Scale leads to tunnel vision
The “bigger is always better” mentality has been prevalent in the corporate world for decades and now, even social enterprises think the same way. It is unsurprising that a scale is frequently regarded as a crucial indicator of success, given that reports published by social enterprises often include data like “number of farmers reached” or “number of women empowered”. However, more often than not, a scale does not always capture the entire story. Should one, instead of focusing solely on a scale, also examine the actual impact and quality of one’s contribution to society?
Taking depth seriously
It is also crucial to consider the depth. Some ways to assess depth are to determine who is being helped, how underserved they are, and how valuable your contribution is to their lives. The fact that a scale is quantifiable but depth is immeasurable prompts investors and donors to place a premium on scale. In Southeast Asia, for example, an impact venture providing dignified employment at cafes to the "severely disadvantaged" was urged to broaden its influence to include the "disadvantaged," trading depth for scale.
Depth is extremely critical for most social enterprises. Taking on risky or unprofitable tasks that typical companies would shy from, social enterprises tend to avoid “win-win” solutions that would yield high returns yet require a compromise on the depth of impact. Instead, they usually opt for a slower and more deliberate growth path. Generally speaking, social enterprises aim to produce cash flows to ensure financial sustainability, instead of pursuing profits and expansion at the expense of their goals.
Case study: humanitarian entrepreneurship
As a journalist covering the Arab Spring protests, Aline Sara gained first-hand knowledge of the refugee crisis. Contrary to the stereotypes of refugees being weak and dependent on handouts, many of them are driven and well-educated people willing to work and contribute to the society. However, they are frequently unable to work due to legal restrictions (such as work permits) or social exclusion.
Inspired by their plights, Sara founded NaTakallam, a social enterprise that offers translation services, online language learning programs and educational partnerships with educational institutions. By connecting these refugees to language learners across the world, Sara realized that the deep impact it would have on their lives; besides basic employment, refugees would make new friends, experience new cultures and overcome stereotypes. NaTakallam’s mission to provide dignified employment to refugees and internally displaced people who are trying to rebuild their lives is what sets it apart from its competitors. In its five-year history, almost 180 refugees were paired with 9,000 users, disbursing more than US$900,000 in wages.
Unlike a typical online language learning platform that pairs students with five-star tutors, NaTakallam ensures impact is maximized by distributing work based on the alignment of interests between the tutor and student. Ghaith Hallak, an employee of NaTakallam, has benefited greatly from this arrangement. He shared that being able to interact with students across the globe has broadened his horizons and improved his skills.
From the standpoint of mainstream entrepreneurship, NaTakallam’s scale may be relatively limited. However, Sara has placed an emphasis on the depth of impact rather than high growth and returns. Although it has grown slower than it could have, there is a silver lining – COVID-19 has boosted the demand for online learning. She also explained that her reliance on internal funding to grow the business was to mitigate the potential distractions that external funding would bring though she would be open to investors who are aligned with her ultimate goal to grow the impact.
It is common for social enterprises to grow gradually as they perfect their business model. However, they do not have to remain small indefinitely. BRAC, for instance, started as a tiny rehabilitation effort for the displaced millions in Bangladesh. Since then, BRAC has grown to be one of the world's largest and most respected social enterprises, focusing on comprehensive poverty reduction programs deeply anchored in communities.
Three dimensions of impact
Impact can be imagined as the volume of a cuboid, where its three dimensions are scale, depth and duration. The success of social enterprises is determined by how the three dimensions are balanced. Kiva, a crowdfunding platform for microfinance, is an excellent example. Despite focusing on scale in the beginning, it quickly pivoted its strategy to ensure its services achieve deeper impact, such as providing loans with low interest rates and flexible terms to the most excluded segments (e.g. refugees and smallholder farmers).
Scale and depth are not always mutually exclusive. Certain business models have leveraged on scale to achieve depth. For instance, Aravind Eyecare provides low-cost, high-quality eye surgeries to the poor in India by tapping on the economies of scale. Moreover, some of its profits are used to subsidize the already low-cost services for the poorest of patients.
As typical companies focus on environmental, social and governance (ESG) issues, social enterprises have been experimenting with cutting-edge business models in hopes of these models being widely adopted and scaled while delivering a significant depth of impact to the society.
Credit to Professor Jasjit