Introduction to Key Terms: Business Model, Business Ecosystem, and Transactions

During the course of the two grants mentioned in my introductory post, our project team convened numerous “stakeholder sessions” across Northeast Ohio in an effort to encourage participants to generate business ideas and use the tools we offered to build them into business cases. In a pattern that repeated itself several times, attendees would have exciting ideas for businesses that played into their skills and captivated their interest in the session, but died along with the conversations after the meetings were over.

A likely reason for the high drop-off is the result of having given thoughtful consideration to the question, “How can I make a profit with my idea?” Or another way to ask the question is “How can I sell the value I deliver for a price that covers the expense I incur for delivering that value and have extra left over as a reward for me taking the risk and succeeding? The answer to that question is a business model. And if I can’t come up with a business model that fits with my idea, then I can’t make a case for it. Simple.

How could so many innovative and compelling ideas raised during the stakeholder sessions not find compatible business models to see them through to start-up? No doubt, there are several contributing factors to this outcome, not the least, of which, is that many of the ideas, which sounded good when first given voice, just didn’t pass muster under closer scrutiny. But what we also found is that how wide the net a person casts to vet an idea with others defines in large degree whether the idea continues toward fruition or dies on the vine.

In effect, almost any idea has the potential to connect with a social network of the countless, nameless many who represent all walks of life and all manner of means, and garner sufficient support to forge the idea into a full-fledged business. It is an application of Barry Commoner’s First Law of Ecology— “Everything is connected to everything else”— to commerce. The result is a business ecosystem.

From this perspective, a business ecosystem encompasses and interconnects all resources and assets as well as all participants be they customers, owners, employees, investors, suppliers, advocates, etc. Given this, how one draws the boundaries for a business ecosystem, defines who participates, and then positions an idea into it, influences the development of viable business models. The more expansive and inclusive the business ecosystem, the more options there are for a serviceable business model to ensue.

This raises the question, “Why do the qualities of expansiveness and inclusiveness contribute to more clarity rather than more chaos?” We found that, as in a natural ecosystem, the business counterpart thrives on an abundance of flows. Only instead of water, air, nutrients, etc., the flows in commerce consist of inputs, outputs, information, and know-how. And when these flows converge at specific points in time and space, an exchange of value, or transaction, occurs using an agreed to medium of exchange.

A business model organizes transactions so that “I sell the value I deliver for a price that covers the expense I incur for delivering that value and have extra left over as a reward for me taking the risk and succeeding.” More participants, more flows, more mediums of exchange, more value generated in a business ecosystem drive more transactions and, with them, greater odds that a business model will surface that develops a worthy idea into a successful business.

With these three terms as tags, look for future postings related to them that appeal to our grant experiences…

Originally posted to Sustainable Local Economic Development by Steve Bosserman on Monday, August 6, 2012

Introduction to Sustainable Local Economic Development

Since 2008, I have been actively involved as a Co-Principal Investigator on a 3-year USDA-Specialty Crop Research Initiative, Regional Partnerships for Innovation grant awarded in September 2008 and back-to-back 1-year grants from the Fund For Our Economic Future (FFEF) in 2009-2010 and 2010-2011. These grants complemented one another. The USDA grant sought, in part, to develop a social networking infrastructure —LocalFoodSystems.org — for connectivity and collaboration that would inspire participation in agriculture localization. The FFEF grants focused on providing social networking participants with templates, processes, and tools necessary to catalyze significant entrepreneurial activity through increased localization within a regional agriculture-bioscience industry cluster.

During this 4-year period, I posted to blogsites, created websites, tested platforms and applications, prepared presentations, provided coaching, and contributed to papers and proposals all related to the themes of these two grants. Most of the information generated unfolded chronologically and addressed particular topics of interest in the moment. Furthermore, it was made available through the media that best supported the message being delivered to specific audiences. This led to a general mishmash of material with wide variations in timing, theme, track, and target making it difficult for those who may have an interest to consider what I tried, why I did it the way I did, what happened as a result, and what I learned along the way.

