Hybrid Value Chains - now more than ever

This week's reading on "the Funding GAP" by Michael Chertok, Jeff Hamaoui, and Eliot Jamison provided a compelling case for the creation of hybrid enterprises and the complexities as well as the risks associated with establishing a for-profit and not-for-profit organizations within one coherent structure.

While disadvantages such as time, money, and legal constraints exist, it seems that this structure is needed now more than ever, particularly in developing communities. Hybrid value-chains that stem from these ventures could significantly lead to poverty reduction, improve local technologies, allow for healthcare provision, and equip low-income families to sustain their livelihoods and improve their own quality of life. I don't think hybrid value chains are "the" solution but certainly an important piece of the foundation in mitigating the societal issues that have been subject to temporary solutions and have consequently existed for decades.

Ashoka, a prominent global organization initiated in India in 1981, invests in social entrepreneurs, promotes networking among them, and creates access to social financing as well as other infrastructure to foster "a global network of changemakers," by bridging the public and private sectors. I think the organization has an interesting value-chain model that explains the gains and core assets of business partners and citizen oriented organizations. While the atmosphere has become increasingly competitive, there are advantages for both sides. Companies can enter new markets and citizen oriented organization can pull in revenues and expand in capacity and scope.

While there may be barriers to hybrid formation and an potential loss in the short-run, the long-term impacts for growth are promising.

Harmony of Public & Private = Harmony of Public Space

I worked as an intern in the Pittsburgh City Planning Office for about six months this year. In most of my role, I was assisting the Public Art Manager and the Senior City Planner. Throughout my internship I caught snip-its of conversations across the open office floor. Conversations about veteran memorial proposals, neighborhood murals, tree plantings next to roadways, RFPs, and unmaintained parks. This weeks' readings made me reflect on how the City of Pittsburgh leverages the balance between public and private funding when it comes to its public spaces. This balance between public and private support reminds me of a specific urban park space in downtown Pittsburgh--PNC Triangle Park. Most Pittsburghers probably don't know this park by the specific "PNC Triangle Park" name. The sign designating the name of the space is unnoticeable unless you are searching for it. This triangle of land sits between Market Street, Fifth Avenue, Liberty Avenue, and adjacent to PNC Plaza, which is the location of the various PNC offices. If you know the park by any name it is probably simply "Triangle Park". The park is enjoyed throughout the day by bus commuters waiting for their connection, professionals taking lunch breaks, construction workers taking coffee breaks, and a couple vagrants napping. It is a peaceful triangle of green amid the busy Liberty and Fifth Avenues. In the summer months, office workers from all the surrounding buildings can be seen on the Triangle Park benches, eyes closed, basking in the warm sunlight. The space is particularly pleasant because it is well designed and very clean. It features a variety of seating options, types and levels of vegetation, and shade covering in areas. Because it is owned and operated by PNC, it is always free of litter and debris. The plants are watered and pruned regularly. And as a result of PNC's immaculate upkeep of the park, hundreds of Pittsburgh citizens enjoy using it every day. One must consider what the triangle of land would be if PNC had not decided to purchase it and make it into, essentially, a public park. Based off of the city's track record of establishing and maintaining urban parks, I would say the chances of Triangle Park existing without the support of PNC would be slim. The city, which is pressed for funds, is just trying to get a handle on maintaining the parks it already has, many of which are in severe disrepair. While PNC, as a company, is probably motivated largely by something other than social good, it has managed to make a gesture that suggests otherwise to the City of Pittsburgh. PNC did not have to develop the triangle on Fifth and Liberty into a pleasant public space. They could have very well have converted it into parking, or an additional office space. What they did create now benefits individuals who use the space, the City Planning office who now has a space they don't have to maintain, Pittsburgh as a city which now looks more beautiful because of the space, and PNC whose image is now raised to a new height because of this public gesture. As a past intern for the City Planning Office, I believe that more public spaces should be created by a partnership between the public and private sectors. The development of a public space by a private business allows there to be a public space without the city spending money and resources on that space. It is also a social good paid for by a private company, who will be seen as a good Samaritan in the situation--using their money to benefit the public. The money and resources of most public parks departments, if they are anything like Pittsburgh's, are running thin. It would be in the best interest of the public parks departments and local private companies to create partnerships such as the one executed in PNC Triangle Park.

