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Impact Imperative: Innovation, Entrepreneurship, and Investing to Transform the Future
379Overview
Axiom Business Book Awards 2020 Gold Medalist in Philanthropy / Nonprofit / Sustainability The Time to Impact the Future Is NowImpact Imperative author Pamela Ryan explores the likely realities facing our planet and humanity for the next few decades. We are, as she tells us, at a pivotal moment in history. Individuals, organizations, and investors are doing immense good, but extraordinary challenges are enveloping the planet, threatening life and humanity itself: escalating extreme weather events, shifting global population and power balances, widening socioeconomic disparities, and rising tensions among extremists and mainstream populations. Impact Imperative stems from consultations with over 130 professionals in the burgeoning impact innovation, entrepreneurship, and investment space. As Dr. Ryan shares insights from these impact innovators about how we can meet these challenges in the next few decades and beyond, she encourages readers to think about how our own consequential actions in the present can propel us—individually and collectively—toward more optimal futures. Or increasingly destructive futures.
Product Details
| ISBN-13: | 9781626346659 |
|---|---|
| Publisher: | Greenleaf Book Group Press |
| Publication date: | 10/22/2019 |
| Pages: | 379 |
| Sales rank: | 1,219,212 |
| Product dimensions: | 6.30(w) x 9.00(h) x 1.20(d) |
About the Author
Dr. Pamela Ryan received her Ph.D. from the University of Texas at Austin with award winning research on the psychology of decision-making in the US venture capital industry. A dual USA-Australian citizen, Dr. Ryan has held leadership positions in multiple international organizations, including the Tingari Silverton Foundation, Psychology Beyond Borders, Issues Deliberation Australia. Her unique skill set and diverse experiences as a psychologist, entrepreneur, investor, business manager, researcher and author have been applied in business, political and psychosocial arenas around the world. Dr. Ryan has taught entrepreneurship at the McCombs Business School at the University of Texas and the psychology of decision-making at the Australian Graduate School of Management.
Read an Excerpt
CHAPTER 1
Impact? What Impact?
"If you asked me what the world looked like in twenty-five years, I guarantee you that companies, all companies, will be reporting not just financial metrics, but also impact metrics … Those things will be driving part of their investment portfolios, and that will effectively get companies to pay for negative externalities."
— Nick O'Donohoe, Big Society Capital
Metrics, measurement, evaluation. These terms have become familiar, almost ubiquitous and inescapable in the social enterprise world, although they can elicit trepidation and exasperation in equal measure. Yet there is nothing unfamiliar about the expectation that an organization, any organization, answers the fundamental question: Is the organization delivering what it aims and claims to deliver? The tricky part is how we can know the organization achieves its aims and unequivocally demonstrates its claims.
In the impact arena, exasperation derives from how specifically to measure the impact of enterprises whose positive impact missions are ahead of or equal to their financial missions. The social metrics that Nick O'Donohoe — who was appointed by the UK government as the first leader of Big Society Capital (BSC), the world's first institution established to facilitate a countrywide, even global, impact investment sector — sees as normal and universal in a decade or two are the source of debate and struggle as we enter the 2020s.
O'Donohoe noted how far the impact arena has come in just one decade. The G8 process raised the impact investing conversation to whole new levels, reflecting justifiable concerns and hype about reality. When leaders of the G8 (the "Group of Eight" of most industrialized countries — the United States, Britain, France, Germany, Canada, Italy, and Japan; Russia was temporarily suspended for its invasion of Ukraine) gathered in Northern Ireland in June 2013 for their annual summit on global issues, then-UK prime minister David Cameron (president of the 2013 summit) convened a pioneering task force on social impact investment. A vocal champion of impact investing, Cameron backed his vision with political and other resources, including committing his Cabinet Office to be the task force secretariat for two years. This G8 task force was mandated with catalyzing a global market in impact investment to improve society, by facilitating global dialogue and action in the G20 and beyond. Initial members included all of the G8 countries, plus Australia and the European Union, both invited to join with observer status. Since then, O'Donohoe has witnessed seismic shifts, like the emergence of a critical mass of investors wanting to positively impact our world. More and more high-net-worth individuals and foundations are asking their banks about positive impact investments. Millennials are investing with their positive impact values and Baby Boomers are seeking alternative meaning and purpose to the financial drivers that may have dominated their lives so far. People are caring about both the positive and negative impacts of their own and organizational actions. They are increasingly paying attention to how they can contribute positively, not negatively.
