Growing, not scaling: Realising the mountain isn’t a molehill

Adam O'Boyle1 Apr 2015Growing

In all conversations about social innovation, scale is a topic that is never far from people’s lips. But it remains ever intangible. In an age in which companies like Google and Facebook can rise from nothing in only a few years to be masters of the universe, the social sectors struggle to get anything to grow even beyond the £50m mark.

And so any research on scale is to be keenly welcomed. In this vein, I finally got round to reading Nesta’s report Making It Big: Strategies for Scaling Social Innovations the other day, published July 2014, which is a very useful overview of some of the issues surrounding the “elusive” problem of scale that stops many social innovations reaching their potential.

The report defines scale as “when [a social innovation’s] impact grows to match the level of need”. This seems robust.

And it builds on another Nesta report, In and Out of Sync from 2007, that I read in the very early days of founding the Oxford Hub and directly informed our growth strategy. Both together are excellent analyses of the different paths that social sector organisations could take towards scaling. They make crystal clear that scale is not just about organisational growth, but could be about influencing, strategic partnerships, licensing, mainstreaming into the public sector etc, and are worthy bedtime reading for anyone interested in social sector scale. A more deliberate scaling strategy, as the reports recommend, wouldn’t hurt some social innovators. And it is helpful to think, as the reports argue, about how you get ‘effective supply’ and ‘effective demand’ for your innovation.

However, a few things struck me about the report which I think essential for further examination:

* Examples: On the definition that Nesta take of scaling – that “social innovations can be said to have scaled when their impact grows to match the level of need” – then unfortunately none of the examples they cited from the UK context (all of them I think Nesta grantees) have actually scaled. Which is certainly a challenge for the analysis. Some of them have grown large (eg, Teach First) and are interesting to analyse because they show the sorts of things that you imagine you might need to do to scale (like Teach First setting up an Innovation programme to expand its impact) but none of them have actually scaled. Teach First, aiming to tackle educational inequality, has clearly not scaled enough to meet the “level of need”, and although its current activities are no doubt successful, perhaps its scaling strategy needs to be entirely different.

Using Nesta’s own scaling typology, perhaps Teach First should be concentrating its substantial resources on a teacher training programme more widely, not just a leadership development programme. Who knows, it’s hard to tell except in hindsight, but shows the pitfalls of labelling any organisation as having ‘scaled’, as well as the sector’s desperation to be showing fruits of its labours. This is not to knock the achievements of any of the organisations mentioned, as even growing at all in the social sectors is a huge challenge, replication to another context or city even more so. However, when it comes to scale as the report claims, the examples can be little more than interesting examples of growth. The point is made most starkly when one of the case studies of scaling is written up with the following sentence “But it doesn’t feel it has reached scale yet. Emma explains, ‘scale for us would be to have a national part-time jobs market and having 10,000 jobs per year on our site.” We need to go back to the drawing board to think about examples that have scaled in the UK context recently – and the findings will, I think, be disappointing. I can’t thinking of any intervention, programme or idea that has been supported in the increasingly popular way in the social sectors at the moment (seed funding, incubators etc) having scaled.

* Timescales: The two international examples used in the report – BRAC and Pratham – seem more robust. But BRAC has been existence since 1979. Things do take a long time, but it does make stark that our ambitions to meet social needs tomorrow are perhaps a little overhyped and if we want to achieve scale at speed we’re going to have to take very very different paths to scaling of the past.

* Responsibility: The report is heavily focused on the decisions and choices that founders/innovators need to make in the scaling journey. And though at the end of the report it refers to funders and intermediaries and the choices they need to make, I think it overemphasises the role of innovators in the scaling journey. I argue below that I think the real path to scale lies with financial providers who help create and shape the market for social innovations – who provide the effective demand in the majority of cases that ideas need.

* Choice: Finally, I may be wrong but I think part of the challenge posed by scale is that of predicting the future. The report to me felt a little too much like it was hoping that innovators could easily design a strategy for scale. Scale and growth are not linear and although it’s easy to map in hindsight, it is very hard to design. Organisations more typically, in my experience, follow an agile strategy, which involves a good deal of trial and error to find their path of least resistance to growth/scale. To design your strategy for scale in advance requires too much market information that you aren’t in control of. The report is a useful toolkit of the types of issues to consider, but too easily it could become another social sector ‘analysis straitjacket’.

