MEMOIRE P r é s e n t é e n v u e d e l ' o b t e n t i o n d u M a s t e r e n I n g é n i e u r d e g e s t i o n , f i n a l i t é s p é c i a l i s é e The social entrepreneurial process: case study on APOPO Aurore Flament Directeur: Professeur Philip Verwimp Commissaire: Professeur Olivier Witmeur Année académique 2011-­‐2012 A n n é e a c a d é m i q u e 2 0 1 1 -­‐ 2 0 1 2 1 Summary The following case study on the enterprise APOPO analyses how two product engineers succeeded, by leading their venture through several stages of growth, to set up a successful social enterprise, despite the challenges they are constantly confronted with. The objective of this case study is to give students a better understanding of how the social entrepreneurial process differs from the traditional commercial entrepreneurial one, as described in the literature. The case study also highlights how social enterprises operate, how they grow, and what difficulties social entrepreneurs might encounter. APOPO is a successful Belgian social enterprise, based in Tanzania, training giant African pouched rats to support life-­‐saving activities, through olfactory detection methods: “APOPO researches, develops and disseminates detection rats technology for humanitarian purposes.”1 Effective detection for landmines and tuberculosis has already been proven. As a matter of fact, APOPO offers landmine detection services in Mozambique, Thailand, and soon in Angola, releasing land from explosive remnants of war. Moreover, through APOPO’s tuberculosis (TB) research program, 5 to 15 patients per week are diagnosed TB-­‐positive by the rats, whereas initially diagnosed TB-­‐negative by microscopy analysis. APOPO is also conducting research for further applications such as tobacco detection and salmonella detection. In brief, APOPO developed a unique detection technology, which is quick, reliable and affordable, and therefore particularly adapted to developing countries. This case study has been designed specially for a course in entrepreneurship, to introduce social entrepreneurship, compared to traditional commercial or business entrepreneurship.2 A thesis under the form of a teaching case study consists of three essential parts: the technical note, the case study as such, and the teaching note. •
The technical note includes the analysis concepts that enable a richer discussion during the class. The technical note of this case study is composed of the following topics: the 1 Note : statement on APOPO’s website. 2 Note : it should be mentioned that the case does not always reflect accurately the reality of the enterprise, to the extent that data may have been simplified or modified for teaching purposes. 2 traditional entrepreneurial process according to Timmons, followed by the “People, Context, Deal and Opportunity” framework, and the stages of development of an enterprise. It also contains a brief description of the trends in the social sector, introduces the “Triple Bottom Line” framework, defines several terms related to the social sector and explains the “Social Opportunity Assessment Tool” developed by Jill Kickul and Thomas S. Lyons. This Assessment Tool enables social entrepreneurs to take a more reasoned decision on whether or not to launch a social venture to create the intended social impact. Finally the technical note includes as well a description of the so-­‐called “Social Entrepreneurship framework”, and “Social Entrepreneurship Process Model”. •
The description of the case enables students to apply the concepts of the technical note to a concrete real-­‐life example of a social enterprise: APOPO. •
The teaching note is exclusively intended for the case instructor. It gives a detailed outline of a teaching plan that the instructor can follow to conduct his class. It suggests questions and answers to conduct class discussion, and it presents synthesis slides. In preparation for the class, the instructor should ask students to read note 1 and note 2 of the technical note. As a matter of fact, to facilitate class discussion, students should have some preliminary knowledge on the traditional entrepreneurial process frameworks that have been developed, and should be familiar with some elements of the social sector. Some preparatory questions are included at the end of the case, to guide students’ reflection in advance. At the end of this case study, students should have developed a good knowledge on social entrepreneurship. Especially, they should come to the conclusion that the success of social enterprises requires the same fundamental elements as commercial enterprises: an opportunity, an entrepreneur or entrepreneurial team, and adequate resources. Like commercial enterprises, social enterprises need a clear definition of their business, strategic planning, etc. to ensure successful growth. In the social entrepreneurial process, however, these elements are put together to sustain a social value proposition. As a synthesis, the main issue addressed in this case is the following: “How does the social entrepreneurial process differ from the traditional entrepreneurial process as defined in the literature?”. This issue is analyzed through several sub-­‐questions divided into four categories: the three fundamental elements of the entrepreneurial process and the context in which they interact. 3 Acknowledgements In this section, I would like to thank those who have helped me and contributed to the development of this thesis. In particular: -­‐ Professor Verwimp, professor in development economics, working at the “Université Libre de Bruxelles”, who accepted to be my advisor. -­‐ Katarzyna Cieslik, PhD student under the supervision of professor Philip Verwimp, who helped me throughout the completion of my thesis, and gave me very useful advice. -­‐ Professor Witmeur, professor in entrepreneurship at the Solvay Business School of Economics and Management, who advised me to write my thesis as a teaching case study, and who accepted to be my reviewer. -­‐ Anne Henricot, managing director at the Marie&Alain Philippson foundation, who gave me a lot of background information on APOPO, and on the role of the Philippson Foundation in APOPO’s development. -­‐ Bart Weetjens, founder of APOPO, who welcomed me with open arms at APOPO, taking time to answer my numerous questions. Several interviews enabled me to substantially progress in the writing of my thesis. -­‐ Christophe Cox, CEO of APOPO, who welcomed me at APOPO with open arms as well, and spent a lot of time giving me very useful information on APOPO. -­‐ Management team of APOPO, who was very open to discussion, and gave me useful informal information on the organization. -­‐ Professor Jongen, former professor of linguistics, who kindly read my thesis over. -­‐ My family, who supported me throughout the whole year, and gave me sound advice. I would like to thank especially my father, who has always been there to help me, who read my thesis and gave me interesting recommendations. The trip I made to Tanzania, in APOPO’s headquarters, to gather the necessary information for my thesis was made possible thanks to the financial intervention of the “Conseil interuniversitaire de la Communauté française de Belgique -­‐ Commission universitaire pour le Développement” (Rue de Namur, 72-­‐74, 1000 Brussels -­‐ www . cud.be ), which I thank as well. 4 Table of Content Summary .......................................................................................................................................... 1 Acknowledgements ...................................................................................................................... 4 Table of Content ............................................................................................................................ 5 Introduction ................................................................................................................................... 7 The case study ................................................................................................................................ 9 Part A : Technical note .......................................................................................................................... 9 NOTE 1: The entrepreneurial process .......................................................................................................... 9 1. Timmons model of the Entrepreneurial Process ........................................................................................ 9 2. The “People, Context, Deal, and Opportunity” (PCDO) framework .................................................. 10 3. Development stages of enterprises ................................................................................................................ 11 NOTE 2: The social sector ............................................................................................................................... 13 1. Description of the social sector ........................................................................................................................ 13 1.1. Trends ............................................................................................................................................................... 13 1.2 From single bottom line to triple bottom line ................................................................................... 13 1.3 Social entrepreneurship ............................................................................................................................. 14 1.4 The social enterprise in context .............................................................................................................. 14 2. The Social Opportunity Assessment Tool .................................................................................................... 16 2.1 Social Value Potential .................................................................................................................................. 16 2.2 Market Potential ............................................................................................................................................ 17 2.3 Competitive Advantage Potential ........................................................................................................... 18 2.4 Sustainability Potential ............................................................................................................................... 18 2.5 Overall Potential ............................................................................................................................................ 19 NOTE 3: the Social Entrepreneurial Process .......................................................................................... 20 1. The Social Entrepreneurship Framework ................................................................................................... 20 2. The Social Entrepreneurship Process Model ............................................................................................. 21 Part B : APOPO – the story of a social enterprise ...................................................................... 23 1. Introduction ................................................................................................................................................. 23 2. The context: the devastating effects of landmines ...................................................................... 23 3. APOPO ............................................................................................................................................................ 24 3.1 The team .................................................................................................................................................................. 24 3.2 Research centre in Belgium ............................................................................................................................ 25 3.3 Transfer of APOPO’s headquarters and R&D centre in Tanzania .................................................. 26 4. Business evolution .................................................................................................................................... 27 4.1 Operations in Mozambique ............................................................................................................................. 27 4.2 International expansion: Thailand, Angola .............................................................................................. 28 5. Further research for other applications .......................................................................................... 29 5.1 Tuberculosis (TB) application ....................................................................................................................... 29 5.2 Other applications ............................................................................................................................................... 31 6. Becoming a social enterprise ............................................................................................................... 31 7. Preparatory questions ............................................................................................................................. 34 8. Exhibits .......................................................................................................................................................... 35 Part C : Teaching note ......................................................................................................................... 40 1. Objectives ...................................................................................................................................................... 40 2. Positioning .................................................................................................................................................... 40 3. Pre-­‐requisites .............................................................................................................................................. 40 4. Synopsis ......................................................................................................................................................... 40 5. Suggested assignment ............................................................................................................................. 41 5.1 Introductive questions ...................................................................................................................................... 41 5.1.1 APOPO’s activities ...................................................................................................................................... 41 5.1.2 Stages of development of APOPO ........................................................................................................ 42 5 5.2 Assignment questions ....................................................................................................................................... 43 5.2.1 Analysis of the “People” pillar .............................................................................................................. 43 5.2.2 Analysis of the “Opportunity” pillar ................................................................................................... 47 5.2.3 Analysis of the “Resources” pillar ....................................................................................................... 51 5.2.4 Analysis of the “Context” ........................................................................................................................ 52 5.2.5 Conclusion ..................................................................................................................................................... 53 5.3 Teaching plan ........................................................................................................................................................ 