With contributions from Anaïs Sägesser and Majka Baur
Since the inception of our Scaling4good initiative, 2,5 years ago, we have analysed many documents and talked to exceptional people motivated to transform our societies and economies at a faster pace than currently to maintain our planet in a “safe operating space” for humanity. What did we learn so far and why do we care about scaling for impact?
The text below proposes some of the key learnings, presented without specific order of importance.
Why scaling is important
We remain convinced that scaling deserves attention and structured approaches since many people and organisations are struggling with it. In search for a recipe to accelerate the revolution toward sustainable development many people test and experiment new solutions. At the same time we know that innovation does not lead to impact but only scaling impactful solutions does. So many prototypes are advertised as successes, yet few of these succeed to scale. One of the main reasons for this is that there is no one-size-fits-all method, but also no framework to capture the lessons learnt in one place in order to replicate them in another. Replicating is not copying, every local success goes with a specific context, with a « story ».
Scaling is an art, not an engineering practice
Scaling is the art of making big things from small ones. This art is critical for disruptive, game-changing ones. These do not benefit from the market strength and traction, contrary to the common assumption in innovation that invisible market forces exist and will capture the good ideas and scale them. Hence specific efforts need to be devoted to ensure the scaling of innovations that deeply transform our economies, communities, societies and ultimately ourselves.Such innovations indeed face further behavioural, societal or regulatory barriers which prevent market forces to enter into action.
Scaling follows or combines three main paths
- scaling-up corresponds to the organic growth of a company or an initiative. It is the one that is best documented because it is the classical one from a business perspective.
- scaling out corresponds to the replication of a given initiative in a different context. Scaling out is well represented in social businesses
- connecting the dots relies on developing synergies with other initiatives of a similar or of a different nature leading to a system’s change
While the first of these paths is common in the business world, the second and third ones are frequently associated with social innovation. But this is changing. The development of « open » approaches (open source, open innovation…) demonstrates the possibility of radically new business models resulting from a combination of cooperation and competition, so-called coopetition. The classical world is based on the belief that competition is the most efficient way to achieve scale because it automatically selects the most adaptive and the most scalable products. This paradigm is changing: in the new world, competition is not anymore “The Solution”. Scaling small things requires combining competition and cooperation, and the combination often starts with cooperation and agreeing to a joint vision of impact.
Scaling needs to be distinguished from innovation
It is critical to distinguish innovation and scaling. Innovation is an initial phase of investment into a new product or service that requires specific processes. These are well captured by the Lean Start-up method. But even if a venture is successful and manages to survive the (too) classical Valley of Death, it does not mean that its products will be deployed at scale. Scaling takes time and persistence, especially when the innovation is disruptive or systemic. Indeed new solutions generally face many barriers, especially when they require a change in behaviour or a transformation of societal values. The book by Christian Seelos and Johanna Meir (see blog) explains this tension between innovation and scaling extremely well. It also shows the complexity of scaling pathways: the social ventures they studied all had their own path to success. But they all tried many different scaling routes before finding the right one.
Christian Seelos and Johanna Meir argue that innovation and scaling imply different approaches and a different mindset. And also that innovation is the most exiting part of the process. It requires creativity, agility and a research oriented mindset while scaling requires persistence, focus on good management and on the long term objectives.
Scaling for impact differs from scaling business
Most of the scaling discourse is classically devoted to « scaling up » i.e. the way a business can be developed and become successful. But many businesses cannot scale easily in a competitive environment, especially when they imply deep and systemic transformations. As we know from classical innovation management theory, scaling does not result only from technology-push or demand-pull approaches but from new market creation. Now the reason why the market creation approach is failing for our grand societal challenges is that a whole system change and new paradigms are required for this. Our assumption is that this paradigm should be based on cooperation and not simply on competition.
Therefore scaling for impact differs greatly from classical business scaling (see blog). It requires a different mindset, not simply focussing on profit and on growing the value of the company. Fortunately, with the tools offered by the new economy (see below section on platform scaling for instance), it is possible that scaling for impact eventually leads to another type of growth, even bigger (see exponential organisations).
