A hybrid business model is one that combines elements of two or more different business models. This can involve combining elements of different economic systems, such as aspects of a for-profit model with a non-profit model. It can also involve combining different types of revenue generation, such as using a combination of sales, subscriptions, and advertising to generate income. Hybrid business models can be useful for companies that want to simultaneously pursue multiple goals, such as maximizing profits while having a positive social or environmental impact.
These hybrid business models are rather new, they started to emerge around the 2000s, even though ideas of their creation had begun to spread in the late 1980s. However, a particular type of leadership is required to direct a company committed to making social and environmental improvements through its practices and products, while it tries to achieve financial permanency.
Characteristics of a Hybrid Business Model
Multiple sources of revenue: Hybrid business models often generate income from a variety of sources, such as sales, subscriptions, advertising, grants, and donations.
Dual objectives: Hybrid business models often pursue multiple goals simultaneously, such as maximizing profits while also having a positive social or environmental impact.
Stakeholder focus: Hybrid business models often consider the needs and interests of a wide range of stakeholders, including customers, employees, shareholders, and the wider community.
Flexibility: Hybrid business models can be flexible and adaptable, allowing organizations to respond to changing market conditions and customer needs.
Innovation: Hybrid business models can encourage innovation, allowing organizations to think creatively about achieving their goals and pursuing new opportunities.
Collaboration: Hybrid business models can involve collaboration with a range of partners, such as other organizations, governments, and investors, to achieve their objectives.
Examples of Hybrid Organizations
Community Development Financial Institutions (CDFIs): These organizations use a combination of traditional banking and non-profit models to provide financial services to underserved communities. CDFIs may generate revenue through interest on loans and other financial products, but they also often receive grants and donations to support their mission of promoting economic development and social justice.
Social enterprises: These organizations pursue both social and financial objectives. They may generate income through the sale of goods or services, but they also often reinvest a portion of their profits back into the community or towards achieving their social mission.
Cooperative businesses: Cooperatives are owned and controlled democratically by their members, who may be workers, consumers, or both. They may generate revenue through the sale of goods or services, but they often also operate on a non-profit basis, with any surplus revenue being distributed back to the members rather than to external shareholders.
B Corporations: B Corporations are for-profit companies certified by the non-profit B Lab to meet rigorous social and environmental performance standards, accountability, and transparency. They must consider their decisions’ impact on all stakeholders, not just shareholders.
Social and Environmental Impacts
Hybrid organizations emerge from the conviction that neither for-profit companies nor non-profit organizations address social and environmental issues in the most proper and effective way. The entrepreneurs who decide to launch businesses using a hybrid business model are part of the generation that places a higher value on social justice and the health of the environment. For such individuals, a main driver is a desire to achieve a positive impact on their social and environmental surroundings. They are conscious of the need for organizations that are not only responsible within their context but also actively engaged in improving the living conditions for every human, animal, and living being that may be affected by their activities.
As a resume, a hybrid business is driven by three fundamental organizational activities: driving positive social/environmental change as an organizational objective, creating mutually beneficial relationships with stakeholders, and interacting progressively with the market, competitors, and industry institutions.
It is important to highlight the innovative nature of the hybrid business model since it modifies the conception of the role of corporations in society: while the objective of hybrid organizations is social and environmental change, these organizations are interested in becoming competitors in the market. For some hybrid companies, their mission must be carried out as a moral imperative, but for all hybrid organizations, it is clear that adopting this strategy is both profitable and sustainable.