A Synergistic Model of Scale

Eric Glustrom
Founder and Executive Director, Educate!

incorporating solutions

As the social change agents of our time, we keep our eyes peeled for any opportunity to grasp that idolized holy grail of social entrepreneurship: a sustainable, market-based approach to scale. However, especially for many Social Edge readers, it’s easy to let advocacy – the process of scaling a solution through policy change or partnership with larger institutions – slip into the distance.

Consider the following diagram:

The social enterprise is the wedge, driving forward its solution. It has a few paths to scale:

Path 1. The enterprise can attract large sources of philanthropic money to scale its product or service.

Path 2. The enterprise can spark a market for its products or services. For example, Inyenyeri, an inspiring Rwanda-based social enterprise, is creating new markets for energy efficient stoves to eliminate indoor air pollution and stop deforestation.

Path 3. The enterprise can work to shift policy or change national systems to scale its solution. Educate!, the organization I work with, partnered with the government of Uganda and UN International Labor Organization to scale the model of social entrepreneurship education we provide throughout the education system of Uganda. As a result, our model will reach 45,000 youth starting in 2012. Does the educational market have that reach, or speed?

If we look back 50 years to the legendary 1960’s the social change pendulum was far on the policy side of the above diagram. Protests in the street, public opinion, and the power of the people were the social change tools of the time.

A few decades later, the 1980’s saw the beginning of the social entrepreneurship movement and the pendulum began to swing to the market side.

Now the social change agents of our time are MBA grads who apply Harvard Business Review articles to the practice of building effective enterprises aimed at optimizing solutions to social and environmental problems. The tools of choice are market research, product design, and financial models.

Let’s face it, each path has its weaknesses. The market, as beautiful as its feedback loops are, has trouble reaching the poorest of the poor. The government can scale quickly, but lacks those very feedback loops which keep solutions from stagnating. Philanthropic money lacks sustainability.

Perhaps the most effective path to scale is not one of those outlined above, but rather the synergy between them all.

Perhaps it is our obligation, as the social change agents of the 21st Century, to find the synergistic path to scale that hedges the weaknesses of each individual approach?

Questions:

What are examples of organizations that have scaled effectively?
Is it necessary to find the synergy between the approaches outlined above, or is it better to focus on just one approach to scale?
What are other approaches to scale that are not mentioned here?

Join Eric Glustrom, President of Educate!, in the conversation.

Laurinda

The older I Get, the More I Know, the Less I Know

Reading your post above, it brought me back to the drawing board.

The facts are that WE as SEs are trying to fix a problem that has no solution because the baseline model is defected and its foundations are shaky.

There comes a time in that we all need to sit back and evaluate this business model that was built on what we thought was a "free market" platform but that is instead a platform of "market deceit"!

We are operating within a financial model that’s been anchored on unsubstantiated "debt" instruments – in fact vapourware!

To support this shaky state of affairs we have allowed "policies" to be passed that compounds the problem instead of providing solutions.

In my opinion there’s only one solution … scrap this market driven economic and political model and focus on creating a new model that is built bottom-up and integrates all – instead of what we currently have which is top-down and highly selective!

A monster has been created decades ago that is now, bit by bit destroying all! And albeit, SEs have been trying to redress some of the current short-comings the fact that we have to face is that we have failed to do so.
- Eric Glustrom
  
  The older I Get, the More I Know, the Less I Know
  
  Laurinda,
  
  Thanks for your comment. I fully agree. The new model you refer to is much needed. The model doesn’t seem to exist in the developed or developing world, at least to too great of an extent (please correct me if I’m wrong) One of the reasons Educate! works in Uganda (rather than in the developed world) is because there is great potential to develop that new model there as the countries are defining what their development looks like. Not only is there potential to create that new model, but it is actually absolutely necessary, and urgent. As countries like Uganda grow quickly both in terms of population and economy, it’s important that unsustainable development isn’t simply imported or followed. The type of education we provide helps the next generation to start a new type of enterprise that will define that new model of development. I look forward to your response – specifically on what you envision that new model of development looking like. One of the keys is surely re-imagining the way we think about currency, as is suggested below!
  - Laurinda
    
    The older I Get, the More I Know, the Less I Know
    
    Eric.
    