54 5.4 Key learning ........................................................................................................................................................... 56 5.5 Additional theory ................................................................................................................................................ 57 5.6 Teaching Note Exhibits ...................................................................................................................................... 58 Bibliography ................................................................................................................................ 61 6 Introduction In a context where traditional organizations and institutions -­‐ designed to answer the basic needs and rights of individuals in society -­‐ constantly fail to serve large segments of the population, new alternatives are being developed such as social entrepreneurship. As a matter of fact, this kind of entrepreneurship plays an increasingly important role in today’s economy. Social entrepreneurship makes use of the tools and techniques of traditional business entrepreneurship, as well as of its professionalism, its mindset, and the working processes it develops, but aims at solving social problems. To meet this new field of interest, many university courses and programs have been developed recently. Similarly, literature on social enterprises and social entrepreneurship is facing a non-­‐negligible boom. However, very few case studies have been written for teaching purposes. The following case study on APOPO might bring a better view on how the social entrepreneurial process differs from the traditional entrepreneurial process, as described in the literature. The study proposes to look at the way social enterprises operate or should operate, and at how they grow. The challenges social enterprises might encounter are tackled as well. At first, I intended to write a traditional thesis on social entrepreneurship, building, confirming or contradicting the existing theories through an in-­‐depth analysis of APOPO. Yet taking professor Witmeur’s advice, as well as discovering APOPO’s characteristics, thanks to my stay at its headquarters and research and development center in Tanzania, I came to the conviction that the form of a teaching case study would be of great use to introduce a class on social entrepreneurship, seen the characteristics of APOPO. As a result, the decision to prepare and write a thesis as a teaching case study has been motivated by the educational and pragmatic aspects of this type of thesis, which enables to apply entrepreneurial concepts to a concrete entrepreneurial situation. So I was influenced in my choice by APOPO’s characteristics, and not the other way around. The methodology that was adopted is described hereafter. The first step has been to contact the social enterprise on which the case has been built: APOPO. Christophe Cox, one of APOPO’s cofounders, with whom I had email exchanges, greeted enthusiastically my project, and sent me useful information on the organization. Feeling it was important to visit APOPO’s 7 headquarters and R&D center in order to have a better vision of their way of working, a one-­‐
month stay at APOPO in Tanzania was arranged. To begin with, I gathered on the subject as much information as possible through extensive literature review. A meeting with Anne Henricot, managing director from the Marie&Alain Philippson Foundation, was arranged as well. This was of great use as a partnership between APOPO and the Philippson Foundation had been concluded in 2008 (and ended in 2010). This foundation supported APOPO financially, and helped the organization to become a real social enterprise, capable of managing its quick growth. Once in Morogoro (Tanzania) -­‐ where APOPO breeds and trains its rats, conducts R&D activities, and where the top management works -­‐, I was given the opportunity to familiarize with the organization, and experience everyday life there. Field observation enabled me to gather information on the work processes of the organization, the interactions between the different actors, etc. Further qualitative and raw quantitative data were gathered through formal semi-­‐structured interviews with Christophe Cox and Bart Weetjens, the two co-­‐
founders of APOPO, and through informal interviews with the rest of the management team and PhD students working at APOPO. Then came the writing of the case study as such, and of the technical and teaching notes. The case was tried in professor Verwimp’s course of “Development Economics and Management”, with students in their third year of Bachelor. However it turned out to be a lecture more than a class discussion, as the students had not been given the theory and case in advance. After several modifications, the case was tried once more on a small group of students in their last year of Master. They were given the theory and case in advance this time. Due to time restrictions, I conducted the session myself. This session highlighted some elements that still had to be changed or clarified. 8 The case study Part A : Technical note This note consists of three distinctive parts. The first part provides an introduction to the entrepreneurial process, through two cutting-­‐edge models: “Timmons” model, and the “People, Context, Deal and Opportunity” model. The different stages of development an enterprise usually goes through is also briefly described in this section. The second part provides an introduction to the social sector. It identifies the global trend of moving towards more socially responsible businesses, and introduces the triple bottom line concept. The terms “social entrepreneurship” and “social enterprise” are defined, before determining where social enterprises are located in the spectrum of enterprises. Then the “Social Opportunity Assessment Tool”-­‐ used to assess whether an idea has a potential as a social opportunity-­‐ is described. Finally, the third part provides an introduction to the “Social Entrepreneurial Process Model”. NOTE 1: The entrepreneurial process Several models have been developed in order to portray the process by which an enterprise is formed and sustained to pursue a viable opportunity and maximize its impact. The models that will be further developed in this section are the cutting-­‐edge ones. 1. Timmons model of the Entrepreneurial Process In the classical entrepreneurial process, entrepreneurs identify an opportunity, assemble the required resources, and start to implement their action plan. As a matter of fact, according to Timmons (2007)-­‐Figure 1, the entrepreneurial process brings together three essential elements: an opportunity, an entrepreneur or entrepreneurial team, and resources. These elements are closely linked, and are essential to the survival of a company in its environment. The only way for the enterprise to remain healthy and survive is the entrepreneur’s successfully keeping the opportunity, team and resources in balance. As the opportunity grows over time, the team and the resources must grow as well. Figure 1: Adapted from Timmons Model of the entrepreneurial process (Timmons, 2007) 9 The opportunity plays an important role in Timmons model. An opportunity arises when an entrepreneur discovers a possibility of value increasing for the customer. However, as not all new ideas are always good opportunities, their recognition and evaluation is crucial. Good opportunities are the ones that have an underlying market demand for the product or service, because of its value-­‐added properties. It can be profit for traditional enterprises, or the creation of self-­‐sufficiency for not-­‐for-­‐profit organizations. The ability to financially sustain the enterprise must be apparent too, and the timing must be right in order to provide maximum benefit to the enterprise’s customers. The resources include financial and physical resources. The team as well as the size and type of opportunity determine the level of resources required. Even though most resources are scarce, high potential opportunities and a good management team attract more easily money and other resources. Finally, the entrepreneurial team is another key ingredient to achieve entrepreneurial success. Entrepreneurs are characterized by several behavioral traits, such as determination and persistence, risk tolerance, creativity but focus at the same time, adaptability, opportunity obsession, leadership, communication, etc. and by the purpose of their action. It is important to note that this model does not show explicitly the context in which the entrepreneurial activity takes place. 2. The “People, Context, Deal, and Opportunity” (PCDO) framework This other model was developed by four Harvard Business School professors (Sahlman et al., 1999) to explain the entrepreneurial process. As shown in figure 2, the context in this model is put explicitly in the middle, surrounded by the opportunity, the deal and the people. Figure 2: The PCDO framework (Sahlman et al., 1999) 10 The context represents all the factors that are beyond the entrepreneur’s direct control such as political, legal, cultural or economic events, affecting the nature and outcome of the opportunity. The entrepreneurial process is impacted by the context wherein it takes place, yet without being constrained by it. As in Timmons model (2007), the opportunity is of vital importance, and it is therefore put at the top of the PCDO frame. It is what initiates the creation of a business. “People”, known as “Team” in Timmons framework, represents the human capital necessary to successfully operate a venture. It includes financial investors (such as bankers, venture capitalists, angel investors, etc.) in the enterprise as well. These financial investors are part of “resources” in Timmons model. The PCDO framework replaces the heading “resources” by “deal”, giving it furthermore another meaning. Actually, the term “deal” refers to how and to whom benefits of the entrepreneurial activity are dispersed. It tackles the following questions: who is in the venture, what do beneficiaries bring and what do they receive, at what times (economic contribution and benefits, decision rights, etc.). This is implied in Timmons model. 3. Development stages of enterprises Once these fundamental elements are assembled, enterprises typically go through five or six developmental stages, forming an “S”-­‐curve, as already noticed in 1983 by Churchill and Lewis. The vertical axis of figure 3 reflects the size of the enterprise, its geographic diversity and the complexity of its products, whereas the horizontal axis represents the maturity of the enterprise. Figure 3: Stages of development of an enterprise (adapted from professor Witmeur O.) 11 During the seed phase, the opportunity is recognized, and the product or service exists as a prototype. The team is very small, and often merely composed of the founders. The organization is informal, and funds are necessary for the prototyping, market research and business plan. Capital and other resources have to be acquired. Once in the start-­‐up stage, the customers have validated the product/service, and the roles within the organization are better defined, even though there is little or no hierarchy. The business has demonstrated that it is workable and that it can survive. Some enterprises tend to stay for some time in this stage, earning marginal returns on invested time and capital. The early growth stage is characterized by the success of the new venture and the need to acquire new managerial skills. A proper management team is formed, and an experienced board gives advice to the company. At this stage, demand is often greater than capacity. The decision that has to be taken here is whether to expand thanks to the company’s accomplishments, or to keep the company stable and profitable. Once in the expansion stage, systems, policies and procedures are in place. The key difficulty now is to have sufficient funds to manage a rapid growth of the company. The organization then reaches a phase of stagnation, where sales become stable or even decline, which leads to the renewal of the business, or in the worst case to the death of the company. Controlling financial gains, brought on by the previous rapid growth, is important at the maturity stage. 12 NOTE 2: The social sector 1. Description of the social sector 1.1.
Trends Globalization, privatization and liberalization have brought into light various challenges such as the emergence of complex social problems. The gap between rich and poor widened for example these last year, and inequalities increased. The majority of the world’s population still lacks access to the main basic services such as water, energy, health, financial services, etc. Governments and public authorities have tried to counter these social issues, but have not been able address them correctly until now. There is therefore an urgent need for a new approach to solve these social problems. As far as businesses are concerned, their priority has increasingly been to cut costs, which led to many hidden social and environmental impacts. However, the trend has recently been towards a growing awareness of corporate malpractice. As a result, a growing demand for Corporate Social Responsibility (CSR) and Socially-­‐
Responsible Investing (SRI) has been noticed. « Impact Investors » have emerged, such as the Bill and Melinda Gates Foundation, the Schwabb Foundation, etc. who in addition to financial success, seek social and environmental results. In this context, new metrics have been developed to evaluate a business performance. 1.2
From single bottom line to triple bottom line Before, assessing the sustainability of a business meant looking only at the economic performance of the enterprise. Nowadays, however, increased attention is given to the assessment of social and environmental performance as well, to better understand the impact of an organization's activities. It is believed organizations can be socially and environmentally responsible only if they measure their social and environmental impact. In the mid-­‐1990s, John Elkington developed a new framework to measure the performance of corporations, known as the triple bottom line (TBL). This framework goes beyond the traditional measures of profits, return on investment (ROI), shareholder value, etc. and includes environmental and social dimensions as well. The TBL dimensions are also known as the three Ps: people, planet and profits, described hereafter. -­‐ People dimension: determines how socially responsible an organization has been throughout its operations. The social consequences of the organization’s activities have 13 to be analyzed considering all the stakeholders. -­‐ Planet dimension: determines how environmentally responsible an organization has been throughout its operations. The objective is to assess the impact of the organization’s activities on the ecosystem. -­‐ Profit dimension: measures how well the organization performed in economic and financial terms. One limitation of the triple bottom line is that the 3Ps do not have a common unit of measure, and therefore cannot easily be added up. It is difficult to measure the planet and people dimensions in the same terms as financial profits for example. 1.3
Social entrepreneurship The global trend of going towards more responsible organizations, and the recognition of potential social opportunities, led to the emergence of a new type of entrepreneurship, known as social entrepreneurship. The concept of social entrepreneurship can be seen as the work accomplished by a social entrepreneur, who according to the Ashoka definition is : “an individual with innovative solutions to society’s most pressing social problems. Social entrepreneurs are ambitious and persistent, tackling major social issues and offering new ideas for wide-­‐scale change.”
