Impact measurement over the next decade

I had the chance to participate on a panel at SOCAP about the future of impact measurement, and was surprised how challenging I found Karim Harji’s framing question:

Where is impact measurement headed over the next decade? What is it going to take to get there? 

After pondering on this question for a while, I ended up at the conclusion that the future is very bright at the level of company-customer interaction.

I say this because in the coming decade, social enterprises, like all companies, will necessarily begin accessing and managing much more customer data gathered remotely through devices. It’s a bit easier to see this future when one is in San Francisco staying at an Air BnB and taking Lyfts everywhere: as mobile phones become both the communications and transaction platforms for nearly everything in everyone’s lives, companies, no matter what their specific business or the customers they serve, will have more data about us. While it’s true that poorer, more remote customers will lag millennials in San Francisco in terms of how soon they get on this conveyor belt, the direction this is heading, for everyone, is clear.

With that in mind, the only question at the company-customer intersection is whether and to what extent companies will incorporate data about social impact into their growing data flow. My thesis is that doing so will be a competitive advantage, allowing companies that move first to better understand how well their products and services are improving their customer’s lives, thereby driving greater loyalty, share of wallet, and share of mind and voice.

I believe this because, as our Acumen impact team has worked with companies on Lean Data projects, it’s become increasingly clear that value creation is impact when you’re dealing with critical goods and services like electricity or education or healthcare: if the customer who buys her first solar lamp stops using kerosene, uses the lamp to keep her business open later at night, and also uses a second lamp for her kids to study at night, then that lamp is creating deep and meaningful value (impact) for her. And all our data show that this same customer is nearly always a net promoter of the company, a source of positive word of mouth, and a high-value and loyal customer.

If this thesis plays out over time, then we’re about to be riding a huge, powerful wave that we’ll simply have to redirect slightly to incorporate thoughtful impact data capture and to drive towards impact management. Soon, even resource-strapped, impact-focused companies in the developing world will have no choice but to gather and utilize more data (including impact data) from end customers if they want to serve these customers effectively.

The question I find harder to answer, interestingly, is: What is going to happen to the capital market for impact? Here, things seem a bit muddier.

In order for capital to increasingly flow towards high-impact opportunities, there has to be some standardization in terms of how impact is measured and communicated, so that an investor looking to compare impact performance can compare opportunity A and B in the same way she compares financial performance for these same two opportunities.

I believe this evolution is a very important one, indeed it might be the most important development that needs to happen if the impact investing marketplace is to realize its full potential. However, unlike the evolution at the company-customer level, it’s less clear to me that there’s forward momentum pushing us in the right direction. It seems possible that we are due for a step-change in terms of how investors deploy capital for impact, and it seems just as possible that five or ten years from now things will be as bespoke and hard to decipher as they are today.

My best guess is that what’s needed to make a shift here is that a handful of highly influential and interconnected players – those holding large amounts of capital that they distribute through a large ecosystem of connected funders – need to establish their own higher, clearer impact measurement standards that they will use to deploy capital, such that their new standards flow all the way down the chain and slowly shift expectations for, and raise the bar for, everyone in the space. This was the role that the U.S. Government played with LEED certification through the GSA, which owns 9,600 buildings in 2,200 communities across the U.S., and I suspect it’s the pattern that needs to play out in impact investing too.

For more on this topic, here’s the link to the SOCAP16 plenary I got to do with Karim Harji, Jim Fruchterman, Kelly McCarthy, and Paul DiLeo.

socap16-impact-measurement

A confluence of impact and scale

I spent last week at the annual meeting of the Global Impact Investing Network (GIIN), and I was struck by three trends that could take our sector to the next level.

The first is around taking impact seriously. The second is how different the impact measurement challenge looks depending on where you sit. The third is the acceleration of the rate at which mainstream financial capital is entering our space.

