Monday, June 2, 2014

Monday Musing: For Profit for Good & the Challenge of Scale

Last week Forbes featured the company TechChange in an article titled "When and How to Scale: DC Startup at Crossroads." The piece caught my eye for three reasons:

TechChange is an example of the "for profit for good" companies I wrote about in this year's TrendsWatch. A for-profit online education company, it trains organizations like the World Bank, the United Nations and various NGOs how to use technology to support their work in health care, disaster relief and humanitarian aid. After TechChange uses fees from paying clients to recoup the costs of developing an online course, they make the course available free. The article contrasts TechChange's economic model to Khan Academy, a free online learning platform that is nonprofit and grant funded. Musing: as for profit companies show they can meet certain social needs without the benefit of philanthropy, will individuals and foundations direct their funding to other causes? Will donors be less willing to give to a Khan Academy if a for profit company (not TechChange, which serves a different  market) shows it can achieve the same social benefits? 

TechChange is a B Corporation-- a legal structure often referred to as "hybrid" because it combines for-profit income structure with an altruistic mission. Though legislation varies slightly from state to state, B corporation status generally requires a company to embed a "materially positive impact on society and the environment" into its activities, and makes the company responsible to shareholders for achieving this impact (along with generating financial profit). B corp status helps socially responsible companies raise money from so called "impact investors" who want to create social change through their financial investments. While there are currently only slightly over a 1000 B Corporations world-wide, it is a social and economic experiment of great interest to the nonprofit sector. Musing: will some museums experiment with B corporation status, enabling them to attract capital from investors to improve arts literacy, support research, or preserve history in addition to a modest financial return? Divorced from often dysfunctional complications of donor expectations and nonprofit governance, would a museum be better positioned to achieve financial sustainability?

The focus of the Forbes article is how TechChange is tackling the challenge of scale. Their founder wants the company to have a deeper social impact, and has to figure out "at what pace and with whose money." Should they "bootstrap" themselves up, expanding their client base and plowing the profits into growing their operations, or attract social impact investors? Musing: What can museums learn from for-profit and hybrid businesses about financing the process of scaling their operations? How can we change the scope of our ambitions regarding scale, and change our financing to match? 

Museums face a vast challenge in an age in which scale is defined by the reach of the internet. Michael Edson summarized this challenge brilliantly in Dark Mattera recent essay which launched the online publishing project Code|Words: Technology and theory in the museum. Michael has addressed this theme before--in AAM's recent report Building the Future of Education: Museums and the Learning Ecosystem, he points out that reaching a billion learners is the kind of dream museums need in order to have a major impact on US education. I've heard from many museum folk, not all of them from small museums, who are deeply disturbed by this challenge of scale. Should every museum be expected to exploit the reach of the internet? Are there appropriate smaller ambitions for impact? What about the physical, face-to-face audience? 

In the Forbes article Sonal Shah, senior fellow at the Case Foundation, points out that organizations can scale in two ways: breadth (reaching more people) and depth (increasing the quantity and quality of what they offer their audience). Both require capital--which is notoriously difficult for nonprofits, including museums, to access. To people who feel it is not appropriate for their museums to aspire to scale up and out, using the reach of the internet to serve a global audience, I would say, what about scaling deep? Either way, you start with an ambition and fund that vision, rather than asking "what can we do with the money people are willing to give us?" And finding the capital needed to achieve that vision may require something more than philanthropy, more than the traditional business model. 

So keep an eye on the news, for coverage about companies like TechChange, or ThinkImpact (profiled in TrendsWatch), and think about what our sector can learn from companies hell bent on improving the world...without the benefit of tax exempt status. 

No comments: