Hmm. For whatever reason the autopost on Posterous doesn’t seem to be working. But I’ve started an attempt to get blogging on http://vshamanov.posterous.com/ 

Cheers.

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It has been more than a year since I last wrote in this blog.

Surprisingly, I still get some occasional visits, mainly due to this little book review. Maybe I should really review more books on this blog. More than one would certainly not hurt this blog’s immense popularity. Unfortunately, there is a small obstacle: I have very little time to read outside my LSE classes. I think book reviews about marketing research, international context of management, and economic histories of Russia, Japan, and India occupy a little bit to small of niche. In addition, searching and applying for graduate jobs isn’t exactly adding hours to my time budget.

But, hey, this could be a good signal! I think book reviews strongly suggest two things: (1) I can read and (2) I do read.

But, seriously, I think I should better use this blog to connect to other blogs. Join the conversation, so to speak.

The main reason for my less-than-triumphant return to WordPress and Twitter was Silicon Valley Comes to Oxford–event that have brought Silicon Valley entrepreneurs to Oxford University for tenth consecutive year.  I haven’t heard WordPress guys speak (and I don’t know if they were there), but LinkedIn co-founder Reed Hoffman and Twitter guy Biz Stone have done a good job promoting their respective  (and respectable) services. And from the general buzz at the conference I have gathered that social media is not just a marketing phenomenon or a way ingenious new way for college students to waste best years of their lives, but a next step in business community evolution. Simply put, the world is becoming more and more transparent and personal and professional connections are not exceptions.

It’s been a while since my last post: I was busy with school, different venture competition applications, and a (tiny) bit of travel.

Tomorrow I am going to Skoll:EMERGE and I am thinking about a divide between Business Plan Competitions and Social Enterprise Competitions. Do we really need it? What IF there is an idea that is very viable commercially and also creates a significant social change?

I think that current divide presents a problem for the best projects: when a venture creates both profit and social and/or environmental impact. This hypothetical successful business model could be altered to create even more profits or even more impact, but it will loose a part of its hybrid characteristics.

So, I am thinking about a trade-off between profit and impact. In any organization we could think that there is a trade-off between a profit and an impact: anything from a bagel shop to a homeless shelter to an multinational corporation to a global NGO could have either profit or impact or some combination of both.

What a for-profit will choose:

On the graph to the left, each curve represents  a posible sets of combination of profit and impact for four different hypothetical organizations. If we look at the graph, clearly, traditional business plans will just focus on maximizing profit, so in cases of both black line, green and red line they’ll prefer a point that has zero impact. But in case of yellow dotted line, they will actually be better off with some impact–this will increase the profit.

What a social enterprise will choose:

The idea behind social enterprise (as I see it) is that profit has a place in impact-oriented organizations. Profit solves the problem of scallability and increases the efficiency. With this in mind, a green line social enterprise will choose a combination that is furthest to the right–it will have a highest sum of profit and impact. But about red line organization? It seem to be inefficient as a hybrid organization, yet I don’t know why or if such cases even exist. And a yellow line organization will pick the same point on the curve as the for-profit–this will offer a highest combination of profit and impact. A black line organization can theoretically pick any point on the line, depending on its short-term and long-term goals: whether it puts more emphasis on sustainability or on current impact.

A few questions arise:

1) For-profit and SE seem to merge in yellow–is that a problem? Wouldn’t SE funders push to a higher impact, even though it decreases efficiency?

2) How to distinguish a for-profit from SE in black organization? Is there any cut-off profit/impact ratio (like 60/40) for SE?

3) What to do with red case: is it better to have either strict for-profit or a strict non-profit?

4) Finally, could other organizations organization be redesigned to become more like yellow organization?

My interest is not academical: I have an idea for an organization that is both profitable and will create an impact. So I am thinking how should I frame and design this organization to better serve its goals and to get initial funding.

I’m just thinking and playing here, so if you could forward me some research or provide me some ideas/feedback/criticism, it would great!

