Business Model canvas. for the sri carpentry workshop[

Transcription

1 Business Model canvas for the sri carpentry workshop[

2 inhoud Introduction 3 Business model canvas 4 elaboration of the canvas model 5 conclusions 14 references 15 2

3 introduction In a few weeks we, Bart Simkens, Dominique Berck and Katie Froeling, are heading towards Okana, Kenya. This is the place where Sustainable Rural Initiatives (SRI) is located. SRI is a non-profit making, non-governmental organization operating in Western Kenya. Their goal is to improve the quality of life for rural communities and to encourage them to make benefit from the potentials and opportunities amidst them. At this moment there is a carpentry workshop operating at SRI, which was established in August The head of the NGO is Jowi, but the workshop is ran by Tina Wentink, a Dutch volunteer from the Flying Carpenters. The Flying Carpenters is a Dutch organization who have carpentry workshops all over the world. The orders that come in, are often coming from acquaintances or friends of TIna or Jowi, this amount is by far not enough. Our mission is to increase the amount of orders and help to make them more self-sustainable. When more orders will arise, more job offers will emerge. This will, on the long term, help in getting the carpentry workshop more self-sufficient. Through the following business model, we hope to get a better understanding of our project. And where our focus will be during the three months we will be staying there. The canvas is focused on the period that we, the TU Delft students, are present in Kenya. This means that it refers to the months of November 2015 to January The canvas aims at the goals that have been set up for the carpentry workshop. The technical component of the business model is represented by the carpentry workshop itself. Several carpentry techniques are applied in the workshop. These techniques are taught by the Flying Carpenters. These people feel that knowledge transfer is of major importance. Just like the Flying Carpenters, Porter and Kramer (2011) state that the solution lies in this case in the principle of shared value. They refer to shared value as something that involves creating economic value in a way that also creates value for society by addressing its needs and challenges. Nowadays, it is important for companies to deal with social responsibilities in a proper way. Competitiveness of a company and the health of the communities around it should be mutually dependent. By learning the local community the basic carpentry skills, the carpentry workshop becomes such a business. It is dependent on the local community, but also gives something in return what the community needs: in this case the transfer of knowledge. So by setting up a business model, the carpentry workshop can get a clear and structured view on what their business components are. Combining all these different components will help them to become more self-sufficient, both socially and financially. TU Delft students: f.l.t.r. Dominique Berck, Katie Froeling & Bart Simkens 3

4 Business model canvas The canvas model refers to the months of November 2015 to January The canvas was set up from the perspective of the carpentry worshop itself 4

5 Elaboration of the canvas model Plans are prepared to improve the marketing of the workshop, so that more orders can be collected. Therefore it is important to target the right costumer segments. That also is the first box in the model to be elaborated. Costumer Segments Bart Simkens The carpentry workshop is situated in a small village called Okana. The third biggest city of Kenya, Kisumu, is a half hour drive from there. The carpentry workshop currently produces some products which are sold to companies in Kisumu, like restaurants and bars. At this moment there is no clear marketing strategy that could reach out to more enterprises. The current costumers are often acquaintances or friends of the owner. For our new marketing strategy, there are two main target costumers. One of them is the local community. SRI is all about involving the local population. Besides that the employees are locals, SRI also wants to offer products to the local community, and so does the carpentry workshop. In this way, the carpentry workshop respresents a form of social entrepreneurship. Seelos and Mair (2005) give a definition of social entrepreneurship in the following way: Social entrepreneurship creates new models for the provision of products and services that cater directly to basic human needs that remain unsatisfied by current economic or social institutions. In addition to this, initiatives all over the world spend special attention to defying the obstacles that prevented companies to reach out to the poor. Companies can contribute to the local community by applying new approaches and designs that are based on local needs, rather than on the centralized assumptions of large institutions about what needs to be done. People from the local community are for example in need of furniture, a product that the carpentry workshop can provide them with and thereby can contribute to the local community. Revenues from the community, however, will never produce enough to become a self sustainable business. That is why there is one other, more important constumer segment. In the city there are more financial possibilities, and therefore it is the place where most of the revenue can be retrieved. Kisumu is the biggest city in the direct neighbourhood, so that is the most appropriate place to sell products. Because of the presence of a large amount of schools, restaurants and offices, the carpentry workshop sees Kisumu enterprises as its biggest costumers. These companies are often in need of products that can be made at the workshop, like chairs, tables and closets. Also costumers from outside Kisumu, or from a city further away, can be served. However, the marketing plan focusses on the city of Kisumu. City of Kisumu 5