Example of Measuring Social Value

The reading about measuring social value resonated with me and some of my previous work. Last year I worked with a local organization here in Pittsburgh called Family Tyes. Essentially, my group was tasked to create an online application that could track both quantitative and qualitative aspects of e organization. The mission of this non-profit is to bring kids in the Pittsburgh area out into the wildnerness and teach them how to fish. Through this experience and over time, values such as respect for others, respect for nature, confidence, and personal skills would be enhanced. Although this organization had been viewed as a success in the community, it still had to fight for funding.

The non-profit, specifically for youth development, organizations had tight competition when it came to grants and funding as a whole, especially given the tight economic climate. Therefore, one of Family Tyes' supporters had asked them to find a way to measure social value and impact for youth development programs. The hope was that by approaching information systems students at Carnegie Mellon and asking them to develop an application that could provide both quantifiable and qualifiable data, then they could possibly benefit by providing this tool for other youth development organizations as well.

The application that we developed could not only track participants for fishing events, but could also their understanding and improvement over time- data that could be shared with investors to prove value and impact. The application could survey the paticipants and quiz the students on their understanding in certain "value outcomes" as well. The interface was kid friendly and enjoyable for kids to use.

For the organization, the application could provide financial records, attendance records, performance statistics, participant demographic information, and an overall snapshot of how the organization was doing. Therefore, similar to the health application mentioned in Mulgan's article, it was not a simple computer program or calculator. It provided strategic value, assessed value outcomes, displayed financials, and identified possible holes in the organization. It is an assessment tool that utilizes factors from multiple sectors and will hopefully be helpful to other social foundations and ventures to measure social value as well.

Measuring the success of social ventures

All projects are designed and launched with some kind of return on investment in mind: students go to school to get an education, eventually find a job and monetize (or not) the return on the years they spent in school, managers oversee projects and measure their success by how much return they generate… Social ventures are no exception! Organizations and individuals involved in social ventures seek to understand how much social, environmental and economic value they are creating. While for-profits rely heavily on numbers to evaluate their success, social ventures also have to consider qualitative data such as descriptions and impressions. People tackle evaluating projects differently. One might go with a comparison of a before and after situation. Others go with comparing the current situation with standards (worldwide or comparable regions, situations…). Another way is to look at the trends since the beginning of the project. I personally believe that the third one is to most effective one because it not only give a view of a before and after but also what happened in between which could include crucial information about problems that might have occurred or unexpected changes. One question that comes to my mind is to what extend is the third evaluation method feasible for social ventures.

When reading about social ventures and projects, the first thing that comes to my mind is what the outcome was and whether it is sustainable. However, I came to realize by doing more readings and researching that even “failed” projects have to be evaluated properly. Looking at both sides of the spectrum will first enable us to understand the strengths and weaknesses of the projects and what made them successful or not. Also, this would enable us to detect trends and factors that contributed to these successes or failures over time hence the use of the third evaluation method. Let’s take the example of the Case Foundation PlayPumps’ initiative. The idea behind the project seemed very innovative at the time: design water pumps activated by merry go around for children: children will play and at the same time generate water. However, over the course of time, the initiative started facing many problems: the children’s needs to play were not as high as anticipated and they quickly got bored and stopped playing causing a shortage of water generation. The other problem was a consequence of the previous one and it is the overhead that the project placed on women as they had to start “playing” on the merry go around to pump water. Women were embarrassed by doing so but they were the primary care givers to their families and pumping water was one of their tasks. In addition to this, the water pumping system had technical issues and the villagers were not trained to fix them. Due to these problems, the PlayPump project came to be a lesson learned for the Case Foundation instead of a successful initiative. One can look at the project and say ok so before people did not have water and after they still did not have water, thus the project failed its mission. While this is true, by doing a before and after evaluation we would be missing on what went wrong and the true causes of the failure of the project: too much reliance on a segment of the community, the children, reliance on habits of the community, playing, lack of knowledge to fix the pump, women’s embarrassment to pump water because of the play factor… The lessons learned can only be extracted from the life of the projects and not the extremities. The same goes for successful projects, we need to start thinking twice when we are presented with before and after data that shows the success of the projects. The VisionSpring project recognized the social problems that were caused by wives being more independent and attracted their husbands to join the project workforce too. The success of the project is now beyond just selling glasses. It created some kind of stability and resolved a problem that was caused by the project itself. These kind of "details" make a big difference when evaluating social ventures.

