What Does ‘Selling Out’ Mean? Four Lessons on Navigating Trade-offs While Scaling Your Social Enterprise
“Selling out” is a common concern for social entrepreneurs, as they strive to maintain a balance between their ideals and their business needs. But as we at Mercy Corps Ventures thought about contributing a post to NextBillion’s “Scaling Up Without Selling Out” series, we realized we first needed to think about what the phrase actually means. Can one person’s “selling out” be another person’s logical business decision?
In the social enterprise space, selling out is really about navigating tradeoffs between scale, sustainability and impact. It is difficult to pull all three levers at the same time with the same force, so businesses have choices to make. When you add the variable of a time horizon, this decision-making process can get even more complex. Entrepreneurs can look at these tradeoffs (and the inherent opportunity costs) very differently, and make very different decisions about how to move forward. Is one approach selling out, and the other isn’t?
A Difficult Question
Let’s look at an example. One Acre Fund is an agricultural development organization that supplies smallholder farmers with asset-based financing and agricultural training to ensure household food security and increase farmer incomes. It is a well-known example of a social enterprise that has reached a significant level of scale.
The Innovation Investment Alliance is a funding and learning collaborative between USAID and the Skoll Foundation, with support from Mercy Corps Ventures. It funded One Acre Fund’s first “systems change” initiative, in which it went outside of its direct implementation model to try to affect change on a broader level. In partnership with the Rwanda Agriculture and Animal Resources Development Board (RAB), One Acre Fund proposed to increase the impact of Rwanda’s nationwide agriculture extension system by helping village-level volunteer extension agents (known as farmer promoters) provide better training to smallholder farmers. The initiative focused on developing improved training and extension materials, implementing schemes to incentivize farmer promoters, and promoting the adoption of high-quality farm inputs.
Sounds interesting, right? The program seemed like a great way to reach scale faster, by making Rwanda’s existing training infrastructure more effective and efficient. But here’s what happened (in a nutshell). Over three years, the program expanded from serving 75,000 farmers to over 500,000. Yet at the end of the funding period, the impact per farmer who adopted the improved techniques was significantly less than what was seen through the pilot – and also less than what One Acre Fund achieves in its direct implementation program that works directly with farmers. This change in depth of impact was due to a variety of factors, including the rapid pace of scale and the involvement of multiple parties.
Nevertheless, One Acre Fund, the funders who supported this initiative and the Government of Rwanda see this program as a success. Different scaling pathways (e.g., direct implementation of your model vs. scaling through partnerships) have different trade-offs associated with them, and they do not always conform to the timeframes of a grant period to show their actual impact. Now, as a result of this program, One Acre Fund and the RAB have a strong foundation to build on, and they can work together to increase the depth of impact per farmer. But the results raise a difficult question: Which is better, less impact for more people or more impact for less people?
Lessons for Scaling a Social Enterprise
These are the types of issues that we explore in the Scaling Pathways series, a learning partnership between the Innovation Investment Alliance and the Center for the Advancement of Social Entrepreneurship (CASE) at Duke University. Scaling Pathways aims to shed light on how social enterprises scale their impact, and what funders can do to better support them. The latest publications in the series are Scaling Snapshots, which describe the entire scaling journey of some well-known social enterprises. The Snapshots highlight key factors that positioned these organizations for scale, and assess the specific strategies they’ve taken to scale their impact – while navigating the tradeoffs inherent in the process.
We’ve compiled some advice included in the Scaling Snapshots, from the leaders at One Acre Fund, Fundación Capital, Living Goods and Water & Sanitation for the Urban Poor. The following insights are based on lessons they’ve learned along their scaling journeys.
Living Goods endeavors to improve community health in the developing world. It does this by training and equipping community health workers (CHWs) to go door-to-door diagnosing diseases and selling lifesaving medicines and products (a bottom-up approach), and through its strategic initiatives to strengthen community health systems (a top-down approach). Here are some things they’ve learned in the process:
Protect your impact drivers, but be flexible on the rest. As you scale with different partners and in different contexts, you will need to be flexible on many aspects of your approach. Therefore, it is critical that you, as an organization, understand the key elements that drive your impact — and that you protect those elements as you scale. Once you’ve established these non-negotiables, be open to adapting and learning from the experience of other partners on all other elements of your approach. For Living Goods, our non-negotiables are ensuring that CHWs are digitally-enabled, are paid (ideally with payment linked to their performance) and have access to medicines. But when it comes to decisions around selling products to supplement their incomes, we are more flexible.
Fundación Capital works in partnership with governments and financial institutions to improve the financial lives of millions of people in poverty around the world. Here’s one of their tips for achieving scale:
If you need government partnerships, make them part of your organizational DNA. For us, government partnerships were part of our founding story. We know that for them to work there has to be mutual trust, a clear value-add and, ultimately, the funding to commit to a partnership beyond a particular project. Social ventures exploring government partnerships should consider whether they are the right fit for their mission and staff, and also recognize that they could jeopardize the government’s trust of all outside partners if the partnership goes awry. If you are committed to partnering with government, set yourself up for success by:
- Actively listening to the government’s needs, concerns and goals.
- Clearly articulating your value proposition with respect to the partnership.
- Letting your government partners be the ones to shine if you’re successful.
- Ensuring that you can adapt to government funding cycles – and knowing what these partners can and cannot fund, particularly if you are hoping to receive public sector funding.
- Checking that your funders value government partnerships and are willing to be flexible on timelines — because it may take longer than you anticipated to get things up and running.
- Identifying a “champion” from within the government to help guide your collaboration. (Note that champions can exist at many levels, and may even be at auxiliary institutions.)
Water and Sanitation for the Urban Poor (WSUP) aims to transform the way that cities provide access to water and sanitation to low-income communities, and therefore improve health and living standards for the poorest residents. Here’s a key piece of advice from them for organizations that are scaling up:
Don’t be afraid to scale through others. We knew we couldn’t do all the work directly, so a critical aspect of WSUP’s work has been learning by doing on the ground – and then supporting other institutions to replicate it. In working with these partners, we understand that demonstrating results is more effective than simply giving advice, so we practice a “show not tell” philosophy. We invest in our relationships to build trust over the long-term, but also expect the partners to invest their own time and money to show us that they are truly taking ownership.
One Acre Fund is an agricultural development organization that supplies smallholder farmers with asset-based financing and agricultural training to ensure household food security and increase farmer incomes. Here’s one thing they’ve learned in their journey to scale:
Over-invest in measurement. We have always invested heavily in measurement, and we believe it has played a significant role in our ability to scale. That investment was a difficult sell in our early days, when we faced pressure to steer all resources toward our program. But it was the right decision, as it has allowed us to quickly course-correct when a site is underperforming, to understand which trainings yield the most impact, and to attract more funding over the long term. We do have a balanced approach to measurement, though: For example, we believe that randomized-control trials (RCTs) are important, but not sufficient. RCTs can be done only periodically and in a limited area, but our internal measurement systems allow us to conduct high-quality evaluations every year, and to collect a wide-range of data points across diverse areas. We can then undertake narrower, gold-standard external evaluations — like RCTs — every few years, to validate our internal findings and methodology.
If you’re interested in scale, we have the full story on each of the above Scaling Snapshots – along with more advice and resources for organizations working to grow their social impact – on the Scaling Pathways website.
The Scaling Snapshots were prepared by CASE at Duke as part of the Scaling Pathways Series.
Amanda West is Principal of Impact & Insights at Mercy Corps Ventures.
Photo courtesy of One Acre Fund.