Thane Kreiner

Why Silicon Valley Needs a Link to the Developing World: Capacity development experiments and social enterprise scaling factors

The 2013 GSBI® Accelerator is one of several experiments in scaling social impact being conducted at the Center for Science, Technology, and Society as an open-source, learning laboratory for social entrepreneurship and impact investing.

Last week, a dozen social entrepreneurs convened on the Santa Clara University campus in the heart of Silicon Valley for the “in-residence” component of the GSBI Accelerator, a 10-month capacity development program that aims to prepare more advanced social enterprises for scaling their impact.

These social enterprises were selected from a larger pool of applicants using a capabilities assessment matrix adapted from impact investors. Panel interviews were conducted with the 30 finalists.

Each social entrepreneur was matched with a mentor team: an experienced, C-level Silicon Valley executive acting as the executive coach; a talented operations professional, often with start-up acumen; and an in-country mentor familiar with the contextual factors influencing scalability of the venture, e.g., social, cultural, infrastructure, and political issues.

A “gap analysis” was conducted for each social enterprise and the program was tailored to address these specific gaps. Impact investors described what makes a social enterprise investment-ready, and content leads constructed advance online work and in-residence programming to address the identified gaps. The content leads are domain experts in operations, financing strategy, organizational design, and other business model elements essential to scaling.

The in-residence program culminated with a GSBI Accelerator Showcase. Each social entrepreneur made a formal presentation, after which interested impact investors and other ecosystem stakeholders interacted informally with the entire cohort. As always, the audience found the presentations inspiring and motivating, linking the Silicon Valley ethos to the developing world.

In fact, Silicon Valley needs a link to the developing world. Most of the planet’s population growth in the next 30 years will occur in Africa and Southeast Asia. Future markets for Silicon Valley firms are, in fact, the frontier markets often referred to as base-of-pyramid (BoP) communities. During the GSBI Accelerator in-residence, Mark Zuckerberg announced that will “put the entire world online,” an excellent example of forward-thinking Silicon Valley entrepreneurship.

But Internet access alone is not enough. Some 1.5 billion people have no electricity and thus no affordable way to charge the mobile devices that would provide Internet access. Literacy rates in some sub-Saharan African countries are in the 30-60 percent range, making the Internet an inaccessible technology, even if on a mobile device. Literacy Bridge, one of the social enterprises in the 2013 GSBI Accelerator cohort, demonstrates the complex interplay between technology solutions and business model innovations in the local context; its Talking Book provides on-demand, off-grid access to knowledge that improves lives of illiterate populations in West Africa.

The challenges of distributing goods and providing services to large numbers of poor people are well known to social entrepreneurs. And scale is not only about absolute numbers of lives impacted but also about the depth of impact and fundamentally transforming lives. Some multinational corporations have reached BoP markets with their goods and services, as Prahalad and Hammond postulated in 2002, but more than a decade later, it is clear that this model alone will not alleviate the pressing problems of poverty.

This year’s GSBI Accelerator experiment highlights several factors in understanding how to scale impact through social enterprises.

Dignified livelihoods

The world is increasingly aware of human rights abuses as well as facilities neglect in global supply chains. To have dignified livelihoods, factory workers need to be able to voice safety, health, and other concerns. The question is, will those to whom they speak listen? Good World Solutions proposes to solve this challenge by connecting the global workforce to decision-makers at major brands through its Labor Link voice surveys. While one can imagine this solution reaching significant absolute scale, dignified livelihoods are also essential in remote villages where they can have deep impact. In the foothills of the Himalayas, Avani develops conservation-based livelihoods that enable women to prosper in their home communities, stemming the urban migration tide. The impetus among social enterprises to create dignified livelihoods is thus both global and profoundly local.

(Left: Avani co-founder Rashmi Bharti)

Global + local

Some of the pressing problems of poverty are so large that it seems simple solutions at significant scale should work. Paul Polak and Mal Warwick present a compelling model for a large-scale approach in their new book, “The Business Solution to Poverty“. This year’s GSBI Accelerator cohort included a venture designed to achieve massive scale and impact, Spring Health. Spring Health tackles the challenge of safe drinking water through radically affordable technology and a profitable business model. Providing safe drinking water globally requires a keen understanding of the local context, however. For example, in some regions, arsenic concentration in aquifers exceeds WHO guidelines, requiring a more complex technology solution than electrochlorination.

In the off-grid energy sector, Husk Power Systems, which pioneered biomass-powered micro-grids for rural electrification, is exploring photovoltaic panels as an alternate power generation technology as it scales to East Africa. In essence, the combination of a micro-grid technology solution and business model innovation requires adaptation to the local context. (Above: Husk Power Systems CEO Manoj Sinha)

Appropriate capital (financial and human)

As social enterprises scale, capital often becomes rate limiting. Working capital is necessary to fund Husk Power Systems’ plants and micro-grids, for example, but human capital is equally if not more important. Without it, financial capital won’t generate social or monetary returns. Attracting and retaining human capital can be challenging, especially in rural environments. Juhudi Kilimo illustrates both dimensions. This social enterprise provides wealth-creating financial services, including appropriate financial capital, to smallholder farmers. As Juhudi Kilimo scales though, mid-level managers prefer the innovation hub of Nairobi to running branch offices in rural areas. Mission is a compelling employee value proposition, but as with all ventures, retaining talent also requires reasonable financial rewards. Impact investors should factor competitive compensation into their funding models to maximize impact. Effective governance also requires appropriate human capital; many social enterprises say their investors have passion and enthusiasm, but not experience. (Left: Juhudi Kilimo CEO Nat Robinson)

Reverse innovation

It’s why corporations, foundations, and governments in the developed world pay attention to enterprises serving BoP markets: There’s an opportunity to deliver higher quality goods and services at lower cost. Clinicas del Azucar is a terrific example. Recognizing that diabetes is the leading cause of death in Mexico, yet quality treatment is affordable for only 10 percent of the population, Clinicas has engineered a “McDonald’s of diabetes” model, reducing the total cost of higher quality care by five-fold. Healthcare business models of this nature (pioneered by Aravind Eye Care) could bend the proverbial cost curve in developed nations. They also represent a unique resource that could reduce the cost of drug development through more standardized and better monitored care.

Right: Clinicas del Azucar CEO and co-founder Javier Lozano

Thane Kreiner is executive director of the Center for Science, Technology, and Society, at Santa Clara University, home of the Global Social Benefit Incubator.