Saturday, November 05, 2011

When Minimal Viable Product Doesn't Work (Part 2)

Today, Seth Godin had an interesting post on "When Minimum Viable Product Doesn't Work"- suggesting that the MVP approach suggested by Lean Start Up proponents has some limits.

I am in the midst of reading Lean Start Up by Eric Ries, and agree with Seth that it is a cool idea, but that it works best in some industries. I don't think Eric buys that, as he argues for very broad applicability of the lean start up approach. Since meeting Steve Blank a few years ago (dare I say he is the father of the lean start up movment?) I have been working on applying these concepts to social enterprises and BOP businesses.

So... is MVP a good idea for social entrepreneurs or BOPreneurs?

To me, the issue is one of "who bears the risk"?  Too often, well intentioned designers come up with a new product idea to help others, without a clear understanding of the context. In the well known example of the PlayPump, there was great excitement. However, the pumps, which had a habit of breaking down, often replaced more rudimentary (but longer lasting) hand pumps. In the end, some villages in Mozambique lost their source of drinking water. The company had put the risk of testing their product on the user, not the company.

I think MVP is still a good concept for BOPreneurs, as long as they pay close attention to "minimal" in their design. Don't make it so minimal that you have shifted risks of failure to your users or their communities. Too often, we fall in love with our ideas and only picture how much better off people will be with our new technology. But you must ask- "if this doesn't work, will our users be worse off than before?" Don't proceed until you can answer this question in the negative.

What happens if your solar powered light stops working? Does someone end up stepping on a cobra in the middle of the night? That is so much worse than a bad web link, isn't it? What happens if someone has spent a week's income on the light? Where do they exchange if for a new one (assuming they side stepped the cobra)? At Envirofit, we bought motorcycles from our early testers before doing retrofits. Did we distort the price signal a little? Probably, but if their bikes didn't work, the risk needed to be on us.

Unfortunately, you may also be working in a place that has had other well intentioned visitors trying things out on them. The cumulative impact of broken technologies should be understood; what can you do to minimize or eliminate the mistrust that results? And what about the reputation of any local partners that are helping you out? When you fly off, they still live there. What can you do to leave things better than you found them, not worse? I'd encourage you to look at Amy Smith's work on creative capacity building, which involves the community in the design of products and their dissemination. It is human nature to look at the benefits, but it is the entrepreneur's responsibility to look at the costs.

The insight behind MVP is validated learning, and using innovation accounting to measure what you learn. The motivation of the lean startup approach is to avoid "achieving failure," as Eric puts it, "successfully, faithfully and rigorously executing a plan that turned out to be utterly flawed." I believe the lean start up approach can be applied to social enterprises, as long as the venture has a deep understanding of, and undertaking to bear, the risks that the product is not viable.

Thursday, November 03, 2011

The Art and Science of Building a Board

Yesterday, our GSSE MBA students were fortunate to have Anne Marie Burgoyne do a guest workshop on governance and capacity building. I had some lame title for her talk, but what I should have called it (and what this post is about) is: "What Boards Do and Why it's Important." The subtitle might be, as Anne Marie put it, "The Art and Science of Building a Board."It is one of those under-taught and under-thought areas of new ventures.

First, a bit more about Anne Marie. She works for the Draper Richards Kaplan Foundation in San Francisco. Basically, she helped Bill Draper*, Robin Richards and Jenny Shilling set up a foundation that took the disciplined approach they had used in the venture capital business over to the social sector. As with traditional investors, they sought to "Find, Fund & Support" social enterprises. Their portfolio is impressive, a who's who of changemakers: Kiva, Living Goods, Room to Read, Vision Spring and The Mission Continues. When you talk to DRKF entrepreneurs, they will tell you the foundation provides much more value than the money. And it is in these conversations that Anne Marie's name often comes up. She is, to put it bluntly, a world class non-profit board member.

As with any venture investor, Anne Marie can only be on a few boards (eight these days). And to get her on your board, you need to win a fellowship from DRKF, which is no easy feat. Fortunately, she is willing to share how DRKF works with portfolio companies. And I am going to try to share what she shared with us yesterday.

She started with a story of how Andrew Youn, founder of One Acre Fund, began with a board that came from a sign up sheet he had posted. Over just a few years, just as he went from 30 to 30,000 farmers served, he also built a strong board. There were some gaps in his early board (no one else had been to Africa), but they all were very passionate, and a number were hands on, willing to help do what was needed. She compared boards to chapters in a book, with different boards performing different functions as a start up grows up.

Anne Marie also told a few cautionary tales. The general theme was that social entrepreneurs often wish to exercise strong control over the organization's mission, and are often afraid to give over this control to a board. This behavior may end up reducing the organization's impact in the long run. Cautionary tale #1 involved an entrepreneur that decided a board wasn't needed. Over time, funding dried up, because funders perceived that no one had a fiduciary duty toward their donations. Cautionary tale #2 was of a talented board member who resigned because the board didn't grow with the organization. The board member grew tired of being the lead on everything, and wanted other talented people to join and share the load. But the founder wouldn't support growing the board.

Anne Marie discussed that there is often an explicit "Give or Get" role for non-profit board members. You either need to personally donate $X or be able to go get it from your network. Her advice is that if this is expected, it needs to be explicit, and is best led by the board chair.

She went on to discuss that successful organizations can have different types of boards, such as "kitchen cabinet" boards that were brought together for their perspective and ideas, but not funding (here the founder was very good at fundraising) to "fundraising boards" where board members are expected to bring $25k/year to the organization.

Most of the workshop was breaking down what boards do into 4 core functions:
1) Composition (Members and Logistics). Key takeaways: explicit job descriptions for board members, true north alignment with mission, regular meetings, set board meeting calendar.
2) Governance (Policies and Financials). Key takeaways: maintain 501c3 status, identify key policies and risks, quarterly financial reports (if you don't get these, points to a systemic problem); calendared budget planning process.
3) Planning (Strategy Development). This is the function most people think boards do. She is a fan of dashboards for financial issues and impact.
4) Execution (Staff Support and Fundraising). Key takeaways: Executive Director reviews key, support (not do) top management searches, help executive set compensation philosophy, set fundraising targets (and board members should be willing to support these by opening their personal network).

She also suggested that once boards start functioning well with the basics they begin to set their agenda based on Bill Ryan's 3 areas of governance: 1) fiduciary- do these in committees and have these on a "consent agenda" where they get approved rapidly without much discussion at the beginning of the meeting, 2) strategic- these are the dashboard items, and if information is distributed prior to meetings, less information sharing is required, and focus can be on discussion and decisions, 3) generative- these are items are for the "big questions" facing the organization, and where broader longer discussions can occur.  As Anne Marie said, "you may only get your board to have 10 hours of discussion a year- it is your job as a leader to make sure you prioritize these hours. If a topic gets an hour, then it should be a 'top 10' issue."

I know Anne Marie helped our students think differently about building a board. And I hope this post helps you to creatively think about how to begin to build (or rebuild) your board. If you have more questions about this topic, post a comment, and I will see if I can get Anne Marie to provide some answers. 
*It is hard to briefly label someone like Bill Draper... how's this for a bio: "In 1965, Mr. Draper founded Sutter Hill Ventures. From 1981 to 1986, he was President and Chairman of the Export-Import Bank of the United States. Thereafter, Mr. Draper was the head of the United Nations Development Program from 1986 to 1993...." Brief. Modest. Weighty.  If you want to read more about the how and why of DRKF, I'd encourage you to read Mr. Draper's book "The Start Up Game"- Chapter 8 is about the foundation's founding and work, as well as case studies of some of the organizations mentioned above.