A case study on proactive NGO business model innovation resulting from increased private sector engagement

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Master Thesis

A Case Study on Proactive NGO Business Model Innovation Resulting from

Increased Private Sector Engagement

Student: George F.N. Ooms Student number: 10998489 Submission date: June 29th₂₀₁₇ Version: final version Executive Programme in Management Studies – Strategy track University of Amsterdam Thesis Supervisor: Dr. C. Gelhard

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Acknowledgements

I would like to take the opportunity to express my deepest appreciation and thanks to many people who have made the journey through the EPMS program a very special experience. The participants in my thesis research who have been willing to share with me their experience, knowledge and vision. All the professors who put energy in inspiring, teaching and debating, I have learned a great deal. Dr. Casten Gelhard for his time, advice and feedback throughout the thesis phase of this program. The best study-buddies one could wish for, who encouraged to continue and helped when needed. My wonderful family and friends, who kept motivating and supporting me unconditionally and my dearest Jet who had to deal with my stress and lack of time but who was always there for me and who helped me make this dream of obtaining an MSc degree come true. Thank you all very much!

Statement of Originality

This document is written by Student George Ooms who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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List of Tables

Table 1: Core literature on BMI

Table 2: Other relevant articles regarding BMI Table 3: List of interviewees

Table 4: Deductive codes example Table 5: Inductive codes example Table 6: Internal drivers - NGO Table 7: Internal drivers - Firm Table 8: Internal barriers - NGO Table 9: Internal barriers - Firm Table 10: External drivers - NGO Table 11: External drivers - Firm Table 12: External barriers - NGO Table 13: External barriers - Firm Table 14: All drivers and barriers

List of Figures

Figure 1: Conceptual Framework

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Abbreviations

BM – Business Model

BMI – Business Model Innovation CVP – Customer Value Proposition

INGO – International Non-governmental organization KP – Key Processes

KR – Key Resources

NGO – Non-governmental organization PF – Profit Formula

SDGs – Sustainable Development Goals TdH – Terre des Hommes

TdHIF – Terre des Hommes International Federation UN – United Nations

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1. Abstract

Over the past decades behavior of firms and non-governmental organizations (NGOs) in relation to each other is changing as a result of globalization and changing interests, NGOs and private sector parties are increasingly dawn toward each other and are engaging more frequently in partnerships. In this research the influence of the changing relationship, between NGOs and the private sector, on business model innovation by NGOs is examined.

Various internal and external drivers foster increasing interaction while at the same time barriers might hinder constructive collaboration. In literature a lot of attention has been given to NGO – Corporate collaborations, also business model innovation is an emerging research stream. The relation between these two is however a blank sheet. This led to research on the impact of external and internal drivers and barriers to NGO-Corporate collaborations on NGO business models and subsequent proactive NGO business model innovation related to private sector engagement.

Through a qualitative multiple case study design, data is collected in semi-structured interviews with 15 employees working for 6 NGOs.

Eleven different internal drivers and barriers and 9 external drivers and barriers to NGO – Corporate collaborations and their influence on NGO business model innovation have been identified. An innovation in the NGO business model around consultancy services has emerged from the data. This research contributes to literature by connecting existing literature on NGO – Corporate partnerships and its drivers, to proactive NGO Business model innovation and the subsequently identified models. The research is of relevance to management practice, as the findings contribute to shaping the discussion on future suitable NGO business model innovation in relation to private sector engagement.

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2. Introduction

“The issues we face are so big and the targets are so challenging that we cannot do it alone.” A quote by Paul Polman, the CEO of Unilever from an interview by J. Confino, related to sustainability and responsibility published in The Guardian in April 2012. Paul Polman states this from the perspective of the private sector. Laasonen, Fougère and Kourula (2012, p. 521) approach this topic from an academic perspective and stage that private sector, NGOs and government should work together “in order to address existing social and environmental challenges.” Our large world has never been so small, globalization is what many call it. Raw materials for food, textile, manufacturing, they come from all over the world, are shipped to places where they are processed, multiple times often, and are then shipped to places where the finished product is traded, sold or consumed. These value chains are long and complicated, many stakeholders are involved in them in some shape or form. We are living in 2017 and firms by now do realize very well that their business affects the lives of many people, in a positive and negative manner. Over the past decades firms increasingly became aware of the fact that their business is not run in isolation from the communities that surround it. Non-governmental organizations (NGOs) are one of the stakeholders that for many years, and still do, work towards the protection of human rights, fair wages, good working conditions, a healthy environment, prevention of child labor and community development. NGOs are the stakeholders that pressure firms to improve their operations and to take their responsibility (Burchell & Cook 2013), not just by adhering to law but go beyond that (Blowfield & Frynas, 2005) and invest in the wellbeing of people and planet, next to making profit. NGO pressure on firms has lead to an increase in Corporate Social Responsibility (CSR) strategies and changing firm behavior. The firm is taking on a different role, the NGO at the same time adapt with it. Pure activist pressure may not be the best way to realize change. Advocacy, cooperation and advice, may form a more solid base regarding the interaction of NGOs and the corporate world. In this changing world and subsequent changing relationships between firms and NGOs, the mechanics in this relation change. Impact is the key term

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9 that both parties frequently use and this is one of the reasons willingness to cooperate in order to realize impact has often become status quo. Many scholars have done research on so called NGO – Corporate partnerships and interactions. A less explored territory is the field regarding the business model of NGOs in this relationship with the private sector and how it evolves or innovates as a result of external and internal forces that push NGOs and firms towards each other. Business models and business model innovation has been subject to scholars attention for many years. Relevant literature on the core business model elements, customer value proposition, key activities, key resources and profit formula, has been written by Johnson, Christensen and Kagermann (2008) and Osterwalder and Pigneur (2010). The business model of NGOs has had little attention however. This might be due to the fact that NGOs in a traditional sense do not use terminology like business models or solely use one relatively straight forwards model, namely fundraising for projects. The assumption is made that NGOs solely engage in partnerships if they contribute, directly or indirectly, to realizing their goals and those goals are for virtually all NGOs aligned with the United Nations Sustainable Development Goals (SDGs). Partnerships with the corporate sector are not taken for granted by NGOs, it is a complex endeavor in which realizing goals without compromising independence (Baur & Schmitz, 2012) are continuously monitored. In the changing landscape, the need for research into NGO business models in relation to collaborations with the private sector has become evident. The external and internal drivers, but also barriers, to NGO – Corporate collaborations are essential elements in both parties’ behavior (Gray & Stites, 2013).

