Welcome to the last week of our course on growing the impact of your social enterprise. This is also the end of this MOOC specialization on Social Entrepreneurship. If you have taken all three courses, then thank you very much for having stuck with us through this social entrepreneurship marathon on writing business plans for social enterprises. Many of you have actually participated in a group. Many have written a business plan and many of you will now upload it in the next couple of days. But even if you have just been listening in on our video lectures, we really appreciate the time you have taken and the contributions you have made on the discussion forums and through the assignments. We hope you have enjoyed this course. And that you will take something away that will be useful for you in your future career as social entrepreneurs. What we're going to do this week is this. First, we will look at the Mobility CarSharing case. And see how they have reacted to what's the hostile takeover bid that the Swiss Railway has issued. Now as we'll see later, this actually turns out quite nicely for Mobility CarSharing. But it might not always go this way. Then we will have four guest speakers. First, we will hear about the exit strategy employed by Cafedirect, which went for an initial public offering, a so-called IPO, in 2004. We will hear from Bob Doherty and Iain Davies about how the Cafedirect IPO has played out. Well, not quite so well. Then we will hear from your Johanna Mair, editor of the Social Stanford Innovation Review, about the role of failure in social entrepreneurship. And how important it is to stand by the mistakes we make. And next we will listen to my colleague at CBS, Sudhanshu Rai, who will talk about how we can plan for success by preparing for failure. Remember that early on we had the case of MyC4, which actually didn't work out quite the way it was planned. We kept those videos in this course because we felt that it is important to give you a realistic picture of how social entrepreneurship startups play out sometimes differently than it was planned. Lastly, we will ask you to submit your final business plan and to get ready for the final peer evaluation round. With that let's have a look at what our students are saying about Mobility CarSharing, and the options they have and what they should be doing about this hostile takeover bid. >> So now we have the Mobility case. Do you take a side here? >> Well I think that Mobility should definitely sell to SBB. I don't think that they would have the capital to compete with them. And I think if they lost the partnership and lost the parking spaces and the marketing deal and the membership deal, then the business would be really hurt and they won't have the capital to compete. So I think they should just sell it to SBB. >> I think they should stay as a cooperative, because they have a strong identification as they are now. And they have the democratic right to [turn off] the voting, the democratic status and they can continue with the existing goal of the sustainability they have. And also they should not worry about the railway, SBB, because they have the first- mover advantage and they can survive even the railway comes into the business. And I think they should stay as a cooperative at least at this time. >> Okay, I must admit that I was engaged or involved or working with a cooperative and it can be very frustrating because you have to reach a conclusion together, you have to agree on everything. That is a huge challenge in some ways, especially when you grow from being this little, it's nice having this little club together, we're all in this. And then when you start growing and scaling, then suddenly you reach a point where it's inevitable that you won't agree anymore. You will have very different perspectives on how to do business. And especially if you really want to grow this concept and you want to go across the borders, then it can be extremely difficult. And in my experience, at least, just as soon as you go outside your normal little sphere and go into the next city, it can be a huge challenge. I know they have quite a good model now. But I just see so many challenges in staying in that way especially if you want to go big. >> I think this is a beauty of the cooperative that everyone has the power to make decisions. Rather than to be a part of SBB, which is a public organization having no visions because they are very much focusing on their-, so in that case, they must stay in the cooperative because they have the power of the democratic. The difference of opinion is always I think a positive rather than consider it as a negative. >> But the problem is always you can't always depend on the workforce as much in a cooperative as you can, for example, in an IPO. I know there's, of course, a strong discussion about the ethics in it, and do we want to stay in this more familiar setting or do we want to really do a more business setting? But if you want to look at how you become more effective, I honestly believe that the IPO is the only way to go. >> Don't you think that since SBB is a public organization, they will be more keen on keeping the sustainability profile of the Mobility? >> It's a good question [CROSSTALK] I think it depends on if you were, for example choose the IPO, if you are very clear on your mission of course and stay true to it. And of course show that in whatever actions you take, then you can of course keep the sustainability profile but I can see the concerns, but I would, actually also be concerned with a public company. I guess it always depends on how good times you're having. >> But I think this is not the right time to going for the IPO, or even to go to SBB because, so they have just come into this business. It's not far away, it's only five to six years of expenditure. They've very good brand image, Mobility's and yeah, so there's no need to go with the SBB or to go the IPO. So they'll have to work as they are and then they have to see the picture. >> But you see it as a possibility in the future. In the longer run. >> Might be, but at the moment, I think that they should stay as a cooperative. >> Okay. >> Right, so let's have a look at the Mobility CarSharing and see what takeaways we have. There are three options. They could change to a for-profit structure through an initial public offering, they can sell to the Swiss Railway, or they can maintain their cooperative structure. Let's look at each of those open, sorry, go back, but I'll just do the last bit, just a little bit, yeah. Let's look at each of those three options, step by step. So what about the for-profit IPO solution? Since CarSharing is established, we could argue that there is no more need for a self-help structure. For-profit would actually have a similar environmental impact for as long as the business model is still working. The more people give up their cars, the more people use public transport. Also critics could say that the cooperative form is a convenient vehicle for management and there is a risk of value destruction. An IPO might allow the cooperative members to get some return on their investment that they did originally. Also it will give a push for internationalization by bringing in capital to expand globally. Remember, the Swiss Railway is a national player by definition. So, it will probably not go global. The cooperative on the other hand, will find it difficult to grow due to the legal structure and financial risks of a global expansion. Next, let's have a look at the options of the takeover through the Swiss Railway. Well, we could argue that the Swiss Railway is better aligned with the founding team's ideas than an IPO would be. It is publicly owned, and hence has a social mission at heart, which is to support public transport. So it would be easier to communicate the founding team's vision to its core stakeholders, the employees and business partners. So this could provide a plan of how the startup could evolve with the Swiss Railway, and this could be reviewed and adapted iteratively as the startup evolves. Finally, we have the possibility of maintaining the cooperative structure. CarSharing has a strong social mission, an environmental impact and neighborly ties. That could actually be in danger in a for-profit structure. And it might not even be able to be maintained by the Swiss Railway because the railway is mainly focused on railway stations. And they might close those locations that are farther away from the train stations. There is a risk that they might close the less profitable locations, and that the cooperative structure might actually be lost in the process. Remember, cooperative members have to put in funds. This gives access to patient capital. About 40% of the capital is equity from the cooperative owners. Also, activists form a valuable resource. They provide marketing, word of mouth. They help with operations, the management of cars in outer areas. And they help with development, giving feedback and ideas on how to move the organization further. So, what happened in reality? Well, actually CarSharing made a joint venture with the railway which they called RailLink. This was a new startup in addition to Mobility CarSharing. This double branding did not go well. The distribution at the Swiss Railway was unsystematic and most of the clients that came in through Swiss Railway were only casual and not regular car sharing users. Finally, RailLink made the mistake of only offering two-seater Smart cars. Also organizationally, there were problems. The joint venture was the brainchild of the Swiss Railway vice-president for local transport. When he left, interests and strategies at the Swiss Rail changed. And the head of business for the business unit, well, he himself was not really a convinced client of car sharing. As a consequence, RailLink, the joint venture between Mobility CarSharing and the Swiss Railway failed to meet its targets by far. Most of the growth happened at Mobility CarSharing, which was well established in the market. And in 2004, RailLink was fully integrated back into Mobility.
