Good point re: Clinton Foundation! Makes sense it would shake out that way all things considered. Appreciate the thoughtful response 🙂
Great question. I’m not actually sure. Since the branches operate so independently, it’s possible they are funding headquarters just out of the 2-3% of overall revenue that is “donations” to Goodwill, rather than taking a cut from the stores, but I honestly don’t know. Will look into it. As for the value of the national organization, this was something I was asking myself as well. Obviously there are reasons why Goodwill can afford to operate so independently while traditional retailers can’t, but it seems that it must still have some need for a central organization (or at least enough of a need to justify one’s existence). I’m not exactly sure what that is but that’s something I’d like to look into as well.
Thanks! Interesting observation–seems to jive with what I’m reading online about their efforts over time to spruce up stores.
I think this is a fascinating question. I agree with you completely that the willingness of consumers to support social enterprises seems to be finite. And I wonder if that problem will only be exacerbated by the fact that some strains of thought around social enterprises like Tom’s seem to have turned negative recently; I’m not sure how long it will be considered an unquestionably good thing to donate goods to developing countries, as documentaries like Poverty, Inc. start to raise questions about the potential of such donations to depress local economies that might otherwise produce those goods (e.g. cobblers can’t make shoes where Tom’s is making its donations because there is no market for them).
At the very least, it’s not clear to me what the answer to your question re: Tom’s vs. Wal-Mart is. If I had to take a stab at guess, I’d think perhaps it actually depends on whether you’re looking at supply or demand. I think Goodwill is in competition with other non-profits and social enterprises for what goes into the business (donations). In this regard, I think it does have a sustaining advantage in that it’s not asking for money but rather for in-kind donations of clothes and appliances, which the consumer often wants to get rid of anyway. I think Damola’s question on how it can compete with for-profit resellers is really interesting here.
But as for Wal-Mart, I think I see Goodwill competing with them more on the demand side, i.e. for retail customers. But even there, I think Goodwill might be in a slightly different space, because it offers unique goods and a “treasure-hunt” experience, which can appeal to a different customer base (and maybe even a more profitable one) than the more utilitarian, “every day low price” Wal-Mart. But I agree that as more and more companies claim the triple bottom line, Goodwill may see pressure from both the supply and demand sides!
Damola! I’m stumped. I’m not sure how they are positioning themselves relative to for-profit donated goods solicitors–will have to look into it. Great question.
My best guess on your second point is that there are partnerships that are being organized by the local Goodwills. I read some examples of specific branches across the country doing interesting things with partners (e.g. fashion shows, competitions, etc.) to drum up interest but my sense is that this happens branch-by-branch rather than nationally (this goes to Schuyler’s question below about what exactly it is that corporate Goodwill does, which was something I need to look into more as well).
Thanks for the good ?s!
Really thought-provoking comment GZA. I find the example you gave of the Mexican non-profit to be really interesting. One of the things I thought was kind of strange about Goodwill as I researched it was the fact that their thrift store operations (besides offering employment opportunities in the stores) don’t actually seem to have anything to do with their core “charitable” function of providing tailored, targeted job training in local markets. The idea of a healthcare non-profit operating thrift stores is even more striking in that regard, which I think is driven home by your point #2 on why it failed (thought obviously the local context in point #1 is also really important). And yet, Goodwill seems to be making this disconnect work–will have to do some thinking on why.
Also, I find it surprising, actually, that consumers aren’t more turned off by a disconnected model like this, where the core operations of the funding sources (the stores) are so different from of the core function of the non-profit itself (job training). It’s such a contrast from companies like TOM’s, where the donation/purchase is clearly linked to the associated charitable service. Learning about what Goodwill does actually made me feel less excited about donating my clothes (I had been under the mistaken assumption that they were being bought cheaply by people who needed them–however, that’s obviously not really how this works). Being two steps removed from the charitable impact of my donation makes me personally feel less good about donating, but I guess Goodwill’s success means not all consumers have this problem.
That’s a great question! I left out of this posting anything about “marketing” that I thought wasn’t directly related to their “operating model” (although sometimes it’s really hard to draw that distinction). For example, here’s an interesting article about how Goodwill is trying to re-brand itself as a hip, fun place to shop, and shake off that image you mentioned (of being an “old, hand-me-down thrift store”): https://www.ama.org/publications/MarketingNews/Pages/goodwill-retail-thrifty-business.aspx
Some of the Goodwills have thought of really creative ways to tackle the branding challenge (including the boutique branding). Another example is this blog, which is written by the DC Goodwill about awesome “diamond in the rough” finds at the local store–it is meant to drum up excitement for shopping there and it is apparently working! http://www.fashionofgoodwill.org/blog/
I think this is a really interesting post (and not just because it appeals to my public sector proclivities)! The main question I was left with upon reading it was about the order in which the business and operating models developed. On one hand, you could see a scenario where the business model is just the most strategic choice (because it doesn’t duplicate programs, or because it leverages existing partnerships, or because it creates a more sustainable local infrastructure for delivering vaccines, etc) and therefore that the business model must have come first, followed by an associated operating model. But I could also see it working the other way, where the realities of doing business in certain countries necessitate that Gavi structure itself this way. In other words, there might be some degree to which it would be very difficult for Gavi to run its own soup-to-nuts vaccine distribution and financing network in many countries, even if such a thing were (in theory) more efficient than this light-and-lean “facilitator” model. In that case, the operating model is really driving the business model. I think these things are difficult to untangle, but I find this a great example of the two being so tightly intertwined that it’s particularly hard to tell which is driving which.
Agree with Dan, this is a great example of a company with terrible misalignment between its operating and business models. I’m particularly surprised by this part: “even at a profitable unit price, the volume required by the United contract was an order of magnitude greater than the projected capacity of its existing production facilities in Clinton, IA and Peoria, IL (4).” Seems truly bizarre that they would sign up for a contract (and get another party to agree to it!) without proven production capacity. In a later paragraph, you say that this wasn’t just an issue of pure volume but also one of quality (which was being compromised at higher production levels). I wonder what would happen if the company could solve that issue and successfully operationalize large scale production without issues with quality. Would it be profitable for them to pursue the high-volume strategy in that scenario, or are margins just too thin given the production techniques required for this process and the variability of the price of oil? It almost sounds like this could (sort of to Dan’s point) still be something they’d be interested in doing if they could work out the quality issues but it’s hard to tell.
I like that your explanation of Dollerama’s business and operating models spans both the company’s single price and multi-price point periods and shows how it was able to maintain alignment throughout. I wonder if you would classify this as an example of a company that had a particular business model in mind (in this case, shifting from single to multi-price to restore margins and/or value to the customer) and then figured out how to shift its operating model to match. I certainly thought so at first blush, but I liked what you said about how moving to multiple prices actually allowed it to “better leverage its existing sourcing capabilities” and to gather more relevant data that improved product mix and customer satisfaction. It made me wonder if this could actually serve as an example of a company that saw value to changing its operating model and then shifted its business model to match. Or (probably most likely), perhaps this is just an instance of a company realizing that BOTH models could benefit from the same change, which would make it unique (at least among the cases we have discussed in our last TOM module, where one model seems to drive decisions about the other).
Quick question: when you say, “Dollarama also carries a mix of merchandise between items that are consistently stocked and items that are sourced opportunistically in a close-out or promotional purchase,” I know you mean that these items are purchased by Dollerama buyers from suppliers on sale (right?), but just out of curiosity, how are these items displayed in the Dollerama store itself? Is the promotional sale advertising carried through to the customer or are these presented as normal items? (Hard to imagine a real “sale” at a dollar store but I’d be curious to know if they happened).