    Thanks for your comments. But before I embark on a "potential" alternative let’s look forward into the future if we continue as we are:
    
    1. Corporacracy replaces many of the roles undertaken by governments today and control the economy even more than today through various financial instruments.
    
    1.1 the number of typical businesses as we know today will decrease
    
    1.2 business that will be running will be an hybrid type of SE. This new breed will have two outlets – addressing some of the things that are done by governments today – and two become a "sourcing pool" for "donors/ corporates" growth through mergers and acquisitions thus entrenching "corporacracy" even more in our market driven landscape. (and we are already seeing of those scenarios in action today )
    
    1.3 the typical role of NGOs will also change – they will deal primarily with grass root processes
    
    1.4 government role will be one of "enforcement" nothing more nothing less
    
    I can go on … but the question that we should be asking is:
    
    Is that the type of "future" that we want for our future generations?
    - Eric Glustrom
      
      The older I Get, the More I Know, the Less I Know
      
      Laurinda,
      
      Thanks for your great comments and I look forward to hearing your alternative. In the meantime, let’s explore the future scenario. Two questions:
      
      What do you mean by the new breed of SE/businesses serving as a sourcing pool for donors/corporates?
      
      Won’t there always be advocacy efforts by people, which will be responded to by government? This would make the government’s role more than just enforcement, but also a provider of services. Or do you see government becoming so separated from the people that it will only serve to enforce/regulate the corporacracy? Scary.
      
      So in addition to the questions above, what do you think is the alternative?
      - Jordan A Hosmer-Henner
        
        The older I Get, the More I Know, the Less I Know
        
        My 2c I think the point to bring it into your context is ok yes education we all think can be a good thing but it still isn’t answering the SO WHAT? factor if the system is broken, if smart educated people can’t create opportunities through action than it doesn’t matter what the multitudinous parts are doing.
        
        And your comment about advocacy. YES absolutely look at numerous states across the "3rd world" (and more recently the second and first) where the governments are exactly that. Nothing more than rent extracting devices which through patronage and out right corruption pillage the stock of a countries capital.
Jeff Mowatt

What Laurinda said

I agree with, absolutely. Our manifesto spells it out:

"Manipulation of numbers, represented by currency/money, allows writing “new” money as needed. There is no tangible asset, or anchor. There are only numbers, managed by whomever might maneuver into position to do so. Economics came to be based on numbers, rather than real human beings."

"On that basis, capitalism trumped people and therefore trumped democracy. Democracy is about people, who since Descartes are considered necessarily real, rather than numbers which are not necessarily real. An imaginary construct, numbers, rule a real construct, people. That arrangement allows for disposal of real human beings, in the name of the imaginary construct."

"Capitalism nevertheless remains the most powerful economic system ever devised. The problem is not with the construct. The problem is with the output of the construct, wherein imaginary constructs – numbers, and currencies represented symbolically by numbers – are left to control real human beings to the material benefit of relatively few people and to the exclusion of many others. Classical capitalism has reached equilibrium in this regard. However, and consequently, many and growing numbers of human beings are excluded in the realm of finite resources hoarded by those most adept with manipulating numbers/currencies."

"Modifying the output of capitalism is the only method available to resolving the problem of capitalism where numbers trumped people – at the hands of people trained toward profit represented only by numbers and currencies rather than human beings. Profit rules, people are expendable commodities represented by numbers. The solution, and only solution, is to modify that output, measuring profit in terms of real human beings instead of numbers."
- Maya Ellman
  
  What Jeff wrote
  
  Your manifesto is very interesting. I really like the part that states:
  
  "Modifying the output of capitalism is the only method available to resolving the problem of capitalism where numbers trumped people – at the hands of people trained toward profit represented only by numbers and currencies rather than human beings."
  
