Design Thinking is a powerful exercise to understand, articulate, and test the customer problem and potential solutions. Design Thinking brings clarity to what product or service you should build, for whom, and why. This module familiarizes you with the elements of the step-by-step Design Thinking process.

This module will cover the following topics:

1. Moving From Idea to Action
2. Social Enterprise
3. Following the Seven Step Design Thinking Process

By the end of this module, you will be able to:

• Identify the elements of social enterprise
• Articulate venture ideas using the Design Thinking process

Section A: Moving From Idea to Action

Motivations

Before getting too far into developing and testing a new idea, you should reaffirm your motivation, and that of your potential co-founders, in spending time on this new venture.

There are no wrong answers, but it’s important to be honest and authentic about your answers so everyone has the same expectations going forward.

Other questions from Courtney Reum include:

• What makes you unique?
• Why you and your team?
• Why now as opposed to anytime in the past?

These questions will later inform both your sales and investment deck.
(See [Module 2.4 Presentations Pitches] for more info)

Building a New Venture Step-by-Step

This step-by-step process outlines the launch of a new venture. Depending on the idea, product/service, team and customer, this process can take anywhere from two months to nine months.

1. Defining motivations and objectives of the new venture
2. Ideation using Design Thinking – Covered in 1.3
3. Develop customer profiles – Covered in Start 2.2
4. Customer development interviews – Covered in module 2.3
5. Business Model Canvas – Covered in Start 2.5
6. Building the Minimal Viable Product – Covered in module 3.1
7. Getting early users and customers – Covered in module 2.3

Incorporation

Incorporation represents an important step, but once formed a corporation takes a lot of work to maintain. You need to complete your business registration, file taxes and maintain accounting and legal records. Delaying incorporation works for two reasons:

1. You don’t need a legal corporate entity to plan, validate, talk to potential customers, or put together a quick prototype to test things out.
2. What if you try to validate the idea and it doesn’t fly? Now you’re stuck with a corporation to maintain, and for which you need to file taxes.

Section B: Social Enterprise – An Idea to Consider

What is a Social Enterprise?

A social enterprise can be many things – the term often refers to businesses or non-profit corporations that use market mechanisms to achieve a social mission. Social enterprises may include the following qualities:

• Organizations that apply commercial strategies to solve a problem in areas of social, environmental or financial well-being (Centre for Social Enterprise, 2020)
• Organizations that can be structured as a for-profit or non-profit
• They may set both business and social goals
• They may be created to further social changes
• Social enterprises have social objectives as their primary purpose. They may seek to earn profits while maximizing benefits to society. Profits, in this kind of organization, may fund social programs (Barone, 2020)

Non-Profit and For-Profit

A non-profit organization (NPO) is a non-business entity whose purpose furthers or fulfills a social cause. Non-profits can generate income in order to maintain operations, but making money is not their primary purpose. Any extra revenue is used for their social cause and not distributed to shareholders, executives, etc. In many jurisdictions, non-profits are tax exempt and often resemble charitable organizations, such as the World Wildlife Fund (WWF) and Amnesty International. Non-profits can also include private foundations such as The Bill and Melinda Gates Foundation.

A for-profit business or organization, of course, generates a profit. Although opposite to a traditional social enterprise, for-profit social enterprises can and do exist. For example, a for-profit social enterprise’s main goal may still be to earn money, but its core mission and values aim to make a positive social impact in society. A company could have a social impact ideology from the start, or existing companies can transition to becoming socially aware over time. The for-profit organization model has grown in popularity in recent years. For example, many tech companies in Silicon Valley have adopted a for-profit social enterprise model.

For example, Change.org, a multi-million dollar company, allows users to create campaigns to mobilize supporters around issues they care about. Pigeonly uses Voice over Internet Protocol (VOIP) to help prisoners communicate with their loved ones and send photos inexpensively.

How do they work?

Since social enterprises do not operate like a purely for-profit organization, it can be difficult to raise funds to achieve their goals. Many rely on donations from the public or from foundations to continue to operate. Those revenues, however, may not meet the organization’s needs, and many social enterprises must diversify their fundraising. For example, some organizations will garner income through government grants; social enterprises may also seek sponsorship from corporations (Socap Digital, 2017). As well, a non-profit may charge fees for its services, or even sell merchandise to generate income.

