Creating Your Own Solution Revolution
A quick guide to changing the world—seriously
Imagine the world if we were able to double, triple, or even quadruple the number of problem solvers, the diversity of solutions, and the scale of social impacts.
Imagine if every government emulated NASA and opened up its toughest challenges for the world to solve.
Imagine if thousands more investors built off Acumen’s patient-capital approach, sharing early-stage funding risk to sow the seeds of dignity and wealth.
Imagine if tens of millions of citizens started building better city blocks and other supportive communities; if every multi-billion-dollar company became a double- or triple-bottom-line business and directed resources to solving society’s problems.
Imagine if the number of social enterprises tripled and thousands of them had the size and scale to spread their innovations across continents.
We’ve started down the road to such a world. The solution revolution is a reality—and it’s growing. This growth, however, is uneven. It’s flourishing in the United States, the United Kingdom, India, Australia, parts of Africa, and in pockets of Europe. In whole regions of the world, however, the developments described in this book are still quite immature.
The reason is simple: the solution economy grows to fill the space it’s given, and certain regions offer habitats more hospitable for a robust solution economy than others. Their governments provide room for creativity, their businesses embrace new measures of value, and their investors trust alternative currencies of return.
What accelerates the solution economy? What constrains it?
Consider two European neighbors: France and the United Kingdom. In the United Kingdom, both Conservative and Labor governments have actively nurtured the social sector for more than a decade. The result is a large and rapidly growing economy of problem solvers and a changing role for government. Instead of shouldering almost sole responsibility for delivery, government increasingly catalyzes solutions. The United Kingdom has fewer civil servants today than at any time in the past seventy years, despite a population increase of 300 percent over the same period. Moreover, the country has experienced a rapid growth in civil society—a 40 percent increase in new charities and a doubling of large charities between 1995 and 2005.1
In contrast to the fertile UK landscape of nongovernmental problem solvers, France is pretty barren. Compared with the rest of Europe, France has the fewest philanthropic and charitable foundations per capita. The nonprofit sector is also smaller than most of Europe’s and less than half that of the United States (4.2 percent of GDP, compared with 8.5 percent in the United States). And the social enterprise sector is still a new and undeveloped concept.2
Some of the differences between France and the United Kingdom can be attributed to long-standing cultural differences. French citizens have long supported the state’s large role in the economy and in daily life. But there is more to it than this. In contrast to France, the UK government has devoted significant time and resources to creating conditions for the solution economy to thrive. “You have to get the landscape right,” explains Gareth Davies, a key architect of the government’s effort. “We spent a lot of time on structural reform, building the institutions necessary to grow the social economy.”3 Steps along the way included opening up services to citizen choice, devolving service delivery to local governments, shifting procurement to payment-for-results models, and creating the £600 million Big Society Capital fund to help finance new entrants into the solution economy.4
Some jurisdictions are designed to offer habitats more hospitable to the solution economy. Their governments provide room for creativity, their businesses step up to build social outcomes into business practices, and their investors innovate how social value is measured and exchanged. Some regions uproot thickets of red tape; elsewhere the opposite is happening. Waste Ventures in India, as described earlier, struggles against laws that limit small-scale contractors. With an act as free and simple as changing restrictions, Indian municipalities could gain comprehensive waste cleanup, reduce carbon emissions, and boost a homegrown fertilizer and recycling industry.
On the other side of the planet, Revolution Foods, in Oakland, California, would be vulnerable to shareholder activism if it registered as a regular corporation—the board would face a legal obligation to turn $50 million in revenue into shareholder profit, rather than reinvesting it to serve 120,000 healthy meals per day to schoolkids.5 Fortunately, recent US laws allowed Revolution Foods to form a B corp, a benefit corporation in which the number of meals served is a valid bottom line.
Think of the ripples emanating from the work of Revolution Foods. The company helps disadvantaged children and the farmers and others who produce healthy food. Children perform better in school, so the education system benefits as well. Private employers later enjoy (and employ) a smarter workforce—and a healthier one. Health-care savings pass both to the students’ families and to their communities.
As this example shows, the effects of one benefit corporation spread widely to the greater community. Imagine what the larger solution economy already produces and how much more can be unleashed. It makes a country stronger, for far fewer tax dollars.
Government’s willingness to forge partnerships (and vet those partners with accurate metrics), to make data more open, to contract for outcomes, to reduce regulatory minefields, and to convene diverse groups of contributors will hold tremendous sway over the scale of the solution economy within its borders. For instance, legal designations for nonprofits and foundations, along with the accompanying tax exemptions, encourage the proliferation of these organizations.
Some factors important to the solution revolution are more cultural and resist change. These range from citizen expectations of the role of government to societal attitudes on business failure and risk.
Yet across these various cultural contexts, one observation remains the same: today’s biggest societal problems are beyond the reach of any individual entity or sector. Collaboration is not just helpful, but essential, for true progress. In many ways, the technologies, business models, and currencies featured in this book offer a more level playing field, enabling the collective strength of all contributors to drive improved public services, wider choices, and better outcomes.
Ignoring the changing ways that solutions are now rapidly developed and deployed presents its own risks. Countries that cultivate connected ecosystems gain the advantage of accelerated growth in the scope and scale of potential solutions, while others that rely wholly on government will increasingly struggle to keep up. As citizens, we know which side we’d prefer. The question is how, as a society, to get there.
