Unfortunately, most NPO's have neither the time nor the staff to answer them, or even think about them. My experience with NPOs (since 1972) has been that scaling is done opporuntistically, haphzardly, and fitfully depending on the whim of donors and various opportunities that arise. VEry few NPOs actually have an executable plan for scaling up, and if they do, unless donors are on board for the long haul - rare - it goes nowhere.

Not all NPOs are this way. The national non profit channel, LinkTV, started with nothing in 1999 and by 2007 was running on a $6 million budget and seen in 29 million homes. Part of its success comes from shifting some of their revenue sources away from donors to their viewers, who they convert to donors.

Social entrepreneurs are a diferent breed. They think in these terms and plan for growth, often hooking revenue streams (as opposed to grants) to grwoth, something Link TV is doing. The more people watch, they more people donate, the more money is avaialbel for programming, the better the programming gets, the more people watch, etc. That is the key.

I agree with Patrick's comments. Prioritizing scale is a defining feature of a social enterprise versus a traditional non-profit organization (NPO). Social ventures also emphasize earned income strategies (if NPOs) or profit generation (if it is a for-profit organization [FPOs] from their inception. In either scenario, this is an essential element of their organizational design and value proposition.

I am highlighting these differences not to diminish from NPOs and their good works. Rather, I simply want to distinguish between organizations that grow by accident rather than by design and those that stumble into funds versus those that pursue sound business models from the start. The former can create meaningful social change, but they are not examples of social enterprise.

I would like to pique readers to dive into the issue of tradeoffs. How does a social venture, particularly an FPO, manage this issue when scaling up its activities? Does anyone have specific ideas about how a business should evaluate its total impact when its footprint might expand as a result of joining up with a larger organization? Any examples that people want to highlight?

That's where P-CED came in, advocating the creation of business for social purpose from inception:

http://www.p-ced.com/History/tabid/57/Default.aspx

The strategy to-date, has been to engage others, for example leveraging funds to deploy the Tomsk initiatiave, a full cost recovery pilot over 5 years in Russia starting with $6m aid:

http://www.p-ced.com/Projects/Russia/TomskInitiative/tabid/61/Default.aspx

Until 2006, this was driven entirely by private funds. Whereupon the opportunity arose to convert a for profit software business to become the revenue generator for continued activity.

These have been the times that tried our souls, as the pundits continue to insist that we don't exist:

http://society.guardian.co.uk/futureforpublicservices/comment/0,,2049170,00.html http://business.guardian.co.uk/story/0,,2044984,00.html

I write my response, they won't publish.

I describe how a self-sustaining IT services social enterprise can remain completely off-radar. Thet they themselves are one of our customers, how we've been removed as a supplier from both a goverment department and a leading business school. I point out that we supply several hospitals yet cannot break into the procurement mechanism. That we are paralysed by late paying major organisations in both public and private sectors. They don't want to hear my news. it would seem.

I would tell them that in spite of all this we've managed to complete a five year project with a propoposal for national scale deployment, in spite of all this. I'd tell them, but I'd most certainly be wasting my breath.

SKS Microfinance in India is a good experiment in one approach to Social Ventures trying to attain scale. With its roots as an NGO and now converting to a for-profit model, it has recently broken new ground by taking on $11m venture capital from Sequoia. It will be interesting to see how this VC, which typically demands high ROI, will push SKS to improve profitability without compromising its social purpose.

I work in India and facilitate scaling up with health NGOs. Unlike in traditional businesses, where bottom-line is revenue gerenration, wealth/ profit maximization, social initiatives, especially in health are driven more by non-financial motives, which are very difficult to track and record on a frequent basis (one can enlist how much sales of a product happened on any single day, but it is difficult to determine how many cases of malaria were treated on a particular day). In public health sector, our experience shows that business strategies such as joint ventures, technology transfer, etc. do not happen as easily as in business sector.

Developing an innovation/ model requires capacities different from taking the model to scale, which again are different from operating at scale. Usually, innovation requires strong research and technical capacities, going-to-scale requires capacities to strategise, document, advocate and mobilise resources, and operations at scale capacities are like that of any large business enterprise.

When a model prepares to go-to-scale, the first step usually includes drawing a scaling up plan, where one need to critically analyse the original design and simplify it. Often models do not go to scale in their original form. Its important to get the basic version and cut out the value-additions. Some key steps for scaling-up will include assessing interest groups, support and opposition to the initiatives, legitimization and constituency building. Our experience shows that many-a-times, innovators or the intermediary agency ignore the opposition, and thus fail in scaling up. Unlke small-scale intervention, scaling-up is a political process and there are winners and losers. Like, when we tried to scale up a model where semiliterate women were trained to provide newborn care in community (and thus reduce neonatal mortality by 70% in five years), the opposition came from professional bodies of pediatricians and nurses. They were losing business/ clientele, and waning of the power the knowledge of medicine brought to them over less literate population.