Social entrepreneurship typically refers to a process or behavior, and can be defined as (Mair and Marti, 2006, p.37): “a process involving the innovative use and combination of resources to pursue opportunities to catalyze social change and/or address social needs.” The organizational context in which social entrepreneurship occurs (in newly created organizations or in established organizations) differentiates social entrepreneurship from other more loosely structured initiatives aimed at social change such as activist movements. 1.4
The social enterprise in context The term social enterprise refers to any private or public organization that conducts 14 activities for the public interest, organized with an entrepreneurial strategy, not driven by the need of maximizing its profit, but driven by social objectives, furthermore having the capacity to bring innovative solutions to social problems (Haugh, 2005). The eventual profits made are usually reinvested in the business or distributed to the community, and not to those with controlling interests in the enterprise. As defined by the UK Government (Social Enterprise -­‐ a strategy for success DTI, 2004): "A social enterprise is a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximize profit for shareholders and owners.” So social enterprises are directly involved in producing goods or providing services to a market. Yet, contrarily to traditional businesses, they have explicit social and/or environmental aims such as job creation, training, or the provision of local services. The social enterprise lies at the intersection of traditional nonprofit companies and traditional business. This can be seen in Figure 4. Figure 4: Spectrum of enterprises (adapted from Kim Alter, 2007, p.14) The primary purpose of the organizations on the right hand side of the above spectrum is shareholder return and therefore profits, whereas social impact is the primary purpose of the left hand side organizations. The organization’s activities, culture, vision and mission will differ according to where it is situated in the spectrum. Social enterprises can have a nonprofit structure, a for-­‐profit structure, or can be organized as a hybrid model. A nonprofit organization is a social enterprise when it deliberately aims at optimizing the social benefits (improvements of the living conditions of the beneficiaries of a social project) generated through its activities, and when it gets organized accordingly. This means all fund allocation decisions, objectives, strategic choices, etc. have to be consistent with the social enterprise characteristics. A for-­‐profit structure for social ventures follows the same conventions as 15 traditional for-­‐profit companies. The main difference is that social enterprises pursue a social mission. Most for-­‐profit social ventures opt for the corporation structure. More recently, hybrid models of social enterprises arose. An example is the creation of a for-­‐profit organization, with nonprofit subsidiaries, or a nonprofit organization, with for-­‐profit subsidiaries. Social entrepreneurs who create these structures generally look for more legal and financial flexibility to pursue their missions. 2. The Social Opportunity Assessment Tool Before creating a social venture, however, social entrepreneurs should assess whether their idea has a potential as a social opportunity. This can be determined using the new tool developed by Jill Kickul and Thomas S. Lyons early 2012. It comprises four principal categories the social entrepreneur should look at: the Social Value Potential, the Market Potential, the Competitive Advantage Potential, and the Sustainability Potential. These four categories are assessed along five criteria, enabling social entrepreneurs to decide whether or not to proceed with creating the social venture, and to invest time and resources on it. It can help social entrepreneurs to open their eyes for unanticipated strengths and weaknesses. It is a tool to use with carefulness and relative distance, as none of the questions raised in the assessment tool can be answered definitely. 2.1
Social Value Potential The following table (Table 1) shows the five criteria that have to be analyzed in order to assess the social value potential of an idea. According to the characteristic of the idea, each criterion will determine if the idea should be classified as a strong or weak opportunity. Criterion Social need Strong Opportunity Service or product directly addresses an identified need Mission alignment Service or product is in direct alignment with mission Achievable impact Social return on investment Community support Service or product can fulfill identified social need in a measurable way A strong effectiveness to cost ratio Service or product will be positively perceived and endorsed by the community Weak Opportunity Service or product addresses need only indirectly Service or product is only indirectly aligned or is misaligned with mission Service or product will only minimally address the need A weak effectiveness to cost ratio, or exceed impact Service or product will not be well accepted by the community Table 1: Kickul J. and Lyons T.S, 2012, p.52 16 To begin with, a social opportunity, to be viable should have the potential to create value for the targeted beneficiaries (who are not always the customers). It should therefore meet a true social need, clearly identified as such, through a survey of the prospected beneficiaries for example. The social opportunity should also be aligned with the social enterprise’s mission. This criterion applies more to social enterprises that are already in operation, exploring new opportunities to pursue. Further, to be viable, the opportunity has to yield an achievable social impact, demonstrable in some way. To guarantee right away that a given project will have a strong impact is difficult, but a system to measure the stated goals can and should be put in place. In the same spirit, the “Social Return On Investment” (SROI) criterion should be used in order to assess the social value potential of the opportunity, as social investments should produce social gains that exceed the value of the initial investment. Yet to calculate the SROI is not always easy as monetizing saved lives for example is a great challenge. Finally, there should be clear support within the community, otherwise pursuing it might be difficult. 2.2
Market Potential Table 2 shows the five criteria that have to be analyzed in order to assess the market potential of an idea. Criterion Customer need or want Window of opportunity Investor interest Market size Market share attainable Strong Opportunity Target beneficiary both needs and wants the service or product Weak Opportunity Target beneficiary is indifferent to the service or product Timing is good Timing is poor Evidence of philanthropic, Evidence of little or no government, or private-­‐sector interest by philanthropic, financial interest governmental, or private investors Large Small An open market, with little or Very competitive market, no competition with several substitutes Table 2: Kickul J. and Lyons T.S, 2012, p.52 To be viable, a social opportunity should also benefit from a relatively attractive market. The social idea should in fact address a customer need and wish. Even though there is an apparent need to solve a problem, it may not be sufficient if the customer does not desire the product or service. Then the opportunity should be seized during a period of time in which conditions are good for a favorable reception of the product or service, in order to maximize the impact of the social enterprise. In order to have market potential, a social idea must also attract investors as they represent a market as well. Finally, social entrepreneurs should seek to reach as many “customers” as possible in order to maximize their mission achievement. The 17 openness of the market and as a result the amount of competition will determine if the social enterprise will be able to capture the adequate market share to be sustainable or not. 2.3
Competitive Advantage Potential To better understand one’s opportunity, assessing the competitive advantage of an idea in more details can be interesting. Table 3 summarizes to five criteria that should be analyzed in order to assess the competitive advantage potential of an idea. Criterion Barriers to entry Prospective partnerships or alliances Control over costs Compelling mission Management team Strong Opportunity High, many Many potential partners Weak Opportunity Low or nonexistent Few potential partners Substantial control Highly compelling; widespread sympathy Strong, complete skill set Little or no control Less compelling; little understanding or sympathy Incomplete skill set Table 3: Kickul J. and Lyons T.S, 2012, p.52 If the obstacles are high for new ventures, the already existing social enterprises benefit from an important competitive advantage. These barriers to entry are for example access to social networks and to other resources, knowledge about the norms and rules of the industry, etc. Being a first mover in that kind of industry is therefore a plus. As social entrepreneurs are not really in competition for market shares, their competitive advantage lies more in their ability to attract and build strategic partnerships in order to acquire the necessary resources. The possibility to develop partnerships and alliances should therefore be assessed as well. Moreover, controlling costs is of high importance for social enterprises. However, social entrepreneurs are limited in their control as the customers are often low-­‐income, not able to afford the enterprise’s product or service. This means the enterprise is often highly dependent on subsidies and philanthropic investments. Therefore, the ability of social enterprises to attract investors and customers is very important. Finally, a strong team with complementary skills, able to effectively operate the venture can be seen as a competitive advantage. 2.4
Sustainability Potential The last element to assess in order to determine the potential of the idea is its sustainability. As a matter of fact, starting a social enterprise is of little use if it cannot be sustained over time. Table 4 summarizes the five criteria to take into account. Criterion Venture capacity Venture capability Strong Opportunity Sufficient physical resources to start and maintain the venture Sufficient skilled Weak Opportunity Insufficient physical resources to start and maintain the venture Insufficient skilled 18 Investor interest Ability to generate earned income Compelling mission entrepreneur(s), staff, and board Evidence of philanthropic, government, or private-­‐sector financial interest entrepreneur(s), staff, and board Evidence of little or no interest by philanthropic, governmental, or private investors High potential for charging Low potential for charging user fees and/or selling goods user fees and/or selling goods or services or services Highly compelling; Less compelling; little widespread sympathy understanding or sympathy Table 4: Kickul J. and Lyons T.S, 2012, p.53 The first criterion consists in assessing whether the physical resources (such as facilities, equipment, etc.) necessary to operate the enterprise over time are sufficient. Similarly, venture capability assessment is important as well in determining the sustainability potential of the enterprise. It consists in assessing the combined skills of the entrepreneurial team, staff and board members. Investor interest is a useful indicator of sustainability potential as well, as social enterprises are very dependent on external funds, seen that they have merely in exceptional cases sufficient earned-­‐income activities to break-­‐even. As a result, looking at the ability of the social venture to generate earned-­‐incomes indicates the financial sustainability of the opportunity. Finally, a crucial factor in sustainability potential is having a compelling mission, in order to attract financial investments more easily. 2.5
Overall Potential Once each factor of each category has been evaluated, an overall assessment for each category can be made according to the following scale: high-­‐medium-­‐low. Social Value Potential
Market Potential
Competitive Advantage Potential
Sustainability Potential
High
High
High
High
Medium
Medium
Medium
Medium
Low
Low
Low
Low
Table 5: adapted from Kickul J. and Lyons T.S, 2012, p.53 Finally, a composite assessment can be made for the idea. A “High” score suggests that the idea is likely to be a true opportunity that is worth pursuing. A “Medium” score suggests the idea could still be a viable opportunity, with maybe some modifications. A “Low” score indicates that the idea might not be viable and that the social entrepreneur would be well-­‐
advised to abandon the idea. Yet this tool has to be used with a certain distance, as several ideas of social change have been successfully pursued in spite of their perceived low potential for success. In fact, social entrepreneurship is a process and that is why the development of a social venture goes through many adjustments to counter continuous obstacles. 19 NOTE 3: the Social Entrepreneurial Process 1. The Social Entrepreneurship Framework The social entrepreneurship framework, developed by Wei-­‐Skillern et al. (2007), portrays the process by which a social enterprise is formed and sustained to pursue a viable opportunity or generate social impact. As shown in figure 5, it identifies three major elements, as in the Timmons entrepreneurial framework or PCDO framework. These elements are: the opportunity, people and capital. Figure 5: Social Entrepreneurship Process (adapted from Wei-­‐Sillern et al., 2007, p.23) The opportunity is the essence of an enterprise and stands for the possibility to add value to customers’ lives by meeting their needs. “People” includes the management team, employees, vendors, etc., but not the financing providers as in the PCDO framework. Capital refers to all sources of capital. The particularity of this model is that these three elements are brought together in a Venn diagram. The overlapping area represents the purpose of the social entrepreneurship: achieving social impact (or “social value proposition”-­‐ SVP), typical of social enterprises. The SVP is in the middle of the model because it represents the result of the coming together of the three fundamental elements of the entrepreneurial process, and because it lies at the core of the social enterprise’s purpose. The context is the environment within which all social enterprise activities take place. The surrounding environment of a 20 social enterprise affects the entrepreneurial process, but the social venture can affect the environment as well, as indicated on the framework by the dotted circle surrounding the three fundamental elements. To achieve social impact, “a state of alignment both externally and internally” (Wei-­‐Skillern et al. 2007, p.17) must be achieved. 2. The Social Entrepreneurship Process Model The Social entrepreneurship Framework developed by Wei-­‐Skillern et al. (2007, p.23) is an interesting model. However, it leaves out the “idea-­‐generation” process of creating a social opportunity. The “idea-­‐generation” process refers to the fact that a promising idea is firstly generated from unmet social needs, and then developed into a viable opportunity, attractive to a variety of stakeholders. In order to take into account both social entrepreneurship process and the “idea-­‐
