$1.$ Minicase $5$Sustaining Shared Value: The Rise and Fall of Toms Shoes

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Sustaining Shared Value: The Rise and Fall of Toms Shoes

This activity is important because the ability of firms to create value through various business models can be a powerful competitive tool.

The goal of this exercise is to explore the use of disruption via business model and creation of economic value.

Read the MiniCase below and answer the questions that follow.

$$I always thought that I would spend the first half of my life making money so I can spend the second half of my life giving it all away. And one of the defining moments of my life was when I realized that I could do both at the same time with Toms.$1$

$$Blake Mycoskie, Founder of Toms Shoes

Growing up with the goal of becoming a professional tennis player, Blake Mycoskie attended Southern Methodist University as a recruit for the NCAA Division I men$$s tennis team. During his first year, Blake injured his Achilles tendon. As a result, he had to wear a cast for several months and couldn$$t play tennis. He also couldn$$t do his laundry because he could only move around on crutches and the laundry facilities were in the basement of this dorm. Having inherited his nose for entrepreneurial opportunities from his mother, who wrote and self$-$published a best$-$selling nutrition book, Blake noticed a need he could solve through a business idea$$offering laundry services on campus for students who did not want to do their laundry. The business took off and expanded to several campuses. With the loss of his ability to play competitive tennis and the laundry business taking off, Blake dropped out of school.

Realizing his talent for starting new ventures to solve problems, Blake went on to sell the laundry business and created two more startups before the age of $24$: a billboard advertising business featuring country music stars and their new album releases and an online driver$$s ed school. Blake$$s businesses were successful, and he didn$$t need to work for a living after selling them. He planned to kick back and enjoy leisure time. But a vacation to Argentina changed all that.

Shoeless in Argentina

Blake decided to learn how to play polo and signed up for a camp near Buenos Aires, Argentina$$s capital. While there, he chanced upon a charitable group organizing a shoe drive. The concept of volunteer charity work was entirely new to Blake. He was struck by the abject poverty just a few miles away from the affluent areas in the big cities. Not having shoes prevented underprivileged children from attending school. After delivering shoes to children in need, Blake wrote in his journal that he had never been happier in his life, seeing how the eyes of the children lit up and how happy they were to receive a pair of shoes.

Blake$$s entrepreneurial mind shifted into overdrive when he realized that a lack of shoes was a significant problem for many children, even in the relatively developed nation of Argentina. He immediately understood that charity shoe drives, despite being noble efforts, were unsustainable. Charity shoe donations are one$-$off actions that are not scalable and thus do not make a significant enough difference in solving the underlying problem. Seeing an entrepreneurial opportunity, Mycoskie decided to start Toms$\mathrm{.}2$ This company would tie the consistent need for shoes in economically challenged countries to consumer demand in rich countries. At the same time, Blake was intrigued by the Alpargata, an everyday linen shoe that is environmentally friendly and super popular with Argentines.

Interestingly, Blake viewed his earlier three ventures $($laundry service, advertising, and driver$$s ed$)$ as real businesses, but he initially saw Toms as his project. He is a social entrepreneur, and he believes that companies are much better at providing for societal needs than governments or charities. Blake founded Toms $($in $2006)$ as a for$-$profit company to provide children in less developed countries with shoes. A social entrepreneurship venture such as Toms uses the profit motive to solve social, cultural, and environmental problems.

The One$-$for$-$One Business Model

Blake$$s big idea is the invention of the $$one$-$for$-$one$$ business model, in which a consumer buys a product, such as pair of shoes, and another product is given away to someone in need. Toms$$ initial mission was to give a pair of shoes to a child in need for every pair of shoes purchased. The Alpargata shoe and Toms$$ appealing one$-$for$-$one model propelled the company forward, creating a massive buzz in the United States, especially among more socially concerned younger customers.

Combining capitalism with a focus on helping needy children, Toms was hailed as a pioneer in creating shared value $($CSV$).$ That is$,$ the company$$s value creation was focused on economic and societal benefits from the beginning. Rather than adding philanthrop