Literature research forms the basis of the research, a subsequent multiple case study research design (Yin, 2013) has been identified as the most suitable method for this research. Fifteen employees working for six different NGOs have been interviewed using semi-structured interviews. The sample that has been chosen consists of independent NGOs active in the field of child protection and children’s rights promotion. These organizations are all part of an international federation called Terre des Hommes International Federation (TdHIF). Although all part of the same federation, the NGOs operate relatively independent from each other and are active in different countries. The

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collected data has been analyzed and the results have led to answering the research questions. This report is structured in a chronological fashion starting with the literature review, followed by a description of the method and data selection. Subsequently the results are presented and then discussed elaborately followed by some managerial implications. The conclusions and limitations lead to the end of this research. This research is of relevance to literature regarding NGO business model innovation related to private sector engagement as well as for management practice as it fosters discussion about and implementation of alternative business models in the NGO sector. As the research on NGO Business model innovation to date is limited, an opportunity for research arises and steps can be taken towards discovering a new field of research. That inspired the author to conduct research that leads to answering the following research question has sprouted from the literature research:

What external and internal drivers to NGO – Corporate collaborations also lead to proactive NGO business model innovation?

And the following sub questions:

• In what way do these drivers change traditional NGO business models?

• What do new NGO business models look like?

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3. Literature review

Over the past decade, a lot of research has been done on NGO-Corporate collaborations, Cross-sector partnerships, Private Sector engagement by NGOs, in all its different forms and shapes (Gray & Stites, 2013; Laasonen et al., 2012). Various other possible names have been created to indicate a specific type of engagement between a small or large company and a small or large Non-Governmental Organization (NGO) that has the goal of addressing and solving an environmental or social problem or that is set up for marketing related reasons. As various terms exist to describe a similar concept, in this research the choice has been made to mainly focus around the term

NGO-Corporate collaboration. According to Gray and Stites (2013) a collaboration between two or more

parties is always part of a partnership, but a partnership does not always include collaboration. As the type of partnership that is of interest for this research always consists of collaboration between two or more partners, collaboration seems to be the most logical term to use. However, for the readability of the research, other terms for the same phenomenon will be used as well, nonetheless, the meaning always comes back to NGO – Corporate collaboration as explained above. The terms corporate sector, firms, private sector and companies will in this research be used interchangeably. The literature on NGO-Corporate collaborations stretches quite far as does the research on business model innovation. However, a gap in the literature can be found in the different external and internal drivers to NGO-Corporate collaborations and their direct effect on proactive NGO Business Model Innovation. Proactivity in this research is defined as the NGO engages in business model innovation (BMI) prior to starting new partnerships with the corporate sector. It is exactly this specific niche of external and internal drivers for NGO-Corporate collaborations and their direct effect on proactive NGO Business Model Innovation where this research will be focused on.

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3.1 The role of NGOs and Corporates in society

When the objective is to analyze behavior that follows a changing relationship between NGOs and firms, it is important to be aware of how this relationship is changing and where this change comes from. The traditional goals and roles of firms and NGOs in society differ to a great length and partially stem from opposite positions regarding specific matters. In the time that corporates started to be pressured to become more responsible in how they do business, it was Milton Friedman (1970) who said “there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game.” This quote is in line with a still widely spread belief that firms have one goal, which is to maximize its (shareholder) value (Jensen, 2001). Jensen (2001) furthermore stresses that managers should have value maximization as a clear primary target. Consequently, other initiatives, with the exemption of adhering to local, national or international legislation, are not a primary goal of the firm. On the other hand, there are NGOs. In this specific research attention goes out to ‘Intermediate organizations’, organizations that “seek funding, and deliver programs and services to people and communities” (Dichter, 1999, p. 39). Human centered development organizations are working on the elimination of poverty, society development, human and child rights and healthcare. They “exist to improve the lot of people, whether their focus is poor or unjustly treated people and seek lasting effects of their work.” (Dichter, 1999, p. 39). Baur and Schmitz (2012) defined 4 roles of NGOs in the form of Watchdog, Lobbyist, Partner and Service provider. One can imagine that the corporate sector and NGOs encounter each other in their route to pursuing their goals. These encounters over time have shown that in the traditional sense, firms and NGOs are often opponents in an arena where the price to win is to get their goals realized in the, for them, most suitable manner. Burchell and Cook (2013, p. 508) in their research state that “relations between these groups have been relatively hostile, even directly adversarial.”

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3.2 NGO – Corporate interaction

Burchell and Cook (2013) have done research on the changing relationship between these two worlds and their research emphasizes that the pressure by NGOs, through media and public, on firms regarding their social and environmental responsibilities has lead firms in the direction of developing corporate social responsibility strategies. Engaging in dialogue with the different stakeholders to work towards more trust and understanding between business and NGOs has been one of the goals of these strategies (Kaptein & Van Tulder, 2003). The increase of NGOs becoming strategic partners for corporates has been labeled as “one of the most significant processes related to the global environmental and social challenges today” (Kourula & Laasonen, 2010, p. 36). Today, from the corporate perspective, collaborations with NGOs are grounded in firms corporate social responsibility strategies (Baur & Schmitz, 2012). The challenge with CSR is that the goal and foundation for developing a CSR strategy by a firm, can be interpreted in many ways by different stakeholders. The firm itself and NGOs that are in some way encountering that specific firm, might have different goals and interpretation of CSR (Blowfield & Frynas, 2005). Core in this difference of interpretation is the level or responsibility and the extent to which it goes beyond what it required by legislation (Blowfield & Frynas, 2005). Several scholars have done literature reviews on the developments over the past decades regarding the various aspects related to NGO-Corporate collaborations. Gray and Stites (2013), who carried out a very relevant study that examined multiple aspects related to NGO-Corporate collaborations and many different forms of collaboration and partnerships, provide rich insights into the various models, their drivers and key success factors. A�hlström and Sjöström (2005) have identified four different types of Civil Society organizations (also called NGOs) and indicated which type has a strategy on engaging in collaborations with the private sector. These types are called Preservers, Protesters, Modifiers and Scrutinizers. Only the Preservers have a strategy of collaborating with business. The other three types, do not want to jeopardize their independence and are therefore not collaborating with the private sector (A�hlström & Sjöström, 2005)

.

