Different Approach to Social Change… Same old problems

Posted on May 14, 2013 by Jen Clessas

While doing research for my MIIS capstone project, I have come across readings referring to the birth of the social enterprise sector. Many of the readings refer to the growth of the third sector leading to social business. The third sector is what falls between public, government run, and private, pure profit business. First, non-profits formed to bridge the gap that the market left behind; educating and providing health care for those left out of the traditional market. Then, large non-governmental bodies began to take over projects that sovereign governments failed to produce, namely infrastructure in developing countries. Social business has been a relatively new construct – becoming more popular in the 1980s with the widespread popularity of Dr. Yunus and others. The mission of a social enterprise is to solve social issues with traditional commercial business practices. Just as the NGOs and nonprofits fill a market gap, so does social business.

However, the more I see social businesses operating in developing countries, the more I wonder just how much impact the businesses will make, and how different the challenges are from traditional nonprofits. One of the greatest challenges nonprofits face in the developmental world is implementing programs that reach the root of the problem they hope to address or rather trying to solve for issues that are really effects of a greater problem (For example, mobile health clinics, which get short-term relief to otherwise unmet health needs, but fail to address the larger issues as to why certain populations are not receiving the health care needed regularly – poverty, rural underdevelopment, etc.). Here, I see similar social enterprises entering into a space that hopes to make an impact on short-term alleviation, but I have seen few that are working on interventions that cause long-term behavior change.

The next biggest issue is revenue stream. Although some nonprofits rely on multiple revenue streams, the majority rely on receiving grants in order to maintain their projects. Social businesses, in theory, differ greatly in this aspect as they rely on customers buying their product or service in order to stay open. However, from the businesses I have encountered, there have been few that have not started with a grant, convertible debt (with generous interest rates) and/or alternative revenue from partner organizations. If we in fact believe that consumer behavior can lead to social change, we would allow these businesses to struggle to survive, rather than continue to promote ones that would not make it in a traditional market.

Which brings me to the third big struggle or both nonprofits and social enterprises – measuring impact and when do you call it quits? Obviously, all development projects should have a timeline. Millennium development goals have a deadline of 15 years, culminating in 2015. The idea is that if the organizations that pledged to those goals have not made significant, measurable strides, then they should bow out and make space for those that can. The tricky thing about social businesses is truly measuring their impact and then deciding when it is time for them to close up and move on. Traditional businesses would love to live on for hundreds of years, and continue to expand – there are no deadlines set. So far, the social enterprise sector has said very little about setting timelines and milestones for success, and has instead focused on “scaling up,” and out, which reflects the traditional commercial sector. Determining impact metrics and setting timelines for success I believe is going to be the greatest challenge for the social enterprise sector.

Does Scaling a Social Enterprise Compromise Impact?

Posted on May 9, 2013 by Jen Clessas

SELCO, a leading solar energy company based in Southern India, has been producing and selling solar energy units to the rural poor since 1995. SELCO works alongside state-owned andcooperative-owned banks in India, to provide loans to rural households in order to assist in the upfront costs of the solar lighting. Families that switch to SELCO solar energy products experience both lifetime savings on energy costs and incalculable costs on healthcare that is prevented from cleaner burning energy. In addition to providing homes with cleaner energy, it is also reliable; users cited that SELCO products increased productivity and quality of life.

Food Stall with SELCO lamp

The company model works by setting up centers in rural areas that are responsible for selling and servicing the products in their vicinity. These centers are small enough that they know their customers and trust has been built between the consumer and the SELCO employee. This is an important relationship since SELCO has taken responsibility for underwriting the loans the “unbankable.” In addition, by placing their centers within close vicinity to the households served, SELCO technicians are able to respond within 36 hours if equipment is in need of repair. It is important to SELCO’s founder, Dr. H. Harish Hande, that SELCO maintain a good reputation with their customers, as trust in the product is a driving factor in the consumer’s choice to buy SELCO’s products.

SELCO lanterns

Six years after inception, SELCO broke even in 2001. Since then, the enterprise has gone through several pivots, investing in R&D, building partnerships and trying to keep its products competitive. Although SELCO hopes to continue to grow at a steady pace, Dr. Hande believes that real impact will only continue by keeping their small-scale model. SELCO management would prefer to assist others in replication of the model (in the North, East and West of India), rather than scaling up their enterprise. As Dr. Hande explains, “It is better if we focus on developing other SELCO’s suited to the context where they would operate, rather than trying to grow this SELCO. Ideally we should create an organization that can become investment partner for entrepreneurial entities – the SELCOs’ of the future. We can provide the seed capital and pass on to them our knowledge, things that we learnt the hard way. However, the new entities will have complete independence in the way they would develop their business, because their specific model needs to be suited to their context. We would like to do this in other parts of India first and thereafter, maybe, across the globe.”

