Creating the ripple effect

Ripple Wave - sIn their Winter 2015 Social Innovation Review, Stanford University included a paper entitled “What’s Your Endgame?”. You can read the full paper here.

The authors proposed that charities can’t scale their innovations because they’re never able to raise the capital required to rapidly expand. And so, the paper proposed four alternative mechanisms to create impact at scale, without having to scale the organisation itself. Essentially, to increase the reach of their impact through the ripple effect, rather than through direct growth.

The ripple effect is a powerful concept: the idea that an organisation can create impact far beyond its own footprint. And there’s plenty of evidence that it works. When brands take a publicly ethical stance, they challenge their competitors to match those convictions or lose their ethical customers. When major manufacturers and retailers sign up to carbon neutrality, gender pay equality, Fairtrade or FSC standards, they can help to raise the bar for the whole industry.

The Stanford article gave four alternative ways that non-profits could create this ripple effect from their own developments. They were: to put the innovation into the public domain for free; to package it up and train, franchise or certify it for other organisations; to demonstrate profitability and thereby encourage commercial organisations to adopt the model; or to persuade government to drive adoption through policy or legislation. The four alternatives still stand up well, but the context has changed dramatically in the four years since the article was written, and recent evidence for two of the alternatives is becoming increasingly thin.

Government adoption has arguably never been more difficult to achieve. Partly in the UK that’s because of Brexit distraction and the resultant brain-drain across the civil service: the descriptions I get from clients are of unprecedented levels of internal chaos and constant musical chairs. But beyond this, there’s the ongoing rise of ideology over rationality that we’re seeing played out in both UK and world politics.

One example would be the world’s first Social Impact Bond, which was set up in Peterborough in 2010 to find ways to reduce reoffending. By 2015 the programme had beaten all its targets and was therefore immediately cancelled to make way for the national Transforming Rehabilitation programme, which ignored everything Peterborough had learned, and spectacularly failed on almost every measure on which the SIB had succeeded. Government adoption may be possible, but right now, success appears to be more a game of roulette than of chess.

In contrast, the open source movement (giving away your IP) is still thriving, particularly in academia and technology development. But a good idea is no guarantee of adoption. Within established organisations, people tend to resist change, and overcoming the gap between innovation and widespread uptake, invariably requires marketing, communication, indeed “selling”, and those are all activities that an open source model can generally neither fund nor facilitate. Plus, people tend to value knowledge in direct proportion to the cost at which it was acquired, and therefore continually undervalue “free”.

What that means is that for non-profits to scale their impact, there are, in practice, really only three reliable options: self-scaling, by finding ways to overcome the capital barrier like social investment; scaling through others by training, certifying or franchising them on a paid-for model; or encouraging commercial adoption, by demonstrating both impact and profitability.

But here’s the thing: those last two elements, impact and profitability, are common to each of the three remaining options; in fact, they’re fundamental to all of them. Capital can only be raised and a model self-scaled, if it’s profitable, and it’s only worth doing if it has impact. Investments in training, certification or a franchise are similarly predicated on both impact and financial returns – if there’s no return on offer, the uptake will always be poor, and the delivery tightly constrained by the costs.

The ripple effect can be the biggest single tool for “leveraging” a charity’s impact in the true, Archimedean sense of the word. But in order to get those ripples, it’s not enough that an idea is good, or that it does good. It needs to be able to make someone money as well, and the easier that is to see, the faster those ripples will turn into waves of change.

It’s a tricky concept for traditional charities, but to create dramatically greater impact, or in the words of Archimedes, to “move the world”, commerce is the critical ingredient that simply can’t be ignored.

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