To address this shortfall, put a final wrap on the grants, and move my thinking into new areas of interest, I will begin a series of postings under the heading of Sustainable Local Economic Development that recasts my work in a more searchable framework. As with this introduction, these postings will appear on Blogger with links to the Sustainable Local Economic Development group on LocalFoodSystems.org (LFS) — you may need to join LFS (free) in order to view posts linked to it — Tumblr, Slideshare, and Scoop.it and announcements to Steve Bosserman on Twitter.

To help organize the information in the postings and maintain consistency in the framework, I will apply one or more of the following tags to each entry:

  • organization dynamics
  • business ecosystems
  • food systems
  • localization
  • local economy
  • mapping
  • business case
  • work space
  • market network
  • business model
  • governance
  • self-reliance
  • transactions
  • community investment portfolio
  • project management

I welcome your feedback about any of the postings as well as input on the tagging convention. This is a complex, yet very important subject about which there are few absolutes and far more questions than answers. The more we can learn together from our different experiences with sustainable local economic development through these media, the more valuable the outcomes. Thanks in advance for your interest and consideration.

Originally posted to Sustainable Local Economic Development by Steve Bosserman on Sunday, August 5, 2012

Rules and Choices for a Sustainable Local Economy

Economies are social systems within which we make choices based on needs, wants, and means. People regulate economies through rules that set taxes, tariffs, fees, standards, licensure, certification, patents, etc. These rules reflect the priorities of the people who enact them through their governance structures be they for small local groups or large global agencies.

The intent of rules is to limit choices in favor of those that produce the desired behavioral outcomes on a consistent basis. Such rules make the economic system more effective (do the right thing) and efficient (do it the right way).

Oftentimes, rules from multiple levels of jurisdiction apply to the same set of choices. For example, cooperatives, municipalities, county, state, and federal offices and agencies, the European Union, the United Nations, professional societies, industry-wide private sector groups all have a hand in defining various regulations to monitor and manage the supply of basic needs such as food, water, energy, fuel, manufactured goods, etc.

Unfortunately, competing or unclear interests behind the rules or insufficient diplomatic moxie to enforce them results in a complex legal and financial landscape in which to make choices. From a business perspective, this dense web of rules becomes a barrier to entry for all but those that have a global market, deep pockets, and easy access to resources to sort through the alternatives, invest in the opportunities, and pay the consequences for any misstep. It also fosters a dependency by people and their communities, neighborhoods, and rural areas on global players to supply them with basic needs. This places communities at risk for survival if supply chains are disrupted whether by natural disasters, climate change, pandemics, fossil fuel shortages, political turmoil, even a down Internet, to mention some of the more obvious.

As explored in the posting, “Business Models for a Local Economy,” the primary purpose of a local economy is to meet the needs of its participants whereas the purpose of the global economy is to satisfy their wants. Such distinctly different purposes result in different rule sets. Governance structures proliferate at all levels to administer rules of the global economy. Far fewer are in place for local economies. However, several types are available. Among these are policy councils, buying clubs, and co-ops for food, family, education, housing, etc.

Governance structures for local economies establish the rules by which members of communities, neighborhoods, and rural areas have more options available so they can choose to meet their needs through local sources. In effect, such “rules management” facilitates “Business Model Development within a Local Economy”, which drives two fundamental “localization” processes:

  • Integration across all value-added steps from the point of consumption back to the points of production
  • Utilization of community assets and resources without reliance on outside funding

The combination of these two processes, under the auspices of a local governance structure, gives interdependent local businesses and support organizations the competitive edge to prevail over their global counterparts when meeting needs of community members. Furthermore, members have opportunities to minimize economic leakage, reinvest their assets, and retain vital resources in the community through an effective portfolio management effort. This collective effort, then, is the foundation for sustainable local economic development.

