Can we use start-up strategies to scale social impact?

GreenBiz Reads

Can we use start-up strategies to scale social impact?

hand touching water
Shutterstocksymonenko viktoriia
Access to clean water is one of the most pressing issues for the developing world, but solving it requires multifaceted efforts.

Excerpted with permission of the publisher, Wiley, from "Lean Impact: How to Innovate for Radically Greater Social Good" by Ann Mei Chang. Copyright 2018 by Ann Mei Chang. All rights reserved. This book is available wherever books and ebooks are sold.

Lean Impact cover imageOver the past 20 years the world has made slow but steady progress in expanding access to crucial services, such as clean water, electricity and sanitation. Yet despite hundreds of nonprofits, social enterprises, companies and governments each doing their bit, on average access to these vital services has grown by less than 1 percent of the global population each year (see Figure 8.1). As of 2015, this has left over 700 million people without clean water, 1 billion without reliable power and 2 billion without proper sanitation. In contrast, adoption of mobile phones has skyrocketed around the globe (Figure 8.1). Despite the challenges of reaching poor communities, growth has resembled that of the classic hockey stick graph.

In my travels, I’ve seen a Maasai warrior herding cattle in a remote village in East Africa with a mobile phone strapped to his belt and a smallholder farmer in rural Indonesia fish a phone out of her pocket. Today, far more households have access to a mobile phone than a toilet. The story of mobile phone adoption shows that massive scale is possible, even in the most challenging contexts. How could we achieve this kind of growth trajectory for matters of social good?

What’s the difference? To start with, people clearly see the value of a mobile phone, whether to stay in touch with loved ones, find job opportunities or access markets. So much so that many will choose to spend their meager earnings topping up their phone credit before buying food. In addition, there is a market‐driven business model for both the hardware and cellular services that continues to drive growth.

The resulting profits provide the means to finance big investments in infrastructure, distribution and product development. Yet it was only when prepaid service plans rolled out — allowing small purchases of minutes as needed — that usage in developing countries took off. Traditional monthly contracts were too expensive and required credit verification that often was not possible.

mobile phone adoption graph
Figure 8.1: Accelerating the pace of progress. Source: World Bank, World Development Report 2016: Digital Dividends (Washington, DC: World Bank, 2016),

In contrast, growth that depends on grants and donations will rapidly hit natural limits. Even if, as the nonprofit charity: water estimates, only $20 can provide clean water for each of the 10 percent of people who don’t yet have it, that adds up to approximately $15 billion. With its online fundraising prowess, charity: water raised an impressive $243 million in its first 11 years, improving the lives of over 7 million people. Yet this still represents merely 1 percent of those in need.

Factoring in electricity, sanitation and other basic needs will require an even greater investment. Aside from a few notable exceptions, charity and aid can only put a small dent in most big problems. The result is a growth curve that looks more like an inverted hockey stick, or logarithmic graph, with rapid initial growth as donors flock to a fresh idea. Growth then flattens out as available philanthropic sources are exhausted, which usually occurs long before reaching anywhere close to the size of the need (see Figure 8.2).

inverse hockey stick graph
Figure 8.2: Inverse hockey stick graph.

Growth is the second pillar of social innovation, as our aggregate impact arises from a combination of the breadth of how many we reach and the depth of change we deliver. A powerful solution that only benefits a few will fall far short of its potential. However, that does not necessarily equate to scaling your organization or program. What matters is scaling the social benefit, which might come from growing an entity, but equally if not more likely from replication, government adoption or policy change.

As we saw, mission‐oriented organizations face many pressures that run counter to thinking big and starting small. After all, there’s no potential initial public offering on the horizon, but rather a constant need to bring in the next grant or donor to keep the doors open. The result? Over and over, nonprofit leaders are forced to make the understandable tradeoff to prioritize short‐term deliverables over the potential for long‐term growth. Staying small while you are validating your growth hypotheses can reduce the likelihood that you’ll hit a wall down the road. Otherwise, it’s easy to waste time perfecting a solution that may deliver value and impact but does not have the means to reach a substantial portion of the need. For a market‐based business model, at what price point will customers find enough value to buy? For publicly funded services, does the design fit within the government budget, process, and policy constraints? For replication or franchising, is the model simple enough for others to successfully copy? For ongoing aid or charity funding, are there sufficient pools of money available? The answers to any of these questions could have significant implications for the design of a solution.

There’s a wide range of potential paths for growth and how to test their viability, along with examples of each model in action. Of course, scale takes time. And typically, it takes far more time than in the private sector, given the perverse incentives, more limited funding, and need to navigate market and policy failures. Just as with value, validating your growth hypothesis isn’t a one‐time event. Lessons will continue to emerge with new audiences, new partners and increased reach.

Topics: 
Tags: