Archive | social enterprise RSS feed for this section

The First £1.5 billion – and what it tells us

10 Apr

Gritty with quote_1As one (tough) financial year passes, and another (as tough) begins, it feels like a useful time to delve into the sector’s finances more broadly. More specifically, to take a look at Big Society Capital’s report on the Size and Composition of Social Investment in the UK, released a couple of weeks back. (NB – the report was Matt Robinson’s swansong at BSC, as he leaves for international development pastures – he’ll be missed as a clear, reasoned, and principled voice).

The headlines are impressive: £1.5bn worth of social investment (that’s the total value at the end of 2015, not deals done in the past year). Dealflow in the year c. £430m (which is up from the £200m figure reported two or three years back) demonstrating 20% growth or thereabouts. And some evidence of a shift from secured lending to more unsecured lending and different types of products.

[in passing, it is worth mentioning that I enjoyed the “We are confident to a reasonable degree of accuracy (+/- £tens of millions)”, which rather illustrates that the data is still not great. Oh for that margin of error….]

There is much else of interest in the report, not least the fact that this total is dwarfed by about £9bn in bonds and bank loans to charities and social enterprises, not to mention a further £59bn or so if housing associations are taken into account. An alternative version of the report could be titled “Social investment: putting it in perspective”, as some have argued for some time. Nevertheless, there are some signs of progress, and they should be welcomed.

I liked the definitional / segmentation approach too, as best demonstrated by these two diagrams:

BSC Segmentation 1 BSC Segmentation 2

This approach to thinking more clearly about social investment and the terms we use (impact investment, ethical investment, positive investment) is a useful contribution; it also came up recently at the release of some new analysis of social investment research by Jess Daggers and Alex Nicholls – also well worth a look – as well as in the Alternative Commission report. This segmentation of what we mean when we talk about different things seems increasingly important to me where social investment is concerned: so much of the heat and light and baby-bathwater debate flows from misunderstandings, often between (potential) investors and investees.

The percentages table on page 9 is where it gets very interesting: this is a breakdown of social investments by proportion / type. Here it is:

BSC Table 1

[The categorisation on the left relates to BSC’s strategy (Social Innovation, Participation, Scale etc). ]

So to draw out a few things here:

  • there does seem to be a bit more unsecured lending going on: this is good news from a social enterprise perspective, as we know this is what a lot of organisations want/need – although we don’t know how much of the 47% lending figure relates to property; when one adds this to 9% in ‘high impact social property’ and whatever might be in the 30% to ‘non-asset locked’, then the figure could still be quite high. Indeed, if one takes the 30% not going to charities and CICs out of the equation (called Profit with Purpose here), even a cautious estimate like the Social bank lending + the high impact social property give you 45% / 70% which would be equivalent to around 65% secured lending. Not the 80% / 90% figures we used to see, but still a significant majority
  • Social Impact Bonds are responsible for 1% of all social investment in the UK. 1%. Even though the report mentions that this could have been double if calculated mid-way through 2015, that would have only taken it (by my maths) to, er, 2%. If data beats opinion, as someone wiser than me once said, then let us hope that due notice is given to this figure – community shares are responsible for 6 times as much; charity bonds 6 times as much (from the same number of investments), unsecured lending 10 times as much etc.
  • Social Investment Tax Relief-related investments are small but there’s been some decent progress in year 1; it will be interesting to see if they can grow as fast as Community Shares, and add to the ‘democratisation’ and ‘retailisation’ of social investment: 353 investments in total for community shares, involving thousands of people.
  • it’s a bit unclear what’s in the 30% at the bottom; in the annex it says this largely includes work by ClearlySo, Triodos (eg. loans to co-operatives), work by Mustard Seed and more – estimated at £462m through 807 investments, £118m dealflow in 2015 through 46 deals. Would be interesting for someone to disaggregate this a bit more, see if there is overlap with some of the sections above and what extent is just companies limited by share and what is social enterprises or co-operatives with pre-CIC or non-ben-com structures etc

I’m sure that the data isn’t perfect, and I’m sure Matt knows that too – indeed, he has some excellent recommendations on how to continue to get better with the data and reporting. More transparent reporting like this will also help eliminate duplicates (eg. with co-investees arranged by a broker) more comprehensively, and also create benchmarks that can allow for better understanding of progress. I’ve learned whilst being in charge of the State of Social Enterprise survey, that improving the data and the questions is an incremental process and one which is best improved by openness (see our report for Access, Prospecting the Future, for example).

So what are the take-aways?
– welcome the evidence of progress, especially with riskier, unsecured lending
– segmentation, segmentation, segmentation
– let’s use data to inform our policies, programmes and practice- let’s be as open about that data as possible (esp. its quality and how to improve it)
– let’s keep this stuff in perspective

 

Advertisements

100 social enterprise truths – revisited in 2015

6 Apr

popseIt’s almost four years ago that I took part in PopSE!, the first ever pop-up social enterprise think tank. I remain proud of what we got up to that week, the report we produced (which still bears reading), and the people who I got to know, meet and work with. It was also a lot of fun, and a refreshing break of new thinking, unfettered by organisational strictures and political agendas. One of the most read pieces was the 100 social enterprise truths that I tweeted throughout the week; they have been translated, re-blogged and continue to get sent round occasionally as they get re-discovered. Somewhat inevitably, the quality went down during the week, and there’s an air of desperation to some towards the end….as you will see. At the risk of extended navel-gazing, I thought I’d have a bit of a revisit of them and see what still holds four years on…

1. Measuring social impact is about improving what you do, not just proving how well it works
Stating the obvious, but still needs saying now – evaluation needs to be of use internally: for decision-making, to improve a product or service, or to motivate and retain staff and supporters. How many are doing social value forecasts looking ahead to the year?

2. Choose legal structure after getting clarity on mission, activities, financing, governance
Yep – still stands.

3. It’s not the size of the profit, it’s what you do with it that counts
Sort of – although you can do more if you make more, arguably. I have a feeling I may have just been making a crude sexual allusion rather than a serious point.

4. More-than-profit is better than not-for-profit (profit’s not a dirty word)
I still don’t think profit is a dirty word – but I don’t think more-than-profit is great. I’m a not-for-dividend-distribution guy now.

5. Successful social entrepreneurs build trusted, authentic relationships
Still think this is true, and still overlooked when people look at success factors. You can’t accelerate trust and authenticity, generally.

6. Social entrepreneurs aren’t individual heroes; they build teams, create networks, mobilise movements
Yep.

7. Social entrepreneurs can work at community, local, national and international levels
Yep.

8. If a pound was donated each time a social entrepreneur quoted Gandhi, no-one would need to fundraise
This has only got worse as Twitter has taken hold. The web is awash with platitudes.

9. Teach too many men to fish and you screw up the entire marine ecosystem and deplete the fish stocks
The serious point about the complexity of problems we are trying to solve still stands. It’s why people are banging on a lot about systems these days; and collaborative impact. Stuff like that.

10. Scale of impact is more important than scale of organisation (or scale of ego)
Yep.

11. A particular legal structure doesn’t guarantee an organisation won’t be rubbish (or that it will be brilliant)
Yes. On a run of stating the obvious here. Although I did see one organisation say that being a social enterprise “guaranteed social value” in the last year or so, which is obviously hogwash.

12. You don’t need an MBA to be a social entrepreneur; you need a JFDI
I’ve probably mellowed on this a bit; I still think people can get lost in the theories and the plans, and never see if they have a customer…but the wave of activity from universities and business schools isn’t a bad thing.

13. Successful social enterprises have a ‘network mindset’ not an organisational one: focus on the mission
This is one I feel more passionately about – seems like everything we do of any value is in partnership, or beyond the boundaries of our organisation.

14. All money comes with strings attached; that’s fine as long as you know what they are
Sort of – although some come with a hell of a lot, and some with barely any.

15. Social enterprise isn’t a panacea; but it can provide a treatment for some social ills, and help prevent others
A bit trite, but true enough. Social investment is the solution to everything now, so I’ve been able to say this a lot less recently.

16. Social entrepreneurs’ work has a ripple effect: mobilising and inspiring others to get involved
The best do, but not all move beyond themselves.

17. There is nothing more tedious than a social enterprise definition debate (apart from two of them…)
The wifi connection on Virgin Trains is beginning to be a serious rival.

18. Not everyone is a changemaker (FAO Bill Drayton)
This was a reaction against the Ashoka mantra. Actually, their university work is more democratic and wide-reaching than the Fellows programme, and I saw them use the phrase ‘Everyone a contributor’ recently (hat tip Eli Malinsky) which seems more realistic to me.

19. The thing that connects most organisations that have successfully scaled is length of time
Still banging this drum. Still being ignored, largely. My fledgling plan for a ‘decelerator’ will have to wait.

20. Social enterprises overestimate what they can achieve in the short-term, and underestimate it in the long-term
I think I was trying to say stick at it, because good things happen if you keep going at the right thing. Still believe that.

21. Organisations are powered by people, and they should be trained, supported and invested in
File this one under obvs.

22. Networking is important for social entrepreneurs: be generous and genuine, and it will be reciprocated
Networking is important, but only if followed-up and leading to something tangible. As the saying goes, networking is only one vowel away from ‘not working’

23. Even if you call them a client, an end-user or beneficiary, the customer is still king
Yes, yes, thrice yes.

24. Social enterprise leaders need to look after themselves; if they burn out, often so does the organisation
Still true, though not just of the leaders.

25. Populate the organisation with radiators not drains
Believe this more than ever. A drain can occasionally do a passable radiator impression at interview.

26. Before you get the right people in the right seats, be sure you’re driving the right bus
Yep – persistence is only good if you’ve got the right thing to aim at.

27. Enjoy it: it’s not called “earnest-and-worthy-and-dull” enterprise; humour is allowed (& often necessary)
Humour in the right context and at the right time.

28. All organisations live or die by the quality of what they deliver (at the price they do it)
Yep. A cynic might add “who they know”.

29. Buy from other social enterprises, and get them in your supply chain: but only if they deliver
Ahead of its time – Buy Social now a big campaign and initiative for us.

30. Underpromise and overdeliver: all too rare in social enterprise
A bit harsh perhaps, although still too few seem to know the old maxim that success = performance minus expectation

31. A crisis might be a terrible thing to waste; it’s also a terrible thing to cause (#bigsociety)
Bit dated this….but you get the gist.

32. There are more holy grails in social enterprise than in Indiana Jones and the Last Crusade
Sort of – certainly there’s always another person with “the answer” though I think that happens in every field.

33. When talking about asset transfer and finite resources, don’t forget the most important assets + resources are human
Yep.