  As your manifesto states, the only solution is to measure profit in terms of real human beings instead of numbers. Do you think then, as Eric asks: that perhaps it’s our obligation, as the social change agents of the 21st Century, to find the synergistic path to scale that hedges the weaknesses of each individual approach that he outlines in his discussion?
  - Jeff Mowatt
    
    What Jeff wrote
    
    Hi Maya,
    
    Yes indeed, it’s this core argument which leads into the suggestion of a ‘for purpose’ business model. i.e. "This business model entails doing exactly the same things by which any business is set up and conducted in the free-market system of economics. The only difference is this: that at least fifty percent of profits go to stimulate a given local economy, instead of going to private hands. In effect, the business would operate in much the same manner as a charitable, non-profit organization whose proceeds go to local, national, and international charities."
    
    Practical application began in 1999 by researching and sourcing a development initiative in Russia, which was able to leverage investment fod a community bank. Based on the moral collateral, lending approach the aim was to place funding in the hands of those who needed it most, the poor.
    
    The significance of this place and time was that it had just been preceded by
    
    Harvard’s Russia Project and an economic and currency collapse which is now better understood as the harbinger for our own economic crisis a decade later. Trickle down had reached little further than mafia, hence the suggestion of turning it upside down to approach it locally, bottom up.
    
    With traditional capitalism typically reaching no more than 75% of population in longstanding democracies, it fared fare worse where democracy has yet to be established.
    
    The theme of reaching those in greatest need in constant for the next decade and may be seen in this statement from our subsequent efforts in Ukraine:
    
    ‘This is a long-term permanently sustainable program, the basis for "people-centered" economic development. Core focus is always on people and their needs, with neediest people having first priority – as contrasted with the eternal chase for financial profit and numbers where people, social benefit, and human well-being are often and routinely overlooked or ignored altogether. This is in keeping with the fundamental objectives of Marshall Plan: policy aimed at hunger, poverty, desperation and chaos. This is a bottom-up approach, starting with Ukraine’s poorest and most desperate citizens, rather than a "top-down" approach that might not ever benefit them. They cannot wait, particularly children. Impedance by anyone or any group of people constitutes precisely what the original Marshall Plan was dedicated to opposing. Those who suffer most, and those in greatest need, must be helped first — not secondarily, along the way or by the way. ‘
    
    Like Eric’s our organisation’s impact is found in the policy shifting path. In this case greatest impact was demonstrated on childcare policies which led to a 40% increase in domestic adoption. By 2011, Harvard had joined the advocacy for ‘social capitalism’.
    
    http://tinyurl.com/3m3fcvc
    - Eric Glustrom
      
      What Jeff wrote
      
      Jeff,
      
      Interesting and important work, thank you. I followed your link and was glad to read more. Part of the new model of development that Laurinda refers to above may not just be about effectively scaling solutions to problems (as this blog post suggest), but also re-imagining what an enterprise is set up to do. Or in other words re-imagining, as you say, the "outputs of capitalism." The main thought leaders I follow for interesting and inspiring ideas on that re-imagination of capitalism are the authors of Natural Capitalism: Amory and Hunter Lovins and Paul Hawken. The book itself is somewhat dated, but has sparked new models of enterprises and capitalism which aim to value the true cost of goods and services. What resources would you recommend on this subject?
      
      The problem, as you mention above, seems to be that currency as we know it does a pretty poor job of valuing human and environmental resources. I agreed with your post, and I wish you had included the "real" environmental resources that also get sacrificed alongside people for the sake of the imaginary construct that is currency as we know it. For example, is the price of oil truly representative of the toll extracting oil has on people and the planet? Or should the long term health implications of oil, dwindling supply of the resource, and political implications of extracting oil boost up the price significantly to represent accurately its true cost? The problem is currency as we know it, alongside government regulation and subsidies as we know them, don’t provide a good way of representing this true cost.
      
      So what do you suggest is that model of currency that avoids valuing an imaginary construct of numbers over real people?
      - Jeff Mowatt
        
        What Jeff wrote
        
        Eric, What came next for us, was the social business model. Investing in local wealth creation which will "change the flow of wealth, ease and eliminate poverty".
        
