How We May Change the “Charitable-Industrial Complex”

I, like many others, read Peter Buffets article on charity in the New York Times this past week. I loved the piece but it left me wanting for more.  If the “Charitable-Industrial Complex” is the old story, then what is the new one and, how do we build it?  I wanted to offer a few ideas.

First, as long as philanthropy is about exchange of goods (water, wells, clothing, hospitals), things will never change.   I believe development should be about finding new ways to truly see one another.  When I worked at Acumen developing the leadership programs we put the majority of our effort into finding the right mix of people for the cohorts.  I remember our first class of East Africa Fellows.  We had two fellows that were born, raised, and still living in Mathare and Kibera (two slums in Kenya), one woman who was the granddaughter of the former President of Kenya, and one man who has just graduated from Harvard Business School.  While the Fellows had access to world-class leadership and business curriculum it was the interaction with people from completely different backgrounds on an equal level playing field that changed the way they looked at the world.  This cannot happen when a philanthropist visits a slum for a day, that system does not lend itself to truly seeing one another.  What might a new model look like?

Second, the new narrative exists it just needs to be written (This part is Africa centric but I figured this narrative needs the most work).  Let me give you a taste.  For the last three years a “Ted” for Africa has emerged called the African Leadership Network, bringing together the under 40 of the African continent to share ideas, foster economic development from entertainment to private equity, and redefine charity.  In addition, African diaspora and philanthropists are emerging as the leading voices for a new type of inclusive African growth.  A few of my favorites include:  Ozwald Boeteng and Chris Cleverly (Made in Africa Foundation) from Ghana, Uzo Iweala (Editor of Ventures Magazine) from Nigeria,  Sara Menker (Gro Ventures) from Ethiopia, Andrew Kuper (Leap Frog Investments) from South Africa, Gustav Praekelt (Praekelt Foundation) from South Africa, Dee Poku (Women Inspiration Enterprise) from Ghana, and Robbie Brozin (Nandos) from South Africa.  Trust me the list could go on.   The ultimate question for me is WHY are we still telling the old story?

If we want inclusive growth we must create mechanisms that allow the low income consumers to give real input.  The charity model is broken.  In our current model the charities real customer is the donor, not the low income person they are ultimately trying to serve. This creates misaligned incentives on all sides and forces charities to tell the savior story.  I would love to see philanthropists move beyond this model to innovate around ways that allow for direct reporting from low income person to philanthropist and also allow NGO’s to truly talk about their failures.  For example it would amazing to have aggregated information via text message on the value of a clinic in a slum sent directly to a philanthropists rather than being filtered through an NGO.

Can we really be inclusive elitists?  Often I find myself at an exclusive event for social entrepreneurs or development workers and wonder: who are these events really for?  We often justify these events because we want to make the philanthropists feel comfortable and not push them too far out of their comfort zone.  I would love to see more philanthropists speak up about this in an authentic way.  Are we really doing this for you?  Could we develop another model to showcase our work that is more inclusive and authentic?

Finally, I believe we live in a world of possibilities governed by archaic systems.  We have to move away from bandaid solutions to real system change I have seen a lot of “new” models emerge that are old ones masked with great marketing or a new way to utilize social media.  These models are not changing the  charitable industrial complex; they are keeping it alive.  I am not saying it is easy to create real systems change but if we want to see new models we have to push ourselves.  We must do the hard work to understand the leverage points because innovation for the sake of innovation or for personal gain will never yield the real transformation we need to build more inclusive societies and economic systems.

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Where Does Innovation Meet Scale?

Since I left Acumen Fund about eight months ago to work with Ray Chambers, the UN Secretary General’s Special Envoy for Financing the MDGs and Malaria, I have been thinking a lot about the question: How do we find ways for the innovation of the social enterprise sector to meet the scale of the the World Bank, USAID, United Nations, or the African Governments? I believe this collision will create new systems, shatter old ones, and ultimately make us more effective and efficient at delivering products and services to the poor.  So what might this look like?

Scale may not mean going from building 50-100 hospitals, scale could be inventing a new model of healthcare that can be replicated around the world.  I was recently talking with one of my friends, Nick Pearson, founder of Jacaranda Health, low cost mobile maternal clinic in Nairobi.  Nick told me that he is not looking to build thousands of clinics, instead he is going to develop a revolutionary model that has the highest quality in the world at an affordable price (this reminds me of my late mentor CK Prahalad’s article “Innovation Sandbox”).  This mentality enables him to think outside the confines of his social enterprise and it will allow his model to scale beyond his organizational capacity being replicated by governments and multilateral organizations around the world.

