Barli Institute and Aavishkaar show the potential of social innovation

Though I have focused much of my attention on corporate innovation, I am increasingly veering to the view that the most interesting innovation in India is happening in the social sector. Confronted with the humungous challenges of poverty, malnutrition, and poor health and education levels, social innovators in India pursue fascinating paths and set up pioneering institutions.

The Barli Development Institute

I wrote about Janak Palta McGilligan’s solar-powered home in an earlier post. But Janak has done much more than implement alternate energy solutions at her own home. I recently had the wonderful opportunity of visiting the Barli Development Institute for Rural Women set up by Janak and her husband Jimmy McGilligan many moons ago.

Started much before skill development became the fad that it is today, the Barli Institute takes about 100 unlettered tribal women every six months and provides them a combination of literacy, livelihood skills and a strong focus on sustainability. The women come from the tribal areas of Madhya Pradesh and Chhatisgarh. Learning is group-based and “active,” with enthusiastic participation from all. Participants are encouraged to compose songs and dances of their own with the help of facilitators  - they presented some beautiful songs when I visited the Barli Institute on World Environment Day, even though they had been at Barli for just a few weeks. Stitching and embroidery are some of the livelihood skills taught – the gift I got was a beautiful chime / wall hanging made by the trainees themselves.

Focus on Sustainability

Sustainability is a central pillar of the Barli programme. The women are expected to be ambassadors of sustainable practices when they go back to their homes. The chime I got was made of recycled waste material. And the core of the sustainability platform is the use of renewable energy, particularly solar energy.

The Barli Institute has a whole range of solar-powered appliances on display, much like what Janak has at her house. I was particularly impressed by the emphasis on solar cooking. A well-designed solar reflector and some cookware that is suited to solar cooking (e.g. painted black so as to absorb solar radiation) are all that is needed. A solar oven allows for baking, and a solar dryer can help preserve things for later use. With the support of some external donors, Barli helps women take a solar cooking kit back home when they return.

Succession Plan & Impact

Many institutions flounder when the founders are no longer available to guide them. Janak and Jimmy must be complimented for inducting a powerful team to continue their good work. Tahera Jadhav and her husband Yogesh run the Barli Institue today with the same passion and commitment.

The Barli Institute has trained almost 7,000 women already. That’s a unique contribution to the empowerment of women and social development.

Janak’s efforts to propagate the message of sustainability don’t stop with the demonstrator at her home, her work with people in the villages surrounding her home or even the Barli Institute. She recently brought an international band called Solar Punch to several prominent educational institutions in Indore, to spread the word around. The band has songs based on the solar theme!

Vineet Rai & Aavishkaar

Professor Anil Gupta has been a great source of inspiration for innovation in India. The crusade that he started 25 years ago has helped the country realize the wealth of creative ideas that we have and value our own “grassroot” innovators better.

But, as I wrote in one of my earlier posts, while the Honeybee network and the National Innovation Foundation have done  a sterling job in identifying and recognizing outstanding innovations, diffusion or commercialization have remained a challenge.

One person who was inspired by this challenge was Vineet Rai. I had a chance to listen to an interesting talk by Vineet a few months ago where he outlined his experience. Vineet started his career “chasing elephants” as he called it, after completing his MBA from the Indian Institute of Forest Management. He soon tired of this, and joined the Gujarat Innovation Augmentation Network (GIAN). Here, he got an opportunity to work closely with grassroot innovators.

The Challenge of Scaling-up

At GIAN, Vineet’s task was to help grassroot innovators commercialize their innovations. In the process, he became the biggest user of the Government of India’s Technopreneur Promotion Programme (TePP), a unique scheme that provided grants to inventors to scale up and commercialise their inventions.

Vineet’s found that this didn’t work. The inventors lacked the skill or interest to be successful entrepreneurs. He then tried the other obvious alternative – technology transfer. But, while he could persuade some inventors to part with their products or technologies for a lumpsum payment of Rs. 1 lakh, he found few entrepreneurs willing to take the risk of working on these technologies.

The gap appeared to be risk capital, and Vineet decided to address this gap by setting up Aavishkaar Fund. Aavishkaar was initially set up with Rs. 1 lakh from the limited savings of Vineet and his wife.

