Innovation in the Social Sector

Despite a whole new generation of social ventures, both for-profit and not-for-profit, there are limitations in their potential to reform.  For one, there are a number of areas such as transportation and energy, where they often simply don’t have jurisdiction.  Also, given the scale of social problems, they are limited by the pace at which they can grow.  For example, Pratham, India’s largest education NGO, set up in 1994, touches 1 million people today.  However, they estimate there are over 100 million children that cannot read to their standard.  The role of government cannot be dismissed.  Only the government, with its formidable revenue generation and reach, can provide widespread access to education, security, infrastructure and health care—services that may not be commercially viable through private enterprise.

However, in countries such as India, the disconnect between citizens and their governments has reached an all time high.  This is no surprise.  Represented amongst the 543 elected members of the 15^th Lok Sabha are 150 with criminal records across 36 political parties. The first Parliament of India in 1947 still holds the dubious distinction of being the most educated Parliament in the history of independent India!  In the 2008 Transparency International survey on corruption, 61% of Indians surveyed admitted to paying a bribe to a public official in the past year.  As a result, most middle and upper income Indians and businesses would rather avoid government at all possible costs.  The use of “middlemen” to register property, obtain a license, or incorporate a company have become all too common.  Reliance on the private sector for education, security, water, garbage disposal, power and health care have become the norm.  India is one of the few democracies in the world where the urban middle class have a lower voter turnout than the rural poor, despite urban polling stations being significantly more accessible.  Politicians have become quintessentially despicable!

Over the years, there have been many-a-politician at the local and national level that has made an attempt to drive reform, with integrity and transparency.  However, they are usually lone posts in a sea of miscreants, which tends to render them dysfunctional or simply drives them away.  Social ventures are today evaluated by what is called the “triple bottom line,” referring to their profits, social impact and environmental impact.  In order to sustain change over generations, they will need to add a fourth bottom line—political impact.  While it may seem a distraction from their original charters, social ventures are in a unique position to gently, but definitively support fresh local political talent.  Successful social ventures tend to command high degrees of respect in the geographies where they operate.  They also develop deep insights on the people in their communities.  Large developing nations such as India have no shortage of respected, high integrity prospective candidates.  They need to be inspired and supported. More often then not, social ventures steer clear of the “politics” of their locality.  But this defeats their purpose.  By encouraging and supporting the right talent at a local, legislative level, social ventures would be ensuring their programs stand the test of time—through good governance.  Most importantly, social ventures and those involved in them are constituents too.  They must play a role in shaping their governments.

Not to be fooled by his mild manner or youthful expressions, Shaffi Mather is in fact vociferous when it comes to putting an end to corruption.  His latest passion is what he calls “BribeBusters,” inspired by the 1984 film Ghostbusters! Bribebusters was set up last year as a BPO-like social venture with a team of legal experts to help citizens and institutions fight bribery.  Shaffi is not only a serial entrepreneur, but also a serial social entrepreneur.  He helped build Kerala’s leading real estate company, India’s first mall, and then start-up retail ventures for several large Indian corporations.  He then went on to set up 1298 (see post under ‘Health Care” on this blog), India’s leading private ambulance service, and Education Access For All, a rural education NGO.

The World Bank estimates that over $1 trillion is spent globally on bribes every year.  According to Transparency International, $40 to $50 billion per year is spent on “mega-corruption,” or corruption between big businesses and government officials in India alone.  In countries like India, bribery takes place at every level—from procuring a cooking gas cylinder to gaining entry into a hospital to acquiring a contract to build an airport.  The impact of corruption is well established.  Most research suggests a direct correlation between corruption and increasing income disparity.  The reason is obvious. Corruption limits access to basic infrastructure, promotes injustice and disparages merit in society.

