Making a dent in the universe

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Christen works as the Venture capital go to guy in The Australian Centre for Social Innovation where I work. He alerted me to the latest Forbes issue on social entrepreneurship, impact investing and using “patient capital” as a VC.

From Forbes profile and story on Jacqueline Novogratz, the CEO of Acumen Fund.

Novogratz plays the role of auditor because, as CEO and founder of the Acumen Fund, helping people starts with financial due diligence. In April Acumen sank $1.9 million into the bank in exchange for an 18% stake, one small investment in a decadelong experiment in charitable giving. Instead of shoveling aid dollars to causes or governments that give away life-­sustaining goods and services, Acumen espouses investing money wisely in small-time entrepreneurs in the developing world who strive to solve problems, from mosquito netting to bottled water to affordable housing. It’s a new twist on the old adage about teaching a man to fish, except that Novogratz wants to build an entire fish market.

Check out the whole story and it’s associated articles. When Steve Jobs talks about making a dent in the universe this is the kind of stuff which resonates with that statement. Writing this on the iPad I consider that stuff great too!

I think there is a serious lack of patient capital playing the social VC (social as not in twitter and facebook but social enterprises) game here in the Oceania region. This is something I will be exploring next year with my colleagues at TACSI.

Drucker on the social challenges in a knowledge society

Quote

From Managing in a Time of Great Change:

The real answer to the question “Who takes care of the social challenges of the knowledge society?” is neither “the government” no “the employing organisation”. It is a separate and new social sector. Government has proved incompetent in solving social problems. The nonprofits spend far less for results the governments spend on failures.

Instead of using the federal tax system to encourage donations to non profits, we have the IRS making one move after the other to curtail donations to nonprofits. Each of these moves is presented as “closing a tax loophole”. The real motivation for such action is the bureaucracy’s hostility to markets and private enterprise in the former Communist countries. The success of the nonprofits undermines the bureaucracy’s power and denies its ideology.  Worse, the bureaucracy cannot admit that the nonprofits succeed where governments fail. What is needed therefore is a public policy that establishes the nonprofits as the country’s first line of attack on its social problems.

Solved is solving Australias Social Issues

There are many different social issues affecting Australians, and one organisation is taking to the community to find solutions.Solved is the new campaign from the Australian Centre for Social Innovation, a non-profit organisation aiming to create and facilitate ideas and techniques that contribute to positive social change. The CEO of The Australian Centre for Social Innovation, Brenton Caffen, says the aim of the 6 week online campaign is to help solve Australias social problems by sharing ideas and solutions that come directly from the community to benefit the community.

 

Featured in story

Brenton Caffen: CEO of The Australia Centre For Social Innovation

Sarah Stokely: Solved Campaign Lead

via Solved is solving Australias Social Issues.

Federation: A Model of Scaling

The McKinsey Quarterly in 2004 wrote about Federation (need free registration), the system of managing local affiliates “that share a mission, a brand, and a program model but are legally independent of one another and of the national office”.

As McKinsey says, out of the 20 largest not for profits in America, 16 operate within a structure called a Federation that is rare outside of the not for profit world.

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More from the article:

Why Federate?

For a federation to realize its potential, the national office must focus on supplying affiliates with four main benefits: a valuable national brand, a reliable system for measuring performance, shared administrative services, and coordinated fund-raising services. Stepping up a federation’s game in these areas might require a delicate rebalancing of power between the national office and the affiliates, but any federation that succeeds will be more than the sum of its parts.

[…]

Federations do have advantages. The federation structure is the nonprofits’ response to the classic management tension between centralization and decentralization. It gives affiliates the autonomy to adapt their programs to meet community needs and to attract local resources—money, staff, volunteers, and board leadership—in a way that centralized national organizations find difficult to emulate. It also offers affiliates the benefits of national scale, which they otherwise wouldn’t have, in areas such as branding and reputation building, fund-raising, administration, and advocacy. Federations, at their best, share their experience on what does and doesn’t work with their affiliates and replicate successful programs across the country.

The Effective Federtation

A nationally recognized brand that communicates social impact and integrity is likely to be a federation’s single most valuable asset, helping in everything from the recruitment of volunteers and staff to fund-raising.

[…]

The role of the national office, then, is to define the brand and to communicate its attributes to donors and local communities, just as a for-profit company would. The national office should develop a culture in which everyone in the network strives to nurture and safeguard the brand—for example, by establishing and enforcing rigorous logo and naming standards.

