Graphic: profit, purpose, passion intersection One of the attention grabbers at this years Asia Social Investment Forum

was the session on Ashokas Hybrid Value Chains (HVCs), or business arrangements at the intersection of making profit and transforming lives. While dual-purpose businesses are not new, Ashoka deigns to take the idea to new heights with potential to improve the social enterprise ecosystem as a whole by employing strategic collaboration. Imagine one man doing heavy lifting for an object he cant fully grasp; now picture what happens when two or three other people join him: the burden becomes lighter, and together they are able to move heavier loads. This is a simple analogy for what Ashoka has done by making critical services available to the poor through the cooperation of multiple businesses where each ones contribution turns him a profit, improves the collective work, and reduces costs/risks for other participants. In most of the HVCs Ashoka has helped launch, poor communities were an underserved market (e.g. with no access to housing loans or to medical services) and could not improve their quality of life because businesses considered them risky clients to be avoided. Ashoka resolved this issue by facilitating dialogue between the supply and demand sides: the businesses whose products or services were needed, and a social entrepreneur or community organizer who understood the underserved market the nature and extent of their need, willingness and ability to pay, how to ensure compliance and full payment. In short, Ashoka put at the same table all parties needed to make serving poor clientele less risky and more beneficial, and these parties agreed on a working relationship that addressed the identified barriers. These arrangements can vary, as seen in the following examples of HVCs launched by Ashoka around the world. Sector Market Low-Income Housing India Slum dwellers could afford to buy homes but no lender would offer them mortgages Willing provider No credit history / traceable income SE created alternative measures of creditworthiness & performed due diligence as paid service Healthcare India Rural farmers could afford medicine but struggled with travel costs to city hospitals Access to quality medicine Cost to travel to experts in cities SE gave rural clinics Internet connections (for telemedicine w/ city doctors) & revenue stream (selling clean water) to run as satellite centers

Problem

Brazil Residents had tools but no architectural knowhow to safely improve rickety favelas Willing architect No scale, not profitable SE gathered slum dwellers with similar home structures to ensure scale for architectural design consultant

S. America Low-income homeowners could not get loans to buy tiles for their houses Willing lender No credit history / formal income SE demonstrated tile demand & uses years of community experience to determine creditworthy residents

Key Need Key Barrier

HVC Solution

Benefits of the model While there are many other ways in which these social issues can be resolved, and there are arguments to support both specialized cooperation and greater integration (a single entity taking on more parts of the value chain), integration takes deep pockets and manpower. Since most social enterprises and SE supporters are still too young to do many things very well, we believe that HVCs are a great way to make use of existing strengths without being limited by each players weaknesses. The following are some ways in which we see collaborative HVCs working well for social purpose organizations. First, agility and efficacy from combining specializations. Unless it is particularly difficult to align incentives, it would be simpler, cheaper, and faster to leverage the expertise of different parties and only afterward build capacity for what is still missing than for one piece to try and solve every part of the puzzle. Additionally it could prove more effective, because spending to build new capabilities cannot replace the benefits of experience. Second, network building from relative ease of entry. Since HVCs dont require businesses to do things outside of their specialization, and partnering with other established institutions adds credibility to the venture, they appear to be a low-risk and viable first step for any company looking to increase their social footprint. This makes HVCs an effective bridge between disparate communities, which social impact professionals can leverage to widen their business networks and deepen engagement with existing partners. Third, a multiplier effect. We already know that having a network of high net worth individuals or businesses work with social enterprises is what catapults those businesses to scale, sustainability, and ultimately greater impact. Because HVCs are all about collaboration between business and social enterprise, creating more HVCs and proving the model works would over time increase not only the total involvement in civil society movements or total impact achieved, but also the rate of social innovation. Caveats and challenges That said, even though there are hundreds of market opportunities just waiting to be explored, there are reasons why this model hasnt already spread like wildfire. One is the difficulty of replication. Even among Ashokas three or four HVCs in lowincome housing, the solutions have all had to be customized because the communities needs are different, market dynamics are different, and business cultures and objectives can be very different too. Any successful endeavor accommodates these differences and nuances because what doesnt fit doesnt last; and good fit can only be carefully designed, not mass-produced. Another is the importance of sensing opportunity and pushing whats possible. On one hand, timing is everything. According to Ashokas Chris Cusano, the things businesses have agreed to do in their India HVCs were only entertained because microfinance, urbanization, the middle class, and the economy all improved at the same time, creating conditions that made people more willing to experiment. On the other hand, the odds may never be overwhelmingly in your favor; most HVC pitches work in the land of possible but improbable, so persistence is crucial. When you walk into the banks to have this conversation, he says, 99 will shut the door in your face, but one might say

