Build a scalable model
Social Impact Business Modelling Principle no. 3
“We believe that… the solutions to the world’s most entrenched social problems exist… it’s just a matter of getting them to scale” (Christina Hachikian, Executive Director, Rustandy Center for Social Sector Innovation) (1)
This message from Canada is tapping a phenomenon well and truly present in the social sector — in Europe just as much as on the other side of the Atlantic. Most new organisations are small and local. There is proliferation — 25% of social enterprises are under 3 years old in the UK (2) –; but growth is rare. Between these micro-businesses and large charities or public service organisations, there is a gap in the middle and that’s not optimal. Incumbents could use innovative grassroots ideas and community insights; micro-enterprises have the capacity to contribute more but need support to do so. Cooperation within and outside the sector, innovative business models and favourable policy could do a lot to increase the combined impact.
Scaling impact
The first challenge is that scaling impact is a relatively uncharted territory in the theory of business. There are many tested frameworks on scaling for profit growth and a lot fewer on how to reach more beneficiaries with a social impact product or service. As the objective is different, execution needs to be different, too — we need new business models.
Deepening and spreading reach
Both deepening and spreading reach increases impact. An organisation can focus on providing a more diverse range of opportunities in the same community like OzHarvest (vertical scaling); or taking the same service to more and more people like Aravind (horizontal scaling). Ideally of course one would aim to do both, and that is where considering alternative impact scaling models can really speed up the process.
Horizontal scaling through standardisation
This is a business model very well known in for-profit industries (think of McDonalds), but often shunned by the social sector as “impersonal”. Yet the benefits of standardisation-based models would be welcome in the social sector: they are immensely helpful for sharing best practices and cutting operational costs. Once expanding outside a local community and maybe hiring staff, social organisations face the same challenges of supply chain management, remote work, human resource management and payroll as any for-profit business. Frameworks and principles of operational efficiency like lean and TQM work the same way regardless who your customers are.
Vertical scaling through engagement
For a social impact solution to become more than a standalone or one-off service, it has to be adapted and owned by the community. On a micro scale, the community knows best how to solve for their challenges, so they can build the best product. As they engage with the solution to enhance it, a highly value focused, “pull” diversification occurs naturally: they build what they need. Methods like participatory design, HCD or SenseMaker® can help with efficient and respectful engagement to encourage holistic, embedded solutions.
Bringing it together
The following three are innovative models for the social sector that combine horizontal and vertical impact scaling sustainably.
Open source models
Often in the for-profit sector scale is achieved by thorough, customised implementation of textbook growth models. Best practices are taught in schools, case studies and frameworks abound; all a business needs is smart people with industry knowledge to tailor it to their needs. Smarts, capability can be developed in-house or bought in the form of high-pedigree consultants or employees. However, this approach doesn’t work so well in the social sector that has fewer “playbooks”, relevant case studies and money to spend on consultants. Models based on sharing and free-form adaptation are better suited to the resources available:
- Online sharing platforms like AVISE
- Industry subsidised, hands-on training/coaching programmes, such as this one by the School for Social Entrepreneurs
- Best practice sharing communities within the sector, like these business model sharing sessions by Coin Street
This form of scaling is the lightest touch model; it leaves the participating organisations intact, they don’t need to partner or work together.
Partnership based models
This is the oldest trick in the book: partnering with organisations that have access to complementary resources or capability, or have good position in a certain geographic location. Partnerships are the fastest way to scaling as there is little to build; the partners just need to connect the dots.
Whilst it is true that there are a lot of organisations using this model in the sector, we still need more and mostly we need them on a larger scale. Often we stop short due to logistics and complexity; the short-term effort overshadows the long-term potential benefits. Another issue is our ingrained competitive approach. Humans in general are prone to distributive bargaining; partnerships require integrative bargaining, that is to think of not just what we want, but also of what we can offer. Strategic partnerships where all sides contribute their strengths and all benefit from the bargain tend to become a sum more than its parts (consider this case study on Save the Children’s global integration).
Franchising models
Social franchising, the replication of a micro-scale tried-and-true model is a new approach growing in popularity. Preserving the small scale ensures that the deep vertical integration stays intact, whilst scale is still achieved through replication. A good example is We Love Reading, a local community-based initiative built on the butterfly-effect philosophy*. A model based on small daily actions is hard to scale with traditional growth methods. Social franchising on the other hand is proving successful for We Love Reading and similar organisations. The same way as with traditional franchising, the brand and the business model, the best practices are retained, passed on, but branches operate parallel to each other.
(*small actions have far reaching effects).
Tools for multi-dimensional scaling
I believe it is important to emphasise that even in the social sector, developing, testing and sharing completely new scaling models, building both the theoretical and the practical knowledge base and creating “unicorns” requires the three fundamental resources: money, business acumen and technical know-how. Especially money, which buys the second two. Not as indispensable as goodwill, but it is a strong runner-up. Belittling or dismissing the importance of money and professionalism in helping us do a better job would be self-indulgent; yet it still happens. We find it hard to talk about them, as if they couldn’t coexist with impact-focused thinking. Still, there is hardly a better cause to dedicate our smarts to than to building a healthier planet with happier people; and having more money conversations will help us spend not just kindly, but smartly, too.
(1) Intro video on: https://www.chicagobooth.edu/research/rustandy
(2) Social Enterprise UK: The Hidden Revolution, p. 12
