The Customer is King

In Profiles & Interviews by Steve Wright10 Comments

Grameen-Foundation-logoSteve Wright, Vice President, Poverty Tools and Insights at Grameen Foundation joins the discussion we raised yesterday on beneficiary insight. There, we addressed an article published in Alliance Magazine by David Bonbright, expressing the concern that Markets For Good may go wrong, arguing that “beneficiaries are not part of the enterprise in a direct or meaningful sense.” See the links above to learn how we have considered this critical topic from the outset. Below, Steve joins in… and joins the themes: beneficiary insight and our current theme, evaluation. He addresses a few difficult questions (and leaves us with more) regarding data-collection methodologies and what they should mean for beneficiaries.

There is a very tired and self-congratulatory axiom from the for-profit community that declares “nonprofits should act more like businesses.” Now that business-like includes illustrative examples of LIBOR rigging, mortgage securities collusion and too-big-to-fail we have the opportunity to throw out the social vs. private distinction and focus on value creation. This is the foundation of Markets for Good as I understand it. How can we best provide value to customers? The difficulty here is that value is subjective and the goal is to provide value as realized by the customer. Fortunately, over the last few years we have seen two specific powerful innovations that provide a methodology for any business to be more focused on the value that is realized by their customers – Human Centered Design and the Lean Startup Methodology. Both of these have been practiced to great effect by every stripe of organization. I bring this up to make the very specific and simple point that these are the methodologies that are essential to ensuring not just the inclusion but the increased agency of the beneficiaries of Markets for Good.

Let’s take the very specific example of poverty, the poor and organizations that intend to alleviate poverty. Whether it’s fair trade, social enterprise, microfinance, a health clinic, or an agricultural co-op, any business that intends to help the poor must be able to measure poverty. Without knowing if your customers are objectively poor you cannot know if you have effectively designed your products and services, or optimized your business processes, to provide the greatest possible value to your customers. The Progress out of Poverty Index® (PPI®) – managed by the Grameen Foundation – is a survey and scoring system that uses specific financial expenditures as indicators to accurately estimate a household’s level of poverty as compared to an internationally recognized poverty line. By using the PPI an organization can answer question like:

What percentage of my customers are below the National Poverty Line?

Are my customers moving relative to poverty over time?

Exactly how are my poorest customers interacting with my business?

With the PPI any business or organization that works with the poor can easily embed poverty measurement into its operations. Measuring poverty can provide any organization that intends to alleviate poverty the data they need to manage their business. CARD Bank in the Philippines implemented the PPI and were able create a dramatic change in the adoption of voluntary savings accounts by their poorest customers.

“We are excited about the additional information the PPI gives us on our customers. Because of the richer analysis we are now able to do, we can be confident that we are designing savings products that suit the needs of the poor and reaching our overall poverty targets.” said Dolores M. Torres, president and CEO of CARD Bank.


Data Should Fall Out of your Social Business
If your business focuses on providing value to be realized by your customer then the data that falls out of the act of managing your business becomes a reasonable proxy for the data you need to assess the performance of your business. This is the principle of manage what matters.It is critical to intentionally manage your business in a way that the activities you engage in are explicitly designed to provide the value that is realized by your customers. Then, as you work with your customers to understand how well they are served by your business, any change you make to your products, services or processes are also changes made to more effectively advance your mission. Measurement and management, in a customer focused business, are integral.


A great example of an organization that is doing this well is
VisionSpring. For over a decade, Vision Spring has been fighting poverty by selling affordable eyeglasses to the poor. Historically it has been too difficult or too expensive for them to get good data about their customers. While this data is clearly valuable, its value to VisionSpring must always be balanced against the cost of collecting the data and therefore the cost of running the business. It is a very straight forward ROI calculation. Like many social enterprises in the developing world, VisionSpring sells its products in difficult and emerging markets where the cost of doing business is high especially when the intent is to reach underserved populations. Using Grameen Foundation’s Taro Works product to collect customer information at the point of sale, VisionSpring now has access to data that gives them the insight they need to continuously improve their products and services.

graphic 01 Steve Wright - Grameen

 

 

 

 

 

This chart shows the likelihood that a customer is below the National Poverty Line for each of 9 different regions where VisionSpring sells reading glasses.

graphic 02 Steve Wright - Grameen

 

 

 

 

 

 

 

 

 

 

In this chart VisionSpring for the first time has access to their customers motivations in El Salvador.

graphic 03 Steve Wright - Grameen

 

 

 

 

 

 

 

 

Would you Refer” metrics are known to be very good indicators of customer satisfaction.