Strategies for Growing the Solution Economy
Seeing the potential of the solution economy no doubt provokes questions. What actions can you contribute to the solution revolution? How can you directly benefit? Or if you are a government official, you might be asking, “What can my government do to create a more favorable environment for the solution economy?” If you work at a big company, you might wonder what you can do to promote social innovation at your organization.
In writing this book, we’ve either developed or come across dozens of actions that business, government, foundations, investors, and social enterprises can take to grow the solution economy (the full list can be found in the appendix). We’ve distilled these down to six overarching principles—all of them relevant to each of the major players in the solution revolution.
Change the Lens: How Will a Different View Reveal Both Blind Spots and Untapped Opportunity?
More often than not, implementing big change in today’s fast-paced world feels like careening down a steep hill in a rail car. Sometimes, it takes your full energy just to make incremental adjustments that keep the wheels on the track. But what if there was a better way to reach your destination?
Just like restricting travel to steel tracks, if you’re thinking about solving a big problem solely in terms of current programs, you will confine potential solutions to a flawed status quo. Frequently, legacy programs harden their approaches through a failure to reimagine what might be.
Forget for a moment about how you currently do things. Begin by asking, “What is my goal?” And this time ignore the caveats and parameters that usually filter the question. Think bigger. For instance, thinking “How can we improve schools?” can limit your thoughts to the confines of a brick-and-mortar classroom. Instead, you might ask, “How can we better educate children to prepare them for the workplace of the future?” The latter question opens up a range of possibilities that may not even include schooling as it is traditionally understood.
Focusing on the desired outcome rather than clinging to bygone processes also opens up a whole universe of potential problem solvers. Consider the fight against obesity. If you sat down and made a list of stakeholders that were key to addressing this epidemic, the tally might include doctors and snack food companies, but not the National Football League. Yet it turns out the NFL is an important player in fighting obesity, using its popular brand to encourage youth health and fitness through the Play 60 initiative. The NFL has now donated more than $250 million in airtime and money to youth wellness since the 2007 inception of Play 60, recognizing that children who ignore presidential directives will listen to NFL running backs.6
How exactly do you change your lens? Luke Williams, the author of Disrupt, defines a disruptive hypothesis as “an intentionally unreasonable statement that gets your thinking flowing in a different direction.”7
To develop such a hypothesis, Williams suggests exploring the dominant clichés in the area in question and then inverting or denying them. Take the education example. Public schooling evokes in-person teachers, classrooms, textbooks, school facilities, cafeterias, and yellow buses. A disruptive hypothesis might ask, “What would happen if we tried to educate children without any of these elements?” The answer might be something like the massive open online courses (MOOCs) profiled in chapter 3.
Also critical to changing your lens is to question assumptions—including your own. Consider the widely held assumption that the disadvantaged cannot afford to pay for products and services. For decades, this assumption blinkered corporate thinking and obscured the opportunity to make a profit in base-of-the-pyramid markets. Now, a range of organizations, both for-profit and nonprofit, have mobilized to serve this population through innovative approaches. While some struggle with this dramatically different business landscape, others, like Unilever and Uganda’s LivingGoods, thrive.
A disruptive way of thinking may begin with an organization or individual, but it can’t go very far unless others can be convinced to think, and act, differently, too. When Barclays thought about branching out from its traditional clientele and expanding into Ghana, where fully 60 percent of money trades hands and is stored outside the commercial banking system, the bank recognized its blind spot and looked to the real experts of rural finance: Susu collectors. For three centuries, Ghanaians have entrusted the Susu collectors with their savings, collected daily or weekly, so that it can earn interest. By helping Susu collectors see Barclays in a different light, not just as a bank to the wealthy, Barclays built trust and from there, a partnership. In this way, the bank was able to bring low-cost lending capital and savings accounts to a demographic it otherwise would have struggled to reach.8
Sometimes, people discover new lenses after years of staring at the same place. When he started Social Capital Partners (SCP) in 2001, Canadian Bill Young focused on finding meaningful employment for disadvantaged workers via the traditional route with nonprofits. After five years and a lot of work, SCP had created about five hundred jobs. It was good—but not good enough for Young.
So he started to look at things differently. What if instead of only looking to nonprofits, he tried to really engage the private sector? Young rejiggered his whole model. He would supply cheap financing to businesspeople seeking to purchase a franchise—Young started with the Canadian quick-lube auto shops Active Green & Ross—as long as the business agreed to hire from a pool of employees SCP provided from social assistance rolls. SCP then worked with community hiring agencies to tailor the pool to the franchise’s needs. The program took off—with more than a thousand individuals placed.
Young’s model worked so well that Active Green & Ross adopted it for the parent company without any monetary incentives at all. And now Young is developing a large-scale program that refocuses the entire way Canada’s community training and placement programs operate.
Young started out on one path and ended up in a very different place. Why? Because he was willing to change his lens.
Changing your lens involves looking at institutions in new ways. Government increasingly is becoming more an enabler, helping to create opportunities for new markets and innovation, rather than a direct provider.
