Social Startup Success

CHAPTER 1

Social startups face a vexing catch-22: funders want to see proof of an organization’s success before offering grants, but nonprofits need funding to get their ideas off the ground. The lack of seed funding is one of the biggest differences between growing a nonprofit organization and a for-profit business. Private sector startups are often able to gain support for the research and development (R&D) phase of building their organizations from angel investors, who hope to earn a handsome return once the startup becomes profitable. For nonprofit startups, private angel funds don’t exist. Most foundations are also not interested in providing financial support for testing. Typically, they want to fund organizations with a proven approach. Even at the infancy of an idea, they press for results, asking: “What is your set of early outcomes? How do we know this is going to work?”

But how can organizations improve their programs with testing and prove impact without funding at the early stage? This dilemma has left many social startups in slow-growth mode for years. The solution is to adopt a powerful set of innovation methods—a cycle of researching, brainstorming, prototyping and implementing often called “human-centered design”—that the Silicon Valley entrepreneurship community developed for creating new products and services. These innovation methods not only allow an organization to produce compelling early indications of scalable success, but also help to speed up the development process; they avoid the common mistake of investing too much time and money in efforts doomed to fail. These methods have enabled much more rapid innovation at lower cost, while also facilitating the development of products and services more responsive to the needs and desires of customers. They have fueled the astonishing success of the Valley’s fastest growth companies, including LinkedIn, Airbnb, Uber and Pinterest—and have driven the breakout success of many of the most exciting new social enterprises too.

A consistent theme in my interviews with breakthrough social entrepreneurs was that they had used these innovation practices to develop their models for their products or services, and had tested them before going out to raise capital and seek press coverage. This allowed them to develop more effective programs and products. It also enabled them to tell a persuasive story about how they had arrived at their models, impressing funders with their research and development process and their initial set of results. In the long run, adopting these practices instills a culture of continuous innovation that helps to assure that organizations keep scaling their impact—always experimenting with ways to improve and expand their offerings, while discontinuing efforts that aren’t working so they can focus on new approaches.

There are three core methods to draw on. One is the lean startup approach to product development, popularized by Eric Ries in his book The Lean Startup.¹ Closely related but with some methods of its own is the practice of design thinking, pioneered at the Hasso Plattner Institute of Design at Stanford University (known as the “d.school”) and the private innovation consulting firm IDEO. This method has been introduced in several books, including Change by Design by the CEO of IDEO, Tim Brown.² Finally, open innovation, also referred to as “cocreation,” was introduced by Professor Henry Chesbrough, of the Haas School of Business at the University of California, and is described in his book Open Innovation.³ Collectively, these methods can be referred to as “human-centered design.” Though each has specific nuances in execution, which you can read about in more detail in the books mentioned, at the core of these methods are three fundamental principles: that organizations must design products and services based upon an in-depth investigation of the customers’ needs and desires; that organizations must test prototypes of products and services (often very simple ones) with customers, and further develop them according to their feedback; and that no matter how compelling an idea for a product or service may be to a founder or organization, if it fails to win the approval of the targeted customers in tests, the organization must pivot to a new approach and consider the failures valuable learning experiences rather than crippling mistakes.

There is no one widely agreed-upon strict process to follow; organizations can either tailor the methods to their work as they see fit, or can follow one or another well-established guide. IDEO, for example, has developed a rigorous step-by-step method for nonprofits through its nonprofit spinoff IDEO.org. It offers a Field Guide to Human Centered Design for free download.⁴ Many other consultancies have followed in IDEO’s footsteps and developed their own set of specific procedures. Several companies and organizations have drawn on these resources to craft their own particular processes to fit their needs. Surveying the full range of methods, the following is a basic step-by-step process for producing optimal results:

1. Conduct in-depth research on the problem with the intended “customers,” who, for social innovators, we’ll call beneficiaries.

It is vital to build strong connections with the end-users in order to better understand their needs. This must involve methods such as focus grouping or surveys, as well as going out to target communities, observing the nature of end-users’ lives and conducting in-person interviews to understand the problems they face. Prominent civil rights activist Bryan Stevenson, founder and executive director of the Alabama-based civil rights organization Equal Justice Initiative, refers to this as gaining “proximity.”⁵ He stresses how important it is to build understanding and empathy with communities in order to design effective programs. As he said in a recent speech: “We cannot make good decisions from a distance. If you are not proximate, you cannot change the world.”⁶ Proximity is also critical to getting buy-in from the communities you hope to serve.

2. Brainstorm a series of solutions for addressing the problem(s) and select a first candidate for development.

Once you have conducted interviews, discuss key findings with your team and perhaps with a range of stakeholders and outside advisors. Hold a session in which you invite unfettered idea generation about the best ways to address the problem; or for established organizations, to make changes in existing programs or products. It is imperative that everyone understands that all ideas are welcome at the table, and none should be shot down during this brainstorming. A ubiquitous practice for idea generation in Silicon Valley is scribbling thoughts on brightly colored Post-it notes, then sticking them on a whiteboard, wall or large sheet of paper.

