Thinking ahead: sustainable business models for your pilot
A pre-read for FCDO Pioneers, as part of the Launchpad mini-series: Ready to Scale
Created by DALL-E, after a long series of prompts.
The Frontier Tech Launchpad is a space for you to come together with your cohort of fellow Pioneers and partners. Together, you'll experience a series of engaging and practical sessions facilitated by the Hub, designed to level up our shared knowledge and skills relating to multiple aspects of the FT programme.
Are you working out what kind of business model you need to use to make sense of your work? Are you exploring different avenues to generate revenue in your work or make your pilot project sustainable? If you are looking to answer these questions and weren't able to make our latest Launchpad session, read on!
Our two Frontier Tech Hub coaches, Benjamin Britton and Nada Ibrahim, led our latest session, bringing a wealth of knowledge around scaling pilots across our portfolio:
Ben has worked on pilots over the last seven years, both as an implementing partner and as a coach on the Frontier Tech Hub. He has worked extensively with small to medium sized enterprises and startups in the humanitarian supply chain sector. Ben currently coaches three pilots focused on developing and testing business models to position for scaling.
Nada is an acceleration specialist with considerable experience in coaching SME across a number of different programmes. On the Frontier Tech Hub she has worked with 7 pilots, exploring the application of different technologies, that range from ideation to scale up stages. She is also an ICF certified coach.
The below covers 3 key areas, you can jump down to the area that's of interest to you:
Two examples from the Frontier Tech Hub. These real life scenarios show how pilots tested different business models, learned and adapted their models accordingly
A 6-step process of how to develop your own sustainable business model
2 lists covering generic and sustainable business models
Bioplastic future: using bioplastics to transform domestic plastic production
The challenge - Plastics, especially plastic bags, are a major source of pollution in Nepal causing major environmental damage. Currently there are no viable single-use, low-cost, environmentally-friendly alternatives.
The idea in a nutshell - Proving demand for bioplastics and retrofitting existing plastic bag production machines will enable a shift to bioplastics production in Nepal. Bioplastics are a type of plastic derived from renewable biomass (eg vegetable fats and oils, corn starch, straw, woodchips, sawdust, recycled food waste). Whilst conventional plastics are made from fossil fuels, bioplastics reduce the reliance on finite, oil-based resources.
Business Model: Eco Friendly Product Model
Assumptions we tested through experiments -
Assumption: there is a market for bioplastics usage in Nepal. Experiment: Using online marketing and selling imported bioplastic bags to establish demand.
Assumption: retrofitting plastic bag production machines as a service is a viable income stream. Experiment: Understanding the requirements and parameters for retrofitting these machines through technical experimentation.
How did these experiments impact the development of the business model?
The first experiment established strong demand and price sensitivity in the market. As a result, the pilot shifted to a mass market model and development of plans for future scaling.
The second experiment found that retrofitting is more costly and time consuming than first assumed. As a result, the pilot shifted to focus on new machines optimised for bioplastics.
Link: https://www.frontiertechhub.org/pilot-portfolio/bioplastic-nepal
3D printing for humanitarian relief
The challenge - In Nepal, effective humanitarian response for diasters was slow and expenesive, due to the supply chain of humanitarian supplies.
The idea in a nutshell - Making humanitarian supplies locally to reduce cost and time-lag on vital supplies.
Business model: Local Production Model
Experiments run to test business model -
Assumption: it is possible to make appropriate humanitarian supplies locally in Nepal and sell these to customers. Experiment: Proving the concept by producing example products in situ for a customer.
Stakeholder discovery and outsourcing - testing assumptions about skills and capacities in country by sending makers files to make and testing the quality.
How did that impact the development of the business model?
We proved that medical supplies could be made in the field, however we came up against a lot of red tape when supplying to the partner. Therefore we pivoted to spares and repairs for medical equipment.
When trying to outsource production to a network of 3D printers in Nepal, we found that standards were hard to maintain and deliveries hard to coordinate. This led to a pivot towards embedded manufacturing capacity as a business model and the establishment of Nepal's first FabLab in 2021.
Link: https://www.frontiertechhub.org/pilot-portfolio/3d-printing-nepal
We explored together what kind of questions you need to ask yourself, and what kind of experiments you can run, to figure out the best business model(s) to serve your work.
First up, understand your market
Conduct your market research
Identify target audience, needs and pain points
Analyse competitors and their business models
Assess market demand
Understand preferences and willingness to pay through surveys and interviews
Is there a growing demand for a certain type of business model in the sector?
