Scaling Growth is a Dynamic Process

This week’s readings covered the efficiency and social impact challenges that social ventures face as they evaluate and implement growth strategies. In addition to considering their short-term and long-term capacity for scaling, a venture’s growth strategy can also be influenced and sometimes strained by the metrics and relationships defined by partners and trends among competitors in the market.

The ubiquitous and traditional idea that rapid business growth equates to success[1] is outdated and not applicable to most social ventures. Oftentimes the success of a social venture must consider the long-term implications of their growth on their mission.  

Depending on the kind of impact that is sought, slow and conscientious development is best. I witnessed these challenges and the like at my most previous position in a human services non-profit that served homeless families in Norfolk, VA. Our goals for growth were often countered by new funding restrictions and guidelines put into place by our donors and even the federal government. For example, the federal government slowly decreased their funding of homeless shelters nationwide and this impacted our growth model.

While we understood how the new funding restrictions were modeled after an approach geared to serve more families, our agency saw how this pressure to serve more families would lead to a decrease in service quality. In the short term, we saw how this approach lead to less stability for the families we served. To counter this pressure to change our program model, we evolved our fundraising team and strategy to fill the gap of less funding. This was a case where our staffing and fundraising partnerships became a growth priority.

In the case of larger benefit corporations, like Patagonia[2], assessment platforms like B Impact Assessment proved to be a useful and effective way for the company to measure their performance and their impact comparatively in the market.

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[1] https://hbr.org/2013/01/its-not-all-about-growth-for-s

[2] http://bimpactassessment.net/case-studies/elissa-loughman

“For-Profit” Cleanup of India: The Threshold of Social Campaigns and Profit

“For-Profit” Cleanup of India: The Threshold of Social Campaigns and Profit

This week’s theme of venture development and growth provoked me to think about a ‘for-profit’ cleanup of India. This piece is not an attempt to explicitly prototype a project. Instead, I aim to bring insight to the issue of trash disposal in India and make suggestions relevant to the theme of having successful social impacts and formulating growth in social ventures.

I spent my last summer, vacationing in India, unable to refrain from carrying public policy in my mind for the duration of my trip. During the course of my travels, I encountered an artistic project or innovation of some sort, vouching to clean up India. A combination of bright paintings and slogans portraying good moral standards were painted on large walls across the country. This, however, did not disrupt the unsanitary behavior of the country. The status quo of India in plain language: people are living in a garbage dump.

In my journey, I traveled to northern and southern parts of India for over two months and witnessed first-hand, rural parts of India and over-populated cities being central to this issue. As seen in the Washington Post article, India begins ambitious campaign to clean up dirty cities and villages; Prime Minister Modi attempts to tackle precisely these communities. The affluent middle class recognizes this issue and this is seen in the behavior and regional settings of individuals from the upper middle class (and of course the elite). 

Prior to reading this week’s articles, I assumed that the main concern of social organizations is to have an impact, not money. The articles, How Misinformed Ideas about Profit are Holding Back the World’s Poor and Profits at the Bottom of the Pyramid explain otherwise. Important aspects to success are changing consumer behavior and the way products are delivered. The current cleanup campaign ought to consider their product (art) and outcome (the behavior of citizens). The flowery art pieces across the country attempt to promote better sanitation standards yet the population has not budged.

Villagers, residents, and owners of rental properties should be held responsible for the cleanliness of the area in which they reside in or hold ownership to the property of. If this requirement is not met, they should be fined a penalty issued by the government. Having an on-spot fine for littering and overall a no tolerance approach to inappropriate garbage disposal will pertain to a disruption of behavior.

Opponents may argue that the government is profiting at the expense of poor villagers and struggling lower-middle class citizens. The larger impact of cleaning the country, however, spreads results in less pollution, better public health, efficiency, and an economically attractive market in the long term. Should we rely on citizen’s reaction to art in changing behavior against garbage disposal or should the government take a rather profitable measure? 

The Power of The People

My submission speaks to the power that consumers have had throughout American History in altering society and redefining social equilibriums. This relates to this week’s theme because it provides historical evidence of economic actors transforming a system to bring about sustainability.

