Hybrid Business Models: Impact Innovation and the Quest for Collaborative Profit

One of the primary reasons for the failure of development projects is that they cannot be sustained. Traditional approaches don’t always work; as soon as the development institutions (NGOs, agencies) leave, things fall apart. Soon the project is either abandoned or simply turned off. This happens all the time with water and energy projects.

One way to work around this and “make it stick” is to involve women in the project. This has been the secret behind the success of organizations like Grameen and the Solar Electric Light Fund.  When women lead and control their own destinies, stuff happens.  This is a lesson learned in the field, but overall the “development-through-empowering-women” movement is fizzling.

Is there anything else we can think of to make development changes stick? 

How about the profit motive?

In his recent book The Solution Revolution: How Business, Government, and Social Enterprises Are Teaming Up to Solve Society’s Toughest Problems Deloitte’s William Eggers asks us to consider erasing public-private sector boundaries.   According to Eggers:

solutionbook.jpgthe solution economy is unlocking trillions of dollars in social benefit and commercial value. Where tough societal problems persist, new problem solvers are crowdfunding, ridesharing, app-developing, or impact-investing to design innovative new solutions for seemingly intractable problems. Providing low-cost health care, fighting poverty, creating renewable energy, and preventing obesity are just a few of the tough challenges that also represent tremendous opportunities for those at the vanguard of this movement. They create markets for social good and trade solutions instead of dollars to fill the gap between what government can provide and what citizens need.

In the book, Eggers presents four specific, scalable business models that are changing the world:

bizmodels.jpgThese business models are all very important because they bring the profits into the equation thus allowing them to scale.

But none of these business models solve the problem of scaling the $300 House or for that matter any of the public services the world is crying out for – sanitation, healthcare, water, energy, etc.

As I asked in a previous post on integrated development, why is it too much to ask that governments, NGOs and development institutions, and businesses work together with the communities involved to build integrated solutions?


Here’s how an impact innovation project might work:

Impact Innovation solves multiple problems simultaneously via integrated development
Because of the interrelated nature of the problems that drive the cycle of poverty, the only way to solve these problems is to employ  an integrated development model which attacks several challenges at once: clean water, food, health, education, employment, and housing. Housing is delivery mechanism for a better life. This can be achieved using “whole village development” an approach proven by the Solar Electric Light Fund in sub-Saharan Africa. Thus a house is of little value without supporting infrastructure– clean water, sanitation, electricity, waste collection and disposal, basic health, education, and jobs!

Impact Innovation demands collaboration between communities, government, NGOs, and businesses
The key ingredient is trust and solidarity. For example, Partner In Health (PIH), one of the world’s most famous NGOs, believes it is essential to partner with the community. They hire and train local staff. They work with governments to reinforce national health services so more people receive services. They collaborate with other health workers such as traditional birth attendants and government health workers because together they can have a stronger impact. PIH has established a community-based model of care that is now viewed as a leading health-care delivery model in the developed world.

Impact Innovation requires total inclusivity
In the integrated development model, the NGO understands local community problems intimately, the government is responsive to the needs of the community through sound policy, land use arrangements and transparency, and businesses work with both to serve the poor as a customer, partner, employee and supplier. Activities and plans are coordinated, even synchronized. Inclusive growth is driven by inclusive business practices.

When we look at the state of current development
projects, we find a curious gap in execution. Because NGOs and
government institutions and agencies don’t think of business as a part
of the solution, they simply don’t include profit as part of the


So here’s what takes care of this gap:

Impact Innovation uses a hybrid or collaborative business model.
Can governments, businesses and NGOs work together to provide basic services for the poor at an affordable cost?  To adopt an analogy from the world of cloud computing, we can think of this integrated model as a “lifestyle-as-a- service.”

Who pays for all of this?
  Instead of choosing 100% charity or 100% market-based solutions, I’m hopeful in a third alternative:  the use of a collaborative or hybrid business model. I started thinking about this thanks to Ashoka’s Bill Drayton and Valeria Budinich (see their Hybrid Value Chain Framework).

So now let’s look at how a hybrid or collaborative business model might be designed to deliver “housing-as-a-service.” We start with a template which shows all the participants and the major process milestones in the service delivery process and adapt it to housing:

hybridbusinessmodel.jpgDifferent phases can be managed by different players. For example, a hybrid business model might include a configuration as follows:

hybridbusinessmodel2.jpgIn the Design phase, the community works with an NGO and businesses to develop a solution that works for them (this is the hybrid value chain approach from Ashoka!)

In the Build phase, the community works with the business to build the houses they designed in the previous phase.  The government may subsidize or donate the land and cost of construction.

In the Finance phase, community members finance their houses with a lending bank that is now a for-profit scheme (under the watchful eye of a government panel).

The Maintain phase may include jobs for the community and training services from an NGO.

And finally, when the time comes to Upgrade, all players come to the table to develop the next solution.

Since infrastructure projects are implemented in phases, they can also be managed in phases. Governments, businesses and NGOs can collaborate to provide basic services for the community at an affordable cost.  Imagine if this were to happen across all 638,000 villages in India. 

And why should we stop at housing?  All public services could be designed, built, financed, maintained, and upgraded using this hybrid business model concept:

allservices.jpgI’m doing some research into finding out who is actually doing this already.


Impact Innovation has an employment effect leading to inclusive growth
The hybrid/collaborative-business model allows the community to be involved in each service as a consumer and as an employee or owner.  A common enough idea is that building low-cost housing can help create an ecosystem of house builders and suppliers – often members of the community being served.  The idea is to transfer that thinking across all the integrated services provided. The hybrid business model can pay for the ongoing employment of community workers for sanitation, energy, education, health, housing, of course, but even something like entertainment, where a member of the community becomes the entertainment entrepreneur, charging a micro-fee for movies or soccer games shown in the village community center, for example.