Over the last 10 years, impact investing has attracted considerable attention. Today there are hundreds of impact investors putting their money behind companies that aim to deliver a social and financial return. For those of us working in this sector, these are exciting times.
However despite our collective name – “impact” – as a sector we are still in our relative infancy with regards to standardizing and improving the way we think about, measure and report social performance. At one level this is to be expected, and it’s a challenge other sectors (including government and traditional philanthropy) have been grappling with for longer still, and yet there are still no turnkey solutions to social measurement. But this creates problems nonetheless since it makes it difficult to know where and how to invest most effectively to create the greatest amount of both financial and social return. The problem is only likely to become exacerbated as the space continues to grow.
At Acumen we’re all too familiar with these challenges. Indeed we’ve been on quite a journey when it comes to our efforts to understand social performance. Early on, we helped shape the development of impact metrics for what was then an emerging field. We co-developed the Impact Reporting and Investing Standards (IRIS), a taxonomy of social and financial metrics.
Once established our earliest approaches to measurement was to send our companies a quarterly request for such metrics, asking them to send us back the data in an Excel spreadsheet. We found that it was relatively easy for companies to tell us simple output measures— such as the number of customers served or products sold – but when it came to reporting on more complex social measures, our companies struggled. We realized that while the IRIS standards do a great job of describing what to measure, they don’t provide a playbook on how to measure.
This “how,” it turns out, is an especially complex matter. For a start it requires a new rule book, since neither the established tools of traditional investing nor the measurement practices of international development are suited to the context social enterprises are operating in. Moreover budgets are tight, and appropriate talent and systems are a rarity. Finally the incentives to measure are often out of line with demand coming from on high, and not recognizing what is most interesting to the enterprises themselves.
In an attempt to change these dynamics we created a new approach to impact measurement, Lean Data. By starting with the context of the social enterprise it is allowing us and our companies to dig deeper into their social performance, and hear directly from end customers. Here’s how:
Finding the intersection between impact measurement and customer value. As an investor in social enterprises, Acumen needs impact data to manage its own performance. But we believe social enterprises should first and foremost be accountable to their customers before worrying about accountability to their funders. Social enterprises set out to solve customer pain points, and getting insights on customer value, loyalty and satisfaction are invaluable in determining business success. We’ve found that collecting impact data is, in general, well-aligned with understanding how a company’s product or service is generating customer value. Lean Data begins by working with companies to determine what they wish they know about their customer and how that would help them make certain business decisions. We then develop short and snappy surveys with questions that develop insights at the intersection between impact data and customer value.
Using lean design principles and technology to produce results efficiently and affordably: We’ve figured out how to use economies of scale, technology and lean design principles to collect data at a fraction of the time and cost of traditional research firms. We use a mix of methods: voice calls, SMS, and IVR. We have done in-person data collection but this has mainly been when partnering with external research agencies. Due to our team’s presence in over seven countries, we know what method works best depending on the regional context. When determining the method or mix of methods to use, we also strongly factor in a company’s existing relationship with their customers and the sustainability of data collection in the future.
Leveraging insights from more than 25,000 low-income customers to inform survey design. We have collected data across more than 25,000 low-income customers in over eight countries. What this means is that we have a growing understanding of what questions work well, throughout multiple contexts. Because of Acumen’s wide sectoral focus, we’ve also gained expertise in determining how to get the richest insights across various sectors and business models.
These adaptations to measurement, whilst simple, are having excellent results. We’re finding that companies are getting excited about social measurement, understanding that at its core, this is simply a question of listening and then responding. Basic activities we can all relate to.
This blog is a part of the February 2017 series on Customer intelligence revolutionising business at the Base of the Pyramid in partnership with Acumen Lean Data. Access the series for interviews with social enterprises Dr.Consulta and D.light, as well as blogs from Business Call to Action, Social Value International and many more.