It is important for corporates to be aware of the different types of NGOs and their willingness

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to cooperate versus their independence (A�hlström & Sjöström, 2005). Additionally, NGOs who are on the one hand partnering with certain private sector players, are on the other hand simultaneously pressuring those same and other firms. Firms need to look for ways to respond to that. Some firms see pressure as an opportunity to collaborate, others refuse to give in and take on a mode of resistance towards the NGO (Spar & La Mure, 2003). When engaging in collaborations there are many ways to identify different types of partnerships or the extent of collaboration. The models described by Gray and Stites (2013) give a complete overview of levels of engagement ranging from the more reactive type of partnerships, like philanthropy and sponsorship on the most basic side of the spectrum of partnerships, to the more transformative types of collaborations, like ‘base of pyramid strategy’ and collaborative governance on the most extreme or integrated side of the NGO-Business collaboration spectrum. The ‘base of the pyramid’ concepts are activities by corporates where the goal is to develop new sustainable business opportunities for poor communities around the world that all parties involved benefit from (Gray & Stites, 2013). The concept of collaborative governance is well explained as “joint efforts by public and private actors, each wielding a degree of discretion, to advance a goal that is conventionally considered governmental.” (Donahue, 2010, p. 151, quoted in Gray & Stites, 2013). Between these extremes many other forms of collaborating or partnering can be found. Kourula and Halme (2008) describe three typologies of corporate responsibility that may form the basis for a business to engage in a partnership. First, Philanthropy, that is aimed at improving a companies image or reputation. Second, Corporate Responsibility Integration, aimed at improving the companies environmental and/or social ‘footprint’ from its core business. And third, Corporate Responsibility Innovation, aimed at working towards solving social or environmental problems not directly benefitting the core business. Goals for NGOs can be securing of funding for their programs, access to capabilities to increase efficiency, reputation, network and increasing social impact (Gray & Stites, 2013). One of the mayor challenges for NGOs in the process of partnering with the corporate sector is to ensure their independence and prevent co-optation (Baur & Schmitz, 2012).

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3.3 Drivers & Barriers

The origin of NGO - Corporate collaborations, amongst other reasons, lies in the acknowledgement of many different stakeholders in society that solving certain social problems is something that cannot be done by one single organization or institution and that by joining forces, resources, skills and knowledge, a much larger impact can be made (Gray & Stites, 2013). This is just one example of many different potential external and internal drivers for forming NGO-Corporate collaborations. As NGOs are confronted with decreasing funding streams they are forced to seek alternative revenue streams (Millar, 2004). Also, NGOs seek ways to leverage their knowledge and capabilities through collaborations with corporate sector parties in order to have a larger societal impact than they would be able to have when operating alone (Gray & Stites, 2013). This leads NGOs towards new forms of cooperating with corporates, focused on social impact. The process of changing NGO-Corporate collaborations is an incremental process. Over a longer period of time the intensity of and need for partnerships increased and the goals for creating impact grew with it. Previous research has been done on drivers for the formation of NGO-Corporate collaborations. Gray and Stites (2013) have, based on extensive literature review, identified five potential external drivers for the formation of these collaborations, being: social perception; expectations and preferences; technological developments; concerns about globalization; the regulatory environment; decline in governmental efficacy (Gray & Stites, 2013).

The driver here named ‘social perception, expectations and preferences’ sprouts from several developments. As various large multinational corporates business operations negatively influenced societies and/or the environment, trust by the community in the private sector was lost. This led to pressure by various stakeholders on business to take their responsibility of being accountable for their actions. It is expected that firms take a responsibility not only in pleasing shareholders but also improve society in a larger context (Loza, 2004). If consumers perceive a firm to be socially responsible, their attitude towards the firm will be influenced (Brown & Dacin, 1997 in Di Domenica, Tracey & Haugh, 2009), so the social perception of a consumer is rather significant for firms. Finally

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there is an increasing awareness in the business sector that ‘being green’ is actually very interesting in a financial sense. Acting strategic and proactive in dealing with corporate responsibility can increase financial performance (Husted & Salazar, 2006) meaning that also shareholder might prefer this type of firm policy, again a driver for possible engagement with NGOs.

Technological developments as a driver comes from the emergence of the internet and other communication technology. These have resulted in a stronger global reach and “voice” of NGOs in the business landscape (Choi & Kim, 2010). The reach resulting from these developments for NGOs and the subsequent pressure through “complaints and grievance” they can have on firms is increasing while at the same time they can use their voice to help the private sector by doing suggestions on improving policy on specific themes they are active in (Choi & Kim, 2010).

Globalization drives NGO – Corporate collaborations as we see firms seeking opportunities and expand their activities throughout the world and NGOs watching over their shoulder. One of the effects of globalization is that firms seek to decrease labor costs. Realizing the offshoring certain steps in the value chain to outside western countries, was seen as an opportunity for western brands. In developing countries production could be realized much cheaper and thus western firms shifted their production to those countries (Kapelus, 2002). In doing so, those firms also shifted their responsibility to countries with much lower labor standards and conditions. This lead to many scandals (Loza, 2004) and the subsequent realization that labour could be offshored but responsibility could not (Egels-Zanden & Hyllman, 2006). Production and supply chains for many brands are highly complex and globally dispersed and NGOs are one of the stakeholders pushing those brands to take responsibility in monitoring those chains regarding human rights related issues (Anner, 2012).