Such client interest is nudging mainstream financial institutions into the impact space. O'Donohoe sees a significant majority of citizens wanting to do more and asking their banks how they can engage. Corporations, managers, CEOs, and boards of directors are seeking opportunities for impact investment — one of the fastest-growing investment strategies — and proactively embedding impact into their organization's culture and activities. Others are accessing this burgeoning source of financial and human capital, as individuals, family offices, philanthropic organizations, governments, institutional investors, and corporations embrace investing for positive purposes. In impact innovators' positive visions of global futures in the late 2020s, these positive impact values dominate entrepreneurial initiatives, investments, and consumer decisions. In the minds of today's impact changemakers, by 2030, these values are a normal part of operating an organization, of life.
What is "Impact"?: Impact as noun and verb, product and process
Conceptions of impact in the first two decades of the twenty-first century have mostly used the word as the end result of action. As a noun. The focus has been on measuring impact as the conclusion of a sequential set of organizational activities — a linear chain starting with an organization's mission and goals regarding social challenges and ending with impact. As a noun, impact belongs to the family of words that includes effect, influence, consequences, results, and conclusions. However, this dominant use of impact as a noun conceals elements of impact that are about force: impact as a collision or the striking of one thing against another. Impact as a verb.
Most impact measures in the second decade of the twenty-first century focus on impact as a noun, only examining outputs and outcomes, the effects of an organization's activities. However, if only the products of an organization are examined, we miss a fundamental set of impacts. We focus on a finite end instead of ongoing evolution. We see only a problem to be solved within a specific time frame instead of a set of circumstances to be managed over time.
As a verb, impact is associated with words connoting "to affect"— the act of influencing, transforming, moving, shaping — but also, in some usages, the act of colliding with or slamming into. As Professor Karl Weick might say: If all incarnations from affect to effect, from influence to collision, have a tinge of impact to them, then determining what impact is and what it isn't, let alone measuring it, becomes exceedingly hard. But doable.
When our usage of impact comes to encompass its complexity — as both noun and verb, as product and process — we get close to articulating how impact and impacting, the doing impact and the measuring of impact, will evolve over the next decade or two.
Impact innovators we consulted foresee a 2030 in which common use of the word impact reflects its full meaning as noun and verb. This reflects the inherent intricacy of the extended and interconnected web of potential impacts (intended and unintended) of any organization. In 2030 the linear chain dominating pre-2020 impact thinking should be replaced by a collective understanding of the mosaic of relationship threads, and the multiplicities of relations among activities, processes, outputs, outcomes, and impacts — replete with feedback loops and circular cause-and-effect ramifications.
UNDERSTANDINGS OF "IMPACT" ARE EVOLVING
If contemplating all of these words feels like we are treading our way through a field studded with land mines, wariness is well warranted.
As the 2020s begin, battles still rage around the planet between shareholders and stakeholders, but the tide is turning toward a future where profit is not the only measurement of a company's well-being. The surge in demand for awareness and action toward net positive impact is being felt in the boardrooms of even the most profit-oriented corporations. Just ask the embattled CEOs of United Airlines or the Weinstein Company about the billion-dollar beating their financial bottom lines endured after public exposure of bad behavior (including delayed responses or cover-ups) that valued profits over people.
Leading thinkers and doers in the impact innovation arena, like Nick O'Donohoe and Stanford Social Innovation Review editor Johanna Mair, believe that by 2030 technology-driven transparency and accountability will ensure that individuals and organizations enacting negatively impactful activities will be routinely called out, held to account, publicly shamed. So, by 2030, individuals and organizations will have no choice but to ensure net positive impact of what they do. By 2030, the debacles like Facebook's or Wells Fargo's public displays of disregard for customers' rights will be so last decade.