This week’s readings on venture development and growth touch on effective strategies that social entrepreneurs use to achieve financial sustainability. As outlined in Two Keys to Sustainable Social Enterprise, the key insight that struck a chord with me was the idea that changing the economic actors involved in an existing system can create sustainable financial models that permanently shift the social and economic equilibrium for their targeted beneficiaries. The article also notes that social and economic problems often reflect an imbalance of power among the economic actors involved. Additionally, the article mentions that adding new actors can transform a system. Taken a step further, the removal of actors can have this same effect.

While reading this article, I immediately thought of the critical role that economic boycotts have had throughout America’s history. From the Boston Tea Party, to the Montgomery Bus boycotts during the Civil Rights Movement. The former played a key role in the American Revolution. While the latter contributed to the end of segregated busing in the United States. Each of these events highlight consumers shifting the power balance of the systems in which they exist. Ultimately, they each led to a redistribution of the social equilibrium within their respective systems.

As detailed in It’s Not All About Growth for Social Enterprises, understanding how a venture is growing requires an understanding of how that venture is working. The evidence of how the social movements that I described above worked is now apparent. The United States exists as a sovereign nation and legalized segregation is abolished in our country. Thus, as the article states, social impact is more important than the growth of any particular organization.

Consumers are the key to growth within any social enterprise. However, the success of each of these boycotts only became apparent years after each event occurred. The results of changing actors within an economic system are slow to reveal themselves. In an ever-changing society, where momentum is arguably as important as revenue, can a social venture that wants to maximize its impact afford to wait for this potential payoff?  

A Portfolio Approach Is Not Necessarily The Wisest

Eric Simanis and Duncan Duke’s article, “Profits at the Bottom of the Pyramid” exhibits an Opportunity Map the authors built for companies looking to make a profit from the four billion individuals around the world making less than $1,500 annually (1), like SC Johnson or Pepsi have done. The authors divided up the investment opportunities in nine ways. Though a company can use a single approach listed in the Map, Simanis and Duke insist that, “smart companies take a portfolio approach, following up on each for its manageability and potential return (1).” This point seems particularly interesting to me, because I initially wondered if it truly enabled companies to build their most effective businesses in each market. I question whether companies are equipped to tackle the needs demonstrated by a variety of regions and behaviors all at one time.

My concerns are certainly legitimate, but I will also admit that I possibly underestimated the span and manpower multinational companies can activate in a variety of regions to serve the bottom of the pyramid best. Serving these consumers most effectively requires careful attention to what the company can do to impact and improve the lives of consumers while also generating a profit. I was most reassured when Simanis and Duke dove into the experience of Lafarge, the largest cement manufacturer worldwide. Lafarge is based in France, but has taken a three-pronged approach to improve housing in their “target countries.” The company uses different approaches categorized in the article’s Opportunity Map that include a mature market opportunity, growth market opportunity, and greenfield market opportunity.

One question I have is at what pace Lafarge has implemented these ventures? If Simanis and Duke are correct in their recommendation of the portfolio approach, should a multinational company, like Lafarge, implement these opportunities concurrently? Is Lafarge’s success an example of successful scaling? I initially assumed that using a multipronged approach all at once in various target countries meant less attention towards pushing for change in consumer behaviors and the effective delivery of the company’s product in individual regional markets. Perhaps it has nothing to do with the number of ventures a company pursues simultaneously.  What likely determines the success and failures of these ventures is the kind of undertaking a business chooses and the environment a company works.

Simanis and Duke discussed the difficulties SC Johnson faced with their cleaning services in Nairobi verses the achievements they made in the Ghanaian market for insect control. Simanis and Duke shared details of both ventures, but I think there were likely more external factors surrounding insect control and cleaning services that contributed to and perhaps determined the level of success both ventures had. The article demonstrates the success of SC Johnson’s business model in Ghana, but I wonder if there was a well-cultivated ecosystem for insect control already present. Perhaps, on the flip side, SC Johnson put more effort into cultivating the environment for their success and effectively scaling their business model in Ghana. Maybe that is what played a role in the difficulties they had in Nairobi?

My questions certainly have the potential to oversimplify the efforts multinational companies are making at the bottom of the pyramid, but understanding the pace and range of these ventures as well as the ecosystem they are built into could help to decide which ventures are able to serve the bottom of the pyramid most effectively, and which are not.