ESG Data: Measuring the Triple Bottom Line

At this week's Commit Forum in New York, it was reported that Bloomberg's ESG data site's traffic has increased by 50% over the last year. Bloomberg, a leading financial reporting firm started publishing this data over two years ago to increase accessibility to the reporting of firms efforts to integrate environmental, social, and governance data into their reports to investors. As mentioned in this Harvard Business Review blog from 2009, I too wonder if it clear that consumers and more importantly investors care enough about corporate practices to convince investors that this is anything more than a short-term "sustainability" trend? As a student that has been involved in several organizations advocating for increased sustainable practices both in the non-profit and for profit communities, I am skeptical of most sustainability efforts. Until you convince businesses that there is a link between social responsibility and a positive return on investment the sustainability movement will not be taken seriously. Advocates need to acknowledge and embrace data and evidence based management in order to give themselves the authority that is respected with the private sector. Such advocacy efforts in themselves are unsustainable unless more progress can be made in aligning words with action as discussed in this week's Funding Gap article.

Value of Arts Education Programs

Similar to Megan's analysis of the value of symphonies, arts organizations that provide education programs face similar difficulties. Theater organizations provide opportunities for underserved children to experience and often participate in the art through their education departments. Organizations in Pittsburgh provide free performances to schools, chances for students to perform on their stage and collaborative opportunities for the students from different schools to write and perform their own work.

The largest difficulty these organizations have is measuring their program outcomes. Students, teachers, parents and administrators have given feedback on the programs, mostly positive, but funders are often looking for quantitative data. Without tracking individual student participation in these programs for years, it is nearly impossible to measure the effects of the arts on their education.

Heinz College in partnership with Pittsburgh Public Theater will be completing a Systems project in Spring 2012 to find news ways to measure these outcomes. The students hope to present methodologies and tools to discover the impact of The Public's arts education programs. Consulting agencies such as Wolf Brown, have started to measure the impact of the performing arts. This project will further that research and hopefully provide The Public with the necessary, quantitative data to convince funders of their importance. This could have an important impact on arts organizations around the city and throughout the field.

Crowdfunding

“Shut out by belt-tightening venture capitalists and dwindling grant programs, thousands of entrepreneurs and artists are turning to a new way of raising money that doesn’t depend on who you know” (http://pajamasmedia.com/instapundit/120351/). The daunting task of funding a large scale social innovation project can hinder an idea in its beginning stages. These social innovators can now petition their peers, along with the rest of the world, for funding. Crowdfunding sites such as IndieGoGo and Kickstarter allow innovators and entrepreneurs to fund projects without having to decide which end of the “Spectrum of Social and Financial Returns” should be approached. By using these sites which are targeted toward individual donations, projects do not have to appeal to or convince and entire department or organization of their worth. Often, the more you contribute to the idea, the more input you could contribute to an area of your interest. For example, Project Generation D based in Atlanta provides students with the tools needed to flourish in the in the creative digital arts, allows anyone who donates $1,000 or more to sit on their board of directors (http://www.indiegogo.com/Help-PGD-Serve-More-At-Risk-Teens-in-the-Atlanta-Area). Crowdfunding sites allow for individuals to fund a wide range of products and ideas that may viewed as controversial by some organizations.

efficient social valuation

I read "Measuring Social Value" with great interest, having been on both sides of the social sector grant application process. Before grad school, I worked at a community foundation and volunteered at a startup cultural nonprofit. Through our regional grant-makers' association, I was exposed to "strategic" grant-making, impact assessment, and capacity-building concepts and tools. Yet, both funders and grantees continually struggle with evaluating project value.

