One of the sessions we’re going to be having in the Tactical Philanthropy track at the Social Capital Markets conference is:
Replication vs. Diffusion: Does scaling social impact require scaling organizations?
A successful for-profit organization must maintain ownership of its concept while it scales in order to capture profit. But social impact accrues to the public, not the firm that owns the process that generates the impact. How should social enterprises weigh the tradeoffs between scaling their organization or scaling impact through sharing their process with others? Learn about two organizations that have successfully scaled using entirely different approaches (this session is still subject to change).
Today, I saw an interesting example of a "diffusion” strategy of scaling impact. New Philanthropy Capital, a nonprofit analysis firm in the UK which is itself a nonprofit, announced the launch of PHINEO, a new nonprofit analysis firm in Germany.
From the post:
“NPC is excited about the arrival of PHINEO, and also a little proud. As of Monday, Phineo’s team of 17 will research social problems in Germany as well as analysing charities trying to tackle them, to find those that have a large impact on the lives of beneficiaries. For this work, PHINEO has carefully adapted NPC’s charity analysis methodology for the German market, and has developed a three-staged charity analysis process…
NPC and PHINEO share a commitment to effectiveness, impact-driven funding, and the creation of public knowledge. We also believe that collaboration is essential to build the case for effectiveness and hope more and more similar organisations will spring up around the globe so we can learn from each other. We’re looking forward to following PHINEO’s progress—watch this space for regular updates.”
So NPC has essentially worked to create their own competition. This is not a one-off event. From my discussions with NPC, sharing their methodology with startups is a systematic part of their process.
This strategy would be insane for a for-profit company. As we note in the description of our SoCap panel, “a successful for-profit organization must maintain ownership of its concept while it scales in order to capture profit. But social impact accrues to the public, not the firm that owns the process that generates the impact.” This means that NPC can legitimately “claim” the impact generated by groups like PHINEO who they help get started. By sharing their knowledge, they are scaling their impact.
This approach is quite different from the more traditional approach to scaling, which generally refers to growing an organization so that it serves more people. The fact that social impact accrues to the public while profit only accrues to a single organization creates a striking difference between effective social sector strategies and for-profit strategies.
Bravo to New Philanthropy Capital for getting that their success should be measured by the degree to which they help drive “effectiveness, impact-driven funding, and the creation of public knowledge” instead of by the growth of their own organization.