Finally, Jonathan, when an innovation is taken to scale, its effect is often diminished as compared to the original. It happens because (a) the simplified design at scale as compared to the model, (b) model operated in controlled environments and (c) it is difficult to replicate the value systems that the originating organization/ originators had, and thus the motivation is reduced.

I'm blogging some thoughts from the closed forum - Jerr Boeschee's http://socialedge.org/discussions/business-building/migrating-from-innovation-to-entrepreneurship-january-2005

Gr8 article! and very relevant for this discussion.

1) Is M&A for npos? YES! For the sake of achieving programmatic scale & operating efficiency & fiscal strength, I'd like to see "successful" npo's actively seek out mergers and acquisitions of smaller npo's. Conversely, I'd like to see at least 20% of current npo's actively self-cannibalize and shut down their operation for the greater good. WHAT??? Yes, Shut it down. I agree with Drucker - if you're not #1 or #2 in delivering that service to your market - shut it down. A sign of a great entrepreneur is knowing when to fold. Not to worry - if you're smart and loving enough to fold - you will find another greater opportunity to serve. 2) I'd like to broaden the definition of markets. When npo's start, often they look very locally at whether their idea for the service exists. So, is there an org in Seattle that does X,Y,Z in this unique manner? If the answer is no, then they go ahead and create a new program/service. I'd like to see that question be broadened - to is there an org in the NORTHWEST (or equivalent regional area) that provides the equivalent service? Or even nationally? If the answer is yes, then rather than starting a new npo and investing in the overhead of setting up a 501(c)3, board, etc. I'd rather have that social entrepreneur approach the regional or national or even global equivalent npo - and say, hey, I'd like to start a franchise of your npo in my area. What can I do to convince you? A good friend did it for City Year and brought it to Seattle rather than "start" a new one... Very smart. I'd like to see more npo's do the same. The primary incentive? Easier time to fund a new org - if it's a franchise of a larger one that already has brand recognition and a proven track record. and I ask larger npo's to take on the risk of adopting smaller EDs for building a national franchise. and I want to ask a very TOUGH question to the budding social entrepreneur.. are you starting your own org because it truly is innovative and exists no where else... or are you choosing the method of starting a new org because you want the flexibility and the choices that come with running your own org? Have you looked into joining a larger npo and being a change agent or intrapreneur within it? There are just TOOO many npo's today - the number needs to shrink by at least 20%! 3) Jerr - I'd like to see your research on proving that decreasing tax incentives decreases charitable giving. There's a giant in philanthropic direction who believes otherwise. ie that eliminating estate taxes will do more good for the npo sector. I disagree with him to the core - but have no data to rebut him. 4) As for the philosophy of "voluntary poverty" that both non-profit and earned income sustainable npos encounter as resistance both internally and externally ... I wrote a paper on that in theoloogy school in 2000. I got a "B" on it.. I don't get B's! :| But the paper was a little too countercultural to theological assumptions about charity. I'm listening to Mr. Teresa right now on my iphone - so I believe I have her blessing in re-educating the public.

If I were her, which I am NOT! While Mr. Teresa advocated doing small things with great love, and STOOD for doing things small in a radical poverty like manner, she ABSOLUTELY blessed and wanted scale. Of course she did. Her order grew globally like weeds! And she funded that scale. In fact, she funded the scale at the risk of her own local order! What she wanted however was that the PATH to growing scale was to stay SMALL. Huh? Paradox. What she was saying was that "staying small and being true to radical poverty" was the most efficient way of growing big and fulfilling God's mission. Now, she doesn't want growing big to be the end goal. Because if it does, we all stray from our mission - which is to SERVE.

Bottom line: (In Mr. Teresa's context.. her call...) Staying SIMPLE and staying SMALL and living a radical call to POVERTY was the best way to grow BIG!

Whether you agree with her philosophy - you can't argue that she made an impact in this world!

So this is "Clara's" call in "my time" in 2007 as a young Clara who has been given different gifts and a slightly different call... which is to re-contextualize the ideals of voluntary poverty for TODAY's time.

Some excerpts from my paper.. which may be helpful to npo's as they try to convince boardmembers and funders to fund "sustainable" earned income...