Last year, I attended a social impact consulting panel at the Net Impact national conference, where experts from FSG, Bridgespan, and GreenOrder also acknowledged the challenge of measuring impact. They and their clients rely heavily on customer satisfaction surveys, attempting to track people's subjective experiences of value creation. This is somewhat consistent with the Stated Preferences and Life Satisfaction methods that Mulgan mentions; he would probably approve of this relative and proportionate approach.

Mulgan seems to be saying that "objective" metrics are illusory distractions, and accounting methods should be differentiated by purpose and audience. To the former point, it was clear to my peers that social value is dynamic and relative; the problem was that we lacked a common currency or language. Market value is also dynamic, yet we agree to use monetary units, and the "law of one price" theory allows us to relate different assets. If social value is a market rate, then what's the currency?

To Mulgan's latter point, transparency is a virtue in assessing social ventures (or, really, almost anything). Just because only "brave" managers open up their books to competitive scrutiny doesn't mean that social sector accounting should be similarly siloed. My former employer freely publicized where the money went each funding cycle and, at least in general terms, why. Some foundations have a rubric that they can share with grant applicants, to get everyone on the same page and achieve the best project proposals and outcomes.

Personally, I'm attracted to triple bottom line (TBL) accounting as a potential common language for internal and external stakeholders. I know there are kinks to work out, but it's a worthy attempt. Among other things, it can help build efficient social capital markets. On a related note, the post below makes an important point about intrinsic value, but ultimately I believe that extrinsic (derivative, tradable, scarce) value subsidizes intrinsic value. I want to help make the performing arts profitable, in order to subsidize a transcendent communal experience.

Impossible to Describe, but Imperative to Measure

This week there was a lot of focus on the attention that investors are giving to the base of the pyramid. It’s an important concept, and one that indicates how funders are beginning to take in the bigger picture of what their dollars can do. What I found even more interesting, was the last article in the reading, ‘Measuring Social Value,’ by Geoff Mulgan and how messy but necessary the measurement of that can be.

In the article, Mulgan states that ‘The failure of the social and public sectors to measure the value they create does not stem from a paucity of intelligence or good intention. Rather is reflects four unavoidable complexities that bedevil the measurement of social value.’ He goes on to describe the lack of laws/regulations, the argument about social values, the unreliability of the numerical metrics, and the problem of accurately estimating the time it takes for these measurements. However, I would go on to argue that there is a fifth complexity missing from this discussion: the lack of a metrics to describe the impact that is at the core of social value.

Sure, you can have metrics that tell you whether your investment is sustainable, whether or not it raised the income for families, or even for an entire community. You can measure the literacy rates before and after an education initiative is implemented. But how do you measure the intrinsic impact of your investment?

This same issue often comes up in the arts. Funders want to know how their money has made a difference. For decades the answer has come from economic impact studies, how property value is raised once a cultural institution is in a community, how arts in education helps to lower drop-out rates, etc. It’s clear that they make positive and important contributions for a community. But the arts are important for other reasons too. For reasons that…are just so difficult to describe. And even more difficult to measure. Although WolfBrown has begun the attempt to try.

It is the same outside of the arts. How do you measure whether a social enterprise’s program has helped raise people’s ability to empathize? Or express themselves? Does it matter when an NGO’s initiative has given a community the greater capacity to build bonds between families living in it? Elements such as these can have just as significant of an impact on the lives of people that programs are intending to reach, so shouldn’t they be included when measuring social value?

