Harvard Case - Daddy Lab: A Chinese Social Enterprise's Dilemma
"Daddy Lab: A Chinese Social Enterprise's Dilemma" Harvard business case study is written by Daniel Han Ming Chng, Liman Zhao, Byron Lee, Peter Moran, Heming Sun. It deals with the challenges in the field of Social Enterprise. The case study is 14 page(s) long and it was first published on : May 6, 2021
At Fern Fort University, we recommend Daddy Lab adopt a hybrid organizational structure, incorporating elements of both for-profit and non-profit models. This will allow them to maximize social impact while ensuring financial sustainability. This strategy will involve focusing on a triple bottom line approach, prioritizing social impact, environmental sustainability, and financial performance.
2. Background
Daddy Lab is a Chinese social enterprise founded by Dr. Li, a passionate advocate for children with autism. The organization provides comprehensive services, including early intervention, therapy, and educational programs, to children with autism and their families. Daddy Lab faces a critical decision: whether to remain a non-profit organization or transition to a for-profit model to expand its reach and impact.
The case study highlights the struggles of Daddy Lab, facing limited resources, a growing demand for services, and the need to attract and retain skilled professionals. Dr. Li, the founder and CEO, is torn between her social mission and the financial realities of scaling the organization.
3. Analysis of the Case Study
Strategic Framework: We will analyze the case using the Stakeholder Theory framework. This framework recognizes the interconnectedness of various stakeholders and their interests in the organization's success.
Stakeholders and their Interests:
- Children with Autism and their Families: Access to quality, affordable services, improved quality of life.
- Dr. Li and Daddy Lab Staff: Financial stability, professional development, fulfilling work, and seeing a positive impact.
- Investors (Potential): Financial returns, alignment with social mission, positive brand image.
- Government: Improved social welfare, reduced strain on public services, responsible use of public funds.
- Community: Increased awareness of autism, support for inclusive communities, improved social well-being.
Analysis:
- Non-profit Model: Limited funding options, dependence on donations, potential for resource constraints, difficulty attracting and retaining skilled professionals.
- For-profit Model: Potential for financial sustainability, access to larger capital, ability to scale operations, potential for conflicts of interest with social mission.
Key Challenges:
- Balancing Social Impact and Financial Sustainability: Daddy Lab must find a way to generate revenue without compromising its social mission.
- Maintaining Transparency and Accountability: A hybrid model requires robust governance structures and transparent financial reporting to maintain trust with stakeholders.
- Attracting and Retaining Talent: Daddy Lab needs to offer competitive salaries and benefits to attract and retain highly skilled professionals.
4. Recommendations
Adopt a Hybrid Organizational Structure: Daddy Lab should consider becoming a Benefit Corporation or a B Corporation. These legal structures allow businesses to pursue both profit and social impact. This structure provides flexibility in accessing funding while maintaining a strong commitment to social mission.
Develop a Sustainable Business Model: Daddy Lab should explore impact investing and social impact bonds to attract investors who are aligned with their social mission. This can involve creating a tiered pricing system, offering customized services, and developing partnerships with corporations for shared value creation.
Strengthen Governance and Transparency: Daddy Lab should establish a robust governance structure with a board of directors representing diverse stakeholders, including investors, community members, and experts in autism. This will ensure transparency and accountability in financial management and social impact measurement.
Invest in Talent Development: Daddy Lab should invest in training and development programs for its staff, offering competitive salaries and benefits. This will attract and retain highly skilled professionals who are passionate about their work.
Engage in Strategic Partnerships: Daddy Lab should explore partnerships with other organizations, including NGOs, government agencies, and corporations, to leverage resources, expand their reach, and create a collective impact on the lives of children with autism.
Develop a Robust Social Impact Measurement Framework: Daddy Lab should develop a comprehensive framework to measure the social impact of its programs. This will allow them to demonstrate their effectiveness to stakeholders and attract funding from impact investors.
