Hybrid Value Chain Framework
What is a Hybrid Value Chain?
Hybrid Value Chain (HVC) is a new operating framework for transforming markets by leveraging the strengths of business and social actors. HVCs spread across the economic spectrum and represent a systemic change in the way business and CSOs interact. They are collaborations that redefine value in game-changing ways, with each side clearly understanding (and willingly accepting) the risks and rewards. Read more about it here
Why Hybrid Value Chains?
HVCs are designed to generate win-win alliances, authentic value propositions and multi-faceted returns on investment.
Hybrid Value Chains: The 4 criteria
Hybrid value chains have the potential to transform industries and to create new ones. They should meet these criteria:
The business has the potential to be large in scale and to cross borders. The best HVCs will have enormous impact, not only on a company’s bottom line but on millions of lives.
For-profits and social entrepreneurs work together to create multiple kinds of value. Companies and CSOs capitalize on their particular areas of expertise to deliver a valuable product or service that neither partner could provide on its own.
Consumers—broadly defined—pay for the product or service. This is not charity work or a CSR project. Sustainability and scalability rest on profitability.
A “system changing” idea can provide the basis for new competition. Successful HVCs will not only break new territory in terms of untapped markets, but their presence will ultimately foster an environment where others strive to replicate their models.
Win-Win-Win: The Return On Investment
Businesses that enter into HVCs can expect three returns to their investment.
|Financial : Because HVCs expand or create markets, they unleash opportunities for growth and profitability. Research by Ashoka and consulting firm Hystra estimates that a exist. Moreover, if a business can construct an HVC to profitably serve those needs, it may well be possible and strategic to provide those services to middle-income consumers as well.|
Knowledge : Companies that pioneer HVCs will run up the learning curve, leaving competitors in their wake. As HVC participants learn through their experiences, they will be able to transfer their new knowledge to different environments, leading them to higher performance than competitors who fail to embrace this new way or working.
|Talent : Participating in HVCs will help companies attract and retain talent. HVCs require entrepreneurs who can spot opportunities and devise creative solutions. They therefore give companies the chance to identify and encourage talented leaders in their ranks. They will also attract progressive thinkers and increase commitment to the firm because working on this new frontier of business is exciting, socially relevant, and challenging|
|HCV IN ACTION|
|Sector Challenge : Less than 7% of Mexico's population has life insurance, and the majority of the uninsured live in widely-scattered, indigenous communities where access to affordable insurance does not exist. Costs associated with a wage-earning relative's death can be financially devastating for members of these communities.||HVC Insight : Zurich & AMUCSS were instrumental in creating the demand for insurance in these markets, which helps to ease the financial burden of funeral costs and reduced household incomes of many already impoverished families. Zurich Financial Services, in its partnership with AMUCSS, sells affordable insurance policies to underserved communities in rural Mexico, for which it assumes financial risk. The Mexican Association of Social Sector Credit Unions (AMUCSS) provides on- the-ground know- how and distribution networks for its partnership with Zurich.||Transformative Impact : This sustainable, low-cost, high-volume model created by the collaboration between AMUCSS & Zurich has created a new standard in the rural micro-insurance sector. The model has been so successful (50,000 policies sold in 2009) that Zurich plans to utilize it to introduce other mass-market products in the coming years that will benefit the rural, underserved communities. Others are starting to emulate the model and tap into the uninsured market of approximately 56 million Mexicans, most of whom are from low-income segments – representing a potential market of $2 billion in annual sales|