Nine Conditions for Scaling

Your social innovation is showing signs of success: It produces tangible social benefits, addresses the needs of customers and communities, and is financially viable. What are the next steps for your social impact project? Should your organization be content with slow and steady growth? Or is there a way to rapidly increase the scale and capacity of your initiative? What resources and best practices would you use?

The following edited excerpt from Chapter 8 of This Little World: A How-To Guide for Social Innovators presents nine essential business conditions for scaling, based on recent research and our experience in the social impact sector. Effective scaling relates to product design and a good theory of change. But it also requires appropriate business conditions, as well as initiatives that provide real value to communities. The following checklist of best practices can be useful for organizations that are interested in deploying scalable, data-driven solutions to new audiences.—Michael J. Halvorson and Shelly Cano Kurtz

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Scaling means to increase the magnitude and reach of a project so that it can have a deeper, more sustained impact on real-world communities. From an organizational point of view, scaling allows a business or nonprofit organization to do more of what it is good at, extending its reach into new domains and contexts.

The business decisions related to scaling are dependent on a number of external factors, including evaluating organizational resources, sizing up the competition, selecting a revenue model, considering economic conditions, and fine-tuning for operational efficiency. Each of these factors will have an influence on how a social impact organization moves from linear, iterative growth to exponential growth at scale. The following questions will help you judge how ready you are to scale a new product or service.

1. Is there a substantial market?

Social innovations need to address the needs of real communities. If you are designing a social innovation that has the potential for true impact, you’ll want to gather quality data about the effectiveness of your initiative so that stakeholders can determine if scaling represents a meaningful opportunity. Effective scaling requires resources and a sustained commitment from your organization. Research shows that organizations that commit to scaling will require additional budget, staff, resources, and organizational support.

To think strategically about scaling, conduct a market landscape analysis as part of your discernment process. A landscape analysis will help you determine who the potential customers or clients are for your product, what their needs and characteristics will be, as well as the competitive ecosystem in your industry. In some cases, there will be a service desert in the community where you have the ability to provide a useful good or service. It could be a systemic challenge such as homelessness, mental illness, underemployment, or food instability. A landscape analysis may also reveal that your region already has quality solutions available to residents. If this is the case, partnering with another organization would be a better approach than adding a new service.

2. How strong is your theory of change?

Theory of change is the empirical basis underlying a proposed social innovation. A theory of change explains how your proposed solution will address environmental concerns or community challenges and be validated through data collection. But in many organizations, a theory of change vision takes shape slowly. Employees tend to articulate what they do well, but not how or why they do it. This trial-and-error approach becomes a problem when organizations want to scale their projects.

To develop a robust theory of change, be sure your rationale provides specific details about how and why the innovation produces benefits. Clarify the types of activities required to produce these outcomes, and be sure to detail the roles and responsibilities of service recipients, donors, funders, staff, and community members. If conditions are expected to be different in new markets, the theory of change needs to explain how and why the intervention will still work in a new setting. Ultimately, a social impact project that is scaled should align clearly with the strengths and reputation of an organization. When an organization is trusted, there is a higher likelihood that new products or services will be accepted.

3. Do you have a solid revenue model?

A revenue model is a business plan for making the product or service financially sustainable. When teams propose a new product or service, they often suggest potential revenue models that leaders can consider to fund their innovations. But before you scale your project, it is important that you vet these ideas carefully and select the revenue model that has the best chance of maximizing income and resource utilization. In our work, we often highlight the benefits of the business-to-business (B2B) revenue model for social impact organizations, including the software-as-a-service (SaaS) model, which can be effective for organizations that plan to market digital services via the Internet.

Four popular models include the self-sustaining revenue model, in which customers pay for the new product or service fully; the cross-subsidization model, which uses established products to subsidize new product offerings; the grant-supported, fee-for-service model, which allows customers to purchase products below actual cost, then seeks outside funds to cover the remaining costs; and the fully grant-funded support model, in which an organization does not charge customers for services at all, but seeks grants pay for the services provided.

4. What will economic conditions be in the future?

So far, we’ve discussed business conditions within a social impact organization. However, it is also important to consider external economic conditions and the broader financial climate to understand how a new social innovation might be received by consumers, who are also impacted by macroeconomic issues. These conditions include the inflationary rate, the unemployment rate, the interest rate for loans, currency exchange rates, health and pandemic scenarios, and general economic output measures, such as GDP.

As we saw in 2023 and 2024, the inflationary rate and unemployment rate have dramatic impacts on global financial markets, compensation, business loans, national politics, and more. If economic conditions are perceived to be stagnant or declining, it’s harder to raise capital or solicit financial support from donors. If economic conditions are perceived to be good, customers tend to spend more on goods and services, including the infrastructure for social innovation. The question is: What will economic conditions be like in the future, and how might social innovators respond to them? Economic conditions can powerfully affect the standard of living and demand for services in a community. They also impact supply chains, the availability of resources, funding prospects, and the timing of campaigns and interventions.