It also means looking at citizens in new ways, not just seeing what they want, but also understanding what—with the right incentives—they would be willing to contribute. Even in the heady world of global diplomacy, former secretary of state Hillary Clinton looked to citizens directly during her foreign tours for partners and creative solutions, which in some cases marked a clean break from traditional government visits: “We do need a new architecture for this new world; more Frank Gehry than formal Greek . . . You can’t build a set of durable partnerships in the 21st century with governments alone. The opinions of people now matter as to how their governments work with us, whether it’s democratic or authoritarian. So in virtually every country I have visited, I’ve held town halls and reached out directly to citizens, civil society organizations, women’s groups, business communities, and so many others. They have valuable insights and contributions to make. And increasingly, they are driving economic and political change.”9
Citizens will be the cornerstone of this new architecture. They are empowered to act, whether through apps built from government data, policy input derived from their own analysis, or data visualizations used to advocate for issues they care about. Such knowledge enables greater influence over what services are provided and how they are delivered, signaling a shift in power.
Many foundations are also viewing themselves in a new way, seeing themselves more and more as the “gap fillers” in the solution economy—looking to find where traditional government aid and charity fall short and then targeting those areas. Other organizations would do well, for themselves and the broader ecosystem, to think as creatively about their evolving roles.
Target the Gaps: Develop New Markets by Meeting Neglected Needs
Sixty-five percent of the world’s population now lives in countries where being overweight kills more people than does being underweight.10 In the United States, maps from the Centers for Disease Control and Prevention show obesity metastasizing over the past twenty-five years. Whereas the majority of states once had obesity rates below 10 percent, the widening splotches of color show that today, all states have obesity rates above 20 percent—and a majority endure rates above 25 percent.11
The problem is also spreading to the developing world. Obesity rates have tripled in Brazilian men and doubled in Brazilian women over the past three decades. China’s diabetes rates are now the same as those in the United States. In Russia, one in four women and one in ten men are obese.12
A significant number of obese adults and children come from lower-income groups.13 A lack of opportunities for safe physical activity, limited access to healthy food, and the high cost of fresh produce all contribute.
As the largest grocery retailer in the world, Walmart has enormous influence on the food-access part of this problem. Walmart credits Michelle Obama’s Let’s Move! campaign with inspiring its own Healthier Food initiative, which commits to opening between 275 and 300 additional stores by 2016 in USDA-designated food deserts—places where access to healthy food is severely limited (on top of the 218 the company has already opened since 2011). The stores will offer produce to more than eight hundred thousand people who today live in food deserts. Walmart has also committed to reduced prices on fresh produce and reformulating thousands of its private Great Value brand products to reduce their fat, sugar, and salt content. And it’s a double bottom line for Walmart: penetrating urban markets in the United States could enable the retailer to boost volume by $80 billion a year.14
Meeting a neglected need like access to produce is practically the definition of entrepreneurship. Businesses and consumers alike may benefit. While these challenges are daunting, most of the new problem solvers we encountered while researching this book approached gaps in basic needs not as obstacles but as opportunities. Recall Parag Gupta’s Waste Ventures. No one else was providing end-to-end solutions for waste removal in poor communities. He improved conditions for waste pickers while satisfying a market need. Or Unilever, which targeted the lack of sanitation in India’s poorest villages, selling soap to people who didn’t know they needed it and who seemingly had no money to buy it.
Advancements and renewed creativity are transforming deep societal problems into fertile markets for change. Take proper housing for low-income populations. As noted earlier, this tough problem is one of business’s greatest opportunities. The same thing can be said for health care and food. The market for serving the very poor in these sectors is an estimated $202 billion and $3.6 trillion, respectively.15
Until recently, explains Ashoka’s Bill Drayton, the business world was unable to unlock the economic potential of these latent markets. Businesses tended to focus on their traditional demographics and lacked the knowledge to deliver what gap-dwelling customers demanded at a price they could afford.16 In contrast, citizen sector organizations were deeply in touch with auxiliary markets, but often lacked the necessary business resources such as wide distribution, expertise in manufacturing, and access to financing. Each side saw no role in developing these markets, because it didn’t see the other side and viewed the societal issue in different terms. If a project was too lofty for either a business or humanitarian approach, it didn’t get done. But all of that is changing.
Like Unilever, more and more businesses are entering difficult, socially important markets with the help of citizen sector organizations. Traditional businesses partnering with social enterprises can build off their respective strengths, unlocking vast markets of public value. Drayton argues that such collaborations—he calls them “hybrid value chains”—can create and expand these markets on a scale unseen since the industrial revolution.17
Agriculture profits immensely from business and social sector partnerships. In Mexico, where two million farmers were living on less than $2 a day, Ashoka and local organizations convinced Amanco, a major producer of water conveyance products, to make small-drip irrigation systems for struggling farmers. Community organizations promoted the technology, organized farmers into loan groups, and installed the systems. Farmers’ yields began to soar. Meanwhile, Amanco and its collaborators reaped the benefits of a brand-new $56 million-a-year market.18
According to Drayton, six hundred of Ashoka’s three thousand fellows are pioneering hybrid value chains around the world. He says businesses should “look for walls” preventing partnership.19 When an obstruction between business and society is torn down to solve a problem, prosperity follows. Drayton says that businesses should look for places where nontraditional services—microcredit services, for example—offer sustainable alternatives to traditionally indifferent commerce, acts of charity, or government services. Partnerships with nonprofits, it turns out, can be profitable and in the company’s long-term growth interests. In the words of Drayton and Budinich, “if you’re not thinking about such collaboration, you’ll soon be guilty of strategy malpractice.”20 While the potential is great, to be successful such partnerships must overcome inherent mismatches in priorities (social versus business) and operational style (the partner’s ability to maintain quality, for example).
