Business-Social Glossary

We have probably all experienced, at some point or another, the cultural and language gap between the citizen and the business sectors. One of the challenges of this Innovation Award, "Market-Based Initiatives that Benefit Low-Income Communities," open to both sectors—was precisely to adopt a language that would be understood and comfortable for all. Below is an attempt at clarifying some of the terms that may cause confusion. It is in no way exhaustive or academic and, in the spirit of this competition, should be an open source document. We welcome your suggestions for new or improved definitions!

Business Model: Because the focus of this competition is market-based strategies for low-income individuals, we are using this term broadly—including organizations with a social mission—to describe the different steps required to bring a solution to end-clients or beneficiaries including product/service development, production, distribution, and marketing/ communication.

Citizen Sector: A defining factor of organizations qualifying as citizen sector rrganizations (CSOs) is that their work addresses some kind of societal issue. These organizations can have a variety of legal structures, but may include cooperatives, social enterprises, charitable organizations, tax-exempt corporations, and others. They are defined by their social mission—and profits gained from such organizations, if any, are reinvested into the social programs.

Client: While the term "beneficiary" is typically used in the citizen sector to refer to recipients of products or services, we are using here the term "client" to emphasize the market focus of the competition.

Competitive Solutions: One of three main assumptions here is that competition among the different actors that provide products and services to low-income individuals will create enhanced value for the poor: adequate, affordable, and locally accessible products and services.

Financially Self-Sustainable: While citizen sector organizations use this term to refer to initiatives that generate enough revenues to cover their operating and financial costs, by definition, businesses are aiming at "profitable" ventures due to their primary mandate to create economic value for its shareholders.

Low-Income: For the purposes of this competition, low-income is defined as the four billion people earning less than US$1500/year (C.K. Prahalad & Stuart Hart, 2002. The Fortune at the Bottom of the Pyramid, Strategy + Business, Issue 26, 2002).

Market: Because the focus of this competition is market-based strategies for low-income individuals, we are using this term broadly—including for organizations with a social mission—to describe the efforts spent to communicate the benefits of a product or service to clients/ beneficiaries (communication messages, communication channels, promotion and pricing). Most citizen sector organizations use communication as a key strategy to create social change.

Market-Based: "Market-based" refers to an initiative that relies on market forces and is demand rather than supply focused. Private sector initiatives are by definition "market-based" because they are commercial. In the case of the citizen sector, a good indicator for this may be that client fees or beneficiaries' contributions are sufficient to sustain the initiative on the long-term. This differs from the philanthropic approaches traditionally employed by nonprofit organizations but is an increasing trend in the citizen sector.

Operational Partnership: We would like to focus this discussion on partnerships where all partners play an active role in the delivery of the solution, as opposed to philanthropic relationships.

Poverty Line: Individuals living in poverty are defined as those who do not have enough resources to meet their basic needs of food, shelter, water, and clothing. Although the actual numerical value of the poverty line varies by country, people living in poverty will be understood for this competition as those who earn less than US$2/day.

Sustainable: Although environment is an important issue as far as low-income countries are concerned, we are focusing here particularly on the financial and social dimensions of sustainability: the proposed initiative generates enough funding to be carried out long-term and is adapted to low-income people's needs and is culturally appropriate.

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