6 Value Propositions So there are two customer segments distinguished from each other. Naturally, each segment has its own specific needs which the carpentry workshop should be able to provide, otherwise the selected costumer segments wouldn t make sense. For the first costumer segment, the local community, the carpentry workshop is able to produce handmade wooden furniture. This furniture manufacturing would go by the population needs, so that the poor living standards can be combated. Examples of these needs are beds, tables and closets. Also for the Kisumu enterprises, the handmade furniture is an important offer. As mentioned before, the schools, restaurants, bars en offices in Kisumu are in need of these products. Another important value proposition, particularly for the Kisumu companies, are personalized wooden products. It is conceivable that, for example restaurants want to submit their own design for chairs or tables. We want to make it possible to produce these products at the carpentry workshop, however a certain amount of product orders is required before they may be produced. This way SRI is ensured of income and there is not just taken a new design into production, without generating revenue from it. Channels Bart Simkens Bart Simkens So the costumer segments and its value propositions have been mentioned, but there must also be a way to communicate with and reach out to the costumer segments to deliver the value propositions. In this sections, there is also a distinction between the two main costumer segments and the way to reach them. For the local community, we feel that it is important to engage them in SRI as much as possible. We want to realize this by organizing an open house day at the carpentry workshop. All the people from the community, who are interested, have the opportunity to get a look at the activities taking place there. By doing this, people from the community get more involved with the carpentry workshop and are probably more willing to buy a product. Or be part of the carpentry workshop in terms of becoming a motivated employee. A more extensive marketing plan applies to the companies in the city of Kisumu. It is more difficult for them to take a look at the carpentry workshop themselves. Therefore, clear and structured information should be available to them. This is possible in several ways. The plan includes the printing of leaflets, posters and stickers, which can be spread in Kisumu among potential customers. The products of the carpentry workshop are visible on these promoting tools, so that awareness of the workshop is created in Kisumu. The plan also includes improvement of the SRI website, including a page with products from the workshop on it. Eventually it would be most efficient if buyers could order their products online, creating a webshop. The workshop is currently not capable of any form of distribution, so the products are to be collected by the costumers themselves. This limitation is something that has to be improved in the future. 6

7 Customer Relationships Dominique Berck The customer relationships building block describes the types of relationships a company establishes with specific customer segments (Osterwalder, 2010). In our case the carpentry workshop has to maintain customer relationships with our two customer segments, the local community customers and the Kisumu enterprises. Because of the difference between those segments, the carpentry workshop should also communicate differently with these groups. What this difference exactly means, is explained below. The first customer segment that will be discussed, is the local community. This segment includes the people who are living in the direct neighbourhood of the carpentry workshop. They do not have a lot of money to spend and their needs are not very high, simply because they cannot afford that. The only way for the carpentry workshop to maintain a customer relationship with the local community is by personal contact. This because the local community simply does not have the resources. Therefore, we want to implement a combination of personal assistance and dedicated personal assistance. First, personal assistance is a relationship based on human interaction. This can be achieved by offering real customer representatives to help the customers during the sales. In case of the carpentry workshop this means that the local customers can come to the carpentry workshop and they will get help with their needs and wishes for new products. Then there is the part where we maintain a dedicated personal assistance. This relationship involves dedicating a customer representative specifically to an individual client. This is actually the opposite of the previous explained relationship. Instead of letting the customer come to us, we will go to them and ask them what their needs and wishes are for new products. In this way we could mean much more for the local community. We have to sell to the poor and helping them improve their lives by producing and distributing products and services in culturally sensitive, environmentally sustainable, and economically profitable ways. says Prahalad (2002) in his article The Fortune at the Bottom of the Pyramid. This is exactly what SRI and the carpentry workshop stands for and what we have to continue. Besides the local community, the carpentry workshop also maintains a customer relationship with the Kisumu enterprises. At this moment the carpentry workshop only gets orders through personal contacts with these enterprises. We want to change this into a more self-service way. This means that Kisumu enterprises can reach the carpentry workshop by themselves through the website or because they got information from leaflets or brochures. When they want to make an order they can do this online. It is important to make this change for the carpentry workshop and get more publicity in the cities, because they will not grow as a business if they maintain this personal contact with the enterprises in Kisumu. In the first stadium of receiving more publicity, we as TU Delft students are going to help the carpentry workshop with this process and set up a good marketing plan. 7

