Impact — Improved Outcomes aren’t enough, delivering on Resilience in Adversity is key

Social Enterprises (and not-for-profits) always talk of the Impact of their work. It is a key measure of success and often the reason that resources are given to them. From a time when Impact was described through pictures of happy consumers there has been a movement to ‘theories of change’, ‘metrics’, ‘measurement’ and ‘assessment’ — people even talk about the ‘Social Returns’ to a dollar. Spiffy stuff!

So why don’t households adopt innovations which should help them?

Even as this happened, there has been a conundrum in many Impact programs– why wont dis-advantaged people adopt innovations which will improve their lives and deliver impact — provide lighting to a household which uses paraffin or oil, increase the yield for a maize farmer in Africa or pay for medical expenses for a previously uninsured senior in the low-income family. To developers of these solutions the case is obvious — if the benefit the household gets from the product or service outweighs the cost, they should adopt it — rapidly. However, many a company has been tripped up — there are trials (sometimes driven by accompanying freebies) — but the product then ‘just doesn’t catch on’. So, what goes wrong?

The answer is in (lack of) resilience to adversity

I believe the answer lies in understanding how a low-income household thinks ‘on the downside’. If things are going well, they may well be convinced that this product is something they should buy. But what if things go badly? For a household which spends, say one month’s salary, on a solar light-system a key question is what will happen if it falls and breaks during a storm. Will they be able to get it repaired? What if the repair costs even more money? In the meanwhile, will they have to go back to spending on paraffin or oil?

So, in a sense, there is ‘risk aversion’ in such consumers. However, it is in no way irrational. For these households — typically spending almost all their income which are uncertain in the first place, still able to afford only the basics, and with low savings — something going wrong can be a catastrophe. It can mean not being able to pay the school fees of their children, being unable to buy sufficient seeds for the next planting season, even going hungry. In such a situation, they may well be making the ‘right’ choice — staying with something tried-and-tested — because their ability to experiment is severely limited by their inability to bear the costs of things going wrong.

Innovators understand this, but define ‘risky events’ too narrowly

Now providers understand this, to an extent — they provide for safety-nets if the product fails or is something new and better comes along in a while.

But what if a newly engineered seed produces a fabulous harvest if the rains are 80% or more than normal but the harvest completely collapses below that amount of rain? The company cannot control for the rain. But climate change can mean that the rains are becoming increasingly variable around the average. Or, their timing during the season is changing in unpredictable ways. The small holder farmer has to account for this.

Or what about a daily wage laborer who suddenly finds that a new virus means that the roadside eatery he works in will be shut for at least 6-weeks, maybe more. Should he really have spent on paying an upfront payment for medical insurance which will, anyway, now be useless as he cannot keep up with the payment of future premiums?

Decades of experience and some societal memory have told them to be wary of things which work well in ‘the normal’ but go sharply down otherwise. The ‘downside’ can have horrible consequences for them. There isn’t a bank balance or investments which they can dip into to tide over the bad period. And, more often than not, there isn’t a social security net which they can rely on for pay-outs when things go wrong.

Providing cover for external adverse events will sharply improve adoption and impact

So, what can Social Enterprises do to improve outcomes for their customers and for themselves? Well, the answer is to continue focusing on ‘moving the average’ up. But, an equally important part has to be to reduce the probability of an adverse event and to reduce how bad things become for the consumer if there is such an outcome. For events which are outside their control (for example, bad rains, COVID19) social enterprises need to focus on the second part.

The seed being given to the farmer must increase his yield from every acre and it has to work reasonably well if the rains are low or come late in the season. If it has a higher resistance to locust swarms, that’s even better.

The household which buys the solar-light system has to know what happens if there are breakdowns or accidental breakages. These will happen and knowing what the remedy is can help them deal with the adversity they face.

In a nutshell — any solution needs to improve outcomes and build resilience.

Without an answer for resilience, innovations — which are good for the most part– will falter at the doorstep of the consumer. With them, there will be happy customers, healthy companies and deep, sustainable impact.