Archive for the ‘Social Entrepreneurship’ Category
Is Giving Money Away the Best Way to Change the World?
Bill Gates and Warren Buffet two of the world’s richest men recently pledged to give their money way to charity. They have also been on a drive to encourage other billionaires to do the same. In India Azim Premji recently created waves when he decided to donate much of this wealth towards improving the country’s level of education. It is beyond doubt that these billions donated can go a long way to create social change. But is giving away money really the way to change the world?
Dayo Olapade, of the New America Foundation explores this question. Read the entire article here.
Are Social Entrepreneurs Crazy?
In his piece in The Washington Post, NYU Wagner School of Business’s Paul Light asks the question “Are Social Entrepreneurs Crazy?” Light’s thought is lead by the fact that social entrepreneurs globally seem to be solving the problems that the world is tired of – poverty, hunger, inequality and disease. Given the scale of the problems they are trying to solve, labeling them ‘crazy’ does not appear to be inappropriate.
The notion also stems from the fact that these entrepreneurs are few and far between – perhaps as low as one in every 10 million he says. Light cites John Hopkins’ University Professor John D. Garter who points to the term “hypomania” with reference to business entrepreneurship. Those with “hypomania,” Garter suggests are “brimming with infectious energy, irrational confidence, and really big ideas. They think, talk, move, and make decisions quickly…. Hypomanics are not crazy, but ‘normal’ is not the first word that comes to mind when describing them.”
This notion however is not new. Light points to how Bill Drayton of Ashoka, set out more than 30 years ago to look for entrepreneurs who were possessed with an idea. The difference in practical terms is that being possessed isn’t necessarily being hypomanic. It is more akin to intense “purpose rooted in the belief that the world must change.”
Light’s article goes on to describe this purpose through examples of various enterprises. Read the entire article here.
The Bad and Good News About Evaluation
In this post Devyani Srinivasan writes about the usefulness of evaluation methodologies in understanding the usefulness of the work of social businesses. This post was first published on Devyani’s blog, Devyani Writes.
In an earlier post, I had critiqued the research methodologies of 2 surveys of social entrepreneurs, by Ashoka and Intellecap. Most of my suggestions for improvement were directed towards helping Ashoka and Intellecap better answer the question, “How representative are my results of a larger community (the universe) of social entrepreneurs?” However, at the end of the post I had also mentioned the concept of causation. Causation is important when trying to answer a different question, which is, “How likely is it that my results were caused by a particular intervention, rather than by something else?”
From the 25th to the 28th of October I attended the Evaluation Conclave 2010 in Delhi, where I had the chance to explore these issues further. In an evaluation context, it’s often the word attribution, rather than causation, that is used. Attribution is an issue at many levels. I’ll try to illustrate this using a hypothetical example of a social enterprise.
This social enterprise produces insecticide-treated bed nets. Orders for the bed nets are placed through a microfinance institution, and the bed nets are delivered to customers through kirana stores (corner shops). The social enterprise requires funds for its social marketing campaigns, to cover costs until it reaches break-even, and to develop talent within the organization. It is able to find donors to meet each of these needs.
An evaluation is conducted of the social enterprise, and it is found that incidences of malaria have decreased in the households in which customers have bought bed nets. The donor that funded the talent development program wants to know how its money contributed to the reduction in malaria. However, it is not possible to isolate talent development from the rest of the organization, as the people developed through this program contribute to social marketing, production and all other aspects of the enterprise.
What all three donors can agree on is that they want to know to what extent the reduction in malaria can be attributed to the bed nets. While it’s easy to assume that bed nets resulted in a reduction in malaria, this may not be the case. For example, the government could have embarked on a mosquito eradication program, and sprayed the villages in which the bed nets were also sold.
How do we find out the extent to which the reduction in malaria can be attributed to the bed nets? The strongest evaluation designs that answer this question should have two characteristics. The first is that they should include both the project group, and comparison (non-equivalent control) group. The second is that both groups should be “observed” at both the start and end of the project. If time and budget permit, both groups can also be “observed” during implementation of the project and after it has been operating for some time.