34. For ‘niche in the market’, read ‘need in the community’ (and vice versa)
Yep.

35. Addressing market failure probably won’t have a commercial rate of return
Yes. Much of social investment would do well to return to this; of course, not always true, but often enough.

36. Learn by doing, learn from others, learn from failures, keep learning
Still believe in being prone to action where possible, and being open to learning.

37. A 3-year government contract is no more sustainable than a 3-year grant
Sustainability comes from diversity these days, I feel (see below).

38. Sustainable financing comes through not being over-reliant on any one source of money
Easier for some than others, but diversification remains important.

39. Optimistic pragmatists and realistic opportunists flourish
I think this is true – but now I think that the optimism + pragmatism (or realism / opportunism) don’t have to be in the same person; they can be in the same team or senior leadership.

40. There a lot of good social enterprise business plans, not many good businesses
I’m not sure there are that many good plans, actually; the business plan obsession may have lessened a bit.

41. If the motivation isn’t really there at the start, it certainly won’t be when times get hard
Bit meaningless this one.

42. Charm and ‘being nice to people’ are enormously underrated
Yes, although it also doesn’t equate to delivery or to speaking truth to power. All things in balance + moderation.

43. Edison was right (1% inspiration, 99% perspiration)
If anything, he overdid the 1%.

44. The “Facebook for social entrepreneurs” is Facebook
Still true – I got a call about “developing a digital social network platform for social entrepreneurs” this week!

45. Newsflash: your social network for a niche community won’t fund itself by advertising
I think I saw a lot of these as applications to Big Venture Challenge round 1, so was a bit bitter.

46. Honesty builds trust builds credibility builds support: ‘calculated candour’ is the way forward
Probably the most important thing on here; with the exception of the ‘calculated’ which implies cunning and planning, whereas it was meant to mean ‘don’t be nasty for the sake of it’.

47. Diversifying too early usually means doing lots of things averagely rather than one thing well
Yes, though tough to square with 38 above. Diversifying at the right time (whatever that is) seems the key.

48. Don’t scale up before the model’s proven, however much noise & encouragement there is
A version of 47 really, but still true. And we still see start-ups talk social franchising.

49. There’s more truth spoken over drinks and meals at a conference than on the stage
Yes. Still not cracked how we create more of that at events – perhaps one can’t.

50. BigSociety, Social Enterprise, Civil Society, Third Sector: it’s more important what we do than what we call it
Well, no-one calls it Big Society any more.

51. Believing your own hype is the start of the downward spiral
Erm, OK.

52. The biggest challenge for spin-outs is not technical but cultural
Yes. And for charities “becoming” social enterprises too.

53. The UK is a pioneer in the field; but first mover advantage also means first mover mistakes
Yep. What’s worrying is not being aware of that when we start to export…humility and caution!

54. If the government created an investment fund for construction, it would be called BuilderBuilders
A bad and dated joke. Now it would be called the Builder Investment Readiness Fund.

55. Measuring social impact is where financial reporting was 200 years ago (so don’t beat yourself up)
196 years ago now. I *think* we’ve made some progress.

56. Too many people confuse innovation with novelty; an idea is easier than continuous improvement
Yes – although now people confuse innovation with everything. It’s a miracle I haven’t been disrupted while typing this.

57. It is possible to go to a social enterprise conference or seminar every working day of the year
No it’s not.

58. There is a difference between having great contacts and actually making use of them
See Networking above.

59. Work is needed on better exit strategies for social entrepreneurs (no more ‘life president’ stuff)
Remains an issue across the social sector, though there are good examples too.

60. More than 146,000 new species have been discovered since the first Social Investment Task Force began
At this point, it seemed like Big Society Capital might never open.

61. UK social enterprise debate is too internally-focused: huge amount to learn from international models
Yes – I think we have a lot to learn, and haven’t brought enough of the learning back to the UK.

62. Mission isn’t about a nice statement: it’s for decision-making, communication & planning
Obvs.

63. Beware the ‘self-styled’ social entrepreneur; normally means it’s more about ‘self’ and ‘style’ [see Melody on the Apprentice]
Here’s one I got totally wrong – I still think people calling themselves a ‘social entrepreneur’ without having done anything need to chill their pants a bit. But I was entirely wrong about Melody Hossaini – she’s shown herself to be absolutely committed to social enterprise and doing a load of good work enthusing future generations in recent years. Apologies.

64. Empowerment means giving power to and equipping with skills, not ‘asking a few questions’
Yes – I think there was a rash of government consultations about empowerment at the time.

65. You can’t really solve or change much from your desktop #slacktivism
Yep.

66. Entrepreneurship is a mindset, an attitude, a set of behaviours (so is social entrepreneurship)
Yep. And skills, and knowledge, and networks etc.

67. You can’t teach entrepreneurship, but you can learn it; learn it by doing and from others
This is a stating the obvious section, I think.

68. Look back after you leap, and work out how you might leap differently next time
Same point as giving things a go and learning from failure.

69. There are many social impact measurement tools, with more in common than they care to admit
This has become a bit more apparent since – the principles of reporting are now largely agreed by most of the main social value measurement agencies.

70. Social entrepreneurs are often ‘biographical’: powered by a personal injustice or experience
Yep.

71. The word ‘synergy’ should be outlawed from daily use
There are worse crimes.

72. Risk literacy and risk awareness are where we need to get to (not just risk vs risk aversion)
I think there’s a nugget of something interesting here.

73. The best CaféDirect coffee is the Machu Picchu: not too strong, but smooth + robust
Still drinking it in the SEUK office.