Besides the gaps stemming from market failures and unmet needs, there are still more gaps among the ecosystem participants trying to address a given issue. For instance, early-stage financing is a major hurdle for most social enterprises. The first investments in a start-up bear the highest risks of failure, referred to as first-loss risk. Few enterprises can front such risk alone, and ironically, the foundations that do have the resources tend to lack an appetite for potential failure. Yet funding experimentation is a critical step to discovery.
In capital markets, such gaps make financiers salivate at the prospect of an arbitrage opportunity; correcting inefficiencies brings pure economic gain to the first movers. While the opportunities for early movers in the solution economy are not always as financially enticing, there is clear value to being the next Acumen or Recyclebank in a new space.
To advance social outcomes, a few bold wavemakers must risk failure in the first plunge to fill gaps. Since the entire ecosystem stands to benefit from this calculated risk taking, creating an environment that encourages exploration—and shortens the recovery time of missteps—can yield major breakthroughs for public gain. Expect some failures with the successes. That’s okay. That’s innovation.
Rethink Constraints: Focus on an End Goal and Consider Outside Resources
Much to the chagrin of any kids who grow up idolizing astronauts, the start of the twenty-first century has marked an era of cutbacks for NASA. Its space shuttle program shut down in 2011. A year later, Congress trimmed NASA’s overall budget appropriation by $648 million.
Now that NASA’s Constellation program has lost its funding, prospects look bleak for sending astronauts back to the moon.21 In 1980, the United States had 100 percent of the global rocket launch capability. This dropped to zero several years ago (but is now inching back up slightly, thanks to private space flight).
The dismal outlook is a far cry from the heady days of the 1960s. It was then, just three years after NASA was founded in 1958, that President John F. Kennedy issued his famous directive that by the end of the decade the United States would send a man to the moon and bring him home safely.
NASA has radically scaled back, but space travel survives. How? In the face of fiscal constraints, NASA has changed its role. For the United States, space exploration is evolving from a government-led venture to a rich collaboration with the private sector.
As NASA has reduced its commitments, a dynamic private-sector space ecosystem has stepped vigorously into the void—with NASA’s strong support. Richard Branson’s Virgin Galactic, for example, is developing a spacecraft to launch tourists into orbit and perform at least $4.5 million in NASA research contracts, prompting the state of New Mexico to build a $209 million spaceport. Blue Origin, led by Amazon.com CEO Jeff Bezos, is developing space vehicles designed to launch and land on retractable legs. A start-up called NanoRacks arranges for scientists who need zero-gravity environments to place their experiments on the International Space Station.22
Many other companies, including Orbital Sciences, XCOR Aerospace, and Boeing, are testing vehicles for space travel. NASA is helping a company called Moon Express Inc. develop robots to search the moon for precious metals. XCOR Aerospace is developing a two-seater Lynx vehicle to shuttle passengers to space for $95,000 a trip. Space Adventures has already sent seven people to the International Space Station from a Soviet-era launch facility in Kazakhstan.23
One of the most interesting players in the new space ecosystem is SpaceX, of Hawthorne, California. SpaceX holds more than $3 billion in contracts for more than thirty launches, including $1.6 billion worth of contracts from NASA. Its unmanned Dragon capsule successfully docked on the space station in May 2012, in what was likely one of many supply runs to come.24
Launched in 2002 by Elon Musk, the cofounder of both PayPal and Tesla Motors, SpaceX intends to vastly reduce the cost of space ventures. “Today it costs over a billion dollars for a space shuttle flight,” Musk says. “The cost . . . is fundamentally what’s holding us back from becoming a space traveling civilization and ultimately a multi-planet species.”25
Surprisingly, NASA feels no sense of rivalry with these emerging space entrepreneurs. “We have an enlightened self-interest in seeing the industry players do well,” explains NASA’s Joe Parrish. Not only has NASA welcomed the new players in space, but it has also radically reengineered its own business model to take advantage of outside innovation, an approach that sets NASA apart from most other government agencies. NASA’s breakthrough was to change its focus from what it could achieve itself to what outcome it wanted to happen—then find who could help.
“Partnering with U.S. companies such as SpaceX to provide cargo and eventually crew service to the International Space Station is a cornerstone of the president’s plan for maintaining America’s leadership in space,” explains John P. Holdren, assistant to the president for science and technology. “This expanded role for the private sector will free up more of NASA’s resources to do what NASA does best—tackle the most demanding technological challenges in space, including those of human space flight beyond low Earth orbit.”26
NASA shows how an organization can nimbly adapt to resource constraints. It offers powerful lessons for wavemakers who find themselves shifting roles within their solution ecosystems. First, instead of seeing new entrants as a threat, consider potential win-win scenarios that also yield additional public value.
Second, support the development of platforms and exchanges that enable different providers to work together toward solving the big problems that affect everyone. You can’t begin to think about ways to combine capabilities with partners unless you know who they are and their specialties, a process that platforms can simplify.
Third, get creative about the resources that you can bring to the emerging ecosystem and that will provide a springboard for new solutions. Perhaps it is funding, or convening a multidisciplinary team of wavemakers, or something as simple as physical space for early-stage innovators to experiment side by side. Pooling these disparate resources will reinforce that there’s more support available for problem solving than your own solitary approach. This awareness boosts not only your organization’s morale, but also the chance of successfully reaching a solution.
