I've known since before BIF started, that it can easily take 5 years for an inclusive business to reach solid success and longer to reach true scale. THis is evident from many of the 'success stories' that are profiled at events and awards.
So meanwhile, how then do we assess whether an inclusive business is on track for success? An interesting question on which I've had good conversations this week.
I've been exploring this question because as BIF approaches the end of 2 years of operation we are looking across our portfolio. Results in terms of numbers of people at the bottom of the pyramid who are involved are bound to be tiny at this stage: many businesses are only just getting going; a minority have reached break-even. But we need to get a sense of whether the businesses are on track for viability and thus sustainability.
I've been asking smart people what they would look for to identify whether a business is likely to reach commercial sustainability. The easiest answer is to explore the trends in turnover, sales, profit and client numbers. We have always said that is what we will report before BIF ends. But what if it is too early to map such a trend? As it is now for most. If the business is still developing, the useful questions include whether the company...
- has a business plan, or if not yet a finished business plan, then a clear plan with targets?
- tracks progress against targets?
- is on track against its business plan and targets (tracking progress and being on track are different, though the one helps the other)?
- adapt plans, based on tracking progress or understanding new challenges?
- demonstrate sufficient commitment to the venture, in terms of staff time, financial resources and leadership?
- have the external leverage that it will need for success - finance and partner networks?
- have in place activities to secure customers and contracts, and a clear plan for turning expected demand into sales?
These are all qualitative judgements. It's not a matter of giving a score to each, adding up the scores and making a firm conclusion. Different respondents have emphasised different ones, but they can all be part of the answer.
Many programmes use a traffic light system. They take the top indicators - such as 3 of the above - and mark them red, amber and green. These traffic lights can in turn be aggregated into one overall traffic light for the commercial side of the project. It sounds simple, but of course it is not at all simple to set up the scoring if the answers are to make sense.
Another light could be applied to the development side of the project; how many people will benefit, how significantly (to them and their livelihood)? Based on a lot of qualitative judgements, high level colours can give a picture of how the portfolio is performing or how it changes over time. In BIF we will exploring the value of these aggregations.
Of course viability is just one part of the story. If the venture reaches commercial sustainability, will it in turn reach scale - engaging tens or hundreds of thousands of poor people? This is why donors are involved after all. A traffic light system for scalability seems even harder to me. We are at least clear on three different ways a business can scale. Business growth is just one, the most obvious. Replication of the model by others is at the other extreme - the first mover may not even survive but the Inclusive Business model takes off in the hands of others. And the third, middle way, is expansion of the model through business-to-business partnerships. In this version, the initial company grows, but as one part of an expanding network, possibly linked through franchises and specialised partnerships. If anyone has a way to assess and rank potential for these routes to scale, let us know.