74. (Social) entrepreneurs are a little bit born and a lot made
Probably. But depends.

75. A group of social entrepreneurs always ultimately revert to gossip
One could replace ‘social entrepreneurs’ with ‘people’, probably…

76. Bad partnerships mean muddied thinking, a multitude of meetings, & compromised delivery
Yes. And even good partnerships take a lot of time. Agreement on the way in is key….

77. There are a spectrum of replication options: it’s not ‘open source’ vs ‘command and control’
Yep.

78. Social enterprise blends outlooks and approaches; so a blended return makes sense
Yep.

79. Understanding the problem is part of the solution (tackle the causes, not the symptoms)
This is important, if seemingly facile. We still treat a fair few symptoms – that’s not always a bad thing, but reflection on where we can have most impact is always useful.

80. Imperfect action is almost always better than perfect inaction
Testify.

81. BigSociety is a riddle, wrapped in a mystery, inside an enigma (apols to Churchill)
And now it’s a memory, wrapped in a sheet, buried in the ground. Pretty much.

82. Financial management matters; you need to know your way round a P&L and cashflow
Obvs.

83. Investors and social entrepreneurs don’t speak different languages, they speak different dialects
I’m not entirely sure what I mean here, apart from trying to sound clever or possibly repeating someone cleverer than me without understanding their point. There is still definitely a job to do around language, as I’ve been hearing this in recent weeks still (from both parties).

84. There are as many social enterprise support agencies & networks as actual social enterprises
Not any more.

85. “Build it + they will come” only works if you build it right (& listen to the people you’re building it for)
Still important reminder for those at the levers of power…

86. Social enterprise isn’t an easy option; starting a business never is
File under obvious.

87. Finding a good social enterprise web designer is like finding a needle in a haystack
We have some better ones now!

88. ‘Be the change you want to see in the world’: with fewer ‘deep’ quotes and more doing
Same point as the Gandhi one above, really. Well was clearly a bit dry at this stage.

89. If London-Edinburgh trainline was a social enterprise, it would stop outside Newcastle when it ran out of funding
Ironically, our former Director of Comms got stuck outside Newcastle on a train to the Lib Dem conference in Glasgow, which is about as close as this metaphor got to ringing true. Of more interest should be: can we have a social enterprise rail franchise?

90. Most investors, funders, policymakers to do with this space are in London (it’s not an anti-Northern conspiracy)
Bit lame this – no excuse, and lots of the best stuff is in not-London. We did recommend Big Society Capital should be based in Leeds….

91. The dark Divine Chocolate is a bit full on: go for the (lovely) milk / mint / orange / hot chocolate
This is obviously made-up as I ran out of inspiration. The Sea Salt and Caramel is the actual flavour to go for.

92. Sectors are diverse + contain multitudes; don’t talk about the public or private sectors (or social enterprise sector) as if they are uniform
Obvs.

93. Survival rate is meant to refer to the business, not the social entrepreneur
Still holds – largely same point as burn-out point earlier.

94. There is an over-supply of loan finance already, with not enough organisations fit, able or willing to take it
Interesting to reflect that I wrote this in May 2011, well before people started talking about the lack of pipeline. If anything, that supply has only been (substantially) added to.

95. Social entrepreneurship isn’t a career, it’s a calling (do something before you take the label)
Bit trite.

96. Secretly, most social enterprises are still pursuing the “hope for a sugar daddy or mommy” business model
I’m not sure this is true – most are hoping to achieve what they set out to do, but they tend to also be fairly independent.

97. The first social entrepreneur was a Sumerian who started the first library / tax system in 1500 BC
Fact.

98. Enterprise support agencies are often amongst the most un-enterprising organisations around
Not always true, but I think it certainly can be.

99. Despite the cynicism + in-fighting, there are great orgs, great people, real change happening
This is still true if a bit “hug-it-out”. Our job is to not let the internal debates cloud or mask the large swathes of great stuff happening.

100. Don’t believe anyone spouting supposed social enterprise truths at you; they clearly don’t know what they’re talking about ;0)
Clearly desperate to make 100 at this point.


I was trying to think about what I’d add to these now. Here’s a few:

101. Just enough anxiety propels an organisation forward
Organisations who are completely secure can get complacent or lazy or try and do everything. Ones that are fighting to survive often miss the larger picture or opportunities due to fear + panic. There’s a book called Just Enough Anxiety too.

102. The big problems require answers and partnerships from all sectors – public, private and social.
I’m frustrated by the binary conversation of the main political parties (public vs private) and in the fact that they are behind much of the private sector itself in how to create a more sustainable, social economy. It will come from the do-ers on the ground.

103. Drink enough water, get enough sleep, keep things in perspective
If the last few years have taught me anything, it is partly to go for it but also to keep things in perspective. Some things are out of our control, some things happen by chance; all we can be is prepared and resilient.

Weighing up scale

14 Feb

laserfocus Just before Christmas, I was invited by NPC to speak at a breakfast discussion/debate about scale in the charity and social enterprise sectors. It was to go alongside a publication from them called Growing Pains – which is worth a read. Scale is something we seem to come back to over and over, always looking for the answer – how can we share / replicate / grow what works, and solve more of the problems that we face? Is it about letting a thousand flowers bloom, or should we be consolidating and encouraging organisations to merge and combine to be more effective? How do we help grow what exists and works whilst being open new ideas and solutions? Are we talking about scale of organisation, scale of turnover, scale of entrepreneur’s ego or (what we should be), scale of impact or value created?