Outcomes and Impact

Vineet has supported more than 50 ventures so far. In all of them, he was the first investor. In 56% of the ventures, he came in even before the venture was set up.

While it was difficult to raise the first million dollars, he has subsequently raised160 million dollars. He has exited from 10 ventures so far. Most of the ventures are into basic stuff like dairy. He has been able to return only a part of the capital that he raised and in that sense has a long way to go. Some media reports have pointed to a tension between the interests of the investors and those of the ventures Aavishkaar supports. These are issues Vineet will have to resolve as he goes along.

I was impressed by Vineet’s determination to find the secret to releasing the energy of Indian local innovation and entrepreneurship. While there can be legitimate doubts about the sustainability of working with entrepreneurs or firms from such a “micro-level,” I have little doubt that his efforts will help us find alternate models that suit the Indian context.

Conclusion

The Barli Institute and Aavishkaar are working in different domains but they are both making significant contributions to the creation of sustainable livelihoods. May their tribe increase!

Alternate Pedagogies for Management Education - Part 2

[Continued from last week…my learning from a Workshop on Emerging Pedagogies in Management Education]

Simulations with a behavioral angle

I found that the simulations that bring in a stronger behavioral element would be a good complement to these more cerebral or analytical competitive games. Two products caught my eye in this context – one from Knolscape, an Indian company started by INSEAD alumni, and the other a non-computer simulation called Malgudi Express. One Knolscape product based on theories of situational leadership requires you to choose managerial styles to work with a set of subordinates with different performance histories, strengths and weaknesses of their own. While some of the academics in the room raised valid questions of cultural relativism, I thought that just the process of thinking through what style would work with a given employee would be a good learning for a sensitive manager.

Malgudi Express (MX) is based on a simulation developed earlier at the Institute for Rural Management Anand (IRMA) called Narayanpur Express.  MX gives a flavor of how the rural economy “really works” and provides insights into why, for instance, a farmer may take a loan from a traditional moneylender rather than a formal banking channel despite its high financial cost. City-bred MBAs tend to thrust their own rationality on to the farmer without realizing that the farmer has to deal with substantially higher risks than most city dwellers ever face!

Macroeconomic Assumptions

Most of the multi-player, multi-round competitive games are developed outside India. I was amused to find that most of them assume mature economies with modest inflation, stable interest and foreign exchange rates, and don’t allow for economic shocks or other large macroeconomic changes. They reinforce the mindset of managers in developed markets rather than preparing them for the rough and tumble of developing ones. And, for students in countries such as ours such macro conditions could be quite misleading indeed.

Timeframes

While the multi-round games need longer time-frames (either in a workshop over 2-3 days or a round per week over several weeks), some games are designed for quick execution. HBS Publishing (a subsidiary of Harvard Business School) offers a Start-up Game that can be played by upto 80 players in an hour in which participants play different roles such as founders, investors and employees. This game is intended as an ice-breaker for an entrepreneurship course. Some of the faculty present at the WEPME workshop were concerned about whether any learning is possible in such a short time, but it  appears that the game is only designed to expose participants to the pulls and pressures faced by the different stakeholders of a start-up, and doesn’t claim to be the last word on running one.

Knolscape also offers simulations that can typically be completed in half a day. I assume this reflects the fact that many of its simulations are designed for a corporate audience. In fact, the company is hot on co-creating new simulations with academic and corporate partners. As a result, the company has a wide product range.

ET Cases, a subsidiary of the Times of India Group, has some interesting ideas including video cases (we saw some glimpses of video cases on an F-commerce pioneer called Gifting Happiness, and the successful food chain, Bikanerwala. They are also creating cases around interesting articles that have appeared in the past in the Economic Times. Both are valuable initiatives, though it seems to me that the video cases need to be strengthened by a data supplement or at least an industry report if they are to be effective vehicles for class discussion.

Accounting is a bugbear for MBA students, particularly those who come from an Engineering background. How do you make learning accounting fun? That’s a challenge Abhijit Phadnis took on some years ago in response to a request from the Aditya Birla group. In collaboration with Skilldom, an animation and simulation design company, Abhijit has created a 49 “episode” animated film that covers the basics of accounting and finance. It’s got rave reviews even from experienced accounting professionals.

