GROWTH/REPLICATION
STRATEGIES
Long-term growth is the objective of most organisations. For
commercial businesses, the goal is incremental economic profit; for a social enterprise that has proved its social impact model and has achieved sustainability, the goal is an enhanced triple bottom line (social, environmental and financial returns), with the emphasis on more impact rather than more financial reward. Long term growth is often referred to as replication in the social enterprise sector, because it often involves taking a tried and tested model and replicating it in a new market, either in a new geographic area or for a new set of stakeholders (beneficiaries / customers).
Replication will involve extending and/or adapting your business model somehow. This part of the toolkit sets out a high level framework for thinking about how best to do this:
Step 1: market, organisational and entrepreneur analysis
The first step to take is to
determine whether the opportunity for replication is real and whether you and your organisation are ready. For the new market you are considering, try to develop a clear, evidence-based understanding of the following:
- What is the need and what is the size of the new market? How well can our current business model / operations address that need?
- Are there any obvious paying customers? How easy will it be to build relationships with them?
- Who would we be competing with?
- What other barriers to entry exist in the new market?
These types of questions are the same ones that you will have asked yourself during the start up phase of your enterprise, highlighting the cyclical nature of replication planning.
As well as thinking about the market, it is important to think about whether your organisation is ready for replication.
Step 2: identify the ‘magic’ in your business model
Next we recommend you take some time to work out and articulate clearly your critical success factors, i.e. the ‘assets’ within your organisation that have enabled you to succeed with your initial pilot and helped you reach sustainability. Whilst you may start with a fairly long list of such assets, it will be important to identify the most important ones that have driven your success. To prioritise, think about questions such as:
Some examples of typical assets are given in the table below:
- Complexity: how difficult would it be to re-create the asset
organically (i.e. from scratch)? Will core elements of this asset be as effective in different contexts / markets?
- Uniqueness: how easy would it be to find the asset elsewhere?
- Ongoing maintenance: how much effort is required to maintain the
value of the asset over time?
- Ease of communication: how easily can assets be communicated to
ASSET EXAMPLES Information/Knowledge • Industry and market research; competitor analysis • Business/financial plans • Marketing techniques • Key operating and performance process Skills/capabilites • Critical ‘in-house’ qualification or certification required for legal or reputational reasons • Key expertise required to engage within the organisation’s market successfully • Key expertise required for internal operations to run efficiently and smoothly
Intellectual property • Brand name/trademark
• Market reputation (organisational or personal) • Technology IP (internal or external use)
Physical infrastructure • Buildings • Equipment • Fixtures and fittings Relationships • Customers • Suppliers • Funders • Partners and allies • Internal (i.e. organisational culture) • Government/political
Step 3: select your replication model
There are various forms of replication model; they broadly fall into the following three forms:
- Wholly-owned growth: new sites, outlets or branches are 100%
owned and controlled by the original organisation. Additional staff, for example, would all be employees of the original organisation. External groups – if they are involved – have no ownership of (or responsibility for) the additional growth.
- Affiliations: on-going relationships with third parties are used to
spread the reach of the organisation to new markets / locations. Whilst delivery in the new market will be the responsibility of the affiliate, the original organisation will support through transfer of its key assets (in return for financial compensation and / or a
These questions will help lead you (at the highest level) to the right replication model for you to consider:
reciprocal benefit). Affiliations range from the tight and formal to the relatively flexible. Examples include franchising/licensing, joint ventures or partnership agreements.
- Dissemination:
t
his replication model is characterised by the original organisation sharing or exchanging their information or best practices openly to others in its network, in the hope that it will be taken up and implemented in a new market. The relationship with the network is likely to be informal and loosely structured. Any financial relationships are short term and ad hoc.Having identified your critical success factors in the previous step, your choice of replication model will depend on a mixture of personal and business-based issues.
- First ask yourself whether you, the entrepreneur, (a) needs or (b) wants to be involved in the replication. The answer to (a) should be driven by your considerations of the critical success factors; for many young enterprises, many of the critical success factors will be found in the experience, vision, relationships and passion of the entrepreneur. You will need to think about whether / how those elements can be separated from you as an individual (i.e. is it practical to assume that can someone else build on them further?). Also, don’t forget the more personal consideration (b). Replication will involve many changes for you personally in terms of your ability to oversee the whole organisation and will create pressures on you to delegate and trust in the delivery by others.
- Next ask yourself how critical it is to have others involved in the replication? This comes back to your market analysis earlier, and is about thinking about the skills, capabilities, networks and expertise that you don’t have and that are critical to success in the new
market. In many cases, working with a partner may be the most effective way to fill those gaps.
Step 4: select your replication model
Now that you’ve worked out your critical success factors / assets and the replication model you will use, the final step is to determine the
appropriate transfer mechanism to ensure that the replicated operation has access to and benefits from those critical success factors. The table below summarises some typical types of transfer mechanism.
As the table and arrows show, more complex assets are more likely to require transfer mechanisms towards the right which require more direct involvement and intervention by the entrepreneur / original organisation. Your choice of transfer mechanism should also be driven by your choice of replication model. For example, written materials will be most aligned with the dissemination model, where there is no day-to-day involvement of the entrepreneur in the replicated entity. Similarly at the other end of the scale, you would expect to see direct engagement of the entrepreneur in the case of wholly owned replication. Transfer mechanisms such as training, consulting and secondment are good transfer mechanisms in cases where you are replicating in partnership with an affiliate (there may be a case for such advisory services to be remunerated).
Books, writt en ma terials Tr aining C onsultancy Sec ondment Entr epr eneur manages or implements as set tr ansf er Entr epr eneur r etains the as set M ost a pplic able to ‘static’ inf orm ation, kn ow ledge an d ba sic s kill s. M ay be us ed in con jun ction with an oth er tran sf er m ech ani sm (e .g . doc um ents to s upport a trainin g por gramm e). Vario us trainin g m eth od s av ail able , e .g . cl assr oom-st yle less on s; ca se studies; w ork sh ops; etc. Th e entr epr en eur or th e or gani sation’ s senior staff act a s advi sors to th e ne w or gani sation in ar ea s w her e dir ect ly tran sf errin g th e skill m ay n ot be appr opri ate or m ay be too cost ly . A pers on fr om th e ne w or gani sation s pen ds tim e with origin al or gani sation to le arn s pecific s kill s, un derstan d pr oc ess es an d/ or b uild rel ation shi ps with staff . Entr epr en eur is res pon si ble for a ss et tran sf er . Entr epr en eur m an ages an d ov ers ees a ction s of staff in th e ne w or gani sation, or cr eates th e ass et within th e or gani sation. com ple x/h ar d to-fin d-replic ate or v al ua ble ass ets. Th e origin al or gani sation pr ovides th e pr oduct or servic e as a ‘s upplier ’ to th e ne w or gani sation.