Formal and informal rules, regulation and legislation regarding societal and environmental wellbeing are at the core of business and NGO focus. Initiatives like UN Global Compact are getting increasing attention of large firms, this forms an example of international soft regulation that influences how firms operate in partnership with other stakeholders to improve social and environmental

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17 performance (A�hlström & Sjöström, 2005). Not only international initiatives but also local and national agreements between different parties, codes of conducts, certification requirements lead to increasing partnerships between private sector parties and NGOs (Gray & Stites, 2013). Pressure by stakeholders on government to change or improve legislation can be seen as an opportunity for firms or as a threat. Properly designed legislation can lead to innovation and increased productivity (Porter & van der Linde, 1995) while at the same time, firms try to prevent legislation and regulation by increasing their CSR programs including cooperating with NGOs and by doing so work towards self regulation (Kapelus, 2002).

At the same time that regulation can be a driver or barrier for NGO – Corporate Collaborations, a decline in governmental efficacy forms a driver for both parties to collaborate, NGOs take a role that government does not as government struggles with regulation regarding sustainable development, NGOs step in and start advocating and collaborating on their behalf (Fischer, 1998 in Sinh, 2002). Furthermore Nikoloyuk, Burns and de Man (2010) state that the lack of government regulations actually lead to an increase in partnerships, in their study this regards environmental law for example. Gray and Stites (2013) state that is development countries, trust in government is low due to weak systems and corruption.

The next step is to look at what drivers play a role in the level of success of NGO-Corporate partnerships. Research on these drivers for success, mostly internal drivers, has been done by for example Austin (2000), Gray and Stites (2013), Jamali and Keshishian (2009) and Samii, Van Wassenhove and Bhattacharya (2002). Some of these drivers are; resource dependency and commitment symmetry (Samii et al., 2002), alignment of strategy, mission and values, personal connection and relationship (Austin, 2000), trust and consensus-based decision making (Gray & Stites, 2013) and many more drivers by these and other scholars can be addressed. Austin (2000) subsequently even goes a step further and also specifies enablers for “the effective management of the partnering relationship and process”. According to Austin (2000) these are: focused attention; communication; organizational system and mutual expectations & accountability. These enablers

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support the drivers to successful partnerships and should be seen on a continuum from passive philanthropy to highly active integrative partnerships (Austin, 2000).

3.4 Business Models

So far research has shown us what drives the formation of partnerships, what type of partnerships sprout from it and what drives successful partnerships. What we are interested in, is whether these external and internal drivers, prior to engaging in a specific partnership, lead to the proactive innovation of NGO business models. If so, are they able to proactively become more interesting partners with more suitable value propositions for the corporate sector. And how would the new business models look like.

The incremental innovation of increasing partnerships is expected to lead to adaptations in the NGO business model. From the business perspective, the “job to be done” (Johnson, Christensen & Kagermann, 2008, p. 52) has changed, as corporates want to and need to run their business in a more sustainable way. As a consequence, the NGO could step up and provide solutions for that specific job. The business model of an NGO might change subsequently. As there is not one specific or commonly excepted definition of what a business model is (Dahan, Doh, Oetzel & Yaziji, 2010; Johnson et al., 2008; Morris, Schindehutte & Allen, 2005; Zott, Amit & Massa, 2011), in this thesis the well-known definition, stated below, of Osterwalder and Pigneur (2010) will be used.

“A business model describes the rationale of how an organization creates, delivers, and captures value.” (Osterwalder et al., 2010, p. 14)

Just as there is not only one definition of what a business model is, there is not only one conceptual framework of a business model. Business models may consist of many different elements, including four core elements, namely; customer value proposition (CVP), profit formula (PF), key resources (KR) and key processes (KP) (Johnson et al., 2008). Osterwalder et al. (2010) use the same four core elements, and add several elements to increase the level of detail, namely: customers segments, channels, customer relationships, key partnerships and cost structure (Osterwalder et al., 2010). As we are focusing on one of many activities of an NGO, namely collaborations with corporates, we will

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19 not look into all different elements of a NGO business model, but we will focus on the four core elements described by Johnson et al. (2010), as with these elements we can break-down and describe the Corporate – NGO collaborations and their related activities.

An assessment of changes in customer value propositions, revenue streams, key resources and key activities will be made.

Customer value proposition being the central element of any business model can in our case be described as the capabilities that the NGO brings to the table in a strategic NGO-Corporate collaboration (Osterwalder et al., 2010). Johnson et al. (2008, p. 14) describe it as ‘the job to be done’, the solution to a problem that needs to be solved. The profit formula defines in what way the NGO uses a collaboration with a private sector party to gain access to funding or income of its activities while delivering the CVP to the partner (Johnson et al., 2008; Osterwalder et al., 2010). Key resources indicate essential and critical resources or assets an NGO should have (access to) in order to deliver the required CVP (Johnson et al., 2008; Osterwalder et al., 2010). The key processes are the activities or ‘operational and managerial processes’ (Johnson et al., 2008) that lead to delivering the CVP (Osterwalder et al., 2010). In the case of an NGO we are mainly looking at services meaning that the key resources are its people and the key processes are thus, for example, training, consultancy and auditing (Johnson et al., 2008).

3.5 Business Model Innovation

Business model innovation is an emerging research stream, today many scholars conduct research on and publish about business model innovation. Focus may be the concept of business model innovation itself, the business model innovation process or business model innovation in specific sectors and types of business. As the research is very comprehensive and broad, not all research is directly relevant for this specific thesis. It is however of importance to get a sense of the core thinking, research and publications on business model innovation that laid the foundation for many scholars today. In table 1 an overview is given regarding this core literature on business model innovation. In the table these articles are presented including some key words to get an insight in the

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content. Also the type of research, either conceptual, empirical or literature is added. To get insight into the relevance of these articles, the number of times these articles are cited is included in the table.