What is it about these evaluation designs that make them appropriate for the social enterprise in the example?
- The project group is “observed” both at the start and at the end of the project. In our example, the project group is households that have bought bed nets. A figure for the incidence of malaria at the end of the project is meaningless if we do not know what the incidence of malaria was at the beginning. The only exception is if the incidence of malaria is 0. However, since this would require all the bed nets sold to be in perfect condition, to be used all the time, and by all members of the family, this is highly unlikely to be the case.
- There is a comparison (non-equivalent control) group, which is also “observed” at the start and end of the project. Even if the incidence of malaria has reduced in our project group, how do we know that this was due to the bed nets and not other factors? The answer is by selecting a comparison (non-equivalent control) group. This group should comprise of households that did not buy the bed nets, but are as similar as possible to the households which bought bed nets. This will enable the evaluator to compare whether malaria declined at a similar rate in the project group and comparison group. If it did, then it is likely that malaria declined due to factors other than the bed nets.
The bad news about evaluation is that it can be quite complicated to successfully meet the criteria for a strong evaluation design. The good news is that between strong and weak evaluation designs, there are a range of options that are frequently adequate. These options are summarized in this overview of Real World Evaluation, a book by Michael Bamberger, Jim Rugh and Linda Mabry. I was lucky enough to attend a workshop that spanned two days, and was facilitated by Jim Rugh, at the Conclave. Based on what I learned at the workshop, I’m going to propose my own design to evaluate the social enterprise in my example above.
If you remember, orders for the bed nets are placed through a microfinance institution (MFI). The social enterprise is still building its distribution network, and has only reached the kirana shops in one geographical area. However, it asks the MFI to aggregate orders from all of the geographical areas in which it has a presence. The customers who have ordered the bed nets, but whom the social enterprise’s distribution network has not reached as yet, will serve as the comparison group.
It is important for the evaluation design that the comparison group also comprises of clients of the MFI. This is because it is likely that MFI clients are more enterprising than other members of their communities. It is possible that even without bed nets, they have devised other solutions to avoid getting bitten by mosquitoes. Therefore, in order to understand whether it is bed nets that have made the difference, the households where bed nets were bought must be compared to other enterprising households, and not to the average population.
The “observation” of the project and comparison groups at the start of the project can come in part from the MFI’s records, as they are likely to have already collected a lot of data on their clients. Any additional data that needs to be collected can be done at the time that orders for the bed nets are placed, before they have been bought and have had the chance to have an effect.
The Real World Evaluation book uses terms such as during, upon completion of, and after the project. In the case of a social enterprise, it is more likely that the evaluation will be of an ongoing business, than of a project that has a start, middle and end. However, as one of Paul Polak’s principles of Designing for the Other 90 Percent is that the design should pay for itself in the first year, one year may be a suitable duration to designate as the project period.
Of course, in this case I have chosen the business model of the social enterprise so that it lends itself to a strong evaluation design. Designing evaluations for actual social enterprises will be less easy. However, I hope my example demonstrates that while difficult, designing a strong, or at least adequate, evaluation is not impossible, and that practical solutions can be found to real world constraints.
Finally, there are some instances in which attribution may either not be possible or not necessary. As I discussed earlier, it may not be possible to attribute the effects of a talent development program within a social enterprise to a reduction in malaria. One example of where attribution may not be necessary is in the evaluation of a sector. Returning to our example, let us assume that an epidemic hits the Asian continent. The government is not prepared for this epidemic. Therefore, in the year the epidemic hits, while all of the government’s planned health programs are successful, the health of the population decreases overall.
In such an event, the overall trend in the health of the population may not be discovered through evaluations of individual interventions or organizations. In a sectoral review, positing an entire nation as a project group and another nation as a comparison group may not be meaningful.
While the example of the epidemic may seem dramatic and unlikely, at the Conclave there was an interesting exchange between a representative of the Rockefeller Foundation and the Asian Development Bank on whether donors should, in addition to evaluating the interventions that they fund, evaluate whole sectors as well. However, sectoral evaluations are likely to be quite expensive, complicated, and therefore rare. For the vast majority of evaluations, issues of attribution and comparison will remain important.
