The Social Enterprise Toolkit

Introduction

Generally speaking there are 5 types of organizations: small organizations, lifestyle organizations, established companies, high growth companies, and social enterprises. Although social enterprises are in a separate category, this category has a set of sub-categories. A social enterprise is a business with a primary purpose to achieve social benefit objectives. While these businesses should seek to maximize the profitability of the delivery models.  This distinguishes them from charitable business models.  Social enterprises can take the form of either a non-profit or for-profit business and prioritize maximizing the benefits to society, humanity, and the environment by building sustainable business models. Their profits are thus used to fund and grow their social programs and social impact. A social enterprise can be a lifestyle organization, a small organization, established enterprise, and/or a high growth enterprise.  It is important for social enterprises to know who they are so that they better understand their organizational structure and how it contributes or impedes innovation.

Entrepreneurship is a word that is used very loosely, especially in the social sector, but quite simply it means the process of creating something new or changing something that is already in existence. This is innovation at its roots and is a difficult and messy path for any organization, but even more so in the social space because normal supply and demand economics does not always take shape. As the technology sector has exploded since the early 1990s, growing from less than 5% of the capital markets to over 22% and sits as the largest sector in world as Information Technology. The innovation building methods rooted in this sector are now being adopted by all sectors.  The social sector has been extremely slow to adopt these methods, but has seen some growth over the last decade. Entire industries are being eliminated by technology and innovation, and although there will always be severe need across the nation and globally, social enterprises are finding it tougher to keep up.

There are a unique set of challenges that social enterprises face and this toolkit is meant to provide a process and framework to research, design, build, test, resource, deploy, and scale solutions.  Building a new service line or product is quite difficult in itself, but getting that solution widely adopted is even more difficult due to so many barriers we may not be thinking of; misalignment of partners, incumbent providers, entrenched thinking, prescriptive funding, and the overall aversion to risk and new ideas.

This social innovation toolkit is designed through open source tools and methods as well as some that Start Co. created to hopefully give you an additional option to how you currently build new things or revisit old ones; but doing it more efficiently, with higher performance, faster, lowering costs, finding new revenue opportunities, and overall being more convenient to fit into your behavior as a social enterprise.

The path way to growing a scalable social enterprise begins with ensuring that the foundations of success are in place and fortified. Whether you are just starting out, entering the market, or scaling a proven system, if the foundations are not set properly your organization will falter- it is not a matter of if, but when. That’s why we emphasize “slowing down to speed up” regardless of the stage of your organization. That means going back to the basics-customer discovery and potentially even designing to make sure that your service or program is being received as planned. It may mean making sure that the legal foundation of your organization is in place and documented. It may mean examining the financial disciplines that are in place to ensure the health of the organization daily and weekly. We strive to equip entrepreneurs at all stages with the knowledge, resources, and disciplines needed to launch and scale a successful organization. Below you will find a depiction of the stages of growth an organization must pass through. Missing a step or not fully completing one can create the conditions for failure.

The amount of work nonprofit leaders must put into themselves and their organization is a great ask that requires much time, patience, and the willingness to learn and grow. This is why we have compiled our organization Toolkit and Guide to help along the way.

The First 4 D’s

There are 4 main causes of organization failure:  

1) Building something that doesn’t meet the market need correctly.  

2) The leadership team of the organization does not have the right skills and knowledge and has failed to align on key issues that create conflicts.  

3) A misalignment of the greater team in and around the organization, including service providers, partners, and funders such that the organization is fractured and underperforming.

4) Other reasons that are out of the control of the organization and leadership, including the regulatory environment changing, macroeconomics hurting industry, etc.

Of the issues above the first three are on the direct control of the organization and its leadership. The first 2 reasons generally occur during the founding of the organization and can be addressed by what we call the 4 D’s. Even those organization that have launched a program or service successfully may fail in the future if they do not address these fundamental issues.  

The 4 D’s are Development of Nonprofit Leaders, Discovering the Customer, Delivering the Program or Service, and Dollars for Stabilization and Scaling.   

