The Business Model of Change is Important!

When I was a kid, I always wondered whether two people in the world were ever thinking about the same thing at the same exact moment in time. As I’ve gotten older and realized the almost mathematical certainty of such an occurrence (since there are 6.77 billion people in the world – you could also look at Twitter), I’m still struck by its reality when I observe the similarities in timing and thinking of thought leaders in the social sector (which I imagined would be more improbable).

For example, Nathaniel Whittemore posted his thoughts on what he considers the distinction betwen “Scale” and “Diffusion”, recounting a conversation that happened at the recent Global Engagement Summit. In the context of his discussion with Josh Nesbit, one of the GES delegates and co-founder of FrontlineSMS:Medic, Nathaniel writes:

What he’s really looking for is not a “scale” that provides new benefits for ownership because of reduced costs, but the diffusion of a tool and an approach to supporting rural health care. I wonder how many innovations in the social sector are under-leveraged or face too-limited distribution because our conception of scale is rooted in a private sector ownership conception of scale?

Sean Stannard-Stockton, who was working simultaneously on a similar blog post, writes about a group called Homeboy Industries who resists calls to scale. He recounts his recent experience at the Center for Effective Philanthropy conference:

During the session, founder and executive director Father Greg Boyle explained that they have intentionally resisted the many offers to replicate their program in other cities. However they do act as a model for other programs and help other programs get started. Since “scale” is the constant buzzword of social entrepreneurship in particular and philanthropy in general, it is interesting to hear the counter argument.

…

So does scale make sense?

In many cases I think it does. But given the assumption that many people make that scale is the obvious goal, I think it is important that we examine when going to scale makes sense and when helping other people steal your ideas is a better strategy.

Both Sean and Nathaniel recognize that the diffusion of the innovation can be more important than scaling the organization – we don’t need more people to try and build empires at the expense of social impact, as others also point out. However, I think it’s critically important for social entrepreneurs and innovators to understand that both scale and diffusion are an inherent and not inconsequential challenge part of social innovation (and that the ability of an organization to scale is often correlated with the ability of an idea to diffuse). Great ideas that improve the state of the world are a dime a dozen and inherent in the challenge of creating sustainable, scalable impact is figuring out how to sustain that change. If you’re a nonprofit like FORGE or FrontlineSMS:Medic, the question of where you are going to find the funding to help scale your operations is as relevant if not more so than how to develop the innovation itself.

Designing the right business model that can scale to best support the diffusion of your innovation can be the key difference between success and failure (at least that’s what I learned from my own failure – and it’s the driving reason why I’ve been studying the business models of change for so long).

p.s. Stay tuned for my upcoming post (Business vs Charity: The Business Case) which argues why business is often the right choice for scaling.