8 Dominique Berck Revenue Streams (Financial) - Income The revenue streams building block represents the cash a company generates from each customer segment (Osterwalder, 2010). Therefore costs must be subtracted from revenues to create earnings. By now the only way the carpentry workshop gets income, is by selling the products they make. These are all wooden products with different purposes. London (2007) suggests in his research that some of the initial start-up costs for a BoP venture may require a subsidy, such as a grant, lowcost loan or venture philanthropy (an equity investment that has low or long term capital repayment expectations). This type of patient capital is willing to accept little or no financial returns and a longer-term payback period. It s also possible to make customized products on requests. In consultation with the carpentry workshop, it can be discussed to make a different type of design and the costs of these new products. At this moment all the products are paid with cash money. For the local customers this isn t a problem. But in the future for the Kisumu enterprises who operate on greater distances, it s much easier to develop an online payment service. This becomes more necessary when there will be distribution of the products to the customers. SRI itselve also generates money from renting the mud house and the guest house to volunteers. This money is initially intended to go to SRI, but because at this moment the only project operating is the carpentry workshop, the money generated from rental is put directly in the carpentry workshop and security. These incomes are unfortunately not enough to cover all the costs. This is why we generate another revenue stream, namely funds and subsidies. 8

9 Key Resources Katie Froeling For the SRI carpentry workshop to run properly, certain key resources are needed. These resources must all be obtained, to create the value proposition. As stated earlier on, our value proposition is handmade wooden furniture. The following resources are essential for the carpentry workshop: Materials For making the handmade wooden products, certain physical materials are needed. In the case of the SRI carpentry workshop they have wood, paint, nails and screws. Tools The workers need physical tools to fabricate the furniture. Because there is only access to a small amount of electricity, the workshop mainly uses hand driven tools. However they do possess machinery. Unfortunately the employees aren t very skilled in using the machines properly. The purchasing of new tools will not be necessary whilst we are there. Location There is a little building, which acts as the work place for the carpentry workshop. This is also considered as a fundamental physical resource. The building is located in Okana, 12 km from Kisumu. Carpentry knowledge The employees must possess knowledge of the craft carpentry. For without this knowledge, they will not be able to create the value proposition, handmade wooden furniture. The Flying Carpenters will pass on this intellectual resource to the employees, through a short summer course. After this summer course Tina Wentink, a member of the flying carpenters, stayed to keep managing the carpentry workshop. Starting from this year, it is desired that she will slowly pass on the responsibilities of managing the workshop. Employees The workshop must have human resources, who will actually realize the handmade wooden furniture. Without employees there will be no one to make the products or receive, and eventually pass on, the knowledge of carpentry. To include the local community in the build up of SRI, the employees are from the local community. Money The carpentry workshop needs financial resources, funds, to start the business, to import materials and to eventually make furniture. After a while, probably years, the workshop should become self-sufficient. This means that no funds will be needed for importing materials or tools, but by selling their products, the workshop can become self-supporting. Motivation During writing this business model, and after talking with people who have been in Okana, we discovered motivation is one of the most important resources that is needed most of all. The workshop runs on the efforts of, not only the employees, but also supervisors. Both of these parties could be improved motivational wise. Currently, engagement between the employees and the workshop is lacking. Promotion materials Promotion materials are another physical resource that will help the workshop. The materials imply leaflets, brochures, posters and stickers. The promotion material will help the workshop in getting more recognition and eventually result in increasing the amount of orders. 9

10 Key Activities Katie Froeling For the carpentry workshop to become a successful business, there are some key activities that must be done. Together with the key resources, they are essential in making the value proposition. The following activities must be realized: Marketing This entails promoting the carpentry workshop to a wider public. Not only for the local community (Okana), but also especially for enterprises in Kisumu. Kisumu is a big city nearby Okana, where there are a lot of possibilities to expand the network. The three students of the TU Delft will design these materials and make sure they will end up at potential buyers. The organization Students 4 Sustainability will fund these costs (see Key Partnerships on page 11). Exchange knowledge Like Shane (2000) already explained in his article, that each person s idiosyncratic prior knowledge creates a knowledge corridor that allows him/her to notice certain opportunities, but not others. Previous information, whether developed from work experience, or other means, have an impact on the entrepreneur s ability to comprehend, anticipate, interpret, and apply new information in ways that those lacking that prior information cannot replicate. Exchanging knowledge is a biderectional current. Different parties can have a different look on things. In this particular project there are two parties, the employees of the workshop and the Flying Carpenters (see Key Partnerships on page 11). Both parties can learn from each other. The employees and the Flying Carpenters will swap knowledge about carpentry and cultural difference. Production Eventually the carpentry workshop is all about making the end value proposition, handmade wooden furniture. Without the product, there is nothing to be sold. Without sales, there will be no profit. The workshop needs an income to insure self-sustainability. This self-sustainability is on of the main focuses of SRI. Finance maintenance The carpentry workshop will need a clear and structured financial plan. Without this structure, the workshop will not know its financial in- and outcome. This is crucial when you want to be a financially independent business. The TU Delft students will accompany the employees, in setting up their own financial structure. This structure should be understandable and self applicable. Sourcing material For making the handmade wooden products, certain materials are needed. These materials are always obtained at a market in Kisumu. The amount of the materials is based on the order. There is no really buffer of materials. Motivate As mentioned before, we discovered that the employees lack motivation. By engaging the employees and giving them more responsibilities, we feel that there can be a significant improvement in the way they work. 10