        One of the influences was Capra, who along with Lovins contributed to ‘Small is Beautiful.
        
        http://www.p-ced.com/1/about/history/
        
        This presents the opportunity to transcend production ans profit maximisation and develop localised people-centered economies:
        
        http://forestofdean.socialg…tainable-enterprise_38.html
      - Eric Glustrom
        
        What Jeff wrote
        
        Jeff,
        
        Thanks for the resources. The P-CED model is wonderful. I’m sure you have also read the book by Yunus: Social Business. My question after reading that book twice has always been: how exactly is a social business structured? He stated the values behind a social business compellingly, but seemed to give a vague picture of the actual structure of the business. P-CED provides some much needed clarity to that model.
        
        So my question is, why hasn’t it taken off. Why is business as usual, still business as usual? Is it a lack of sufficient capital for a P-CED model, or another reason? What needs to change to help social business to become the new business? Is it simply an organizational structure/legal question? Or, does the culture and values of society need to reach a tipping point first?
        
        Thanks again for the comment.
      - Jeff Mowatt
        
        What Jeff wrote
        
        Eric, A combination of factors seem to have worked against us. I suspect we were treading on toes with our UK efforts and in Ukraine we faced considerable defamation when speaking out about organised crime. We were vastly under-capitalised and unpublicised.
        
        The Yunus approach to social business has been to partner with forward thinking businesses. We’re in the supply chain of one of these BASF, who don’t know what we do. We’d approached one of these partners with out social enterprise proposal. Our conversation began with a comment.
        
        http://www.socialbusinesstour.com/…/#comments
        
        Within a few months they were part of a new partnership with USAID and UK government to create a partial replica. I offered our plan to the EU 3 years ago, and they too have produced a partial replica in the European Social Business initiative.
        
        http://www.guardian.co.uk/s…-social-business-initiative
        
        So in some ways it is taking off, albeit by means of influence.
Daniel Epstein

This piece reminds me of an acronym

BINS!
- Eric Glustrom
  
  This piece reminds me of an acronym
  
  Epstein,
  
  By BINS, are you referring to the similar theory of Realistic Techniques for Building Government. Wonderful. On this note, and in relation to Jeff’s point above I wanted to throw out an idea that will hopefully spark some debate:
  
  Aid in the past has a strong tendency to flow to the more privileged. Reasons being: the more privileged people are generally easier to access and better connected. If aid has trouble reaching the less privileged, how do we expect a market based approach to do so? Isn’t a revenue generating social enterprise going to rule out the poorest of the poor even further than an aid-based approach because there is a cost involved with accessing the good or service?
  
  Well, maybe it’s ok for the enterprise to not reach the poorest of the poor. Or maybe if a good or service isn’t bought by the least privileged than it means it’s not valued. But perhaps the limitations of a market-based social enterprise necessitates the need for a synergistic model of scale. A model of scale that works with government and/or other large institutions to scale the goods and services to all, or change policy such that everyone has equal access.
  - Paul Rigterink
    
    This piece reminds me of an acronym
    
    Eric
    
    I suspect you may not fully know the answer to these questions but I thought I would ask
    
    1) Are "all" the graduates from Educate able to make a good living?
    
    2) How much in demand are graduates from Educate in comparison with other scholars with the same amount of education in Uganda?
    
    3) Do graduates from Educate hire other graduates from Educate?
    
    4) Do you have metrics that show the validity of your ideas which you present to Government officials and fund raising agencies?
    - DanielBassill
      
      This piece reminds me of an acronym
      
      It looks like Educate has only been in business for a few years thus it might be too early to know the answers to these questions. However, I’m not sure I see on the web site a strategy of how Educate stays connected with its students, continues to support them in future years, and can learn from their efforts new ways to provide support and encourage the growth of similar programs in more places.
      
      In the intro to this week’s discussion a graphic is uses to show how "The social enterprise is the wedge" between policy and market. I would like to see similar graphics illustrating how an enterprise might connect its alumni with volunteers, talent, technology and operating resources in future years.
      
      Another graphic might show how intermediaries might connect enterprises doing similar work, but in different places, with each other and with talent, volunteers, technology, capital and operating resources on an ongoing basis.
      
      Such ideas could come from anyone already doing this type of work, or from new innovators who see the need for this "match maker" role.
      