Building Blocks of Innovation
This post is contributed by Villgro Fellow, Jeanne Chen.
A few weeks ago, the Wall Street Journal (WSJ) featured an article: “The Origins of Good Ideas” discussing how many successful innovations aren’t revolutionary, but rather built on existing products. The premise: Existing Products + New Idea + Modified Application = Innovation. The corollary is that new ideas result from cross-industrial applications – the article gives the example of using a motorcycle battery to power an infant warmer. This example and conclusion should be familiar to those in India’s social enterprise sector, where adapting motorvehicle batteries has created a reliable source of power in rural districts. What’s critical to note from the article’s examples is how innovation often arises from sharing ideas across industries, which highlights the importance of bringing ideas together to facilitate innovative adaptations.
In my opinion, this facilitation of idea sharing is one of the more valuable and intangible differentiators of social incubators like Villgro. Bringing together innovations from multiple disciplines, incubators can furnish a fertile environment for new ideas to develop. While incubators can actively facilitate cross-pollination of ideas as part of a recommended course of action, many times the facilitation is passive simply by creating a network of innovators. For example, Villgro’s annual Unconvention social entrepreneurship conference hosts InnoHub, specifically for nurturing partnerships between innovators and entrepreneurs. The exhibition brings together Villgro’s network and creates opportunities for meetings and discussions, which can lead to an alternative application of an innovation resulting in meaningful social impact. In the larger social sector, this is a significant way for Villgro to contribute to the further development of new innovations.
Villgro also hosts monthly Learning Saturday Workshops for its incubatees and staff. Each month’s sessions focus on different themes of best practices, sectoral knowledge, and general social development information with featured experts and guest speakers. These learning sessions have a tremendous potential to help teach incubatees to improve or adapt their technology as well as to encourage staff to look at existing ideas with a fresh eye. From innovative marketing to design, having specific events for the entrepreneurial community to exchange ideas and knowledge helps the sector to apply new ideas to existing systems.
The conclusion of the WSJ’s article, while not a surprise, is a good reminder to all of us that we can all encourage more innovation through the facilitation of platforms for idea exchanges. Social incubators, like Villgro, have a unique advantage in bringing together their entrepreneurial networks and actively creating opportunities for those networks to interact is an important part of their core functions.
The Role of Civil Society in Affordable Housing
Contributed by Robert Moore
India recently saw a spate of announcements for affordable housing projects being launched in various parts of the country. So, what has led to developers getting involved with affordable housing projects in India? A closer look at some of these projects where developers are launching projects in the price range of INR 4-10 lakhs ($ 8000 – 20,000) shows that in most of these projects there is a collaboration with a Citizen Sector Organisation (CSO).
Read more about these potential partnership here.
Open Innovation: Innovation Through Networking
In this article, Vijay Rangarajan, a Villgro Fellow, takes a look at the ‘open innovation’ route to innovation, and looks at its relevance for social enterprises.
In 2004 Proctor and Gamble was able to accelerate the launch of their new line of crisps, Pringle Prints using a new approach to innovation – open innovation. P&G was looking for a way to introduce edible printing on to each crisp. The idea was to have trivia, pictures and words printed on each crisp. Rather than develop the technology in-house, P&G floated the requirement globally, and acquired the technology from a small baker in the Italian city of Bologna. Taking this route allowed them to take the product to market at a fraction of the cost of the traditional innovation model. The term ‘open innovation’ was first used by H.W Chesbrough, of the University of California, Berkeley in his book Open Innovation: The new imperative for creating and profiting from technology. Open innovation is defined as “the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively.”[i]
Traditionally, companies follow the invention model to innovation. If it is a well established firm, they create infrastructure and recruit the best talent from their internal fund to produce innovative products. A fortunate startup or a mid-sized firm would do the same using the funds from venture capitalists. The idea behind this is to keep the innovation within their four walls and gain an edge over their competitors. The focus in this model is on talent and not on the business model. World class talent developed valuable innovation that finds its way to the market. Through this process, the innovations which are not useful to company’s core business are shelved. Often the people involved in developing the idea leave the firm and commercialize the innovation on their own. As a result the firm which financed the innovation is not able to enjoy the benefits. Chesbrough, uses the example of Xerox Palo Alto Research Centre (PARC) to explain how Xerox failed to capitalize on disruptive innovations developed by their own staff. These products were later launched by companies set up by former Xerox employees. The market capitalization of these companies collectively exceeded Xerox itself.[ii]
Secondly, the invention model is not able to sustain the high levels of top-line growth. Stagnation in R&D productivity leading to flattened sales and squeezing by nimble competitors mandated change in the innovation model. Important innovations were originating mostly from small and midsized entrepreneurial companies. Individuals, university and government were looking for ways to make money out of their intellectual property. The above factors led to the new paradigm of open innovation.