Embrace Lightweight Solutions: Sometimes the Best Solutions Are Also the Cheapest
Chances are, the last online service you signed up for required you to read and enter a somewhat murky-looking set of letters. Those are CAPTCHAs, web programs that filter out spamming robots with the simple, real-human verification test. About two hundred million people solve a CAPTCHA each day.27 Unbeknownst to them, the nonprofit reCAPTCHA program makes use of those millions of Turing tests to digitize archival print materials. This free, crowdsourced solution double-checks tricky words against multiple human readers to ensure accuracy. In contrast, hiring bored typists for transcriptions, even at minimum wage, would cost astronomical amounts and would offer no such quality control. The better result is far cheaper.
It’s a hallmark of the information age: traditional trade-offs dissolve. We no longer always pay the sacrifice of higher costs to get superior results. In fact, superior solutions may emerge for little or no cost, although along the way we may have to sacrifice old models, traditional jobs, and even long-trusted institutions. When we think of solving big problems, especially through government, our minds tend to immediately go to huge sums of money. After all, in today’s dollars, the Apollo program would amount to more than $170 billion.28 But as reCAPTCHA and dozens of other examples in this book demonstrate, today’s solutions to even the most intractable problems often don’t require the massive spending and heavy infrastructure so associated with the industrial age. Truly innovative solutions deliver results at a fraction of the cost.
A few key strategies have a track record of eliminating the trade-offs between dollar investment and social returns. More lightweight solutions like the following can yield enormous savings over traditional, centrally organized results:
• Leveraging the internet for distribution
• Using tools like peer-to-peer networks to crowdsource solutions
• Encouraging business model innovation
• Helping citizens identify their own needs—something they’ll do far more assiduously than any caseworker
• Involving individuals and communities in addressing their own challenges
Today, many governments and private companies utilize these strategies, but typically only as pilot projects or fringe initiatives far removed from the organizations’ central “business,” because the public agency or company wouldn’t trust “outsiders” to handle the project.
The internet, the single most powerful trade-off breaker yet discovered, has decimated numerous traditional business models (music, publishing, news, etc.). This technology promises to revolutionize business even more, because of its most salient feature: the ease of information sharing. Costs in information-intensive activities are not just declining, but are plummeting.
Higher education stands to reap significant savings from the low-cost capabilities in information sharing, if it can work through the financials. Since 1983, the cost of a university education per student rose at almost five times the rate of inflation. US graduates owe about $1 trillion in student debt at last count.29 Online learning strategies like MOOCs can slash costs and, for poor people in the developing world, can open up unimaginable education opportunities. So too can the low-cost franchise models pioneered by Bridge International Academies and Gyan Shala. Worldwide, the sixty-one million out-of-school children of primary-school age and the seventy-one million out-of-school children of lower-secondary-school age could potentially benefit from the potential to scale education.30 With the right business model, the outcome can be superior education at a fraction of the cost.
Innovative education solutions that address a learning challenge can readily be scaled to far wider populations or tweaked to tackle entirely different challenges. Online learning approaches that can help a student learn programming in Bangladesh can be modified to help companies in Europe significantly boost the technical proficiency of their workforce for less money.
Lightweight solutions employ the lightest-touch approach to problem solving. Why add complexity if an elegant solution can reach the desired outcome with less intervention? An added benefit with this approach is often lower costs. Take ridesharing. While traffic gridlock chokes some of the world’s largest cities, our analysis suggests that shifting about 15 percent of drive-alones to car sharing or ridesharing could save 757 million commuter-hours and about $21 billion in congestion costs annually. To achieve this savings through traditional means would require billions of dollars of infrastructure investment. Ridesharing apps, a tiny fraction of that cost, could engage the millions of commuters needed to generate a sizable impact. The same goes for peer-to-peer education and job training models. All have the potential to hugely reduce the strain on governments, but their impact is highly dependent on all kinds of intangible factors, like marketing, adoption, trust, and societal attitudes that money alone can’t buy.
In the health arena, self-help tools can improve health outcomes and lower costs. Self-monitoring, cheap remote consultations, and widely available preventative care information all help cut health-care costs for both consumers and governments. Health-care apps now do everything from monitoring glucose levels in people with diabetes to managing chemotherapy schedules for people with cancer.31
By one projection, health-care providers could save up to $5.8 billion by 2014 by using existing mobile health technologies. Another study found that for every dollar spent on wellness programs, medical costs fall by about $3.27 and absenteeism costs fall by about $2.73. This could save billions. The market is responding quickly, with mobile health services slated to reach $4.6 billion by 2014.32
Not all lightweight solutions involve sophisticated technology. For years, governments and foundations in Africa have been trying to boost farmers’ use of fertilizer. The institutions have poured vast sums into fertilizer cost-subsidy programs, but still found that in Kenya, less than one-third of farmers regularly used fertilizer.33 In one instance, a group of farmers was given free fertilizer one season. Despite experiencing crop yield increases of 70 percent, the majority went back to not using fertilizer the following season. Why?
. . .
Impact of Lightweight Solutions
CAR SHARING AND RIDESHARING
The combined effect of ridesharing and car sharing would reduce the number of drive-alone commuters by 15.7 million and save 866 million hours annually in the United States.
. . .
When asked, the farmers explained that they had spent all the money from the previous harvest, leaving no money to buy fertilizer at sowing time. Farmers in the area explained why they had not bought fertilizer: “When we have the money, they [markets] don’t have the fertilizer. When they have the fertilizer, we don’t have money.”