generation” process, Jill Kickul and Thomas S. Lyons developed early 2012 a new hybrid model: the Social Entrepreneurship Process model, depicted in figure 6. Figure 6: Social Entrepreneurship Process Model (adapted from Kickul J. and Lyons T.S., 2012, p. 34) This model is composed of two stages that follow each other: •
Stage 1: An idea is generated through the joining together of the entrepreneur’s individual motivation, influenced by his or her background, the social need to be addressed, and the current resources available to meet that need (the capacity of the community or society to fulfill the need). At this stage, the social entrepreneur does not know yet whether a viable social venture can be built around the idea. As a result, to go 21 further, the social entrepreneur must assess the feasibility of the idea. This can be done with the help of the Social Opportunity Assessment Tool, as described above. If the idea is indeed a good social opportunity, then a social enterprise should be created to complete the social mission coming from that opportunity. •
Stage 2: The confirmed opportunity and the human and other resources to pursue it (capital and physical resources) are brought together to complete the social enterprise’s mission and achieve positive social impact. These two stages of activities take place within a context of different systems that affect the social venture. As the context is permeable, is enables interaction between it and the social entrepreneurship effort. 22 Part B : APOPO – the story of a social enterprise 1. Introduction After an intense meeting with the board members in Belgium on the future growth strategy of APOPO, Bart, founder of APOPO, could finally have a good rest on his return flight to Tanzania. APOPO’s growth had gone through many different stages since its creation, and even though it was performing well and constantly growing, it was becoming more and more difficult to obtain sufficient funds because of the increasing competition on the philanthropic funding market. Projecting to withdraw away from its grant-­‐funded charity model towards a fee-­‐for-­‐service social enterprise, APOPO had to decide on what strategic steps to follow, and all the board members had finally come to an agreement, after several years of discussion. Bart was going to lean back and close his eyes, when his seatmate wondered: “Are you feeling all right sir? You look very pale!”. “I’m fine, I just had an exhausting week” answered Bart. Apparently willing to continue the conversation, his seatmate said “Exactly like me! Alex Walker, nice to meet you. So tell me all about it, we have plenty of time.” Always happy to talk about APOPO, Bart started the story by giving him some background on the challenges APOPO was trying to address. 2. The context: the devastating effects of landmines Landmines and other explosive remnants of war are a threat to many communities in post-­‐conflict areas; they have devastating social, economic and environmental consequences. According to the Geneva International Centre for Humanitarian Demining (GICHD, 2007, p.17), more than 100 million landmines are probably still under the ground around the world, likely to explode at any moment. Certain regions are particularly affected, like Africa with 20.5 million landmines, found mainly in Angola, Mozambique, Somalia and Ethiopia, or the Middle-­‐
East, with 21 million landmines in Irak and Afghanistan, without forgetting Asia, where landmines are found in Thailand, Cambodge, Vietnam, Birmania, etc. Not only are landmines responsible of many deaths and injuries (1367 deaths and 4296 line-­‐related injuries were recorded across 68 countries in 2006 alone). They are also a real obstacle to the development and economic growth of these countries. Mine-­‐affected countries remain dependent on an imported expertise to respond to landmine detection problems, but they rarely have the sufficient funds in the national budget to support mine action activities. 23 In 1989, the UN appealed for funds around the world to solve the important landmine problem in Afghanistan. This led to a real boom of mine action NGOs developing mine action programmes. Mine detection technologies can be classified into 3 categories: manual detection, machinery detection and animal detection. The traditional methods include the hand probe, the mechanical mass detector, ground penetrating radars, infrared, and the smell of dogs. None of these methods is rapid, secure, of low cost nor easy to use simultaneously, which are key success factors for the implementation of such technologies in a developing country. “I am not convinced by these traditional demining methods” said Bart “they don’t go in the sense of an independent Africa vis-­‐à-­‐vis foreign aid, and none of these methods is satisfactory from all points of view”. 3. APOPO APOPO, Dutch acronym for “Anti-­‐Persoonsmijnen Ontmijnende ProductOntwikkeling”, which can be translated in English as Anti-­‐Personnel Landmine Detection Product Development, is a Belgian social enterprise. It trains giant African pouched rats in Tanzania, to support life-­‐saving activities using olfactory detection methods. 3 APOPO’s first detection rat application was landmine detection. Alex was all ears and eager to know more about this rat story. He could recognize a good business opportunity when he heard one. “How did you get involved in this?” he wondered. “Well it all started when a guy I met at a conference showed me an article written during WW1 on rodents and their ability to detect explosives in a laboratory” said Bart. Fascinated by the article, he immediately started to exploit the idea with rats. 3.1 The team Bart Weetjens (Belgian native) had studied product engineering at the University of Antwerp. After graduation, he started to work in a car company, but did not go along with the vision of the company, and felt he would never be able to be himself in that kind of traditional enterprise. He therefore decided to try some different jobs, in the hope of gaining “life” experiences and finding the job that would fit him. However, his vision on life darkened, and he went through a rather profound existential crisis. He therefore decided to devote himself to an activity that would not harm anyone: painting. In 1997, though, after he read the aforesaid 3 See Exhibit 1 for APOPO’s vision, mission and core values 24 article, Bart finally knew what kind on meaning he would be able to give to his life. Together with a good university friend, Christophe Cox, he started several research activities on “detection rat technology”. Bart had since many years a passion for Africa. Moreover, already from a child, he had had the opportunity to play with domestic rats and to gather a lot of experience on them. Through the years, he developed a real passion for rodents, and began breeding mice, hamsters and rats during his adolescence, selling them to pet shops to earn money. Christophe Cox, on the other hand, had developed some experience in management in West African countries, where he had lived and worked several years. “Together,” explained Bart, “we started in-­‐depth research and feasibility studies on imported African giant pouched rats from Tanzania. Through operant conditioning methods (where the rat learns that the “click” sound is associated with a food reward), we quickly realized those rats had an exceptional sense of smell and other non-­‐negligible advantages.” A biologist and a supervisor joined the team the first and second year respectively. 3.2 Research centre in Belgium “In 1997, we started our research operations as a traditional non-­‐profit making research centre in a temporary laboratory at the university of Antwerp” explained Bart. “Breeding the rats was an important challenge in the beginning. The rats, which we had put in the same cage, fought to the death, so improvements in the breeding process had to be made”. Once this problem solved, the two co-­‐founders of APOPO developed a unique training method. Very soon, they realized these African rats were capable of detecting in a reliable way any kind of scent, including explosive scents, after only 12 months of training. Mine detection dogs (MDD) for example, which are the closest alternative to mine detection rats (MDR), require at least 18 months of training. Rats present other advantages as well compared to dogs: they are less expensive in terms of breeding, feeding, housing, and transportation, and contrary to dogs, rats can work with different handlers as they show weaker bonds. Moreover, African rats resist much better to tropical diseases. “So as you can see, even though the rat is usually associated with sewers, APOPO wants to give it a social value and utility”, said Bart laughing. “I love to hear about how passionate people develop unexpected technologies to address social problems! But tell me, where did you find the money required to start all these activities?” asked Alex. “Well, we started our research program in Belgium thanks to a 250.000 Euros-­‐grant we received from the « Belgian Directorate for International Co-­‐operation», to develop the concept” answered Bart. “For the first two and a half year, we lived without any salary. When we moved our headquarters and Research and Development centre to Tanzania,” 25 continued Bart, “we received grants from the Belgian government”4. Surprised, Alex asked Bart to tell him more about this strategic move to Tanzania. 3.3 Transfer of APOPO’s headquarters and R&D centre in Tanzania In 2000, APOPO decided to transfer its headquarters and R&D centre in Tanzania, in Morogoro, a small village located near the economic centre of Dar-­‐Es-­‐Salam, through a partnership with the Sokoïne University of Agriculture (SUA). The idea of moving to an African country was in the founders’ minds since the beginning. This new step in APOPO’s development was made in order to breed and train the animals in near-­‐to-­‐real conditions, and to develop a more independent Africa towards foreign aid. “African communities are too dependent on foreign expertise for their development. I think it is possible to tackle certain issues with local population and resources” argued Bart. “Through this partnership, APOPO builds local expertise and capacity. SUA on the other hand supports APOPO not only by housing its physical headquarters, but also by providing access to local human resource pools, legitimacy in the hiring process, etc. And more importantly, it gives a local face to the organization. Furthermore, because it is under the umbrella of the government (SUA is a public university), we don’t face as much corruption as other organizations. But of course this partnership is also responsible of some challenges,” said Bart, “all of APOPO’s tangible assets for example are the property of the University, and salaries are paid through the University, on a government-­‐established pay scale. Our partnership with SUA certainly has an impact on our growth”. “But why did you choose Tanzania rather than another African country?” asked Alex. “Well, it is true we could have started in Kenya for example, where education is higher than in Tanzania, and where things might have gone more quickly, or in Mozambique where the landmine problem is more important, but in reality, the choice of Tanzania came quite naturally” answered Bart. The department of Biology of the University of Antwerp had a long cooperation history with SUA in the field of rodent research, and the place was ideal to train rats. SUA was at first reluctant to the idea of having a minefield in its university. Yet an agreement was found, and APOPO received logistical support from the Tanzanian Peoples Defence Force to establish a training and test minefield of 24 hectares at SUA. “And how do you communicate there? Do you speak the local language?” wondered Alex. “Yes, we speak Kiswahili now, which is the local language. Tanzanian people particularly 4 See Exhibit 2 to know more about APOPO’s funding model evolution accross the years. 26 appreciate it, and as a result they respect us more. However, when I arrived in Tanzania, I knew only a few words, and it made things much more difficult. Building the minefield for example was a great challenge, and I wish I had known more Kiswahili at that time to make things go faster. An advice I would give to any entrepreneur wanting to start an activity in a foreign country, is to take first a few months to learn the language spoken in that country. We offer courses of Kiswahili to all our expat managers. I think it is really important.“ 4. Business evolution 4.1 Operations in Mozambique Seven years of R&D were necessary to put into place this new mine detection technology with rats, and make the verification studies, before the “Geneva International Centre for Humanitarian Demining” (GICHD) validated the technique through its accreditation in 2004. In this same year, APOPO achieved demining accreditation from the “National Demining Institute of Mozambique”, which allowed APOPO to definitely undertake official demining activities in Mozambique. “Our HeroRATS could finally use their olfactory capabilities on real field!” exclaimed Bart with a satisfactory smile. APOPO started offering its mine detection services to local NGO’s in Mozambique, who needed a detection tool in their mine action program. But that appeared to be very difficult as APOPO’s technology was not yet the trend. So APOPO decided to create its own branch in Mozambique, providing a complete package of services, including survey work, field preparation, detection of landmines with APOPO’s rats and manual clearance. As a result, APOPO nowadays manages all the aspects of demining, from the beginning to the end, and works in close collaboration with national demining authorities, while adhering to the « International Mine Action » standards. 5 “The program of mine action in Mozambique employs 150 full-­‐time employees, and is partially funded by the United Nations Development Programme, and by the Belgian, Flemish and Norwegian governments. Our demining service costs 1,5 USD per m2 compared to 2 USD per m2 when traditional methods are used”. Bart continued: “Since the beginning of our activities in Mozambique, over 1,700 landmines have been discovered and destroyed by our “HeroRATS”, which rendered about 2.7 million m2 of land accessible again. In half an hour, one of our rat is capable of doing the detection work wherefore a human needs one day. Over 51% of the country has already been inspected, and four northern provinces are now out of danger. 5 See Exhibit 3 for more information about the process for the landmine activities 27 The objective is to eliminate all known minefields in the country by 2014.” The mine action community is of a risk averse nature, and the adoption of a new technology is slow and often requires additional « proof of practice » before it is accepted. The significant support from the GICHD helped APOPO to gain credibility, and to achieve its current levels of industry acceptance and accreditation for its detection rat services. In fact, the GICHD plays a key role in anti-­‐mine policy setting and standards development for mine clearance practice. It highly influences the funding priorities and accepted practices of mine action organisations. “I didn’t know the mine clearance industry was so difficult to penetrate” reacted Alex. “Oh yes, it is a very difficult industry indeed” answered Bart “and it took us several years to enter it. A large network and a lot of perseverance and motivation is the key!”