different rules on reporting per state. The main difference is that it gives the board the opportunity to make decisions based on both financial AND social reasons. This signifies a shift from the previous focus on a financial duty to shareholders. However there is nothing related to paying out dividends nor reinvesting profits.

What’s best for social business?

Three countries, three different set of rules. They do all protect the need for the triple bottom line, to ensure the organisation is able to make the social or environmental goal as important as the financial one. Which one goes far enough? There are arguments that dividend caps can share of investors, but this is why there is now a movement in the ‘impact investment world’.

Ultimately I would say, for trust purposes with both customers and stakeholders, having a legal requirement that a set percentage has to be committed, is better. You can build your business model around this, you can plan short, medium and long-term investment on it, and you can boast about it to the world.

What do you think is a reasonable percentage for reinvestment?

Originally published at https://medium.com/@michaelfreersplit/how-much-profit-should-go-towards-your-goal-167fe95a465a