Rather than developing all the innovations inside the firm, the idea behind open innovation is to look outside the boundaries of the firm for innovations that can solve business problems. Also, the intellectual property created inside the firm can be licensed to other firms for application in other markets. It is important to understand that open innovation is different from outsourcing innovation. Outsourcing is transferring work to low-cost players. But open innovation is about finding good ideas that are almost ready-made solutions that suit your requirements. Open innovation is a form of crowdsourcing that helps companies to have a rapid design process with the help of ideas of people available globally.
Changes in the way innovations are done in firms have led to emergence of players who play a significant role in connecting technology seekers and providers. They act as knowledge brokers between the R&D labs of multinationals and scientists in government and private labs, consultants and universities. The benefits that the firms that seek them get are several times greater than the seeking charges that these brokers charge. Ninesigma, Innocentive, Yet2.com are some of the intermediaries who provide services to accelerate the process of open innovation. Other ways of looking out for innovations outside the firm would be to have your own people to look out for ideas or look out for innovations among the partners and suppliers you engage with.
The Institute for One World Health (IOWH) is a perfect example of a social enterprise capitalizing on open innovation. The organization is a pharmaceutical social enterprise founded in 2000 that is dedicated to developing drugs that can cure diseases affecting millions irrespective of their ability to pay for the drugs. They conduct an international search for most promising solutions that can cure the most infectious diseases in the world. After evaluating each identified lead, they closely work with the inventors, form partnerships to seek funding, and secure rights to develop these innovations for the noncommercial markets in the developing world where they are needed most. Through their efforts, they are able to provide an appealing outlet for idle intellectual property of pharmaceutical and biotechnology companies. Pharmaceutical scientists, drawn to a mission of saving lives and improving health worldwide, are eager to participate in groundbreaking and compassionate research and development. IOWH also plays a significant role in bringing promising drug research from the lab into the clinic and onto regulatory approval and manufacturing.
These examples show how open innovation can lead to more players entering the market, as well as direct benefits to us, the consumers who use these innovative products. The IOWH example shows how social enterprises can use the idea of open innovation to possibly create greater social impact. Open Innovation has helped realize the full potential of every innovation. But we must remember that it is not a substitute for in-house innovation, which is still required for the development of ideas that do not find a solution outside the company.
[i] Open Innovation Blog, http://blog.openinnovation.net/2010/08/definitive-open-innovation-primer.html
[ii] http://www.quickmba.com/entre/open-innovation/
Innovation and India
In this article, Mayank Jaiswal, Villgro Fellow 2010, looks at how innovation in India differs from innovation in the West, and what might help bridge the gap.
I have always been intrigued by the question – why does systematic innovation and product design happen so much better in the developed world compared to the developing world?
In this piece, I have tried to triangulate the causes and potential solutions, using my reading and understanding of the book “From Jugaad to Systematic Innovation” by Rishikesha T Krishnan, talking to Heather Fleming (Co-founder, Catapult Design) and my own grey cells. I have also attempted to predict some future trends. First, it is pivotal to confirm whether the developed world actually does design better products than those of the developing world? I am not going to quote texts, tomes, or indices as mentioned in the book, but from first-hand experience, the details and attention to efficiency, ease of use and the ‘user experience’ derived from a salt shaker or an airplane, I can say product design is executed better in the developed world than the developing world.