. Mine Detection Technologies also require 100% accuracy, which is a significant challenge. Quality control is therefore of huge importance. “This is a difficult part of our job, because we have to train our rats over and over again in order to get to the required performance. We constantly try to improve our methodology and training procedures, but rats remain animals, and their behaviour might not always be the one expected. Human follow-­‐up is really important at APOPO”. Finally, securing funds for operational mine activities is a constant struggle as it is highly dependent on financial support from western countries. “So to survive in the mine detection industry”, continued Bart, “we must offer a cost-­‐compared and high quality service”. “I see…” said Alex thoughtful “these two elements are a necessity, so what is your competitive advantages?”. Bart then explained to Alex that APOPO has the advantage of being first mover in MDR technology, and because of its geographical position, the organization has a non-­‐negligible advantage over competitors based in Europe or the United States in its understanding of African logistics, cultural and political issues. In addition, some companies may prefer to hire service providers who employ primarily African staff. In fact, all the trainers, handlers, laboratory technicians, and other personnel are locals, even though the majority of APOPO’s management team members come from western countries. 4.2 International expansion: Thailand, Angola “Do you still want me to continue with my rat story?” asked Bart after a fresh glass of water. “Of course”, was Alex’s answer, “what happened next?” 28 “We started to expand geographically, and proposed our land release services to the Thailand “Mine Action Centre” in 2010. We started conducting a field survey in the provinces of Trat and Chantaburi, along the Thai-­‐Cambodian border. The project was worked out through a partnership with the local Thai NGO “Peace Road Organization”, to determine which suspected hazardous areas really contained landmines. We might send our rats there one time.” Bart continued: “ And now our technology is taken seriously, and the costs of it are low, mine action organizations are coming back to us to use our services. So we could benefit from a service-­‐model now, gaining earned-­‐incomes by charging these organizations per square meter. But to get to that service-­‐model, we first need to gain partnership experience again. So through a partnership with a Norwegian NGO, we are now going to start operations in Angola. We are currently training around 40 rats at Morogoro to send them to Angola. We are not going to establish a branch there like in Mozambique. We merely plan to send some of our trainers to Angola (with the 40 rats) to transfer our technology.” 5. Further research for other applications 5.1 Tuberculosis (TB) application “But I didn’t want my rats to stop there… If they can smell explosives, why not other scents?” said Bart. “In 2003, we won 163.000 USD from the “World Bank Development Marketplace Global Competition” which enabled us to start research on tuberculosis detection.” The principle is the same as for mine detection, but this time the exceptional good sense of smell of the giant African pouched rats is used to detect the “mycobacterium tuberculosis” in patients’ sputum samples we collect from DOTS (Direct Observation and Treatment Strategy) centres. 6“In the beginning we have had some difficulties with incorrect labelled samples. The DOTS centres we pay were not doing their job properly. So now APOPO’s driver labels all the samples as he collects them. This may result in operational inefficiency, and it is of course not the optimal solution, but we cannot afford to loose our access to the supply of samples”. TB detection is a promising new application for APOPO’s rats. In fact, the actual technology used to detect TB is the microscope, which is relatively slow, expensive, and only 40 to 60% reliable in African countries. If a lab technician is able to analyse only 40 samples a day, the rat is capable of analysing the same quantity in only 7 minutes! “Moreover”, continued 6 See Exhibit 4 for more information about the process of tuberculosis detection 29 Bart, “we did a study in 2010, where on 12 347 patients, 1 671 were diagnosed TB positive with the conventional microscope method. Our rats then screened the same samples, and 716 other patients (about 5%) were identified as TB positive. A second microscope analysis confirmed these results. Of course, we send these results back to the DOTS centres to enable patients to be treated accordingly. So second line rat screening increases the detection rates to around 43%.” “This is phenomenal”, exclaimed Alex, who remembered he had red an article lately on the devastating consequences of tuberculosis. Two million people die every year from tuberculosis, and about 9 million new cases of tuberculosis are detected every year. As a matter of fact, left untreated, a person with active tuberculosis, infects 10 to 15 new people each year. In a context where the United Nations objectives of the Millennium for the development is to stop the growth of tuberculosis by 2015, a faster, more accurate diagnostic technology is needed to help curb the spread of this deadly disease. With its unique combination in terms of speed, accuracy and costs (low), Alex realized how APOPO’s rats could change drastically the medical approach to detect TB cases in the future. “It is indeed a more appropriate detection technology for developing countries, as it is quicker, more reliable, and more affordable than traditional methods. Yet before we can commercialise this method, it has to be scientifically proved irrefutable. In 2010, we received the necessary funding to launch a three-­‐year research plan to examine more in detail the effectiveness of detection rats in the diagnosis of tuberculosis, in collaboration with the World Health Organization. The screening technique is currently undergoing final testing. But it is again a relatively hard market to penetrate, because the Tanzanian government is reluctant to our technology. Medical institutions find it difficult too to accept the idea of using rats for medical purposes… So we need to gain credibility first”. Alex could totally understand this final remark. Rats are not the best symbols of cleanness! “But we recently received the approval and funding to expand our TB detection program into Mozambique as well, and an NGO which distributes anti-­‐viral medication recently showed its interest in our screening technology. We therefore think of developing commercial TB detection services. So the perspectives are good!” concluded Bart. 30 5.2 Other applications Remote scent tracing (RST) is another area where APOPO is conducting research. This kind of application involves collecting samples of air or dust from defined locations. The samples are then presented to mechanical or animate detectors in a remote location. “In 2011, our team conducted a number of new pilot studies, carrying out experiments to determine the rats’ capabilities in detecting illicit tobacco, salmonella bacteria, and bedbugs. Another preliminary research was conducted in an application we named CameRAT. It consists in training young rats to search for humans and to respond to a command to come back. All these research programs may lead to operational applications in the future, which could be commercialised. But practical aspects such as funds or contracts need to be secured first. We are constantly tempted to conduct research for new applications. Rats could be used for so many things… It is really frustrating not to be able to work out some interesting projects because of the lack of funding and because we have to stay somehow focused!” 6. Becoming a social enterprise “Your achievements are really impressive!”, commented Alex very seriously, “I feel that APOPO has grown very rapidly since its foundation. But according to what you told me, it seems like you evolved without any real strategy supporting it, taking the opportunities as they came. Am I wrong?”. “Well, your are not totally wrong” answered Bart. “During the first years, APOPO was growing fast, and things were changing so quickly that we couldn’t keep up. When we started our research activities in Tanzania in 2000, there were less than 10 of us. Nowadays, APOPO employs more than 230 people. We couldn’t go on working as a small family enterprise. It is our partnership with the Marie&Alain Philippson Foundation in 2008 that brought us to work in a more professional way. We developed a more effective governance structure, and an explicit strategic framework. The Foundation provided us with management tools (like strategic planning, business plan, legal structure, etc.) and helped us to implement them. There was financial support as well, which enabled us to employ a specialised consultant (from Virtue Ventures) who helped us moving towards a social enterprise model, capable of managing its growth. Putting our strategic and business plan on paper for the first time was intimidating because we didn’t have the necessary background to do it. But I wish we had done this earlier, as it helped us to answer tough questions and further develop our -­‐until then-­‐ implicit strategy.” 31 In 2009, APOPO decided to change its legal status from “non-­‐profit making organization” to “non-­‐governmental organization” (keeping its non-­‐profit structure). APOPO had no sustainability prospective at that time, and was based only on research grants. So one way to receive structural funding from the Belgian Ministry of Development Co-­‐operation was to become an NGO, which is what APOPO did. Thereby, the credibility of the organization was also increased . “This took us a lot of time, and we put a lot of efforts in it” said Bart. “Then, with the increasing competitiveness in the donor funding sector, for the implementation of our operational demining applications and for the new TB application, we recognized the importance of capturing both social and financial value creation opportunities in order to maximize our impact, and protect our actual leadership position. We therefore decided to start to move from a time-­‐bound project oriented organization (depending only on funders) to a Centre of Excellence in rat detection technology, capable of earning incomes, in order to ensure successful implementation of future applications, while continuing our research activities. But these socially entrepreneurial goals require the necessary support systems such as capacity (including governance, facilities, etc.), branding, funding, R&D, etc. With the help of the Philippson Foundation, we made several changes in order to help the organization to become a real social enterprise, more strategic and market-­‐driven.” Changes in the governance structure were undertaken. The Board of Directors, composed only of university professors had initially developed informally, without any capacity assessment beforehand. The composition of the Board was therefore reviewed, and new influential members from the entrepreneurial sector joined. A reporting template was also established to ensure a good communication between the Board in Belgium, and the management team in Tanzania. Moreover, the two co-­‐founders who initially worked as co-­‐
directors, separated their roles. Cox is now the CEO of APOPO, while Weetjens is responsible for the development activities, looking for the new business opportunities for the organization, and handling all the media relations. The roles and responsibilities of each management team member was also (re)defined. “Yet we still have a problem. There is a high turnover in the management team, because they are expats. They usually don’t stay more than two years. When they introduce a new project, tool or system, we often don’t manage to keep it when they leave. So there is a lack of efficiency here, for which we definitely have to find a solution” said Bart. Changes were also undertaken in the financial accounting system. While initially, the accounting was done by merely recording the incomes and expenses, a proper format is now 32 used, with a balance sheet, income statement and cash-­‐flow statement. “This enables us to gain credibility, and to be considered more professional. We can give clearer information to our supporters as well now” explained Bart. “So as you can see, we have recently gone through many important organizational changes. But changes require time, and we are still working on improving our way of working as a social enterprise to increase our social impact as much as possible.” “I imagine you understood I am a very optimistic person ”, said Bart turning to Alex, “but our current success is the consequence of many failures and a lot of doubts. Every positive result we achieve comes with new challenges to tackle. Yet the satisfaction I get through my work is enormous, and it is so rewarding when people support you and your work! I was named Fellow by the Schwab Foundation for Social Entrepreneurship and endorsed by Ashoka. More recently, I also received the Skoll Award for Social Entrepreneurship. Doing the work I do is really worth it, even though it is difficult”, Bart said finally, smiling. “That being said, here we are now!” concluded Bart “I just had this very week a meeting in Belgium with the board to discuss our growth strategy for the following years. It has taken us several years, but all of us finally agreed to grow through a more hybrid structure. The exact legal form that APOPO will take is not decided yet, but I am thinking of a cooperative society. It would enable us to keep not for profit, purely humanitarian activities, and at the same time develop for-­‐profit activities, and become our own donor for our non-­‐profit activities”. The plane just landed, confirming so to speak that the story had ended. “Well, thanks for telling me your story so openly” Alex said; “I should have mentioned it earlier, but I work for a social venture capital firm, and we’re always looking for new investment opportunities, so if you are interested…” He handed Bart his card. “Stay in touch.” 33 7. Preparatory questions o
Identify the different stages of development APOPO went through. At which of the 6 stages is APOPO now? o
How does the entrepreneurial process for traditional enterprises, as described in the theory, differ from the social entrepreneurial process? Look at the differences or similarities in the context and at the three elements considered to be essential for a successful enterprise: People, Resources, and Opportunity. (Base yourself on the APOPO case and use your general knowledge) o
What is the potential of the idea of using rats for tuberculosis detection as an opportunity, according to the social opportunity assessment tool as described in the theory? 34 8. Exhibits Exhibit 1: APOPO’s vision, mission and core values 35 Exhibit 2: Evolution of APOPO’s funding model and sources •
Funding model of APOPO: 2001-­‐2010 (by percentage of the total amount) Source: Author NB: A particular effort was made to raise private, independent funding through the development of a website and the “Adopt-­‐a-­‐Rat” program. •
APOPO Private Funding Sources: 2002-­‐2011 Funding Source
Private Foundations
UBS Optimus Foundation
Skoll Foundation
Charities in Defense of Nature Trust Fund
World Bank Development Marketplace
Lien Foundation
Philippson Foundation
Peery Foundation
Swift Foundation
Symphasis Foundation
Flora Family Foundation