Yes, lots of good questions and few answers. I’ve been grappling with this stuff in theory and in practice for lots of years now – I was trying to remember when I’d presented the idea of the Long Tail of Social Entrepreneurs at the Skoll World Forum; turns out it was 2007. Here’s the presentation:

Later, I grew (a bit) and ran SSE‘s franchise, and helped develop the brand and evaluation system to help it grow. And then tried to help other organisations replicate, first with a replication learning programme (which is still running) and then a social franchising manual for my current employers, SEUK. I also did a few bits of consultancy as a freelancer, trying to help organisations grow and scale directly. There were some minor successes, but also a dawning realisation about how hard this stuff was: there are a hell of a lot more toolkits, guides, pieces of research and learning programmes (yes, including from me) than actual organisations that have scaled or replicated. Successful social franchises are still extremely thin on the ground – and that’s with good people (like ICSF) trying to make it happen; but still it’s mostly research + accelerators, not organisations growing their impact on the ground.

Now of course the focus is all about how social investment can help you scale – it’s just been the wrong type of finance till now that has prevented scale. But if we combine the right type of finance with the right type of support, it will happen – there’s limited evidence this is the case (albeit there are some individual successes emerging from the likes of Big Venture Challenge and the raft of incubators that have been supported). As I said at the NPC debate, finance and support are absolutely necessary, but so is market readiness. If commissioners or the general public or private sector supply chains aren’t ultimately buying/paying for the products and services provided, then scaling is inevitably difficult or impeded. The other point I made in relation to the incubators + accelerators was that most of the evidence pointed to one common factor in the charities and social enterprises that had scaled: time. Most had taken time. So, unless technology allowed something to grow at a more exponential pace, the most common thing the scaling debate has lacked is a reality check about time – even if we are impatient for things to change.

So, any answers? Well, after making my usual reference to Forces for Good (still the best book on scale / charity + social enterprise I think) I had a stab at a few things I thought might help the sector in my presentation. These were:

1) Collaboration Prize – this one dates back to PopSE! days; there used to be a US prize which rewarded and recognised the best piece of collaboration in the sector. I think a trust or foundation could usefully set up something along these lines to foster, encourage and recognise the sort of behaviour and action we need.

2) Systems Fund – as I say above, finance is obviously important; but it’s often the timing and the type that is key, not just finance per se. Most of the small-to-medium social enterprises we work with who are looking to grow their work are grappling with when to invest in: new CRM systems; bringing HR functions in-house; new technology; new measurement / impact systems; and so on. Where is the investment fund that suits these needs, or focuses on them?

3) Buy Social commitment – small piece of organisational promotion, but the point is a general one. We can all help grow the market and grow the potential impact of organisations by changing how we buy. The sector itself has huge collective purchasing power – channelled for good, it can help us all achieve more (and change the reductive overhead debate).

4) Peer networks – a bit banal this (every support document I read always has peer-to-peer in at the moment….but probably with good reason), but I do think networking organisations at similar stages, and networking the people within them who do similar functions and are facing similar challenges might help. Trade associations and support organisations have a role in making this happen well.

5) Big-small mutuality – this is connected a bit to 3 + 4 above, really; we have started to see more of this, between housing associations and local social enterprises, or between big healthcare organisations and smaller peers. There is much more that could happen though – secondments of people at difficult times; sharing of documents; help with cashflow + bridging loans (without an intermediary); etc. Some of this can be facilitated and brokered; but much is also about relationships and providing the space for trust to be built.

All of these are thinking a bit more systemically, even if still thinking about finance, support and markets – while I don’t think we necessarily need a new buzzword (“systempreneur” ahoy), bringing an entrepreneurial mindset to systems makes a lot of sense to me. And that’s got partnership and thinking beyond just our sector at its heart. More of both would help get us towards the answers (and putting them into action) on scale, and not just generating more questions.

Here’s my slide set from the debate:

Moneyball and flash boys: social enterprise?

29 Jan

dataFirst post of the year, and the fact that it is almost the end of January probably reflects what a busy start to the year it has been – at SEUK, as everywhere, there’s a lot on: new people joining, working on strategy / business planning, policy work ahead of the election, next state of social enterprise research in full swing, plenty of delivery before year end, and events, dear boy, events. Yesterday, I was up in Salford with about 30 participants of our Health + Social Value programme, and then on February 3rd we have our Social Value Summit – a big conference in London to try and move the whole field forward. More to come throughout February + March, and more local events with members too.

All of which unrelenting pace means it was nice over Christmas to take time out to do a bit of reading, and get a bit of external inspiration and thinking in. Given my new role which started in January, I read Consiglieri by Richard Hytner which was OK, if a bit badly structured – there were some nuggets (highlighted ready to be Evernote-d), but nothing that earth shattering or insightful. Interesting to think about the interplay between senior people in an organisation, and what makes that work, and how different pairings and groups can work best together. But not sure the book added much to existing management and leadership literature.

More thought-provokingly if behind-the-times-ingly, I read both Moneyball and also Flash Boys by Michael Lewis (find more on both here). The former is all about ‘sabermetrics’, the data revolution in baseball and how it changed the sport for good. The latter is all about how technology (and the people in charge of it) changed, corrupted and made a mockery of the stock exchanges in the US and elsewhere. I’d recommend both – Moneyball the book is better than the film, with more of the tracing of the history (some data nerd back in the 70s stapling his own publication together), more depth in the surrounding characters, and more detail on how it actually works. Of course, all of that would have made a more boring film, but it makes for a great book. My takeaways are: don’t assume what you’ve always done (+ taken to be right) is the right way, or always will be; don’t underestimate what data can do for you (but also use it in combination with gut, feel, instinct + heart); and don’t think you can’t win with fewer resources.