Another strong model is that of 1298 Ambulances.  The founders from the outset were in conversation with the government about their model and how it might work with or complement the current infrastructure.  That being said, they needed flexible capital early on to prove their model.   When Acumen invested $1M equity in the company they had 20 ambulances.   They promised the customer that they would provide quality treatment on the ambulance with a 20 minute response time, and they delivered.  They slowly scaled their own model to around 100 ambulances but it was not until the government of India awarded them contracts to scale across multiple states in India, leveraging the government’s capital and infrastructure, were they truly able to scale.  Scale is developing a model that, from the outset, can be plugged into a government infrastructure.  Despite what people may think Government is looking for more effective and efficient solutions to deliver services.

In my current role working with a group of former and current private equity players at the MDG Health Alliance I have learned some great lessons about what it might take to scale.  For example, the model for private equity is, if there is a company that is distressed or not adding value, there is an opportunity to take over that company and convert their assets to something of value in the market place.  This is far from the mentality of the non-profit world.  Most non-profits when they are struggling do not look for someone to buy them out or, when they are expanding, do not look to buy out other non-profits.  They should. This model will allow us to create greater value, let failing organizations fail, and let the most successful organizations scale their work. If we were able to consolidate in our sector we would be able to more effectively collaborate with some of the larger development institutions to merge and blend our models. The recent TED talk by Dan Pallotta is fantastic and touches on this argument.

Finally, a new design is developing around social impact bond’s.  There is an incredible model taking shape in Mozambique focused on a malaria bond.  It is being spearheaded by the government of Mozambique, Dalberg, Nandos, and Anglo American.  The government of Mozambique is putting in $20M and impact investors are putting in $10M.  The concept is that by leveraging the successful model in Ghana development by Anglo Gold Ashanti the Mozambique government will be able to pay back impact investors based on pay for performance.  This model will rely on the private and public sector working in collaboration with local non-profits to better deliver malaria control services.  This model is a true test of non-profits working with and understanding the performance based metrics of the private sector. If this works it could unlock a tremendous amount of capital to help scale the non-profits that are providing the most value in the marketplace.

In conclusion, as the world shifts and changes and the non profit, for-profit, and governmental sectors merge I believe there is a tremendous opportunity for non-profits to ask some critical questions about scale:

  • What unique value am I adding to the market place?
  • Is there another organization doing this better than me?
  • How do I measure my performance?
  • What is my path to scale?
  • What is my exit strategy?

Perhaps questions like these and some of the models I mention above could lead us to a place where innovation meets scale.

 

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A New Movement in Philanthropy

I have spent the majority of my professional career working in emerging markets and one of the reasons I love what I do is because I know I am on the cutting edge of innovation.  Every time I go to Kenya, India, Pakistan, Nigeria, or South Africa, I am fascinated and energized by the amount of innovation coming out of these regions.  My late mentor C.K. Prahalad deeply understood this and it is captured in his paper The Innovation Sandbox.   But C.K. is certainly not alone.  Mckinsey recently published the report entitled “Lions on the Move” about the huge market potential and innovation coming out of the African continent.  And there is an incredible Ted Talk on the hot bed of innovations in India. I could go on and on and if you spend time in these regions you know exactly what I am talking about.

But, my recent excitement is not only about business model innovation it is about philanthropic innovation.  Due to the rise in income in many individuals in these regions a group of philanthropists are emerging, mostly business leaders, who are developing new models of philanthropy and innovating in exciting ways.  Please note: I don’t want to discount that philanthropy has always been a part of these economies, as the majority of people do give back on a daily basis, in particular to their home communities (I highlight this in a recent blog about my trip to Nigeria).  But, I do believe something different is happening.

To put this in perspective, some examples I have seen are the MTN Foundation (creating a very strategic model for CSR with real metrics) and The Tony Elumelu Foundation (focusing on impact investing and human capital) based in Nigeria, the Praekelt Foundation (leveraging mobile technology to improve health outcomes in Africa) based in South Africa, and Nilekani ID Project based in India (here is a great article on this rising phenomenon in India).