Roviralta Foundation
Lee & Gund Foundation
Marty & Dorothy Silverman Foundation
Private Corporations
Imperial
TIB MOLBIOL
Johnson & Johnson
Ernst & Young
Kriegskindernothilfe (KKNH)
Research Institutions
Geneva International Center for Humanitarian Demining
National Institute of Health
Source: APOPO Currency
Amount
Project
CHF
USD
EURO
USD
USD
EURO
USD
USD
CHF
USD
EURO
USD
USD
1,800,000
1,000,000
550,100
163,000
158,000
120,000
75,000
60,000
50,000
45,000
35,800
10,000
6,500
TB Detection
Capacity Building
TB & MDR
Capacity Building
Mine Action Thailand
Strategic Planning
Capacity Building
TB Detection
Mine Action Angola
General Support
Capital Investments
General Support
General Support
POUNDS
EURO
EURO
USD
EURO
165,000
50,000
20,000
10,000
6,000
Local Staff Tanzania
HeroRat Adoptions
TB Detection
General Support
HeroRat Adoptions
CHF
USD
1,085,171
150,000
Research MDR/REST
TB Research
36 •
Allocation of APOPO’s philanthropic funds – 2011 Source: APOPO’s annual report 2011, p.22 37 Exhibit 3: The Landmine detection application The process is the following: land must first be cleared from vegetation with an armoured bush cutter, and trainers and handlers then clear manually “safe-­‐lines” to walk through. A rope is then strung between two handlers, and the rat, attached to the rope through a small harness walks from one handler to the other, indicating a suspected landmine by scratching the ground with its paws. Finally, to ensure accuracy throughout the process, a second rat survey is done. The indicated landmines can then be removed manually. 38 Exhibit 4: The Tuberculosis detection application The process is the following: the rats have to sniff a series of holes, under which human sputum samples are lined up for evaluation. These samples are collected from four DOTS centres in Dar Es Salam each week. When a sample containing the TB bacteria is identified, the rat scratches at the hole. If the sample is known positive, the rat receives a food reward (banana or peanut). If the rat’s indication is on an unknown sample, it is verified using microscopy. Samples that are in fact TB positive are then reported to the hospitals where the samples come from. The patient is warned and can be treated. 39 Part C : Teaching note 1. Objectives The objective of this case is to give students a first contact with the world of social entrepreneurship. The case aims at introducing to social enterprises, and at highlighting the essential differences between the traditional entrepreneurial process, and the social entrepreneurial process. How social enterprises arise, how they develop and grow is the main thread of the case. The challenges social entrepreneurs have to deal with are also addressed. At the end of this case study, students should have developed a good knowledge on social entrepreneurship. They should come to the conclusion that social enterprises, to be successful, require the same fundamental elements as commercial enterprises: an opportunity, an entrepreneur or entrepreneurial team, and resources, interacting in a specific context. However, contrarily to commercial entrepreneurship, the social value proposition (essence of the social enterprise’s mission) is at the heart of the social entrepreneurial model. 2. Positioning This teaching case study is essentially designed for a bachelor or master course in entrepreneurship, where social entrepreneurship is discussed in the program. 3. Pre-­‐requisites Basic knowledge on traditional entrepreneurship, and on the way enterprises function might be useful for this case study. No previous knowledge on social enterprises is expected. On the contrary, the case is intended to be an introduction to social entrepreneurship. 4. Synopsis In a hostile context, where landmines and tuberculosis are a real obstacle to the development and economic growth of developing countries, two entrepreneurs, Bart Weetjens (passionate about rodents) and Christophe Cox (with management experience in Africa) seized the social opportunity in front of them. They developed a new, quick, efficient and low cost detection technology with giant African pouched rats, to counter these social problems in Africa, and go in the direction of an independent Africa vis-­‐à-­‐vis foreign aid. In 1997, they created their venture under the acronym of APOPO. APOPO is today a successful Belgian social enterprise, based in Tanzania, training rats to support life-­‐saving activities, through olfactory detection methods: “APOPO researches, develops and disseminates detection rats technology for 40 humanitarian purposes.”7 This would never have been achieved without the essential financial resources that APOPO found on the philanthropic funding market. 5. Suggested assignment In preparation for the class, students should receive and read carefully note 1 and note 2 from part A (the technical note), as well as part B (the case study). After having read the case, students should have a better idea of how social enterprises work, and should be able to answer the preparatory questions. Note 3 of part A (the technical note) should be distributed to the students only at the end of the class. 5.1 Introductive questions It is suggested that the instructor starts class discussion with the following introductive questions. These questions are aimed at refreshing the students’ mind, and obtaining their full attention. 5.1.1
APOPO’s activities To begin with, the instructor could simply ask students: “what type of enterprise is APOPO”. The answer is straightforward: APOPO is a social enterprise. The instructor could continue by asking someone to read out loud the mission of APOPO (see Exhibit 1 of the case study): “developing a detection rats technology to provide solutions for global problems and inspire positive social change”. Then, the instructor should ask the students to enumerate APOPO’s different activities, classifying them by their type: core or support activities. The instructor could use the board plan provided in Exhibit TN-­‐1 for this question. An example of the solved question can be found in Exhibit TN-­‐2. Students could mention the following points: •
•
APOPO’s core activities: -­‐
Breeding and training rats -­‐
Operational activities: full landmine clearance, TB detection -­‐
R&D on new applications (Tobacco, salmonella, etc.) APOPO’s support activities include amongst others: -­‐
Fundraising -­‐
Marketing -­‐
Business development 7 Note : statement on APOPO’s website. 41 The instructor could then sum up saying that APOPO’s core business is to research, development and disseminate a detection rat technology for humanitarian purposes. 5.1.2
Stages of development of APOPO In order to give students a clearer view of what APOPO is, and of how it developed through time, the instructor could ask a student, “At what stage of development do you think APOPO is now? Can you explicit each stage of development APOPO went through?”. The instructor might invite the student to answer these questions on the blackboard, reproducing the six usual stages of an enterprise’s development, in casu applied to APOPO. The instructor can use the board plan of Exhibit TN-­‐1 to guide the student. An example of the solution for this question can be found on Exhibit TN-­‐3. The instructor could start by asking the student to draw the curve that represents the growth of an enterprise, according to the different stages of development it usually goes through. He could then ask the student when APOPO was in its first stage of development, and why he thinks so. •
Seed stage: APOPO was in its seed stage when it started research at the university of Antwerp and then transferred to Tanzania. Bart and Christophe recognized an opportunity, and as co-­‐founders, they developed a product, still in its research and prototyping stage during the initial phase. The team was very small, composed only of the two founders, both directors of APOPO, managing the project. After some time, two other people joined the team: a biologist and a supervisor. Yet things were still very informal in the organization at that time. Thanks to their partnership with the Sokoine University of Agriculture, the team acquired the necessary resources to continue research in Tanzania. The Belgian Directorate for International Co-­‐operation and the Belgian government provided APOPO with the initial necessary funds. The instructor could then ask the student if he thinks APOPO went on to the second stage of development, at what moment, and why. •
Start-­‐up stage: APOPO can be said to have moved to the start-­‐up stage at the time the Geneva International Center for Humanitarian Demining validated its detection rat technology and when it received the accreditation to start official work in Mozambique. Marketing and communication became important as APOPO had to convince governments to use its demining technology. In order to satisfy the increasing demand in Mozambique, 42 APOPO created a branch in this country, and hired and trained local people for demining activities. The roles within the organization started to be better defined, even though there was still very little hierarchy. There was the management team on the one hand -­‐ considered as a big block without any clear understanding of their respective roles -­‐ and the trainers on the other hand. Once more, the instructor could continue by asking the student if he thinks APOPO moved on to the third stage of development, and why. •
Early growth stage: Students should realize that APOPO is for the moment at an early growth stage. In fact, APOPO is successful, and needs to acquire new managerial skills to further develop. It decided to diversify its activities by looking for new markets (Thailand and Angola) and developing new products (TB, Tobacco and salmonella detection). Moreover, it made several changes in the management and board, in order to become a more strategic-­‐oriented organization focused on the market, in order also to adapt to its growth and increasing complexity. The company formed a more structured management team indeed, with split roles and responsibilities. The co-­‐founders’ responsibilities were split. The other members of the management team were given specific titles and responsibilities. The hierarchy within the company became more explicit. Changes were made at the board’s level as well, in order to benefit from the advice of more experienced people. 5.2 Assignment questions Through the following questions, students will have a better global view of social traditional entrepreneurship. The questions are grouped into 4 categories, which coincide with the traditional entrepreneurial process. The final objective is to come up with a new model of this process, one adapted for social entrepreneurship, combining the same fundamental elements of the entrepreneurial process, in a slightly different way. At the end, the instructor could take a further step and look at the limitations of this model, handing out note 3 of part A (technical note). 5.2.1
Analysis of the “People” pillar In order to analyze the first pillar of the entrepreneurial process as defined by Timmons, the instructor could start by analyzing the behavioral characteristics of the social entrepreneurs of this case. The first question that could be asked is: “What motivated Bart 43 Weetjens and Christophe Cox to act and create an enterprise to overcome an unmet social need?” Students could mention the following elements: •
Dissatisfaction with the status quo: First of all, what motivated Bart’s social change fostering is his negative impression of life. He is dissatisfied with the way traditional enterprises work, and does not feel sharing in that world. His past experiences highly influence his point of view. The article he read on rodents and their ability to detect explosives was the trigger, giving him directly the idea to go back to the basics, and use an abundant African resource: rats, for detection purposes to save lives. •
Not convinced by traditional methods: Bart is not convinced by the traditional demining methods for example, which do not go towards an independent country vis-­‐à-­‐vis foreign aid, which are not rapid, secure, of low cost and easy to use all at the same time, this being precisely what is needed in landmine affected countries. Even though the demining industry is a very conservative industry, difficult to penetrate and very fund dependent, Bart and Christophe see a great opportunity in this industry, whereas others might see only chaos. •
Personal satisfaction: Christophe Cox, who had working experience in Africa, saw in this project the opportunity to put his knowledge to good use and gain social recognition. For Bart Weetjens, it meant flourishing. The instructor could then move on to another, related question: “What drives Bart Weetjens and Christophe Cox in their daily lives?” Students could mention the following points: •
Passion: the dominant characteristic put forward in this case – and worth mentioning-­‐ is the true passion that moves Bart Weentjes and Christophe Cox in their day to day lives. •
Frustration and desire to address social problems: Bart likes rodents and Africa, but is frustrated that Africa remains terribly dependent on foreign aid as far as detection technologies are concerned. This frustration, and his desire to address social needs convince him to continuously look for other detection applications with his rats. In order to summarize this section, and to get a more general view on social entrepreneurs, the instructor could ask the following question: “How are social entrepreneurs different from commercial entrepreneurs (looking at their behavioral traits and the purpose of 44 their action)?”. The instructor could synthesize the answers on the blackboard, using the board plan of Exhibit TN-­‐1. Traditional business entrepreneurs are often characterized by the following behavior and/or attitudes (J. Timmons & al., 2007): strong motivation, commitment, determination, tolerance of risk and uncertainty, opportunity obsession, courage, leadership, etc. Social entrepreneurs need the same entrepreneurial skills. However, as seen in APOPO’s case, they are characterized by their dissatisfaction with the status quo, their action-­‐oriented behavior, their capacity to identify a social problem and organize, create, and manage venture to make social change. Social entrepreneurs recognize opportunities where others merely see chaos and confusion. Actually, the landmines detection industry is an unattractive one, but this is where APOPO started. Moreover, rats are often associated with dirt and diseases, but APOPO sees a great opportunity in using these exceptional creatures for humanitarian purposes. Because social entrepreneurs often operate in resource-­‐scarce environments, they use very creative approaches to attract non-­‐traditional resources and assemble them in new ways, to tackle the challenges government and private-­‐sector companies failed to solve. The biggest difference between traditional and social entrepreneurs lies in the purpose of their action. For social entrepreneurs, the primary goal is mission-­‐related impact. While business entrepreneurs focus on building a business, on earning profits and on wealth creation, the social entrepreneurs' purpose is to create social change. Once filled, the table could look like this: Entrepreneurs
Behavioral
traits
Traditional Entrepreneurship Social Entrepreneurship
-Strong motivation
-Commitment
-Determination, courage
-Tolerance of risk and uncertainty
-Opportunity obsession
-Etc.
