Posted by: Tayo Akinyemi | December 23, 2011

What Disruptive Startups Can Learn from Social Enterprises and Nonprofits (Maybe)

Warby Parker is an eye wear company that sells prescription glasses for $95 each.  Impossible?  Hardly.  In a strategy designed to cut out the middle men—a handful of companies that control the design, manufacture, distribution, and insurance of prescription eye wear—they design, manufacture, and sell their eye wear online.   Check out Co-Founder Dave Gilboa breaking it down at Fast Company.  What’s more, Warby Parker has adopted the BOGO model (buy one, give one) pioneered by TOMS, which enables them to distribute a pair of glasses to someone in need for each pair sold.  Warby Parker donates glasses to VisionSpring, which trains “vision entrepreneurs” in developing countries to identify presbyopia, and fit its sufferers with low-cost reading glasses.  (You can watch Dave and another Co-Founder, Neil Blumenthal, explain the motivation behind the business model as part of the Smart Entrepreneur series.)

Here’s the thing.  From what I understand, Neil learned the ins and outs of the eye wear industry during the five years he spent at VisionSpring.  Neil talks about  that with Mitch Baranowski in BBMG’s The Green Room.  (Watch from 4:05 to 4:21.)  That’s when he discovered that glasses are sold at a steep mark-up because a small group of companies control the value chain.  For example, Luxottica Group basically corners the frame market by licensing 20 retail brands, manufacturing the glasses, and selling them at a 10-20x mark-up.  They own optical outlets— Lenscrafters and Pearle Vision, eye wear only retailers—Ray-Ban and Oliver People, and even the second-largest vision insurance provider in the country.

Is this an isolated incident?  Or are there other social enterprises/nonprofits that have discovered supply chain inefficiencies that can be exploited by disruptive start-ups?  If it’s the latter, then it weakens the questionable assumption that innovation mostly flows from the private sector to the “public” sector.  (Granted, VisionSpring is a social enterprise with an inclusive business model; the lines are clearly blurred.)  Perhaps this might cast a new light on the prescribed role of nonprofits.  Community service provider?  Check.  Honest broker?  Double-check.  Bastion of (social) business model innovation?  Hmm….

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