The diagram below offers another way to view these critical interrelationships.

The integration of value-add steps–a function of rules management–flows from the point of consumption to the points of production, whereas the utilization of community assets and resources–a function of asset management–flows from identification and location to inclusion in an infrastructure project and business case portfolio.

The center of the diagram lists a wide range of professional services required to accomplish the tasks and complete the activities associated with rules management, business ecosystem functionality, and asset management. Social networking and innovation, which characterize asset management, and entrepreneurship and commercialization, which result from rules management, form the backdrop to conduct these transactions.

As the graphic suggests, services are transactions–the lifeblood in social system behavior. Nothing gets done between and among people without transactions. However, some methods and processes require fewer transactions than others. Furthermore, a healthy local economy incurs fewer transaction costs, either internal or external, to meet the needs of its members than a global economy. This is simply because the sustainability of the community is in the hands of those who live there. It’s in their vested interest to manage it. And given the choice to do so, which a vibrant local economy does, members will act on behalf of their collective sustainability.

Community members, represented by the orange-colored background, have the rules in hand to manage the context and the choices available by which they can:

  • Meet their needs
  • Sustain their community for generations to come
  • Assure themselves of a reasonable quality of life
  • Build on a firm foundation to participate, successfully, in the global economy

These outcomes of constitute the primary purpose for a sustainable local economy and the healthy development it catalyzes and encourages.

Originally posted to Sustainable Local Economic Development on Tumblr by Steve Bosserman on Wednesday, September 8, 2010

Metrics for Local Economic Sustainability

Business models within a local economy engage community members, focus on meeting the physiological and safety needs of members, integrate across value-added steps, utilize community assets and resources , and apply output and performance metrics so that community members can keep score.

Although listed last, the significance of applied metrics cannot be overstated since it is through them the functionality, impact, and cost of the organization or cluster of organizations built upon the business model are measured. However, carefully crafted metrics have the capability to expand the business model beyond its basic purpose to drive solvency and sustainability of an organization or cluster of organizations to deepen the resolve to establish a fully functioning local economy, spur creativity and innovation to find business solutions, increase the rate and degree of adaptiveness, and significantly improve the odds of long-term sustainability for the community-at-large. The quality of the metrics, e.g., the relevance of the scorecard, within the framework of a local economy, shape the design of a business model so that the performance of the organization or cluster of organizations achieves these broader objectives. What are these metrics, then?

The graphic below builds on the basic flows of assets and work functions introduced in the posting, “Does Your Community Meet the Needs of Its Members?” The spreadsheet table superimposes traditional and alternative measurement systems across the two flows in order to motivate, track, and compensate progress. These complement the output metrics already identified in the posting.

The interplay between these two systems of metrics is the engine that strengthens and sustains a local economy. Let’s start with output metrics. The purpose of a local economy is to meet the needs, e.g., food, water, energy, housing, etc., of people within a given community, neighborhood, or rural area. The success of a local economy in delivering these needs to local points of consumption is determined by output metrics. For instance, food can be measured in calories, water in gallons, energy in kilowatts, housing in livable units, and so on.

These same output metrics apply to the work functions associated with delivery of a specific need. For example, food preparation, food processing, and food production provide calories, water recycling yields gallons of potable water, deconstruction and repurposing result in units of usable materials, parts, and components, etc. The more efficient these work functions, the more effective they are in delivering needs and the more sustainable the local economy. How to manage and improve work function operations, then, is of considerable importance.

Work functions or work modules are not independent of one another. They are highly integrated value-add steps that span from the point of consumption to the points of production. The key to managing and improving their operation rests in increasing the degree of integration among them. This requires a highly collaborative effort among those who are responsible for carrying out the tasks associated with each step whether they do so under the auspices of separate businesses or support organizations. For this reason, there is a direct association among the roles community members play: holders of the output metric scorecard; “owners” of the work functions; and leaders of work function integration into clusters of for-profit and support entities in their local areas.

