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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