Lifetime guarantee

18 months ago I got a fancy work bag as a gift.  Within a year, the little ring holding the strap to the bag broke; a few months later the second one broke.

I finally made my way to their store in Soho in New York’s West Village to see if they’d fix or replace it.  Sure, they said.  It would take about a month to repair, and would cost me $150…to replace two little metal O-rings.

If you’re from the US you probably remember, way back when, when LL Bean was famous for taking back ANYTHING and always being willing to repair it or replace it.  This was long before the web or Facebook or social media yet, despite a lot more friction around messages spreading, that story spread – like the one about the guy who had 30-year LL Bean duck boots that finally gave out, he sent them in to LL Bean, and a brand new pair arrived, no questions asked.

This contrast got me thinking about what we see when a customer takes the time and the effort to bring back something that didn’t work or disappointed her.  Sure you could think her as a cost to be minimized.  You could make sure that the clerk she speaks to doesn’t have the authority to make a call to do something to help her, and you could definitely write a policy that’s going to minimize unwanted returns from people trying to scam you.

Or you could see her as someone who cares enough about your product to come back, someone who’s ready and willing to be wowed or disappointed right at that moment, someone who may as well be holding up a sign that says, “THIS IS YOUR BIG CHANCE: turn me into an evangelist for your extraordinary service!”

So of course you show that person the door…?

I don’t care much about the bag.  But it did get me thinking about the rare opportunities we have to really keep our promises.   It’s hard to imagine, even for folks in the nonprofit space, cases where a “lifetime moneyback guarantee” wouldn’t win you legions of loyal fans who will shout your story from the rooftops.

It’s not just the right thing to do, it also will pay off handsomely in the end.

33 voices

Moe Abdou runs a site called 33 voices and he recently posted an interview we did there.  It was a far-flung conversation and Moe does the heavy lifting of boiling that down to 10 maxims – in addition to posting the full audio of our conversation.

Actually interesting to see someone boil down a conversation to just 10 things, and makes me wonder how those 10 things might change over time, as well as depending on who you’re speaking with.

I do like the “best advice” Moe said I gave: Trust yourself and quiet the voice that’s telling you that you can’t do it.  Advice to myself as much as to anyone else.

33 voices mission is to educate, connect and inspire – lots of great content there including interviews with Babson College President Leonard Schlesinger on teaching entrepreneurship and with venture capitalist Tony Tjan on self-awareness.  Hope you find some good stuff there.

Investing in leaders and ideas

At the start of this year, I took on a new role at Acumen as our Chief Innovation Officer.

Acumen’s mission is to change the way the world tackles poverty by investing in companies, leaders and ideas.  The Chief Innovation Officer role is about scaling Acumen’s impact: building out from our core investing work to create the ecosystem of leaders the world needs to do this work; and investing in the spread of ideas by digging in to measure and understand the direct impact we are having through our investing work and sharing these learnings with the world – so we can all get smarter about what it really takes to tackle poverty at scale.

The impact piece is the most challenging and potentially the most exciting part of this work.  Challenging because deciphering and quantifying impact is the 10 zillion dollar question in any social change work.  And exciting because I firmly believe that the day we can clearly and succinctly explain and quantify impact is the day that everyone stops pretending that financial returns are the closest proxy for success for impact investors.

I dug into these issues in my recent talk at Acumen’s Investor Gathering last week.  The talk just went live on YouTube (see below or link here), so I thought I’d share it here first.

(Special thanks to Niklas Peters at Acumen who helped with the presentation and, while juggling a million other things, found the image for my favorite slide – the one from Brazil.)

Two sigmoid curves

At this year’s opening keynote at the SOCAP conference, Katherine Fulton, President of the Monitor Institute, discussed the evolution of the impact investing sector since her last SOCAP keynote in 2007.  If five years ago the sector was all promise and possibility, now Katherine worries that we may be on the verge of a significant downturn.

Katherine reminded the audience that in 2007, the year the term “impact investing” was coined, one of the main questions we were asking ourselves as impact investors was how we would balance financial returns and social impact.  In Monitor’s analysis, while there was the possibility of high financial returns and high social impact in some areas, by and large impact investing funds would have to decide whether they aimed primarily for social impact with a minimum financial hurdle or primarily for financial return with a minimum social impact hurdle.

Instead what happened over the last five years was that we mostly opted out of the heavy conceptual and analytical lifting to figure out how best to balance financial and social returns.  Instead, we spent five years pounding the table saying “WE ARE A SECTOR!! NOTICE US!!” and in order to get noticed we told ourselves and the world a story about high financial returns and few tradeoffs.

Not surprising that we got what we wanted: our sector grew, more funds started flowing in, in 2010 JP Morgan wrote a report claiming that impact investing had $1 trillion in potential, and things kept on accelerating.  In the last few years impact investing has gotten noticed not only by the major development institutions but also the biggest banks in the world and even the world’s billionaires.

Katherine’s worry, which I share, is that we could be on the verge of a downturn.  Not surprisingly, financial returns are hard to come by, the risks we need to take as investors in this space are high, and lofty expectations are crashing against the realities of what it really takes to build businesses in some of the toughest places on earth serving customers who earn just a few dollars a day.

