Innovation and Scaling for Impact: How Effective Social Enterprises Do It

Christian Seelos & Johanna Mair

246 pages, Stanford University Press, 2017

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In this book, we argue that innovations are activities that lie outside the established knowledge base of organizations. Three dimensions of knowledge—what-knowledge, how-knowledge, and why-knowledge—form the basis of a central framework that we call the “impact-creation logic” (ICL) of an organization. “What-knowledge” requires that organizations deeply understand problem spaces, or the factors that generate and sustain the needs of poor people and communities. “How-knowledge” involves the resources and capabilities required for effective solutions. And “why-knowledge” means that organizations are clear about their identity and strategy, what motivates and inspires them, and why their staff go to work full of energy and enthusiasm every morning. This excerpt from the book’s eighth chapter addresses the “what-knowledge” dimension of problem spaces. —Christian Seelos & Johanna Mair

Mapping Problem Spaces

Those people, the so-called evangelists of innovation, will always be small [in numbers]. They need to be small. If you had 300 people, and all 300 would run around with 900 ideas of innovation [laughs], it might not work. In Google, you can do that. I think you will be able to do that in a technical way. With Google or Apple you have a machine, you have a program, and it will act in a particular way. You give the 300 people one problem, and say: “All right, I want a solution within a year. You spend what you want; resources are no problem.” Yes, you will get this for a technical problem. But you come to a village [in rural India, where Gram Vikas operates] where you are taking each one’s action, reaction, response, et cetera. Working with people, especially in innovation and development, is a completely different cup of soup or tea, is a different cup altogether than a technical problem. —Joe Madiath, founder of Gram Vikas

Joe Madiath hints at the importance of seriously considering the particular characteristics of the problems and needs that an organization addresses. Only then can we understand and effectively decide on the roles and specifics of innovation for creating impact. The organizational trajectories of Aravind and Gram Vikas vividly illustrate this point. Preventing needless blindness by conducting cataract surgeries represents a drastically different problem space from confronting inequality or reversing tribal villagers’ dependence on powerful moneylenders in rural Orissa. The two have vastly different implications for organizations.

Social enterprises and their supporters need to understand the nature of these problem spaces and how they are embedded in local realities. In our research we have found that the characteristics of problem spaces are important determinants of the options for impact creation available for social enterprises.1

Unfortunately, organizations in the development sector rarely consider the implications of the environmental characteristics—the local problem spaces—in a systematic way. This oversight can have detrimental effects. It can also lead to a bias toward technical innovations and implementing best practices. But these innovations and best practice solutions often remind us of Maslow’s famous hammer: All poverty-related problems start looking like nails.

Microfinance is an example of such a “hammer.” In the mid-2000s, it almost reached the status of a panacea for global poverty. The year 2005 was designated by the UN General Assembly as the International Year of Microcredit. In 2006, Muhammad Yunus and the Grameen Bank received the Nobel Peace Prize for their leadership in pioneering microfinance for development work. But critical assessments of outcomes show a very mixed picture.2,3 Microfinance works differently in various environments: Sometimes it creates positive outcomes, but often it has negative unintended consequences. Clearly, these results are not due just to variance in microfinance implementations. They require consideration of environmental variance as well.

Unfortunately, the bias toward technical solutions has spread to university campuses, too. At entrepreneurship centers around the world, young, motivated entrepreneurs design new poverty-targeting technologies typically after spending anytime up to three weeks in a developing country. “Disruptive solutions” are the new mantra! Solutions are sexy, and problems are mere annoyances that stand in the way of all these wonderful solutions. During recent discussions about solutions to stubborn problems of poverty a young student at a business school remarked: “Let’s just do a hackathon!” Yet poverty and poverty-associated problems persist.

We believe that people can make better investment and operational decisions by prioritizing a deep understanding of problem spaces instead of prioritizing solutions. To begin, we propose a diagnostic framework as a starting point for productive decisions on innovation and scaling.

Four Dimensions Shape Problem Spaces

Effective social enterprises invest significant time and effort in exploring and learning about the true nature of people’s problems and needs. Our case study organizations have accumulated deep knowledge of the problem spaces they target. They all invested time and effort in examining and documenting factors that capture how problems manifest in people’s lives on the ground. The studies of BRAC’s research and evaluation division in the many aspects of village life in the 1970s and 1980s and Gram Vikas’s studies of power dynamics in tribal villages in the 1980s are illustrative examples. Many of their decisions about innovation and scaling seem to have arisen from their accumulated knowledge of the factors that constitute the problem space of poverty in the communities that the organizations served.

In particular, they ask a crucial question that goes beyond merely identifying a problem or need as an opportunity for action: Why is this problem or need so persistent? Answers to this question produce better ideas for the development of effective interventions and solutions. The “mapping problem spaces” framework identifies a constellation of barriers that sustain poverty-associated problems and needs. Effective interventions must overcome these barriers to make progress and have any impact. Decisions about innovation and scaling thus need to target the barriers explicitly. In working with organizations more directly, we found it tremendously useful to separate the barriers that characterize problem spaces into four dimensions: economic, cognitive, normative, and political.