These aspects are not easy to measure, or else that would have already been done. However, Mulgan states, ‘Indeed, the greatest contribution that funders can make is often not to measure value, but to forge the links between supply and demand that will later generate value.’ The simple discussion about the value of intrinsic impact is the beginning of that. This field of measurement may not be hammered out to perfection yet, but for funders to bring it into the picture can help build crucial bridges towards a deeper understanding of social value. Sometimes the money a program brings to a community runs out, but the impression that program made lives on, so doesn’t that matter too?

The Value of Difficult Financing

The thing that struck me most from the articles on financing social enterprise was from the Stanford Social Innovation Review which was that “Entrepreneurs starting social enterprises should find it difficult to raise capital.” As was mentioned in class 80% of new business fail in the first five years, but of the 20% that survive 90% had well thought out business plans. The same must hold true for social enterprise as well. Merely having a good idea that will help society is not enough to be truly effective, there must be a plan. Even if that plan is to continue to rely on the charity of others; success is based on sound planning. This can be seen in the individuals chosen to participate in the “Global Impact 50”. This organization is comprised of companies and individuals who are experts in investing not only those seeking to ‘do good’ in society. This shows on a very large scale the necessity of business expertise in social innovations. Divide Data is another example of how making difficult to find funding can benefit social enterprise. Jeremy Hockenstien found it difficult to grow his enterprise as fast as he wanted, but it is possible that slow controlled growth could be beneficial in the long run. My time in Iraq I witnessed powerful example of money without a plan. It was nothing for the US Army to build a $100,000 water project, and the impact created good for the people in the area that received these new water pipes. The question was where does that leave the water situation for the entire area? The men and women creating and overseeing these projects had the best intentions, but gave little thought to, or more accurately, did not have the expertise to see these small projects in a larger context. As a result in my mind the money spent did not create the most value for the money, in essence there was little ‘bang for the buck’. I believe that this same lack of planning would be equally detrimental to social enterprises. Using financing to force social innovators to asses and evaluate their long term goals and impacts is absolutely necessary if the field of social enterprise is going to grow in any significant way.

Will impact investment work best with or without government intervention (tax breaks etc)?

After reading the article "A place in society",(The Economist, Sept 2009) I couldn't help but ask myself this question.

On the one hand, I believe (as mentioned in the article) most people want to do well by doing good. This is especially true after the economic recession, which has forced people to reconsider their investing options. The "Global Impact 50" is a great initiative that promotes impact investing and enables people to invest in social enterprises. Another thing in favor of impact investment is that most of these are in growing economies, so the investors can expect more returns than they would by investing in (say) real estate in mature economies. The question is will these offerings be able to attract significant investment on their own (without government offering tax breaks etc to investors) or will they be unable to compete with much more attractive investment options like real-estate funds and bonds in growing economies, gold, silver, oil and gas companies etc. Will impact investment (such a noble cause at the heart of it) do well in the long run on its own? (without help)

My question is whether government intervention by way of legislation, regulation,tax sops and the like do more harm than good? Will these laws only entice companies to "apply an ethical screen to their portfolio" as the article mentions?

Depends on the actual laws and the regulations and "only time will tell" are two answers that I could think of!

The Social Value of the Arts

Our articles this week talk a good bit about measuring social value. As someone who's favorite hobbies involve theater and visual arts, this is a topic that I have been aware of since at least high school. I absolutely agree with Mr. Geoff Mulgan in "Measuring Social Value" that social value is better captured in metrics when it is viewed as "subjective, malleable, and variable."