As pointed out, the articles presented in table 1 are used by many scholars to develop their thinking and to build their theories and concepts on. Some relevant next generation articles are presented in table 2. In the search for business model innovation literature, extra attention is paid on business model innovation in the NGO sector. It seems that empirical academic literature on this field is very limited. One conceptual article by Landes Foster, Kim and Christiansen (2009) was found about NGO business models, it is however not a peer reviewed article. Seelos and Mair (2005) and Yunus, Moingeon and Lehmann-Ortega (2010) mention NGOs in their research and their vision on business models, the actual models themselves are however more social business models or social entrepreneurship models which are models that Baden-Fuller and Morgan (2010, p. 158) call “models that lie between for profit and charity”, although very interesting, this field of research is not a point of focus of this research.

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Table 1: Core literature on BMI

Article Key words: Conceptual /

Empirical / Literature

Cited in number of articles Business Models as Models (Baden-Fuller & Morgan, 2010) Business models; Descriptions; Literature; Typology Literature /

Conceptual

902 Business Model Innovation: Opportunities and Barriers

(Chesbrough, 2010)

Business model innovation; Opportunities; Barriers Conceptual 1945

Business Model Evolution: In Search of Dynamic Consistency (Demil & Lecocq, 2010)

Business model evolution; Dynamics; RCOV framework Conceptual 899

The Business Model in Practice and its Implications for Entrepreneurship Research (George & Bock, 2011)

Business model; Dimensions; Entrepreneurship Empirical 552

Reinventing your business model (Johnson, Christensen & Kagermann, 2008)

Business models; Value; Organizational change; Innovations in business

Conceptual 2160

The ultimate competitive advantage of continuing business model innovation (Mitchell & Coles, 2003)

Business improvement; Innovation Conceptual 316

The entrepreneur’s business model: toward a unified perspective (Morris, Schindehutte & Allen, 2005)

Activity sets; Architecture; Business model; Strategy; Model dynamics

Literature 2084

Business model generation: a handbook for visionaries, game changers, and challengers (Osterwalder & Pigneur, 2010)

Business model generation; Business model canvas; Innovation

Conceptual 5460

Social entrepreneurship: Creating new business models to serve the poor (Seelos & Mair, 2005)

Social entrepreneurship; Sustainability; Business model; Corporate social; responsibility

Conceptual 688

Business Models, Business Strategy and Innovation (Teece, 2010) Business models; Business strategy; Innovation Conceptual 3681

Building social business models: lessons from the Grameen experience (Yunus, Moingeon & Lehmann-Ortega, 2010)

Social business models; business model innovation; Grameen Bank

Conceptual 693

The Business Model: Recent Developments and Future Research (Zott, Amit & Massa, 2011)

Innovation; Business model; Value creation; Value capture; Strategy

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Table 2: Other relevant articles regarding BMI

Article Key words: Conceptual /

Empirical / Literature

Cited in number of articles Business model innovation and competitive imitation: The case of

sponsor-based business models (Casadesus-Masanell & Zhu, 2013)

Business model innovation; Imitation; Sponsor- based business model; Strategic revelation; Strategic concealment

Empirical 244

A literature and practice review to develop sustainable business model archetypes (Bocken, Short & Evans, 2014)

Business model innovation; Industrial sustainability; Value creation; Stakeholders; Sustainable consumption; Sustainable production

Empirical 413

Business model innovation – state of the art and future challenges for the field (Spieth, Schneckenberg & Ricart, 2014)

Business model innovation; Literature review; Role-based approach

Literature / Conceptual

107

Business model innovativeness: designing a formative measure for business model innovation (Spieth & Scheider, 2016)

Business model innovation; Value offering innovation; Value architecture innovation; Revenue model innovation; Formative measurement design

Empirical 12

Ten Nonprofit Funding Models (Landes Foster, Kim & Christiansen, 2009)

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23 To continue more specifically with this research, the different types of internal and external drivers related to NGO – Corporate collaborations create a dynamic field in which the NGOs should continuously adapt the internal and external fit of their business models, matching internal activities with external conditions (Morris, Schindehutte & Allen, 2005). This effect of these external and internal drivers on proactive business model innovation (BMI) of NGOs, had been subjected to research in a much lesser extent. How do NGOs innovate their business model to become and stay interesting and suitable partners for the corporate sector in increasing strategically important NGO-Corporate partnerships and realize their societal and/or financial goals simultaneously. Well-designed and thought-through business models are key to successful innovations (Teece, 2010) and scholars agree that business models can be a source of competitive advantage and are key to firm performance (Zott et al., 2011). In this research, we make the assumption that a NGO-Corporate collaboration can be one of those successful innovations and thus that a well-designed business model of the NGO will contribute to the success of a collaboration and can be a source of competitive advantage. A progressive stance and active strategy towards business model innovation can lead to outperforming competition and thus can be a competitive advantage (Mitchell & Coles, 2003). Competitive advantage might be a somewhat strange concept when talking about NGOs, as the ultimate goal of an NGO should be that it would be obsolete as there are no problems in the world that it needs to address. At the point of writing, there are unfortunately several serious issues in the world that need attention. Consequently, NGOs will be part of society for many years to come. As there are various NGOs working on similar problems, with each having its own approach to tackle that specific problem, we can talk about competitive advantage as an NGO considers its approach to solving the problem most suitable and thus wants to prevail over its competitors on program implementation and fundraising activities. Although not being that black and white, this is in theory what it looks like. In practice however we see a lot of collaboration between NGOs to combine efforts and work towards solving specific problems. Business Model Innovation can take place at two levels, the marketing and fundraising level and the programmatic or impact level.

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4. Propositions & Conceptual Framework

4.1 Propositions

Following the literature review, several propositions have been formulated. When entering the final stage of this research, the researcher should be able to either confirm or refute these propositions. As this is an exploratory research approach, not all drivers are set in stone beforehand. One of the goals of this research it to discover relevant drivers and barriers, therefore other drivers can be identified during the analysis of the cases.

• P1: External and internal drivers for NGO-Corporate partnerships lead to proactive NGO BMI.