The First D: Founder Development

Leaders of social enterprises many times get overwhelmed by complex social environments they are working in, causing their day to day to consume them, crushing the ability for them to leverage and better utilize their industry knowledge for innovation.  This toolkit recommends and utilizes concepts from the book “The Power of Social Innovation,” by Stephen Goldsmith; a book that focuses on Civic Entrepreneurship, helping communities develop and organize their economic assets and build productive resilient relationships across the public, private, and civil sectors.  It provides great education on navigating the social sector with real actionable solutions packaged in an innovator’s toolkit. We recommended reading the book and studying the toolkit as a means to develop yourselves and your organization’s focus.

The Power of Social Innovation

The Innovator’s Toolkit

  1. Identify the Problem You Will Address

You are committed to making real change in your community or in your field of work, but where do you start? Your first step is to identify and describe the problem you are trying to solve and understand why it persists. Click here to learn more. 

  1. Rethink Your Community’s Current Approach

Although countless individuals now labor tirelessly on meaningful efforts in education, health care, child welfare, youth development, housing, economic insecurity and poverty, public safety, and more, few communities have enough to show for their collective efforts.

Ask yourself:

  • Does the social system in which you work allow too little space for improvement?
  • Does it suffer from a lack of meaningful focus on measurable results, rule-bound funding and a deep-seeded aversion to risk?
  • Has your local system been infected with a “curse of professionalism” which causes providers (despite the best of intentions) to assume they know what is best for citizens who receive services without asking what works for them?

Click Here for more information on how to rethink your community’s current approach.

  1. Scan the Landscape for Opportunities

There are many methods for assessing and scanning your local landscape for opportunities for the most effective intervention. Below are brief descriptions and tips for carrying out four possible processes of discovery:

  • Civic Discovery
  • System Discovery
  • Personal Discovery
  • Predictive Discovery

Click Here for more information on how to scan the landscape for more opportunities.

  1. Craft Your Intervention

Social innovation is different from traditional technological innovation. Transformative innovations are not only new tools or software programs; they aim to catalyze changes that dramatically lift performance across the system. The goal is not simply to replace the outdated with the innovative, but equally often to add a missing ingredient that ignites drastic improvements in programs and other assets already operating in the community— innovation as catalytic ingredient.

After completing the discovery process and identifying your best intervention points, you can choose several ingredients that will make the system itself perform better. We found four categories of such ingredients, which you might also think of as four different categories or types of innovation: civic realignment; technological glue; filling the management gap; and new pipelines for community engagement.

Below are descriptions and helpful tips related to each:

  • Civic Realignment
  • Technological Glue
  • Filling the Management Gap
  • New Volunteer and Donor Goodwill Pipelines

Craft your intervention

  1. Navigate Between Collaboration & Disruption

Having crafted your intervention, the next step is to execute. Implementation might start on a small scale, but a true breakthrough requires the growth of an innovation from the margins to the mainstream. To achieve this growth requires attracting resources and partners from across the system, but it also requires disruption of that same system. Click Here for more information. 

  1. Balance Top-Down & Participatory Approaches

As an innovator, you will also have to navigate a second tension. Rather than finding the right balance between collaboration and disruption, this tension requires both exercising executive leadership and responding to the public will. Click Here for more information. 

  1. Expect More Individual Responsibility

Another important strategy for the social innovator is based on an understanding that progress requires citizens to move from passive recipients of public services to active participants in civic life. As an innovator, you can do this by giving citizens—as clients—a greater voice in determining and evaluating the services they receive. As important, ensure that these same individuals are included in both identifying problems and in solving them. Click Here for more information.

  1. Open Space for New Ideas

As mentioned above, there are any number of constraints and barriers that any innovator is bound to face in starting and then growing a new approach. You can see that these challenges are found at both the organization and city level. They are as likely to be analytical and administrative in nature as they could be political and social.

Public and private sector leaders alike can open the doors to innovation and reform by making space within an entrenched delivery system or organization. Here are some ways that have been shown to work.

