Table of Contents
Role of business in society ... 2
Stakeholders ... 2
The four initialisms ... 2
Profit maximisation ... 2
Corporate social responsibility ... 2
Creating shared value ... 3
Social enterprise ... 3
Internal analysis ... 4
SWOT ... 4
VRIO ... 5
Value chain ... 6
External analysis ... 7
Porter's 5 forces ... 7
Value net ... 8
PESTLE ... 9
Strategy ... 11
Strategy lenses ... 11
Porter's generic strategies ... 11
Hambirck and frederickson strategic framework ... 13
Sustainability ... 15
Sustainable investing ... 15
Triple bottom line ... 15
Sustainable reporting and communications ... 16
Emerging market ... 17
OLI: ownership/location/internationalisation ... 17
LLL: linkage/ leverage/learning ... 17
Design thinking ... 18
Double diamond ... 18
Entrepreneurship ... 20
Business model canvas ... 20
Role of business in society
Stakeholders
● Stakeholder: an organisation or "a person such as an employee, customer, or citizen who is involved with an organisation, society, etc. and therefore has responsibilities towards it and an interest in its success"
● Stockholders: a person who owns shares in a company and therefore gets part of the company's profits and the right to vote on how the company is controlled.
● Stakeholders and shareholders are different
● All shareholders are stakeholders, but not all stakeholders are shareholders
● Potential stakeholders include:
● Owners (investors, shareholders, agent, analysts…)
● Customers (direct customers, indirect customers, and advocates)
● Employees (e.g. current employees, potential employees, retirees, representatives…)
● Industry (e.g. suppliers, competitors, industry associations, media..)
● Community (schools, community organisations, residents…)
● Environment (nature, nonhuman species, future generations, scientists, NGOs)
● Government (e.g. public authorities, local policymakers, regulators…)
● Civil society organisations (e.g. NGOs, faith based organisations….)
The four initialisms Profit maximisation
● According to Friedman (1970): there is only one social responsibility of a business- to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.
● This view is embedded in classical economics
● This perspective was prominent for millennia
● There has been increasing dissatisfaction throughout the 20th century in the role of business in society
● Human's impact on the world however had increasingly entered public consciousness o Global warming
o Ozone depletion
● Organisations impact directly on the lives of individuals o Great smog of 1952
o Bhopal disasters in 1984 Corporate social responsibility
● Increasing societal pressure for organizations to think beyond their bottom line
● CSR as actions that appear to further some social good, beyond the interests of the firm and that which is required by law
● Giving back examples
o Ethics and legality of spending shareholders' money on ventures unrelated to organisation's profitability and performance.
Creating shared value
● The purpose of the corporate must be redefine as creating shared value, not just profit per se.
This will drive the next wave of innovation and productivity growth in the global economy. It will also reshape capitalism and its relationship to society.
● CSV must benefit the organisation and another stakeholder
● Three key ways of engaging in CSV o Driving mutually beneficial change o Reconceiving products and markets o Local cluster development
● Example: transforming procurement o GE
o Ecomagination program
● Critiques of CSV
o Moving beyond tradeoffs
o Assumes people will comply with law and ethical standards o Greenwashing
o Trashes CSR- it really isn’t that different Social entrepreneurship
● SE is a type of entrepreneurship that is distinguished by three key factors
● Sociality: dominant social mission- addressing social problems: reduced externalities, market voids, gender empowerment, equal supply chains
● Innovation: creative destruction, resourcefulness, changing institutions, reconfiguring needs, wants, demands
● Market orientation: performance, impact measurement, stakeholder not just shareholder strong values, market failure
Social enterprise
● Social enterprises are established to respond to unmet social needs through business-like and innovative means
● Can be profit or non profit
● More sustainable earned income strategies
● Use of business as a vehicle and a way of thinking
● Example: Honey care Africa
o NGO provides beehives through loan finance and trains rural farmers o Farmers sell to private enterprise selling fair trade in EU market
o Proceeds return to NGO to pay off hives and buy new one to scale program o Pioneering SE and fair trade before it was popularised
● Critiques of social entreprenuership o Who's unmet social needs
o How can existing organisations engage in social entreprenuership
o Can all enterprises that deliver social service be considered social entrepreneurship?