The main proposition of this research is that NGOs do proactively change their business model as a result of external and internal drivers for NGO-Corporate collaborations. It is in the interest of the NGO to be and stay an interesting partner for the corporate sector and that a collaboration leads to higher impact on realizing the UN Sustainable Development Goals, than the NGO would be able to realize alone. For this reason NGO are willing to invest in adapting their value proposition, key resources, key activities and revenue streams prior to engaging in a specific partnership to become and remain an interesting partner for corporates to work with. The foundation of this proposition lies in the following more specified propositions and their integration in literature.

• P2: Social perception, expectations and preferences of corporate stakeholders leads to NGO BMI.

Based on literature it can be concluded that social perception, expectations and preferences by different stakeholders push private sector to improve social and environmental responsibility and drive the formation of NGO – Corporate collaboration (Brown & Dacin (1997) in Di Domenica, Tracey & Haugh, 2009; Husted & Salazar, 2006; Loza, 2004). As a result NGOs develop value propositions that form a solution for the problem corporates face.

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25 • P3: Technological developments in the private sector do not lead to NGO BMI.

Increasing NGO – Corporate collaboration result from technological developments, more specifically from the voice NGOs have and through this their capacity to pressure private sector (Choi & Kim, 2010). As this seems primarily a ‘voice’ related development, it is not expected that NGOs see this as an opportunity for BMI regarding private sector engagement.

• P4: The regulatory environment leads to NGO BMI

Formal and informal rules, regulation and legislation regarding societal and environmental wellbeing drive the formation of NGO – Corporate partnerships (A�hlström & Sjöström, 2005; Gray & Stites, 2013; Kapelus, 2002; Porter & van der Linde, 1995) it is expected that NGOs see this as opportunities and innovate their business models to benefit optimally from this driver.

• P5: Decline in governmental efficacy does not lead to NGO BMI

As stated in literature, governmental efficacy actually drives NGOs and private sector towards collaborating (Fischer, 1998 in Sinh, 2002; Gray & Stites, 2013; Nikoloyuk, Burns & de Man, 2010), it is expected that this primarily relates to programmatic collaborations set up together and does not driver pro-active BMI.

• P6: Funding challenges of NGOs leads to NGO BMI

Funding challenges resulting from a changing environment lead NGOs to seek alternative sources of income (Millar, 2004) and therefore are at the core of proactive NGO BMI.

• P7: Ethical standards may form a barrier for NGO BMI

Different ethical standards is what forms the core of the traditional tension between NGOs and the private sector (Burchell & Cook, 2013) and for NGOs there is a big challenge regarding keeping independent in their interaction with the private sector (Baur & Schmitz, 2012). This forms a barrier for NGOs to proactively adapt their business model regarding private sector engagement.

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• P8: If BMI takes place, it begins with the customer value proposition.

Johnson et al. (2008, P54) state that “it is not possible to invent or reinvent a business model without first identifying a clear customer value proposition”. The start of a business model should always be the solution to a problem, a “job to be done” and therefore business model innovation always starts with the CVP.

• P9: If one element of the business model changes, all elements change.

The different elements of a business model cannot be seen as independent from each other, if one of them changes, the other elements will also change. Johnson et al. (2008) call them “interlocking elements” as they directly interact and influence one another. For this reason the propositions above do not specify which of the elements will be influenced, but if the business model will be innovated or not as a result of a specific driver.

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4.2 Conceptual Framework

The literature research and propositions led to the development of a conceptual framework for this research. The foundation of the research is formed by a baseline research into the traditional business model of an NGO regarding collaboration with the corporate sector. Over time, the business model might innovate under the pressure of different external and internal drivers. In addition to that, business model innovation might be limited or blocked by external and internal barriers. The drivers and barriers form the independent variables for this research and the possible adaptations in the business model regarding NGO – Corporate collaborations is the outcome.

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5. Data and Method

5.1 Research Design

A recap on the research questions resulting from the literature review:

- What external and internal drivers to NGO – Corporate collaborations also lead to proactive NGO business model innovation?

- In what way do these drivers change traditional NGO business models? - What do new NGO business models look like?

- Are these business models associated with an increase in NGO-Corporate collaborations?

5.1.1 Exploratory research

In order to answer the questions above, a qualitative exploratory research approach is chosen. The exploratory research is aimed at exploring the chosen topic, seeking new insights and try to discover information and a better understanding of a situation (Saunders & Lewis, 2012). Typical for this type of design is that its set up is relatively flexible. Starting with a more general theme that is of interest to the researcher, preliminary research has been conducted. The preliminary research included informal discussions regarding NGO – Corporate collaborations and business model innovation with specialists from the NGO working field who are well informed about what is happening in practice. Furthermore a professor from the University of Amsterdam who conducts research on topics related to private sector engagement and NGOs has been consulted. Simultaneously academic literature research has been conducted in order to get first insights into what has or has not been subjected to research to date. This preliminary research is a process in which general ideas have developed into more concrete research questions and subsequently resulted in the research project and thesis proposal (Saunders & Lewis, 2012).

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5.1.2 Literature review

A review of academic literature forms the basis of this research. Literature research is essential to develop understanding of the specific topics related to this research. An important method used in the literature review is searching for academic articles using Google Scholar, through this search engine, in combination with University of Amsterdam access, a substantial amount of academic titles is accessible through the internet. Search terms included amongst others: Private sector engagement, NGO – Corporate collaboration, stakeholder dialogue, non-governmental organizations, business model innovation, business model, fundraising model, public private partnership. The relevant articles found subsequently also lead to other publications in the specific field. In this literature review significant contributions related to the research topic are found and reviewed in a critical fashion (Saunders & Lewis, 2012). This resulted in the literature review that can be found in chapter 3 of this research. As a result of the literature research it became clear what the exact gap in the literature is and confirms the relevance of this research into drivers that foster NGO – Corporate collaborations and subsequent NGO business model innovation, and its contribution to academic literature.