Session Chair of one of the sessions Manju Ahuja of the University of Louisville quoted Maya Angelou: “I've learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel” to emphasise the importance of bringing emotion into the learning process.

At least two of the companies (EnParadigm and GTL Ventures) offer simulations that are a part of workshops and not standalone or playable through the internet. EnParadigm emphasized the importance of end-to-end learning and focuses primarily on a corporate audience. GTL offers a Blue Ocean Strategy Simulation developed by StratX in the form of a boot camp plus a practical simulation with a similar rationale.

Class Participation

One of the challenges in case teaching is getting everyone in the class engaged. Given the limited time available in the class, it’s not possible to give airtime to everyone, and there are often complaints from students who feel that they had prepared well but were not allowed to speak. There is also the issue of transparency of evaluation of class participation. Creatist is an active learning platform designed to address these challenges. It has two important features – (1) Quickcheck, that gives the opportunity for the instructor to pose a question to the class that everyone answers on their tablet; the answers get recorded for the instructor to review immediately and later, or can be projected on the screen and (2) Poll, the opportunity to take a quick feedback from the class on whether they agree or disagree with a particular course of action. Some faculty expressed concern on students getting distracted if they are sitting with a tablet in front of them connected to the internet!

Other solutions presented included ones that are, strictly speaking, not simulations. WizIQ provides technology for virtual classrooms and streaming videos. Another presenter provides a solution for automatic lecture capture on video so that students can refer to the video later.

Concluding Observations

The workshop gave us a good sense of the potential of simulation. At the same time, there is a need to avoid over-hyping its virtues. Some of the speakers went as far as to say that simulation is the solution to all the quality problems in management education (faculty quality, standardization, etc.). My sense is that simulation is an excellent complement to the other methods we currently use in the classroom.

On the other hand, the sharp criticism from faculty about the shortcomings of different products may not be warranted either. Most of these tools should be helpful as long as one understands both their benefits and limitations. Any tool is as good as the users, so it’s up to faculty to utilize the simulations well. Faculty need to dive in, and learn. But one thing I am reasonably confident of is that students will find simulations a welcome addition to what is currently being done in the classroom.

I particularly liked one point that Ramkumar made – that it is important to close the loop, i.e., face the consequences of one’s actions, for learning to happen. The case method, by its very Socratic approach, remains somewhat open-ended, and doesn’t close the loop. But, a good simulation such as a multi-round game, makes you face up to the consequences of the decisions you make.

Alternate Pedagogies to Enhance the Effectiveness of Management Education - Part 1

How can we help students learn how to manage? This is the biggest challenge faced by management educators. Over the last 50 years, management research has become more sophisticated, and uses more rigorous (even if somewhat complex and esoteric) methods to enhance the validity of its findings. But, there is broad consensus that management theories will remain mid-range, that is applicable in relatively narrow circumstances and that “general” theories of management will remain largely elusive. So, the “broad” theories found in text books will remain important and useful, but may not cover all the contingencies a manager will face.

Further, as ICICI Bank Executive Director K. Ramkumar told participants of a Workshop on Emerging Pedagogies in Management Education (WEPME) held at IIM Indore recently, good managers need more than managerial “knowledge” – they also need skills, perspective, and attitude. As business schools have embraced research more closely, and as faculty have been evaluated more on their research output than their teaching (true in all the top business schools in the US), the knowledge component of management education has tended to get emphasized more than skills or perspective (business schools do very little on the attitude front; in fact, it could even be said that they have a negative influence on attitude, but more on that some other time!).

The History of Management Education

Management education started out in the early 20^th century as more of a vocational training with practitioners sharing war stories from their experience or tricks they had picked up on the job. Harvard Business School (HBS) deserves the credit for moving away from these war stories to a more rigorous approach of learning how to manage in different situations by pioneering the case method. Patterned on the Socratic approach to learning, students at HBS are exposed to a mind-boggling 400+ cases during the MBA programme. If nothing else, by the end of this, they have the confidence to tackle any situation! Each case represents a real managerial situation faced by an executive in the past with all the dilemmas faced by the protagonist and the (limited) data available to her in taking such a decision.