Throughout the GIIN conference, impact — the role it plays in defining our work and how to improve the quality of our impact data — was front and center in a way that I’ve not felt before. For example, one of the first panels kicking off this year’s event was on market segmentation. While segmentation is not a new topic in impact investing, the panel was titled “Market Segmentation through an Impact Lens.” The panelists — from Skopos Impact Fund, Tideline, Athena Capital Management and Omidyar — discussed their research and client-facing efforts to make sense of impact investing from the perspective of impact objectives.

This shouldn’t be brand new, but it is. An orientation to start segmentation with an impact lens runs against the natural tendency to segment investors by asset class or sector strategy, and it’s certainly a far cry from accepting that “intentionality” (as in: my intention is to make such-and-such happen with limited accountability on the data to figure out whether or not real change is happening) is a high-enough bar to set for the sector in terms of impact.

If we could pull off organizing ourselves, as impact investors, by the change we’re trying to make in the world rather than by the investing strategies we’re using to make that happen, that would be a big step forward.

Second, we need much better impact data AND we need to help people who are drowning in too much indecipherable, low-quality data.

I had the chance to participate in two panels focused squarely on advances in impact measurement. What I learned from these panels is that better impact data isn’t enough — there’s a huge desire for simplification too.

At Acumen, our Lean Data work has focused relentlessly on going directly to the low-income customers we aim to serve so we can understand what they have to say. Our objective is to improve the quality of impact data we have by scaling up our capacity to listen to the voices these customers, so we and our investees can better serve them.

While I’m convinced that this kind of listening must to be the foundation of everything we do as a sector, it’s not enough. Listening to my fellow panelists — from Goldman Sachs, Zurich Re, Abraaj Capital and Leapfrog — I heard that big institutions with large, diverse portfolios of impact investments not only desire better impact data but they also need help simplifying and clarifying the reams of impact data they already feel they receive.

Ironically, these large institutions have too much data coming in and most of it’s not very good. Our job is both to improve the strength of the signal and also lessen the noise.

Lastly, it was impossible not to notice that more and more big-name financial players are coming to the table.

The simple fact of having an impact measurement conversation between Acumen and Leapfrog on the one hand (two organizations that are essentially growing startups, with between $100M and $1B in capital under management), and Goldman Sachs, Zurich Re and Abraaj Capital on the other means that there are innovations in impact management happening across the spectrum of impact capital. That’s hugely positive.

Then, at the end of the day, we got to hear Former Governor Deval Patrick and Deborah Winshel discuss the impact investing strategies they began implementing in the last year at Bain Capital and Blackrock. Both articulated their goals to fully integrate impact into the global practices of these uber-blue chip firms, firms that collectively represent more than $4.5 trillion in assets. While it’s early in the journey for both Bain and Blackrock, it’s clear that their actions could have a huge influence with other mainstream financial players and beyond.

As I left the conference and made my way back to New York, I was struck with the feeling that we are entering a new phase in our sector. Having passed through the teething pains of our early days and our loud, sometimes impulsive childhood, we’re ready to start growing up a bit. This means harnessing — rather than just shouting about — the increased momentum building in our space, thanks to the entrance of major new players, while also taking a much more sober and serious look at the ultimate goal of this work, which is to make a real, large-scale and lasting difference in the well-being of people and the planet.

If, in this next chapter, we can find a way to have impact investing go deeper on impact and bigger in terms of scale and reach, we will truly be in a position to take this work to the next level.

[Note: you can also follow the conversation about this post on Medium]

#ImpactMatters Twitter Chat

Tomorrow, Wednesday, February 17th at 12 noon Eastern, I’m helping run a Twitter chat that Acumen is hosting to talk about Lean Data and measuring social performance. It’s all about the finding the next frontier in impact measurement, in a discussion with Acumen, Omidyar, Stanford Social Innovation Review, the Aspen Network for Development Entrepreneurs and Root Capital.

Here’s how it works: (aside: Twitter chat 101)

  1. You can follow the chat with the hashtag #ImpactMatters.
  2. Please submit your questions before the chat so we have good stuff to talk about.
  3. You’ll also want to follow @Acumen on Twitter and join the chat on Wednesday at noon Eastern.

