This case study describes a social enterprise, which considers whether a for-profit model is a better approach to scale its impact. La Vaca Independiente (The Independent Cow) was established to bring art to underprivileged children. La Vaca Independiente solely focused on an initiative called Developing Intelligence through Art (DIA), which uses art as a stimulus for further thought and hence providing individuals with opportunities to develop meaning in their lives.
Chris Laszlo; Anya Briggs
Case Western/Ivey (9B13C033)
Case questions answered:
- The overall problem here is whether La Vaca Independiente should remain a nonprofit or become a for-profit organization. Make your consulting recommendation and back it up.
- How should they proceed forward in either case?
- If they remain a nonprofit, how can they become more sustainable as a business? (not sustainability)
- What are the marketing perspectives of this situation?
- What are they losing if they go for a for-profit model?
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Case answers for La Vaca Independiente: Should a Social Enterprise Adopt a For-Profit Business Model?
Executive Summary – La Vaca Independiente: Should a Social Enterprise Adopt a For-Profit Business Model?
In this report, we provide business recommendations to La Vaca Independiente to help decide if you should keep your current nonprofit business model or if you should restructure and become a for-profit entity. We discuss the current situation of La Vaca Independiente, an overview of social enterprises with a comparison between nonprofit and for-profit organizations, and the business model for entering the for-profit sector.
Overview of Social Enterprises
This section provides an overview of social enterprises. We discuss some of the benefits and drawbacks of being a social enterprise. We discuss the government regulations that have to be followed as well as the sentiment of consumers of the products and services of social enterprises. It is in this section that we recommend that La Vaca Independiente should venture into both sectors (nonprofit and for-profit) by splitting current programs. This will help La Vaca maximize the benefits and minimize the drawbacks discussed in this section.
In this section, we introduce the current situation of La Vaca Independiente. La Vaca has been in operation since 1992 with the mission of incorporating art into the lives of children. Since its creation in 1992, La Vaca has flourished and developed a specific program, Developing Intelligence through Art (DIA). It now faces the question of how to expand the vision and whether it should change its business model from a nonprofit to a for-profit organization.
In this section, we explain our detailed reasoning behind our belief that La Vaca Independiente should split into two different companies. You should keep the nonprofit organization focused on the education sector with programs like DIA that benefit students, teachers, and principals. Any new venture should go through the for-profit sector.
Business Model for Entering the For-Profit Sector
We describe what steps La Vaca Independiente needs to take in order to enter the for-profit sector. This includes a mission statement, background and structure decisions, market analysis, competitive analysis, marketing, and sales decisions, and operations and financial plans. We also discuss other areas that La Vaca could benefit from by splitting into two business models.
We summarize the key points discussed in this report. La Vaca will benefit in splitting into 2 business models, nonprofit and for-profit. This will allow La Vaca to be able to focus its initial initiative (DIA) in the school systems through the nonprofit sector and be able to venture into new avenues through the for-profit sector. By doing this, La Vaca will be able to minimize risk and maximize the benefits associated with both sectors.
Overview of Social Enterprises
In today’s world, social enterprises have to either choose to be charitable nonprofit organizations or be a money-making, for-profit company. This choice often proves to be a difficult one as each of these have their own positive benefits as well as negative drawbacks. Even though a for-profit company is doing excellent work socially, the donors are a little hesitant to make contributions under the pretext if their complete donation amount will be put to actual use or would be just utilized to fill in the pockets of the higher management of the for-profit company. It prevents them from receiving the grants and donations even when they have a very strong social mission. Whereas, when the same work is done by a nonprofit organization, everyone tends to give with open hands.
When it comes to for-profit companies, they don’t have to follow as many regulations when they want to use their extra profits for the good of the community. They are using their own money and helping society so no one raises any questions on their way of contributing and it gives the company complete flexibility on how they want to accomplish a social task.
In a nonprofit organization, the organization is forced to maintain transparency in everything they do. The contributors keep a keen key in their activities and if something is unclear, they pull back and donate to another organization. The nonprofit organization cannot maintain complete flexibility and independence in its operations to help society.
In our analysis of this case on the La Vaca Independiente, we strongly feel that any organization cannot reap all the benefits if they stick to a single model. This is the main reason why we recommend that La Vaca Independiente split into a nonprofit and a for-profit company in order to maximize their benefits and minimize the drawbacks.
La Vaca Independiente (The Independent Cow) was founded in 1992 with the mission of incorporating art into underprivileged children’s lives through publishing and art exhibits. After two years, this enterprise started a program called Developing Intelligence through Art (DIA) which focused on introducing art into the classroom to encourage discussion of personal experiences and global issues. The program had a large impact on everyone involved including the teachers and principals and encouraged everyone to find the inner motivation that will help them to gain purpose and a sense of being valued. The major outcomes for students are communication skills, cognitive ability, emotional insight, and social skills.
By 1998, DIA was in 400 schools in Mexico City and Monterrey. La Vaca Independiente consulted Educational Tanesque to determine the effectiveness of the DIA program and found that it was making a difference in the four above-listed areas but it wasn’t meeting its full potential. La Vaca saw an opportunity to better enable the teachers to lead these discussions.
They began to hold training sessions in the DIA format so the teachers could better understand their students’ needs and practice how to effectively lead discussions in the classroom. The training sessions also involved principals attending the teachers’ trainings, attending their own training, evaluating teachers, and collaborating with other principals to share ideas. By 2007, they published a training manual that helps teachers understand the purpose of the program and helps to get them started. DIA continues to expand to new locations, train new teachers, and have an impact on more students.
La Vaca is now faced with the decision of remaining a nonprofit or moving toward a for-profit model in order to have a larger impact and a broader business model. Should La Vaca Independiente become profitable, they need to decide if they should…