What makes these philanthropists and their models unique is that they deeply know their markets (compared to many outside philanthropists or foundations) and, in addition, many of these leaders are one or two generations out of poverty which allows them to personally understand development and the limitations of traditional aid. In fact, many of these leaders are favoring trade vs. aid.  See Ngozi Okonjo Iweala’s Ted talk and check out Dambisa Moyo’s book “Dead Aid”).

There must be a movement to build more partnerships between western donors and non-profits and local philanthropists and foundations, as there are shared learnings that these collaborations can create.  We have experienced this first hand in the Acumen Fund Regional Fellows Programs (East Africa, India, Pakistan, and West Africa).  We have committed to raising the majority of capital for these programs locally and over the long term our plan is that all of this capital will come from local sources.  In order to do this, we found an amazing partnership with the Edmond De Rothschild Foundations whose global capital was able to galvanize and compliment the support of local capital.  As a result, the Regional Fellows Program was launched in partnership with the Edmond De Rothschild Foundations and Kenya Commercial Bank (KCB).   Working with KCB and Rothschild has taught us a tremendous amount around global and local collaborations, using culturally relevant language, and leveraging a local and global brand to build local credibility and networks.  This experience has made us recognize that non-profits have to not only be willing to listen to the poor in the regions in which they work but also listen to the wealthy.  These collaborative partnerships will ask us to iterate on our models and develop new ones.  This is hard but, speaking from experience, I know our program in East Africa would not be what it is today without the synergy between Acumen Fund, KCB, and Rothschild.

So as this emerging market philanthropic movement takes place Western philanthropists and non-profits must take advantage of this opportunity to grow and learn by forging partnerships and raising local capital.  These types of collaborations have the opportunity to unlock scalable new models for social change that truly represent the global community we all imagine.

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Lighting up Bihar

I just got back from a three day trip to Bihar, India where I was visiting Acumen Fund Global Fellow, Neha Kale, as part of my work on leadership at Acumen Fund.  Neha is currently working for Husk Power System (HPS), an Acumen Fund investment that uses rice husks to electrify rural villages in India (check out how they do it here).

Husk is located in Patna, Bihar the poorest and darkest state in India and probably the place most in need of light.  Patna is a few hour flight from Mumbai so I hopped on the plane and was greeted in the airport by Neha.   She quickly scooped up my bags and threw them into the back of a faded red SUV, making sure we did not waste too much time as we had a seven hour drive to Tamkuha, where the first Husk plant was established.

Husk sign

The roads to Tamkuha were a lot better than I had imagined as Mr. Kumar, the new governor of Bihar has focused on infrastructure, but let’s just say we were not on an Emirati super highway.  We arrived in Takuha late at night shivering from the cold (there was no heat in our car) and wrapped ourselves up in blankets in the hotel close to the small space heater. As we drifted off to sleep my mind kept wondering  how the villagers managed to stay warm in this temperature.

We awoke the next morning drove about an hour to the first village.  The roads were filled with potholes, bikers, tuk tuk’s, and running children filled with energy and laughter.

Neha Kale and Vinodji, Husk Training Manager

Husk Power Systems impressed me on many levels.  The first was leadership.  During our drive up Neha kept telling me how inspired she was by Gyanesh.  He is the entrepreneur behind HPS who achieved the highest levels of education and decided to use it to build HPS.  His deep commitment to improving the lives of the people in his home town was truly admirable, “he is like a celebrity here,” she said.  She also talked about his incredibly flexibility as a leader who could work and understand problems and opportunities at a plant level and then move fluidly back to the strategic level.  This is critical for someone working in social enterprise because if we truly want to change systems we must value the voices of the poorest as equal to those of the richest.  Gyanesh not only knows this but has built a business around it.

A Husk Power System

The second thing that blew me away by Husk was their significant investment in talent.  While we were still in Patna I met Rama, an LGT Fellow who was placed at Husk for a few months but ended up staying for two years.  Rama has helped develop Husk University, a training institute the teaches local workers the technical skills necessary to work at a Husk Plant.  Each plant manager spends two weeks with a trainer at the Husk plant and then two weeks at Husk University learning the technical parts of the systems in case it breaks down.  I can’t tell you how important this is as I have seen many systems set up in villages by outsiders that break down and no one knows how to fix them.  But what is incredible is that Husk is thinking about how they can expand their university model to more people who work at different organizations, another potential revenue stream, amazing.