Voluntary poverty has its roots in the Gospel and was practiced and idealized throughout the times of St. Thomas Aquinas and Luther. In the Middle Ages, mendicant orders followed the footsteps of their founders St. Francis and St. Dominic in living as paupers among the poor and hoping to see the destitute as sacred images of Christ.(10) Later during Reformation, Luther's "Sermon on Good Works" taught that Christians were to serve their neighbors even to the point of self-sacrificial forbearance. (11) In his 1524 "Trade and Usury" Luther recommended that "Christians handle property by letting themselves be robbed, giving to the needy, and lending without expecting return. (12) Recommending voluntary poverty as a foundation for religious life, Thomas Aquinas also stated that "the perfection of Christian life does not essentially consist in voluntary poverty, but voluntary poverty conduces instrumentally to the perfection of life." (13)

What non-profits often forget is that poverty as an ideal can be abused. During the Reformation, Luther pounced on the excess of voluntary poverty of the clergy and attacked with his wit, "Whoever heard tell of a poverty which possessed nothing of its own but everything of everyone else?" (14) As for the poor, they were used to service the salvation of the wealthy by turning poverty into a theological construct that made charity a condition for salvation. (15) However, "it does not follow that where there is greater poverty there is greater perfection," (16) according to Aquinas. "If done in an undue manner, ie. out of unlawful superstition, or again for vainglory, [poverty] will be in excess." (17)... In discerning the role of poverty in charity, mendicant academics such as Thomas Aquinas contradicted clerics who preached absolute destitution and believed that the complete absence of material resources was in fact an impediment to charitable endeavor. (18) Although repudiating superfluous income , Aquinas stated that "impoverishing oneself and one's family to aid the poor, far from being a moral duty, is morally wrong." (19) He quoted, "The Apostle says (1 Tim 5:8): 'If any man have not care of his own, and especially of those of his house, he hath denied the faith and is worse than an infidel." (20) When non-profits practice excessive or inappropriate voluntary poverty, time and resources that could be spent on more effective strategies and long-term programs for the poor are wasted on short-term organizational survival tactics.

Both Luther and Aquinas discerned that the problem is not money or profits but its usage. Luther believed that money or property is a gift of God to be used for the neighbor. (too long a quote to list here) Aquinas categorized the use of profit into two areas: to exchange commodities in order to maintain life and to seek money in exchange for money for the sake of profit. "The second can be justly criticized for feeding the acquisitive urge, which knows no defined bounds and grows without end... The first is praiseworthy because it supplies natural needs." (29) So long as profits are directed to some necessary or virtuous end, business can be justified. "A man [I would say man or woman :)] may intend the moderate gain which he [or she] seeks to acquire by trading for the upkeep of his household, or for the assistance of the needy... or for some public advantage, lest his country lack the necessaries of life...Gain itself may be lawfully intended, not as a last end, but for the sake of some other end which is necessary or virtuous." (30) "Man [or woman} is wealth's goal rather than wealth man's." (31) We can therefore conclude that neither voluntary poverty nor profits by their nature are good, but rather it is their appropriate usage that makes it so.

The paper continues.. if you're interested, email me clara.jong@gmail.com. It's outdated.. but may be helpful for all those who fight "church" values of poverty and charity.

The simplest thought-provoking question I would ask to boardmembers/funders who are upholding the ideals of "charity" is this...

Have you ever been inside or behind the gates of a monastery? On the surface, they (we) stand for charity and poverty. God asks us to. But go inside.. make no mistake... religious orders and even the Vatican.. any "successful" religious institution... they (we) are making earned income!

I'd ask another question... but maybe not for now.

Clara

4)

(10) Michel Mollat, Poor in the Middle Ages (New Haven: Yale University Press 1978), p. 119-121. (11) Martin Luther, Luther's Works, LW 45:94-104; 21:105-18. (12) Stewart W. Herman, "Luther, Law, and Social Covenants," Journal of Religious Ethics 25 (Fall 1997): 264. (13) Thomas Aquinas, Summa Theologica, ST II-II, 186,6. (14) Martin Luther, Luther's Works, LW 44:358 (15) Carter Lindberg, Beyond Charity, (Minneapolis, Fortress Press, 1993), 26-27. (16) Thomas Aquinas, Summa Theologica, ST II-II, 186,6 (17) Ibid, ST I-II, 1. (18) Mollat, 131. (19) Stephen J. Pope, "Aquinas on Almsgiving, Justice and Charity," The Heythrop Journal 32, (1991): 175. (20) Thomas Aquinas, Summa Theologica, ST II-II, 32,9 (29) Timothy McDermott, Summa Theologiae, (Texas: Christian Classics 1989), 396. (30) Thomas Aquinas, Summa Theologica, ST II-II 77,4. (31) Timothy McDermott, Summa Theologiae, (Texas: Christian Classics 1989), 174.

I dedicate the above to Prof. Anderson and Prof. Raschko who pushed my thinking. I also thank the School of Theology and Ministry at Seattle University for having the vision and foresight to build an ecumenical school of theology and create a course that unites both "Luther and Aquinas."