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Finding Common Ground Between the Financing Fault Lines

Forging Common Ground – Series of Oxford Student Insights to the Skoll World Forum 2017.

 Skoll Scholar and Oxford MBA Candidate 2016-17, Ashley Thomas, draws on this year’s Skoll World Forum theme in relation to social impact business models.

There is a fault line between models of international development financing. On one side, there is the traditional donor and philanthropic capital that utilises grant money to support projects. On the other side is the social enterprise space that seeks to create sustainable impact through revenue generation.  There has been a lot of excitement in utilising grant funding for social enterprises to build and tweak their business model, but to date there has been little appetite for true hybrid models of ongoing subsidies for social enterprises.

This is a conversation that I had in numerous sessions and coffees throughout Skoll World Forum. It was also one of the key themes from the session hosted by Mercy Corps and USAID on sharing the learnings from their investments in the Innovation Investment Alliance. There is a common ground emerging; these conversations are hinting at the start of innovative new business models that allow for hybrid grant and revenue streams.

The Problem:

Social enterprises are addressing market failures. They bring products or services to underserved markets, often at low margins, and often at high costs. However, market failures exist for a reason; many companies are realising that even at scale, high volume low margin products are not able to generate the revenues that are necessary to be sustainable. However, social enterprises often sell themselves on this vision- that with initial capital to pilot and build systems, they will be financially sustainable at scale.

The Solution:

Philanthropic capital- which does not require financial returns, can help bridge this fault line, and maximise the potential impact of social enterprises. This does not mean we should revert to the large scale unsustainable development models of the 1990’s, but use philanthropic capital as way of targeting the market failure and allowing social enterprises to maintain their focus on their mission and outcomes. This hybrid model is being utilised in the FundiFix hand pump repair service designed by Dr. Rob Hope out of the University of Oxford. The model uses monthly user subscription payments to pool capital to finance prompt hand pump repairs. However, the willingness to pay only accounts for 2/3 of the cost of the service, and the remaining cost is subsidised through grant funding. This is also used in much larger social enterprises.  Ella Gudwin from Vision Spring spoke about how their model has shifted from seeking to maintain cost recovery- and retailing glasses at increasingly higher prices, to minimising the “philanthropy per pair” and serving their target customer.  They were able to do this under a scaling innovation grant from USAID and Mercy Corps, demonstrating that donors are also recognising the need for the pivot into these hybrid models.

It is increasingly clear that there is not one single model for social enterprise, and a single-minded focus on achieving commercial sustainability may limit the impact. Innovative hybrid models that use the social enterprise ethos of cost effectiveness in combination with smart grant funding that can subsidise the product can address the market failures preventing social enterprises achieving impact at scale. There is immense opportunity to achieve scale and impact through creating this common ground.

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More in Common

Forging Common Ground – Series of Oxford Student Insights to the Skoll World Forum 2017.

Skoll Scholar and Oxford MBA Candidate 2016-17, Alex Shapland-Howes, gives his perspective on the  Skoll World Forum session “Mobalizing a Movement: More in Common”.

How many articles have you read over the last year about the rise of populist politicians? How Brexit and Trump were caused by a great divide within our societies? How xenophobia so easily becomes the go-to response?

Almost all the articles end with something like “…and we must start acting now to fix this”.

But perhaps the thing that’s been most alarming is the lack of ideas as to how we should go about tackling these issues. Lamenting their existence is an important start – few of us had appreciated the scale of the problem until recently – yet of course without deliberate, concrete actions, it’s hard to see the situation changing.

This week at Skoll World Forum, I heard from an amazing group of people who are founding a new organisation to stimulate the changes they want to see. Led by Gemma Mortensen, Tim Dixon and Brendan Cox, More in Common will focus on five key areas:

  1. Public opinion research

It’s easy to make assumptions about the views of individuals or groups across society, but to make deliberative change successfully, we need to listen very carefully to each other. We often hear, for example, that there’s a divide between liberal cosmopolitans and what could be termed ‘angry nationalists’ in our societies. More In Common’s detailed research has found that whilst that divide very much does exist, roughly half the population have mixed views and don’t fall into either camp.

  1. Communications strategy for key influencers

Getting the messages right is critical to winning this battle. Brendan Cox told the audience that what we often call populism is actually just bigotry and hatred. A huge amount of work is needed to get the balance right between appeasing the dangerous views of some and genuinely listening, acting on the valid concerns of others.