Flash Boys is genuinely terrifying – I don’t feel capable of explaining it here, but basically clever programmers + traders exploit microseconds of difference in the speed it takes for trades to travel along broadband / cable lines to manufacture profits for themselves in between buyers and sellers of stocks. And financial institutions create their own ‘dark pools’ (basically closed exchanges) in which the customer has no transparency, but is promised said financial institution will get them the best price – strangely, they tend to rip the customer off…who would have thought? I thought having read a couple of books about sub-prime and collateralised debt obligations that I had read about the lowest to which financial services could stoop + over-complicate; but this stuff is quite extraordinary. Blatant screwing of the individual, of the smaller company, and even of large main customers – and basically buying up the exchanges + regulators to the extent that no-one can change it.

What’s interesting about it is that it takes all skill out of the process – there is simply technological exploitation (admittedly very cleverly designed technological exploitation), no understanding of markets, analysis of companies, building of relationships, gathering intelligence, or applying of experience; just quicker fibre optics + algorithms. I’m not sure what I took from this book, apart from raised blood pressure – a reminder, maybe, that while we look at methods of investment + financial products in the social sector, we should be careful what we import and what we seek to emulate.

It’s got me thinking a lot about the unintended outcomes of new technology too – I wonder whether, as Stephen Miller has written recently, we need to be thinking about the ramifications + potential of ‘tech for ungood’ as well as ‘tech for good’. But at the same time, I’m hugely encouraged by the potential of data (again through advanced technology) to better inform and influence our knowledge and our decisions. Given we do (some of) the leading research on social enterprise in the UK, we need to up our game on data, follow the money + help share it better so that the whole movement can use it: no small feat for the year ahead.

Innovation: why disruption isn’t the only option

21 Aug

GoldfishGoogleIn the world of innovation, Clayton Christensen is a big deal – his book The Innovator’s Dilemmahas been the bedrock of much innovation theory since it first came out in the late 90s. It’s central thesis about disruptive innovation (& how new technology disrupts old businesses because their existing value networks & paradigms don’t value the new stuff) and it has been hugely influential across business and a wide range of other sectors. Which is why it caused a bit of a stir recently when it was given a fairly public takedown by Jill Lepore in the New Yorker. Her take was that taking a rigorous, research-led look at Christensen’s theory identifies plenty of holes – not least that several of the organisations he raised up have since not done that well (while those apparently being ‘disrupted’ have since gone on to great things).

I’m not well-informed enough to know which side of the argument to come down heavily on, although my sympathies are with Lepore – captivating business theories aren’t often followed up and analysed fully (it will be interesting to see if we are *still* talking about changing the tax letter 10 years from now as the best case study of ‘nudge’ in action in the UK). It’s been similarly well-documented how many of the companies in Good to Great then went to Gone. Broadly, I’m with John Kay in the FT on the Lepore-Christensen squabble (see Innovation disrupted by warring gurus).

But the thing that stood out for me from Lepore’s critique was less about the strength of the research / evidence or otherwise (Christensen has pointed out he has updated his book several times since), but more her attack on the overuse and misuse of the term itself. As she puts it, “Innovation and disruption are ideas that originated in the arena of business but which have since been applied to arenas whose values and goals are remote from the values and goals of business. People aren’t disk drives” – that certainly resonates with me. In the social sector here, we do seem to have simply appropriated the term and assumed that we should also seek to achieve or find or foster disruptive innovation. Should we? Is what Christensen puts forward about digital cameras or steel manufacturing as easily applicable to mental health services or youth unemployment? Is the language and landscape of clusters, accelerators and incubators appropriate for the social sector?

I was struck by this when listening to a senior guy from Google talk to a room full of mostly social enterprise leaders about all things Google – how they innovate, what products are coming up next, building culture, not being evil etc. It was interesting & engaging, and there was the odd nugget or takeaway that I felt I might be able to apply or think about putting into action in some way. But I couldn’t help feeling there wasn’t much that translated; a feeling reinforced by one of the leaders afterwards who pointed out that it was a little bit different running an enterprise supporting the most vulnerable people with complex needs in a very disadvantaged area in England – the ability (& propensity) to take risk is entirely and rightly different; innovation very likely to be incremental not disruptive; 20% of time on innovation development a non-starter; minimum viable product a scary prospect..and so on. Even before we get to the difference in scale. Is Silicon Valley really the model for everywhere (& everything) else?

It’s prevalent – take this recent TED talk from Joi Ito which takes the Silicon Valley ‘model’ (& different iterations of it) as the model for innovation everywhere, in a vast swathe of assumption. Or, as another recent article put it, we have heard a lot about Zappos and the way their values and practices revolutionise business, but we have heard less about Zalando and their effective implementation. And our sector ends up talking about social silicon valleys and the like, despite a long and outstanding track record of creating organisations & movements that create social change – Amnesty, Oxfam (& countless other major charities), Open University, the co-operative movement, the Big Issue (& accompanying network of street papers), fair trade, and many more. It’s primarily supposition that more innovation infrastructure, or mimicking venture capital in all its forms will lead to any acceleration in the continuation & growth of this track record.