5. Can you lower the cost of your product or service?

The promise of scaling is that it reduces the unit cost of a product or service while simultaneously raising revenues and overall impact. Under normal operating conditions, an organization that expands its operations by adding manufacturing costs, support staff, and overhead doesn’t necessarily do this. More typically, an iterative growth scheme brings in additional revenue while expanding the organization’s financial footprint. But scaling is an exponential growth strategy. It tries to increase revenues and impact without substantially increasing staff or overhead. The goal is to accelerate impact by reaching new people and markets while keeping costs low.

In reality, this type of revenue efficiency can be hard to achieve. Before you plan to scale your operation, determine if you can truly lower the cost of producing your product or service without substantially increasing overhead. In addition, you’ll need to lower costs while keeping product quality high. On the management side, scaling should not be an invitation to demand more from your employees without giving them additional resources or compensation. Instead, scaling is an efficiency puzzle wrapped in social and financial constraints. When conditions are right, organizations can ferret out hidden costs in the system and leverage creative solutions.

6. Is scaling environmentally sustainable?

In the eighteenth and nineteenth centuries, conversations about scaling (or economies of scale) surfaced few concerns about sustainability. The invention of iron production and the steam engine sped up industrialization, which led to the development of railroads, steamships, and innovations that boosted prosperity and raised living standards. However, there was little consideration about the environmental consequences. Governments and industrialists paid little attention to the depletion of natural resources, pollution, or the health consequences of industrialization. The general belief was that the planet’s natural resources were inexhaustible.

The fragile condition of our planet is now daily news. This means that social entrepreneurs need to build into their operating procedures a commitment to carefully steward the resources of people and planet as they build scalable, data-driven solutions for customers and communities. The term “responsible business” has been used recently to capture some of this commitment to sustainability, and you’ll see it in the mission statements of many organizations, especially in Europe and North America.

7. Has your organization considered all market conditions?

We’ve all probably observed a restaurant chain that does splendidly in one part of town but seems to struggle in other locations. Although the food is the same, market conditions are somehow different in the new place, and the attempt to replicate the business eventually fails. Why is this? One of the challenges with scaling is the vexing issue of hidden market conditions that conspire to reduce the effectiveness of replication and growth. Social innovators need to consider this problem carefully, even if they are not selling fine dining experiences.

There are a number of reasons why conditions will vary subtly as you move from one market context to the next. The first is product presentation or quality issues, meaning that the components or “ingredients” in a product or client experience vary subtly from one location to the next. In online contexts, this happens when a smartphone app or media product is presented in different ways depending on the platform customers are using. For example, a podcast series will appear differently on different websites, and the way a customer buys or plays a media product will change from location to location. This is why we recommend human-centered design approaches, deep community engagement, and continual testing and refinement for new innovations.

8. Do you have the capacity for sustained impact?

An organization that is planning to launch a new product or initiative needs to be prepared to support the innovation over the long term. This means it will be necessary to plan for gradual expansion in the organization. This does not imply new office space or buildings. Many social impact organizations operate just fine remotely or in a hybrid manner, which reduces the need for physical space when an organization grows. But you will need to fund appropriate technology, customer support systems, and sales personnel that can help the organization sell its product or service. You’ll also need to acquire appropriate software tools to organize data, particularly the tracking data you use to verify your theory of change and success metrics.

Remember that the employees in impact organizations also need care and support, because they are ultimately the most valuable assets in the company. Employees enact the mission of the organization and need to be engaged with any new initiatives the leadership is planning. There are different growth models you can use for staffing up. For example, rather than building physical infrastructure or hiring employees, an organization may choose to leverage the network of a partner for product distribution, marketing, and assessment.

9. Have you fully exploited digital transformation for operational efficiency?

Digital transformation is the process of integrating digital resources into key areas of a business to add value and build capacity. When social impact firms increase their efficiency, they are able to handle common business tasks like interacting with clients, managing the supply chain, and reporting.

When an organization is preparing to scale a new product, they should ask digital readiness questions like “How can we improve our product with digital-first methods?” “How can we gather data and respond to changing market conditions?” “How might new systems help us with this work?” Digitization can also mean using low-cost tools and infrastructures that already exist, including smartphone networks, social media, free Wi-Fi, public workspaces, AI tools, and so on. In each context, appropriate technology becomes the mechanism that connects impact organizations to clients and customers, making commerce rapid and efficient. The more elements of a program that can be standardized before scaling, the better.

In sum, scaling means increasing the magnitude and reach of a social innovation project, so that it has a deeper, more sustained impact on real-world communities. Before you take this step, be sure that you think carefully about relevant business and market conditions, so that you use resources wisely and provide real value to clients and customers.