1. : Profits at the Bottom of the Pyramid (Simanis and Duke, Harvard Business Review, October 2014)

2. It’s Not All About Growth For Social Enterprises (Harvard Business Review Blog Network, January 21, 2013); http://blogs.hbr.org/cs/2013/01/its_not_all_about_growth_for_s.html

Capitalism solves social issues when partnered with a sense of purpose

One of the first things that struck me about social entrepreneurship is its embrace of capitalist ideals to address social problems. As pointed out by earlier blog entries by my colleagues, the importance in focus to a core mission is what distinguishes these ventures. This ability to bench-mark success based on how closely the company is serving the mission rather than profits alone is what makes social ventures able to solve the problems of society.

I found the article by Hugh Whalan, “How Misinformed Ideas about Profit are Holding Back the World's Poor", particularly helpful when determining what issues prevent the utilization of capitalism for addressing social needs. He illustrates three points that are crucial to understanding why capitalism is important in addressing social problems. The first point is that misconceptions about making money from countries with poorer citizens is unethical. He points out that in fact starting new ventures creates competition, which "brings prices down and creates choice"(Whalan). His second point is that there are other companies already involved in these markets such as Coca-Cola. Whalan argues if Coca-Cola can sustain profits in these markets selling a non-essential good, why can't companies that provide products they need succeed too? The third point which I agree with is that, while there are uses for charity funds, charity alone does not provide a sustainable solution for addressing the needs of the world's poor. 

To create ventures that are both sustainable businesses and address social problems there must be an avenue to create them. B-Corporations represent a means of developing these organizations, that are not only captive to the return on Investment for their investors. This organization structure provides an opportunity to commit to a company mission of social good that is as Bob mentioned in his blog entry having a “clear vision to bring opportunity” to all stakeholders.

Supplementing the theme of this week, venture development and growth, these principles of the free market provide an avenue for social entrepreneurs to success in delivering new products and creating successful companies in the developing world. Capitalism can solve issues, such as delivering cleaner natural fuel stoves to families in India, by creating a supply chain from the producers of these new products to the people that need them. To create ventures that are scalable and sustainable, the methodology is simple; be focused in the mission of the company, benchmark success based on stakeholders served, and identify ways to reduce overall costs. 

Experimenting to Prove Program Efficacy First

     Social ventures need to prove that their programs ‘work’ before they are taken to scale. The scientific process models how to obtain this proof – only, funders need to better support this groundwork before they make larger investments in unproven programs.


     This week’s readings present two main measures of social ventures’ abilities to ‘work’ effectively. First, Kimberly Dasher Tripp argues in “It’s Not All About Growth for Social Enterprises” (1) that the most important measure is the ability to prove impact. By asking “so what?” about traditional business growth metrics, a venture following Tripp’s model will ‘work’ best because it knows it’s moving the needle on its target issue.
  A second measure, from Simanis and Duke’s “Profits at the Bottom of the Pyramid” (2), is a venture’s ability to secure small-scale profitability early on. “A steady flow of profits, however modest, will then allow companies to tackle riskier growth opportunities with greater social impact.” By taking things slow, a venture following Simanis and Duke’s model will ‘work’ best because it will be financially sustainable.
  Despite both articles talking about similar poverty and public health issues, these criteria are very different. Taken together, we conclude that the impact must be sufficient to justify the spending of profits, while the profits must be sufficient to sustain the impact. Additionally, the achievement of both measures must be proven before scaling the program.
  That’s where MIT economist Esther Duflo comes in — specifically, her TED Talk titled “Social Experiments to Fight Poverty” (3). In it, she talks about applying the scientific process to social issues. Referencing modern drug trials, she describes using “the same randomized, controlled trial for social policy… you can take the guesswork out of policy-making by knowing what works, what doesn’t work and why” (3).
  One example that Duflo gives is similar to the health issues from the class articles; she studies methods of increasing vaccine clinic use in rural India. By conducting a randomized, controlled trial of an incentive treatment at 134 clinics, she proved that the treatment was impactful and cost-effective. Her experiment satisfies both Tripp’s and Simanis and Duke’s measures, and acts as a green light for scaling.
  Duflo’s experiments relate to a separate problem raised in Tripp’s article, too. While the vaccine clinic experiment was pre-scaling groundwork, it still cost money. According to Tripp, “funders have traditionally been interested in how their money is attributable to a specific impact (e.g., my money built X number of schools)” (1). In order to support impactful, financially sustainable social ventures, funders must do their part to “cultivate the ecosystem…[through] business and product development, marketing, evaluation, advocacy, and training” (1).
  This type of “shared contribution” (1) may not sound as good to funders as ‘X number of schools’ but, if the schools aren’t impactful or sustainable due to a lack of groundwork, the question that needs to be asked is “so what?”