      Part of the talent that might be connected to the enterprise might be people who could help an organization answer the type of outcome questions that Paul has posted.
      - Eric Glustrom
        
        This piece reminds me of an acronym
        
        Thanks for your post. Once Educate! Scholars finish the two year leadership and entrepreneurship course and mentorship, they join our alumni program. Alumni receive training opportunities, some access to capital, enterprise incubation, continued mentorship, and a deep network of advisors and resources.
        
        One component of the alumni program that is relevant to your comment is the micro-technology institute (MTI). MTI provides sustainable development technologies (such as solar panels and energy efficient stoves) to our students on loan. Students use those technologies to start enterprises, then pay back the loaned technology. It helps take potentially harmful pressure off youth that can come with giving a loan of money when there are many competing demands. In addition providing a loan of a specific technology allows us to choose the technologies that best fit a market need, and provide specific training on using that technology to start a business. We piloted MTI, now we are iterating and refining it as we speak!
    - Eric Glustrom
      
      This piece reminds me of an acronym
      
      You are right, we don’t fully know the answer to all these questions simply because our oldest graduates are only one year out of our program (and thus many are in university).
      
      However, while education is usually thought of as a long-term investment, why wait? Our students are encouraged to start enterprises and community initiatives to solve poverty, disease, and environmental degradation both in school and afterwards – this is the purpose of our education.
      
      So, to answer your questions:
      
      1. It’s too early to tell at this point, but what I can say is that 62% of our most recent class of graduates started enterprises. The average income of our students’ enterprises varies greatly. We consistently hear stories of students using their income to pay for their school fees, help their family, or reinvest in another enterprise to diversify and grow revenue.
      
      2. Difficult to answer, but we will soon have better data on the number of our students who are employed or self-employed compared to Uganda’s national youth unemployment rate, which is one of the highest in the world.
      
      3. Yes, we do see many cases of graduates of Educate! hiring others. My best estimate is that about a quarter of jobs our students create are for other Educate! students. The remaining are for other youth in or out of school and community members.
      
      4. Yes, good question, the primary metric we use with the government is early job creation data driven by our students and alumni. For the government, job creation is a key driver, especially in a country like Uganda where 50% of the population is under the age of 15. In total, our students have started over 415 enterprises which have provided an income for the students running those enterprises and additional jobs for over 55 people.
      
      Thanks for your post – I remember your good comments and questions on the "new education for new leaders" discussion i had up on SocialEdge a while back.
    - Eric Glustrom
      
      I should also add:
      
      Educate! is about to enter a rigorous impact evaluation of our curriculum and program. The evaluation is being designed and implemented by the International Labor Organization and it will measure economic (income and jobs), social (leadership and community involvement), and attitudinal measures (such confidence, empowerment) that result from our program. It will help provide strong, externally-validated answers to Paul’s questions.
Imran Oomer

Balancing Scale and Quality Assurance: What Comes First?

Eric,

Thanks for the thought-provoking post and congratulations on your success with Educate so far. You raise some interesting questions about how SEs should be thinking about scaling their enterprises and increasing their reach. I want to add an example and some follow up questions from my recent internship with the social enterprise, Lend-A-Hand India, which works in the education space as well and is headed by founder Sunanda Mane, an Ashoka fellow.

When working in education reform, it’s hard not to focus on scale as being the predominant driver of impact. And for good reason…education reform doesn’t do any good at creating systems change by only being applied to a few schools or a few hundred students when millions are in less-than-optimal circumstances.

Education, like other fields critical when discussing BoP markets such as health and agriculture, also relies on other metrics to measure impact. Beyond the number of students we ‘reach’ at Lend-A-Hand India, we want to get students to sustain their studies through, or at least to, tertiary ed. We want to increase student aspirations and relevant skills to make them valuable in the workforce. We want to make the students we reach good citizens. We want to increase teacher retention. The list goes on. I raise this point because my experience tells me that while government partnerships allow for scale, the extent to which these other areas are prioritized or measured is sub-par or sometimes nonexistent in my opinion. When an SE has a smaller enterprise, s/he is better able to quality control the program and monitor its fluctuations and adjust for it (like the feedback loop you referred to), but what happens when 3 schools turn into 300? Who will be accountable? The market? The NGO? The government?