I'll use a couple of examples from my own life to discuss Mr. Mulgan's points. When I was in high school, I started acting - participating in school plays and attending acting competitions usually two Saturdays per month around the state of Tennessee. These plays were funded, in part, by school taxes. In addition, I spent the summer attending the Tennessee Governor's School for Arts, a residential program completely funded by taxpayers. It's possible that I learned more important skills from these programs than from any formal education I have had before or since - including comfort with public speaking, the ability to think on my feet, empathy, teamwork, and perhaps most importantly, confidence. As a senior in college, I got a transformative job that required extensive public speaking which I am almost positive I would not have gotten without my theater background. In turn, that job from college has helped me get subsequent jobs. All because of government-funded programs I received outside of the normal public education curriculum. Sadly, every one of these programs has been cut in my hometown. Why? As Mr. Mulgan points out, probably because effective demand is lacking because it is not viewed as a need "pressing enough to warrant...resources." He stated one problem is "estimating how much good an action will bring about many years in the future, relative to how much it will cost to implement it now." Undoubtedly, it would have been difficult to predict ten years ago that these extracurricular programs would bring economic benefits years later as they have for me and no doubt hundreds or thousands of other students.

To add to the complexity, it's hard to come to a consensus about what's valuable. Most of us would agree that participation in sports often increases confidence, builds teamwork skills, sometimes critical-thinking/strategy ability, and can improve physical health. With the exception of the physical health component, I believe that the same benefits can be applied to the arts. Because athletics (though extremely expensive programs to run) may bring in more money through tickets and concession sales, they are often valued at a higher level and are among the last extracurriculars to be cut. Mr. Mulgan writes, "Social value can become clearer only through iterative processes that bring together supply and demand in deliberation and discussion. Even the most brilliant researcher cannot measure or even describe social value if she is not immersed in these discussions." How true this statement is when applied to the arts. On paper, looking at numbers, the arts may not seem valuable, but they take on an invaluable quality when talking with the participants or audience members.

As Mulgan states later in the article, supply and demand in this area is fuzzy. Perhaps what funders can do best is to encourage dialogue between program providers and program purchasers (the government). Foundations, like the Heinz Endowment, also have an important role to play and are often great supports of the arts. What other areas do you identify as being difficult to measure value?

-Whitney Coble

Crowdfunding as Economic Signaling

Going off of Katy Peace's article on crowdfunding platforms like Kickstarter and Indiegogo, I think there is a way to use the power of crowdsourced funds beyond the simple creation of initial capital. Socially-oriented projects can utilize these platforms as a way to create economic signals that could be very useful in attracting larger potential investors. Take for example some of the different projects that have been overfunded. One of the ones I picked out was the Revolight, a set of programmed LED clip-on lights that attach to bicycle wheels and project lights brighter and farther (in the direction the bike is travelling, than conventional bike lights that are currently available. The creator of this project only needed $43,500 of start-up capital to make his product come to life. His project was successfully funded in the 3-month window Kickstarter gave him and was received 395% more than his original goal. The reason I chose his product is it's similarity, in simplicity and novelty, to many product solutions covered in class. The successful funding of his project, $215,000 in 3 months by only 1,400 individuals, is a strong factor to take to a potential investor. It provides a sample of how popular his product could be and show the groundswell it has already created. When approaching a potential investor with nothing but a product prototype and a dream, it can be very difficult to make the case and have them pull out their wallet. But I believe going to them with a crowdsourced project can prove on a small scale the attractiveness and profitability of an idea as well as having a group of invested advocates. While I agree with Katy that many of the projects on Kickstarter and Indiegogo are focused on the creative sector, I see no reason why the platform could not be used effectively for socially focused ventures.

Capital Investments + Pro Bono Support: The Robin Hood Foundation

When I moved to New York City three years ago, I had not heard of the Robin Hood Foundation (RHF) and chances are that you may not have either.  So please, allow me to introduce you: 

The RHF is a specialized foundation that offers intermediary investment services paired with pro bono managerial assistance to deserving non-profits in the New York City area (many of which are new social ventures).   Funding goes to programs that focus on education, jobs/economic security, or survival.  While these non-profits receive rather generous funding and assistance from both private and corporate donors, they also receive strategic pro bono management assistance in the form of operational planning, board recruitment/development, fund development, fiscal management, legal/human resource expertise, real estate assistance, and technology planning among others.  This key feature of coupling financial support with infrastructural guidance is what sets RHF apart from other sources of funding.  This approach does two things – 1) It protects donor’s investments and 2) it ensures that the organizations it supports have the greatest impact possible.  Additionally, RHF has a results-focused accountability structure that it holds its recipients to produce the results they say they will and provides coaching when they do not.