11 Key Partnerships Katie Froeling The carpentry workshop is part of the NGO, SRI (Sustainable Rural Initiatives). The workshop relies on partnerships. Without them it won t survive, at least for now. In the future it is desired that the carpentry workshop will be self-sufficient. TU Delft Students The three chosen students from the TU Delft are Dominique Berck, Katie Froeling and Bart Simkens. They will help with the marketing side of the carpentry workshop. Their main focus will be on increasing the amount of orders. This will be realised by promoting the workshop both locally (Okana) as in the bigger cities (i.e. Kisumu). With a bigger amount of orders, comes more responsible and we must be sure that they are ready to take this on. Therefore structure will be implemented, which is accepted by the employees. The Flying Carpenters The focus of this foundation is on exchanges carpentry knowledge and skills with locals, during short summer courses. At the end of every course the locals should have obtained enough amount of knowledge to become self-sufficient in carpentry. The knowledge will be transferred through carpentry workshops/training. As stated earlier, Tina Wentink plays a big role in the management part of the carpentry workshop. Students for Sustainability S4S is a foundation that involves students from the TU Delft in developing countries. In this particular project they will subsidize a certain amount of money for marketing purposes. The three TU Delft students, Dominique, Katie, and Bart will realize these marketing purposes. SRI Jowi Jowi is the boss of the NGO, SRI. He is the one who brings in different parties, from different places, to contribute to the NGO. Jowi has the final responsibilities concerning SRI. Unfortunately, as he also studies in Holland, he can t always be present as much as he wants to. Wood supplier The wood supplier is located at the market in Kisumu. The supplier does not deliver a constant shipment of wood, because the workshop amount of material is based on the orders. This differs through time. Kisumu market 11

12 Cost Structure (Financial) - Costs Dominique Berck Social costs Dominique Berck The cost structure describes all costs incurred to operate the business model. The key resources have to be paid to get the carpentry workshop going. The carpentry workshop is operating between two different cost structures, the cost-driven and the value-driven structure. Because the carpentry workshop is producing for people with low income, it s necessary to keep the products affordable for them. However a certain standard should be obtained for the products, as they need to be handled with individual care and dedication. Therefore a balance between cost- and value driven structure is desired. Below is explained what the fixed costs and the variable costs are and how they fit in into the business model. Fixed costs Fixed costs remain the same, despite the volume of goods or services produced (Osterwalder, 2010). The fixed costs at the carpentry workshop are salaries of the employees and security, investments who are made into machines and tools. The carpentry workshop itself was a one time investment, by now we only have to keep investing in the maintenance of the carpentry workshop. Variable costs Variable costs vary proportionally with the volume of goods or services produced (Osterwalder, 2010). The variable costs of the carpentry workshop are the purchase of materials to make the products. The amount of materials that need to be purchased, depends on the amount of orders that they receive. Another factor of the variable costs are investments in marketing, such as leaflets, brochures and transport costs to meet new potential buyers. Social costs are sacrifices we have to make concerning social elements associated with our project. Working in the carpentry workshop is a physical labour, therefore employees who work there are only men. This excludes women and elderly people from working, while they might would like to have a job as well. This exclusion of women and elderly people is an issue which should be revised. Does the carpentry only want to work with the male locals, or is it possible to adjust the work process, so involvement of different types of people becomes realisable? This exclusion is not the main focus during our stay. Perhaps in the future the carpentry workshop can find other ways to engage women and elderly people. Another social cost which is made, are all the people we cannot reach out through promotion. We can only approach a certain amount of people. Especially in Kisumu, the focus lies on the enterprises. Ecological costs Dominique Berck Ecological costs refer to waste and damage of ecological elements. We consider the wood use as a large economical cost. Every piece of furniture we make in the carpentry workshop contributes to deforestation. Also making use of promotion materials, requires tree cutting and damages the forests of our world. Hart (1997) explains it s easier and cheaper for rural populations to make insufficient use of forest, soil and water. Short-term survival pressures often force these rural populations into practises that cause long-term damage. It is important that the carpentry workshop makes sufficient use of the wood and minimize the amount of ecological damage. 12

