Illustration by Marina Muun
In July 2014, I moved to Kenya to launch a social enterprise. Along with a cofounder, I had been lucky enough to secure a grant of £10,000 (about $15,000) for that purpose from the Skoll Centre. We spent the next six months building our enterprise, a vegetable trading business called Linkage. Our mission was to improve the livelihoods of smallholder farmers by creating a vegetable brokerage business that increased market access and lowered transaction costs. We built a local team of seven, and we recruited a network of 170 smallholder farmers and 20 motorbike drivers. By December, we had traded more than 30 tonnes (about 66,000 pounds) of vegetables—cabbages, spinach, peas, kale, and onions.
Despite these successes, we failed. We failed because we couldn’t meet our goal of providing a more efficient path to market than other brokers could offer. We closed down the business in early 2015. Since then, I’ve done a lot of reflection on that failure—and on the role of failure in social innovation more generally.
A Missed Link
The goal of Linkage was to improve the livelihoods of smallholder vegetable farmers in Kenya by better linking them to markets for their produce. Under the existing trading system in that country, those farmers capture only a small percentage of the final retail price of their vegetables. And that’s because the whole supply chain for vegetables is inefficient.
At the center of the supply chain are informal brokers. Every morning, a typical broker rises at the crack of dawn to visit farmers on a bike or on foot. At each farm, he harvests the produce himself, selecting only the best vegetables and leaving farmers to take the risk on what’s left. He negotiates a price with each farmer, knowing that the farmer has few alternative routes to market. He loads the vegetables that he’s bought on his bike. Next he goes to the local market, lays his vegetables out on the ground, and spends his afternoon waiting for buyers. At the end of the day, he sells the remaining vegetables at any price that he can get. (In most cases, he has no way to store them.) The brokers, in sum, are able to handle only a low volume of produce. The only way that they can make a profit is by maintaining high margins, and that’s why they offer very low prices to farmers.
We saw opportunities to alter the supply chain in ways that would allow us to offer higher prices to farmers. Our main goal was to build systems that would accommodate a larger volume of trade and thereby reduce transaction costs. Toward that end, we pursued two main innovations. First, we would arrange trades by phone in order to reduce the staff time and transport costs that in-person visits entail. Second, we would use networked transport in order to move vegetables from farm to market at a lower cost. We sometimes described our business model as an “Uber for veggies”: Transplant the Uber idea from San Francisco to rural Kenya, replace cars with motorbikes, and instead of transporting people, transport vegetables.
One of our central hypotheses, in short, was that arranging trades via phone would allow us to deliver vegetable brokerage services more cheaply than our competitors. To test this hypothesis, we surveyed farmers. The results were encouraging: Of the 170 farmers we surveyed, 97 percent had mobile phones, 94 percent used mobile money, and 72 percent could send a text message. Our next step was to test their communication ability. The results here were less encouraging. Many farmers couldn’t send a simple text message, but they were too embarrassed to admit that fact in a survey. So we tried calling them instead. But a lot of farmers find it hard to keep their phones charged, or they lack network coverage on their farm.
These infrastructure constraints were significant. But as one farmer pointed out, “Where there’s a will, there’s a way”: If farmers really wanted to sell their vegetables to us, they would call us to say that their vegetables were ready for harvesting. So we worked harder to understand farmers’ thinking and behavior. We learned that vegetable trading in Kenya is a relationship-based business. And we realized that it’s hard to form a solid relationship over the phone. One farmer summed it up well: “I know the brokers give me bad prices, but at least I know who they are.”
Social innovators need to be clear from the start about what conditions must hold true for their venture to work socially, financially, and operationally. After six months of experimentation, we recognized that the assumptions on which our model depended were invalid. Although we had created a business that offered smallholder farmers an alternative route to market for their vegetables, we had not created a scalable enterprise that could reach millions of customers.
In a word, we had failed. We had not been able to provide smallholder farmers a better vegetable brokerage service than our competitors. We offered better prices, but we did not offer the kind of relationship-based service that most farmers preferred. For that reason, our service was neither cost-effective nor sustainable.
The most important lesson that we learned was that behavioral change is hard. We had thought that if we offered higher prices, farmers would sell to us. But we didn’t pay enough attention to other factors—trust, in particular—that affect farmers’ decisions to sell their vegetables. Over time, we developed new ways to build trust. We discovered, for example, that when our team helped farmers harvest their vegetables, those farmers were much more willing to sell to us. Yet this approach drastically increased the cost of recruiting new farmers, and it therefore cut into our margins and slowed our efforts to scale up.
The One True Failure
What is failure? In simple terms, it is not achieving one’s goal. In the business world, the basic goal of a company is to make a profit. If a company cannot provide a product or service that is better than what its competitors can provide, it’s not likely to be profitable—and so it will fail. The basic goal of a social venture, meanwhile, is to improve the lives of its customers or beneficiaries. A social venture will fail, or should fail, if it can’t meet the needs of its customers or beneficiaries more effectively than its competitors. These two definitions mirror each other. Yet failure in the social enterprise field is not as clear-cut as it is in the for-profit business context: A social venture can be unprofitable and still be a success. Consider One Acre Fund, a nonprofit organization based in East Africa. Although it recovers only 78 percent of its field costs, it qualifies as a success because it has developed one of the few scalable models for improving yields of smallholder farmers.
A social venture will fail, or should fail, if it can’t meet the needs of its customers or beneficiaries more efficiently than its competitors.
The difficulty we have in clarifying what constitutes failure in the social sphere has two significant negative consequences. First, donors and investors end up allocating money inefficiently. Second, the lack of a market-like mechanism for weeding out unsuccessful ventures slows down innovation.
Competition, failure, and innovation are parts of a tightly integrated process. Consider the automotive industry. In its early stages, hundreds of companies experimented with a wide range of technologies, including engines that used various sources of power (steam, electricity, gasoline). By 1960, only seven large automakers were left, and all of them used the same basic technology. Imagine if there had been no competition: We might have ended up with a cart on wooden wheels powered by a steam engine. Or imagine if there had been no failure: We would have a lot of horribly inefficient and dangerous cars on the road.
There are two types of failure. One is a natural part of innovation, and the other is the enemy of innovation. In one sense, failure is simply a “lack of success”—an inability to meet a certain goal. This kind of failure is an essential part of innovation: Not every business or social venture can succeed. In another sense, failure involves an inability to achieve anything of value. This type of failure occurs when those who undertake a venture make no effort to adapt their product, service, or business model. As Thomas Edison said about the process of inventing the light bulb, “I have not failed, I’ve just found 10,000 ways that won’t work.” The only true failure, in other words, is the failure to learn.
To tell whether a social venture has failed in the first or the second sense, ask yourself, “What conditions need to be in place for this venture to succeed?” If this question produces an answer like “We need greater technology expertise,” you have the potential to iterate and improve your venture. These are factors that you can change. But if the question produces an answer like “The technology in this industry isn’t advanced enough,” you might have to admit that you face problems that are impossible to change—at least for now.
At the end of our experience in Kenya, we concluded that the necessary conditions for Linkage to succeed—to become an Uber for veggies—did not exist in that country at that moment. We believe, however, that those conditions will be in place in the next decade or so. An expansion of mobile network coverage, an increased familiarity with doing business via phone, and a more concentrated vegetable retail market will enable a company like Linkage to stay in business. We learned a lot, and in that regard, we succeeded. But our biggest success came with admitting that our venture had failed.
Read more stories by Isabella Horrocks.