To rectify this, researchers designed a program in which farmers can purchase a voucher for fertilizer right after a harvest period, to be delivered the following sowing season. ICS Africa, the NGO implementing the program, sold the vouchers at market price, with no subsidized discount, but the program doubled the number of farmers using fertilizer.34 This low-cost, lightweight approach achieved greater results than a costly, large-scale, international program to subsidize fertilizer use.
As these examples show, technology and innovative, lightweight approaches are breaking the chains that once inexorably linked better results to higher costs. They show a path to overcoming the seemingly unavoidable trade-off between paying more or getting less. In short, a way to achieve that most elusive goal: getting more for less.
Buy Differently: If a Purchase Is a Vote, Are You Driving the Right Outcomes?
Governments and large companies purchase trillions of dollars in goods and services each year from millions of suppliers and partners. One of the fastest ways for these public and private institutions to influence the solution economy is through how they buy. “Procurement is a powerful tool for driving positive social change,” explains Jonathan Greenblatt, director of the White House Office of Social Innovation.35
FIGURE 7-1
Among OECD countries, government spending averages around 46 percent of national GDP.36 Figure 7-1 shows a rough depiction of how most governments use their purchasing power. The lion’s share of financial resources tend to be in the two innermost rings of the diagram.37 It’s not hard to understand why this is so: in-house provision and one-on-one contracting relationships via procurement are within the comfort zone of most government agencies—and give the perception, if not the reality, of control.
By putting so much attention on the innermost rings in this diagram, governments miss the opportunity to boost public-value creation through the solution economy. Hovering on the periphery, largely out of sight, market innovators, social enterprises, and double-bottom-liners creatively bootstrap new, resourceful solutions to the challenges of their communities. Some solutions never get off the ground, while others, like FareStart, the combination restaurant/soup-kitchen and job-training organization profiled in chapter 1, flourish. Locked into their traditional approaches, governments often ignore this part of the private sector, sometimes even competing with programs that are doing a better job of serving the same citizens. “Social innovation happens on the edges of the network,” explains Greenblatt. “The challenge for government is to create the conditions in which this kind of bottom-up innovation can happen.”38 Some agencies are embracing newer, more innovative approaches to accelerate such innovation. Under former Secretary Hillary Clinton, the State Department announced that USAID would embrace an impact-investing approach to development assistance. The agency would look to match funding with private-sector players and foundations. Likewise, the $1 billion India Inclusive Innovation Fund, expected to derive more than 80 percent of its capital from the private sector, represents another radical departure from traditional government grants and contracts.39 The widespread investor interest in these kinds of partnerships offers resource-strapped governments a compelling opportunity to magnify the impact of the tax dollars spent.
These outer-ring wavemakers can help traditional public institutions address often neglected and misunderstood problems. Consider the innovative waste collection model instituted by Waste Ventures. All the money Parag Gupta raised from private investors and foundations was money that governments didn’t have to spend figuring out how to make waste pickers’ lives a little better while also solving a waste problem. Governments were also spared the challenge of scaling the model.
Yet most governments, particularly Western governments, don’t think through what they could do to help Gupta and innovators like him scale their business models. As a result, governments tend to miss the opportunity for huge amounts of value creation in the outer rings. Yet as described in chapter 6, new ecosystems are quickly evolving to tackle societal setbacks. By neglecting this dense matrix of ecosystems, governments could relegate themselves to peripheral relevance among these agile wavemakers.
Matt Banick and Paula Goldman of Omidyar Network suggest an approach that could apply to governments, foundations, and other funders: “Our experience from the past eight years is that impact investors can massively increase the number of lives they touch by concentrating investments in specific industry sectors in specific geographies, and by investing in a range of organizations to accelerate the development of these industry segments.”40 When governments and other large institutions engage with a variety of similar social-sector organizations, for example, they can advance the industry in a very tangible way, helping shave years off the time it takes to bring new models to scale and benefiting millions of people in the process.
Recent actions by the UK government open the door to wider collaboration and investment in social enterprises. The Social Value Act, enacted in January 2013, enables commissioners and public bodies to secure services from the organizations deemed most capable of delivering social impact, criteria that suddenly make social enterprises and nonprofits appear more attractive.41 As discussed earlier in the chapter, the goal for the UK government and for others that follow suit is to expand purchasing power to the outer rings depicted in figure 7-1—and potentially to shrink reliance on the government-controlled inner rings. Not only would this change give a big boost to the solution economy, but it would also be likely to create greater public value.
Along with promoting social-impact investing and procurement, the public sector can refashion traditional government contracting through myriad other ways. Prizes and challenges, open tendering, and pay-for-success approaches open up the government market to new solution providers, helping to grow the supply side. Competitive markets for public services via citizen-choice models benefit from the same advantages that competition brings to consumers: greater choice of suppliers, greater variety of offerings, and lower prices. These help grow the demand side of solution markets.
Corporate purchasing power can promote social good as well. Consider overfishing. While it was once just an issue for environmentalists, now Costco, Target, and Walmart sell fish that meets the Marine Stewardship Council’s standards for sustainable fishery practices.42 A subset of vocal, informed consumers led large retailers to shift their sourcing strategies, so that the stores now offer a more responsible default setting for the average shopper. Practices like eradicating sweatshop labor and the introduction of cage-free eggs, fair-trade coffee, and organic produce to mainstream consumers demonstrate the power of corporate sourcing strategies.