lets give it a try. HVCs operational today took place because instead of focusing on closed doors, the people knocking on them had to believe in what they wanted enough to hold out for a single opening. These challenges are part of what makes Ashoka focus its efforts on a small number of HVCs about a dozen so far, all in fields where filling the market gap changes peoples lives in the most important ways (e.g. housing, healthcare, education, water) but this is by no means a sign not to keep trying and exploring HVCs in other fields. In fact, it is Ashokas hope that sharing what they do and what theyve learned will encourage more organizations to take the lead in their own industries of focus. Why? Because even though HVCs are win-win situations, traditional businesses will never invest time in finding these opportunities themselves. They will bite at something good once its presented, but it is up to social entrepreneurs and SE supporters to imagine these opportunities, believe in whats possible, and make it happen. That has been Ashokas role thus far, and that is the role social impact professionals need to play when engaging with the private sector catalyst, pathfinder, facilitator, and enabler. Making HVCs mainstream Because the idea is quite new, Ashokas HVCs still feel very much like experiments; and at the moment, they take a lot of effort to set up and sell in (i.e. convince companies to participate). But we anticipate that someday, as more cases crop up and it becomes clearer how to set up an HVC for success, companies will start initiating these types of value chains on their own. That is a future not so far away, in Cusanos book, as long as people have the tools they need to succeed. Technically, all thats needed to run a profitable HVC are an unexplored market gap, a demand-driven solution, and competent businesses committed to supplying the solution. As simple as that sounds, each qualifier is there for good reason. Cusano says the following are the three keys to making your HVC a success. First, you have to be willing to do whats never been done before and believe in it when no one else will. Related to the challenges mentioned earlier, much of the social impact scene today focuses on investing where the chances of success are highest, which is great for managing risk but detrimental to pursuing innovation. While there is great merit to looking for a track record and replicating the tried and tested, sometimes there is no such precedent and in those cases, an entrepreneurial do now, learn as I go mindset is essential. The smartest companies, which have managed to stay ahead of competition, know that it is a death sentence to ignore the unexplored, to claim that they already understand how the world works. Things change; the companies that come out of this change on top are those who see opportunities where no one else is even looking yet, and learn from the quirky niche so they can ride the wave when it comes. Second, you have to see the world through the eyes of the customer youre trying to serve. None of the HVCs Ashoka has set up were conjured in a meeting room; all of them came from ideas brought up by social entrepreneurs or community organizers who had been on the ground, knew peoples habits and needs, and wished an alternative were possible. An HVC opportunity has to be built on the insight of such a person if you are to ensure that it really solves a problem, and is a viable business opportunity demand-driven solutions come from field experience.

Third, HVC involvement should not be a CSR decision but a business decision. If an arrangement doesnt make strategic sense for a company in the short term, medium term, and long term, there is no way of guaranteeing that it will stay committed to the deal. The idea is to create virtuous cycles of sustainable impact, so the challenge is not to convince every company to climb aboard in substandard ways, but to ensure that everyone who does participate has a real stake in making the HVC succeed. These things arent exactly easy to achieve, but they are possible and the effort will be worth it. If we can find more and more ways of making the above conditions true, social responsibility need not remain on the fringes of corporate activity, and it will finally become inarguable that good business includes the business of doing good.