Markets for Good

The thesis of this post and the goals of the organizations mentioned above is that a good business – and a good market – is one that strives to provide value that is realized by customers. This is the obvious and ultimate goal. It is also true that there is a broad group of stakeholders beyond the social enterprise and its customers that is integral to the work of markets for good and essential if we are to approach solutions to some of the world’s most intractable problems. The great challenge that is before us is to figure out how to align the incentives. How can competitors focusing on market solutions to clean water collaborate enough to ensure that their work is additive if not exponential? How can funders and investors align their data needs with those of the interventions that they are funding so that both are taking and the same risks and gaining the same rewards? Maybe most problematically, how can we co-opt profit maximizing markets to scale this disruptive innovation of delivering value as realized by the customer?

Comments

  1. Steve, what you are talking about is important. From my experience, most social change organizations are simply not in a position to ground their evaluation efforts in broad-based data like what you are describing. Several years back, I ran a mission-driven consulting group that helped sustainability nonprofits with technology and engagement. We worked hard to get them to focus on measuring the effectiveness of their engagement efforts, but the one question that would come up again and again was: how do my results measure against other, similar organizations?

    In other words, organizations need context, a backdrop against which their data takes on real meaning. And that is what I find exciting about the work you are doing at Grameen Foundation.

    I am not very familiar with Markets for Good, but I will share an anecdote from a conversation with a friend just yesterday. He was talking about gathering data about homeless people, and noted that it was one thing to gather their data and quite another to gather their opinions.

    Data comes from subjects. Opinions come from partners.

    1. Gideon,

      Many thanks for the thoughtful reply. I think your comment about context is right on and reminds me of a post of yours Social Impact Strategy (http://www.the-vital-edge.com/social-impact-strategy/). A Social Impact Strategy is a very practical thing and I think in our work we let it get away from us and start just waiving our hands at amorphic ideas of “good”. The idea is to create a strategy, use that strategy to design the business and then perform activities that you believe will lead directly to your social impact. The strategy IS the context and the activities are an enterprises best guess as to how to create social impact.

      1. Steve, Gideon: Thanks for noting/writing the Strategy article – a dead-on rationale behind social impact that positions it as a peer outcome to…money, the traditional business outcome, i.e. not as a lesser or competing outcome.

        With that, we jump out of a closed social sector conversation to talk about convergence of profit and impact and perhaps use the successes and knowledge of the social sector as an example for any business, regardless of organization type.

        Timely, as I noticed at the recent Global Philanthropy Forum panel on Impact Investing that the very last question from the audience was a sharp one, “We’ve talked for the last hour pretty much on financial returns, but we have to find a way to put social impact on equal footing – or else, why are we here?”

        Gideon: the “tough points” you mention are ones that we may be gaining traction on – restated here, with a quick paraphrase.
        Fuzziness: making meaningful qualitative measures is hard
        Interdependence: no one organization can claim impact, but can pull up a seat at that table by regularly meeting and communicating mission goals and then putting those in the impact conversation
        Multiple Scales: the complexity of impact on multiple levels maps directly to why we’re here – we must share information, methods, problems, successes to estimate individual effectiveness as well as sector effectiveness on broader levels.

        I think we may be gaining traction on these, at least in conversation getting closer to action – some references below to support that:

        – on interdependence, multiple scales, and the folly of isolating “impact” by single goals or organizations – see Katya Smyth here: http://bit.ly/RRFgXy “There are new harms created when people live their lives striving honestly for one goal while we’re gathering data to measure how we’re doing in getting them to reach a different and competing one.”

        -on “deep branding” from Gideon’s article- here is an article I wrote for AdAge in 2009 (http://bit.ly/10XGQM9), later featured on Tactical Philanthropy – http://bit.ly/10td5zL – the point – a whole brand includes social impact and not as a sacrifice

        – Nikon Rasumov, Founder of Pullapproach: http://bit.ly/ImpactAndProfit -on organic data collection, similar to VisionSpring/Taro Works example – “the transaction cost for providing complete data through social impact questionnaires is still too high, relative to its added value. As a result, traditional data acquisition is infrequent and hinders wide range adoption of even free social measurement tools. …An alternative social and financial reporting strategy is organic data acquisition (ODA), which accumulates data with a minimal transaction cost. ODA begins with intelligent process design because any data acquisition depends on the willingness of the user to provide data.”