  1. Convening and building broader coalitions

This work is inherently political but to succeed, it has to bring people with it across the normal divides. Organisations that normally wouldn’t take a political stance might do so if everybody was part of it. If More In Common can show that the most hate-filled views aren’t part of the same continuum – that they’re another, far more malevolent force – then they will try to get businesses, civil society, the media and more to stand up against it.

  1. Partnerships

Partnerships will also play a key role. We heard the example of how the Jo Cox Foundation has organised The Great Get Together in partnership with everyone from Oxfam and the Women’s Institute to the Premier League and The Sun. Across the UK, 10 million people are expected to get gather with neighbours on 17-18 June to “be part of a national celebration of what we have in common”. Amazing!

  1. Digital activation

We all know the power of social media. We heard less about this but there are plans to mobilise a ‘base’ of supporters to lead a movement from the bottom up too.

More In Common is new. There was little push back from anyone in the room at Skoll World Forum, few in the room who disagreed and this is arguably the biggest challenge of our lifetimes.

But the group running it are incredible. I was sold.

They are thinking, they seem to be listening and they have concrete plans for what to do next.

It felt like the start of the fight back.

Follow Alex: @alexshsh

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Building Bridges: Partnerships in Responsible Supply Chains

Forging Common Ground – Series of Oxford Student Insights to the Skoll World Forum 2017.

Macarena Hernandez, Skoll Scholar and Oxford MBA Candidate 2016-17 at the Saïd Business School, gives her perspective on the Skoll World Forum session “Building Bridges: Partnerships in Responsible Supply Chains”.

The task to build bridges to trigger the development of responsible supply chains is not only a task for “bridges builders”, it is a common task. We need to forge common bridges together.

The session kicked off with a “pop-quiz” leading by the session’s moderator, Daniel Viederman, Managing Director at Humanity United. “How many cocoa farmers are around the world?” After guesses and approximations, the right answer was 5 million.

Could you imagine the investment that is needed to audit all of these cocoa farmers have the responsible practices? How many more products a single food industry company have? As Viederman mention, we are not talking about a lineal supply chain, we are talking about a supply web.

The complexity of this supply web has meant that no one takes the responsibility to ensure fair labour conditions within the web. The private sector thought that labour issues needed to be solved by the public sector. Governments have been establishing regulations that encourage big industry players to start solving these issues.

Despite this complexity, companies such as Target and Mars Inc. are taking responsibility and action. In 2015, Target started a partnership with GoodWeave in support of their mission to end child labour in the rug industry. Mars Inc. is partnering with Verité to design simple solution for their suppliers to meet their responsible sourcing standards.

Building Bridges - Partnerships in Responsible Supply Chains panel

Building Bridges – Partnerships in Responsible Supply Chains panel

These leading efforts are transforming the unfair labour practices across industries. However, these partnerships and projects are not easily scalable for the various products across different industries. As Marika McCauley Sine, Mars’ Human Rights Director, said, ‘the situation is complex; we need to make it easy. We need to be specific and clear. Make it as simple as possible.’

For me, this simple and scalable solution is called: trust. If enterprises trust in other stakeholders, especially suppliers and suppliers of suppliers, there would be no need for huge investments to develop detailed audits or localised projects throughout the supply chain.

Although, building trust is not easy. How can we trust in others? Transparency, openness, collaboration, accountability, and information flow is needed. Who is creating trust through stakeholders? Talking and listening during the forum, two potential solutions came into my mind. After the panel, I had the opportunity to talk with Charmian Love, Co-Chair and Co-founder of B Lab UK. I realised that the B-Corporation Certification is identifying responsible players around the world. Listening to the session “Data-Driven Models for Change”, I discovered that Provenance is developing digital tools to trace products’ journeys.

Both trust’s mechanisms, mentioned above, include characteristics such as collaboration, data sharing, and transparency. This openness creates and distributes value along all stakeholders. Which make me reflect: Are the main industry players and competitors ready to collaborate between them? Are the innovators ready to share best practices? Are businesses ready to share value, despite the fact that these actions will reduce barriers to entry, increase the number of competitors, and increase consumer power?

I hope they are! In the long term, collaboration will be the key for value creation. My favourite value at Prospera, the Mexican social enterprise where I was working before coming to Oxford, states: “El que comparte, prospera. Siempre.” Translated to English: “The one who shares, thrives. Always.”