The final thing that impressed me about the Husk team was that they just kept showing up.  Working in this sector for almost 10 years has taught me the single most important thing for an entrepreneur is trust.  What makes HPS unique is that they set up physical infrastructure, provide maintenance, hire local workers to manage the plant, and provide ongoing training to their workers.  This type of robust business investment goes a long way in a rural village.  I am firm believer we have a lot of the solutions just lack the trust and business models to deliver them. 

Village matriarch

Husk has set up 84 plants so far serving nearly 200,000 people.

While I was there, I also found myself thinking a lot about the critical need for social impact measurement. As we sat drinking chai with the village matriarch we asked her how the access to electricity has changed her life.  She spoke of how she could work longer hours and how the kids could study into the night.  While I listened to her I could not help but think back to the home we had just visited where the family proudly showed us the TV they had charged for late night viewing.  I also looked to my left where the kitchen hut was located and thought about the kerosene they used to cook.  Yes, development is extremely complex

But at the end of the day, Husk is doing an incredible thing; they are responding to a demand and having dramatic impact on the lives of the villager thought their work. But how do we quantify it?  Esther Duflo and the Poverty Action Lab have developed an incredible tool in their randomized control trials but how do we bring this work to the majority of high impact social enterprises to really understand how to get better and smarter at what we are doing?  I see a real need to convince more donors to invest in impact measurement.

Village life

As we began our long trip back home and I watched the beautiful bucolic villages fade into the distance Neha said, “I think I might move up here for part of my fellowship.  Gyanesh told me it will be really hard. I can handle it”.  I have no doubt she could.  Then I thought about what Gyanesh told her and remembered the hard part (reflecting on my time living in a rural village in Senegal).  The hard part is the moment when you live in the village long enough to really feel and touch the impact of poverty; when your friends are unable to educate their families, their children die of preventable diseases, they cannot get access to markets, and are constantly manipulated by middle men.  The hard part is when you realize how great the problem is and how your work and sacrifice can feel so insignificant.  This hard part is the thing that awakens me every morning and motivates me every night.

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The Second Wave of Social Entrepreneurs?

I had an interesting moment of reflection the other day about the field of social entrepreneurship.  We are reaching a point where we are seeing a second wave of professionals moving into this space.  I look back to about 7-10 years ago when I started pursuing this work.  We were all entrepreneurs in our own right trying to define a career path that just didn’t fit with the mold.  We all came at if from different angles and were experimenting in different sector, geographies,  and educational degrees.

The other day though I began to realize that the field of social entrepreneurship is becoming more professionalized.  We have people prescribing their careers.  First consulting out of undergrad, then one year stint at an NGO or social enterprise abroad, then b-school, then they land a “job” an organization in this field.  It is so interesting that people are pursing “jobs” in this space, and it is exciting to see as it is demonstrating that the industry is growing and becoming more institutionalized.

So while this phenomenon is thrilling to see there are two things I am thinking about.

First, what does this mean for the level of innovation pumping in and out of the industry?  With a more “traditional” career path into this field will this stifle the entrepreneurial drive of our industry and/or bring in the systems and processes we need to really grow?

Second, while there is a more traditional path into the field, there are not traditional career progressions within the field.  I find that many people who come into the field for a “job” struggle to see what their career path beyond that job looks like.  That aspect of our industry is still very entrepreneurial. The people who are successful at staying in this field understand how to move in and out of sectors and organizations.

Interesting to see how our field will evolve…

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Time for a New Type of Leadership

Ten years ago I found myself in a tiny music club in Dakar, Senegal.  It was tightly packed with locals whom had come to see the regular Thursday night show of musical icon, Youssou N’Dour.  As I sat there eyes closed, swaying from side to side,  I was taken to another place, the energy around me was so palpable you thought it might ignite, and the music, the music was transfixing.  Youssou had this ability to take you to another place, imagining a world of endless possibilities.  As a twenty year old American living on the African continent for the first time, I imagined that the world was getting smaller, that together, we could change things.  The following Tuesday was September 11th, 2001.  The night of possibilities all of a sudden began to feel small and insignificant.  And the next ten years were filled with language and action based on fear, othernesss, and polarization.

Last week Yousou N’Dour put in his bid for the presidency of Senegal.

I believe we are at a moment in time when we are ready to reignite our human connection, our potential, our music.  Something is happening around the world, we are waking up and demanding a new type of leadership.