5.1.3. Case study

For this research the choice has been made to use the Case Study approach. This “research strategy focuses on understanding the dynamics present within single settings” (Eisenhardt, 1989, p. 534). By using case studies of various NGO organizations, insights can be gained on NGO BMI as a result of external and internal drivers to NGO-Corporate partnerships. More specifically, a multiple case study design (Yin, 2013) is conducted. Business model innovation within different NGOs, who are part of the same federation, will be analyzed. In this research 15 employees working for 6 NGOs are interviewed, all having a different view on NGO – Corporate collaborations and NGO business models. The goal of interviewing several different people within one organization is to get a holistic perspective from within one organization. It is not per se the goal to compare the different views within one NGO, a broader view on developments across the different NGOs is the goal. This would

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result in an embedded approach instead of a holistic approach (Yin, 2013), the research however has elements of both and a clear choice between the two has thus not been made.

5.2 Case selection and Sampling

Proper case selection is an essential step in building theory from the type of research (Eisenhardt, 1989). For this research, it was not realistic within the available timeframe to conduct research on the entire population. Various methods for selecting samples from a population exist (Saunders & Lewis, 2012). The entire population would in this specific case be all NGOs in the world that are collaborating with the private sector. Getting access to all of these is not possible so probability sampling is not an option. This leads us to non-probability sampling techniques. This research is limited to a specific family of NGOs which is chosen through convenience sampling as it is a federation of NGOs of which one member is the employer of the researcher. The sample of this research consists of 6 different entities or independent organizations that are all part of the same international federation, Terre des Hommes International Federation (TdHIF). Terre des Hommes is a large international non-governmental organization focusing on promoting children’s rights and child protection around the world. The TdH mission can be found in appendix 1.

TdHIF consists of ten independent member organizations. The various TdHIF member organizations differ to a relatively large extend in how they operate, their size and annual income/expenditure. Terre des Hommes as a federation is a global player in the children’s rights sector. The sample that is used for this research consists of members of the TdHIF. The next step in sampling was done by purposive sampling of the researcher (Saunders & Lewis, 2012). Using the network of the researcher, access was gained to larger TdHIF member organizations that are active in private sector engagement and specifically to employees within these organizations. These organizations are based in the Netherlands, Germany, Italy, two in Switzerland (Lausanne and Basel) and the TdHIF Secretariat based in Geneva. The employees where selected based on their position in the organization, the goal was to get access to member of top-management, and their connection to the research topics of either NGO – Corporate collaborations or NGO business model innovation. These

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31 employees are approached using e-mail correspondence in which the purpose of the research was explained and the question was asked if they were willing and able to participate. Subsequently, the first people who agreed to be part of this research were asked which colleague they would recommend speaking to in order to get a solid overview of that specific organization. This approach is called snowball sampling (Saunders & Lewis, 2012) and led to the following sample.

Table 3: List of interviewees

*TMT meaning top-management-team.

5.3 Data collection

In semi-structured interviews data is collected from a conversation between the interviewer and interviewee in which specific predetermined topics and themes are discussed in a relatively flexible setup (Saunders & Lewis, 2012). From the interviews insights are gained into the traditional value proposition, key activities, key resources and revenue streams of NGOs when dealing with corporates. These form the baseline for the rest of the research and deviations from this baseline might be called business model innovations. Subsequently the NGOs are questioned about external and internal drivers to NGO-Corporate partnerships and what actions the NGOs take as a result of these drivers. For this research the focus will be on possible adaptations of the business model. In

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these interviews in depth insights are gained on the NGOs awareness of and sensitivity to external and internal drivers and the extent to which they act as a result of them. Subsequently, the interviewee was asked to describe the NGOs new business model, if they have a new model.

In appendix 2 the topic guide and interview questions used can be found. The topic guide and interview questions where deliberately not shared with the interviewees as this might result in confusion and misunderstanding of how the interview would take shape. It is important to stress that the interviews where not conducted as rigid as the setup of the topic guide and interview questions, these solely formed a rough guideline in the conversation. There was no strict protocol to follow in this research as that would negatively influence the flexibility of the data collection and more importantly this would impact the potential to encounter unanticipated themes and events as part of the research and thus limit the richness of conducting exploratory qualitative research. Even specific terminology might not be used as stated in the guide. As sticking to much to the use of strict terminology might be confusing and impacting the conversation in a negative way, a layer of interpretation of the researcher is added in the stages of data analysis. More on this can be found in the section regarding data analysis.

Data collection took place between March 21st_{and April 19}th_{2017. Interviews with participants from} outside of the Netherlands are done through Skype and took between 40 and 55 minutes each. In some cases there was visual contact through the use of a webcam and in some cases there was just voice contact. All interviews have been recorded after consent by the interviewee. The interviews that have been conducted with employees who are based in the Netherlands have been done face-to-face and those have also been recorded. All recordings have been transcribed literally into written documents. Sounds and words like ‘ehm’ have been left out of the transcripts. Also introductory talks building rapport have not been transcribed. Finally, if an interviewee explicitly mentioned that a specific sentence could not be used or was of a confidentiality level that it could not be used, that section was not transcribed.

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33 In order to ensure free and safe communication, the agreement was made with all interviewees that their names will not be used and their positions and location will never be linked to a specific quote. This means it is not possible to trace quotes back to a specific individual. Transcripts and coding files will not be added to the appendices of this thesis. The transcripts and coding files are available upon request with the researcher and will in such a case be confidential or made anonymous prior to distribution.

Determining the correct sample size for this type of research is formally not possible in advance. The theory is that research should be done until data saturation has been reached. Data saturation being the moment that no new information is being gained from collecting more data (Saunders & Lewis, 2012).

5.4 Data Analysis

The steps that follows transcribing the different interviews, the analysis of the data, is what leads to the results and subsequently the discussion of those results. In the end, the goal of this research is to develop theory from the data, “A description of a pattern that you find in your data” (Auerbach & Silverstein, 2003, p. 31). The step-by-step approach called coding leads towards organizing and structuring the high volume of data that has been collected. According to Saldana (2009, p. 3) a code in qualitative research is “most often a word or short phrase that symbolically assigns a summative, salient, essence-capturing, and/or evocative attribute for a portion of language-based or visual data”. For coding the transcripts resulting from the data collection in this research, the qualitative data analysis software called NVivo was used to support the researcher in organizing and structuring the data. Various techniques and methods exist on how to approach and handle data when coding. Gaining a ‘feeling’ with the data is an essential first step in the data analysis. During the process of interviewing and transcribing the interviews, rough patterns might emerge, but these patterns need to be grounded in the data in a more clear and formal way.