5. Basis of Recommendations
- Core Competencies and Consistency with Mission: The hybrid model aligns with Daddy Lab's core competency in providing high-quality services for children with autism and its mission to create a more inclusive society.
- External Customers and Internal Clients: The model caters to the needs of both external customers (children and families) and internal clients (staff).
- Competitors: The hybrid model allows Daddy Lab to compete effectively with both non-profit and for-profit organizations in the autism services sector.
- Attractiveness: The model offers a compelling proposition for investors seeking social impact alongside financial returns.
- Assumptions: The recommendations assume that Daddy Lab can successfully attract investors who are aligned with their social mission and that they can effectively measure and communicate their social impact.
6. Conclusion
By adopting a hybrid organizational structure, focusing on a triple bottom line, and developing a sustainable business model, Daddy Lab can achieve both financial sustainability and significant social impact. This approach will allow them to scale their operations, reach more children with autism, and create a positive impact on the lives of families and communities.
7. Discussion
Alternatives:
- Remaining a Non-profit: This option would limit Daddy Lab's growth potential and ability to attract and retain skilled professionals.
- Transitioning to a Traditional For-profit Model: This option could compromise Daddy Lab's social mission and lead to conflicts of interest.
Risks and Key Assumptions:
- Risk of Losing Focus on Social Mission: The hybrid model requires a strong commitment to social impact to avoid prioritizing profits over social good.
- Risk of Difficulty Attracting Investors: Finding impact investors who are aligned with Daddy Lab's mission and willing to accept lower returns may be challenging.
- Assumption of Effective Social Impact Measurement: Developing a robust framework to measure social impact is crucial for demonstrating effectiveness to stakeholders and attracting funding.
8. Next Steps
- Conduct a Feasibility Study: Daddy Lab should conduct a thorough feasibility study to assess the viability of the hybrid model and identify potential risks and challenges.
- Develop a Strategic Plan: Daddy Lab should develop a comprehensive strategic plan outlining their vision, mission, goals, and key strategies for achieving their objectives.
- Seek Legal Advice: Daddy Lab should consult with legal experts to understand the legal implications of adopting a hybrid organizational structure.
- Engage with Stakeholders: Daddy Lab should engage with key stakeholders, including investors, staff, and community members, to build consensus and support for the proposed changes.
- Pilot Test the Model: Daddy Lab should pilot test the hybrid model on a smaller scale before implementing it fully to identify any potential challenges and refine their approach.
By taking these steps, Daddy Lab can successfully navigate the challenges of scaling their social enterprise while remaining true to their mission of improving the lives of children with autism.
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Case Description
This case follows the development of Daddy Lab, a Chinese social enterprise founded in 2015 by Wenfeng Wei. With extensive experience in product safety testing, Wei started Daddy Lab to tackle the social problem of poor-quality and hazardous consumer products used by children and their families in China. By identifying, testing, and reporting such products to the public via social media, Wei became an internet celebrity. Nicknamed "Daddy Wei," he racked up millions of followers on China's most popular social media platform, WeChat. In 2018, Daddy Lab received China Gold Social Enterprise certification from the China Charity Fair. That same year, Daddy Lab generated average monthly revenue of approximately ¥5 million by selling high-quality, non-hazardous products online. As Daddy Lab continued to grow and tackle its social mission, it faced numerous challenges. Social entrepreneur Wei realized that he faced the dilemma of trying to make the world a safer place for children and their families while making a profit to sustain this purpose. Wei had established a model to make profits through Daddy Lab's dual roles as a "reviewer" and a "seller" but wondered whether it was appropriate for this social enterprise. As Wei considered Daddy Lab's future, the following questions kept him awake at night: Was Daddy Lab's current business model effective in achieving its social and financial goals? How could Daddy Lab better manage its dual roles as a "reviewer" and a "seller"? How could Daddy Lab become more sustainable in the future?
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