Scale Matters for Impact Investment

By Lauren Burnhill – @LaurenOPV

When I wrote “Incubators, Accelerators and Impact Investors, Oh My!“, my goal was to start a dialogue around the issues of scale and replication. I don’t believe that every promising social enterprise (#socent) must be scalable, but that doesn’t mean I’m against the notion of using scale as a way to achieve change objectives. If historically, most micro and small businesses have failed to scale, it seems reasonable to assume that many small/new #SocEnts will also fail to do so. But let’s face facts — many micro and small businesses go under in the medium term without ever even tackling the challenges of scaling up. If scale is important, and I believe it is, the question is where can scale have the most impact?

When I read the Startup Genome reports analyzing data for significant numbers of #tech #startups, I am envious! @GigaOm has had some good coverage of  @StartupGenome by Ki Mie Heussner,  Cortney Fielding and others. I wish we had this depth of information for #SocEnt startups. Would this knowledge  encourage better #replication methodologies in support of sustainable, local job creation and economic development?

This week, I was planning on posting the structure and numbers for my “Flip the Incubator” replication, but I’m still wresting with how to address the question of “better replication”.  In the interim, I stumbled across a write-up on Coca-Cola’s 5 BY 20 program, which aims to improve the lives of 5 million women by 2020 via economic empowerment across the global supply chain. The target numbers are big, but notional scale doesn’t excite me. We can all AIM high! What did excite me was the fact that #Coca-Cola has already reached more than 130,000 women in 4 countries since program launch in 2011. @FastCompany picked Charlotte Oades, Global Director of Women’s Empowerment at Coca-Cola as a member of their “League of Extraordinary Women for this work. Using Coca-Cola resources and outreach opportunities (a majority of their global vendors are women) to scale, now that makes sense!

Scale matters, for sure, but it shouldn’t be the end goal across the board. We need to scale in ways that make sense. Scale financial intermediaries so that the perpetual “new manager” problem is less of an issue. Investors would be happier to have more products offered through experienced managers and entrepreneurs would gain improved access to finance (or at least better pricer). Use existing scale to provide goods and services to small businesses that serve the #BOP or #MOP. In other words, let’s tap into existing scale – corporate or international non-profit – to reach more people and enterprises more efficiently.

If we use existing scale to better serve incremental innovators, we make two things possible:

1.  We can save pushing scale for those companies that have true potential for disruptive innovation; and

2.   We can focus on effective replication of  small businesses, aggregating them through voluntary associations that make it easier to access existing scale. Think of making an affordable group health product available to every barber shop, green grocer or #solar PV installer – the entrepreneur gets to keep running the business he or she is comfortable with, but now has access to better health care for the whole family. Outsourcing with scale would let entrepreneurs focus on the #sustainability of their core business even if they don’t want to grow or expand.

What are the best ways to replicate or re-create successful small businesses? Is there a way to cull part of the franchise model and make it work for social enterprises? How many elements of the business model can we standardize to facilitate things like credit-scoring to reduce the cost of making loans? Where and how do we leave flexibility to respect local culture and traditions? If you’re working on double or triple bottom line replication models, please tell me about what you are doing!


One response to “Scale Matters for Impact Investment

  1. “What are the best ways to replicate or re-create successful small businesses?”Very interesting question like the article.Replication or recreating a successful business really needs a lot of good thinking as well as good utilization of resources,like having social connection,like from Finance Advisers like Ed Butowsky,they’re the experts when it comes to Investment Business.

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