29 April 2010 ~ 11 Comments

Much Ado About Scale

A few months ago I was involved in a long discussion about hybrid organizations on Social Edge. From that conversation, I ended up writing a post called “Dear Social Entrepreneurship Thought Leaders” about my views on the metrics and definitions we are using for social enterprises.

Recently, I was lucky enough to be asked to synthesize these thoughts for the latest addition of Beyond Profit magazine where this piece is now featured: Much Ado about Scale.

If you have not been to Beyond Profit’s website before, please do!  They have  a blog featuring interesting social ventures and ideas from around the world and from their site you can subscribe to their social enterprise magazine. I am a big fan of what they are doing and am delighted for the chance to write for them!

The text from the article is below but click on the link to see it laid out: Much Ado about Scale

The social venture movement grew out of a rebellion against big business and international non-governmental organizations (NGOs). We shook our sticks at self-indulgent big businesses and turned up our noses at the waste and inefficiencies in the traditional non-profit world believing we had a better way to do things. We claim to be the outliers, looking to make an impact on the people and problems the traditional sectors have left in their wake, but have we really chosen a different path?

Like a middle child, stuck between businesses and NGOs, the social venture movement clamors for attention. We are quick to point out flaws but, like our sibling sectors, social entrepreneurship has drawbacks, too. Although we try to distance ourselves from our siblings, we continue to hold profit and scale as our markers of success. Groups supporting our sector, like The Skoll Foundation or the new Unreasonable Institute, choose projects that “expand to a new country within three years” or “reach over 1 million people.”  Have we forgotten the value in knowing the place of origin and its people? Often, that is precisely what makes a program successful. By limiting the conversation—as Skoll and Unreasonable and many others do—to for-profit, scaleable, sustainable enterprises, we are ignoring the good work of many entrepreneurs and organizations.

Some things can be scaled easily, the processes can be repeated, and the results in one place might be similar to another. Take, for example, Colgate. The company reaches millions of people with their products, encourages good dental hygiene, and makes a nice profit while doing so. Is this what we aspire to be?  No, most of us are not seeking a fortune at the bottom of the pyramid; we’re trying to create lasting change.

We need to speak differently about the realities of improving lives, whether it is through for-profit or non-profit means. But we limit the conversation when we only value one or the other.  Changing lives involves working closely with communities and the men, women and children within them. Lest we forget, people don’t change their habits overnight, nor can we move them out of poverty overnight. By demanding that all “social enterprises” in need of investment be card-carrying members of the “scale up” train, we are going to miss out on groups that have quality, lasting, bottom-up impact.

The fact is, scale can often dilute impact. Practitioners are often forced to choose between  improving the quality of a product/service, or offering a more affordable product or service. For example, take microcredit. It can be profitable by itself. But, a microfinance institution that sinks time and money into education, vetting, and training, resulting in an improved product, does so at the expense of profit and scale. Or, take the case of water. Which would you support? A water filtration company with the most sophisticated techniques, which ensures clean water?  Or a less effective product which is profitable and can scale?

We should take lessons from those large-scale international NGOs implementing projects which have lost touch with the people and communities they are claiming to support by “scaling up.” We can also learn from some of their solutions: partnering with small community-based projects which have the understanding and flexibility to tailor offerings to local needs. When working with people, it’s not always the solution which can be scaled but rather the process which led to success. Rather than providing incentives for initiatives to scale, perhaps we should start looking for successful localized initiatives and incentivize them to train “competitors” in other areas to spread their impact while keeping localized solutions.

We need to find ways to reward those who choose impact over income and success over scale, as they will be faced with those dichotomies with more frequency. As a sector, we should create new and previously unimagined possibilities. In order to do that, we need to support people who are not satisfied with providing just enough, but instead are focused on the quality of what they are doing.

Investing in groups that have a commitment to quality and impact is harder to track and measure than focusing on scale and profit margins. That requires a thorough understanding of the project and issues they are facing, but that is the point! We need to do the research to know if the impact and their commitment to quality is there, not just the easy task of looking at profits and size. Let’s take “Supporters of Scale and Profit” off our doors and get to the core of what we want to be: “For quality and impact.”

  • http://www.socialeffect.org Rizwan Tayabali

    Nice article. I regularly see a dilution of quality of outcomes in the scaling process. The reality is that scaling social outcomes can and should be seen as independent of the organisations that create and prove the model of change. Recently put together some thoughts on scaling social enterprise here http://social-effect.blogspot.com/2010/03/defin… – thought you might find it interesting.

