August 16, 2019

Lean Startup + Lean Impact: Combined Short Summary

INTRO / SUMMARY
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This post summarizes entrepreneurship startup principles of The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses by Eric Ries, and the social venture principles from the book Lean Impact: How to Innovate for Radically Greater Social Good by Ann Mei Chang , to propose a way to build scalable solutions in organizations that work for social impact.

What is a startup

One is engaged in a startup, whenever they are trying to do something new. Such as a new product, service, or market. This means a startup can be found within an existing organization, as a new company, in a for-profit business venture, or an academic institution. A startup can be a small project or a whole new venture. One does not need to be working in a for-profit technology company, to benefit from 'startup thinking' in their work.

A startup by definition involves trying to do something when there is a high level of uncertainty. If the path forward was clear, a startup isn't needed — instead, all that is required is a straightforward business plan.

A social impact startup often is formed when the path is very unclear. If the solution was known, markets and governments should have likely solved this challenge by now.

Ann Mei Chang challenges social impact organizations, to set their vision of what they want to do in the frame of mind that, 'if their plan is successful, how will they reach a sizeable number of people affected by the issue'. This type of exponential thinking is a necessary part of a traditional Silicon Valley startup, but rarely found in social impact projects.

Purpose of a startup

The purpose of a startup is to reduce the uncertainty about what works and to find the winning combination of value, growth, and impact.

A startup's purpose is to develop 'validated learning' about how the organization can test their value hypothesis (ie. something people really want), and their growth hypothesis (how will they scale). In a traditional startup, they ultimately know that they have found "product-market-fit" because they make a profit. Money acts a surrogate indicator that a winning combination has been found.

However, in a social impact startup, often profit is not able to act as a validator. Instead, the social impact startup must test a third hypothesis: their impact hypothesis. The impact hypothesis validates that they are spending each dollar as cost-effectively as possible, and each unit of impact has the greatest potential benefit. This must be measured, tracked, and continuously improved.

In many ways, for those familiar with the scientific method, this is hypothesis-driven development.

“Innovation is the path. Impact is the destination”

- Peter Singer (link)

Principles of Lean Impact

Ann Mei Chang's book, Lean Impact, outlines this approach over three sections:

1. Think Big

Start with a long term goal, and consider a plan that has the potential to reach a significant amount of people affected. Quite often, to achieve full potential, one organization can't do it all. A strategy of partnerships, collaboration, and new policies and markets is often needed to achieve full impact. "face your goals based on real need in the world, not what seems incrementally achievable".

2. Start Small

Identify all the assumptions about a proposed plan and why the approach will fail if any of these assumptions are invalid. For each assumption, develop a series of hypotheses that need to be tested. These hypotheses must validate that the premise is either true or not.

To test each hypothesis, develop an experiment that requires as few resources as possible. Any work invested in the experiment that adds functionality and features beyond the hypothesis that needs testing, is in the Lean Manufacturing lingo, considered "waste."

Why is this waste? Because the purpose of the startup is to develop "validated learning." It is to test its hypothesis in the area of: value, growth, and impact. The ability of an organization to move through the Build, Measure, Learn feedback loop as quickly as possible is needed for it to be able to have the highest chance of success. Any activity that deviates from this purpose is "waste."

The hard work in a startup isn't the innovation (it's not the inspiration), but the hard work is the perspiration to take an idea validated it, find a scalable solution, and ensure its creating meaningful social impact.

Groups often want to bypass the start small stage, and have a 'higher impact' sooner. But this makes it harder to innovate, and actually discover what works best.

3. Relentlessly seek impact

A social impact organization must measure and test each hypothesis with experiments. Organizations should "fall in love with the problem, not their solution".

One must be able to report to donors the unit-yield and unit-cost of the intervention and how each of these metrics not only has improved over time, but how their organization is able to deliver superior results in each of these categories.

Funding

Ann Mei Chang hopes the future of grant and donor funding is used to 'de-risk' ideas with huge potential.

Initial philanthropic funding should enable organizations to rapidly experiment, and learn if their hypothesis is correct or not. The purpose of this funding is to uncover the activities that result in the best value, growth, and impact hypothesis. It is also to identify which ideas do not work.

The few ideas that show promise after rigorous testing should receive additional funding to continue to scale their hypothesis and tests further.  Ultimately the most substantial funding is reserved for the ideas that have proven evidence of their successful ability to have a massive impact.

The final funding required to take a successful social impact program or project or tool to full scale will likely not come from donors or grants.

Ann Mei sees a model of blended finance. Philanthropic dollars are used to fund risky innovation and understand what works best. These dollars then are able to unlock private capital markets, or government funding to take the best projects and accelerate their implementation to scale.

This Lean Impact approach to social good helps ensure that funds are used on those projects with the most significant potential for impact, and a proven value, growth, and impact hypothesis.

It ensures that organizations always continue to strive to do better. To always believe they can achieve greater impact, with fewer resources. A hypothesis-driven, results based mentality is needed to make this happen.

Articles in this series:

  1. Lean Startup + Lean Impact: Combined Short Summary (this article)
  2. Why philanthropy hampers innovation
  3. Engines of growth in social impact
  4. Lean Impact: How to Innovate for Radically Greater Social Good (detailed summary)

Other articles you may like:

  1. The Lean Startup: Key themes from the book by Eric Ries
  2. Pair Together: Design Thinking, Lean Startup, & Agile

I highly recommend reading the full book Lean Impact: How to Innovate for Radically Greater Social Good, by Ann Mei Chang yourself.

Please note. The quotations used in this blogpost are jotted down while listening to the audio version of the book. They may be slightly inaccurate or accidentally missing. Please contact me with any revisions to the accuracy of these quotes and the original text.



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