Despite the challenges of the 2010s, many impact thought leaders generally believe in a positive trajectory for impact from the 2010s' struggle to sift through all possible definitions and measures to consolidated understandings and clarity. When it came to impact measurement, our interviewees cohered around consistently salient themes. Impact innovators see impact metrics in the late 2020s reflecting a world where impact is the way, not a "third sector" or "fourth way." They see definitions of impact and measurement characterized by clarity and intent, transparency and accountability, forcing everyone into measurement. They see a 2030 in which conceptions of impact success are multistoried and customized, measures of impact are multistoried and customized, and definitions and measures of scale are multistoried and customized, with measures occurring at multiple levels. They see definitions and measures of impact reflecting evaluations of relationships and collaborations, processes and products. They see locals driving the impact measurement process with reference to global, sector, or other stakeholder measures, and impact definitions and measures simultaneously encompassing the short term and the long term.
For the remainder of this chapter, we examine the status of impact measurement in the 2010s, and then explore the challenges for measuring impact into the 2020s.
MEASURING IMPACT
How do we know when net positive impact has occurred? How do we measure impact? Designers, entrepreneurs, investors, and other stakeholders may have very different objectives and priorities. Some types of impact — for example, the number of farmers who use solar drying systems to preserve their produce, or the number of children with diabetes who use Jerry, the educational teddy bear, to learn how to monitor and care for their own disease — may be easier to define and measure than others. For example, how specifically the recipients of these initiatives were impacted, or how the entrepreneurs' lobbying efforts helped change public policy to enable government subsidies to farmers, or educational teddy bears being reimbursable on health insurance.
Forms of impact measurement that may capture more nuanced impacts — especially the gold standard, randomized control research designs — take time and specialized intellectual and research knowledge and skills. But a more nuanced approach to understanding impact is the key to unlocking proper measurement of it.
While virtually every impact changemaker envisages a future where impact measurement dilemmas have been solved by 2030, few have solved the measurement puzzle that might enable standardized comparable measures of impact across organizations, industries, and sectors. They were certain that by 2030, understandings of how impact manifests would be predicated on data. On evidence-based decision-making. They were certain that understandings of the nature, size, and rippling effects of impacts (both positive and negative) are much more advanced by 2030, facilitated by technology-enabled, real-time access to meaningful data. But measuring traditional returns or financial return on investment (ROI) is relatively simple and straightforward: Compare monetary income streams against monetary outlay streams, calculate the profits (or losses) and the consequent financial ROI, and explain in the annual report. Can social and environmental returns on investment, which are often social changes or quality-of-life improvements, really be measured in numbers? For enterprises intent on positive impact — whose missions dictate that their companies make a positive difference to societal challenges — the task of evaluating whether or not they have reached their impact goals is much more complex than a single or even triple bottom line of numbers.
Accurately capturing the multiplicity of impacts of an enterprise is often an illusive endeavor. Illusive because, as an Economist editorial asserted, defining what constitutes impact has been plagued by squabbles among impact constituents. Illusive because impacts are typically qualitative rather than quantitative, dynamic rather than static, long-term rather than short-term, complex rather than simple, and embedded in larger systems rather than existing independently. Impacts unfold indefinitely and are variable depending on contexts, timing, and levels of analysis. They are not adequately represented by reductionist monetary proxies.
IMPACT MEASUREMENT NOW
If the impact sector has been characterized by existential squabbles about what constitutes impact, determining how to measure potential impacts can be even more contentious. What is measured and how measurement occurs depends on a range of factors. Some of these factors seem simple: who is commissioning the measurement, where the measurement initiator lies on the donation or investment spectrum, and the goals of the positive impact initiative. Others are more complex, such as an entrepreneur's beliefs about how their product or service will make an impact; goals of impact measurement; type of enterprise; target population for the impact initiative; stage of development of the enterprise; risk appetites of donors and investors, and the degree to which they subscribe to a venture capital or other model of growth; the context in which an impact initiative is rolled out; and level of analysis at which measurements are targeted.
An example might illustrate the array of possible measurement options.
Case study in impact measurement: Grameen America
Our Tingari-Silverton Foundation was a first-mover investor in Grameen America's forays into Austin, Texas. Grameen Bank, with its rich history of funding women entrepreneurs in their pathways out of poverty, understood that its pioneering approaches to nurturing enterprise had potential to contribute to neighborhoods of the less fortunate in prosperous cities.