[…]

Faced with a substandard affiliate, most federations have a choice of living with it or, as a last resort, revoking its charter. A well-run federation, by contrast, develops specific program and administrative standards that help it to review and benchmark the performance of its affiliates and to share best practices. One such federation is the Girl Scouts. To solve the problem of uneven performance among affiliates, the organization developed a tool that lets it evaluate each of them according to a range of criteria, including success in building and retaining a diverse membership.

[…]

Few federations have taken full advantage of the economies of scale to be had in back-office functions such as finance, benefits, information technology, and purchasing. Quite the opposite: many are plagued by a costly duplication of effort. At a certain federation, the affiliates’ persistent distrust of one another and of their national office’s supposed centralizing tendencies has prevented the organization from realizing cost savings of up to $150 million annually—equivalent to 25 to 35 percent of its combined administrative budget. In some cases, the national office provides shared services that affiliates don’t use: one federation found that almost half of its affiliates ignored the Web-hosting and employee benefits services supplied by the national office

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[…]

Well-coordinated fund-raising can help the national office tap into elusive community support. Affiliates, in turn, can get access to national sources of revenue that would otherwise be out of reach. To make the system work, the federation must divide up responsibility for different types of donors (such as corporations, high-net-worth individuals, and foundations), draw up guidelines for the transfer or sharing of resources, create procedures to resolve conflicts, and institutionalize opportunities to share lessons and practices within the organization. All parties must be flexible enough to adjust to changed economic conditions. Typically, the national office owns relationships (such as developing major new donors) that require long-term or up-front investment. It might also undertake fund-raising activities that benefit from scale, such as direct mailing. The affiliates take responsibility for developing local, community-based relationships and should be free to experiment with new fund-raising ideas.

 

Speed, Tempo and Decision Making

Steve Blank is a great person to read if you are interested in start ups and working with new companies in order to develop your customer side of the business.

Here, he talks about the kinds of decisions and why speed is important.

Decision Making Heuristics for the Startup CEO

The heuristic I gave my friend was to think of decisions of having two states: those that are reversible and those that are irreversible. An example of a reversible decision could be adding a product feature, a new algorithm in the code, targeting a specific set of customers, etc. If the decision was a bad call you can unwind it in a reasonable period of time. An irreversible decision is firing an employee, launching your product, a five-year lease for an expensive new building, etc. These are usually difficult or impossible to reverse.

My advice was to start a policy of making reversible decisions before anyone left his office or before a meeting ended. In a startup it doesn’t matter if you’re 100% right 100% of the time. What matters is having forward momentum and a tight fact-based feedback loop (i.e. Customer Development) to help you quickly recognize and reverse any incorrect decisions. That’s why startups are agile. By the time a big company gets the committee to organize the subcommittee to pick a meeting date, your startup could have made 20 decisions, reversed five of them and implemented the fifteen that worked.

Tempo = Speed Consistently Over Time

Once you learn how to make decisions quickly you’re not done.  Startups that are agile have mastered one other trick – and that’s Tempo – the ability to make quick decisions consistently over extended periods of time.  Not just for the CEO or the exec staff, but for the entire company.  For a startup Speed and Tempo need to be an integral part of your corporate DNA.

Great startups have a tempo of 10x a large company.

Drucker on Knowledge Workers

Peter Drucker has been the seminal person in identifying the most important trends that will have the biggest impact on the world. From creating the field of management to drilling home the importance of business tools for the social sector and to identifying that the biggest challenge for the 21st century is the productivity of the knowledge worker.

The one thing that was not clear from Drucker’s writing was how to do it. I think that the whole Agile/Scrum methodology is geared towards knowledge workers (yes, software developers are another kind of knowledge workers) and the Radical management stuff promoted by Steve Denning with a focus on client delight fits very well.

So what does Drucker actually say?

Drucker (1999, p142) describes six major factors determining knowledge worker productivity.

1. “Knowledge worker productivity demands that we ask the question: “What is the task?”

2. It demands that we impose the responsibility for their productivity on the individual knowledge workers themselves. Knowledge workers have to manage themselves. They have to have autonomy.

3. Continuing innovation has to be part of the work, the task and the responsibility of knowledge workers.

4. Knowledge work requires continuous learning on the part of the knowledge worker, but equally continuous teaching on the part of the knowledge worker.

5. Productivity of the knowledge worker is not – at least not primarily – a matter of the quantity of output. Quality is at least as important.