This begs the question: are product design skills God’s gifts to certain individuals or are they acquired? I turned to Heather Fleming for answers. Fleming has worked with Engineers Without Borders both in Kenya and India. She is also an Adjunct Professor at Stanford University, where she teaches at the School of Design where she interacts with students from different nationalities. Speaking to her, I got a sense that genetic disposition may not be a factor, i.e, you don’t have to be born with keen spatial or aesthetic sense. But the cultural differences surely are. For example, Flemming suggests that in the US there is an ‘innovative air,’ particularly in Silicon Valley. This spirit to innovate and make things better is ingrained deeply in the US due to the capitalist nature of society which rewards better processes and innovative solutions to problems. India has slowly started emerging from the quasi-socialist model, moving towards a capitalist model for economic governance. I am not criticizing or condoning the reasons why India took the quasi-socialist route to develop after independence, since I believe that is a separate discussion altogether. However, it is a fact nonetheless and in this model’s focus was on provision of jobs and making mega industries with foreign help.
So is culture the only aspect? Not quite, there’s actually more! Applied design also has a strong role to play in developing a sound innovation system. Fleming pointed out that she went to Stanford to study design and right from the get go the focus was on applied design. This mirrors the discussion about educational institutions and academic institutes referred to by Krishnan in his book. The incentives for educational institutes in the US (and now China too) are tied much more closely to research and innovation as compared to Indian institutions. Also, the funding for basic science research like Physics and Chemistry is huge in countries like the US as compared to India. This leads to more innovative products, which in turns leads to more innovation and better designed products.
The academic research is followed by great infrastructural support. If an individual is passionate about innovation and product design there are a plethora of companies in the US one could join and hone these skills. Apple, which makes the ‘coolest’ products, as well as more mundane businesses like Kellogg are working grounds for product designers. (Yes, Kellogg! I personally think they need to figure a way to increase the shelf life of their product, as well as use less packaging material.) Not to mention established design shops like IDEO or start ups like Catapult Design.
Are we to assume then that individuals do not matter? Is it just the infrastructure? Well, that would not be fully correct. Heather attributes Stanford for her ability to design for “American companies,” but it was her zeal and passion for sustainable design which led her to self-learn concepts of sustainable design (the basis of all of Catapult’s work). Due to her experience, Heather and Catapult incorporate a holistic view of design beyond the nuts and bolts to include questioning who the consumer, what competition exists and how the consumer use the product. Heather has actually taken a few pages from the business analysis book and uses it to design a complete, practical and implementable solution for her clients. Thus, it is not all about the infrastructure!
Finally, what does the future hold? Will the balance remain as is – developed world doing all the design and the developing world following along? This is a tough one, and one can but make educated guesses at best. We can clearly see a trend in countries like India and China towards innovation. There are more incubators opening and more incentives for academic institutions to do cutting edge research, but is the developing world there yet? I would say not really, that it is on the right track but still has a ways to go. On the other hand, is everything hunky dory for the developed world? Not really! The U.S state of Ohio recently banned outsourcing of federal or state government contracts. It is getting tougher for foreign nationals to get jobs in the developed world, given that a major recession is going on and the developed world is facing unemployment issues, but the flight of talent to the developed world was a key reason for its cutting edge technologies. Companies such as Microsoft, Intel have openly valued the role foreign nationals played in growing their companies. Thus these trends do not augur well for the innovation ecosystem of the developed world, but what has to be seen is do these trends continue when the developed world has come out of the recession.
Of course, an ideal situation would be when both the developing and the developed world ignite a healthy competition to attract human resources – the key to innovation – and simultaneously provide infrastructure to support them. In such a situation the world will come out ahead.
The author would like to thank Heather Fleming, Co-Founder of Catapult Designs who graciously gave her time to talk on the subject and review the draft of the article.