Austin is a city more known for its spawning of multimillionaires, people born to a postcode on the advantaged side of the digital divide, but as many Austin social impactors know only too well: "There but for the grace of the universe (or the postcode lottery) go I." Children born on the disadvantaged side of the digital divide, in poorer postcodes, often inherit more gloomy trajectories. Their futures can be limited and bleak. Many disadvantaged youth do not make it to their final year of high school. Some drop out when they give birth as a teenager; others get caught up in gangs and end up in prison, or become seriously ill or die before they should.
Grameen America launched operations in Austin in 2014. Since then, it has invested more than $10 million in women entrepreneurs in Austin's poorest communities. To help measure the success of these investments, Grameen America regularly sends reports to supporters and investors about its microfinance program in America, particularly in Austin. The organization relays its impact in terms of numbers: women "served," total loans dispersed and dollar values of loans, average credit scores of borrowers, total new businesses started, changes in numbers from previous years, and new members taking out loans since inception. Grameen America also tracks types of businesses that its microfinancing has supported: beauty and cosmetics (26 percent), clothing and fashion accessories (21 percent), food and beverage (20 percent), health products (12 percent), and so on. Grameen America's current focus on these measures is partly dictated by the fact that it only started in Austin in 2014, so by nature, its reportable results are short-term. Reporting other data, even if collected, is not particularly meaningful until several years of data show patterns over time.
We know from research in the microfinance industry that other impacts could be included in Grameen America's research and reports: changes in knowledge and skills around finance, business management, budgets, and marketing; individual well-being indicators like self-esteem, sense of agency or control, happiness, and life satisfaction; community-level health and well-being indicators like numbers of children completing successive levels of education; and domestic violence. Even higher in the system is assessing the impacts these new businesses have on less wealthy parts of the wider Austin community.
DILEMMAS AND CHALLENGES FOR IMPACT MEASUREMENT
Nick O'Donohoe believes effective impact measurement starts with impact enterprise measures that most reflect the positive changes the enterprise is in existence to achieve. According to O'Donohoe, measurement should cover both the depth and breadth of impact (can assist lots of people a little or some people a lot).
If investors pressure for more data, an impact enterprise usually tries to deliver more data if it is financially feasible to do so. Examples of available impact assessment tools include the European Venture Philanthropy Association's (EVPA) comprehensive guide on how to implement impact measurement in five easy-to-understand steps, at the level of both the social investors and their investees. TRASI — Tools and Resources for Assessing Social Impact — is a database developed by the U.S.-based Foundation Center in partnership with McKinsey & Company. With input from a diverse range of organizations, including social investors, foundations, non-governmental organizations, and microfinance institutions, as well as the Better Business Bureau, the U.S. Agency for International Development, and The Center for Effective Philanthropy, the database is extensive and helpful for anyone trying to wade through the array of impact measurement possibilities.
(Continues…)
Excerpted from "Impact Imperative"
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Copyright © 2019 Pamela Ryan.
Excerpted by permission of Greenleaf Book Group Press.
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Table of Contents
Introduction 1
Part 1 Toward Clarity: Impact, Doing Good, Minimizing Harm 17
1 Impact? What Impact? 19
2 Intending Good. Doing Harm 37
3 Doing Good. Minimizing Harm 55
Part 2 Changemakers Inherent in Entrepreneurial Ecosystems 69
4 The Twenty-First Century Entrepreneurs 71
5 The Designers 95
6 The Ideas Facilitators, Mentors, and Launchers 114
7 The Ecosystem Shapers 138
8 The Impact Influences 162
9 The Capital Providers: Twenty-First Century Philanthropists 186
10 The Twenty-First Century Venture Capitalists 207
Part 3 Toward 2030: Which Future? 233
11 Likely Geopolitical and Socioeconomic Futures in 2030 235
12 2030: Four Alternative Futures 259
13 Toward 2030: Insights from Impact Changemakers-Navigating to Preferred Futures 278
14 Impact Measurement by 2030 303
Forthward: Everywhere, Everywhen 321
Acknowledgments 336
Appendix: Forms of Capital for Innovation, Entrepreneurship, and Impact 340
Notes 346
Index 371
About the Author 381
About the Contributors 383
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