264 VP CR Ch CS R$ Beyond-Profit Business Models The application of the Canvas is in no way limited to for-profit cor- porations. You can easily apply the technique to non-profit organiza- tions, charities, public sector entities, and for-profit social ventures. E very organization has a business model, even if the word “busi- ness” is not used as a descriptor. To survive, every organization that creates and delivers value must generate enough revenue to cover its expenses. Hence it has a business model. The difference is merely a matter of focus: the for-profit business’s goal is to maximize earnings, while the organizations discussed in the following pages have strong non-financial missions focused on ecology, social causes, and public service mandates. We find useful entrepreneur Tim Clark's suggestion that the term “enterprise model” be applied to such organizations. We distinguish between two categories of beyond-profit models: third-party funded enterprise models (e.g. philanthropy, charities, government) and so-called triple bottom line business models with a strong ecological and/or social mission (“triple bottom line” refers to the practice of accounting for environmental and social, as well as finan- cial, costs). It is mainly the source of revenue that distinguishes these two, but as a direct consequence they have two very different business model patterns and drivers. Many organizations are experimenting with blending the two models in order to exploit the best of both. Third-Party Funded Models In this type of enterprise model, the product or service recipient is not the payer. Products and services are paid for by a third party, which might be a donor or the public sector. The third party pays the organization to fulfill a mission, which may be of a social, ecological, or public service nature. For example, government (and indirectly, taxpayers) pays schools to deliver education services. Likewise, donors to Oxfam, a large U.K. non-profit organization, help finance its efforts to end poverty and social injustice. Third parties rarely expect to receive direct economic benefits from the exchange, unlike advertisers—who are players in for-profit business models which also feature third party financing. One risk of the third-party enterprise model is that value creation incentives can become misaligned. The third-party financer becomes the main “customer,” so to speak, while the recipient becomes a mere receiver. Since the very existence of the enterprise depends on contributions, the incentive to create value for donors may be stron- ger than the incentive to create value for recipients. All this is not to say that third-party funded enterprise models are bad and recipient-funded business models are good. Conven- tional businesslike selling of products and services doesn’t always work: education, healthcare, and utility services are clear examples. There are no simple answers to the questions raised by third-party financed enterprise models and the resulting risks of misaligned incentives. We must explore which models make sense, then strive to design optimal solutions. mission product or service “donor” “recipient” free donation bmgen_final.indd 264 6/15/10 6:01 PM