  • danielapapi

    Thanks for the link, Rizwan. I really enjoyed your presentation. I very much agree that, when are goals are impact over profit, to successfully “scale” in the social sector we need to focus on scaling our outcomes, not necessarily scaling our organizations themselves. I love the way you highlighted many other models and ideas for how to scale our impacts which are distinctly different from traditional profit-driven scaling models. I'll pass on the link!

  • http://www.goinginternational.com Bonnie Koenig

    Excellent succinct article of some too often overlooked points. We've set up structures that 'measure' only in numbers when we should be focused on the impact to people and their local communities. Only in true partnerships will this impact be positive.

  • tejuravi

    Daniela,

    This is a great post and calls into question some important assumptions about scaling social enterprise. I first of all want to thank you for writing it!

    I think your criticisms of a focus on scale are indeed valid, especially if it means organizations sacrifice intimacy with the markets / beneficiaries they intend to serve. I do want to clarify that at the Unreasonable Institute, we indeed look for ventures that have global scalability to millions in their DNA from the very, very beginning. But the very first criteria we look at is something we call of agile development, or a deep and consistent intimacy with the market an entrepreneur intends to serve and a structure or value for remaining intimate with this market over time. If our applicants intend to serve Kenyan farmers but haven't spoken to Kenyan farmers or aren't Kenyan farmers themselves, we're unlikely to accept them. A knowledge of the customer base is one of the single most important criteria for selection for us (and often more compelling than a plan for reaching a million people, which quite frankly, few people can articulate well at the startup stage).

    Whether the resulting enterprise takes the form of a non-profit or for-profit is not something we're concerned about. International Development Enterprises (IDE, website at http://www.ideorg.org), is a non-profit and has lifted over 19 million farmers out of poverty, especially because its founder, Paul Polak, spoke with over 3,000 farmers living on a $1/day or less around the world. And IDE, ensuring that its organizational locations around the world are staffed by locals, remains in constant communication with the farmers it works with, constantly adjusting the products and services it provides based on feedback. These are exactly the sorts of organizations we are looking for.

    That being said, this is only our first year as an organization and I think we have a great deal to learn about what works and what doesn't. Over time, if we find that a focus on scalability does indeed do what you say, Daniela, and mar an intimacy with customers / beneficiaries and dilutes impact, we will alter what we're looking for. And that's exactly why this article is so valuable. We truly believe that these kinds of basic assumptions need to be challenged consistently – this is the kind of conversation that keeps us honest and keeps us dedicated to the ultimate goal of impact.

    So once again Daniela, thank you for the article and I look forward to keeping this discussion going!

  • http://twitter.com/pbjpaulito Paul Jones

    Great article Daniela! I was really struck by your concluding suggestion to strive “for quality and impact” rather than scale and profit. I work with two very different charitable organizations in Honduras, one is a small traditional charity called Friends of Honduran Children and the other is a much larger, newer and more dynamic (albeit maybe less focused) organization called Global Brigades. Each in some ways struggles with scale and has come to their own unique solution.

  • danielapapi

    Thanks for your thoughts and comments. I have added my response and clarifying points about my thoughts on our obsession with “scaling up” organizations in a separate post here: http://lessonsilearned.org/2010/05/why-do-you-h

    I'd love to read your thoughts there as well!

  • Vmlsd

    how about scale and profit while retaining quality and impact?

  • Vmlsd

    how about scale and profit while retaining quality and impact?

  • Anonymous

    That would indeed be ideal! In the cases where that is possible, I do hope that is the goal. Some organizations or projects reach a point where scale or profit maximization changes their impact significantly, so this is the area where I think we need to proceed with caution and be willing to consider prioritizing positive impact over further scale and profit goals.

  • danielapapi

    That would indeed be ideal! In the cases where that is possible, I do hope that is the goal. Some organizations or projects reach a point where scale or profit maximization changes their impact significantly, so this is the area where I think we need to proceed with caution and be willing to consider prioritizing positive impact over further scale and profit goals.

  • danielapapi

    That would indeed be ideal! In the cases where that is possible, I do hope that is the goal. Some organizations or projects reach a point where scale or profit maximization changes their impact significantly, so this is the area where I think we need to proceed with caution and be willing to consider prioritizing positive impact over further scale and profit goals.