Although competitive, there are a variety of funding sources to support most social ventures.  However, given that these innovations tend to be created by those with little to no business background, it is in the best interest of funders to and ventures to use money wisely through strategic guidance and coaching.  Don’t take this the wrong way, however.  I am not saying that investors should act as “big brother” to their investees, watching every move they make.  Instead, they could implement a tiered structure of sorts where such resources are highly encouraged (or even mandatory) for ventures with little business experience and available for those with greater experience.   This way, investments and impact are maximized – a win-win situation for all involved.   

Creative Evaluation for a Creative Industry

Evaluation is not a new idea.  Nor is the idea of value and supply and demand.  In the creative sector, namely arts organizations in the United States, these practices aren’t always used with efficacy, if they are used at all.  Like the reading states, it is not from a lack of intelligence or good intentions, but rather a wide-ranging difficulty of exactly how to evaluate arts programming, from arts in education to performance series.

After reading Geoff Mulgan’s article, I recognized that I have heard the conversation about “social value” in the context of the arts before.  The supply and demand angle of evaluation isn’t as new as he suggests in his writing, but not because arts professionals have had an earlier insight into this way of thinking.  Rather, it’s that the industry has been struggling with what ‘demand’ means to their particular organizations in current years.  It’s an interesting spin on the problem presented in the readings: social ventures need to measure their social value by studying supply and demand, yet arts organizations have had the opportunity to study their (traditionally static) supply and (steadily declining) demand and haven’t been able to adjust their idea of the social value they are providing.

It is a relatively new conversation, but in my opinion timely and relevant, that arts organizations are recognizing that program evaluation is crucial for sustainability.  However, without the need in the last thirty or so years of governmental and foundation, endowment, etc. support, organizations created previously may had never thought about evaluation at all. 

For the sake of scope, I will focus on large-budget, American symphony orchestras.  Their situation is in some ways opposite to new social ventures in that they have been in existence for, in some cases, a hundred years or more, and haven’t had to analyze their product in relation to demand.  In some sense they have, but not to the point where it effected their programming decisions.  In recent years, it fell to the marketing department to make the programming relevant to the changing audiences.  Now, with much more competition for the general public’s expendable income and free time, orchestras are facing an uncertain future.  As I mentioned before, new funding sources and standards set by funders and regulators demand that the structures of these organizations must adapt to survive.

But the conversation spirals around the same question – how and what can we evaluate?  That’s where these articles can be applied to the evaluation predicament.  It takes a collaboration of many different people with different backgrounds and expertise to come up with measurements that make sense.  Orchestras fall into the same kind of reporting as Ted London’s article states; uplifting stories and the fact that you are ‘helping children’ or ‘creating excellent music’ is not a measure of success.  Similarly, the holistic idea of measurement is crucial.  Measuring attendance is like only measuring products distributed, but not how those products are affecting the people who receive them in their lives and communities.

My solution to this problem is an arts take on the holistic view that encompasses effective supply and effective demand.  In my experience, traditional orchestras have a tunnel-vision view of ‘demand’.  Demands are changing, and there’s no way to please all people all the time.  Orchestras need to understand where they fit into the larger picture of the community.  In some places, sticking to a traditional ‘classics only’ season may actually be sustainable.  However, in others, new music or overlapping popular interests with the classics will be more sustainable because you are adjusting your supply to match the demand.  Also, I whole-heartedly believe that arts organizations, like social ventures and other initiatives should learn as many lessons as they can from businesses.  This background will help them compete in today’s changing world of entertainment and culture.