Challenges Social Enterprises Face

1. Inconsistent access to capital: Social enterprises rely on funding through various avenues such as donations and government grants. This is not guaranteed income as governments may cut funding to their grant programs. Additionally, donations can fluctuate, and funding may fall short of sustainable levels.(Forbes, 2018).
2. Alignment with investors: The people or organizations who provide financial support can influence a social enterprise’s goals. A social enterprise may feel pressured to follow their investors’ goals, which might clash with the mission of the social enterprise. And, if the organization balks at what their investors want, it may risk losing funding.
3. Non-transparent reporting: A social enterprise is not easy to run and some might say they can be even more difficult to manage than a traditional business. How the organization chooses to report on its activities and outcomes can often influence the continued support and advancement of a social enterprise and its mission. If the organization or a particular project does not show quick results the enterprise may be seen to have failed; that, in turn, may impair donations. On the other hand, if the organization over-inflates its successes, it may later get embroiled in a scandal that damages its reputation. Societal changes take time, and unexpected circumstances can arise. Reports that fail to show results, whether or not it’s due to unforeseen circumstances, can greatly affect whether the social enterprise will receive and maintain support. (Pebblemag, 2017).
4. Retaining social purpose: The purpose of a social enterprise can go astray over time. Changes in leadership and influence from external factors are two reasons that the purpose can drift from the original intent. Social enterprises need to have clear missions, and plan consistently to succeed. Changes to plan execution will happen over time, but the organization’s overall goals should not change.

Types of Social Enterprises

There are numerous types of social enterprises with various goals. Some common social enterprises include:

1. Charities
2. Non-Governmental Organization (NGO)
3. Community organizations
4. One for one/Donate Portion of Proceeds Model

Charities

Although charities and non-profit organizations differ in terms of structure and tax treatment. As the definition and rules of a charity vary from country to country, we will only discuss what defines a charity in Canada. According to the Canada Revenue Agency (CRA):

“charities are charitable organizations, public or private foundations that are created and resident in Canada and must use their resources for charitable activities and have charitable purposes that fit into one or more of the following categories:

• The relief of poverty (i.e. food banks)
• The advancement of education (i.e. colleges, universities)
• The advancement of religion (i.e. places of worship)
• Other purposes that benefit the community (i.e. libraries, animal shelters)”

Charities must be registered and provide donation receipts in order be free of income tax. It is important to note that if an organization operates as a charity, whether registered or not, it cannot be considered a non-profit organization.

Non-Governmental Organizations (NGOs)

An NGO is a non-profit entity that functions independently of the government. NGOs can be set up to fulfil political and/or social causes. The organization’s size and scale can range from a local community effort to an international organization, and can be staffed by volunteers or paid employees. The World Bank differentiates “operational NGOs” from “advocacy NGOs”. Operational NGOs tend to focus on development projects, such as building wells and irrigation systems in countries with little access to clean water. Advocacy NGOs, on the other hand, promote particular causes such as human rights. (See Future Learn for more discussion of the types of NGO organizations.)

Like many social enterprises, NGOs rely on many different avenues of resources to fund their organization. Some of these resources include grants, membership dues, donations and revenue from goods/services.

Some well known NGOs include:

• The Red Cross
• Unicef
• The World Wildlife Fund (WWF)
• Save the Children
• Amnesty International

Community Organizations

Community organizations are made up of citizens in a community who come together to address a social problem within their local area, such as helping to provide resources and housing for the homeless. Community organizations can collaborate with the government and private entities to achieve their objectives. (Future Learn)

One-for-one/Donation of Proceeds Model

The “one-for-one” model is popular with many companies, and for some, it defines their company brand. TOMS for instance provides a pair of shoes to a child in Ethiopia for every pair purchased. Canadian company, Tentree, has a similar model that plants trees in return for particular purchases. The “donation of proceeds” model donates a portion of proceeds to a charity or some other organization. For example McDonald’s donates ten cents from every Happy Meal to its Ronald McDonald House organization, a non-profit that “supports programs that directly improve the health and wellbeing of children.” (Future Learn)

Examples of Social Enterprises

Rootworks is a not-for-profit organization that provides drinking water to areas susceptible to drought in Somalia and Ethiopia. Rootworks was part of the Brilliant Catalyst in 2018 and since then has made a documentary called The Water Project to help raise funds to build sand dams in east Africa. Rootworks has also partnered with Excellent Development, a non-profit that builds sand dams, and the American Relief Agency for the Horn of Africa.