        The unifier is still solid work, strategy, data from and on behalf of beneficiaries, customers, however we want to call it. Reporting impact without those is just paperwork. We can’t require improvement without creating definite data intersections (p-o-s + data for VisionSpring) that make it easier and sharing data to do that.

        Even at the most rigorously quantitative operations I’ve been a part of, qualitative dimensions weren’t a hard sell, e.g. customer satisfaction projects in Dallas, TX with restaurant customers for Pepsi. They didn’t just fit in the financial model. They were essential: We spent money on defining the dimensions of satisfaction and testing those for validity then investment. That would be “impact” in our case. I hope we continue to move this forward. More case studies are welcome: We will feature them on the site in an effort to get a better picture of the market for social sector data.

        1. I completely agree with Erik and with the example of VisionSpring. One of the central discussions in the field is the distinction between Output, Outcome and Impact. It is not enough to measure the number of units sold but is crucial to obtain the impact on the beneficiaries in the long run.

          To this end, we offer our open innovation tools to all regional stakeholders and involve them from the beginning into the decision making process: What are the problems? What solutions would work? This way they join the process and are part of the solution, but more importantly are directly, from the start contributing their feedback on the impact the products have on their life. Because of this engagement, they continue to do so during the implementation phase of the products and describe the impact on their lives, without any questionnaires or polls.

          In the long run the beneficiaries need to be empowered to not only provide feedback but also improve the product and be part of the solution from the start.

          1. re “…empowered to not only provide feedback but also improve the product and be part of the solution from the start.” Well-said. While the voice of the customer, constituent is core, it would be worth it to catalog those businesses (for profit, nonprofit, public) that have gone beyond the incorporation of perspective to an honest and appropriate collaboration at the strategy, decision, execution levels. This isn’t another “we need to do x” statement, but a request for any examples you’ve seen. .

  2. Hello, Gideon. Welcome to Markets For Good. The Taro Works example does point a way out of…”most social change organizations are simply not in a position to ground their evaluation efforts in broad-based data like what you are describing.”

    I’m talking more to the insight behind the solution than to the solution itself.

    What I appreciate is the first recognition of the ROI calculation – implicit, explicit, whatever – and going from there. Data isn’t free. There is room for much more investigation of ways to facilitate getting the info we need, especially when it’s out there waiting on just another thoughtful way to get it.

    Sheetal Singh of Techsoup makes an excellent case on the point in an earlier post: https://marketsforgood.org/making-data-an-afterthought/. She says: “We realized that when you are working with small organizations in constant crisis mode, thinking about data is a luxury. If we wanted the agencies to track and share data, we needed to give them a really good reason to do so.” Read more for her examples of how to address that.

    That’s ROI and data thinking, not as a mental exercise, but infinitely more appropriately – on behalf of an organization doing effective work that could be made easier or better, as Steve demonstrates with the VisionSpring example.

    On your last point: I remember growing up in Oak Cliff (Dallas, Tx) and all of us in school, church sharing an inside smile at the people and orgs who arrived for one intiative or another not recognizing that kids worldwide can easily differentiate the look that said “subject” from the one that said “partner.” We treated each accordingly. – Eric, Conversation Curator, Markets For Good.

    1. Yes, Eric, in many ways, the tool is the easy part compared to the the culture change necessary to bring data-driven thinking into an organization. One of the things I saw while running Groundwire was that among the client organizations we served, there were some who had stuff who really understood the power of the databases that we were helping them put in place in their organizations. Not to generalize, but many of these folks were younger, and we found that an hour invested with one of these individuals was worth more than ten hours on someone else. They got it. They understood the power of what the tools could deliver.

  3. I teach a course on Social Entrepreneurship at the Universidad del Desarrollo in Chile, and I’m going to assign this article to my students next semester. Thanks Steve for explaining impact measurement in a way that is so clear and easy to understand. I think it will be part of a section on measuring the social impact of social enterprises, probably midway through the course.

    1. Thanks for dropping this note. We’d be ready to air the conversation/webinar! And thanks to Steve, yes, for illuminating the topic. A few good trails of thought to work with there.

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