Guest Articles

Thursday
December 6
2018

Chris Bullard

Data That Does the Work: What Acumen Has Learned About Enterprise Feedback Loops

Impact investing funds plan to commit a total of $25.9 billion this year, up from just $6.7 billion committed in 2015. Despite this increased influx of capital, however, social enterprises still struggle. After nearly 20 years of investing, our team at Acumen has learned that it’s not just capital that prevents companies from reaching scale, but critical operational gaps such as real insight into customer preferences and an inadequate pool of skilled workers.

The key to addressing these challenges is helping companies build a data-informed culture from the start. By asking the right questions and listening to important stakeholders like customers and staff, companies not only acquire valuable information, but can also build the right tools and systems to turn that information into action as they grow.

We have learned this valuable lesson through our Lean Data initiative, Acumen’s approach to impact measurement that leverages low-cost technology to gather high-quality impact data and amplify the voices of low-income customers. Lean Data has taught us more than just social impact; it has taught us how a data-informed culture is critical for companies to overcome operational barriers to scale.

 

INGRAINING A CULTURE OF DATA

At Acumen, we work with our companies to ingrain a culture of data, one where every stakeholder matters, to collect information that’s valuable to the future of their business as well as their investors. We’ve observed that the companies most effective at integrating data into decision-making take ownership by creating long-term feedback loops. d.light Design, a company that provides clean energy solutions to low-income populations, has used such data collection to integrate feedback loops into its after-sales support.

d.light turned to Acumen’s Lean Data team to find out more about its customers’ needs, so the company could improve the design of its products and customer service. The first step was to understand if customers viewed d.light’s products positively and, if not, why.  Initial data collection showed the company’s net promoter score (which measures how likely a customer is to recommend a product) was extremely high. d.light scored an 82, a higher score than an Apple laptop received.

d.light didn’t stop there, though. The company continued to gather these scores on a weekly basis as a key metric for management to track performance, using a script we co-developed with the company.  For customers unhappy with the product, data showed only 36 percent with a product issue actually reach out to the company.  This motivated d.light to implement a standard feedback loop, so the team could proactively check on product issues rather than waiting for customers to grow unhappy.

 

UNDERSTANDING THE CUSTOMER

Understanding customers is an important facet to any business, but even more important for companies like our investees building products and services for low-income customers.  These consumers have traditionally been ignored by private markets, so building an entire business model around them requires tracking the pulse of their motivations, preferences and day-to-day challenges.

BioLite, an investee that sells clean energy products, was seeing a slow uptake in cookstove sales in its East African market. Although the company allocated resources into developing its sales teams, it experienced lower than projected customer conversions and referrals.  Using Lean Data, Acumen worked with BioLite to survey more than 250 customers and interview sales agents. We uncovered two surprising pieces of information: (1) sales agents focused their pitches on the stove’s distinctive features, but the customer’s primary motivation for purchase was actually savings on fuel; and (2) existing customers experienced long wait times when experiencing problems with their product.

At the time, less than half of BioLite’s sales team was emphasizing savings during their pitches. The company retrained the team to increase customer conversion rates, and sales increased by 73 percent in the next quarter. When digging further into the long wait times, the company found that agents had trouble reaching customers, so BioLite rented low-cost motorbikes for four branches. The decision helped BioLite’s support team become more efficient and service five times as many customer service calls, resulting in a 25 percent increase in referrals. By listening to data, the company was able to create a more effective sales and customer service system that can be expanded as it scales.

 

LISTENING TO STAFF

Human capital is the backbone of any organization, and it’s particularly relevant for social enterprises. A study of over 600 social enterprises found that 64 percent of those entrepreneurs report limited funds as their top hiring challenge. Because social enterprises are often too capital-constrained to provide competitive salaries, it is vital they understand staff motivations to attract and retain talent in other ways. Company culture, in particular, can help social enterprises attract better talent, retain staff, and ultimately develop leaders from within.

SiembraViva, an e-commerce company that sources organic produce from Colombia’s smallholder farmers to sell to urban consumers, was looking to build a stronger culture. The company had experienced a period of high turnover, and management’s immediate thought was to provide a stock option plan to the remaining team members. Of course, that was before speaking to them.

SiembraViva wanted to understand what, beyond compensation, could help attract and retain talent. The CEO reached out to Acumen to see if it could collect Lean Data on its employees. We conducted a series of in-depth interviews of 19 staff members and segmented the data by seniority. It became clear that it was actually mid-level employees predominantly dissatisfied with the work environment. What they were looking for wasn’t so much an increase in pay but rather opportunities for growth and development. As a result, management put into place new mentorship and development programs and access to English lessons. This enabled Siembra Viva to reduce attrition and promote employees from within based on a concrete set of development objectives.

Through these valuable insights we’re collecting on our companies and their customers, we have continued to build our own culture of data at Acumen, learning from our investments at an individual and portfolio level. Having an understanding of data can allow investors of all types to benchmark metrics across their portfolios and make more informed decisions when looking at new investments. Most importantly, a culture of data allows social enterprises to thoughtfully assess how they meet the needs of their customers and team, and continuously improve as they scale.

 

Chris Bullard is a Senior Post Investment Associate at Acumen.

 

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Categories
Impact Assessment, Investing, Social Enterprise
Tags
data, impact investing, impact measurement, social enterprise