Sustainable impact - What do business practices, patience and listening skills have to do with it?

Not a day goes by without a reference to sustainability, strategic philanthropy or impact investing. It dominates LinkedIn and corporate websites. It is dinner party conversation (remember those?). It’s a current trend, right?  

Would it surprise you to learn that it is in fact a 50-year-old conversation, kick started by John D. Rockefeller III in 1969 when he first coined the phrase “venture philanthropy”? He was referring to an “imaginative and risk-taking approach to philanthropy” Nearly 40 years later in 2008 Matthew Bishop and Michael Green introduced Philanthrocapitalism in their book of the same title. They meant an approach being taken by billionaire social investors, who were embedding business approaches into their philanthropic investments with expectations of big impact and accountability.

This all seems a practical and effective strategy, so why are we still talking about it as if it were a new trend? Why isn’t it “the norm?” The answer is because it is really hard to do well. It takes great patience of capital and attention to an iterative process. It requires commitment to share power, trust and knowledge with the communities you wish to support.

I have been reflecting on this recently and thinking what I would say if this was the beginning of the conversation.  How would I frame the critical factors that will increase the odds of achieving sustainable impact? How would I outline how to achieve sustainable impact, both in terms of strategic principles and operational considerations.       

I am the first to hedge my bets. This is hard. If it were easy then the billionaires of the world would have solved entrenched challenges already. Many well intentioned and experienced social investors have committed to tackling change. I applaud them for their commitments and I believe that with every effort we are left with important learnings.

Bill Gates recently was said that he “thinks more like an engineer than a political scientist.” He has embraced a venture capital approach to philanthropy. He takes big bets and accepts that not all the ideas will work, but he calls himself an “impatient optimist.” He is a great believer in engaging with stakeholders and he has an insatiable hunger for knowledge about the ecosystems he wishes to engage with. Missteps and failures are not things to be hidden away. They are to be shared and discussed.

Many of the world’s largest businesses did not start out to do what has made them successful. It took time, mistakes, learnings, and do-overs. Adopting an approach which is open to iteration is essential. This approach is applicable to philanthropy and impact investing in my view.

Here is my go at bringing together the best of venture philanthropy and philanthrocapitalism to develop impactful and sustainable solutions.  I’d love to hear - What would yours be? Have I missed anything?  What would you do differently?

Strategic principles

 1.       Take an entrepreneurial approach to achieving impact

Introducing business metrics, a business plan and predetermined objectives to measure can add rigour and accountability.  However, it is essential that this business-style approach is underpinned by deliberate and strategic thinking on where power, knowledge and trust sit.  Without this, a great idea can be doomed to ineffective outcomes, low impact and unintended consequences.

2.       End hierarchical power dynamics

The real power wielded by the social investor is the ability to employ patient or catalytic capital.  Communities need to possess the power of their voice and play a leading and collective role in conversations that identify challenges and solutions.  They understand the barriers to success and are the keys to overcoming them. Tackling these entrenched challenges requires a commitment to a long-time horizon and a communication channel that flows in both directions.

Power dynamics are rarely one dimensional so don’t ever forget to engage with those who stand to lose power if the intervention is successful. They represent the most dangerous hurdle to success. People don’t willingly relinquish power unless there is a soft landing space. You must find a path forward for those who are threatened by the change you wish to see.

3.       Invest in the power of knowledge

The most impactful interventions are those which employ the knowledge of all the stakeholders. The social investors bring business acumen and the building blocks of structure, monitoring, feedback and key performance indicators (KPI’s). However, it is not possible to understand the culture, outcomes, potential impact and hurdles to success without tapping into the knowledge of the local stakeholders. These are often a mix of elders, faith leaders, social enterprises, multinational corporations, charities, government officials or educators. They are families and professionals. They all have a perspective to add. Welcoming that wealth of experience and wisdom is essential in shaping the right approach. Unintended consequences happen when all these perspectives are not considered.

You will never be able to avoid all the obstacles, but this collaborative approach will put stakeholders on a collective path, building a common agenda, consensus and a shared vision-key ingredients for the success and future adoption of the changes.

4.       Commit to earning, building and maintaining trust

Trust is the final factor to consider. It doesn’t happen instantly. It is earned and built over time. Social investors need to show true commitment to the timeline and to partnering with local communities to help them solve their own challenges with solutions which can endure. Stakeholders need to commit to embracing some change. They need to use their collective power to influence local thinking and to help overcome social and cultural barriers.