The other error our sector seems to be making is often conflating innovation with technology (and in doing so, often with novelty). Got an idea? Got an app to go with it? Score! Got an approach that works? It isn’t online? No score! [NB – this is exaggerated for probably limited comic effect] I’m a passionate advocate and user of new technology, and of course it is changing our lives in myriad different ways, and opening up new possibilities – but does it require specific focus to generate more examples? Or, as one recent post put it, isn’t every entrepreneur a digital entrepreneur now? Isn’t every social entrepreneur too? Maybe this specific focus is helping drive progress – though I’d like to see more money flowing to investment in technology that helps existing organisations have more impact; apparently the ‘systems investment for medium-sized effective charity/social enterprise’ doesn’t have quite the same pzazz as a new start-up being accelerated.

[incidentally, kudos to Local Partnerships who are piloting a social investment fund for investment in technology; it has a narrow-ish focus, being only aimed at spin-out social enterprises from NHS / Local Govt, but let’s hope other funders and investors see if there is room for similar]

It’s not just about the social sector, though. Innovation is everywhere – I’m a big fan of Santander at the moment, because they have really authentically engaged with the social enterprise world, and supported a good range of initiatives (including some with my organisation, SEUK) which are trying to address gaps and build markets. But their current account advertising baffles me: its claim is that it is three things: 1) Useful (OK) 2) Rewarding (OK) 3) Innovative (erm…). Why on earth would I want my current account to be innovative? Many other companies are doing the same – as if innovation (rather than reliability, customer service, responsiveness, better pricing, consistency etc) is simply a good thing per se.

Of course, this isn’t an argument for the status quo – we need new answers and solutions but we also need to use the ones we have already found (& evidenced) more effectively; and we need to improve and refine models and services that work, but could be even better. And we know that social enterprises innovate – sometimes through necessity, sometimes by happy ‘accidents’ and coming-togethers, and sometimes by design. Often they have new collaborations and partnerships at their core. Certainly at SEUK, our most meaningful forward-pushing work is done in partnership (often multi-partnership) – sometimes that makes it more challenging than going alone, but the outcomes are usually better and more lasting.

So this isn’t an anti-innovation rant. But it is a ‘let us think about (& foster) innovation in the ways that are appropriate and fit to us’ plea. Less catchy. As I’ve written before, Saul Alinsky’s Rules for Radicals says that the “The price of a successful attack is a constructive alternative“. I’m not sure this has been an attack, or successful, but here’s a go at a constructive alternative made up of several parts:

– let us celebrate and encourage incremental innovation (and the persistence and commitment it can require), giving them profile to rival the new start-ups and waves of entrepreneurs
– let us look at infrastructure & interventions that promote & incentivise collaboration, partnership and joint working; across sectors, seeking to create shared, collective social value (less bees and trees than constructing a hive)
– let us look at the best innovation practice from not-the-US: what are the best approaches from Europe, Asia and elsewhere? (have we given up on frugal innovation? where are the long-term approaches + thinking on diffusion / replication?)
– let us read + respond + give equal prominence to alternative voices: the work of Judy Estrin (the Innovation Gap) and Mariana Mazzucato (the Entrepreneurial State) as we do to the Facebooks and Googles (Judy Estrin is worth listening to as a counter-blast to the rest of Silicon Valley on this recent Peter Day podcast: Inside Silicon Valley)
– let us create funds for investment in IT and finance systems, and in training / networks for those in operations, project management and partnership roles
– let us support innovations seeking to change the market and operating environment so that all those start-ups can thrive in their chosen industry

Or we could wait for the hack hack and the Accelerator for Accelerators to be joined by a Lab Lab and an Incubator Incubator. And wonder whether the money spent is really helping the people and communities that prompted the action in the first place.

Growing an enterprising culture

26 May

Image[originally posted on SEUK website]

I’m looking forward very much to speaking at the forthcoming Evolve conference organised by NCVO and partners (including ourselves at SEUK). I’ll be leading a workshop on ‘Building a culture of enterprise‘ which, for me, is at the heart of building a sustainable, enterprising organisation. To put it simply, a legal structure or nice mission statement doesn’t guarantee you will deliver anything; or to quote the mighty Peter Drucker, guru of gurus, “culture eats strategy for breakfast

It’s also all too easy for those looking at social enterprise, whether they are starting up or starting out in the charity and public sectors, to view it in a very technical way: is it a trading arm? should we be a CIC CLG or CLS? can we TUPE the staff across? what board + governance will work best? And so on. Or the temptation (especially for start-ups) is to get obsessed with the business plan, with forecasts, with modelling and more – this ‘paralysis by paper’ was a not uncommon sight in my time at the School for Social Entrepreneurs, as people tried to get everything sorted before they started. Plans are important frameworks for overall direction and strategy – but, as the saying goes, no plan survives first contact with the customer…

So we are really talking about culture here: that people within an organisation feel the ability to spot, develop and pursue opportunities (in line with the mission), to take and be comfortable with risk (and reward), to be creative and problem-solve, to be flexible and responsive in their approach. I tend to think of culture as like an organisation’s ‘personality’ – like people, a culture can be rational and objective, shy and introverted, or outgoing and gregarious. Sometimes there are visible signs of this ‘personality’: how people dress, what the workspace feels like, mission and value statements. At other times, it is through actions and interactions that a culture becomes apparent: actions that say “this is the way we do things here“.

