Scholars from Lappeenranta University have been researching social enterprise business models for years. Some time ago they focused their research on health care sector. The study looked at six health care companies with social enterprise characteristics. They were analyzed about their business model and financial success over the past three years. The sample included social enterprise mark holders as well non-branded companies. They have suggestions for the clarity of the business model / mission statements, as well as the level of transparency.
The researchers state that social enterprises are playing an increasingly important role in the healthcare sector role. The business model of social enterprises has contributed as a counterweight to the establishment of multinational corporations in Finland. Because social enterprises have so-called business models hybrid organizations, combining profit-making and social value creation, they play a natural role in the midst of public health services and purely commercial services.
How do you know when a business model differs from a traditional one, if it’s not stated clearly?
According to the researchers, for social enterprises the decision about the business model on how to reach their of social mission is central. In the healthcare sector, this mission statement and bringing it up can be challenging, as it integrates with the business as a whole. They note that businesses with the social enterprise have their social mission often articulated in a simplified form: ‘The purpose is to provide a high quality healthcare service’. This kind of mission statement can be confusing as it fails to address what’s in fact different in this business model as compared to the public sector or purely commercial operators.
With regard to the researched enterprises: all companies had challenges in expressing their social mission. The review did not fully explain how the business model was in fact differentiated and what articulation was more of a customer promise and clearly related to the mission.
Are the social enterprise business models successful and transparent?
Any business needs a successful business model to thrive. This research suggests that this is not so easy to find, as it shows that economically there were challenges to success, especially for the companies that were owned by association or foundation.
One of the most important criteria for social enterprises is transparency. If the social enterprise is owned by a non-profit organization, the importance of transparency is particularly emphasized in total cash flow to the owner and vice versa. Many societies or foundations owning a social enterprise allocate capital to a business unit – and at the same time receive grants or public support.
The researches suggest that social enterprises in the health care sector should have their social missions more clearly expressed, and cash flow transparency should be given more consideration.
The original article can be found (in Finnish) here. It’s based on research publication:
Syrjä, P., Sjögrén, H. & Puumalainen, K. (2015) Business models for healthcare social enterprises, presented in ACERE-Conference 2015.
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