Economic Barriers

Economic barriers range from a lack of savings, disposable income, or insurance at the level of individuals to community-level barriers, including missing infrastructure and lack of access to markets. Economic factors are the most frequent characteristic of poverty that the development sector measures and uses as a defining criterion. Gross domestic production (GDP) per capita at the country level and income per person at the individual level are examples. Economic barriers prevent people from satisfying urgent needs, even if postponement has dramatically negative consequences. The inability to feed children adequately and to get essential health care are examples. Some barriers, such as a lack of savings or insurance, prevent people from allocating resources across time. These barriers make it difficult to act on temporary opportunities or to protect people during crises.

Aravind is a good example of working in a problem space in which economic factors are important barriers for effective solutions. Most poor people in Indian towns and particularly in rural villages cannot afford adequate health services even for life-threatening conditions. Lowering or eliminating economic barriers through efficiency, productivity, and cross-subsidization thus were hallmarks of Aravind’s impact-creation logic.

Economic barriers may also sometimes mask other problems at a deeper level. For instance, the indebtedness of the tribal villages that Gram Vikas worked with in the 1980s seemed to be just economic problems. But—as the case study showed—bad economic outcomes were caused by power relations that kept the tribal villagers dependent on moneylenders. Focusing solely on economic factors would not solve the underlying relational problem, the asymmetric power dynamics between moneylenders and tribal villagers. Microfinance represents another solution that sometimes suffers from false problem specification and little systematic engagement with the problem space. Providing loans targets only the economic dimension of the problems of the poor. BRAC has learned how important it is to support a loan by proper training, creation of opportunities, and using social processes to prevent borrowers from making bad decisions. All these additional program areas target cognitive barriers. The mere provision of a loan ignores a crucial set of barriers that constitute the local problem space of poverty. The result is failed interventions.

Cognitive Barriers

Cognitive barriers refer to human reasoning and knowledge. They include a particular outlook on oneself and one’s life. The permanence of poverty-associated problems is often taken for granted by poor communities. They may find workarounds for some problems but do not question their situation or perceive an opportunity for fundamental change. BRAC’s efforts at conscientization targeted cognitive barriers. Based on ideas introduced by Paulo Freire, conscientization strives to enable people to realize and critically reflect on their situation and to devise ways to improve their lives. We would say it helps people diagnose their own problem spaces and the barriers that prevent them from making progress. This knowledge empowers them to act instead of just reacting.

Cognitive barriers also include a lack of skills, trust, and hope that generates a state of lethargy. An inability to learn objectively prevents communities from accumulating valid knowledge that could support progress and lead to smarter decisions over time. Superstitious explanations of events often justify and sustain the old ways. All of these barriers sustain an undesirable status quo.

Economic and cognitive barriers have closely related implications for innovation and scaling, as we will see in the next section. We find it useful to group problems and needs that are sustained by predominantly economic or cognitive barriers as technical problems.

Normative Barriers

Normative barriers refer to what are seen as appropriate roles and behavior in a society or in a local community. They are deeply grounded in societal and community values, norms, and traditions. Religious beliefs, ancient traditions, and social habits are powerful structural forces that prescribe how members of a community behave and relate to each other. Normative barriers are an important factor to understand the problem space in which Gram Vikas operates in India: inequality in villages in rural Orissa. Norms and traditions anchored in religion, as well as local systems of patriarchy and kinship, shape the daily lives of both advantaged and disadvantaged people in a community. What makes these barriers particularly challenging is that the norms and customs at their core are taken for granted and deeply entrenched in the daily lives of the inhabitants.

Equally, BRAC in Bangladesh faces important normative barriers in its home territory. Each intervention BRAC designs has to factor in how the solution resonates with local communities and local customs. Often the solutions proactively integrate local customs. For example, in its human rights initiatives, BRAC builds on local and historical traditions of theater play to communicate and implement its programs.4 It also encountered a series of normative barriers in the early days of microfinance. Bangladeshis did not think it was appropriate for women to engage in transactional activities involving money, to participate in market-based activities, and to earn income. Each program and intervention related to microfinance had to factor in such local normative proscriptions.

Political Barriers

A fourth type of barrier is political. Political barriers include power asymmetries as well as the ambiguity, absence, or weakness of formal rules and regulatory arrangements. Poor people are the most vulnerable. They often lack actual or formal rights and are liable to abuses by powerful actors. The aggression and violence that BRAC staff experienced in some of their international operations outside of Bangladesh are examples of this dimension of problem spaces.

The abuse of tribespeople by liquor sellers and the designated roles of lower-caste people in rural villages were crucial barriers that Gram Vikas had to overcome. They severely challenged the organization’s innovations and efforts to achieve scale.

Knowledge about the general implications of mapping problem spaces for innovation and scaling, combined with deep environmental knowledge about particular problems or needs, lets organizations make much better decisions about intervention design, expected outcomes, measures, and realistic time scales. We suggest that our framework has great potential for funders as well. Understanding the nature of problem spaces that an organization targets allow better appreciation of how best to support an organization and what types of results may be reasonably expected. This mapping also leads to much more systematic learning by organizations, because it explicitly relates the particular problem spaces that they target to the other two dimensions of their impact-creation logic (resources/capabilities and identity/strategy), in a way that encourages continuous learning and strategizing.

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