6. Finally, knowledge worker productivity requires that the knowledge worker is both seen and treated as an ‘asset’ rather than a ‘cost’. It requires that knowledge workers want to work for the organization in preference to all other opportunities.”

And each of these aspects are covered through the agile methodology. What is the task? That is exactly what is suggested is clarified at the start of each iteration through user stories etc from the client. Drucker talks about autonomy and this is what is achieved through the use of self-organising teams which decide what they can do in a iteration and how they want to do it. The self-organising team along with sprint planning and retrospectives create the right environment for reflection and continuous innovation.

The absolute need for running a self-organising team is to realise the importance of these individuals and their brain power and that it is the biggest asset of the organisation. How we tap into that will be the key. Focussing the whole aspect of creation on client delight at every iteration makes sure that quality is the name of the game.

In a nutshell,

The principles of Radical Managementsm are: 

- A shift in goal from making money for shareholders to delighting customers through continuous innovation. 
- A shift in the role of managers from controlling individuals to enabling self-organizing teams. 
- A shift in the way work is coordinated from bureaucracy to dynamic linking. 
- A shift in values from a preoccupation with efficiency to a broader set of values that will foster continuous innovation. 
- A shift in communications from top-down commands to horizontal communications.

 

Ofcourse, as a Knowledge worker it is each and everybody’s responsibility to keep learning and growing. And here is where Drucker believes that teaching is the best way to learn something.

Drucker also adds that “…to be successful, the knowledge work must be focused as part of a system, on the needs of the customer and business strategy.” This is clearly achieved through the focus of the ScrumMaster and Product Owner on the needs that satisfy the client the most. This is the pull aspect of work rather than push from a lean thinking point of view.

The stuff on aligning for business strategy is a much larger point and is the role of senior management to make sure that all projects are aligned with the larger business strategy.

Drucker points out “that many knowledge workers have many activities beyond their core task which take up their time and remove their concentration, thereby impacting productivity. He strongly advocates concentration of effort, with other tasks minimised or delegated.” This has been clearly suggested in various ways in the agile literature through the use of Kanban techniques or the need for no interference in a sprint etc.

Working at Families SA I have realised that social work, residential work, psychologists etc are nothing but knowledge work. It is absolutely the same regarding TACSI. I have never seen this work being identified as such. Once we do that then it becomes clear what the next step is. It is to start creating the management structures, incentives and work environment that is suitable for knowledge workers.

What is quite fascinating for me is the clear alignment of the agile methodology along with the explanations of Steve Denning and their answer to Drucker’s questions. This is exciting.

Drucker puts a lot of responsibility on the knowledge worker to manage his time, to learn continuously, to learn how to work in a team and to determine what makes them tick. It is a lot of responsibility and Drucker has some great answers for that. That will be a another post.

Business Coach

I wrote a few days back about MBA and Social Change and discussed the idea of how we need all the four aspects of

ResourcesExpertisePassionsContribution.

to create successful change.

At What Matters website from McKinsey there is the same discussion with some vibrant comments.

Matthew Bishop writes:

Different skills are required at different stages along the way—from the single-minded determination of the entrepreneur with an idea to the visionary and organizational capacities of the CEO leading a large corporation. Those like Bill Gates who make it all the way from the garage to the corporate boardroom as the head of their firm are remarkably rare.

Contrast this with the social sector, where the praise and reward always seems to be focused on innovative new ideas rather than the boring challenge of taking these ideas to scale. Social entrepreneurs are rightly celebrated, but we should also celebrate the social bankers, social venture capitalists, social equity investors, and so on. This is why I’m excited by the influx of suited MBAs into the world of doing good. And why, more generally, I think that those who want social change need to embrace the language and methods of business.

This is exactly my new role as Business Coach for the Family by Family project in Adelaide. FbyF has been innovatively developed by The Australia Centre for Social Innovation or TACSI based here in Adelaide. They are one of the few people I know in Adelaide who understand the need for business tools and frameworks for social enterprises.

They have created a new model of supporting @risk families to go over the hurdles by being mentored by a Sharing family. My role is to make sure that in the next year we have an evaluation of the intermediate outcomes and long term impacts, test the viability of the business model, create systems for scaling and getting the project ready for a a greater impact across Australia and may be on day across the world.

I have been lucky enough to work in my current role at Families SA and work part-time at FbyF as a Business Coach. One of the first things that has changed for me is that I have started blogging again after a long hiatus and that is a good thing.