Simply Fly: Chapter 1
Traditional businesses have a lot to offer social enterprises. Several pioneering business models are perfected in mainstream markets before being adopted by social enterprises. The low-cost business model is one such concept that has taken root in the sector. In a series of blog posts, Devyani Srinivasan will provide chapter-wise reviews of the book, “Simply Fly” by Captain Gopinath, the founder of Air Deccan, India’s first low-cost airline. The book promises to hold some interesting lessons for social enterprises looking to work with the BOP. This month Devyani presents a review of Chapter 1
In July of this year, the Monitor Group released “Building Houses, Financing Homes: A Study Report of India’s Rapidly Growing Housing and Housing Finance Markets for the Low-Income Customer”. In this report, Monitor defines the low-income customer as one with a monthly household income of between Rs.7,000 and Rs.15,000. In contrast, the BoP literature and books such as Paul Polak’s Out of Poverty talk of the dollar-a-day customer. A back-of-the-napkin calculation suggests that the monthly income of a dollar-a-day customer in India would be around Rs.1,200. Even if this dollar-a-day customer has other family members who are working, it is unlikely that their monthly household income would reach Rs.7,000. Therefore, the low-income customer of the Monitor study is clearly different from the dollar-a-day customer of the BoP literature and Out of Poverty.
Nevertheless, there may be lessons to be learned from Monitor’s business model and other innovative solutions to meet the need of low-income urban housing that can be applied to reaching the dollar-a-day customer. It was with a similar thought in mind that I started reading Captain Gopinath’s Simply Fly, published last year. Captain Gopinath founded Air Deccan, India’s first and largest low-cost carrier. While Deccan is exalted for enabling the “common man” to fly, this “common man” is again not the dollar-a-day customer. Nevertheless, I expected that elements of Deccan’s business model would be applicable to reaching the BoP. In addition, Simply Fly is the autobiography of an Indian entrepreneur, and therefore could be also be relevant to efforts to promote entrepreneurship, and incubate entrepreneurs, in India.
The first chapter of this book, the subject of this post, is on Gopinath’s life from childhood to the time he becomes an officer cadet in the Artillery School. The reader learns that Gopinath’s father is a role model for him during his childhood. Gopinath enters military training, enrolling in a boarding school called the Sainik School where he suffers from homesickness. It is then that Gopinath’s father advises him to be courageous, to take hold of his life and to make something of it. The reader assumes that it is these lessons, learnt from his father, that stand Gopinath in good stead later in his career as an entrepreneur.
However, there are some contradictions that emerge in the first chapter as well, both in the lessons that Gopinath’s father teaches him, and in comparison with the military training that the boy receives. Firstly, while Gopinath’s father is himself a schoolteacher, he likens school to a jail, saying that it is too regimented and that, “real education is in life’s experiences.” He therefore decides that Gopinath will be taught at home until the fifth standard or grade. Not unexpectedly, both the Sainik School and the National Defence Academy, in which Gopinath subsequently enrolls, are highly regimented in contrast, and Gopinath says that he “deeply resented” and “hated” this.
The second contradiction is between equality and hierarchy. Gopinath’s father imbues him with a sense of equality, disapproving of the superior status that the Brahmins (of which he was one) in their village held with respect to the artisan class and Dalits. The army is, in comparison, hierarchical, and on the last page of this chapter, Gopinath describes his discomfort in occupying a position of formal superiority over junior commissioned officers and jawans. I’m interested to see how these contradictions play out in Gopinath’s life, and whether they contribute to his later decisions to leave the army and start Air Deccan.
The Benefits of Doing Well, and Doing Good
Can companies do well by doing good? To my mind, almost all companies are able to make profits while solving a problem rooted in society. For instance, Hemant Sahal, a VIT University undergraduate, has created Callmat, a chemical product which makes water fit for drinking. Sahal’s business has great potential to thrive, because the product is cheap and can solve a common problem in India. In an interview by the Spanish newspaper La Vanguardia, Sahal claimed that if he can not invest the profits made in society, he will have failed in his project.