The Limitations of the Case Method

HBS likes to call its case-based education “participant-centered learning.” There is no doubt that when practised seriously on both sides (i.e. by instructor and student), the case method can be a powerful method of imbibing decision-making abilities. But, the case method has its limitations as well. To be effective, it demands high levels of prior preparation from participants. It could take 2- 3 hours for a student to prepare thoroughly for a case discussion. The teacher needs to be skilled enough to use the case effectively – contrary to the philosophy behind the case method, many teachers are known to push a single solution preferred by them rather than be open to a debate around the many possible solutions that are proposed by the class. Linking case discussions to theory and concepts is another skill that not all instructors have.

Another major criticism of the case method is that the typical case study is a neatly packaged set of facts and data, but most decision makers in real situations will rarely have access to data packaged in such a “ready-to-process” form. A joke is often told about the HBS MBA graduate who when given his first task on the job asks where is the case on the situation so that he can “crack” it. Cases also tend to be static, in that they represent a decision problem at a particular point in time, and don’t represent the dynamic changes that are a part of most managerial environments today. Case writers have found a way to address this – through multi-part cases that track the evolving decision-situation over time. But few cases are available in this multi-part form.

The “Raw Case”: An Alternative to well-packaged cases

One interesting solution provided to these last two criticisms is the “raw case” pioneered by some faculty at Yale University’s School of Management. Their internal case portal has “cases” on a number of companies of interest. But each case is not neatly written and bounded. Instead, it consists of links to articles, videos and other internet resources related to the company chosen, and these are updated regularly. As a result, the student (and the teacher!) have to wade through a lot of unstructured information, much like in the real world. Of course, this makes the preparation challenge even worse than before, but that’s the cost of simulating the real world better.

The Power of Simulation and Games

Since the advent of computers, simulation and computer games have opened up new possibilities for management education. Multi-player games that simulate market-based competitive situations have been around for at least a couple of decades. But these games were expensive, and needed powerful servers to be effective. In recent years, the power of the high bandwidth internet with audio and video streaming has changed the landscape for such simulation and games. So has the power of computing itself.

To understand more about this landscape, we organized WEPME 2014 at IIM Indore (IIMI) recently. We invited 13 leading vendors of simulation-based learning tools to present their solutions to the faculty of IIMI, academic associates, doctoral students, and faculty from other institutions. Here are my key takeaways from the workshop in the context of the management education challenges I raised above.

Several products (Global Strategy game, Capsim, Brandpro, Markstrat, EnParadigm) simulate multi-player competitive situations with multiple rounds of engagement. The exact details vary across the games, but players can decide on investments in manufacturing, R&D, and marketing; introduce new products, and change prices; choose which markets to focus on, etc., all within well-defined resource constraints. At the end of each round, each team can see how it has performed vis-à-vis other teams, “learn” from this experience, and then apply this learning in the next round while at the same time making assumptions about what others will do. This certainly provides a good framework to learn about business decision-making in a dynamic and competitive context and is a good counter to the lack of dynamism and competitor response in most case discussion exercises.

Once concern I have about these games is that they make execution seem very easy, pretty much at the touch of a key. Changing a strategy or re-orienting a company is a very hard task from an organizational perspective, but I fear that thee games tend to gloss over that. Henry Mintzberg has criticized MBAs for being Master of Business Analytics rather than Master of Business Administration, and these decision-oriented games could be criticised for reinforcing that analytical streak. Dharam Pal of SanRisk Solutions (that sells Capsim products in India) shared with the audience that his product replicated at least one dimension of real-life execution: team dynamics. From his experience, the quality of a team’s performance in Capsim depends on the cohesion of the team; even if one member is obstinate or refuses to cooperate with the others, the team is often unable to respond effectively to the feedback from prior rounds!

(To be concluded in my next post. All views expressed here are my personal views.)