Borrowing from the work of Charles Handy, Katherine suggested that our sector may be riding a sigmoid curve. (note: here’s a great post that explains sigmoid curves in much more detail)

We’re on the upswing now, are building momentum and things feel pretty good compared to where we started, but a downturn may be just over the horizon thanks to unrealized expectations – either lower financial returns or, more troubling, social impact not being realized as quickly or easily as the glossy headlines suggested.  Without reinvention our sector runs the risk of not living up to its promise.

The potential we have as a sector is to jumpstart a second sigmoid curve, building on what we have learned so far.  This begins with the recognition that what we set out to create in the first place was large-scale social transformation using the tools of business (which is NOT the same thing as creating an asset class).

 

Drawing this new curve means more, not less, transparency – acknowledging that this is hard and messy work, that we don’t have all the answers, that we are still figuring out how and where financial and social returns are complementary and where there are real tradeoffs.  That’s why the new (dashed) curve slopes downward at first – because the new path is beset with uncertainty and the path we’re on feels safe and familiar.  It’s hard while the music is still playing to ask tough questions, to demand to look at the data early, to ask, when most new funds have been investing for two or three years, why opportunities are hard to come by and ask if investors are willing to take on enough risk to achieve real social impact.

I agree with Katherine that we have the chance to draw a new curve if we’re willing to look hard at the data.  The Blueprint to Scale report co-authored by Monitor Inclusive Markets and Acumen starts to do this by analyzing what it takes to build large-scale businesses that serve the poor – concluding that most impact investors are unwilling to take early bets on risky new ventures and arguing that we need much more philanthropy if we are going to build out the supply chains and supporting infrastructure these ventures need to succeed.

What struck me at SOCAP is that our sector is actually willing to have this conversation, but these conversations are nascent.  I’m finding more and more people saying out loud that impact-first funding is incredibly hard to come by, more and more people asking if we need to do much more than tweak around the edges, more and more people saying that if we want radically new solutions then we can’t keep pretending that we are private equity investors with the same old, broken fund structures and the wrong metrics for success.

The difficult bit is that this conversation is just starting to unfold just at the moment when real money (big banks and pension funds) are knocking on our doors, asking if they can make asset allocations to impact investing at exactly the moment when we’re starting to realize that, by and large, this is not an asset allocation, this is a social change movement.  Or, to put a finer point on things, that there may be sub-sectors where the economics really work and the social impact is significant, but “impact investing” writ large is a very broad space where the risks are high and the timelines are long – and why would we expect otherwise if we’re in this business of helping tackle some of the world’s toughest problems?

In many ways these potential investors are starting to walk the first sigmoid curve just when we’re trying to draw the second one.  They want to hear about unbridled enthusiasm and no tradeoffs just at the moment when we are collectively realizing that free lunches are hard to come by.  Yes, there may well be some big problems that you can solve while also getting big financial returns, but those aren’t most of the opportunities our sector has found.  If anything we’ve discovered that this is nuanced work, that the companies we are funding are first movers operating in environments where almost no supporting infrastructure exists, and that to get this right we are going to have to roll up our sleeves and get our hands really dirty.  There may be some big financial wins on some distant horizon, but that’s not what we should expect in the next five or ten years.

And why should it be surprising that solving problems of poverty, of lack of access to energy or water or sanitation, of providing healthcare and safe clean and affordable places to live is never going to be quick or easy or – gasp – particularly lucrative?

 

What it feels like

Think about that moment when your Board members (hopefully) introduce you and your nonprofit to new potential donors.  What’s your caricature of that conversation between your Board member and your next big donor?

My vote: “(whisper) Pssst.  C’mere.  There’s something I want to tell you.  I want to let you in on a secret.”

A secret.  Not an obligation or an “I’m sorry I’m going to ask you to take a meeting.”  It should feel like sharing a stock tip, the fast track on a deal, something special that this person is lucky to learn about.

Now wind the tape back, back to way before that conversation, before you asked your Board member to make some new introductions.  What kind of relationship do your Board members need to have with your organization, with its mission, with its work on the front lines?  How deep must that connection go?  How strong must their conviction be?

When Board members don’t feel comfortable reaching out, what we must ask is not “why aren’t they doing more?” but rather “why aren’t our Board members more connected to our work?  Why don’t they feel like it’s so special that they know something that other people don’t?”

What can we do to address that?

Our goal, a few months down the road, is to see new green shoots sprouting in the field.   We can jump up and down about buying and planting more seed, but the real work is tilling and preparing the soil.

Barbara Grant – Management Practices for the Social Sector

I admit it, going into an all-day training called “Management Practices for the Social Sector” I was feeling, uh, skeptical.  I’d heard great things from colleagues who’d done the training, but I was suspicious.

Man was I wrong.

Barbara Grant has been running her own training and consulting practice since the early 90s.  Before that she had roles of increasing seniority at Microsoft including her last job running all of training and development for Microsoft’s most senior executives.  And before that she worked in the prison system.  She’s been there and done that.