Second, define your value proposition
What is your unique selling point (USP) and how will you deliver it?
Next, evaluate revenue streams for the different business models
Develop a list of core assumptions for each business model you are exploring. Assess the potential revenue and profit margins for each. The examples above include assumptions.
Now, consider cost structure for the different business models
What are the fixed and variable costs for each?
What is the break-even number for each model (the minimum performance needed to cover costs)?
Next, assess scalability and flexibility
Scalability: can you scale and increase this model with demand? What resources will you need to scale it?
Flexibility: is the business model flexible to adapt to changes in the market or customer preferences?
Finally, think about your strategic fit
Does the model align with your long term vision and goals for the work?
Does the implementing partner have the skills and resources needed to use this model?
Now that you've got an idea about which questions to ask yourself to define your business model, here's our cheat sheet of different types of business models.
This cheat sheet starts with generic business models which can be utilised for sustainable purposes, and moves on to explicitly sustainable business models.
Generic business models, can be utilised for sustainable purposes, such as:
1. Retail Model
What It Is: Selling products directly to customers.
Example: Physical stores and online shops.
2. Manufacturing Model
What It Is: Producing goods to sell to other businesses or directly to consumers.
Example: Factories producing electronics or clothing.
3. Subscription Model
What It Is: Charging customers a recurring fee to access a product or service.
Example: Streaming services like Netflix or subscription boxes.
4. Freemium Model
What It Is: Offering basic services for free while charging for premium features.
Example: Apps with free and paid versions.
5. Brokerage Model
What It Is: Connecting buyers and sellers, earning a commission on transactions.
Example: Real estate agencies or online marketplaces like eBay.
6. Advertising Model
What It Is: Providing free content or services and earning revenue from advertisers.
Example: Social media platforms or news websites.
7. Licensing Model
What It Is: Selling the rights to use intellectual property or technology.
Example: Software companies licensing their technology to other businesses.
8. Franchise Model
What It Is: Allowing others to operate a business under your brand and business model.
Example: Fast food chains like McDonald's.
9. Consulting Model
What It Is: Providing expert advice and services to other businesses or individuals.
Example: Management consulting firms.
10. Razor and Blade Model
What It Is: Selling a primary product at a low price and making profits on consumables.
Example: Printers and ink cartridges, or razors and blades.
11. On Demand Model
What It Is: Provides products or services to customers when they need them, often through a digital platform or app
Example: Ride Hailing Apps, Food Delivery Apps.
Explicitly Sustainable Models (with social and/or environmental impact embedded):
1. Eco-Friendly Product Model
Focus: Products that have a minimal environmental impact.
Example: Companies producing non-toxic, biodegradable, or reusable products.
Sustainability Features: Use of sustainable materials, reduction of waste, and promotion of eco-friendly consumer habits.
2. Circular Economy Model
Focus: Extending the lifecycle of products through recycling, reusing, and upcycling.
Example: Fashion brands that take back old clothes for recycling or upcycling.
Sustainability Features: Reduces waste, promotes product longevity, and uses recycled materials.
3. Social Enterprise Model
Focus: Addressing social and environmental issues through business operations.
Example: Companies providing affordable solar energy to underserved communities.
Sustainability Features: Provides renewable energy, improves quality of life, and supports local economies.
4. Subscription-Based Model
Focus: Providing continuous value through a recurring revenue stream while promoting sustainability.
Example: Subscription services for eco-friendly household products.
Sustainability Features: Encourages regular use of sustainable products, reduces packaging waste, and promotes a shift towards sustainable consumption.
5. Shared Economy Model
Focus: Maximizing resource use by sharing access rather than ownership.
Example: Car-sharing services or coworking spaces.
Sustainability Features: Reduces overall resource consumption, lowers carbon footprint, and promotes efficient use of assets.
6. Green Supply Chain Model
Focus: Ensuring sustainability throughout the entire supply chain.
Example: Businesses sourcing materials from sustainable suppliers and ensuring eco-friendly logistics.
Sustainability Features: Reduces environmental impact across production, distribution, and disposal stages.
7. Impact Investment Model
Focus: Generating positive social and environmental impacts alongside financial returns.
Example: Investment funds that support sustainable startups and social enterprises.
Sustainability Features: Drives capital towards businesses that prioritize sustainability and social good.
8. Local Production Model
Focus: Producing goods locally to reduce transportation emissions and support local economies.
Example: Farm-to-table restaurants or local craft manufacturers.
Sustainability Features: Lowers transportation emissions, supports local businesses, and promotes community resilience.