Perfint, Skanray and Panacea represent a new generation of Indian Medical Technology Companies

The Indian Healthcare Challenge

Providing high quality yet affordable healthcare to our 1.3 Billion citizens is one of our biggest challenges. Several distinctive characteristics of our existing healthcare system are well known. It is city-centric, with the availability of medical support poor in rural India. Qualified doctors and other manpower are rarely willing to serve in rural locations. As a result, the government network of Primary Health Centres set up across the country rarely functions effectively. There has been a large shift to private doctors and hospitals, even though patients can ill afford their services in the absence of a widespread health insurance infrastructure. Just one major health setback in a family can drive that family into a financial catastrophe. India is at the top of countries when it comes to “out-of-pocket” payout for medical services.

New Initiatives

In recent years, this problem has been well recognized and a whole slew of initiatives have been launched by the government as well as the social entrepreneurs. These include the National Rural Health Mission of the Government of India, low cost medical insurance schemes by state governments, new models of affordable healthcare provision (e.g. Aravind Eyecare, Lifespring Hospitals, Narayana Hrudayalaya, etc.) and the use of information technology and traditional practitioners to provide primary healthcare services (e.g. Sughavazhvu Healthcare).

Medical Devices

Contemporary healthcare provision is strongly dependent on the use of powerful diagnostic and curative methods. Medical devices, drugs and vaccines are at the core of this. While India has made a name for itself in the pharmaceutical industry thanks to the reverse-engineering and process-engineering capabilities of our local drug companies, the medical devices sector has received relatively less attention. At the high end, medical devices are predominantly imported. And, the cost of imported devices pushes up the cost of healthcare.

In recent years, given the size of the market and the obvious need, there has therefore been a lot of interest in building a local medical devices industry. The focus has been on affordability and ease-of-use, with a particular focus on making the devices usable by people without sophisticated medical education. In the diagnostic field, efforts are being made to put intelligence into the system using heuristics and algorithms so that detection is less dependent on the skills of the user of the equipment.

At one end, programmes like Stanford India Biodesign seek to create the next generation of medical equipment designers who will build devices ground-up based on an identification of needs and creative solutions to these needs. At the other, several major multinational companies including GE, Siemens and Philips have major initiatives to develop low-cost devices out of India (and China). Prominent areas of such devices include ECG machines, ultrasound scanners, patient monitoring systems and infant incubators.

Somewhere in-between is a new set of Indian enterprises. These have attracted investor interest and industry bodies like FICCI have tried to kindle interest in them. In this post, I look at three of the prominent enterprises to get a picture of where this activity is headed.

Perfint Healthcare

Perfint has a nice niche, it specializes in solutions for image-guided cancer therapy. For example, one of its new products called Maxio, is a CT accessory that “helps a physician see, plan, treat and verify during CT guided procedures like tumour ablation.” Perfint was recently in the news for this product getting the approval of the US Federal Drug Administration (FDA). That’s an important milestone for being able to sell the product globally, particularly since India lacks a strong and transparent mechanism for the testing and certification of medical devices.   

Several things about Perfint are noteworthy. First, the core team that set up Perfint came out of GE. This has always been one of the hopes of encouraging MNCs to invest in India – that these MNC subsidiaries will be incubators for Indian entrepreneurs. Second, the company has been able to raise a fair amount of capital – more than $30m in four rounds so far. This shows the faith of investors in the company, considering its revenues are reported to be only in the region of $6-7 m and raises some questions about our usual assumption that it’s difficult to raise capital for high tech startups out of India. Third, the company has been granted three patents so far, with more applications pending. Fourth, the company already has a global footprint with more than 2,000 patient procedures being conducted on its equipment across the world last year.

Perfint appears to be more in the advanced technology game than in the affordable healthcare arena. While it’s safe to assume that Perfint’s development costs would be lower than its foreign competitors since its R&D is predominantly based in India, clearly it is competing in the global healthcare market based on the quality of its solution. In fact, when I was reading recent accounts of its achievements, the company sounded more like a typical Israeli technology company than an Indian one!

Clearly, at this point, the major challenge before Perfint is commercialization. Press reports indicate that the topline goal is in the region of $100m. Such a sales number will have to be achieved fairly quickly in order to justify the quantum of investment that has gone into the company. While the sales challenge is obvious, interestingly the company sees talent (particularly in product engineering and management) as a possible obstacle to its future success. Interestingly, this echoes some of our findings in the pharma sector where we found that the absence of certain specialized skills is a barrier to new drug development out of India.