Follow Macarena: @macarenahdeo

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We the People: Populism and progress

Forging Common Ground – Series of Oxford Student Insights to the Skoll World Forum 2017.

Skoll Scholar and MBA Candidate 2016-17, John Kakungulu Walugembe, gives his perspective on the  Skoll World Forum session “We the People: Populism and progress“.

We the People: Populism and progess panel

We the People: Populism and progess panel

When President Donald J. Trump announced his intention to seek the Republican party nomination, under the slogan, “Make America Great Again”; many considered this to be one of the many publicity stunts, he had become famous for: The Daily News compared him to a clown, the Trentonian’s headline was: “I am rich”. On the contrary, the Boston Herald cautiously predicted that Trump’s running, would be impactful. Well, in the end, they were right. Contrary to mainstream predictions; he went on to clinch not only the Republican party nomination, but also the Presidency of the sole superpower – the United States of America. How could an individual with no political experience get himself elected using xenophobic and misogynistic tactics? My view is that we should have seen this coming. The rise of populist leaders like Donald Trump, Nigel Farage in the United Kingdom, Geert Wilders in the Netherlands, Marine Le Pen in France in the recent past is well documented. These leaders seek to discredit the establishment by labelling it “corrupt and dishonest” as compared to “regular, hard-working and honest” people. They also tend to appeal to nationalistic sentiments by attributing the challenges faced by “ordinary folks” to “immigrants from other countries” or what they consider to be unfair dealings, by other countries or institutions.

One is compelled to ask several pertinent questions? What explains this surge in populist sentiment across the West? Is this a new phenomenon or history has had precedents? Are there economic explanations for this phenomenon and if so, how should the world respond?  I do not think that there is a single explanation for this rise in “populism”. However, many researchers admit that there is a linkage between the rise of populism and economic inequality, in the west. There is no doubt that globalization, technological advancement and the rise in immigration have led to tangible benefits for humanity, as a whole. However, it appears, they have also led to the disenfranchisement of significant sections of society; who now feel, “ignored and left behind” Rising levels of national prosperity have been accompanied by a growing gap between the “haves and the have-nots”, due to unemployment, redundancy and low wages. The 2008 financial crisis, in particular, led to an explosion of anger among those who felt that the system had been “rigged” to favour Wall Street and the establishment. It is therefore not surprising that populist politicians have tended to exploit and benefit from the economic grievances of the unemployed and working class who have been hit hardest, by the forces of the “market”. Donald Trump has referred to this adverse economic situation, as the “American carnage” in which American factories were shattered, millions of American workers left jobless and “their wealth” redistributed. Anne-Marie Slaughter, the President and CEO of New America cautiously agreed with this position in today’s session, when she talked of the brokenness in America’s infrastructure, campaign financing system and policy framework that may need fixing, if the system is to work for all.

On the other hand, others have attributed this rise in populism to socio-cultural factors. According to this school of thought; the shift in the value system of western societies over the last forty years away from traditional to liberal/secular values, was bound to elicit a backlash. Older citizens in these countries look suspiciously at the left’s liberal agenda, including support for; human rights, immigration, gender equality and LGBT rights. The hosting of refugees, the openness to immigration and the granting of asylum to individuals from volatile and troubled parts of the world, elicited resentment and xenophobia, in this group. Demagogue politicians have therefore exploited these fears to capture power by democratic means; a view shared by Ernesto Zedillo, the Director of the Yale Center for the Study of Globalization. For example, Nigel Farage and the Vote Leave campaign in the UK promised to cut net migration to under 50,000 and to reinvest the £350m which they claimed the UK sends to Brussels each week, in the National Health Service (NHS). No wonder, in a 2014 press conference, Nigel expressed his discomfort at hearing only foreign languages being spoken by other passengers, on a London train journey. Unfortunately, such racist remarks simply serve to solidify his support base.

It is interesting that populism is not an entirely new phenomenon. History is full of examples of populists who have appealed to popular discontent and gotten elected: From Lajos Kossuth in Hungary, Hitler in Germany, Benito Mussolini in Italy to the more recent examples in Latin America. Perhaps, Latin America, more than any another continent, has had the largest share of populist leaders such as; Alberto Fujimori in Peru, Alvaro Correa in Ecuador, Hugo Chávez in Venezuela, Fernando Lugo in Paraguay and Morales in Bolivia. What lessons can we draw from these countries in tackling populism? I consider their context to be quite different, from the one in the West.