Whereas independent agents dominate the play in the global economy, collective responsibility and leadership for meeting community needs rule the day in a sustainable local economy. The challenge is to match the assets and resources in the community with the work function clusters so they have the wherewithal to deliver according to the desired output metrics. The purpose of the community investment portfolio is to match infrastructure projects and work function clusters with assets and resources such that community members are confident the results will justify their investment. Performance metrics through multiple mediums of exchange indicate how well this match is made.

The posting, “Business Model Development within a Local Economy,” illustrates how a business model can “…execute the work functions required to meet needs and keep the organization sustainable.” Or put another way, a business model shows how to utilize all assets and resources in the community without precluding future availability.

The key is to use the assets and resources without changing ownership or without modifying them to where their original purpose is lost to others who might also use them. This is accomplished through various mediums of exchange such as alternative currencies, time banking, carbon credits, renewable energy certificates, and volunteering that provide liquidity of fixed assets, like land, water, facilities, equipment, housing, clothing, materials, etc., so they can be easily committed to the completion of prioritized work functions.

While money / currency remains a principal way to access resources, to buy or have a long term lease agreement limits access by other community members. It also runs the risk that ownership and control of assets and resources transfer to people outside the community. This imposes another set of restrictions on access and use and contributes to economic leakage, which weakens the community’s chances for sustainability. A Sustainable Seattle report, Why Local Linkages Matter: Findings from the Local Food Economy Study, offers an excellent overview about the consequences of economic leakage related to food sourcing choices and ways to return to a more sustainable path.

The commitment of assets and resources is associated with the completion of commissioned work functions. The same mediums of exchange that assure the flow of assets and resources also incentivize people to apply their skills, talents, and wherewithal to the tasks at hand and fulfill what is necessary to meet the needs specified by the output metrics. And, just as purchased assets often blocks the community from further access, employment often limits the person hired from participating in other work functions and the value exchanges presented by mediums of exchange other than money / currency for salary / wage.

A healthy local economy establishes sustainability through two features. First, it enables members of a community, neighborhood, or rural area to invest and reinvest its assets and resources as represented by multiple mediums of exchange into a portfolio of prioritized project and clusters. Second, it incentivizes community members to carry out the tasks associated with the integrated work functions in each project and cluster in the portfolio as they are prioritized and launched. When the combination of utilized assets and executed work functions deliver on the needs of community members the local economy is successful. And when this is done repeatedly, the local economy is sustainable.

Originally posted to Sustainable Local Economic Develop on Tumblr by Steve Bosserman on Monday, September 6, 2010

Business Model Development within a Local Economy

A business model illustrates how an organization or combination of interdependent organizations sustains itself based on certain output metrics.

Furthermore, a business model addresses the basic question of concern by anyone starting or expanding an organization: Is the amount people will pay for the perceived value of the products and services delivered by this organization sufficient to cover its operational expenses and sustain it?

Consideration of this question begins with the posting, Business Models for a Local Economy, which outlined five key characteristics of business models for a local economy. In summary, these are as follows:

  • Universal participation by community members
  • Initial focus on meeting the needs of community members without fail
  • Integration across all value-added steps from the point of consumption back to the points of production
  • Utilization of community assets and resources without reliance on outside funding
  • Application of performance metrics that deepen the resolve to establish a fully functioning local economy, spur creativity and innovation to find business solutions, increase the rate and degree of adaptiveness, and significantly improve the odds of long-term sustainability

The first two have links to previous postings that offer more detail. This post focuses on the two in bolded italics.

The previous posting, “Does Your Community Meet the Needs of Its Members?,” stressed the importance of community members knowing the following:

  • Are any community members hungry; homeless; living in unhealthy and unsafe conditions; or are they confronted with no paid work; illness; limited healthcare, and inadequate life skills to influence their circumstances?
  • How do you and your community keep score on needs met?
  • What are you and other community members doing to impact the scorecard?

