Scalability for Social Enterprises and Non-Profits

February 15th, 2011

This is an attempt to define how social enterprises can scale their businesses. This is not meant to be a comprehensive or exhaustive resource!

In a technology or for-profit setting, scalability is more obvious – the internet provides the perfect scalable platform due to small costs of good sold (COGS), approaching zero – but what does it mean to design a business model for social enterprise or non-profits, where profit and technology might not be the only considerations?

Instead social impact is what they should strive for, in a financially sustainable way.

What is scalability?

A buzz-term in the business world, but rather new to the non-profit world, scalability implies that the underlying business model of an organization has the potential for large growth in a cost-efficient manner. Scalability can be both a tangible concept, as well as a metaphor, so that is why it is sometimes hard to define.

Scalability can apply to a wide variety of business settings, but the concept is consistent; if a company can increase their “volume” (this could be selling more, increasing revenues, or expanding operations somehow), without impacting the contribution margin (= revenue – variable costs), then this is considered “scalable.” For a business to be scalable, incremental costs must be decreasing — ideally approaching zero (in the case of an internet distribution channel). This means that the cost of each incremental dollar in revenue must be going down.

scalablecosts1_small
Source 1: www.sacredcowdung.com

Other ways to say this include:
• Increased revenues cost less to deliver than current revenues
• The operating margin increases as the company’s revenue grows
• Small variable costs

The key to scalable business models is to have small Costs Of Goods Sold (COGS), and to get a demand driving revenues up.

There are limits to scalability and at a certain threshold revenue volume, an organization will not be scalable and will have to address infrastructure issues through investment in operations, new technologies, new distribution, etc. For example, a given piece of equipment may have capacity from 1-1000 users, and beyond 1000 users, additional equipment is needed or performance will decline (variable costs will increase and reduce contribution margin).

Top 10 Most Important Business Model Criteria for Social Enterprises and Non-Profits to Scale

You may still be wondering “what does that all mean for me in my social enterprise or non-profit”? Well, here are some simple general principles that all organizations should strive for:

1. Simplicity – Complex businesses MUST become simple before they can scale. If anyone in the chain of suppliers, employees, management, sales, customers, donors and investors can’t explain simply what the company does — IT DOES NOT SCALE!!! Ex. Think Kiva (featured below). Hint: it scales.

2. Find Your Champions – You need local people to see the value of your idea to their community. Foster and maintain relationships with these people and make sure that you have a plan for successful champions to become integrated into your organization somehow. They will recruit others and outsource a lot of the work that you won’t be able to do. Ex. The Green Belt Movement gave numerous opportunities for dedicated community members to plug into the organization, even providing paid positions to the most promising champions. The Green Belt Movement is responsible for planting over 40 million trees in Kenya!

3. Innovative Partnerships – tapping into an established network, such as partnering with an organization that has a great reach and credibility is a solid strategy for scaling up. This may be difficult, but it should be a part of your strategy if you want to expand beyond the local level. Also, look at cost-savings through public-private partnerships, such as working with the cities or local government. One side benefit is that this will increase your credibility too. Ex. Wangari Maathai, noble peace prize recipient, partnered with a national womens organization of Kenya in the early days of the Green Belt Movement, VisionSpring with BRAC.

4. Leverage Research & Science – base your programs on solid research. Engage sociologists, psychologists or scientists in your program design. You may also be able to use your programs as research in themselves; this can be a powerful way to show your program effectiveness.

5. Stack Functions & Create Systems – Stacking functions, a buzzword from the world of permaculture design, refers to designing your internal processes so that you can perform one action that will be indefinitely reproducible or serve numerous functions; make sure you keep this in mind from the get-go so that you have a system for reusing almost every piece of work that you do. For example, everything that you create internally should serve multiple uses (I learned this one from an innovative consultant) — blog it, make it into a video, have it syndicated, write a testimonial, etc.

6. Act Like a Private. Be nimble, find the “bright spots” and go with what’s working. – act like a private business, so that you are not just an idealistic bunch of people shooting in the dark. Be quick enough to change strategic direction, if necessary.

7. Get in touch with your customers – talk to them, interview those who you will be serving. Find out what concerns them and how things could be better. Often this essential step is overlooked as a social venture comes up with a “solution” and then launches it to the public, without intimately involving them from the beginning.

8. Tap into the support of microcontributors. CROWDSOURCE. – think about Kiva, MYC4, and DonorsChoose.

9. Train the trainers – the more that you can train others to thrive, the better. VisionSpring equips their women entrepreneurs with a “starter kit” for providing eyecare, trains them on how to use it, and lets them run with it.

10. Be Open Source and Transparent – share your findings and knowledge with others.

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The Quality of Life Foundation, planting seeds of happiness!

April 2nd, 2010

The Quality of Life Foundation

I have just started working for a great organzation called The Quality of Life Foundation with my good friend, Lee Hwang. The Quality of Life Foundation is a San Francisco-based 501(c)(3) nonprofit startup that seeks to engage volunteers to plant trees in public spaces in order to build stronger and healthier individuals, communities, and ecosystems. The foundation’s mission is to build a mindful and compassionate community that values and protects the planet’s natural ecosystems in service to humanity and all life on Earth.