Skanray

Skanray Technologies was founded in 2007, and is based in Mysore. It focuses on high frequency X-ray systems and some other critical care products. Interestingly, the Skanray team is also ex-GE. Like Perfint, Skanray has a host of international certifications including FDA approval for some products.

Skanray is more focused on affordable healthcare. The company’s dream is to provide healthcare to Indians at a cost of Rs. 100 per person per month.

Skanray has made a few interesting strategic moves. In 2009, they tapped into the support available from the government of India by obtaining low cost funding (a loan for Rs. 4.7 crores) for commercialization of technologies from the Government’s Technology Development Board. Earlier, in 2008, they integrated backwards through a joint venture with CEI of Italy to manufacture X-ray tubes. The company sees this backward integration as important to fulfilling its promise of “Advanced Techology and Affordability.”

But, by far, the most interesting move by Skanray was to acquire the medical instruments business of Larsen & Toubro in November 2012. (Under AM Naik, L&T decided some years ago to hive off some of its non-core businesses.) Fortuitously for Skanray, L&T’s medical business was also located in Mysore. The acquisition of this business gives the company a broader product range, and an established distribution and service channel.

Skanray has also attracted private equity investment. I couldn’t find Skanray’s financial numbers, but it’s safe to assume that Skanray’s investors will also put pressure on the company to scale up rapidly. Recent reports point to entry into the Brazilian market, and the creation of an Advanced Technology Centre in Europe.

Panacea

Panacea Medical Technologies is another interesting company in this space that has received investor interest. Their main focus is on Digital X-ray machines. They have also launched a Digital Telecobalt machine (called Bhabhatron), in collaboration with the Bhabha Atomic Research Centre of the Department of Atomic Energy. Panacea’s goal is to offer complete solutions for oncology centres.

They received the Technology Development Board’s award for technology commercialization in 2010. Unfortunately, the founders seem to be quite media-shy: there is no mention of their names on the company’s website and they have very little web presence. But their website suggests that they have machine installations across the country.

Wrapping Up

Companies like Perfint, Skanray and Panacea constitute the core of a newly emerging medical device industry. It looks like they have chosen appropriate strategies – if you are trying to be at the edge of technology, you need to internationalize rapidly (like Perfint), but if you want to pursue the affordability plank, you need to focus more on lowering costs through the supply chain, distribution and service like Skanray. It’s good to see these companies attracting capital, I only hope that they are able to retain the interest of investors by sustaining growth. But, I suspect we still don’t have enough local players to constitute a critical mass of companies in this sector. I hope I am proven wrong!

[All information in this post has been obtained from sources in the public domain, including company websites. The views expressed by the author are personal.]

Making Impactful Social Investments

I am a member of Social Venture Partners (SVP), an organization that uses venture investing principles to support social ventures. Founded in Seattle, SVP now has chapters all over the world. SVP Bangalore celebrated its first “formal” anniversary last weekend.

SVP Bangalore Chair Akila Krishnakumar invited me to talk on strategy for social investments. I had fun preparing for this talk, and decided to use this opportunity to think carefully about the important question of how to make impactful social investments.

I started by thinking of which social ventures have really impressed me. I quickly zeroed in on Aravind Eyecare as one of the leading candidates. Aravind founder Dr G Venkataswamy took an important problem (hundreds of thousands of people suffering from unnecessary blindness due to cataract), figured out a way of reducing the cost of cataract surgery by a significant margin (a complete reconfiguration of the process to improve doctor productivity and replace expensive doctor’s time by relatively inexpensive paramedics’ time) and scaled it up in his own hospital. Another important reason for success of the Aravind model is its sensitivity to the social context – for example, they usually collect prospective patients from a single village and bring them together with their families to the hospital since they realize that an individual patient, on his own, is likely to be find the process scary.

But Aravind is not impressive just for this reason. Over time, they have improved upon the original process in a spirit of continuous improvement. They have been generous in sharing their model with others. And they organize an annual conference where they and other eye hospitals exchange ideas and best practices.

But, it doesn’t stop there. The Aravind model has been a source of inspiration to others. Lifespring Hospitals uses Aravind’s principles in maternity care. Dr. Devi Shetty’s Narayana Hrudayalaya has adopted elements of the Aravind model in its efforts to cut the costs of cardiac care.

