Unravelling the business models of think tanks in Latin America and Indonesia

By Ashari Cahyo Edi (Hari), researcher at the Institute for Research and Empowerment (IRE), and Leandro Echt, independent consultant representing the Center of Analysis and Dissemination of the Paraguayan Economy (CADEP).

The business model is an essential part of think tanks sustainability. It is indeed the heart of any organisation, -including a think tank. Ralphs (2011) defines business model as:

the manner by which the think tank delivers value to stakeholders, entices funders to pay for value, and converts those payments to research with the potential to influence policy.

In general, however, only few think tanks spend sufficient efforts to carefully design, revise or even change their business models.

  • Think tanks might think that their business models have been around for some time and since nothing serious as happened it is not necessary to review them. Yet even if something did take place, they may interpret this as external factors and little attention would be directed to their business models’ performance.
  • An even more fundamental problem might be that think tanks are reluctant to learn from their counterparts’ business models. They fear of opening discussion about this subject to avoid sharing their secrets with their competitors.
  • Think tanks also know that not much has been done to study think tank business models. Despite some efforts in the field (Mendizabal, 2010; Universalia, 2013; Ralphs, 2011; Struyk, 2006; Yeo, 2011; Politics & Ideas, 2014), there is very little systematised knowledge on think tanks’ business models, particularly in developing countries.

Thus, our project seeks to deepen on these ideas and provide think tanks with knowledge that will allow their leaders to shape their organisations’ business models to better serve their missions, given the contexts in which they operate. The main questions are:

  1. What are the key aspects that characterise effective business models in the context of developing countries?
  2. How do these work in each context?

This comparative study in Indonesia and Latin America is expected to provide findings for think tanks working in other developing countries and to donors supporting them.

Methodology

Through our initial research we found that the literatures does not provide a set of established methods. Nevertheless, some efforts have been done by Osterwarder and Pigteur (2010), Yeo (2011), and Ralphs (2011). These works helped us to understand why business models are important, what aspects of business model should be scrutinized, and what could be the implications of business models failures.

Below are aspects of business models that these studies explore:

Scholars Yeo (2011) Osterwarder and Pigteur (2010) Ralphs (2011)
Aspect of business model v  Governancev  Funding structurev  Program/service designv  Leadership/management

v  External relations

v  Value proposition

v  Customer relationships

v Channel

v  Customer segment

v  Revenue streams

v  Cost structure

v  Key activities

v  Key resources

v  Focus of researchv  Institutional developmentv  Status of organization (profit/nonprofit/etc)v  Governance

v  Funding sources

v  Value proposition

Based on these, we finally arrived at eight dimensions for our study.

The dimensions that we chose to explore are:

Dimensions Description
Value proposition When producing and selling their bundles of products and services, what value do think tanks offer to their users?
Core business activities What are the activities that think tanks carryout in order to create value propositions, and consequently, generate revenue for their organisation?
Leadership What are the characteristics of leadership that support effective business models?
Governance How does the organisation set up its governance in order to make decisions regarding its business model?
Communications How do think tanks define their key audiences considering their value proposition and what strategies and channels do they develop to reach them?
Funding structure How does the organisation organize and manage the different function regarding funding?
Staffing How do think tanks identify, attract and motivate their staff members?
Financial management How does the organization deal with revenues and costs to ensure its sustainability?

To dig out the relevant data, we interviewed several key actors in each think tank including executive directors, members of board, senior researchers and finance managers.

Deciding which think tanks to include in our study presented another challenge.. Think tanks are so diverse in terms of modes of work and the nature of the messages (Mendizabal, 2010). We selected the think tanks for our case study mainly because of their diversity and accessibility. The last consideration is critical because it determines whether we will have access to information or not.

Country Think tanks Mode of work Type of message
Indonesia Institute for Research and Empowerment (IRE). Influence or advocacy Ideology, values, or interest
SMERU Research Institute Independent research Applied, empirical, or synthesis research
Jawa Pos Institute for Pro-Otonomi (JPIP) Independent research Applied, empirical, or synthesis research
Paraguay Centro de Análisis y Difusión de la Economía Paraguaya (CADEP) Independent research and Influence or advocacy Applied, empirical or synthesis research
Bolivia Fundación ARU Independent research and Influence or advocacy Applied, empirical or synthesis research
Ecuador Grupo FARO Independent research and Influence or advocacy Applied, empirical or synthesis research

Besides producing six case studies, our research will generate a synthesis report that compares some common and important aspects between the two sets of think tanks: Indonesian and Latin American think tanks.

The goal is to understand the underlying factors that generate such variations, what are the key aspects that characterize effective business models in the context of developing countries, and why certain models might work for certain types of think tanks and in certain contexts or circumstances.

We also hope that this project will help build bridges between think tanks in Indonesia and Latin America.

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