Unbeknownst to many, it is possible and beneficial to do business and carry out life corruption-free in countries like India.  It simply requires a strong stomach and a slightly longer-term view, and many successful individuals and institutions have demonstrated that.  While still underdeveloped, many countries like India do have a strong enough legal infrastructure to operate with full transparency.  This is where Bribebusters comes in.  For a fee, an individual or an institution, when confronted with a request for a bribe, can hire Bribebusters to prevent it from taking place.  Bribebusters uses only legally established means to stop the action.  For example, the recently passed Right to Information Act allows any citizen to request public information from a government body, which must revert within 30 days.  So far, Bribebusters has handled about 100 cases successfully, mainly in its home state of Kerala.  Interestingly, in many cases the perpetrator simply backs off after Bribebusters makes first contact.  At this stage, the cases are smaller ones, ranging from getting a passport renewed to registering a new company.  Over the next several years, Shaffi plans to take Bribebusters national, and with his keen eye for injustice, will certainly make anyone in a position of power think twice before asking for a bribe.

While India’s economy doubles in size roughly every 9 years, it is a shame that over half the population—600 million people—are yet not on the electric grid.  The country’s highly regulated energy sector continues to be mired in corruption and bureaucracy, curbing its growth.  Over 130 years after the invention of the light bulb, 1.6 billion people worldwide still have no access to electricity, mostly for similar reasons.  On top of that, most households with access to the grid get limited power.  The village of Bhandgaon, in the relatively prosperous industrial state of Maharashtra, gets just 12 hours of power a day, alternating between day and night each week.  As a result, most households still use dangerous kerosene lamps to read, cook or to simply walk around every day.

In 2007, Stanford MBA graduates Sam Goldman and Ned Tozun embarked on a journey to change all that.  As part of a class at Stanford’s Institute of Design, they designed a low cost solar-powered LED lamp prototype.  They decided to commercialize the project with the launch of D.light Design, and in less than 3 years have sold to over 1 million consumers in 30 countries.  D.light launched in India with a product called Nova.  The Nova provides up to 12 hours of bright light on a day’s charge, and doubles up as a mobile phone charger.  It is 8-10 times brighter than a kerosene lamp, 30-50% more efficient than a fluorescent light and costs about $30. Today, D.light has 3 products including the Solata and the Kiran.  The Kiran provides 8 hours of light on a day’s charge and is 4 times brighter than a kerosene lamp.  Launched in October 2009, the Kiran is dubbed the “kerosene killer.”  It costs just $10, making it the most affordable quality solar lantern in the world.  It provides 360-degree illumination, which is good for cooking, working, studying or traveling.

D.light is unique amongst companies in its space, in that its products are designed with tremendous consumer focus and using the world’s best design principles.  For example, the Kiran is portable, can be hung from a wall or ceiling, or placed on any surface.  The Nova was designed to be water resistant and protect from dust and large insects.  With 80 people and offices in India, China and Africa, the company has also built a deep sales and distribution infrastructure.  It has the backing of major venture capital firms including the Acumen Fund, Nexus Venture Partners and Draper Fisher Jurvetson, giving it the financial muscle to move quickly.  D.light aims to touch 100 million consumers by 2020.

D.light’s social impact is far reaching.  First, its products completely eliminate the need for kerosene lamps.  Low income households spend 5-30% of their income on kerosene, so D.light products pay for themselves in as little as 6 months.  Second, bright light supports income-generating activities such as agriculture and retail.  The United Nations Development Program estimates that families with improved lighting have up to a 30% increase in income due to improved productivity at night.  Next, D.light customers report that children’s study time increases by a factor of 2 to 4 times after purchasing a solar lantern, resulting in greater learning and higher test scores.  By removing the need for kerosene lamps, D.light products also solve the problem of indoor air pollution.  The UN Millennium Development Goals Report estimates that indoor air pollution from kerosene lamps claims the lives of 1.5 million people each year.  They are also the cause of numerous deaths from suffocation, burns and fires.  Finally, every kerosene lamp removed from a household removes 1 ton of carbon dioxide emissions into the atmosphere over 5 years.  Kerosene lamps are currently responsible for 100 million tons of carbon dioxide emissions into the atmosphere, making it amongst the largest sources of greenhouse gases in developing nations.  Planet Earth will certainly not miss them!  To learn more about D.light, visit http://www.dlightdesign.com.