Check out this video on the 7PM project.

Family by Family on TV from TACSI on Vimeo.

Acumen Fund: 10 years of patient capitalism

Acumen Fund was started 10 years back in 2011 as an investment model to fight poverty around the world. It is a great model to initiate social enterprises and social entrepreneurship around the world.

These are the ten things they have learnt in the last ten years. According to them in the last 10 years more and more organisations have come up in the “impact investing” sector and they are now about 1999 as of 2010.

So the lessons learned:

  1. Dignity is more important to the human spirit than wealth
  2. Neither grants nor markets alone will solve the problems of poverty
  3. Poverty is a description of someone’s economic situation, it does not describe who someone is
  4. We won’t succeed in the long term without cultivating local leaders, local money and strong communities
  5. Great people, every time, no exceptions
  6. Great technology alone is not the answer
  7. If failing is not an option, you have ruled out success as well
  8. Governments rarely invent solutions, but they can scale what works
  9. There is no currency like trust, and there are no shortcuts to earning it
  10. Patient capital investing is built upon a system of values; it is not a series of steps to be followed

Jacqueline Novogratz founded Acumen Fund and she has written about the background and growth of the sector in her book, The Blue Sweater.

From the Economist:

In “The Blue Sweater”, her recently published autobiography, she describes her past frustrations working in such pillars of finance and development as Chase Manhattan bank, the African Development Bank and the Rockefeller Foundation. She found them bureaucratic, distant and condescending to those they sought to help. So in 2001 she set up Acumen Fund, a “social venture capital” outfit, to promote what she calls “patient capitalism”. Acumen is an odd mix of charity and traditional investment fund. It takes donations from philanthropists in the usual fashion, but then invests them in a businesslike way, by lending to or taking stakes in firms. The recipients—private ventures aiming for profits—must serve the poor in a way that brings broader social benefits. Acumen goes to great lengths to measure those benefits, and thus the efficiency of its work.

Acumen’s charges are a diverse bunch. In India, Drishtee runs a network of internet kiosks in rural areas, while LifeSpring runs low-cost maternity hospitals. A to Z Textile Mills, a manufacturer of antimalarial bed nets, has grown to become one of Tanzania’s largest employers. Some ventures, including a Pakistani mortgage provider and an Indian pharmacy chain, have flopped. But many others manage to repay their loans (granted at below market rates) or generate dividends. Acumen reinvests its profits in other companies, thus stretching the initial donations further.

[...]

Ms Novogratz dismisses those such as Jeffrey Sachs, an influential economist, who think that the bottom billion are too poor to be treated as consumers, and should sometimes receive handouts instead. “When Jeff Sachs says every poor person should receive a free bed net, I agree—but in reality many end up not receiving one,” she says. “And I don’t live in a world of shoulds.”

 

 

 

MBA and Social Change

Charles Cameron asks a good question over at Social Edge:

What exactly is a social enterprise?
Is it a business? Is it a business, plus? Or is it something else entirely, something new, perhaps even something not yet defined?
The question we’re looking at this week echoes one that came up at a recent career development session at the Haas School of Business at the University of California, Berkeley.
The coach for that session made an interesting observation: that students in the liberal arts believe their careers should leverage their appetite for passion and contribution (to the world we live in, and the world our children will inherit) while MBA students believe in the importance of resources (read: dollars) and competences (read: expertise).
Two groups, two streams of students who will shortly be entering the workforce -and four significant considerations that motivate their career choices:
Resources. Expertise. Passions. Contribution.
There are some interesting discussion on the topic there but as an MBA and somebody interested in social change here is my take.
Passion is critical for personal satisfaction satisfaction and big success. I say big success because a lot of things can still be achieved in the world through hard work. However, in the start up world where you are creating something from an idea without many resources etc, passion is critical. A social enterprise is like a start up for me. In order to get it started we need to do all the things that work in silicon valley. Contribution is absolutely critical to the whole social enterprise area. No doubt about it. That is critical in how we define social change. For more on this check A Path with a Heart on my MBA blog.
In my experience working in the government and not for profit areas, these things only matter to a limit. Unless you have the capability in terms of resources and expertise to convert that social change idea into meaningful change on the ground it is practically useless.
All contribution is what makes a difference on the ground, to people. Does it need a MBA? It will be helpful but that is not the only way. The important thing is that passion and contribution can get you started but it will not let you scale and make a difference. Isn’t making a difference the point of social change?