As I close, I wish to be optimistic; by proposing solutions:  First, it is important that there is a recognition, on both sides of this issue that certain things need to change. It is true globalization has been beneficial to humanity, as a whole. However, some sections of society, feel excluded. As such, there is need for better regulation of markets to ensure inclusion of the most vulnerable. National economic growth must translate into prosperity for everyone. Investments in social services and job creation for low skilled workers, is key. As Emma Mortensen, the co-founder of Crisis Action, mentioned in today’s session; we must create a society that works for everyone.  In my opinion, this is where social entrepreneurship can become a game changer. Second, it is important that we listen to each other. The rise of social media, has had the unintended effect of facilitating siloed debate. People choose with whom to interact, based on common interests; and tend to avoid those with whom they disagree. This deficiency can be addressed by facilitating conversations among groups that may be on opposing sides of issues. Finally, we must learn to listen to each other.  As Emily Kasriel, the Head of Editorial Partnerships and Special Projects at the BBC World Service Group advised in her closing remarks; we should look out for people with whom we do not necessarily agree, on issues and listen to them.

John is a Skoll Centre Skoll Scholar on the Oxford MBA programme, he is also the founder of Better-Livelihoods Uganda, a community-based organisation working in rural areas of Uganda to improve the livelihoods of poor and vulnerable people. 

Follow John: @JohnWalugembe

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A Work Landscape in Flux for Young People

Forging Common Ground – Series of Oxford Student Insights to the Skoll World Forum 2017 MBA candidate 2017, Ahmed Abu Bakr gives his perspective on the Skoll World Forum session ‘A Work Landscape in Flux for Young People’

We all know that the world is changing at an unprecedented rate, but I regularly feel that we forget, often far too easily, that these changes aren’t entirely new. Marina Gorbis, executive director at the Institute for the future, reminds us that the technological disruptions we are witnessing today, aren’t really as rapid as we make them out to be.

The internet, the proliferation of mobile technology and sensors, and the big data revolution are a result of over thirty years of consistent investment and prioritisation in the space of communication technologies. She refers to the outcome of these technologies as greater “digital coordination”; and through this, she provides a broader definition for technology. If the internet and big data allow for coordination, then institutions and organised systems (for business, government, and otherwise) are also technologies in their own right- technologies for the coordination and allocation of resources.

'A Work Landscape in Flux for Young People' panel.

‘A Work Landscape in Flux for Young People’ panel.

And it is important to keep in mind that organised systems that are being disrupted today- financial markets, healthcare systems, the transportation sector, etc.- were actually major innovations in their own time that disrupted the status quo back in their day.

There is no doubt that the nature of work is being radically transformed by what Marina calls “digital coordination” technologies. But is it really a source of disruption for the nature of work?

The remaining panellists attested that young people in Egypt and Africa were choosing to delve into entrepreneurship and the growing start up culture because of two primary reasons. Firstly, there is an undoubted frustration within the youth populations where they are dissatisfied with the available economic opportunities. Fhazhil Wamalwa, managing director at Disa Energy Management, recalled how he was led to believe that a good education would result in a decent job, and how his inability to get on after his master’s degrees was a painful but necessary disillusionment.

The second factor is a deliberate and concerted effort by many to promote entrepreneurship and entrepreneurial activities as a response to the failure of the existing systems. Dina El Mofty (Injaz Egypt), and Marwa Moaz (Bamyan Media) both talked about their sustained efforts within Egypt to inspire and develop an entrepreneurial mind set.

With this context, it becomes evident that the changing nature of work, the rise of gig jobs, and the proliferation of self-employment and entrepreneurship is a response to the failure of the existing econo-political system where digital technology is less of a cause and more of an enabler.

One thing remains uncontested- the old institutions have to be reformed, and in some cases completely revised. For me personally, the key question is around the evolution of these new systems. The topic of the day seems to be around growing wealth inequality. But wealth inequality is a result of inequalities in the distribution of power- social and politcal. What’s even more troubling is the feedback effect on power from the accumulation of wealth. The 21st century has seen tremendous concentration of wealth because of a tremendous concentration in power. What can we learn from history to design new social and political institutions that distribute power rather than concentrate it?

Ahmed Abu Bakr is an MBA 2016-17, Skoll Scholar at the Saïd Business School, University of Oxford, and Co-founder of Jeeon

 

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From Uganda to Oxford

John Walugembe; Skoll Scholar 2016-17, social entrepreneur, and the Founder of Better Livelihoods in Uganda. John shares his candid story of how he came to Oxford to study his MBA.