Visit Rootworks: https://rootworks.org/whywater

Enactus, a not-for-profit community of students, academic and business leaders from around the world, uses social entrepreneurship to improve the lives of people in their community and/or abroad. Enactus teams are established in over 1700 campuses globally, helping more than 1.3 million people through each team’s social enterprises.

Start Your Own Social Enterprise

Social entrepreneurship begins with an idea that would bring positive change to society. Everyone has ideas that could change the world; what separates a social entrepreneur from others is action. A social entrepreneur refuses to think of themselves as just an “ordinary person”, without the potential to do good. They understand that anyone can be a leader and achieve their goals.

Before starting a social enterprise, you should:

1. Have some knowledge in the area/problem you are trying to solve
2. Have a plan and alternatives for what you want to achieve
3. Have realistic expectations
4. Have a method of determining the impact of your efforts
5. Form the right team to work with
6. Improve your financial literacy

Section C: Following the Seven Step Design Thinking Process

Review the linked resource on Design Thinking by Jennifer Nichols and Niamh Wallace.

If you are at the stage to begin designing, please record your responses to the questions and prompts through the seven Design Thinking steps.

Notice / Understand

The “Notice” or “Understand” stage comes at the start of the seven step Design Thinking process. Before starting to empathize with your user, it is important to recognize and understand who you are, who your user is, and how you are both connected.

Take this time to ask a few questions about the industry, organization or individual that you are solving a problem for. What are the goals of your stakeholder? What is the background or origin of the problem? Has a solution to the problem been implemented before?

This stage focuses primarily on surface-level research, while the Empathize stage focuses on gaining a deeper understanding of the problem being solved and how that problem impacts your stakeholders.

Empathize

During the ‘Empathize’ step you are trying to gain an empathic understanding of the problem you are trying to solve and an initial understanding of who you are trying to solve it for. Try to put yourself in your customer’s shoes, especially on an emotional level. What kind of problems do they have and how do they feel about those problems? How do these problems fit into their everyday life and why do these problems exist? The ‘Empathize’ step will also help inform your customer profile in the next module.

Tenille Spencer, Sinan Mohsin, and Hanna Haponenko discuss the importance of empathizing with your customer or user while designing and developing your product or service.

To help guide the ‘Empathize’ step, frame your understanding of the problem and the customer around:

1. What does the customer say about the problem?
2. What does the customer think about the problem?
3. What does the customer do about the problem?
4. What does the customer feel about the problem?

Define

Now you need to clearly define a single problem to focus on. When defining the problem statement you should:

1. Identify the gap between the current state of reality (problem) and the desired state (end goal).
2. Frame the problem from the customer’s perspective – not from your solution’s perspective – by answering the four “W’s”:
   1. Who is experiencing the problem?
   2. What is the problem?
   3. Where does the problem present itself?
   4. Why does it matter? (Why is it important that this problem be solved?)

The answer that comes out of the ‘Define’ step will inform the value proposition section of the Business Model Canvas.

Ideate

During the ‘Ideate’ step you will generate different ideas for solutions that could be created to solve the customer problem.

As a word of caution, this step is ONLY for brainstorming and not to define the actual product.

During modules [2.2 Validation] and [2.3 Customer Interviews] we will explore options for what the minimum viable product (MVP) should look like.

Essentially, the ‘Ideate’ stage is an opportunity for free thinking exercises to question assumptions of what a solution COULD look like. During this stage you want to explore all options for potential solutions regardless of how silly or unlikely they could be.

Prototype

Pick one of your potential solution ideas from the ‘Ideate’ step and scale it down into a potential prototype that COULD be tested with users. To stress test the prototype, it’s important that it actually solves the problem for the customer defined in the ‘Empathize’ and ‘Define’ stages.

Test

At the testing stage you take the developed prototype to test with users. This activity is beyond the scope of this module, but will be touched on in future modules.

Reflect

Design Thinking is an iterative process, which arguably makes reflection the most important stage in the process. After you have tested your solution with users, take some time to reflect on the process as a whole.

Quiz