The 3-in-1 Solution

Until very recently, we used to think of welfare as being the sole responsibility of the government. We are even willing to give away a significant chunk of our hard-earned money so that our everyday needs are taken care of without having to worry about them. This system has proven to work fairly well but only to a certain extent. Indeed, several anomalies are lingering or gaining ground in a context of rapid demographic growth and social and economic changes.

However, where the system stumbles, individuals are increasingly taking the lead and disrupting the current landscape with simple and efficient solutions. Take Khan Academy and the virtual school or Grameen Bank and the bank for the poor. These concepts have revolutionized their respective industries and democratized the concept of social entrepreneurship, attracting more and more individuals who want to help find sustainable solutions to social and environmental problems.

One of these individuals are social entrepreneurs Iftekhar Enayetullah and Maqsood Sinha who started Waste Concern in Bangladesh back in 1995. With their concept, not only were they able to solve three critical problems at the same time, but they also found a way to secure sustainable revenue streams and to engage all the stakeholders in the process. Here is their model:

-          The Problem

o   In cities and slum areas, more than 20 000 tons of waste a day - 70% of which is organic - is stockpiled in open dumpings and landfills

o   This causes environmental and health issues resulting from greenhouse gases

o   On the other hand, over-farmed soil in rural areas lacks nutrients and needs more fertilizers

-          The Solution

      A 3 steps process:

o   Collection of waste: waste pickers and communities participate in the collection and separation of waste

o   Composting: a network of more than 60 neighborhood composting plants through the country

o   Marketing: sale of organic fertilizers to distribution companies and sale of carbon credits to large organizations

-          The Impact

o   More than a thousand jobs created

o   Less open air waste resulting in less environmental and health issues – a goal of 90,000 tons of carbon emissions reduction from the atmosphere by the end of 2015

o   Less burden for the population who had to find ways to get rid of the waste

o   Fertilizing solutions distributed to more than 100 000 farmers, reducing the use of chemical fertilizers and increasing the per hectare yield by high percentages

-          The Development

o   Waste concern has moved from a simple small scale composting model (Up to 3 tons/day) to several offerings including a medium scale model (3 to 50 tons/day) and a large scale model (51 tons/day)

o   This concept is being replicated in more than 10 Asian countries as a first step, then will be exported to several African cities

This example shows how a problem for some people can be eliminated and transformed into a solution for others with simple ideas. It also shows how populations’ welfare can be efficiently handled by a streamlined ecosystem engaging all the stakeholders involved in it. The question is why aren’t successful models like this one already replicated everywhere in the world? How can they rapidly be disseminated and scaled-up?

More information on Waste Concern can be found in: http://www.wasteconcern.org/

A Match Made in Heaven

In the past decades, emerging markets achieved tremendous growth rates, resulting in rising attention and investments from all over the world. However, many global and local companies are still shy on grasping the substantial opportunities arising from this development. Others decided to take the bet but failed to achieve their full potential, often because of a mismatch between their offering and local needs. My years working for a consulting firm on Africa related topics confirmed this trend as I was faced with several clients who were aware of the Africa opportunity but saw the continent as a big scary spot on the map and didn’t know where or how to start looking into it. On the other hand, many research and analyses that I performed showed that the population is still struggling with day-to-day basic issues that could be addressed by those same companies. It felt like all the ingredients for a great match were available but the recipe was missing out or was at best very fuzzy.

Human-centered design might be the mean to close this loop. This simple and efficient approach caught my eye lately as it has been gaining momentum across various fields and industries. Through a collaborative and inclusive process, it uses insights from the community as a starting block to finding tailored solutions to specific needs. It is different as a problem-solving technique in its emphasis on the discovery and interpretation phases where people and their behaviors are thoroughly observed and distilled. This method is even more relevant in an emerging markets context where people tackle their problems with very simple solutions adapted to their reality and limited resources. Using human-centered design, these solutions can be more easily scaled-up and adapted to reach a larger target, more efficiently.