I don’t know which other school has a better array of public lectures than LSE–there are really great.

Copenhagen Climate Change Conference is a hot topic and it only gets hotter as the time of the summit approaches. So, I’ve decided to share some notes and thoughts from two lectures at LSE.

The Road to Copenhagen: a global deal on climate change. by Ed Miliband, the Secretary of State for Energy and Climate Change.

LSE will upload the podcast soon, but today let me to outline the key points.
Basically, Ed believes that the politicians have all the power to achieve success in Copenhagen. Still, he admits that challenge at hand is enormous–a consensus of such scale has never been reached in history. So, to accomplish this enormous task, he argues for a change from “the politics of now” to “the politics of common good,” with four attributes:

  1. Beyond immediate good
  2. Focus on consumers of future generations
  3. Self-interest as (still) powerful motivator
  4. Idealism

The main problem, he says, is that the Global Warming challenge is “marked by distance”:

  1. temporal distance: we need to act now, but the benefits will be felt decades after (how old will you be in 2050?)
  2. geographical distance: people are affected everywhere around the globe, but we need to control our actions domestically
  3. causal distance: who does what and what causes what? we can’t play the blame game here

This also sounds great, but how exactly to create this change in frameworks? Can we include future generations and distance regions into our comparison of pros and cons of our actions? I am very excited to see where this challenge will lead us.

Let’s look at some economics of the Copenhagen.

Climate Change: Are We Heading for a New Cold War? by Professor Graciela Chichilnisky.

She was one of the authors of Kyoto Protocol. Despite it’s failure, the Protocol was an important attempt to regulate carbon emissions through market solutions.

At the LSE lectures site you can listen to her podcast, so I’m not going to put all my notes here. What struck me most are two things: the gloom and the bright perspectives.

Gloom future. many have heard about the effect the Global Warming will soon have on the coastal states. But have you read heard the speech by the President of the Maldives? It’s titled “The Death of a Nation”–during this century the country will cease to exist.

Bright future. But, Professor Chichilinksy also presents another point. The costs of switching to low carbon infrastructure are $43 trillion (!). But an alternative that she proposes–Cap and Trade + Air Capture–will create a global $200 billion a year industry of sustainable energy and carbon capture! This would allow gradual
switching and would create significant economic benefits to all participants. Can we make money and save the world through this one?

Let me conclude with the words of an unknown MP whom Ed Miliband have quoted: “Martin Luther King didn’t say ‘I have a nightmare’.”

We all need a dream to make cooperation of such scale possible. So, who wants to share a dream?

As a part of research for my new project I have done a Gogle search in Russian on “social entrepreneurship”. The results are: 1,160,000 pages found. To put in perspective: Google gives 5,500,000 results for “entrepreneurship” (in Russian). To compare, in English the results are 5,200,000 and 16,200,000 results for “social entrepreneurship” and “entrepreneurship,” respectively.

Here is a youtube video about the winner of the pilot competition (a family of artists who teach unemployed mothers of three or more kids to create woolen dolls), started by NB-Forum in a search for social enterprises:

It’s all great, but look at the numbers. In case you don’t speak Russian, the narrator says:

“in Rybinsk, there are more than 250 unemployed mothers …. . At least ten of them will have a job now”

It’s really nice what these people do, but they don’t solve the problem. Not even 5 % of the tiny target population is impacted. The problem is that this venture doesn’t innovate the processes. I am not talking about high-tech or anything. I mean that the main processes are just the same they were before the venture. The other problem is that the venture has zero capital–it completely relies on the two people to teach and the others to learn and produce.

Next, look at the number of views this video got. 500! and it’s the winner and it was published 5 months ago..

Also, look at the type of sources, that Google gives on the first page–there is an interesting observation to be made. They are all scholarly: published by universities, foundations, research institutes, etc. A specific blog-search on Russian Yandex.ru gives 63 blog entries that contain “social entrepreneurship”… Compare it with 40,000 entries for “entrepreneurship.” This just shows that VERY few people besides experts know what the social entrepreneurship is.

