MERL Tech and the World of ICT Social Entrepreneurs (WISE)

by Dale Hill, an economist/evaluator with over 35 years experience in development and humanitarian work. Dale led the session on “The growing world of ICT Social Entrepreneurs (WISE): Is social Impact significant?” at MERL Tech DC 2018.

What happens when evaluators trying to build bridges with new private sector actors meet real social entrepreneurs? A new appreciation for the dynamic “World of ICT Social Entrepreneurs (WISE)” and the challenges they face in marketing, pricing, and financing (not to mention measurement of social impact.)

During this MERL Tech session on WISE, Dale Hill, evaluation consultant, presented grant funded research on measurement of social impact of social entrepreneurship ventures (SEVs) from three perspectives. She then invited five ICT company CEOs to comment.

The three perspectives are:

• the public: How to hold companies accountable, particularly if they have chosen to be legal or certified “benefit corporations”?
• the social entrepreneurs, who are plenty occupied trying to reach financial sustainability or profit goals, while also serving the public good; and
• evaluators, who see the important influence of these new actors, but know their professional tools need adaptation to capture their impact.

Dale’s introduction covered overlapping definitions of various categories of SEVs, including legally defined “benefit corporations”, and “B Corps”, which are intertwined with the options of certification available to social entrepreneurs. The “new middle” of SEVs are on a spectrum between for-profit companies on one end and not-for profit organizations on the other. Various types of funders, including social impact investors, new certification agencies, and monitoring and evaluation (M&E) professionals, are now interested in measuring the growing social impact of these enterprises. A show of hands revealed that representatives of most of these types of actors were present at the session.

The five social entrepreneur panelists all had ICT businesses with global reach, but they varied in legal and certification status and the number of years operating (1 to 11). All aimed to deploy new technologies to non-profit organizations or social sector agencies on high value, low price terms. Some had worked in non-profits in the past and hoped that venture capital rather than grant funding would prove easier to obtain. Others had worked for Government and observed the need for customized solutions, which required market incentives to fully develop.

The evaluator and CEO panelists’ identification of challenges converged in some cases:

• maintaining affordability and quality when using market pricing
• obtaining venture capital or other financing
• worry over “mission drift” – if financial sustainability imperatives or shareholder profit maximization preferences prevail over founders’ social impact goals; and
• the still present digital divide, when serving global customers (insufficient bandwidth, affordability issues, limited small business capital in some client countries.

New issues raised by the CEOs (and some social entrepreneurs in the audience) included:

• the need to provide incentives to customers to use quality assurance or security features of software, to avoid falling short of achieving the SEV’s “public good” goals;
• the possibility of hostile takeover, given high value of technological innovations;
• the fact that mention of a “social impact goal” was a red flag to some funders who then went elsewhere to seek profit maximization.

There was also a rich discussion on the benefits and costs of obtaining certification: it was a useful “branding and market signal” to some consumers, but a negative one to some funders; also, it posed an added burden on managers to document and report social impact, sometimes according to guidelines not in line with their preferences.

Surprises?

a) Despite the “hype”, social impact investment funding proved elusive to the panelists. Options for them included: sliding scale pricing; establishment of a complementary for-profit arm; or debt financing;

b) Many firms were not yet implementing planned monitoring and evaluation (M&E) programs, despite M&E being one of their service offerings; and

c) The legislation on reporting social impact of benefit corporations among the 31 states varies considerably, and the degree of enforcement is not clear.

A conclusion for evaluators: Social entrepreneurs’ use of market solutions indeed provides an evolving, dynamic environment which poses more complex challenges for measuring social impact, and requires new criteria and tools, ideally timed with an understanding of market ups and downs, and developed with full participation of the business managers.