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Helping social businesses to grow

Study by University of Cambridge researchers identifies four strategies and two key methods for scaling up social businesses in developing countries in order to meet huge unmet needs of more than four billion people.

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Social businesses can play an important role in developing countries in addressing needs such as healthcare, energy, education and sanitation, but such businesses have faced a difficult time scaling up to significant size and reach.

New research authored by researchers at the University of Cambridge identifies four key strategies and two methods for social businesses to scale up, which could help them reach many more of the four billion people in developing countries who could benefit from the services of such businesses.

Professor Jaideep Prabhu

Professor Jaideep Prabhu

“Meeting these needs through affordable and sustainable solutions offers businesses a vast opportunity for future growth,” says the study published in the Journal of Cleaner Production. “Indeed, as developing markets emerge from low-income to middle-income status, their development offers businesses the potential to make profits while also delivering significant social impact.”

The study identifies market penetration, market development, product development and diversification as the four key growth strategies at different stages of business maturity for social businesses. In parallel, the study found two ways of increasing income generated through these four strategies – increasing revenue per stream and diversifying revenue streams.

The study defines “scaling up” as “increasing the number of customers or members of a business as well as expanding its offer and maximising its revenues until it reaches millions of people.” Previous studies had focused on scaling up conventional for-profit businesses and NGOs, but there had been little research on scaling up profit-generating social businesses.

Social businesses have had difficulty scaling up in developing countries due to a lack of infrastructure such as roads and electricity, coupled with a lack of clear property rights and well-functioning courts. On a more encouraging note, new technology such as mobile telephony and new business structures such as public-private partnerships now make it easier for such businesses to find ways to reach new consumers.

The study – entitled “Scaling up social businesses in developing markets” – is co-authored by Nancy Bocken, a Fellow at the Cambridge Institute for Sustainability Leadership; Alison Fil, a former Industrial Systems, Manufacture, and Management (ISMM) student at the Institute for Manufacturing, University of Cambridge; and by Jaideep Prabhu, Professor of Marketing at Cambridge Judge Business School and Director of the Centre for India & Global Business. Nancy Bocken is also Associate Professor at the Delft University of Technology in the Netherlands.

“Social businesses have enormous potential to provide important services to billions of people around the world – but such businesses need to scale up in order to meet these needs,” says Professor Prabhu. “This study is a first step to greater understanding in this area, but we need a lot more work to support the development and growth of such businesses.”

Cambridge Judge Business School last year inaugurated a new Centre for Social Innovation, and a new Master of Studies in Social Innovation degree programme launches this autumn.

The study published in Journal of Cleaner Production identified scaling up strategies and methods by focusing on three successful social businesses – development organisation BRAC, eye care company Aravind and Amul Dairy.

BRAC, one of the world’s largest NGOs, serving 135 million people in 11 countries in areas ranging from nutrition and sanitation to microfinance, uses “replication and diffusion” as a key to its successful efforts to scale up, the study says. To reach people in dispersed regions, for example, BRAC used village societies and village intermediaries to train people, testing solutions in local communities and improving them before expanding to larger communities.

Aravind Eye Care runs a number of hospitals and eye care centres in India, treating more than three million people a year to fight blindness in the country. In order to scale up, Aravind chose to increase the number of hospitals and centres in a given region – and then diversified activities by adding a manufacturing unit, staff training and a research department.

Amul Dairy, an Indian co-operative of three million milk producers, began to scale up by increasing the number of milk producers in the state of Gujurat followed by establishment of a processing plant to produce dairy products from excess milk. A partnership with the government then helped Amul to expand across India and into other countries.

All three companies used “almost all the different scaling-up methods at one point in their development,” the study found. “This indicates that all strategies are important to achieve scale and that companies need to mix and match different strategies.”

Based on the case studies, companies with a clear single purpose (Aravind and Amul) might start with “simpler’ strategies” such as market penetration, while companies like BRAC with broader goals will need a more diverse approach.