There have been rumors lurking in the corners of social entrepreneurship gatherings. I heard them whispered: “There are investors who want to pursue impact investing and social impact bonds, but we don’t have the right deal flow.” We didn’t know for sure – until now. A study in Australia has confirmed the rumors to be true. According to the report, “Demand for social impact investment is higher than supply, with only $1.2 billion committed in capital in the last five years and an estimated $18 billion gap expected in the next five years.”
The opportunity presented in this report is why I chose to pursue social entrepreneurship. I realized early in my career that we could never solve the big social issues through charitable dollars and traditional means alone. I wanted to learn new methods for solving old problems, so I left a wonderful career at the national office of American Heart Association to spend the next decade getting my MBA in social entrepreneurship at Duke University and experimenting alongside dozens of nonprofits to find the best path forward. Last week, my good friend, Drew Tulchin of UpSpring, who teaches a graduate course on Social Enterprise Strategies at the University of Denver, invited me to present to his students via a webinar. I shared the five truths that all social architects need in their toolkit to ensure that the supply of the right deals meets the demand of impact investors
Fall in Love with the Problem, Not the Solution – As Albert Einstein once said, “If I had an hour to solve a problem, I’d spend 55 minutes thinking about the problem and five minutes thinking about solutions.” The opposite is often true in the social sector – in part because of our traditional funding mechanisms. But, this is changing and, as social sector experts, it is incumbent upon us to ask the right questions so that we can reach the optimal solutions. In addition, by focusing on the problem, we can shift the solution as circumstances or needs change.
Build from the Bottom Up – When investigating the problem, it is essential to involve those you serve in developing the solution. This is the most effective way of getting to “root-cause issues” and designing solutions that will last. For more ideas, we suggest reading thought-provoking books, such as Bridges Out of Poverty, to learn about how our own assumptions about poverty get in the way of alleviating it. In addition, techniques like Design Thinking can also help facilitate this process.
Think Outside the Box – Thinking outside the box is easy to say, but not as easy to do in the social sector. It requires a whole new mindset, which we discussed in our blogs on the 3Qs and Entrepreneurial Culture. It also requires each of us to engage in eco-thinking, putting the interests of our clients and the community ahead of our own.
Impact Is the Bottom Line – The key to greater investment in social change is impact measurement. As Global Impact Investing Network chief executive Amit Bouri said, “The better we can measure impact and agree what constitutes success, the more effective we can be at directing investments to areas and issues of greatest need.” As social architects, our focus must be elevated to impact rather than exclusively on the traditional model of outputs, activities and outcomes. We built a framework – Social Alchemy – to help social sector leaders take ideas and turn them into the gold that investors are looking for. Once we have proven impact, we must also determine how to replicate similar results in the most efficient manner possible. Finding ways to create social change that saves taxpayer dollars in the long run is the underpinning of all social impact bonds and Pay For Success.
Scaling Is the Final Frontier – We know what works for many social issues – our problem is an issue of scale. We must develop the discipline needed to make the tough trade-offs and systematically invest in what works. If we can do this, it will move us from an innovation model to a franchise model. We also need to move beyond just using traditional programs and look at layering all types of interventions – e.g., policy change, coalitions and social marketing – together to drive systemic change.
While these new truths are daunting and will require new ways of thinking and doing, I predict that the ever-resilient social sector will catch up with demand for investment. We welcome your thoughts on these five truths.
Sign up to receive the Social TrendSpotter e-newsletter
Thank you for your article. I’d like to attend to #5. Scaling.
Every problem is unique. There may be global truths, but every problem needs a thoughtful and unique solution. Creating a ‘one stop shop’ kind of solution will only perpetuate the dis-ease that is upon us.
In your article you talk about impact being the bottom line. Based on the rest of your words it seems that you are firmly in an ‘economic’ bottom line mind frame. Good solutions will be elegant, beautiful and efficient/economic. However, applying the same solution to every similar problem is bound to ignore important context. The economic and impact bottom line will not be the same in every scenario.
Maybe I took your words too literally. As a young architecture professional, I hope to be a part of real change and social impact, not for money’s sake, but for people’s sake.
Scaling – by its definition – does indeed look at a solution that has proven its impact, but individuals and organizations who take these ideas to scale are absolutely looking at how to customize it for individuals and communities. You brought up disease – health care is a good example of scale. We do research in the field – EMTs, hospital ERs – to find ways to better save lives through detailed research. A good idea surfaces – for example the use of TPA (clot-busting drug) when a stroke occurs – so it is measured and then once impact is proven across multiple locations, it is scaled as a “standard of practice.” Now, this doesn’t take the discretion away from the doctor or EMT. Each of these professionals in the field will look at each unique patient before administering TPA. What I argue is that social organizations should do the same – develop “standards of practice” that we know work and take them to scale for the benefit of the masses. As an architect, you can appreciate that even in your profession that there are principles and guidelines that are now followed based on centuries of research – because they are known to work. It doesn’t mean that the final outcome isn’t still elegant and beautiful, but is building upon the work of others to create something extraordinary. The same is true in the social space. While what we build isn’t as concrete as a home, bridge, or skyscraper, it is important that we construct using sound principles and leverage existing work to build the extraordinary.
Impact is the bottom line of the social sector – I encourage you to read some of my other blogs to get to the root of what this means. It is not only economic as you suggest, but more importantly impact in the lives of those we serve and their communities. The only economic value is return on investment, so we can have a fair relative assessment of various interventions based on time and money invested.
Thanks for the tough questions – keep asking them! – Suzanne