Lesson: Business Model Canvas with Alexander Osterwalder

Step #9 Social Impact: To make a difference at a scale, create a profitable business model

I think the exiting thing in social entrepreneurship today is that you can create business models where profit and impact live in harmony.

What I mean with that is it's not either doing good or doing well; it's both. Which means you can today design business models that make a profit that's not at the expense of impact. And where you can create an impact in the world, which is not at the expense of profit. Where you harmonize both. There are a lot of entrepreneurs who are doing this today.

One of my favorite examples is Jigar Shah, who created SunEdison, which became the biggest solar and energy provider in the US. He was driven by a vision to get everybody, every company, to use solar energy, yet this was not happening in the solar energy industry. So he came up with a business model that scaled adoption of solar energy because he found a business model that would give away the panels to businesses for free so they could adopt solar energy.

Now giving away panels for free, that's easy. But designing a business model that allows you to give away solar panels for free profitably, that's the challenge. So he designed a business model that was ultra profitable and became the biggest provider of solar energy in the US. He changed the face of the solar energy industry in the U.S. And today, a lot of companies are copying that model. That's really exciting. Impact and profit going hand in hand.

Purpose has a crucial role to play in terms of either implementation or running a business. So there's another topic that might require other tools that go hand in hand with the business model canvas. And not everybody would want to run this business or that business, so purpose does play a role in either creating a business or running a business.

What I think is great to see today is that a lot of people coming out of some of the best business schools today, they want to make money, but they also want to change the world with great business models that tackle some of the biggest issues. They're not happy with going into an investment bank. They're not happy just running some kind of business. They want to change the world.

But at the same time, they don't believe in the traditional NGO model, the not-for-profit model. Don't get me wrong; I'm not saying everything needs to be for profit, there's a space for both. But I do think this space of innovative business models that harmonize profit impact, that's growing. Because that's new and that's scaling. And a lot of purpose-driven people are going into that area, and that's exciting to see.

Try hard to find a profitable business model. If it can't be done, you can always go for the NGO option. So I'm not saying one is right and one is wrong. You need to figure out what's doable, but you need to push the boundaries until you find the right model.

Today we're still a bit in this dogma that, "Okay. I want to do good. I'm going to build an NGO." The reality is today a lot of people in NGOs, they work a lot and they burn out. And they don't see their families. They get divorced. Their kids hate them. Because they overwork. That's a direct consequence of business models that are not financially sustainable. Many of those don't have an impact. Why aren't there any mergers and acquisitions in NGOs? Because everybody is happy with their little feel-good thing. I'm being a bit sarcastic.

On the other hand, private companies, large companies, are not only doing bad. Some of them are doing great stuff. And I'm not talking about corporate social entrepreneurship, which I think is just an alibi thing. Some of them are building great new business models. So the boundaries between good and bad are not as clear-cut as some ideological people or young students might want to think. Today the exciting space is those who do both. I think that's a really exciting space to be.

I'll give you another example. It's a bit of a funny one if you just hear it like that, but it's actually a big issue in the world. There was a company called Peepoople and they created the peepoo bag, which is a single sanitation bag that is self-sanitizing and it's biodegradable, and it turns into fertilizer. So the technology works. The group of people they were targeting is the 2.6 billion people in the world who don't have access to proper sanitation. That's a huge issue. Health, education, and so on.

They said, "We want to bring this peepoo bag to this population, but we can't do it as a charity." They decided to create a profitable business model that would also be scalable, and they were hoping to make a difference. They raised money, a couple of million euros, to start prototyping and trying out business models to do this. And today they're on the best path to creating a profitable business model that's going to contribute to eliminating a part of this big issue, that 2.6 billion people don't have access to proper sanitation.

So they were not trying to either do good or do well. They're trying to do both because they think that's the way forward. That's the way to create value for these people who don't have great purchasing power, but who are willing to pay as long as you create value for them. Really, really exciting.

More and more entrepreneurs who think of social entrepreneurship like this, profit and impact, hand-in-hand. Not either, or. Either doing good or doing well, that's how we used to think. Today, we can actually do both if we think hard about the business model and try experimenting with better business models.