3. Create a rough prototype and get feedback.

This should be a very simple and inexpensive representation of the product (such as a sketch depicting the product), or how the service will work (a storyboard describing how the service would operate). You can present the prototype to targeted users and gain valuable feedback.

4. Refine the prototype and launch a pilot program or product to test results.

As you observe the responses to the pilot, you will generally discover additional ways to improve it, often launching a number of progressively more developed versions until you see the results you are aiming for. It is critical to have good benchmarks to measure impact during this phase to determine whether a pilot is successfully addressing the problem you seek to solve. You may find the approach simply isn’t working, and that it’s time to pivot to a new one.

NEVER ASSUME YOU KNOW THE ANSWER

Too many nonprofits have made the mistake of not interviewing and testing before launching their service. A number of the respondents to my survey described this as the biggest mistake they made in building their organization. One of these is Rachel Armstrong, the founder of Farm Commons, a Minnesota-based organization that serves farmers by providing them with information regarding legal issues. Her original concept was that the farmers would be clients, paying the organization for providing legal services. But after the service was launched, it turned out the farmers didn’t want to pay for legal representation. What they did want was education about legal issues, and Farm Commons had to completely redesign its model, not relying on income from the farmers and developing extensive educational resources and tutorials.

Even if social entrepreneurs have direct experience with the problems they are trying to solve, research and testing with beneficiaries is invaluable. Speaking with beneficiaries and all the other stakeholders, who can either help to make one’s program a success or stand in its way, will always be enlightening. It will also build understanding in the community and earn buy-in. In the nonprofit world in particular, engaging beneficiaries is essential: communities will not embrace your efforts if you do not involve them in the process of developing your idea.

Take the case of CareMessage, a multimillion-dollar organization Vineet Singal and Cecilia Corral cofounded. It provides a sophisticated web-based system that allows health clinics to send patients text and voice messages to remind, educate and motivate them to manage their disease. One target is Spanish-speaking individuals who struggle to understand the information they receive from health care providers. Corral grew up between south Texas and Mexico, and her own parents spoke only Spanish at home. She knew very well the problems these patients have with the language barrier, because she watched her parents’ blank stares as they struggled to understand doctors, and sometimes even the translators.

Despite her familiarity with the problem, Corral led extensive interviewing and testing of the prototypes for CareMessage with targeted users. She sat in on meetings between Spanish-speaking patients and translators, and even enrolled people from her circle of family and friends in the program, without notice, to see how they reacted to receiving such messages. She then proceeded to question them about their thoughts as the service evolved, constantly asking, “Does this sound okay? Is it making sense?”

FROM POST-IT TO PROOF OF CONCEPT

To see how powerful this general approach of customer research and product testing can be for social enterprises, let’s take a close look at the process Tipping Point Community used in collaboration with the nonprofit Aspire Public Schools (a group of charter schools) to devise a boldly creative solution to ineffective preschool education in low-income communities.

Tipping Point Community, based in San Francisco, is one of many funders supporting nonprofits to embrace human-centered design practices. Others include Google.org, the Michael & Susan Dell Foundation, the William and Flora Hewlett Foundation and the Bill and Melinda Gates Foundation. The Gates Foundation, for example, has spent hundreds of millions of dollars on R&D to test various solutions to the malaria epidemic. In a speech, Bill Gates described R&D funding as “urgent to stay ahead of emerging disease threats.”⁷ It is promising to see international, national and local funders recognizing the vital role they can play in dedicating significant amounts of philanthropic capital to R&D.

Tipping Point Community aims to find solutions to extreme poverty and to facilitate innovation. To promote more innovation and design thinking in its work, it established an R&D arm, called T Lab. As Renuka Kher, the founding managing director of Tipping Point’s T Lab, says, “The problem is that nonprofits are held to a different standard while in the business world we call R&D spending ‘infrastructure’ and it sounds essential, in the nonprofit world we call it ‘overhead’ and it is highly scrutinized.” As a result, while corporations spent $145 billion on research and development in 2015, nonprofits spent nearly nothing. Tipping Point decided to change that, making R&D spending a priority within their own organization.

Through their research, T Lab identified the lack of preschool in many neighborhoods as a key problem, leaving eighty thousand children in the San Francisco Bay area without early childhood education. The lab’s research group decided to tackle the challenge. Step one was for fellows of T Lab, a cohort of young professionals that Tipping Point trains and supports in human-centered design, to reach out to members of the communities lacking high-quality preschool options; the group asked questions about what they desired for their children in their early years, and their perspective on how to improve the situation. The fellows reached out to community-based organizations, schools and libraries to talk with parents, teachers, principles and anyone else who might have an opinion about how to solve the problem.

The team then held a brainstorming session, often called the “ideation” phase of human-centered design, and proposed a wide range of creative solutions. The team chose eight concepts, then developed a series of prototype solutions for testing. One was to convert a bus into a classroom, which was appealing because it would solve the problem of needing to either rent building space or, in many cases, construct a whole new building. They could also move a mobile classroom wherever needed, perhaps serving families in more than one location if scheduling permitted.