In the end, I agree that a synergistic path is the right one and no one solution will fit every problem. The question I pose to this forum is: To scale effectively, what roles do different stakeholders (e.g. consumers, NGOs, governments, parents, employees/teachers/administrators) need to play and what should they be held accountable for?
- Eric Glustrom
  
  Balancing Scale and Quality Assurance: What Comes First?
  
  Imran,
  
  Thanks for your great comment and question. I will comment on the role I think governments should play, and I hope other readers jump in about the role of those other stakeholders.
  
  Yes, quality can be sacrificed when scaling via the government. However, I think of the process of partnering with the government to scale as a step-function. One step at a time, an entire model can be incorporated into a system.
  
  For example, Educate!’s curriculum is now being incorporated into Uganda’s national entrepreneurship curriculum. But what about the mentorship we provide that is so crucial? And as importantly, what about the valuable practical experience starting an enterprise that students go through in our program (learn by doing!)
  
  Well a next step for us is to work with the teacher training institutions such that the teachers of entrepreneurship are trained in a way to provide mentorship and support for students to actually start an enterprise. That helps takes care of the mentorship and teaching methodologies, but what about the practical experience?
  
  We are also beginning to work with the examination board to change the exam for entrepreneurship such that students are graded based on their progress actually starting an enterprise. In an education system like Uganda (and many post-colonial systems), the exam drives all the incentives in the education system. So if students can actually get credit on the exam for starting an enterprise, it will greatly open the door for youth across the country to create enterprises while in school (the best type of entrepreneurship education!)
  
  Governmental institutions, therefore, have an important role to play in determining the content of curriculum, teacher training and the exam (to name just a few components). It is in the government’s best interest to structure these components in a way that encourage youth to actually start enterprises, earn an income, create jobs, and solve the challenges facing their community. From the government’s perspective, isn’t that the best investment in the next generation?
  
  Thanks again Imran, for the good question and thoughtful post.
- Sarah Olson
  
  Balancing Scale and Quality Assurance: What Comes First?
  
  Hello Imran,
  
  The work that Lend-A-Hand India is doing sounds very important and innovative. I agree with you that when working in the education reform field, scale is a huger driver of impact. When an organization scales to reach a large number of schools, the quality of the program could potentially become less effective unless certain stakeholders are held accountable.
  
  The question you posed was very thoughtful. I will comment on the role I think that teachers and administrators should play in order for SEs to scale effectively. I work for Educate! and as Eric commented, Educate!’s curriculum is now being incorporated into Uganda’s national entrepreneurship curriculum. Thus, the curriculum will be reach over 45,000 students across Uganda. In order to make sure that the curriculum will be scaled effectively and taught at the standards that Educate! holds, teachers and school administrators will be largely accountable. Teachers and administrators must have a firm belief in and understanding of Educate!’s social entrepreneurship curriculum in order to provide the guidance and mentorship that students need. I believe that well trained, experienced teachers and administrators are the key to ensuring that the curriculum will be successfully taught throughout the country.
  
  Thanks for your great question.
Kelly Salance

Synergy

Throughout my college education, synergy has been stressed to be the goal when working towards a successful goal. In this case, I don’t see much difference. Synergy was taught to me in the cheesy saying, "1 + 1 = 3". I believe that this applies while working with social enterprise as well. Working through both policy and market is obviously the plan with the most potential. However, the likelihood of this happening is much easier said than done.

In the case of Inyenyeri, for example, if they could work with policy to make their energy efficient stoves a standard then this synergy could amplify their impact. However, the chances that the Rwandan government buys into their idea is likely to be slim. And moreso, the chances that the poverty-stricken Rwanda could even sustain a standard like this through policy is even less.

While reading this, my mind wandered to the thought of the difference between markets and populations. Could a social enterprise reach synergy in a first-world nation (United States) much easier than a third-world country (Rwanda)? Obviously the type of governments would make a difference as well. It would be have to be a totally different approach working in a Mugabe-ruled Zimbabwe compared to a democratic South Africa.