According to Rosabeth Moss Kanter, who writes here, if a company can integrate the benefits that it offers society more closely into its existing business, that integration can be very sensible and beneficial for the business. Moreover, she highlights that some smart companies are finding that including a focus on benefiting society in their mission can help yield competitive advantage by creating a corporate culture that leads to high performance and profits.
On the other hand, Kanter argues that there are a number of reasons why incorporating social good into strategy can improve a company’s long- term performance.
- Can help motivate employees.
- Help to maintain a cohesive culture despite the diversity.
- Can help spark innovative thinking by exposing employees to new ideas and perspectives.
Also, the writer points out that the reason many companies now want to enter emerging markets is because those markets are growing. But companies are discovering that there are so many social and environmental needs in emerging markets and those needs can be a good source of new product or service ideas that people will pay for. For instance, in November 2006, Danone launched a yoghurt called Shoktidoi, designed to provide a response to the nutritional needs of Bangladeshi children at an affordable price.
Furthermore, for surviving, companies have to do some good for society to continue doing well financially. Fundamentally, companies that are not somehow doing good will eventually have problems. For Kanter, information about a company’s behavior anywhere in the world is more readily available to people all around the globe. That is why most companies try to invest part of their benefits in their Corporate Social Responsibility programs.
In conclusion, Kanter agrees that thinking about creating societal benefits through business should be part of setting strategy. If, as a business leader, you start thinking deeply about growing your company, in the future that means thinking about unsolved problems and unmet needs. Solving some of those problems and addressing some of those needs can, if done well, benefit both your company and the larger world.
Three Mistakes Made in scaling Up New Ventures
Most organizations feel that the job is done when they have successfully prototyped the first product or the initial service and are now selling to the first outlet or set of users. They’ve defined success as developing something customers want.
But reality is much different. The journey has just begun. Many fledgling companies and many ventures within established companies fail to capitalize on successful prototypes because they make one strategic error: they do not understand scale-up. In this post Robert Moore looks at three common mistakes in the transition from promising start-up to full scale venture.
Charles Baden-Fuller and Ian MacMillan recently wrote for the Harvard Business Review blog on a topic that is very important to every one of the businesses here at Villgro. From Coir Atlas which provides bamboo/jute alternatives for the wood separators used in steel transportation to a rural BPO called Desicrew, all of the Villgro Incubatees have or will realize a need to shift their customers and products if they are going to scale.
In just this last month I have seen each of these issues in many of the Indian social businesses. While this article talks about the difficulty in scaling correctly in general it is vital that the social enterprise sector think about these concepts early on especially because the social goals they want to meet makes this transition to scale even more complex.
The three basic concepts introduced by Baden-Fuller and MacMillan are
- Realize your customers are not the same as users
- Recognize that first users are not the same as scaling users
- Anticipate that first products are not the same as scaling products
While it is easy to see the user of your product as the customer it is also important to look for other revenue streams that might not be the end user. If you take Wonder Grass for an example, their goal is to sell their affordable housing product to both the village end user and to other organizations that will provide the houses to the end users. If Wonder Grass solely relied on the ability for the villagers to buy their product then it would take much longer to grow to scale.
The authors’ second and third points are where complexity develops in the social enterprise sector. Many social businesses have a particular customer or user in mind when starting the business because of the social benefit they hope to create. When starting small it might be easy to reach your intended user but growing to scale can involve issues with unmanageable distribution channels or even being tempted to focus on a more accessible user who isn’t as bad off and won’t provide as much of a social benefit. Another complexity of this space is that normally the transition from your first to your scaling products would indicate an increase in revenue potential but in the social enterprise space sometimes it means taking a cut in the ultimate earning potential your company can make, especially if that transition involves trading financial return for a social one.
In this sector there are a lot of companies who have taken many years to figure out who their scaling user or what their scaling product and the only reason they are still in business is because they have been supported by the entrepreneur’s previous successes or been given grants to address the social need they are trying to impact. The rest of these social enterprises however do not have the luxury of wasting time and if they aren’t careful will find themselves with customers, users, or a product that does not scale. If they take these ideas of scale into account now the issue of scale will be much easier to accomplish and they will be able to successfully take their impact to the next level.