13 Our goal is also to expand our network to Kisumu. Unfortunately the expansion of our customer network, will also result in an increase of CO2 emissions. This because more and further distribution occurs. Social Revenues The carpentry workshop also offers a lot of social revenues to the community, employees and other partners. More jobs are available and knowledge exchange gives people more opportunities in life. By expanding our network we will increase our exposure and get more inclusion in society. Eventually the carpentry workshop will become self-sustainable and there will be a good knowledge transfer development over time. Ecological Revenues Dominique Berck Dominique Berck As mentioned before using wood will contribute to deforestation. But when we compare this material to other materials that can be used to make furniture, wood actually is a durable and sustainable material. For thousands of years, wood has been used as a building material and the fact is that it has huge environmental benefits over other building products. It is completely biodegradable, works as an effective insulator, and is 100 percent renewable (Binational Softwood Lumber Council, 2010). So in that case it s better to use wood instead of another material. 13

14 Conclusion In this business model canvas, the main goal was to discover new ideas and insights on our project. By making a strict distinction between the different parties involved, activites performed and other relevant aspects in the canvas, a clear picture has been established of whats need to be done. The fundament of the canvas is the presence of two main customer segments, namely the local community and the Kisumu enterprises. Because of the big differences between these target groups a different approach is required. Implementing marketing strategies for the local community should be through personal contact and engaging the locals. This can be achieved by organizing interactive gatherings, for example establishing an open house. This entails inviting the local community to the carpentry workshop, showing them around and providing them with information about our products. An active attitude is the basis of this contact and will accomplish more engagement from both sides. During our process of writing this business model whe came across one new significant insight, which gave us a renewed look upon our project. By reviewing our previous conversations with different stakeholders within our project, we came to the conclusion that we couldn t ignore this fact, namely the lack of motivation amongst the employees. Vastbinder et al. (2011) also explains in their research that starting a business in the context of low-income economies are not used to large-scale cooperation and disciplined labour, requires effort in terms of training and education of the workforce. In other words, the technical innovation introduced also requires a social innovation. Through this article we were pointed out that without a proper mindset of the employees as well as the carpentry workshop itself, there is no foundation from where a solid marketing plan can be achieved. By engaging the employees more with the carpentry workshop, for example giving them more responsibilities, this foundation will get stronger. This will lead to a better running business. For without a strong base there is no future. When implementing marketing strategies for the enterprises from bigger cities (i.e. Kisumu), the focus should be on using promoting tools and making better use of the website. This because a bigger target group needs to be reached. Also a self-service customer relationship is desired, because this will lead to a more efficient way of doing business. At the moment orders are only obtained through acquaintences. When combining the promotion tools with the use of the website, this will lead to an expansion of their customer network. 14

15 References Hart, S. L. (1997). Beyond greening: strategies for a sustainable world. Harvard business review, 75(1), London, T. (2008, August). The Base of the Pyramid Perspective: A New Approach to Poverty Alleviation. In Academy of management proceedings (Vol. 2008, No. 1, pp. 1-6). Academy of Management. Osterwalder, A., & Pigneur, Y. (2010). Business model generation: a handbook for visionaries, game changers, and challengers. John Wiley & Sons. Porter, M. E., & Kramer, M. R. (2011). The big idea: Creating shared value. Prahalad, C. K., & Hart, S. L. (2002). The Fortune at the Bottom of the Pyramid in Strategy + Business, Issue: First Quarter, Seelos, C., & Mair, J. (2005). Social entrepreneurship: Creating new business models to serve the poor. Business horizons, 48(3), Shane, S. (2000). Prior knowledge and the discovery of entrepreneurial opportunities. Organization science, 11(4), Vastbinder, B., Kroesen, O., Blom, E., & Ortt, R. (2011). 10. Business, but not as usual: entrepreneurship and sustainable development in low-income economies. 15