References:

(1) Tripp, Kimberly Dasher. “It's Not All About Growth for Social Enterprises.” Harvard Business Review, 7 Aug. 2014, hbr.org/2013/01/its-not-all-about-growth-for-s. Accessed 18 Sept. 2017.
(2) Simanis, Erik, Duke, Duncan. “Profits at the Bottom of the Pyramid.” Harvard Business Review, 28 Oct. 2014, hbr.org/2014/10/profits-at-the-bottom-of-the-pyramid. Accessed 18 Sept. 2017.
(3) Duflo, Esther. Social Experiments to Fight Poverty, TED, Feb. 2010, www.ted.com/talks/esther_duflo_social_experiments_to_fight_poverty. Accessed 18 Sept. 2017.

For Profit, with a Heart? (Week 4)

Of this week’s readings, the piece by Hugh Whalan, “How Misinformed Ideas About Profit Are Holding Back the World’s Poor,” struck me as particularly interesting in light of this past week’s lectures and their focus on the importance of designing and innovating for an audience or target demographic. Germane, too, is Dan Lockton’s guest lecture from Thursday 07 September, when he spoke about how imaginaries govern our relationship with the world around us and how perception is often far more important to our understanding than is reality. This seems a fortuitous intersection of ideas because Whalan makes a compelling case¾as does his company’s growth and social impact profile over the past couple of years¾that a profitable business and a positive social force need not be mutually exclusive concepts.

What Whalan’s examples show has been the focus of Lockton and Dr. Zak’s lectures over the past three class meetings. The strategies of these companies, and perhaps their successes, seem directly attributable to their embrace of geographic and population-governed product diversity. Jamii Bora, the aforementioned Kenyan microfinancier, was created specifically for its target demographic, a customer base of now over 360,000 Kenyans who previously had no access to banking and have since been given the opportunity to serve as agents in the improvement of their lives rather than merely recipients of well-meaning aid.[1] The bank’s founder, Ingrid Munro, talked about the access to financial services as being rungs on a proverbial ladder out of poverty; amongst the original 50 clients of Jamii Bora are former beggars who now run their own businesses and employ others. As a consequence of the very visible success of the bank’s customers, the organization has experienced such growth since Whalan’s article that they’ve announced that the bank will continue their shift from a strictly mobile model to having “fully-fledged bank branches” as well as expand outside of Kenya.[2] This is, arguably, directly attributable to their focus on the needs of their population¾unlike Coca-Cola or Diageo, though, which are able to enter the market from an external position of power and tailor a beverage to suit a resource and taste, the success of Jamii Bora and PEGAfrica arises from their ability to function within localized economies (within Kenya and Ghana, respectively) with specific needs.

This is where those imaginaries live. Whalan and Munro each identified a specific problem and set about finding a solution that would work specifically for and within the population in which they had identified the problem. This doesn’t seem like a spectacular leap of logical reasoning, but one can find dozens (if not hundreds, or even thousands) of examples of organizations and efforts that have been created in order to address a problem who set about to do so by imposing their solution onto the population experiencing the problem. I would argue that this mindset, and not whether a solution comes from the for profit or non-profit side of the economic aisle, is what makes the difference when it comes to success or failure. The people that Whalan and Munro have assisted have been given agency for their own success. They have been given access to technology or systems previously unavailable to them, but by means that make sense for them both socially and economically. They are not trying to change the people; they are changing what the people have the means to do. And that might make all the difference.

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[1] https://jamiiborabank.co.ke/about-us

[2] https://jamiiborabank.co.ke/about-us