Unilever’s supply chain offers another example. Half of its raw materials are from farms and forests. These sources are critical to its business, but also critical to the health of the world’s ecosystem. Because of Unilever’s size, how it buys raw materials has a significant bearing on global natural resources. To this end, the company has committed to the sustainable sourcing of raw materials to reduce the pressure on agricultural supplies worldwide. Unilever’s sustainable agriculture program defines sustainable farming according to eleven social, economic, and environmental indicators. The company already buys from more than 1.3 million small farmers around the world and has committed to source 100 percent of its agricultural raw materials sustainably by 2020.43
The significant buying power of multinationals can help drive the adoption of social and environmental criteria across entire industries. This clout extends into business practices; recall how Patagonia’s policy of channeling 1 percent of sales revenue toward environmental causes sent out ripples that encouraged more than a thousand companies to pledge the same commitment.44 When a company like Coca-Cola requires that the members of its supply chain participate in numerous external audits annually to verify that forced labor is not occurring, workers receive protection that their own national governments may lack the resources to provide.45
Choosing to source from small producers or intermediaries that aggregate local suppliers may require some up-front infrastructure development, but can profoundly impact the economic development of remote regions. This style of sourcing falls into a category known as the inclusive business model. Alquería, a large dairy company in Colombia, for example, draws its supply of milk from over sixty-five hundred independent farmers. The company offers these farmers many forms of technical assistance, from bulk procurement of fodder and fertilizer, both of which improve profit margins for suppliers, to millions of dollars dispersed through microcredit financing, since most farmers are ineligible for commercial bank loans.46
Altering existing procurement practices is a low-cost way of enhancing social, financial, and environmental outcomes, directly benefiting buyers and consumers in the process. Expect to see increasing innovation in purchasing practices, particularly in the government sector, in the years ahead.
Measure What Matters
The right metrics, Bill Gates says, are a powerful compass for problem solvers, pointing resources to where they will have the greatest impact: “An innovation—whether it’s a new vaccine or an improved seed—can’t have an impact unless it reaches the people who will benefit from it. We need innovations in measurement to find new, effective ways to deliver those tools and services to the clinics, family farms and classrooms that need them.”47
Solving society’s most intractable problems begins with understanding what actually moves the needle. This allows resources and creativity to be focused where they have the most impact. Requests to support a social purpose are now regularly expected to include a solid demonstration of effectiveness. It may be a donor inspecting a nonprofit on a website like Charity Navigator, an impact investor evaluating a potential loan recipient, a citizen inspecting where his or her tax dollars go, or an investor evaluating socially responsible stocks. How impact is articulated may vary, but providing compelling evidence of results is now a make-or-break proposition for organizations seeking financial support.
In theory, it is simple: funding that is contingent on measurable impact should produce better outcomes. In reality, however, decisions about which outcomes to measure and how to measure them present thorny challenges: how do you avoid getting so fixated on measurement that innovation is stifled? What is the right amount of resources to commit to measurement overhead? What is too much?
Unlike in business, social outcomes are more nuanced. Volume measures (such as individuals served) are easy to obtain, but miss critical characteristics of quality. Such quality measures are often elusive, subjective, and difficult to come by. It is far easier to determine how many children are receiving foster care, and nearly impossible to assess the quality of that care in every setting. Attempts to holistically capture various measures of overall impact will certainly raise administrative overhead costs, but such efforts may or may not improve the assessment of actual performance.
On balance, the trend toward greater scrutiny of measures suggests that the complacent acceptance of “activity measures” is disappearing. Better scrutiny is prompting new and better measures of impact.
RARE, a conservation group that deploys its program fellows to areas with biodiversity deemed at risk, is differentiating itself among environmental funders by measuring not only ecological improvements, but also the economic benefits to local communities.48 The goal is to coach communities on sustainable practices while also looking out for their economic interests.
When RARE is seeking to establish a no-take fishing zone to repopulate overfished areas in the Philippines, it also tries to provide alternative income streams for locals, in some cases by providing honey bee boxes. Prioritizing the well-being of locals not only promotes lasting shifts in behavior, but also reflects a much more comprehensive conservation program than many others that stick to traditional metrics, such as acreage of land preserved.
While organizations like RARE demonstrate the value of unique metrics in conveying the effectiveness of an original approach, speaking a common language with investors does have its benefits. Standard measures enable the development of exchanges, which opens up larger financial channels. A broad coalition of partners, including Acumen, Rockefeller Foundation, and B Lab, established the Impact Reporting and Investment Standards (IRIS) out of awareness that “fragmentation is inefficient and expensive, and also limits comparability.”49 Stakeholders can use IRIS to aggregate sector-wide data and compare it across organizations—the same way the SEC extracts data to analyze public companies. Organizations get an accredited way to assess their social performance and maximize their funds. Investors get transparency.
Innovations like IRIS’s web-based platform, which allows organizations to collect, analyze, and report their outcomes quickly and cheaply, as well as social return on investment (SROI) tools, provide a fuller picture of how value is created and can therefore be traded. Innovations in measurement promote systemic approaches to solving social problems, with the knowledge that no single player can fix the world’s biggest problems alone. Shared measurement systems help bring disconnected problem solvers together and enhance coordination and impact for funders and funded alike. The Social Progress Index, launched in 2013, represents an ambitious attempt to develop a rigorous way of benchmarking countries’ progress in achieving social goals, identifying areas of both strength and weakness.