The results of this survey assist community members to focus their creative energy on conditions and circumstances that warrant their collective attention. Such an overview enables them to quickly define those opportunity spaces wherein the community has the most to gain. This quickly leads to the development of robust and dynamic business models that undergird the development of business cases for clusters of interdependent businesses and community-based organizations. Those clusters have the potential for significant impact according to the scorecard metrics of the community. Furthermore, when loaded into a portfolio they offer opportunities for members to reinvest in their community and manage the launch and expansion of clusters.

In effect, community members take ownership for their sustainability. To do so entails the development and application of business models that increase community asset utilization while prioritizing the introduction of essential work modules.

The following diagram builds on a basic framework introduced in the previous posting. Both illustrate the flows of work functions and assets required to prepare infrastructure projects and business clusters for launch, provide the means to carry them out, and track results through a system of output metrics. However, the one below describes each flow in more detail and establishes the relationships between them.

In order to add value, an organization solves a problem or meets a need or frequently, does both. As mentioned at the outset, a business model shows how the organization does that and sustains itself.

The problem to solve in a local economy is how to conduct efficient, affordable distribution of needs to the points of consumption or use. The term “last mile” as a descriptor originated in the telecommunications industry during the 1990’s to describe a situation where, despite the relatively short distance (the “last mile”) between mainline fiber optic cables and subscriber homes and businesses, the installation costs prevented connections. In other words, the efficiency of the global economy did not reach into the communities, neighborhoods, and rural areas that lacked the infrastructure to make the connection given the prevailing state of technology. It required the development of another solution, wireless, for instance, to solve the last mile problem.

A similar “last mile” problem exists in the local economy whether it is the delivery of food, energy, housing, education, health care, etc. Organizations execute work modules in each of these that add value throughout the integrated steps of preparation, processing, waste recovery and reinvestment in year-round and cyclical production. But getting those products and services delivered to the point of consumption and assuring their utilization by the vast majority (80-90%) of community members is a challenge. The infrastructure of food carts, commercial kitchens, electric-drive vehicles, battery exchange stations, anaerobic digesters, modularized do-it-yourself (DIY home construction kits), experience-based learning, accessory dwelling units (ADUs) for eldercare / healthcare, etc. is not in place. The local economy is in the same situation as many areas in the U.S. 10-15 years ago when looking for affordable ways to have high-speed Internet access. That last mile can be a killer!

An infrastructure of integrated work modules itemized above solves the last mile problem. It also inspires the development of a long list of potential business and non-profit organizations required to fill the gaps. This is where the assets and resources of the community are brought to bear on interdependent business and support organization clusters so they take shape and continue along their paths to successful start-up and build-up.

The development of a business model or number of interrelated business models guides the association of assets / resources to work modules as they deliver across the last mile to consumers. The purpose of the model is to show how to execute the work functions required to meet needs and keep the organization sustainable. The steps in business model development include the following:

  • Identifying where assets and resources are located in the community (Maps)
  • Aligning the assets and resources so they support the mission of the business cluster in the most efficient and least costly manner (Models)
  • Monitoring what happens during operations of the newly aligned cluster in order to anticipate issues and opportunities before they become crises or target them quickly if they surface unexpectedly (Information)
  • Applying practical experience, theories in practice, and action frameworks through human engagement and embedded intelligence to resolve problems, improve operations, and course correct if appropriate (Know-how)
  • Loading a cluster of interdependent businesses and support organizations required to meet needs, add value, generate revenue, manage costs, and assure sustainability of operations for all involved into a community investment instrument (Portfolio)

The bottom line is that for a business model within a local economy to be effective and sustainable the consumers’ needs must be met; businesses and support organizations must collaborate to contain costs; and the value-added steps from consumption to production must be integrated to conquer the last mile. And there’s one more… The final key characteristic, application of a common set of performance metrics to help community members keep their investments on track, will be addressed in an upcoming post.