Sound good?

We believe that there has been a spiritual underpinning to most great grassroots social movements. For example, Gandhi’s movement had a spiritual underpinning as did the Martin Luther King’s Civil Rights movement. The environmental movement has gained a huge amount of traction on a global scale in the last 5-10 years but much of this has been inspired by talks of gloom and doom. Fear and disaster have been motivations ahead of joy and abundance. Our foundation hopes to use the joy of tree planting as a way to build community and bring people back to themselves and closer to their loved ones.

Our main goal right now is to focus on a scale-able model that can be replicated and eventually spread to other cities, and eventually internationally. But we are very focused on making it work here in beautiful San Francisco first. Currently, we have our sights set on schools and open public spaces in or near urban areas where tree-planting is needed and can bring joy and meaning to young and old alike. We hope that both spiritual communities and schools are ripe for what we hope to facilitate.

If you would like to join the mailing list to find out about future tree planting events, please email me at matt at qualityoflifefoundation.org.

You can read more about the foundation at http://www.qualityoflifefoundation.org and read a recent interview with Lee Hwang, executive director.

The Quality of Life Foundation
The Quality of Life Foundation
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Links to my Triple Pundit Articles from the 2009 Net Impact Conference

November 30th, 2009

Here are the articles that I wrote for TriplePundit.com during and after the 2009 Net Impact Conference at Cornell University.

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I’m blogging at the Net Impact Conference for TriplePundit.com!

November 10th, 2009

I am excited to be covering this event for TriplePundit.com.  I am hoping to cover bigger trends surrounding lifecycle analysis, supply chain and water scarcity/quality. Please contact me if you have any ideas for juicy stories!

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How can a flock of birds give us hope?

October 20th, 2009

Flock of BirdsHave you ever seen a flock of birds or a shoal of fish change direction very quickly? This is called an emergent behavior; according to Wickipedia: An emergent behavior or emergent property can appear when a number of simple entities (agents) operate in an environment, forming more complex behaviors as a collective.

Think of how we are becoming more and more interconnected. My social networks are growing everyday. While I am not totally sold on social networks, they are setting us up so that we will be able to quickly organize and coordinate.

We may not think that our society is moving quickly enough towards solving the problems of our time, but look at the birds and get inspired!

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Cool Rainwater Harvesting Promotional Video…

December 15th, 2008

We need more efforts like this here in the US. This one was done for India.

Anyone want to put together an ad campaign?

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Can We Talk About This? –> “Greensumption”

October 31st, 2008

Watch this video called “Greensumption”. This is something that needs to be discussed. We think we have it all figured out, don’t we???

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The Vice of Capitalism

September 26th, 2008

Socialism collapsed because it did not allow prices to tell the economic truth. Capitalism may collapse because it does not allow prices to tell the ecological truth.”

— Oystein Dahle, retired VP of Esso Norway

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All Foods at Anytime?

September 4th, 2008

Green_AppleConsumers expect all types of food, with no concession to season or geography. This used to be mainly a habit of the richer countries, but now the developing world is taking our example.

Why is this like this? Well part of the reason is that there was a little-known international treaty signed in Chicago in 1944 called the Convention on International Civil Aviation to help the (then) fledgling airline industry. This was basically a tax exemption on fuel for international transport of goods, unlike what we pay for cars and trucks. Also, the exemption extended to ocean freighters.

This is only part of the reason, the other part is that the labor in the developing world is so cheap.

There is much debate about the carbon footprint of a good versus the distance it traveled. They are not always the same. Sometimes, people argue, that the locally produced good has a higher carbon footprint than an imported good. I would think this is a rarity, and if this is the case, I think that we can find ways to minimize the locally produced footprint much easier than the one from across the world.

I would prefer to just reinstate the tax on all of this transported food from all over the world. We need the cost of food to reflect the distances covered and energy used to get the food to us. Firstly, we should have labels about where everything comes from, which I am starting to see more and more although you really have to have good eyes! Secondly, we should have a carbon footprint label on the item. Maybe they could be the same label.

Meanwhile, as a food shopper, I would suggest to buy as locally as you can and to buy in bulk as much as you can to minimize packaging. Now that I know better, I will change my much-ingrained habits. Or do my best…that’s about all any of us can do.

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Going Local is a Matter of Life and Death!

August 21st, 2008

jessicaIn Memory of my sister, Jessica Brigida Stevens.

When my sister died last summer suddenly, I was struck by the most amazing realization. She had lived in Alaska with her family, my brother lives in Sydney, Australia with his family, and the rest of the family lives here in San Francisco. It seemed ridiculous to be so spread out as a family. How could the most important people in your life be the ones that you saw the least?

Asian cultures view the family differently. It is not uncommon to support your parents in China, for example. Actually, many people don’t have a choice. But, in our western culture with everything at our fingertips and supposedly little free time, how did we separate so much from our families and friends?

Everything can change in an instant. I know that when I came into close proximity with death, my priorities changed. My whole outlook changed, actually. I wanted to be close to family and friends. I wanted to get more involved in the community and build something special right where I lived.

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