26 million babies will be born in India this year and an astonishing 57% will be delivered without the supervision of skilled health care professionals.  As a result, over 100,000 women will die due to the lack of adequate care.  As indicated by several other posts on this blog, India’s health care infrastructure ranks amongst the worst in the world.  Government hospitals are grossly under-resourced and often corrupt, while private hospitals are out of reach for the vast majority of the country’s poor and middle class.  At the lower end of the spectrum, a delivery in a private hospital costs about Rs 25,000 (about $550).  This is about two-thirds the average annual household income.

Through a unique combination of expertise, a passion for change, and a compelling business model, LifeSpring Hospitals aims to drive a wedge through those numbers. As a joint venture between public sector contraceptive maker Hindustan Latex and New York-based social investor Acumen Fund, LifeSpring was set up to be a chain of maternal care hospitals for low-income households.  Its first hospital was set up in Hyderabad in 2005 and it now has a total of 9.  It plans to have 18 hospitals by the end of this year and 150 hospitals by 2015.  Each hospital can serve about 10,000 women per year, so the impact LifeSpring will soon have is tremendous.

At LifeSpring, a regular delivery can cost as little as Rs 2000 (about $45).  A Caesarean section costs as little as Rs 7000, which is just one-fifth the cost of a private hospital.  All this and the hospital chain is profitable—simply by applying principles of business that would be intuitive in almost any other company.  LifeSpring sets up small hospitals, with typically 20 to 30 beds each, primarily near slum localities.  This way, real estate costs are low, the hospitals generate high footfalls and vacancy rates are kept low.  LifeSpring doctors, on an average, perform four times as many operations as their peers in other private hospitals.  By focusing on just maternal care, the hospital chain is able to standardize clinical procedures and kits, further bringing down costs.  Then, like other social ventures, LifeSpring utilizes a cross-subsidy model, where higher income women can choose a more expensive semi-private or private room, allowing procedures for lower income women to be cheaper.

Unlike most hospitals in India, private or public, LifeSpring is uniquely customer focused.  Its medical professionals are forthcoming in their communication and cheerful in their approach.  As CEO Anant Kumar says, “After all, pregnancy is no disease.  So, why should we call them patients?” With its aggressive growth plans, LifeSpring is constantly looking for obstetricians and gynecologists, radiologists, surgeons, pediatricians, anesthesiologists, nurses and other health care professionals.  With Indians accounting for 5% of America’s physicians and 10% of America’s medical students today, LifeSpring could be an excellent opportunity to gain experience and give back all at once.

With Rachel Ray lobbying on Capitol Hill, Michelle Obama gardening at the White House and Jamie Oliver camping out in West Virginia, the topic of school lunches is starting to get the attention it requires.  It is flabbergasting that it has taken so long. Children spend 180 days a year consuming 1 to 2 meals per day at school, and only 6 percent of US schools meet the USDA’s lax nutrition standards.  According to the Center for Disease Control, 1 in 3 children born after the year 2000 will get Type II Diabetes.  The situation is so grave that a group of retired military officers called Mission: Readiness has called school lunches a “national security threat.”  It turns out that 27% of all Americans aged 17 to 24 are too overweight to join the military and it is now the leading medical reason that recruits are rejected.  Adding insult to injury, a USA Today study found that the meat supplied by the USDA to schools does not meet the safety standards of most fast food restaurant chains.  Chains such as Jack in the Box have limits for certain bacteria which are 10 times more stringent than what the USDA sets for school beef.