CRV vs CSR
● CSR and CSV do not view companies as a lone entity, but as a part of a larger whole where societal and environmental aspects has to be thought through to reach success
● Creating share value is taking the concept of CSR one-step further. CSV is about creating financial wealth for the company and at the same time fostering value for the society.
● CSR is often viewed as a social responsibility that is a cost of a business and is a resource- demanding activity that is used to create a good reputation and aren't linked to the core of the business.
● CSV on the other hand creates value for the society and is a core of the business model, it recognises that the competitiveness of a company and the health of communities are mutually dependent
Entrepreneurship vs social entrepreneurship
● An entrepreneurship's final objective is wealth creation
● The social entrepreneur participates in profit seeking business ventures only to use the profits generated to create valuable social programs for the whole community
● The social entrepreneur utilizes its philanthropic skills into its business ventures, creating value in the business so that consumers are willing to pay for the goods and services, and by doing so, the social entrepreneur earns profit which is invested in social ventures.
● Focuses on benefiting society at large by targeting its programs towards neglected and highly disadvantaged population that lack financial means.
Internal analysis
The resource based view (RBV)
● The resource based view (RBV) of the firm holds that certain assets with certain characteristics will lead to sustainable competitive advantage. All the traits are required to be present to result in a sustainable competitive advantage.
o Design research groups
● The objective of the discover stage is to act as a 'phase of divergent thought', where the designers and other project team members keep their perspectives wide to allow for a broad range of ideas and influences. In this stage of the design process, the company is asking a question, posing a hypothesis or identifying a problem by analyzing market data, trends and other information sources.
Define
● The second quarter of the double diamond model represents the definition stage in which interpretation and alignment of these needs to business objectives is achieved
● Key activities during the define stage are:
o Project development o Project management o Project sign off
● The define stage should be thought of as a filter where the review, selection and discarding of ideas takes place. This is where findings from the discover stage are analysed, defined and refined as problems, and ideas for solutions are pitched and prototyped
Develop
● The third quarter marks a period of development where design led solutions are developed, iterated and tested within the company.
● At the development stage, the project has been taken through a formal sign-off, which has given the corporate and financial backing to the development of one or more concepts that have addressed the initial problem
● Key activities and objectives during the development stage are:
o Multidisciplinary work o Visual management o Development methods o Testing
● Testing reduces the risk and time of failing in the future.
● Put In place as a preventative Failure is important
● In fact, it is essential
● When you fail while testing an assumption, you are better off than continuing on the wrong path
● Learn from every failure Deliver
● The final quarter of the double diamond model represents the delivery stage, where the resulting product or service is finalised and launched in the relvant market
● The key activities and objective during this stage are:
o Final testing, approval and launch o Targets, evaluation and feedback loops
● The deliver stage of the double diamond design process is where the final concept is taken through final testing, signed-off, produced and launched
Targets, evaluations and feedback
● We have constantly talked about the importance of remembering the fourth dimension: time
● Almost all organisation will have targets, evaluation and feedback in place Critiques of the double diamond
● Another model that is linear and does not have a chronological element
● It's a useful guiding tool to understand the process, however
o Ideals are only evaluated against the brief and the need (there can always be unanticipated elements)
● In reality, the process isn't the meritocracy that we are seeing portrayed here
o Social desirability o Face management
o Experts such as 'Gurus', 'heroes' and 'designers'
Entrepreneurship
Business model canvas
● Developed by Osterwalder & Pigneur (2010)
● The BMC is a strategic management and lean startup template for developing new or documenting existing business models
● It is a visual chart with elements describing a firm's or product's value proposition, infrastructure, customers and finances.