If I were to make a “social” investment, I would like to make it in an organization like Aravind which has such widespread impact.

Giving this a conceptual shape…

Social investing, or impact investing as it is called by some, has been around for about a decade. Along with strategic philanthropy, it seeks to make a dent in major social challenges, particularly in the poorer parts of the world.

Some recent research done by prominent foundations in this broad space points to a framework for impactful social investing.

The Omidyar Network

The Omidyar Network has some insights that resonated with me. They identify three important types of social enterprises – market innovators, market scalers and enterprises providing market infrastructure. Aravind would clearly be a market innovator, a social enterprise that created a new model to solve an important social problem. However, Aravind is unusual in that it has also been successful in scaling up the model and making it a more generic solution to the problem. Often, this market scaling is done by a different set of enterprises. Market infrastructure is a set of activities and functions that is often needed by a sector to function effectively – e.g. a credit rating service helps the growth of microfinance.

How are these relevant to the question of social investing? Market innovators need risk capital and a willingness to support experimentation. Some market innovators take a long time, as long as a couple of decades to refine their models. So, they would clearly need some philanthropic investments to sustain themselves. On the other hand, market scalers may be more amenable to the risk-adjusted return metrics of more conventional investing. Market infrastructure again because of its public goods nature may need philanthropic capital.

I believe the importance of this market infrastructure is often under-estimated. Take the case of low-cost medical devices as an example. With the support of the Government of India’s Department of Biotechnology, Stanford University, AIIMS and IIT Delhi offer a Stanford India Biodesign (SIB) Programme to train a new generation of innovators. In its first 5 years, SIB graduated 24 fellows leading to 12 devices, 20 provisional patents and 5 products in trials. But there are major gaps in the ecosystem that currently prevent SIB from achieving its full potential. The absence of independent and credible testing, certification, distribution, and service support organizations across the length and breadth of India impede commercialization of the new medical technologies emerging from SIB. Social investing could help create this critical market infrastructure.

The Omidyar Network makes another important point – it’s sometimes necessary to support a large number of social enterprises in the same space in order to provide the critical mass to help the sector take off.

Ashoka Foundation

The Ashoka Foundation is a catalyst for social entrepreneurship and social innovation in a different way. They identify individuals who have the potential to make a major impact and then support them as Ashoka Fellows. The criteria Ashoka uses to select fellows are relevant to our search for criteria for impactful social investing.

Ashoka has identified five pathways for an individual to revolutionize a sector – (1) changing the market dynamics to include new, previously excluded beneficiaries; (2) changing public policy or industrial norms; (3) bringing about full inclusion of disadvantaged groups; (4) creating a congruence between business and society; and (5) bringing about a culture of change-making.

These change-makers (particularly categories 2 and 5) would benefit from philanthropic investing because they often provide social benefits that clearly have the characteristics of public goods. Here, I am thinking of organizations like the Association of Democratic Reforms that have contributed to improving the quality of our democracy by putting the spotlight on the criminal records and assets of election candidates. Or, of PRS Legislative Services that seeks to improve the quality of parliamentary discourse and decision-making by briefing legislators on the consequences of impending legislations.

Conclusion

Social (philanthropic) investors have a major role to play in making social entrepreneurs successful. To make a large impact, the broad consensus seems to be that they should look at sectors and not individual organizations. They should identify and understand the nature of the problem being solved. The nature of the financing required and the organizations to be supported is linked to the gap/problem being solved. The effort of social investors should be to accelerate the process of solving the problem – a study by McKinsey suggested that accelerating the development of new low-cost medical devices by even a few years could mean additional health benefits to a couple of billion people in India. In doing so, they need to take an ecosystem approach, realizing that innovators, scalers and infrastructure will all be needed to make major impact.

[References: Matt Bannick & Paula Goldman, “Priming the Pump: The Case for a Sector based Approach to Impact Investing,” Omidyar Network, downloaded from omidyar.com on May 22, 2014; “How do you know when you have revolutionized a field? Ashoka’s approach to assessing impact,” downloaded from ashoka.org on May 22, 2014]

(The view expressed here are the personal views of the author.)