Youssou is obviously not the only example of a calling for a new type of leadership.  We are seeing this everywhere.  The Arab Spring has shown us that archaic power systems can be broken, occupy wall street has asked the world to reevaluate how to interact with one another, and double bottom line philosophy is dminishing the polarizing divide between the business and the social sector.

It is clear, the old leadership model, where hierarchy ruled, knowledge was controlled by the elites, and people were waiting for someone to tell them what to do (Check out “Drive” by Daniel Pink if you don’t believe me), is breaking, shifting, shattering.  Right now we have an opportunity to help a new type of leadership emerge.

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Reflections from Nigeria

At first glance I felt as if I was in Mumbai.  I arrived at the airport and was welcomed by the rains; heavy, deep, cleansing rains that spilled into the bustling streets and surrounding sea face.  This rain brought a wash of excitement over me, something was happening in this country, and I was about to find out.  Nigeria is a land of riches; riches of resources, riches of people, riches of culture, riches of tradition, and riches of poverty.  In 10 days I had the opportunity to get a taste of all of them.

Lagos greeted me with a deep heat.  After arriving at the apartment where I was to stay, I immediately put on my running shoes and took a jog to explore the neighborhood of Ikoyi.  Lesson#1 There is nothing like an open road to clear your head and open your mind to what lays ahead.

Since I am not your typical vacationer (ie. I like to explore new places through people, experiences, and social development), I decided to tag along with a few friends who are doing some amazing work in the country.  We visited the Co-creation Hub in Lagos an innovative community that is helping build the Nigerian entrepreneurship infrastructure by bringing together young people to co-create solutions to the challenges of government transparency, infrastructure, information asymmetry, and more.  I also visited the Institute for Venture Design, funded by the Fate Foundation (an incredible Africa philanthropy) that is focused on finding and investing in innovative ideas that have the potential to re-imagine business in Nigeria.  A few ideas; A Nigerian car, mobile money transfer, a culturally relevant Nigerian education platform, and mobile gaming the generates advertising revenue.  Lesson#2:  Entrepreneurship and passion flow like water in this seaside country.

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From Lagos I went to Oweri, a small town in Eastern Nigeria, and the hometown of a friend.  The domestic airport greeted us with the legacy of the poor infrastructure in which the country was so desperately trying to rid itself of.  Yet once we braved the check in line and our airplane began its assent, the frustrations washed away and calm was upon us.

Our trip to Oweri was only a day, but I had the opportunity to see the reality of a small town that was isolated from the capital, exposure, and infrastructure of a big city.  My friend’s family is committed to changing that.  They have invested in a state of the art IT Training school and are working to develop a furniture factory that will employ hundreds if not thousands in the town exposing them not only to jobs but also to export markets within the country.  Lesson #3: Nigerian philanthropy is prevalent but often under the radar and isolated to an individual’s hometown or tribal roots.  I wonder what it would look like if that began to change?

Back to Lagos.  As I sat on the couch in my friend’s home next to his mother, across from his aunt and brother, with his nephew at my feet, a rush of community came over me.  The conversation was filled with discussion of his mother’s favorite dishes from her hometown (two of which I had the opportunity to try), the challenges of child rearing, and the recent conversations sparked at church earlier in the day.   As the conversation flowed “couzins”, friends, and family moved fluidly in and out of the home, no invitation was needed.  Lesson #4:  In a country that has the tangible riches of any “developed” country, they are managing to preserve the intangibles; their sense of family, community, and traditions.

Abuja.  I was welcomed by another friend, a Nigerian American who finds himself caught between his somewhat competing origins.  The next three days I explored Abuja partially by foot (well running shoes) and partially by car.  While in Abuja I was exposed a strong ex-patriot crowd, Nigerian Americans, who felt a deep commitment and tremendous opportunity to invest in their home country.  Abuja reminded me of DC, more open space, filled with politics, and searching for an identity amidst competing priorities.  Lesson #5: Our identities are fluid changing in each moment, each interaction, how do we find and preserve the core? Do we need to?

As I drove back to the Lagos airport on my way home to New York, I crossed the bridge that took me from Victoria Island to the mainland of Lagos.  As our car raced over the bridge I looked to my right and saw the slums of Lagos sinking deeply into the water, yet they held on as if they had been on that edge for centuries refusing to let go, refusing to give in.  Rather than feeling sympathy, I felt a power in this image, a realization that at this moment in time this resilience has real opportunity to find its voice.

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