● “…a concept that allows you to describe and think through the business model of your organization, your competitors, or any other enterprise.” (p 15)
● A shared language, without which “it is difficult to systematically challenge assumptions about one’s business model and innovate successfully.” (p 15)
Customer segments
● “The Customer Segments Building Block defines the different groups of people or organizations an enterprise aims to reach and serve
● Various sets of customers can be segmented based on the different needs and attributes to ensure appropriate implementation of corporate strategy meets the characteristics of selected group of clients.
● Customer groups represent separate segments if:
● Their needs require and justify a distinct offer
● They are reached through different Distribution Channels
● They require different types of relationships
● They have substantially different profit abilities
Value propositions
● “The Value Propositions Building Block describes the bundle of products and services that create value for a specific Customer Segment
● A company's value proposition is what distinguishes itself from its competitors.
● The value propositions may be:
● Quantitative: price and efficiency
● Qualitative: overall customer experience and outcome
● Elements from the non-exhaustive list can contribute to value creation
● Newness, Performance, Customization, Getting the job done, Design, Brand/Status, Price, Cost reduction, Risk Reduction, Accessibility, Convenience/Usability” (p. 22) Channels
● “The Channels Building Block describes how a company communicates with and reaches its Customer Segments to deliver a Value Proposition
● A company can deliver its value proposition to its targeted customers through different
channels. Effective channels will distribute a company's value proposition in ways that are fast, efficient and cost effective
● Can reach its clients either through its own channels (Store front), partner channels (major distributors), or a combination of both
● Channels serve several functions, including:
● Raising awareness among customers about a company’s products and services
● Helping customers evaluate a company’s Value Proposition
● Delivering a Value Proposition to customers
● Providing post-purchase customer support” ( p. 26) Customer relationships
● “The Customer Relationships Building Block describes the types of relationships a company establishes with specific Customer Segments
● To ensure the survival and success of a business, companies must identify the type of relationship they want to create with their customer segments
● E.g. personal assistance, automated services, communities
● Customer relationships may be driven by the following motivations:
● Customer acquisition
● Customer retention
● Boosting sales (upselling)” (p. 28 Revenue streams
● “The Revenue Streams Building Block represents the cash a company generates from each Customer Segment (costs must be subtracted from revenues to create earnings)
● E.g. usage fee, asset sale, licensing, subscription fees
● A business model can involve two different types of Revenue Streams:
● Transaction revenues resulting from one-time customer payments
● Recurring revenues resulting from ongoing payments to either deliver a Value Proposition to customers or provide post-purchase customer support” (p. 30) Key resources
● “The Key Resources Building Block describes the most important assets required to make a business model work
● Resources are the main inputs that a company uses to create it value proposition, service its customer segment and deliver the product to the customer.
● Considered as the asset to a company, which are needed in order to sustain and support the business. These resources could be human, financial, physical and intellectual
● Key resources can be categorized as
● Physical
● Intellectual
● Human
● Financial” (p. 34) Key activities
● “The Key Activities Building Block describes the most important things a company must do to make its business model work
● Key activities can be categorized as
● Production
● Problem solving
● Platform/Network” (p 36) Key partnerships
● “The Key Partnerships Building Block describes the network of suppliers and partners that make the business model work
● Complementary business alliances can be considered through joint ventures, strategic alliances between competitors and non-competitors
● Four different types of partnerships
● Strategic alliances between non-competitors
● Coopetition: strategic partnerships between competitors
● Joint ventures to develop new businesses
● Buyer-supplier relationships to assure reliable supplies”
Cost structure
● The cost structure describes all costs incurred to operate a business model
● Two broad classes of business model cost structures
● Cost driven – the business model focuses on minimizing all costs and having no frills e.g.
low cost airlines
● Value driven – less concerned with cost, this business model focuses on creating value for their products and services
● Characteristics:
● Fixed costs
● Variable costs
● Economies od scale – costs go down as output increases Critiques of BMC
● It is quite an abstract framework
● It is quite focused on some key stakeholders, but notably not others.
● It seems somewhat blind to levels outside of the organization as we have talked about them.
● It is very much designed around SMEs and startups It likely is ill suited to large complex organizations