-Attracted by money
-Serve markets that can afford
Purpose of their the product/service
-To create wealth and earn
action
profits
-Not satisfied with status-quo
(want social change)
-Recognize a social problem
-See opportunities where others
see chaos; creativity
-Serve neglected, disadvantaged
populations
-To create social change
45 The instructor could then go through some complementary questions regarding social and human capital, which have such an important place in the social sector. These questions could be tackled as well at the end of the third section on resources. The instructor might invite the students to investigate the role and the importance of partnerships for social enterprises, especially in the case of APOPO. He could start by asking students to list the different partnerships APOPO was able to build, and then identify the advantages of these alliances. •
Partnership with the Sokoine University of Agriculture (SUA): enabled APOPO to have access to the resources necessary to continue R&D in Tanzania; resources it might not have been able to obtain on its own. In fact, SUA provided APOPO with a place for its headquarters, a training minefield for its rats, access to local human resource pools, etc. Moreover, the partnership with SUA gave APOPO a local face, which is a considerable advantage, certainly in the demining industry. As a matter of fact the demining industry is known to be reluctant to change, and is therefore not prone to use a new mine action tool. Yet knowing that the enterprise employs local workforce and uses local resources helps in the process of gaining acceptance. •
Partnership with the Marie&Alain Philippson Foundation: enabled APOPO to have access to several management tools and to a specialized consultant, which helped the enterprise to become more professionalism, and move towards a real social enterprise model. •
Partnership with the Thailand NGO: enabled APOPO to expand, to put a foot in Thailand, and start an analysis of suspected hazardous areas. •
Partnership with a Norwegian NGO: enabled APOPO to start operations in Angola. •
Partnerships with DOTS centers: without these partnerships, APOPO would not have access as easily to samples of sputum, indispensable to its research on TB detection with rats. Students should conclude that partnerships are essential, particularly to social enterprises. While traditional enterprises make partnerships to benefit from economies of scale and increase their profitability, working in partnership for social enterprises is of high importance, as it helps to pool resources and develop capabilities that would not be affordable individually. Students might also remark that for a social enterprise, in the view of the constraints it is faced with, it is critical to develop a large network of contacts to expand the organization’s capacity with limited capital. While social entrepreneurs seek to attract capital for the social good rather than for financial returns, they rely decisively on a robust network of contacts and partnerships enabling to get access to funding, board members, management, staff and other resources. 46 Then, the instructor could invite the students to have a closer look at the human capital available to social enterprises, and ask: “Do social enterprises have access to the best talents? On what kind of human capital do social enterprises rely? Why do you think it is like that?” To begin with, social enterprises’ access to the best talents is limited. As a matter of fact, if commercial enterprises often have the financial capital or the incentives necessary to recruit and retain talent, social enterprises can rarely pay the market rates salaries, they are even less able to offer other equity incentives like stock options. So social enterprises often rely on volunteers in the board or staff. APOPO’s board members were initially mere professors from the Antwerp University, acting on a voluntary basis. This caused some inefficiencies and challenges. The management has less authority than it would with traditional employees. Finally, in order to conclude, the instructor could stress out the fact that social (and environmental) considerations are of uttermost importance to social entrepreneurship. To do so, the instructor could ask a student to come up to the board, and help to come up with the graph proposed in Exhibit TN-­‐1. The graph represents the relative importance of each variable (People, Profit and Planet) of the Triple Bottom Line (TBL) for social entrepreneurship, compared to traditional entrepreneurship. The student should draw a square for example with S (standing for social entrepreneurship) and another one with T (standing for traditional entrepreneurship) for each variable, placing them according to the relative importance of measuring the impact of impact of this variable. The “S” squares should be on the right hand side for the variables “People” and “Planet”, whereas the “T” squares should be more on the left hand side. For the “Profit” variable, the two squares should be closer to each other, as social entrepreneurship still needs to be financially sustainable, and as a result it should measure its eventual profit. However, financial metrics are less important to social entrepreneurship than to traditional entrepreneurship. After having briefly investigated this first pillar of the entrepreneurial process, the same can be done with the second pillar: the opportunity. 5.2.2
Analysis of the “Opportunity” pillar The instructor can start this section by asking a student: “What type of opportunity is APOPO seeking? How is that opportunity different from commercial entrepreneurship?” In APOPO’s case -­‐as with any social venture-­‐ the opportunity is social more than 47 commercial. Like business entrepreneurs, social entrepreneurs need to identify the needs and wants of their “customers”. However, the focus of social entrepreneurship is on social returns, and often on serving basic needs more effectively, whereas the focus of commercial entrepreneurship is on financial returns, concentrating on developing breakthroughs and new needs. Moreover, commercial entrepreneurs, see an idea as a good opportunity when it has a large or growing total market size, and when the industry is attractive. Social entrepreneurs, on the contrary, do not need all those characteristics, as for them, a recognized need, demand or market failure consists already of a sufficient market size. Finally, in the commercial sector, finding an unexploited and profitable opportunity is relatively hard. For social entrepreneurs however, social opportunities are abundant. The instructor could complement the previous question by asking the same student what opportunities APOPO saw more specifically in the demining industry and after in the healthcare industry in Africa, and if the timing was right. •
In the demining industry: landmines in Africa and other countries with explosive remnants of war have devastating effects. Not only are they responsible for numerous injuries and deaths, but they constitute also a real obstacle to the development and economic growth of these countries. The need for an efficient mine detection technology was therefore very present when APOPO was created. Moreover the UN appeal for help for the landmine problem in Afghanistan opened a window of opportunities for social entrepreneurs seeking to overcome the landmine problem. The time period during which APOPO was created was therefore the good one, namely during the big boom of mine action NGOs. All attention was given to mine action programs, and funds went into that direction at that time. •
In the healthcare industry: tuberculosis has negative repercussions on the economy of African countries, as they are highly affected by this contagious disease (in some African countries, more than 35% of the population is affected by tuberculosis). A reliable, cheap and effective tuberculosis detection tool is therefore highly needed as well. More generally, developing countries keep being very dependent on imported expertise to solve the landmine and tuberculosis detection problems. Bart Weetjens saw there the opportunity to develop a more adapted technical innovation. In actual fact, he was not convinced by the existing methods used, such as detection dogs for landmine detection or microscope for tuberculosis detection. Those traditional methods are relatively expensive, and do not go towards an independent Africa vis-­‐à-­‐vis foreign aid. They are not satisfactory from 48 every point of view, and Bart was convinced his giant African rats would meet these important social needs more effectively. It is interesting then to have the students assess for example APOPO’s idea of using rats to detect tuberculosis, in order to determine its potential as an opportunity. The instructor should suggest them to use the Social Opportunity Assessment Tool (as presented in note 2, section 2 of the theory) as far as it is possible, relying on the information given in the case, and using their general knowledge as well. The instructor could invite the students to get into groups of four and compare their answers, and then ask a group of students to come and solve the question on the blackboard. The instructor could use the board plan of Exhibit TN-­‐1 for this question, and ask to put a cross for each category in the high, medium or low column. •
The social value potential of the idea: There is clearly a true social need for a quicker, cheaper and more reliable tuberculosis detection technology. Microscopy detection is the traditional method used. However, only 40% to 60% are reliable, which is not sufficient to reach the objectives of the Millennium development goals for the tuberculosis by 2015, in view of the fact that an untreated person can contaminate 10-­‐15 people a year. Detecting tuberculosis with rats is aligned with APOPO’s mission, which is to “Develop detection rat technology to provide solutions for global problems and inspire social change”. Furthermore, the opportunity has a measurable social impact as APOPO keeps track of the number of cases of tuberculosis detected by the rats, and informs the medical centers when a patient is diagnosed TB-­‐positive by APOPO’s rats (whereas it was diagnosed TB-­‐negative by the first microscopy analysis). The DOTS centers call back those patients who can then be treated in the right way. The social return on investment (SROI) though is more complicated to calculate. The only criterion that makes APOPO’s idea a weaker opportunity is community support. In fact it is hard to convince medical institutions to use rats as a detection tool, because rats are associated with dirt and illness. However, it can be concluded that the social value potential of APOPO’s idea in general is high. •
The market potential of the idea: APOPO’s idea addresses a need and an apparent will. Moreover, the timing is good as the Millennium development goals opened a window of opportunities for social entrepreneurs wanting to solve the tuberculosis problem. We can see that APOPO’s idea actually attracts investors: there are many funders supporting the TB-­‐detection research program (see Exhibit 1 of the case study). Usually this criterion has to be assessed before launching the idea. Yet, being today in its research phase, the TB-­‐detection program supplies some indication on the 49 ability of attracting other sources of funding for APOPO’s TB-­‐detection program. The potential market size is rather important, inasmuch as the tuberculosis affects in some African countries more than 35% of the population. Moreover, real substitutes are scarce, because the requirements are high. So competition is low in that market. The conclusion for this part is that the market potential of APOPO’s idea is high. •
The competitive advantage potential of the idea: There are important entry-­‐barriers in the TB-­‐detection industry. As a matter of fact, the technology needs to be reliable, quick and cheap at the same time, which is not easy. Moreover, APOPO benefits from a good knowledge of the customs and ways of working in Africa, in view of its history. The support from the WHO, and APOPO’s already existing social network are other considerable advantages. APOPO’s potential partners for its TB-­‐detection program are numerous, as once accepted by the community, the probability is high that other DOTS centers will want to build a partnership with APOPO. The control over the cost criterion is less positive though, as APOPO is highly dependent on philanthropic investments, in the view of the countries it targets. However, APOPO’s mission is very compelling, likely to attract many investors. Finally, APOPO has built over the years a management team with complementary skills. Yet their turnover is high, which causes some important inefficiencies. As a result, the competitive advantage of APOPO’s idea can be considered as medium. •
The sustainability potential of the idea: The physical resources to start are sufficient. Rats are plentiful, and their breeding is controlled by APOPO itself. In case of quick growth, APOPO would have to increase its facilities. This would not be a challenge as APOPO is located in the Sokoine University of Agriculture, where new buildings could easily be added. APOPO’s capability is strong, as a highly skilled board supports it, and because it benefits from a competent management team, and employs very motivated local trainers. As mentioned before, APOPO’s mission is compelling, and there is evidence of philanthropic, government and private investors interest. However, there is a potential for charging fees (very low) to hospitals or to patients for APOPO’s TB-­‐detection services, which would lower APOPO’s dependency on philanthropic funding. So the sustainability potential of APOPO’s idea might appear to be high. As a result, the composite assessment of APOPO’s idea to use rats as TB-­‐detectors can be considered to be high, and the idea is likely to be a true opportunity. 50 5.2.3
Analysis of the “Resources” pillar The analysis of the financial resources available to the enterprise is the last pillar of the entrepreneurial process. In order to analyze this pillar for social enterprises, the first question the instructor could ask to one student might be: “Where do APOPO’s funds come from?”. As shown in Exhibit 2 of the case study, APOPO benefits from several sources of funding to support its activities and projects: -­‐
Grants: Belgian Government, Norwegian Government, Province of Antwerp, Flemish Government -­‐
Public fundraising: Adopt-­‐a-­‐Rat platform -­‐
Funds from foundations: Skoll Foundation, Philippson Foundation, Swift Foundation, etc. -­‐
Funds from corporations: Johnson&Johnson, Ernst&Young, etc. -­‐
Funds from research institutions: GICHD and the National Institute of Health Then, the instructor could ask: “How did APOPO’s funds evolve through time?”. It can be observed that in the beginning APOPO had only financial resources from governments, and more precisely from the Belgian Government. However, it soon diversified its financing sources in order to support its growth more effectively. The instructor should stress out that philanthropic capital is really the fuel that powers a social venture. It is effectively the case for APOPO; without funds, APOPO would not be able to survive. As a result, by considering investors as partners in the creation of a meaningful impact rather than just funding sources, social enterprises such as APOPO can build more scalable and effective enterprises. The instructor could then move on to the analysis of the differences between the financial resources available to social enterprises, compared to the ones available to commercial enterprises. The instructor can use the board plan shown in Exhibit TN-­‐1 for this question. -­‐