I am going to ponder about that. I feel like I have so stuff to share with Runet.

I am adding a new category: book reviews. I read a lot on business, social change, & etc.–I just read a lot. So I am going to express my opinions here, as well as on amazon.com.

Business Model Generation

Business Model Generation by Alexander Osterwalder & Yves Pigner

Written by two guys from Switzerland together with 470 contributers from around the world, this book is not your typical business innovation book. First, it is very accessible, intuitive, and easy to use. It is indeed a “handbook for visionaries, game changers, and challengers”!

The essense of the book is the “Business Model Canvas”–a simple framework that solves the problem of defining what business model, creates a shared language, and spurs innovation. Here’s what it looks like:

An Example of Business Model Canvas

The Canvas consist of nine blocks:

  • Customers
  • Value Proposition
  • Distribution Channels
  • Relationships
  • Key Activities
  • Key Partners
  • Key Resources
  • Cost Structure
  • Revenue Structure

Any business model can then be described using these blocks. But the most important thing is that it allows people from different backgrounds to create business models together. If you are looking for a brainstorming activity, that involves hundreds of post-its, divers group of people, and gallons of coffee–add this book to the list!

The strong sides of the book:

  • Clear, concise, simple approach to business model innovation
  • Tested, re-tested, and refined–no bullshit
  • Great design by  The Movement–it’s a pleasure to read and fun to work with!

The weak sides:

  • Puts external context (market forces, etc.) outside–easy to get carried away and ignore the outside world
  • Uncompromising about where to each aspect of the business, which can potentially split the team.

Let me give an example of the last point. At the workshop, the author have said that the brand goes into Key Resources, but a marketing person behind me wasn’t satisfied. “You don’t have a business if you don’t have a brand!”–he said. Of course, a finance guy would have said the same about finance: we don’t put financing the separate box either. But putting each aspect of the business into a separate box would have made the canvas a mess. To illustrate that brand is not always a part of the business model: how many have heard about Hon Hai? I am sure far more people own stuff they’ve made.

Anyway. Overall, I really like this book. Tomorrow, I am going to put it into practice and brainstorm business models with social mission–I am excited to see how it works in a group!

Oh, the best part is that Alexander Osterwalder puts all his slides online! There he has also stuff on business models beyond profit and lots of other interesting stuff.

Enjoy!

dahshurHere at LSE, I am taking a fascinating pilot course about the business innovation for the Base of the Pyramid. It is organized by LSE’s Department of Management and Innovation and Co-Creation Lab and is taught by Professor Harry Barkema. This year the course is “pilot,” which means it’s a test-drive that will hopefully result into adding the course to formal curriculum of the School.

As the syllabus reads, in this course

we will share, review, apply and co-create new insights and frameworks (to understand), and methodologies and tools (to design, implement, innovate and improve) business models at the BOP that work. It is part of a much larger, coherent set of activities at the LSE to co-create, share, review, and apply knowledge and capabilities and to provide systemic measurements of impact, together with our partners across the world in academia, companies, social entrepreneurs, NGOs and governments. The ultimate aim is to (help to) innovate/improve, implement, and scale economically sustainable models that have a significant measurable impact on serving needs at the BOP. Where “sustainable” means systemic funding from customer payments, donors, governments and/ or companies, with an eye to maximizing payments from customers, if possible and desirable, to make it economically sustainable.

It doesn’t just sound great, it is great! At the last meeting we have discussed different business models that are already employed in ventures at the BOP. This week we will look at the ways to engage the users, local community and others in the process of co-creation of business models.

We have a great reading list and (even though I already have piles of work for LSE) I am going to share some of my ideas and reflections on the pages of this blog.

For those who have read Prahalad’s The Fortune at the Bottom of the Pyramid, don’t get too enthusiastic or skeptical: what we are doing in this course is actually looking at what is the BOP, what can work there, and how can business can create value for the communities at the BOP. Fortune-making is not really the part of the course.