At the same time, the risk of overly standardized measurement of social impact parallels the arguments against standardized testing: that it diminishes creativity and too often encourages a teach-to-the-test mentality that suppresses innovation. But if standards are easy enough to measure, then additional, distinctive metrics could also be used. While RARE likes to showcase its unique markers of progress, the conservation group covers its bases by capturing more common environmental metrics as well.
Beyond even the most carefully constructed set of measures, there is the feedback of beneficiaries themselves, which offer candid commentary on the social outcomes an organization delivers. Similar to how Yelp’s online platform lets users rant and rave about the service at various restaurants and local businesses, platforms like Kiva and Charity Navigator offer similar features for donors and lenders to share their perspectives.
The sooner an organization is aware of a mishap, the more quickly it can course-correct and repair relationships with jilted users. Problems that ferment can quickly produce tarnished reputations that are time-consuming and difficult to repair. For this reason, real-time feedback is arguably the most valuable test of performance for service-driven enterprises. Real-time feedback, still relatively rare among solution economy organizations, is nevertheless likely to grow with rising consumer expectations. People of all ages are becoming increasingly comfortable with reviewing their consumer experience over social media, whether the feedback comes in the form of restaurant reviews, grades for their professors, or assessments of their doctor’s care. Organizations are discovering the benefits of capturing that feedback and reacting to it.
Consider the GlobalGiving Foundation, which connects individuals to more than one thousand prescreened grassroots charity projects around the world. A few years ago, GlobalGiving solicited feedback from residents in a Kenyan slum. The foundation asked what it was doing right but also where there were delivery gaps or program complaints. However, instead of simply interviewing individuals, GlobalGiving went a step farther and partnered with a UK-based analytics firm, Cognitive Edge. The partner’s software helped GlobalGiving turn the raw information of residents into data that could be broken down, analyzed, visualized, and, in turn, inform decisions on where funds should be allocated.50 Think of it as Monitoring and Evaluation 2.0. Government-funded development projects, including several USAID engagements, are employing similar feedback mechanisms.
Market innovators are similarly using feedback mechanisms to achieve better results. As described earlier, Recyclebank’s business model is based on a strengthened feedback loop. When a citizen recycles an empty soda can instead of chucking it in the trash, he or she is rewarded. In turn, the company gleans key insight from the data and analytics collected by the RFID-enabled recycling bins. These detailed metrics about each user can improve services by tailoring them to a community’s specific needs—whether the data indicates a need for increased newspaper recycling or more access to eco-friendly products.51
Partnerships with data-savvy innovators can also provide the feedback data that many organizations might not be able to otherwise amass. Preserving all 936 of the majestic UNESCO World Heritage Sites scattered across the globe is an ambitious undertaking—one that can benefit from the millions of people who visit these sites every year. While UNESCO may struggle to attract visitors to its website to comment on the condition of World Heritage Sites, a partnership with TripAdvisor gives UNESCO access to the forty-five million visitors who seek and share travel advice on the platform monthly. It’s a win-win proposition, sustaining the rare, unique beauty of UNESCO destinations for future travelers, while allowing UNESCO to track in real time the various preservation projects as soon as the need emerges.52
Despite the saying “What gets measured, gets done,” the measurement of performance is just the start. What will be transformative for the solution economy is applying that insight and feedback to how problems get solved.
In one telling example, as money poured into microfinance, the Bill & Melinda Gates Foundation opted against merely donating to existing microfinance institutions. Instead, it dedicated time and money to understanding the many environmental factors that drive a microfinance organizations’ success or failure. The effect? By exposing the weaknesses in the landscape, the foundation had an informed starting point to take action. After identifying a need for more savings vehicles, for instance, in 2010 the foundation dedicated $5.8 million to help microlenders provide savings accounts to even the poorest populations. After observing the positive impact of these grants, the foundation expanded its contribution to the field to $500 million. Just as with a business venture, analysis preceded seed money, and real money came only after proven results.53
Measurement, notes Bill Gates, “may seem basic, but it is amazing how often it is not done and how hard it is to get right.”54 Selecting the right combination of measures to gauge impact, and applying them iteratively to track progress, is one of the most powerful ways to accelerate problem solving in the solution economy.
This book has chronicled a little-understood revolution that is changing the way public value is created. As the solution economy grows—and it will grow only as fast as it is nurtured—it will change the landscape dramatically. There will be more alliances between government and the private sector and more mold-breaking alliances across sectors. These shifts stand to reduce gaps in public services and empower individuals and communities to take a greater role in creating their own future. Education deficits that have held back developing nations can be eradicated through greater access to online learning. From housing to obesity, the environment to transportation, a brighter future is in reach if we are savvy enough to grasp it.
Of course, the particulars of tomorrow are impossible to know from today’s vantage. But as we scan the solution economy, this promising landscape of breakaway technologies and innovative business models, we should ask ourselves how much further we can take this. And how many of the old ways of doing business—operating in isolation, ignoring entire classes and groups of people, shrugging off ruinous externalities of the market—are we willing to let go?
If we are smart, quite a lot. Nothing in any economy is static. Technologies and business models keep advancing, and as they do, older modes of service delivery will need to evolve. New problems will emerge. Luckily, the fundamental strength of the solution economy is that challenges become opportunities for progress.