Often, impact investors searching for investable social enterprises seek out businesses that have eventual scalability. Profitability and impact are often examined hand in hand, and evaluated with the same weight, therefore making scalability a vital factor. However, culture context is just one of a slew of issues that prevent many industries from scaling up. Customer trust, social capital and depth of impact are challenges that scale may pose on a social business. Perhaps, as SELCO’s management team would suggest, impact investors should re-evaluate their terms of measurement, examining the real trade-off between scale and impact.

Note: Information gathered and quotes are taken from: Mukherj, Sourav. “SELCO: Solar Lighting for the Poor.” UNDP Case Study: New York, NY, 2011.

Nothing stands Still – Lunch with Ralph Simon

Posted on August 2, 2012 by Jen Clessas

Today, I was fortunate to be part of a small gathering led by Ralph Simon, a long-time music industry executive and mobile technology leader. Mr. Simon came to Hub Bogota to speak with staff and guests about how technology and social media are being used for innovation and social good around the world. The talk was not only educational and eye-opening, but inspiring as Mr. Simon acknowledged Hub’s own leadership potential, “The Hub is creating a whole new road for Colombia to move forward.”

After working at the Hub for over a month now, I think it’s quite easy for the novelty of the Hub atmosphere to wear off; the co-creation meetings, the tables covered in scratch paper – to jot down ideas whenever they arise, the ability to suggest virtually any idea without getting an open-mouthed stare. It was a refreshing to have Mr. Simon remind us that the Hub is a special place – one that you do not come upon everyday. A work environment that thrives on innovation and change, and works to make ideas come alive.

As Mr. Simon said, “Innovation is everything because nothing stands still.” Innovation is not about creating something completely new, but rather about transforming something existing into something better and fresh. The sad truth however, is that most firms are not excited by innovative ideas, and do not want to take a chance on something new. Unfortunately “naysaying” is the norm and until we can break that paradigm, innovative thinking will be considered too risky for the average company. My director here at the Hub, Paula Gutierrez, raised a good point as we were wrapping up our session; the Hub atmosphere is a space for open innovation, imagination and idea creation, “How can we make this space visible to the public?” How can we get the community engaged in this open thinking to make real and lasting changes?

Preserving the past, investing in the future

Posted on July 30, 2012 by Jen Clessas

Anyone who knows me, knows that I am a patriot. I love America. Don’t get me wrong, I love traveling the world, being introduced to new cultures and food, but I always love coming home. Obviously, I know that my country has it’s many, many problems, but I still love it. Well, one thing I LOVE about Colombia, is most everyone I’ve met here is a Colombian patriot. They love their country, the way that I love mine. And there is such a rich, indigenous history, of which there are still many artifacts.

These pictures are of artifacts taken at the Museo del Oro (Museum of Gold) in Bogota. Colombia has taken good care of the artifacts, and the museum is curated very well, and is quite beautiful. The best part is that it is free on Sundays, which is great for both tourists and locals. In fact, the great majority of visitors to the museum are Colombians, curious to learn more about their historic past. It’s beautiful to see both small children and adults excited to learn about their history and I wish I saw that same excitement in my countrymen.

Not only do Colombians seem to relish learning about their history, but as well, are emotional when speaking about the future of the country. A common sentiment here is, “The war is now over, but we still have not won our independence.” Those of you that know your Colombian history may be confused by this statement, since Colombian won it’s official independence in 1824, and the world has yet to acknowledge that Colombian has been in a civil war for the last 50 years, calling it rather an “armed conflict.” In Colombian reality, the country was in a war, and the country has now experienced a period of peace they haven’t seen for 30 years.

With this new found liberty and freedom, there is also a movement (especially among the youth) that Colombians are ready to begin investing again in their country. The daily threats of robbery, kidnapping, and violence is all but gone, and so the people of Colombia are ready and excited to rebuild. You can clearly see the entrepreneurial spirit alive in the country and this, I believe, is going to lead Colombia into a new “golden age.”