Social Franchising in China – Still Way to Go
“Nearly every problem has been solved by someone. The challenge of 21st century is to find what works and then scales it up.”
—— Bill Clinton, Former U.S. President
This is especially true for China, where an increasing number of social enterprises (SE) have emerged over the past decade. How many of them work? Are they ready to scale up?
Initiated by Mr.Michael Norton in November 2014, an ardent SE expert from UK, and NPI, one of the largest non-profit platform in China, “Social Franchising Workshop” was held to provide professional consultancy services to 16 Chinese SEs that plan to scale up soon. Venture Avenue was invited to join the consultancy team, and provided services to 3 SEs. Their areas of interest involved urban waste recycle and reuse, community governance and minority protection, etc.
The consultancy team employed “Readiness Test” to evaluate how well the SEs are prepared to commence on the scale-up process. The test assessed the SE from 3 main perspectives: 1) How well the social impact is exerted and measured; 2) How viable the current business model is; and 3) How supportive the shareholders and staff are towards the scale-up plan.
The test results revealed several improvement areas that commonly exist among SEs：
- Funding source needs to be diversified
Many SEs work extremely hard to source funding. Although government purchase constitutes a big portion of it, the contract is often signed on a short-term basis (normally annual basis), bringing uncertainty to SE scale-up.
It is suggested that SEs increase self-generated income by increasing profit margin of the goods and services sold or by developing new services. Also SEs may reduce operation cost by refining business process or seeking business partnership to share some cost.
- SE managers need to be more business-minded
Speaking of self-generated income and profitability, this is exactly the reason why SE managers need to think like real businessmen. Unfortunately, many of the SEs interviewed expressed their discomfort with running SE like a business. Of course, the primary concern of SEs is to promote social good; however, SE managers should bear in mind that business is an approach. In order to stand out in competition, They have to be business-minded. Business techniques, such as market analysis, marker positioning, product analysis, pricing strategy and business partnership, are all detrimental to the extent that the business can be scaled up.
- Social impact needs to be more readily tracked and measured
Many SEs are not paying enough attention to impact measurement. Some do not know how to do it. As a matter of fact, a convincing impact record can add lots of value when SEs seek funding or partnership externally. To measure impact, SEs may start with just a simple list of impact indicators. For example, the consultancy team recommended a waste recycling SE to start tracking the number of disadvantaged people they hired in the waste plant along with the environment impact they were already measuring.
It might be true that for most Chinese SEs, it is too early to actually do Social Franchising at this moment. But we believe it is definitely one viable way to go if an SE wants to realize large-scale impact. We hope that the process of assessing Social Franchising readiness could help SEs be more aware of their strengths and weaknesses, and accelerate their growth.