Thursday, January 29, 2009

Scaling back (or forward)?

My regular bleeps know I have made a few posts which are skeptical of the fashionable demands for "rapid scaling" of all social enterprises. It is a key item to think about for a new venture, but the answer is not always "be the biggest." You do, however, want to figure out a way that your new venture makes a significant impact and also can pay its bills.

Beth Rhyne, head of Accion's Center for Financial Inclusion, has an interesting systemic perspective on the appropriate scale for financial system fixes that was written for the Davos crew. Beth suggests that "a return to a banking microgrid, in which each institution operates a locally-grounded business, could help stabilize markets in many countries." She points out that banks based on local deposits and loans have a better track record on durability than the global institutions.

This theme, of "going local" has long been present in the field of sustainability, and I always felt it was a bit too "granola" for me. Bill McKibben (Deep Economy) and Michael Shuman (Small Mart Revolution) helped change my perspective with their discussions of enterprises that went well beyond local food businesses. There are industries that seem to fit well into more local systems, and as these grow, clusters of related companies seem to grow. The community reconnects and grows stronger.

Microfinance and community development institutions (such as Accion, FINCA, Shore Bank and Opportunity International) can help build connections between these more local communities, just as the Slow Food movement builds global connections between local food enterprises, and Fair Trade approaches connect agricultural producers and local artisans.

When the going gets tough, even for those that attend Davos, a common response seems to be to fall back on relationships and communities. I sense that this may reinforce preferences for more local solutions and accelerate networked business models based on local relationships and communities. And this may help entrepreneurs think about scaling in different ways.

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