Honesty needs to be a priority and failure needs to be accepted and employed as a tool for learning. The deeper the trust runs the more iterative the journey can become. Having a safe environment for reviewing flawed assumptions or imperfect plans is a critical component of a sustainable solution that can be deeply embedded in the community.

Operational considerations

• Don’t skip the preparation

Systems, communities and their surrounding ecosystems are complex. Historical context, cultural norms, religious beliefs and social hierarchies must be understood before any project can be designed. Take the time to learn. Speak with academic experts about the region. Speak with community leaders. Interview families. Map the stakeholders in a community. You will need them once you begin to plan for the project.

Listen without preconceived notions. That is hard to do. Without a fair and unbiased overview of the environment you cannot accurately identify and understand the challenges with any context. In business plans this is often the market analysis. It is the SWOT analysis. My analogy is preparing to paint your home. The factor which determines the quality of the final paint job is the prep work to the walls. In the absence of good preparation, the paint peels away and is not sustainable.

• What type of change needs to happen?

Based on what you learn from stakeholders, does the change need to be baby steps within an existing structure or an entirely new set of rules and represent a paradigm change? It is crucial to understand the depth of change you are requiring of a community. The journey to buy in and consensus will vary greatly based on how deeply embedded the beliefs and systems are that you are trying to change. If your programme will challenge deeply held beliefs or impose deep systemic change then the potential for unintended consequences and barriers to success are far greater. Engaging with stakeholders from the very start will be essential to understand how and why the beliefs are held and the history of the culture. Power dynamics need to be respected and welcoming input from various perspectives will help to build broad level collaboration. If previous interventions have failed study them judiciously to learn and to avoid the imperfect assumptions and missteps.

• Outcomes and Impact

In order to determine the outcomes you are planning to deliver and the impact you wish to achieve, you will need to collate all the information you have gathered from your stakeholders. You need to work with them to create solutions to the challenges they have identified for themselves. This is the moment when the business style approach adds real value to the process. Creating feedback loops, monitoring plans and KPI’s will empower you to stay in control of the journey. It helps to give you moments of reflection to review assumptions, listen to stakeholders, analyse progress against the plan and measure your outcomes and impact to date. Impact is slow to materialise. Patient capital provides time so be realistic about how quickly you can understand real sustainable impact. Be proactive about missteps and re-evaluate in collaboration with the stakeholders. The earlier an honest assessment happens the better chance that a successful pivot can be implemented. Don’t play the blame game.

• Identify and mitigate risks to success from the start if possible

Take the time to catalogue the barriers to success as you identify them. Make a mitigation plan for each to the extent that you can. Be up front with stakeholders about what you see as the challenges and engage them in finding solutions. Change is best accepted when those who are respected in a community are prepared to adopt them and advocate for their acceptance. Find your ambassadors and lean on them heavily.

• Exit Strategy

Even if you are a social enterprise and don’t intend to leave the community you will need to plan for your exit from the initial programme. Impact is not sustainable if you can’t leave. Every intervention has consequences at the point of entry and exit. Planning carefully for transitions is so important but often is a last-minute consideration. Local stakeholders need the training and support to take over the programme in your absence. You can be a source of support and if you have built the trust properly. They will be confident in their ability to share vulnerability with you. Having defined success alongside the community at the start you should be ready to leave when you achieve that.

It will not come as a surprise to see the community wobble a bit after you leave but that is expected. Those who would like to see the status quo return will wait for their chance to interfere. They will emerge when the community is most vulnerable and that will be after you leave. Make sure to have considered those actors during your exit strategy and made plans for as many potential conflicts as possible. If you have planned for risk mitigation strategies then you can return to them and leave the communities with tools to manage them in your absence. Planning avenues for compromise will leave them in good stead to press on.

Finally, blend all the best strategies because nothing worth doing is easy. There are big and entrenched problems waiting to be solved. Bringing the rigour and structure of business to the process of development can strengthen interventions. It can provide long term patient capital that has the potential to act as a catalyst for change. However, it is not enough without careful consideration of the placement of power, knowledge and trust within the complex relationships between social investor and stakeholder.

Sustainable impact is ultimately for the stakeholders to carry on. Building bridges and a common agenda is the best strategy to employ when planning an intervention. Collaborative programmes driven by the community have the best chance for long term success. These building blocks create structure for philanthropy and impact investment alike. They both strive to deliver sustainable impact.

Be brave, bold and patient but above all become a good listener.