To facilitate the discussion, the instructor could start by asking on which type of capital market commercial and social enterprises rely. o
Traditional enterprises rely on commercial capital market, and benefit from a wide range of financial instruments available at every stage of their growth. o
Social enterprises on the contrary rely on a highly fragmented philanthropic capital market. They rely on various and numerous actors -­‐ as has been seen 51 through the precedent question (such as individual contributions, foundation grants, government payments, etc.). These actors have a wide variety of motivations and expectations. -­‐
The instructor could continue by asking how important sources of funding are to social enterprises and why. o
As social enterprise operations rarely attain the breakeven point without some form of donor support, they are highly reliable on these sources of income. Therefore, most of the competition in the social sector concerns fund raising. As a result, social enterprises spent a lot of time on finding funds. o
Commercial enterprises on the contrary generate earned incomes, and rely less if not at all on donor support. The financial instruments available to them are numerous (bank loans, venture capitalists, etc.), and they therefore spent less time on finding funds to sustain their business. -­‐
Finally, the instructor could also ask how the investments in commercial enterprises differ from investments in social enterprises. o
Whereas investments in traditional enterprises are based on objective measures and consist of big and long-­‐term amounts of money and for a long term, investments in social enterprises are based much more on personal preferences, are smaller and for rather limited terms. The following table summarizes the previous arguments. Resources
Financial
Resources
Traditional Entrepreneurship
-Commercial capital market with
many financial instruments
-Attract capital for financial
returns
-Generate earned incomes
-No time spent on finding funds
-Big investments usually for a
long period of time
-Investments based on
objective measures
Social Entrepreneurship
-Philanthropic capital market
highly fragmented, with few
instruments
-Attract capital for social good
-Usually no earned incomes: very
reliable on donor support
-High competition for funding: a
lot of time spent on finding funds
-Small investments usually for a
small period of time
-Investments based on personal
preferences
5.2.4
Analysis of the “Context” In order to look closer at the context for social enterprises, the instructor can question students about the importance of the context to APOPO. Students could mention the following points: 52 -­‐
The context is of special importance to social enterprises in general, and to APOPO in particular. It gives the term “social” in social entrepreneurship significance by providing a source of opportunities to social entrepreneurs to add social value. -­‐
The context is not only source of many opportunities; it is also source of some challenges. APOPO has to bear for example with the African culture, different from the European one, having its own social norms. The economic environment is different, as well as the legal and political systems, etc. Social enterprises, as noticed in APOPO’s case compete with each other for philanthropic dollars, grants, volunteers, community acceptance, political attention, and attention from clients or customers, etc. -­‐
The context in which social enterprises operate affects what they do, and how they do things. So APOPO has to adapt to its context, but the other way round, APOPO can also have an influence on it. APOPO for instance is progressively changing the idea of an Africa dependent vis-­‐à-­‐vis foreign technology, as it highlights the fact that local resources can be used to solve local problems. The instructor can then ask students how social entrepreneurs react to an inhospitable context, compared to traditional entrepreneurs. An inhospitable context will not stop social entrepreneurs from pursuing an opportunity. On the contrary, inhospitable environments usually bring new needs of change and new opportunities, and can bring considerable social impact. As a result, what might be seen as an unfavorable contextual factor for market-­‐based commercial enterprises can be considered as an opportunity for a social entrepreneur who aims to address social needs arising from market failures. This is exactly what happened with APOPO. The demining industry is an unattractive industry, very conservative and not changing easily form one technology to another. Yet available technologies are not satisfactory as they are not rapid, secure, of low cost and easy to use at the same time. APOPO sees there an opportunity, and it is not stopped by the inhospitable context. 5.2.5
Conclusion In order to conclude, the instructor may ask a student to summarize the key difference between commercial entrepreneurship and social entrepreneurship. The answer should include the following elements: -­‐
Social entrepreneurs focus on social mission achievement as opposed to the commercial entrepreneurs who focus on profits for the enterprise’s owners. -­‐
The social value proposition is key to social enterprises. 53 Now that the students acquired a better global view of the differences between commercial entrepreneurship and social entrepreneurship, the instructor could draw on the blackboard the social entrepreneurship process as developed by Wei-­‐Skillern et al. (2006, shown in Exhibit TN-­‐1, and Exhibit TN-­‐4), with the help of the students. The instructor should highlight the fact that the social purpose is in the center of the model, as it is really the driver of the framework. As a matter of fact, one should note that the greatest difference between the commercial entrepreneurial process and the social entrepreneurial process lies in the social value proposition, which has a central role in the social entrepreneurial model. The social impact of the enterprise activity (social value proposition) is effectively the goal of all the actions from the social enterprise. The opportunity is represented at the top of the framework (see Exhibit TN-­‐4) by a circle. It is the departure point for entrepreneurship. People and capital resources are represented by circles as well, and placed at the bottom. They are the enabling variables in the social entrepreneurial process. The three circles intersect, to reflect the overlapping and interdependent nature of the
variables. The instructor could finally point out that despite the differences between social and commercial entrepreneurship, as analyzed through the previous questions, both types of entrepreneurship employ the behaviors, skills, processes, tools and techniques of entrepreneurs: opportunity recognition (adding value by addressing needs), bootstrapping (being creative and efficient when assembling resources), risk tolerance, etc. 5.3 Teaching plan The following teaching plan can be used for a 100 minutes class discussion. The questions that are intended to guide class discussion are indicated by “Q”. The instructor is advised to read the analysis provided in the previous section before using this teaching plan. (Time) 0 :00 Introduction Q: What type of enterprise is APOPO? What are APOPO’s activities? (Exhibit TN-­‐1 + Exhibit TN-­‐2) Q: Identify the different development stages APOPO went through. At which of the 6 stages is APOPO nowadays? (Exhibit TN-­‐1 + Exhibit TN-­‐3) -­‐
Draw the curve that represents the growth of an enterprise, and write down the different stages of development it usually goes through. -­‐
When was APOPO in its first stage of development, and why? 54 -­‐
Do you think APOPO went on to the second stage of development? At what moment? What characterizes that stage for APOPO? -­‐
Do you think APOPO moved on to the third stage of development? What characterizes that stage for APOPO? 0:10 Analysis of the “People” pillar of the entrepreneurial process framework Q: What behavioral characteristics of entrepreneurs are exhibited in this case? Q: What factors motivated Bart Weetjens and Christophe Cox to act and create a social venture to overcome unmet social needs? Q: How are social entrepreneurs different from commercial entrepreneurs (in terms of behavioral traits and the purpose of their actions)? (Exhibit TN-­‐1) 0:25 Questions to go further in the analysis of the “People” pillar: Q: List the different partnerships APOPO was able to build, and identify the advantages of these alliances. Q: Do you think social enterprises have access to the best talents? On what kind of human capital do social enterprises rely? Why do you think it is like that? Q: Represent the importance of the “People, Planet, Profit” variables of the triple bottom line (TBL) framework for traditional and social entrepreneurship in the graph of Exhibit TN-­‐1. 0:35 Analysis of the “Opportunity” pillar of the entrepreneurial process framework Q: “What type of opportunity is APOPO seeking? How is that opportunity different from the opportunities in commercial entrepreneurship?” Q: What opportunities did APOPO see in the demining industry, and after in the healthcare industry, in Africa? Was the timing right? Q: What is the potential of the idea of using rats for tuberculosis detection as an opportunity, according to the social opportunity assessment tool? (Exhibit TN-­‐1) 1:05 Analysis of the “Resources” pillar of the entrepreneurial process framework Q: Where do APOPO’s funds come from? How did this situation evolve through time? Q: What differences are there between the financial resources available to social enterprises, compared to the ones available to commercial enterprises? (Exhibit TN-­‐1) -­‐
On which type of capital market do commercial enterprises and social enterprises rely ? -­‐
How important are sources of funding to social enterprises, and why? 55 -­‐
How are the investments in commercial enterprises different from the investments in social enterprises? 1:15 Analysis of the “Context” of the entrepreneurial process framework Q: How important is the context to APOPO? Q: How do social entrepreneurs react to an inhospitable context, compared to traditional entrepreneurs? 1:25 Conclusions Q: Summarize briefly the key difference between commercial entrepreneurship and social entrepreneurship. Q: Draw a framework representing the social entrepreneurial process. (Exhibit TN-­‐1 + Exhibit TN-­‐4) 1:35 Key Learning (slide) 5.4 Key learning The instructor can conclude the class discussion by presenting the slide of Exhibit TN-­‐
5, mentioning the following points: -­‐
The social entrepreneurial process is quite similar to the commercial entrepreneurial process, but particular importance is given to the social value proposition and the context. -­‐
Social entrepreneurs focus on social mission achievement while commercial entrepreneurs focus on profit creation. In fact, the commercial entrepreneur’s final objective is wealth creation. For the social entrepreneur, however, wealth creation is simply a means to an end. -­‐
Social entrepreneurs are unhappy with the status quo. -­‐
They see opportunities where others see only chaos. -­‐
Social enterprises are often highly dependent on philanthropic money. Finding sources of funding is where there is major competition for social ventures. -­‐
The context provides social entrepreneurs a source of opportunities to add social value. -­‐
The context is permeable, and can be influenced by social entrepreneurship. 56 5.5 Additional theory Finally, the instructor could give the students the short part of theory referred to as “Note 4: the Social entrepreneurship Process Model” in “Part A : Technical note”, at the end of the class, for further reading. In fact the entrepreneurial model that is developed in that chapter is a very recent model that goes beyond the “Social Entrepreneurship Framework” created by Wei-­‐Skiller et al. (2007, p.23), and discussed in class. 57 5.6 Teaching Note Exhibits Exhibit TN-­‐1: Board Plan Source: author 58 Exhibit TN-­‐2: APOPO’s activities Source: Philippson Foundation Exhibit TN-­‐3: APOPO’s stages of growth Source: author 59 Exhibit TN-­‐4: Source: Wei-­‐Sillern et al. (2007, p.23) Exhibit TN-­‐5: Key Learning (slide) Source: author 60 Bibliography Articles: -­‐ Abell D. (1997), “What makes a good case? Technical note”, International Institute for Management Development -­‐
Alter K. (2007), “Social Entreprise Typology”, Virtue Ventures LLC -­‐
BEPA-­‐Bureau of European Policy Advisors (May 2010), ‘”Empowering people, driving change: Social innovation in the European Union” -­‐
Churchill C. and Lewis L. (May-­‐June 1983), “The Five Stages of Small Business Growth”, Harvard Business Review -­‐
Geneva International Centre for Humanitarian Demining: Guide to Mine Action and Explosive Remnants of War (2007) -­‐
Haugh, H (2005) “A research agenda for social entrepreneurship”, Social Entreprise Journal, 1 (1): 1-­‐12 -­‐
Mair J., Marti I. (2006) “Social entrepreneurship research: A source of explanation, prediction, and delight”, Journal of World Business, 41:36-­‐44 -­‐
Phills Jr. J. A., Deiglmeier K. and Miller D. T. (2008), “Rediscovering Social Innovation”, Stanford Social Innovation Review. -­‐
Roberts M.J (2001), “Developing a Teaching Case (Abridged)”, Harvard Business School. -­‐
Wei-­‐Skillern J., Austin, J.E., Leonard H., Stevenson H. (2006), “Social and commercial entrepreneurship: same, different, or both?”, Entrepreneurship Theory and Practice, 30 (1): 1-­‐22 Books: -­‐
Fayolle A. (2007), “Entrepreneurship and New Value Creation: The Dynamic of the Entrepreneurial Process” , Cambridge University Press -­‐
Leenders M.R., Erskine J.A. and Mauffette-­‐Leenders L.A. (2001), “Writing Cases”, Fourth edition, Richard Ivey School of Business, University of Western Ontario -­‐
Metz Cummings A. and Hehenberger L. (2011), “A guide to venture philanthropy for venture capital and private equity investors”, p.15, European Venture Philanthropy Association -­‐
Sahlman W.A., Stevenson H.H., Roberts M.J., Bhide A.V. (1999), “The entrepreneurial venture”, Harvard Business School Press 61 -­‐
Timmons J., Spinelli S., (2007), “New venture creation: Entrepreneurship for the 21st century”, McGraw-­‐Hill/Irwin -­‐
Vyakarnam S. and Hartman N. (2011), “Unlocking the enterprise inside! A book of Why, What and How!”, World Scientific Publishing Co. Pte.Ltd -­‐
Wei-­‐Skillern J., Austin, J.E., Leonard H., Stevenson H. (2007), “Entrepreneurship in the social sector”, Harvard Business School, SAGE Publications Websites: -­‐ APOPO website: http://www.apopo.org/home.php?lang=en, page consulted the 25/05/2012 -­‐
WHO website: http://www.who.int/en/, page consulted the 25/05/2012 -­‐
Entrepreneurship knowledge hub (Olivier Witmeur): http://www.olivier-­‐
witmeur.net/teaching/master/introduction-­‐entrepreneurship,“ Introduction to Entrepreneurship, Session 6 – Start-­‐up & growth strategies”, page consulted the 25/05/2012 62