I have become increasingly obsessed with how social change organizations can achieve breakthrough – meaning how can they become powerful in effecting the social change that they want to see. I’ve also become discouraged at the way our sectors are structured, and the sources of financing available. At the end of the day, it’s only possible to be big and powerful if you can raise enough money – no matter if you are a for-profit company, and non-profit organization, or some hybrid form. Unfortunately, the sources of catalytic capital are few and few between, meaning that most social change organizations will languish in marginal obscurity for many years, never reaching escape velocity and changing the world.
In my next series of blogs, for 2014, I want to look at the factors that help or hinder organizations in achieving breakthrough. I’ll look at the role of leadership, the benefits of a great new product, results from investing heavily in marketing and the role played by philanthropic capital. Maybe by the end of the year we will have a somewhat better understanding of what it takes to reach breakthrough. There are some amazing examples out there, so will be talking with Erin Ganju of Room to Read, Eric Stowe of Splash, Ned Breslin of Water for People, and others. What can we learn from how they were able to get that critical momentum?
My primary sectors of interest are the third and fourth sectors. If the first sector of the economy is the private sector, and the second government, then the third sector is civil society, including non-profits, religious groups, trade associations, unions and so on. The fourth sector is the brave new world of for-benefit corporations (B-Corps), social enterprises and other hybrid forms that seek social change while using business techniques, or at least offering fee-for-service programs that bring in unrestricted revenue.
“Those of us who have toiled long and hard in the salt mines of the non-profit sector (I was self-sentenced to thirty years after college), know that there are many moments of intense joy, and lots of disappointments and struggles. We had all hoped that the rise of impact investing, social enterprise and strategic philanthropy would unlock a cornucopia of smart money that would accelerate the growth of the sector and favor innovative, high-impact organizations. ”
In this blog series, I will focus on organizations working in international development, because that is the sector I know best. I hope that what I learn in this journey will also be interesting to those working in other sectors, particularly in social and racial justice in America. I don’t know about you, but I have the distinct sense that we are moving backwards in many ways. Schools have re-segregated, inequality is entrenched, and half the kids in America live in poverty. This is awful and needs to change. But who will make the change happen?
Those of us who have toiled long and hard in the salt mines of the non-profit sector (I was self-sentenced to thirty years after college), know that there are many moments of intense joy, and lots of disappointments and struggles. We had all hoped that the rise of impact investing, social enterprise and strategic philanthropy would unlock a cornucopia of smart money that would accelerate the growth of the sector and favor innovative, high-impact organizations. But so far, what we have seen is more of the same – lots and lots of small grants or investments for start-ups, inventions, innovators and new ideas, but very little in the way of follow-on funding that allows organizational growth and development.
The result is an ecosystem in the third and fourth sectors of what are, for all intents and purposes, small businesses. Nothing wrong with that; taken as a whole, small businesses are great at keeping lots of people employed, developing innovative new products and services, and are in some countries the majority of the economic activity taking place. But they are also disconnected from each other and disorganized, repetitive, duplicative and in competition for limited funding. Each one may have a minor effect in a small locality, but few have any larger impact. They don’t pay great salaries to their employees, and don't generate much overall wealth or social impact. We need these small businesses, but we also need breakthrough organizations with larger ambitions.
So, how does a small business achieve breakthrough? Next week, I will take a look at some of the key factors.