Barbara was tough, funny, and insightful.  She was practical and dynamic in going where the group needed to go yet also keeping us to our agenda.  She presented a number of frameworks that we could and will actually grab on to and use, and gave us a shared vocabulary that will allow us to have different conversations internally.

In short, if you work in nonprofits and are looking for a great trainer, I’d recommend looking Barbara up (and no, she doesn’t even know I’m writing this post).

We covered a lot in just one day – a coaching formula Barbara calls, simply, “heart, tree, star;” a situational leadership framework; a model for task and work prioritization; a facilitated conversation around decision-making styles, all of which I found impactful.  But probably the thing that hit me hardest over the head was her presentation of Argyris’s Ladder of inference:

 

The basic notion is that, as human beings we have a natural adaptive mechanism to filter out information based upon past experiences, and in so doing we create a self-reinforcing worldview – about people or about situations – that limits our ability to really see  what is happening and draw new inferences or conclusions.

So, for example, I clearly have a ladder of inference about group training sessions: based on experiences in the past in which I didn’t find management training valuable, at the start of the session with Barbara, rather than just taking in the observable data I’m sure I selected data that affirmed my worldview, added meaning and then made assumptions based on that worldview…and on and on up the ladder.   And of course every time you get up the ladder you use that information to reinforce the ladder, further narrowing the data you choose to see and the stories you choose to tell yourself around those data.

So it could be stories around how so-and-so doesn’t prioritize the work we’re doing together; so when she’s late for a meeting I retell that story to myself rather than consider that her flight might have been delayed.  Or how another person is always getting the plum assignments; so when she goes on a work-related trip to Paris it must be because she’s a favorite and not because in her prior job she worked in Paris and has a lot of business contacts there.  And on and on we go up our ladders.

It’s such a simple framework, yet just being talked through it by Barbara I quickly saw it everywhere, and I realized how my ladders could be short-circuiting my ability to really listen, to process new information, to be adaptive in my worldview.

The bit that really hit me in the gut is that I know that I’m generally quick at processing information.  And then I got to wondering: could it be that I do this not only because I objectively process things quickly but also because I’m really quick to build ladders or use existing ladders? A sobering thought, but also freeing when you have a new framework to carry around, one that gives you the freedom to check your ladders at the door.

Just a glimpse of a great day in which Barbara gave us real gifts, ones that I know I’ll carry around and use for a long time.  Maybe she can help you too.

 

Bob Dorf – Two customers

Recently I, together with Acumen’s Global Fellows, had the chance to spend the day in a training session with Bob Dorf. Bob, together with Steve Blank (who writes a must-read blog), is the author of The Startup Owner’s Manual: a step-by-step guide to Building a Great Company.   Steve, in turn, was an investor in Eric Reiss’ (author of Lean Startup) startup IMVU which I blogged about here.

Bob, Steve and Eric have done incredible work in demystifying and breaking down what it really takes to create a startup – yes drive, vision, tireless devotion, but most importantly it’s about finding customers, talking to those customers, figuring out what they really want and how they’ll really behave with your product.  It’s the opposite of sitting in a garage, having a eureka moment, investing time and energy and way too much money in that idea and then figuring out if people want the thing that you’ve built.

I learned a ton from Bob, and am still processing most of it, but there was one piece that really jumped out at me as being hugely important in the nonprofit space, in particular to fundraisers.

One of the stories we tell ourselves is that our work is different and hard(er) because the beneficiary of our work and the customer from whom we are fundraising are rarely one and the same person.  It’s this disconnect that can make everything so tricky, because just because you deliver transformative impact for your beneficiary doesn’t mean your fundraising goes through the roof.

Bob made the simple point that there’s nothing particularly new about this.  Google, for example, is free to you and me and anyone as customers.  We get the best search in the world served up instantly with an ever-improving suite of accompanying products.  The service that pays for it all is Google AdWords which has a completely different customer set.  In Bob’s language, Google needs two separate business model canvases, one for me (user of Google Search) and one for whoever buys Google AdWords.

“But wait!” you protest.  “That’s different!  Google AdWords only works because Google Search works.  Their growth goes hand-in-hand.  Not so in the nonprofit world where I can deliver a world-class product/service and it has no connection to whether or not I can raise another dollar from a funder!”

Perhaps.

But also perhaps not.  True, funding decisions are not typically made as objectively or in a data-driven way, whereas Google Adwords purchases surely are.

Then again, when was the last time we really rolled up our sleeves and found a way to monitor how good our nonprofit service delivery really is, how satisfied customers really are.  When was the last time we presented clear compelling metrics from the front lines – metrics that proved out hypotheses, metrics that drove to real insights?  And when was the last time we took those metrics and showed them to our funders and said, “THIS is what we’re doing!”

Sure, it’s not exactly the same, but it’s also not so different.  And it’s nice to know that we’re not so special, that having two (or many) customer sets isn’t novel.  And it’s a helpful reminder that building a value proposition and finding customers (aka “funders”) is just as core to everything we do as whatever service delivery work we do.