  1. Advocate for Success

You should expect that traveling down this path to solutions that transform the system and bring measurable results will generate an enormous amount of highly focused and intense opposition to your efforts.

Without an engaged and supportive general populace to counter the inevitable opposition, serious reform is unlikely. In a democracy little can compete with an engaged public in helping the political benefits of innovation outweigh the costs. Click Here for more information. 

  1. Leverage Social Media

To rethink and rebuild the way we deal with social problems, you will want to engage citizens as catalysts for social change—whether as clients, community members, or fellow entrepreneurs. There are a number of important opportunities for digital media to help build citizens’ capacity for self-organization and for community problem-solving and to help grow the most exceptional providers. Click Here for more information.

  1. Focus Your Dollars on Results

Yours and other social innovations that show results will be sustained when dollars and other resources flow to what works, not to the most politically savvy or connected. In an ideal world, public agency and philanthropic funders would be less impressed with the ongoing efforts of good-hearted nonprofits and more willing to make the difficult decision to repurpose dollars to what works. When dollars flow to what works, providers will be forced to trade their good intentions for performance. Click Here for more information. 

  1. Take the First Risk

The last item in the Innovator’s Toolkit is an often overlooked but critical component of successful innovations.

As an innovator, being closely connected to the people and communities you are trying to help will allow you a deeper understanding of the risks—and rewards—of their entrance into employment, retail, and other markets. Similarly, you can increase your impact by understanding and helping to underwrite the political risk intrinsic to both new ideas and to disruptive ideas. Click Here for more information. 

Appendix: Self Assessment

These 20 questions will help you begin to understand your local landscape in terms of its potential for cross-sector efforts, its openness to outside or new ideas, the availability of resources for trying innovative programs, key barriers to reform, and more. Many of these questions can be directed to a range of actors across sectors.  A few (as denoted) are specifically geared to government agencies seeking to re-evaluate their impact on the local landscape and environment for public problem solving.

Resources:

  • For those looking to assess their organization concept we recommend this resource on What Makes a Great Business Idea?
  • Organization leaders of all types looking to evolve their thinking should add these books to their Reading List (.doc)
  • As mentioned in the introduction, although you are a social enterprise you probably show characteristics of other Types of Entrepreneurship (.doc) written by our partners Jumpstart Inc.
  • Entrepreneurs need to be effective communicators in a variety of settings and nothing is better than Power of Storytelling

Growth Wheel

Beyond these tools it is important to assess your organization and its needs holistically.  The Growth Wheel is a great way to bring a bigger perspective to your organization. Looking down on your idea or existing program/service from a macro level will ensure you are considering all the components that need to be fortified and built going forward for growth. It is a good idea to even rank yourself on the below 20 areas of the organization and prioritize which ones to improve over a timeline. No organization is strong in all areas, but all organizations should have a plan around each of the areas.

The Second D: Customer Discovery

For social enterprises trying to improve, addressing potential future conflicts, and dealing with other macro issues, it is time to focus on product market fit ( getting the market to better receive your service or program) by testing their ideas for change  with real customers to ensure the fundamental hypotheses for those ideas are rooted in facts and not false visions. There are tools for this and how to digest and compile this data. If your organization has never gone through a discovery process or it has been more than a year, you should consider engaging in the below steps for customer discovery.  As discussed earlier in the toolkit, the below process should be applied to all forms of discovery whether it is your direct customer, a partner, a funder, etc.

Basic Resources:

Customer Discovery In Depth– this process was originally designed for launching product or service ideas so all the vocabulary does not match social enterprises.  We chose to keep the language and format as not to dilute the content; please keep this in mind as you use this portion of the toolkit.

The Third D: Delivery

Once the four hypotheses have been defined into a solid and narrow plan for building your organization, the team needs to shift some of its effort toward developing and building the solution. For social enterprises this is best accomplished by moving from proofs of concept into a minimum viable product. For existing organization this is accomplished by revisiting the design of the service because many, even if they had been in service for years, are working with a minimal viable product or less.  This method is iteration based.

Iteration Trumps Perfection.