Transformation at scale requires systemic approaches
Understanding how a system functions, which balancing mechanisms and leverage points exist, is critical to trigger its transformation. One approach to identify these leverage points is to “nudge” the system, i.e. to apply small changes to it in order to understand its reactions and to locate its critical functions. Only when the system functioning is understood can its transformation be initiated.
An interesting synthesis of the key leverage points related to different types of innovations has been produced by C Seelos and J Meir. There is a progressive increase in the difficulty to scale impact from technology to economy, to human and then societal issues. One lesson from their study is that due to the complexity of human systems there cannot be a one-size-fits-all process to scaling.
Managing transitions requires to anticipate that some stakeholders will lose their power
The typical three phases of transitions (adapted from William Bridge): it is critical to put efforts on both the abandonment of the old model and on the development of the new one
Another reason why scaling is difficult is that deep changes affect many stakeholders. Some of them lose, at least at the beginning of the transition, while some others benefit from the changes. A key lesson is that during transitions, it is critical to think of both the losers and the winners. The losers are often those who have a significant power in the system. Anticipating the consequences for the losers and mitigating these consequences is therefore critical and requires proactive action. This needs to go hand-in-hand with the deployment of the new solution.
The book by William Bridges, Managing transitions, (see blog) provides important insights into this transition process and the way to manage it.
Public-private synergies are key for scaling impact
Public-private synergies are an essential dimension of many scaling approaches. Too often the two domains are perceived as opposed and their cooperation is not easy. Public action contributes to public good and should be neutral vis-a-vis private goods. By contrast private companies are perceived as benefiting primarily to their shareholders and employees and as such face difficulties to contribute to the public good. This Manichaean perception leads us to (rightly) think that separating the two is essential for good governance. But it also prevents imagining new models where the two domains complement each other.
We discovered that this divide, often justified, can also be a barrier to scaling solutions. There are many synergies between public and private action that need to be better articulated (see on this topic the book “The Entrepreneurial State” by Mariana Mazzucato). Public money is for instance essential to de-risk new solutions, i.e. to contribute to the initial stages of development through research, grants and guarantee mechanisms. It can also incentivise public research to valorise its results in innovative solutions. During the scaling phase, public action is essential to removing barriers through policy and regulations, through adapted procurement rules or through providing space for experimentation. Indeed several disruptive solutions face difficulties to scale despite of their contributions to the public good, because regulations quite often fit the business-as-usual solutions.
Platforms: critical for scaling and new business models
Scaling for impact (i.e. to contribute to positive transformations) requires most of the time to cooperate with others, to accept losing some IP to accelerate the adoption of new solutions and to be more on the cooperative side than on the competitive one. Fortunately new IT solutions such as online platforms facilitate this sharing of information. Building on these new trends, « platform scaling » is becoming one of the mechanisms that contributes to scaling for impact (see the Book Platform Scale). Platforms mean at least a certain degree of openness. They also oblige to construct interoperability between different tools. A good example is offered by our smartphones which offer possibilities for millions of applications to be developed and to benefit from the « zero marginal cost » announced by Jeremy Rifkin.
A massive transformative purpose and the capacity to externalise resources are critical to fast scaling companies
Several lessons can be drawn from the large unicorns (e.g. Airbnb, Uber) that are currently growing more and more rapidly. These new « beasts » grow mostly from huge amount of capital mobilisation that reveal and create trust from investors in their new models. These exponential organisations do not generate operational profits for a long period of time which questions the scalability of the capitalistic model on which they are built, but they nevertheless provide interesting lessons well captured in the book “Exponential organisations”.
Successful fast-growing companies ride the information wave, adapt themselves very quickly by test and error approaches, are highly decentralised to increase their employees’ autonomy, externalise their resources and assets, and finally adopt a massive transformative purpose that help them aggregate a big community around them. Obviously, we find here again that these successful companies address the cooperation-competition polarity with new eyes and that a major reason for this is that in a world that is dominated by information, learning and adapting has become essential to success (see blog).
To conclude, learning has, since the beginning, be one of our objectives. We are progressing and an initial framework is on its way. Bear with us!