In conclusion, arts organizations should closely follow the progress of social ventures and their methods of evaluation and measurement.  Their missions, while different, dovetail in many ways and both sectors can learn from each other.  Evaluation is a difficult conversation when societal value is the determining measurement, but from these articles it is clear that there are tangible outcomes from whic all sectors can benefit.

crowdfunding

Reading about the funding gap that exists for social enterprises because of their existence somewhere in between for profit and not-for-profit models got be thinking about different crowdfunding models and how those could be better used to support social ventures. Websites like kickstarter.com and indiegogo.com provide groups, individuals, and businesses a way to raise funds from people all over the world through the power of the Internet. Kickstarter's model focuses mainly on creative projects, but it has been very successful in helping all sorts of people get funding they could never have raised on their own. Generally speaking, the projects proposed don't need to raise all that much money (certainly not as much money as would be required by significant social enterprises), but it provides an interesting model that could be potentially be expanded. Socially minded projects seem like they would be perfect so funding campaigns designed around social media and awareness. The kind of crowdfunding model described above could easily benefit initiatives focusing on issues of poverty, education, and other basic human needs to the same way Kickstarter helps creative projects. The questions is, how can we expand that model to provide the kind of financial support some of these projects need? I'm not sure how to make this kind of crowdfunding sustainable or robust enough to provide the kind of support needed by social enterprises, but I think it's certainly worth thinking about.

Can A Business Model Be Creative?

The rallying cry in the non-profit arts field nowadays is "the non-profit model is dying/not sustainable/unreliable/not fit for human consumption". Forums are held, conferences are convened, panels are moderated and everyone comes to the same conclusion - the funding model is broken - but that seems to be as far as it gets. In the reading for this week, I was glad to see that effective aspects of ascertaining for-profit success are being adapted to determine the viability of social enterprises. However, I think the field could innovate itself a really awesome, brand new business model. I would assume that the trouble is that those who enter into the field to create products, systems, strategies, solutions, what-have-you - aren't entirely interested in the nitty-gritty business stuff.
When Bill Gates gave the Harvard commencement address in 2007, he asked graduates "to invent a more creative capitalism". And as the economy continues to operate on shakier and shakier legs, creativity seems to be the most important weapon in the arsenal. The L3C model may be the way to go - as discussed in this article.
One of the greatest offerings of the L3C model is flexibility. There's a wider range of funding options, flexibility in organization formation and somewhat decreased bureaucratic interference. To my knowledge, there are only a few organizations actually working under this model and they haven't been in existence long enough under this model to illustrate whether this is the model we should all move towards.
But perhaps shifting from one broken model to another largely unproven model continues to put the field-wide eggs in one basket. While the field of social innovation continues to attract visionary, creative engineers, designers and problem solvers - perhaps there's we should attract business innovators who will take creative approaches to what has been typically thought of as the complete opposite of creative.

Community-funded micro-grants

I first learned about this type of funding effort in the beginning of 2010 when a new monthly event was created in Detroit, called Detroit SOUP (www.detroitsoup.com). Every month, community members show up and pay a modest $5. In return, they are served a meal, during which people from the community pitch ideas for creative projects that would have a positive impact on the community. At the end of the dinner, after hearing all of the presentations, you cast a vote for which project you feel should get the funds. The project with the most votes walks out with all of the money raised during the evening, often between $600 and $900. It brings neighbors together, face-to-face, to talk about issues facing their community and how they can influence change. That in itself can have enormous social impact. Those ideas that resonate the most with people in the community, those likely to have the greatest social impact, get a needed financial boost that doesn’t need to be paid back. Soup events are now popping all over the place. (There’s even one in Pittsburgh! Check out www.sundaysoup.org to see the international network of these events.) Although not appropriate for many larger social ventures, I have been fascinated with this growing movement. Funding mechanisms like this can help small, community-based projects that just need a small infusion of capital to get started. It builds their credibility and can help demonstrate to other potential funding sources that they have the community’s support.

So, how can we improve this model? I think that collecting more follow up information could increase the benefit for the community. For example, tracking the progress of funded projects, measuring their social value to the community, and soliciting feedback from those who have been impacted by the project could help engage more people and make those funded more accountable to the community.