Over the last few years at SEUK, we have worked with lots of groups from the public sector spinning out as social enterprises, and many charities exploring a social enterprising approach: to all, the mantra has been that the culture is the important bit, not the technical process. At the same time, as an organisation ourselves, we have been undergoing a similar shift: the transition from having a large core government grant to being a real social enterprise ourselves with mixed, diverse income streams would not have been possible without a more enterprising culture – in every person, in every team. Many of our members have also likewise successfully developed a more enterprising culture – from 100+ year-old charities to 2000-employee spin-outs from the NHS.

How? Well, you’ll have to come to Evolve and the workshop to find out – but it involves strategies around challenge, validation, recognition and communication. And a surprising amount of repetition. And a surprising amount of repetition. And the willingness of great, committed, skilled people to come on the journey – fortunately there is no shortage of them in the charity and social enterprise world.

Economics, equality and enterprise: recent reading + links

11 May

came_here_to_be_inspiredI’ve been struck recently how very significant trends and evidence seems to pass the social enterprise world: we’ve got our own voluminous waterfall of information, announcements, news, analysis and reports to cope with, so it can be difficult to get time to look at the contextual stuff too. And yet quite a bit of it is very interesting indeed – particularly how, at the same time as social enterprise continues to interrogate its relationship to mainstream capital (often through the vehicle of social investment), that same mainstream capital(ist) system is being questioned quite fundamentally by places like the FT and the IMF and the OECD, and other important initials. So there is a broad theme here of inequality, economics and their relationship to our world. And some other stuff I thought was interesting :0)

– Martin Wolf writes in the FT about how A more equal society will not hinder growth – he bases this on a note from the IMF (pdf) which, to quote Wolf, found that “societies that start off more unequal tend to redistribute more; lower net inequality (post- interventions) drives faster and more durable growth; and redistribution is generally benign in its impact on growth, with negative effects only when taken to extremes”. I think this (and Wolf’s further analysis) is fascinating – in a sense, at the heart of the social enterprise movement is a belief that business can reduce inequality, increase social justice, and help everyone prosper. The IMF might just be backing that up. And the analysis could not be more relevant in the UK where growth headlines don’t tell the full picture.

– There is more on inequality here (via @JeremyANicholls) on the Public Leaders Network: The 2014 budget fails to deal with the deeper issues of inequality in Britain which talks about the OECD pointing out that the austerity implemented may be having good overall economic effects in the short-term (as per growth headlines mentioned above) but be storing up trouble and cost in the medium to long-term.

– Stephen Miller, Senior Researcher at UnLtd, has been taking a look at neolilberalism and social enterprise on his blog. It explores the relationship of civil society and the social sector to business paradigms, and what effect the current financial / economic climate might have on social enterprise, social entrepreneurs, charities et al: “Is there a danger that good ideas are left on the roadside because they aren’t in vogue, or because they can’t generate substantial financial return?” and “There is an argument to be made that, actually, the retraction of the State from civil society just displaces dependence, rather than creating more independence”. Well worth reading part 1 too.

– More geekily / narrowly, I was interested to read David Ainsworth’s take in Civil Society on the new Social Investment Tax Relief and how it might play out – he points out that there might be some gift and loan scenarios that make it an exceptionally good deal for lenders….much more so than those getting the investment?

– There’s more good stuff from Martin Wolf on the Astra Zeneca-Pfizer smackdown: Astra Zeneca is more than the investors’ call He discusses how it creates questions about ownership, control and who should make decisions (newsflash: he thinks the employees might have a say….I wonder where that happens more currently? #socent) [via @JohnHitchin]

– Dan Corry’s RSA lecture on How do we drive productivity and innovation in the charity sector? also warrants a read. Some of it is fairly unsurprising ‘impact measurement organisation recommends impact measurement as important’ shocker, but there is some more interesting stuff there too even if (again) it assumes that importing private sector practice and theory is right (creative destruction etc). I think the part about feedback loops (which plays to why stakeholder involvement / accountability is so important) and how little collaboration we see is spot on – we’ve been involved in some really big collaborative projects of late. They are *hard* but also the most important things we are working on. Much else to agree and argue with here…

– Elsewhere, business leads government kicking and screaming into the future. As politicians tread water on the environmental challenges we face (across parties), business takes it seriously because they are thinking further than May 2015 (or indeed, 5 years after that). Latest example? Lloyd’s of London calling on insurers to take climate change into account (via M&S’ Mike Barry: @planamikebarry )

– Meanwhile, this wouldn’t be a blog about economics if it didn’t feature Piketty (review in the Telegraph of his book, Capital), who is so de rigeur as to already be a cliché. Piketty also argues that capitalism as it is leads to inequality, and that the evidence for this is overwhelming. The response from the right I’ve most enjoyed on this has been Janan Ganesh’s call for ‘rational optimism’ and the Conservatives introducing a property tax – an unlikely prospect, perhaps, but interesting reasoning on the way there.

– And then, today, Ha-Joon Chang (of 23 Things They Don’t Tell You About Capitalism fame) returns to a theme he has covered previously: how students are demanding a more plural economics curriculum, and how we should resist anyone saying that economics is a ‘settled science’. And he challenges the ‘economics can analyse everything’ trend we have seen in recent years. Read more in After the crash we need a revolution in economics teaching

– And a final non-economics, non-equality one, but one that will undoubtedly be more useful than the rest, and usable tomorrow! – 7 rules for meeting up. I love these. Now if I could just stick to them….