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The coding technique used in this research is based on the approach presented by Auerbach and Silverstein (2003). The following steps are taken to go through the data:

Raw text relevant text repeating ideas themes theoretical constructs theoretical narratives research concern (Auerbach & Silverstein, 2003).

It must be stressed that this process is never as linear as this step-by-step method suggests. During coding and the process that leads to theoretical constructs, the researcher goes back and forth between raw data, codes, ideas and themes. It is not a linear but a more cyclical process (Saldana, 2009). The step from raw text to relevant text however is a complicated one as the researcher might not be aware of all that is relevant yet. For this reason a two way path was chosen during this step, deductive coding and inductive coding. Deductive coding is a top-down process, using the predetermined concepts as a guide through the data and try to fit the data in the known theoretical interest for this research, a more analyst driven approach (Brown & Clarke, 2006). Inductive coding is a more bottom-up approach in which the data is approached without predetermined concepts or codes in mind, a data driven analysis, and can lead to unanticipated findings (Brown & Clarke, 2006). The research question and topic guide of the research formed the basis of the deductive approach, however not only the literal terms where used in the deductive coding, the researcher tried to stay closer to the data by also adding more contextual data to the code, some examples can be found below.

Table 4: Deductive codes example

Simultaneously to the deductive coding, an open mind was kept to pieces of information that might very well be relevant but had not occurred to the researcher when starting collecting data. These codes have more description to them, an example can be found in the next table.

Key NGO Resource - Local Knowledge NGO process - Assess value chains Traditional Business Model - Sponsorship

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Table 5: Inductive codes example

The coding for relevant text lead to a list of 524 codes. The next step was to cluster repeating ideas, that process resulted in 78 clusters and subsequently seek themes amongst the repeating ideas are identified, resulting in 30 themes. Themes are “groups of repeating ideas that have something in common” (Auerbach & Silverstein, 2003, p. 38). These themes where then clustered on a higher abstract level into theoretical constructs which where then described in a theoretical narrative, a summary and story of what the data tells us (Auerbach & Silverstein, 2003). This theoretical narrative should provide answers to the different research questions. An abstract grounded in the collected data that provides rich insights that answers the research questions and so leads to theory. The results of this process are described in detail in the ‘results’ section.

Barrier - corruption leads to passive corporate behavior regarding proper CSR

Corporate foundations are becoming so powerful that small and medium NGOs might not be able to meet their standards

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6. Results

In the following sections the results of the qualitative research through interviews will be presented. The results are structured in a chronological order. First findings regarding the traditional business model are described and split up in the four central elements of the business model regarding NGO – Corporate collaborations. Following the traditional business model, results regarding drivers and barriers impacting business model innovation are described, these drivers and barriers will be the core of the section regarding business model innovation and the level of proactivity in that process that follows the drivers and barriers sections. In paragraph 6.4, after the description of the results of all internal and external drivers and barriers, a graphical representation of the results regarding drivers and barriers is presented. Subsequently, possible innovations in the business model resulting from those drivers and their relation towards other business models are described. Finally the impact of these developments on the extent of growth of number of NGO – Corporate collaborations are elaborated on. It this results section quotes from interviews will be used, in multiple cases these quotes have been translated from Dutch.

6.1 Traditional business model

In the results a broad consensus between the various interviewees exists on the main traditional business model of NGOs regarding NGO – Corporate collaborations. The business model that this type of partnership is built on can best be described as philanthropy. Reactions to the question to describe the traditional business model were for almost all interviews similar to the following quote:

“It is philanthropy, so knocking on the door of a business to ask to sponsor an event or to get some money for a project in the field.“ In 12 out of the 15 interviews traditional fundraising or

philanthropic giving was said to be the standard model. Several elements within this type of business model exist and with it come different sub value propositions, processes and resources, the important ones will be discussed.

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6.1.1. Value proposition

Firms are looking for ways to increase their brand image or to show to their stakeholders that they are a responsible company. This mainly marketing related source of philanthropic giving can be distilled from 12 of the 15 interviews. “It is a lot of marketing and less about really changing

situations on the ground” is a quote in line with many others. Marketing and brand image is also

close to risk mitigation. One participant stated in relation to this: “The kind of collaboration is going

through a CSR angle, which does not really have a direct impact on the business but do have an impact in terms of reputation, visibility and mitigating some risks.” Risk mitigation related to brand,

image and marketing is a theme that was mentioned in 8 of the 15 interviews. Employee engagement is another frequently heard reason, in 7 out of 15 interviews, that firms want to collaborate with NGOs as it helps create a shared feeling of belonging and responsibility for the firm’s staff that results in higher employee motivation. The job to be done for firms is making sure they look good to the general public and their stakeholders, including their staff. The traditional value proposition that NGOs deliver to these firms has different shapes. Firstly, the NGO reputation and logo are an important element, secondly, good projects to support that match the demands of the firms and, lastly, good communication materials for the firm to use are essential in fulfilling the job to be done.

6.1.2. Key Processes

As in a traditional sense the NGO and the corporate have very different roles: the NGO is the ‘watch dog’ with a goal to protect people or promote their rights, whereas for the business the goal is to maximize its value. They have long been ‘enemies’. “The core business of a firm is to have a positive

business case, not to rescue children.” One of the core activities or processes of NGOs was pressuring

firms and increasing their awareness about what they are doing that might harm their environment or societies they are active in. In 6 interviews it was clearly stated that the firm, in a traditional sense, is the enemy of the NGO or “the devil”. The pressuring is done through advocacy and awareness activities and 11 interviewees mentioned this as a key process in the relation to the corporate sector.

A case study on proactive NGO business model innovation resulting from increased private sector engagement