More to come…

Originally posted to Sustainable Local Economic Development on Tumblr by Steve Bosserman on Saturday, September 4, 2010

GeoTagging with Google Earth – Put What Your Community Has on the Map!

Every community area has unused and underutilized assets such as vacant lots, empty buildings, blighted properties, discarded equipment, even unrecovered waste in the form of lost heat, materials, by-products, etc. Take your camera phone, snap pics of what you see, and map what’s there. It’s worth more than you may think.

Originally posted to Open for Consideration on Tumblr by Steve Bosserman on September 4, 2010

Does Your Community Meet the Needs of Its Members?

Everyone needs food to eat, water to drink, air to breathe, clothes to wear, a house to live in, and energy to heat and cool it just to survive. And to assure sustainability, add safety, health, and education for good measure. Communities where people live have the same imperative. Either they provide the means by which members can meet their needs or they outsource the responsibility to others some distance away. In the former, communities are on a sustainable path whereas in the latter community survival is put at risk when needs cannot be met.

Needs met is the universal measure of success and sustainability of any community. Does your community meet the needs of its members? To find out, take a quick survey of your community by considering the following three questions:

  • Any community members hungry; homeless; living in unhealthy and unsafe conditions; or are they confronted with no paid work; illness; limited healthcare, and inadequate life skills to influence their circumstances?
  • How do you and your community keep score on needs met?
  • What are you and other community members doing to impact the scorecard?

The answers to these questions speak loudly. If your community is like most, the answer is “Yes” to the first one. It’s almost impossible to eliminate these conditions. However, the next two answers tell the tale as to whether your community is on track to sustainability.

Their order is important. Tom Peters is quoted as saying, “What gets measured, gets done.” As a community addresses the issues identified in the first question, the answers to the second question are calories of food, gallons of water, kilowatts of energy, cubic feet of fuel, units of housing, tonnage of recovered waste, etc. Those metrics shape answers to the third question in the form of infrastructure projects and business cases that deliver outputs according to the scorecard.

In effect, how a community responds to these three questions highlights economic choices made by community members. Those responses can be mapped onto a flow diagram, such as the one below, to give an overview of the local economic system for the community.

In the local economic system above, the drive for local economic sustainability precipitates flows of community assets and work functions that increase in their range of application and depth of value-add as they proceed to a community investment portfolio loaded with infrastructure projects and business cases that, when launched, generate calories, gallons, kilowatts, units, etc., in an effort to meet the needs of community members.

By placing their emphasis on how to meet their needs, community members take ownership for their sustainability. This commitment frames opportunities to charter projects and develop businesses. It also establishes a local economic context for business models that are based on widespread participation.

So, what’s the scorecard for your community? Calories in meals or community gardens? Gallons of water or number of water meters? Kilowatts of power or utility bill assistance? Housing units or vouchers? And so it goes… How does your local economy rate in terms of progress toward community sustainability? Are unemployed and underemployed community members engaged in paid work through local businesses and organizations whose outputs help meet local needs?

These are topics for further consideration in future posts. Stay tuned…

Originally posted to Sustainable Local Economic Development on Tumblr by Steve Bosserman on Wednesday, September 1, 2010

How Do You Participate in YOUR Local Economy?

The most important characteristic of business models in a local economy is universal participation by community members. In other words, all community members contribute to their local economy however they can. This may be counterintuitive if one thinks of business models from a typical global economy perspective. Let’s consider some of the main differences between the two economic views.

In a local economy, members are both the market for and the means by which their needs are met. This is quite the opposite of what happens in the global economy where those who produce, process, prepare, and distribute are often separated from one another by considerable distance and even further removed from the end-user or customer. Because of this, the consequence of buying decisions on a particular community does not impact consumer choices within the global economy.