The conclusions I draw from the Nesta piece and otherwise about how to scale suggest to me three options:

  • You need to increase your sales rapidly. Which then just becomes a function of how large your market is, and how quickly you can convert customers from one way of purchasing goods to another. To me that places you in a very traditional private sector dynamic and you’ll grow as fast as would any private or public deliverer or a product. Unfortunately, however, the key thing about the social sector is that your market demand is almost certainly limited or broken, which certainly restrains the speed at which you can grow. Your scale strategy then will require some definite interventions on the demand side, which might only be achieved through slow policy changes.
  • Or you need to merge or acquire other organisations. A company like Groupe SOS in France is an interesting example here, as it shows, reaching a turnover of $750m what is possible.
  • Or finally, someone just needs to give you a lot of money in a way that does not mimic the traditional sales model. This could be in the form of investment, grant or ongoing revenue. And with that you can both build your product to outstrip the competition but also create market demand. This is clearly what is happening in the world of private sector angel capital investment. Or in the charity sector, one of the examples Nesta uses is National Citizen Service. It’s obvious that their revenue model came about through a particular political confluence and that if that funding ran out there would be no incentive for most of the providers of NCS to continue the programme. That may be sustainable, but it may not be.

What does this mean for the social sectors and more effective ways in which to promote scale?

  • That if we truly want anything to scale then we will need to see much much more targeted investments in particular interventions. Perhaps funders just need to cut back their portfolios and back a few things at a really significant level, or find ways in which a few programmes can be backed at a significant level.
  • Funders, social innovators, intermediaries, governments need to take a hard look at themselves and then grow things until they ‘succeed’, until they scale and actually meet the needs of the problem they have set out to tackle. That successful growth should more often mean more money flowing to a venture, not, as is currently the case, often less. Or kill the innovation quickly and tell the founders to concentrate their efforts elsewhere and not just create another small scale intervention which goes no way to tackling the problem. At the very least funders should take responsibility, with their investees, to ‘closing down’ ideas which are unable to scale at that time or not at all.
  • As part of this decision to help venture ‘scale’, investors and innovators need to have a very detailed discussion as to what growth trajectory is demanded of the venture at each stage of investment. Is it more users, is it more revenue? Then, and only then, will innovators have a robust understanding of what it means to have reached the ‘next stage’. And it might make clear that next stage is far beyond the 3 year grant timelines of most funders.
  • That along current growth trajectories, we are going to be waiting a very very long time, much longer than all the social sector/scale hype would lead us to believe, for any current innovations in the social sectors to reach scale.
  • Let talent run with things. I think it’s a very very telling symptom of our problem that successful founders often leave their social ventures after a number of years, long before any signs of scale, not because they aren’t ‘best suited to the next stage of growth’ but because they become bored by the limited impact they know they will have if they continue on their current trajectory. One of the examples cited in the Nesta report as an example of scale/growth is one where the founder actually moved on recently, in part for other reasons, but at least in part because they had become bored with the slow growth trajectory they had become locked on.
  • Impact doesn’t matter, investment needs to a degree to just be arbitrary – which in many ways means it’s best tied to the quality of the team. The report makes clear that despite attempts to increase quality of impact measurement across the sectors, impact is only part of the story. Family Nurse Partnerships, a very very well documented early childhood intervention in the US, despite its evidence base, has still only reached 5% penetration. A good team will find avenues for growth if given adequate support.

Making It Big is a strong piece of analysis in many respects and builds on Nesta’s strong pedigree of research. However, it shows how far we are from tackling the scale problem properly, especially because the best informed of us are still far from understanding the problem at all well. We can’t unfortunately pretend that any of Nesta’s cited investments have catalysed any scaling and it looks like some much better analysis of what will be required to bring about scaling will be required.

Question: Why does scale as yet remain so elusive?

Author: Adam O'Boyle

Adam O'Boyle is Executive Director of Hub Ventures. Adam co-founded Student Hubs in September 2007 during a sabbatical from his History and Economics degree and rejoined as Executive Director upon graduating in July 2009. During that time Adam also worked as a part-time analyst for New Philanthropy Capital where he co-authored a research report entitled: ‘Critical masses: Social campaigning, a guide for donors and funders’.