“It is very painful to remember my daughter”, Maria said. “She was only five years old”. “I had a lot of hope in her”. “I wonder, what I could have done better”. “I was certainly lucky that Dr. Matovu was willing to attend to her. It was unfortunate however that it was too late!” This story by Maria – a distressed mother of two living in the Bwaise slum of Kampala, Uganda – is not very different from those of many others in Uganda and other developing countries. According to a recent report by Water Aid, only 30% of Ugandans have access to improved sanitation. The situation is even worse in urban poor communities, especially slums, where children collect water from contaminated gutters or ground water. The result of this is that at least two one million and five hundred children die annually, from diarrheal related illnesses.  The contamination primarily results from lack of proper disposal for excreta.

How does an organisation set up to support poor communities, survive off the very people it is supposed to assist. Indeed, it was and still is a dilemma!

When I founded the Better livelihoods Uganda, four years ago, I recognised that there was a need for a fundamental shift in the way water and sanitation issues are handled. Were communities, expecting so much from their governments that they failed to do for themselves, what was in their means to do? Were some Non-Governmental Organisations fostering a syndrome of dependency and raising the expectations of communities for handouts, to the extent that they exacerbated these problems? Which market approaches could be employed to ensure that communities contributed more to addressing these sanitation challenges. From the onset, I thought it prudent to make the organisation lean and limit its dependency on external financing. As you can imagine, this was no mean goal. How does an organisation set up to support poor communities, survive off the very people it is supposed to assist. Indeed, it was and still is a dilemma! However, we resolved that unlike the traditional NGO, we would seek to play a more facilitating role among the key stakeholders in the sanitation ecosystem.

We piloted our work in the Rwenzori region in western Uganda, particularly in the Municipalities of Fort-Portal, Kawenge, Kyegegwa and Kyenjojo. Using the diamond approach (a model first piloted by Waste Advisors in the Netherlands) we have been able to accelerate access to clean water and sanitation facilitating a well-functioning system of local stakeholders that facilitate the delivery of sustainable sanitation services. The bulk of our work has involved supporting entrepreneurs and other sanitation stakeholders to build more hygienic pit-latrines. As of last year, over 1400 direct jobs have been created in the region, the amount of fecal sludge collected had increased tenfold to 4,000,000 kilograms, the costs of accessing sanitation services have reduced from $30 to $5 and over 4,000 people have directly accessed sanitation services.

I thought it prudent that I acquire the skills to build and grow an organisation with a great vision, such as ours.

It would be great if I told you that after this, everything worked just fine and we have simply encountered success, upon success. Unfortunately, as someone whose academic background was not in business management, I thought it prudent that I acquire the skills to build and grow an organisation with a great vision, such as ours. An MBA looked an attractive option. The more I thought about it, the more counterintuitive it seemed. If I desire to engineer, social change, why not pursue a qualification in development? In the end, it only seemed logical that if our approach seeks to use market based approaches to tackle the sanitation challenge, there is no better preparation than an MBA from a business school with a focus on social entrepreneurship. In the end, the Oxford MBA looked the best fit for me.

Did I look at other business schools? Certainly! So, why the Oxford MBA? Well, the Oxford MBA was unique in a number of respects: First, the Oxford MBA is a rigorous one year programme. This was particularly attractive for me, as it would ensure that I get back to Uganda, in the shortest possible time to continue with my work.  Second, the Saïd Business School through the Skoll Centre, places a lot of emphasis on social entrepreneurship. For me, this was the ultimate attraction. Additionally, the possibility of social entrepreneurs, like myself, benefitting from the generous Skoll Scholarship, set the Oxford MBA apart.

Going forward, Better Livelihoods like other nonprofit organisations must look for new models of generating revenue streams while fulfilling its expanding mission. One possible strategy could be to set-up a social purpose business as an innovation for both the financial and operational sustainability of the organisation. The mission of this social venture could be to offer clean water, sanitation, health and hygiene solutions throughout Uganda, on a commercial basis.

In conclusion, I look forward to this year and taking advantage of all the opportunities that Oxford has to offer!

John was recently featured on the BBC World Service, Business Daily Show, where he sat on a panel discussion on Africa’s Social Entrepreneurs. Listen to the iPlayer recording.