Quickly stepping back and thinking through this lens, coming myself from an emerging country, Morocco, my brain is already starting to make connections between observations and possible applications. For example, one thing that pops up to my mind is how groups of people use a system called “the Wheel” to save money and finance important expenses: Each month, all members contribute a fixed sum, the total of which is given to one of them based on a draw or an agreement. What if we could find inspiration in this system to improve the bancarization rate? Another system is how independent grocery shops created an informal network to enable people in different locations to buy items for each other: The buyer gives money for a certain item to the grocery shop manager who calls a fellow manager in the desired location asking him to deliver the requested item to the beneficiary. The managers will later balance their accounts through bank transfers. Can this idea help us rethink distribution strategies to easily reach a larger pool of people?

Modern alternatives to these traditional systems exist but the fact that the latter are still used means that needs are not served in the most efficient way. A bottom-up approach like human-centered design could be the missing link between those needs and the resources available in the world. Companies and other organizations can use it as a powerful tool to efficiently address any topic in any market. If adopted on a large scale, this could generate an exponential number of sustainable and efficient solutions that can drastically improve the life of billions of people. The next question is: How can we make that happen?

What does value mean for you?

Human- centered design thinking makes sense, as the human (your target population) should be at the center of the social innovation that is being designed for them. "The Importance of Frugal Engineering" and IDEO's "Human Centered Design Toolkit" both point out the need for a deep understanding of how people live and will ultimately use a product for the design- process to be successful. Obviously people living in different parts of the world from different economic and social backgrounds have different routines, preferences, and needs. But as a consumer, don't we all benefit from "frugal engineering"? I certainly want products that were designed to maximize customer value while they minimize nonessential costs. This isn't just the desire of the "bottom of the pyramid", but of all consumers. Why isn't frugal engineering more popular among the middle and top of the pyramid as well? Perhaps the tenets and products of frugal engineering will capture the hearts of consumers in developed economies as well. Or is value perceived in a fundamentally different way between the "developing" and the "developed" consumer? Is a radio (or an IPOD dock rather) worth more to the relatively- affluent consumer than extra storage space, thereby affecting each party's value calculations? Finally, is a company like Tata really engaged in social innovation when it designs the Nano? I think the product is certainly socially innovative and fits our class definition of social innovation, but Tata's main motivation is to create a product that's profitable. Is frugal engineering about social innovation, or is it just a necessary step in doing business in the developing world?

Innovation funding Innovation: The Social-Impact Bonds

There is no doubt about the funding gap that exists for social entrepreneurs. These entrepreneurs aim to develop a business that in addition of supporting a social mission also generates a financial return. Social enterprises at the early stages of their inception critically need financial backing to survive and grow. We can only see the full impact of these innovative businesses once they have passed their initial development phase and are in good financial health.

To face this challenge we need to think of creative financial tools to fill this funding gap. One such interesting innovation was the British social-impact bonds. This is a derivative tool tied to the performance of a social enterprise in a defined population. Private investors investing in this bond, channel money to a selected social organization. On the part of the social organization, this tool gives them long term capital to scale up their innovative model. On the part of the investors, financial returns are made by the public sector on the basis of improved social outcomes. If outcomes do not improve, then investors do not recover their investment. This can be measured by a suitable social performance metric.

A diagrammatical view of the Social Impact Bond working can be seen below.

This innovative financial instrument has many advantages, including:

1. Provision of long term capital for promising social innovative ideas.

2. Transfer of risk to private capital markets.

3. The use of public tax money only if the enterprise provides promised social benefits.

For more information please go to the link below:

Source:

http://www.socialfinance.org.uk/work/sibs

http://www.economist.com/node/16789766?story_id=16789766&CFID=145242723&CFTOKEN=80436283

To think about this innovation more objectively, let me propose the following questions:

1. There are many stakeholders involved in impacting a social problem. How can we identify a single entity or group of social businesses for the purpose of funding through this bond?

2. Will this innovative social bond attract enough profit seeking private investor’s money?

3. Can philanthropists be attracted to make a potentially profitable investment such as this?

4. What defines a good social metric? To what extent will we be able to measure the social impact?