I’ll be joined by a great group that of partners who have helped us develop and spread Lean Data, including:

Hope to see you there!

The Power of Lean Data

In the last few months, I’ve been writing more about the evolution in how we’re thinking about impact measurement at Acumen. We call in Lean Data.

Until now, there’s really not been a good way for social enterprises to measure their impact in a way that makes sense for them and adds values for their companies and for their customers.

I think we can change that.

For the full soup-to-nuts story of Lean Data, check out the article that we published yesterday in Stanford Social Innovation Review: The Power of Lean Data. I had the great pleasure of writing this piece with Tom Adams of Acumen and Alnoor Ebrahim of Harvard Business School.

SSIR_Lean Data

If you want to go out and use Lean Data, you still have time to sign up for our +Acumen Lean Data course, which starts on Monday. And don’t forget to print out and laminate your own version of our handy-dandy Lean Data Field Guide.

Geeking out Next Thursday

I’m looking forward to speaking at the Catalyst for Social Change event this coming Thursday, November 12. I’ll be speaking together with Jake Porway, the founder of DataKind and Samuel Sia, one of MIT’s Innovators under 35.

The event is at Fordham Law School at 7pm, and there are still a few seats left – you can get tickets here.

We’ll be talking about innovative approaches to data and measurement, and using them to make the world a better place. It should be a lot of fun.

While I don’t know exactly where the conversation will go, I suspect that if you’re the kind of person who finds this image funny then you’ll have a blast. Hope to see you there.

Numerator_denominator

Here’s what you’ve been able to do

The Citibike app has a nice new feature, a pull-down menu that shows information on your latest ride and on your cumulative rides.*

It’s pretty cool to see that I’ve done 613 rides for 113 hours, covering nearly 700 miles. I never would have known that, and this helps me see the impact of Citibike on my life and my health in a new way.Citibike_IMG_4550So often when we engage with donors it’s about the next thing they could do if they give again. Most organizations miss opportunities to thank and honor people, and more still forget to make it easy for people to see the cumulative effect of their giving – what it all adds up to.

“Here is how much you have given, and here is what has been possible because of that.”

When we share that cumulative effect with others, we empower them to see how important they have been. And they’ll be much less willing to let go of that feeling, of their connection to your organization, once they understand what it all adds up to.

 

*P.S. Dear Citibike, the distances calculated seem about 30% less than the figures from Google maps.  That 1.7 mile ride (above) is apparently 2.4 miles long.  Just goes to show, once you start sharing this kind of data, people care about it a lot.

CEO of me

Each person we meet in a professional setting sees two things: the person we are and the role we play. Often, that role casts a long shadow, as people are quick to look for shortcuts in figuring out who they’re talking to and what that person brings to the table.

When my business card said, for five years, that I was head of fundraising at Acumen, I felt like my first job in every meeting was to convey to someone that I wasn’t “just the” fundraiser (indeed every great fundraiser I know says that they “aren’t a traditional fundraiser.”) There was and is a lot of baggage associated with being a fundraiser – many philanthropists would tell me that they experienced many fundraisers as seeing them as nothing more than big wallets waiting to be cracked, which itself tells you something about how we all tend to caricature people. Indeed it was always a sign that things were going well when someone would say to me, often with a hint of hesitation, “Uh, so, how did you get into fundraising anyway?”

The pernicious, less obvious constraints are those we place on ourselves. We let a narrow definition of a role or a title create boundaries around the way we see ourselves, how we walk in the world, and impact we dare to have.

To be clear, in any organization our first job is to do the job that our organization hired us to do – indeed, if we don’t do that with excellence, professionalism and precision then we haven’t paid the table stakes for a broader conversation.

At the same time, we are often the ones who box ourselves in, waiting for someone’s OK to even begin to think bigger in anything but the most private ways.

What would happen if you sent yourself an email signed:

Sincerely,

Your name

CEO of me

The best part is when, somewhere down the line, the bigger, more audacious, more impactful version of how you play the role helps you, and others, reconsider how they mistakenly categorized the role in the first place.