Many organizations are prone to believe they can deliver a perfect program or service without interim versions. The process they use consists of building out a specification for what the end product or service will look like, how it will function or deliver, and even the messaging surrounding the offering.

After the specification has been set, then work begins in earnest for several weeks, or several months, or maybe even years. At the end of the build phase an organization will emerge with the golden key, the magic formula, the secret sauce, or the silver bullet. Much to the surprise of these entrepreneurs the customer will not pay for the product or service.

Even if social enterprises conduct superior customer and market discovery work, they should continue to engage the customer in shaping the future of the product or service. Market conditions can change rapidly along with customer needs. Furthermore, through actual interaction with the interim versions the customers could uncover that a key feature was missing or needed to be changed to support adoption. Finally, the organization will uncover difficulties or complexities in delivering value to the customer with each version.

Perfection is difficult to attain. Iteration however will get the founding team as close to perfection as possible in the least amount of time. There are truly no shortcuts.

Customer Feedback and Phases of Delivery:

There are key reasons why proof of concept work is important.

Proof of concepts are used:

  1. To verify a given principle behind the program or service or to gauge the design appeal.
  2. To provide confidence that the solution can in fact deliver value to the customer.
  3. To provide confidence to funders and partners that the solution can deliver value to the customer.
  4. To help with articulating the value to others (i.e. showing is bettering than telling).
  5. To aid in the process of protecting intellectual property through patents or other means.

To determine if the organization is on the right track in delivering value to the customer, the social enterprise needs to take the existing program/service or build a prototype of the program/service and take it to the customers for feedback immediately before building the next version. The customers that are contacted during customer discovery are likely very willing to give feedback on the prototypes. Reach out to groups of them at a time to learn as much as possible.

The more an organization can receive feedback, make needed changes, and take it back to the customers the faster the product or service will take shape.

If you are in the early stages, proof of concepts could be rough models, lacking even functionality. They could be mock-ups on paper, videos, animations, cardboard models, or diagrams.

At the intermediate stages of development, the program or service should be minimally functional. It should demonstrate in a limited or basic way how a customer would make use of the offering but still lack refinements and the design of a final version.

Once the product has been developed sufficiently, the transition to a useable version often takes into account user experience. It is important that the product appeals to the target customer in this phase. Eventually, as the organization continues to iterate over the product or service and give it to the customer for feedback, the organization will notice a change in the perception that the customer has toward the organization.

Much as customer and market discovery work never truly ends, the same is true for the delivery phase. Development doesn’t stop at the final version.

Resources:

Creative Process From Scratch

The Downsides of Linear Thinking & Why We Need to Embrace Failure

Prototyping for Social Impact

Nonprofit Communications:The Culture of Prototyping

Innovation From Within: How Nonprofits Solve Problems

Operating Model Canvas

The Fourth D: Dollars

Social enterprises face issues that all businesses do, but they face an additional level of challenges because the majority of the funding is grant and/or government based, bringing in further complexities that many times don’t make business sense.  The below tools are to provide resources that can help fill gaps in business and operational models to help secure needed funds.

Once social enterprises have done quality discovery so that they have seen a transformation in their idea, and they have built proof of concepts for experimentation and feedback. They can now do a better job of putting some business structure around the solution.  Going through the following documents and the exercises they suggest will bring greater strength to your solution:

Social Innovation Deck Template

  • Organization is all about managing and mitigation of risk.  Read more about that here: Mitigating Risk
  • Branding & Marketing position should also be reviewed and modified periodically
  • Competition must be analyzed and presented in a clear context both to internal and external stakeholders.
  • Check out this Guide to Creating a Competitive Analysis (.doc)
  • For those that want to dive in deeper, particularly in existing industries we recommend using Porters Five Forces (.doc)
  • If you are looking for clarity on your unique selling proposition this Competitive Advantage Checklist (.doc) can help.
  • One area that is usually overlooked when building financials is the Sales Cycle and the temporal elements of it.  For that we recommend that you examine yours with this tool conveniently called the Sales Cycle (.pdf)
  • Mapping Business Ecosystems
  • KPIs for Nonprofits