1) What is a Hybrid Value Chain (HVC)?
2) Why should you care?
The answer to the first question is a freebie (just see the blue box), however, the second one is not necessarily an easy one to answer. Why should you think about HVCs? Well, you shouldn’t until it becomes clear that HVCs are meaningful to you, your community and the world. By shifting how we frame problems as opportunities, social and economic returns on investment are multiplied. Think corporate social profitability where everyone is a player.
How does this work? As noted in this month’s Harvard Business Review Article, “A New Alliance for Global Change,” businesses offer scale, expertise in manufacturing and operations, and financing. Social entrepreneurs contribute lower costs, strong social networks, and deep insights into customers and communities. By forming hybrid value chains (HVCs) that link the two, they can together create real social as well as economic value.
Ready to innovate? Here’s how.
One. Reconceive value to find new markets. How can innovative pricing and products replace charitable funding and ‘free services’? Can a storefront be replaced by a mobile salesforce? Can video technology and electronic medical records do the work of doctors? Can wood stoves be replaced by solar alternatives?
Two. Consider how customers in new markets define price. Do they focus on purchase price or lifetime costs? How elastic is demand? Companies that pioneer HVCs will run up the learning curve, leaving competitors behind, but they must first think holistically about their business strategy and the industry they’re in, as well as the realities of bringing a model to scale in emerging markets.
Three. Look for pricing and financing innovations. HVCs need different types of capital at different stages of their life cycles. They may need up-front seed money, but sooner rather than later, customers will have to pay for the product or service they’re receiving, and developers of HVCs will have to come up with appropriate financing solutions. You might try to engage traditional partners like banks and microfinance institutions in new ways.
Four. Organize to innovate. Once you have identified a good idea and started to form a business plan using the above three steps, you will need to find somewhere to house your hybrid venture. You will also need to appoint a leader – look for someone able to work across sectors and with unfamiliar suppliers and customers. Use your social networks for starters.
Do you already know of social entrepreneurs and organizations in your community that are using Hybrid Value Chains? We want to know about them. Tell us there story here.