As a result, the purpose of a local economy is to assure sustainability of the community that defines it. The community is the central focus. Community members contribute in whatever ways they can to establish, manage, and maintain the requisite level of business activity within the community that meets their needs. The intent is to advance interdependence among many businesses in the interest of resilience, adaptability, and self-reliance.

In contrast, each business in the global economy strives to be first to market, remain alone in that market for as long as possible, and be deemed best in the market among any other competitors should they appear. The business is the center of attention. A wide array of stakeholders comprised of management, employers, suppliers, and investors promote the business in an effort to gain acceptable returns. The objective is to survive in an intensely competitive environment that challenges the right of each business to exist on a routine basis.

Given participation in a local economy is so important, what does it look like?

Essentially, community members participate in their local economy along five pathways of action:

  • They buy from local businesses
  • They believe that interdependent local businesses must be successful to assure community sustainability
  • They advocate on behalf of local businesses and the local economy
  • They administer to the rules of the local economy so that businesses within it have opportunities to function more effectively and efficiently
  • They invest in businesses

The following graphic recasts the five paths mentioned above as vectors positioned on a backdrop of concentric circles that represent level of participation as indicated by the teardrop scale at the bottom which begins with limited involvement at the status quo center and progresses through three levels to much wider participation in the outer ring.

The view below offers additional descriptors for each vector, level by level. Although this particular example relates to a local food system, the diagram applies to any product or service related to meeting the basic needs of a community.

But these details are not answers. They are merely placeholders to spur your thinking.

How do you participate in YOUR local economy?

What are the appropriate labels to indicate involvement by you and your community members?

Originally posted to Sustainable Local Economic Development on Tumblr by Steve Bosserman on Tuesday, August 31, 2010

Business Models for a Local Economy

Whether you want to go into business within the global economy to satisfy customer wants in markets around the world or a local economy to meet the needs of community members close to home, an effective business model is essential. However, a business model that applies in the global economy is different than one in a local economy. Why?

Two Economies:

The global economy is driven by people’s insatiable desire to have more than what is required to sustain their lives. In contrast, a local economy is focused on meeting the basic physiological (food, water, energy, housing, and clothing) and safety (security, education, and health) needs of its immediate members. In the former, I can live without it, whereas in the latter, I can’t.

In a global economy, customers have two choices: first, do they want something, in general—a car, for instance; and second, do they want a particular item within that general category—a specific car by make, model, year, and other specifications. Any number of factors influence customers in their decisions to buy at all and, if so, which ones. As a result, in the global economy, customers rule.

In a local economy, the market is automatically defined as all who live in the immediate area. The common factor is that everyone must have food to eat, water to drink, air to breathe, shelter as protection from the elements, energy to heat and cool the home, and clothing to wear outside. In addition, everyone must have a reasonable measure of security, means to manage their health, and access to education opportunities so they can better care for themselves and contribute to the sustainability of their local community. The capacity of a local economy to sustain community members predicts how well and for how long those members can participate in the global economy. As a result, in a local economy, the community rules.

Two Business Models:

Given the emphasis on customer choice, a successful business model in the global economy is one that:

  • Anticipates customer readiness for proposed products and services
  • Strengthens company readiness to deliver to customers
  • Adapts quickly to customer reaction and responses to what’s delivered

The net result is to establish and maintain a competitive edge among countless others who want the same outcome for their companies.

For further insights on the development and use of adaptive business models in the global economy, consider Steve Blank (@sgblank) an excellent resource. Steve brings his extensive firsthand experience in building early stage businesses to bear through informative posts about entrepreneurship, start-ups, and applied business principles on his website. Business models is one topic he treats particularly well. In his posting, “What’s a Startup? First Principles,” he describes what is a business model and how to apply it. He also contrasts it to business plans, an analysis he carries forward in a later posting, “No Plan Survives First Contact with Customers – Business Plans versus Business Models.”

In a local economy, community members can choose to source their needs from suppliers far afield from their community. However, to do so puts at risk long-term sustainability due to interrupted supply lines. As a consequence, business models for a local economy offer attractive choices to members so they can meet their needs from local sources.

Although its emphasis is primarily on food, the report, Why Local Linkages Matter: Findings from the Local Food Economy Study, sponsored by Sustainable Seattle through a community development program, Building the Local Food Economy – A Call to Action offers insight into business models within a local economy.

Key characteristics of business models for a local economy include the following:

  • Universal participation by community members
  • Initial focus on meeting the needs of community members without fail
  • Integration across all value-added steps from the point of consumption back to the points of production
  • Utilization of community assets and resources without reliance on outside funding
  • Application of performance metrics that deepen the resolve to establish a fully functioning local economy, spur creativity and innovation to find business solutions, increase the rate and degree of adaptiveness, and significantly improve the odds of long-term sustainability

As indicated by these qualities, business models that deliver the basic needs of community members within a sustainable local economy are quite different than those that satisfy wants of customers throughout the global economy. Given the importance of these local economy business models, they warrant further attention. Look for more details in future postings.

Originally posted to Sustainable Local Economic Development on Tumblr by Steve Bosserman on Sunday, August 29, 2010

Fill the Food Gap – The Mission of Meals on Wheels in Boulder, CO

Meals on Wheels America (MOWA) delivers affordable, healthy noon meals to seniors in their homes or at MOWA-sponsored group dining locations. In that single instance each day MOWA fills the food gap between the point of preparation and the point of consumption for seniors. And with that meal come the only calories some seniors will have for the entire day.

What if a local food system delivered ALL the calorie needs for each person in that community every day? Kind of a MOWA on steroids! Yet as far-fetched as this proposition might seem, it is the challenge every community faces if its members choose a sustainable path. After all, everyone NEEDS food and to not have it puts survival at risk.

How might a single meal everyday for everyone system work? The Meals on Wheels of Boulder, Colorado offers a glimpse. The MOW of Boulder mission is

…to provide tasty, nutritious meals to residents of our community who need and want our service, regardless of age or income.

That’s quite a statement. Add “affordable” and “familiar” to the description of the meals and the stage is set for meeting the food needs of the community.

The current MOW of Boulder tagline reads, “Building a Future, Nourishing Our Community.” Formerly, it read, “We Deliver Energy”! And that’s exactly what nourishment is—energy in the form of calories for the human body!

Here’s the rub, though. On average, each of us needs 2,000 calories per day. Those calories are delivered via three meals plus a snack. Like all MOWA chapters, MOW of Boulder delivers one meal per day for a sliding-scale fee based on ability to pay. If we take the cost of a meal yielding 600-700 calories times three in order to meet the 2,000 calorie daily requirement, the total cost may well exceed the threshold of $10 per day. That brings us back to the challenge of affordability each community faces if it is to have a self-sustaining local food system.

The key to the solution rests in how well value-added operations throughout a local food system fit and function together. As a result, sustainability depends on the successful integration of local food preparation and distribution, such as what MOW of Boulder provides, with upstream local food processing and food production. When done effectively, the result is a flexible, interdependent food value chain that stretches from the points of consumption to the points of production. Interestingly, MOW of Boulder shows significant progress enrolling value chain partners with the inclusion of several Community-Supported Agriculture (CSA) shares and other fresh produce from local farms and community gardens.

The community of Boulder has a long way to go before its local food system has the capacity to serve all members and be sustainable. But the efforts of MOW – Boulder and its partner organizations has given it a tremendous leg-up in the process. Keep it up, Boulder!

What can YOU do to help YOUR community establish a Meals on Wheels chapter? And if there is a MOW chapter already up and running, what can YOU do to help it extend its scope to fill the food gap wherever it exists in YOUR community?

Originally posted to Sustainable Local Economic Development on Tumblr by Steve Bosserman on Saturday, August 28, 2010