From a preventative health care perspective, making school lunches healthy is obvious.  Obesity-related diseases account for 10% of America’s health care bill and that number is expected to double over the next 20 years.  In recognition of this, the 2010 Child Nutrition Act was recently approved by the Senate Agriculture Committee and is expected to be voted on this summer.  Currently, the reimbursement rate for free lunches served to low income children is $2.68 per lunch.  The bill will raise the rate by a measly $0.06 per lunch.  Experts believe the rate needs to be increased by $0.35 just to keep the quality of lunches the same, and by at least $1 to make lunches healthy.  One of the main reasons schools have vending machines is to generate revenue to make up for the shortfall from the government’s current reimbursement rate.  As most vending food is unquestionably unhealthy, this is only exacerbating the problem.  The bill will also give the USDA expanded authority for setting nutritional standards in both cafeterias and vending machines.  Assuming the department does not succumb to the lobbying interests of large food companies, there is much to choose from the fledgling natural and organic industry—low sodium chips from Cape Cod or Kettle, energy bars from Lara Bar or Clif Bar, or preservative-free ready meals from Amy’s Kitchen or Tasty Bite.

As upcoming legislation will not deliver the sweeping reform that is required, it is still up to local school systems to deliver examples of change.  One such example that the country should pay attention to involves the efforts of Tony Geraci in Baltimore. As Director of Food and Nutrition for the Baltimore City Public School system, Mr. Geraci is re-shaping how the city’s 83,000 students perceive food.  His approach involves students at every level.  As part of the curriculum, students design lunch menus that meet strict nutritional requirements for each day of the school year.  The design of these menus weaves in science and nutritional learning to further engage students.  He cancelled contracts for pre-made lunches and has prioritized the school district’s $35 million budget for fresh and local food.  Last year, Mr. Geraci convinced the city to donate a 33-acre piece of land to the school system, where he built the Great Kids Farm.  The farm, which is run by students, will serve as an incubator for organic school gardens around the city.  As an experiment in entrepreneurship, he is also launching 3 student-run restaurants that will serve the farm’s produce.  In grade schools, he has introduced a concept called “no-thank-you bites.”  At the end of each line in cafeterias are sample cups of a high nutrition food such as lentils or radishes.  If students try them and don’t like them, they simply say “no thank you.”  If they do like them, they would have broadened their palates.  For each bite students taste, they get a star next to their name, and at the end of each month, cafeterias hold “constellation parties” to honor the winners.  Now, in order to scale his approach, he is lobbying the state for a large centralized kitchen to serve flavorful, nutritionally designed meals across the system.  By thinking outside the box, challenging the bureaucracy and simply making food fun, Mr. Geraci aims to transform the health destinies of an entire population.  Legislators and local school systems need to take notice.  Independent filmmaker Richard Chisolm is currently directing and shooting A Recipe for Change, scheduled for release this fall, which documents the transformation of the Baltimore public school food system.

Competing in the 100K Business Plan Competition at the Massachusetts Institute of Technology can be a daunting experience.  Judging it is both enthralling and humbling.  As the world’s leading brand in technology innovation, MIT has fostered a culture of entrepreneurship over decades—in many ways, without even trying.  A recent study by Edward Roberts at MIT and Charles Easley at Stanford estimates that there are 25,800 companies in existence today founded by MIT alumni.  These companies collectively generate over $2 trillion in revenue.  That works out to 14% of US GDP or 3.3% of global GDP coming from one university!  If they were a country, it would be the world’s 11^th largest economy.

The 100K Competition boasts its own set of impressive statistics.  In its 20 years of existence, it has facilitated the creation of 120 companies with aggregate exit values of $2.5 billion and a market capitalization of over $10 billion.  This year’s Development Track finals featured six unique businesses with students ready to relocate to Africa, Asia and Latin America to create profitable impact.  Some examples included Salud del Sol, which has developed a solar powered autoclave for sterilizing medical equipment in rural clinics with no access to electricity.  PerfectSight, another finalist, has developed a low cost tool for automated diagnosis of common refractive eye disorders.  On the services front, there was Doodh Bandhar, which is looking to provide breeding, feed and veterinary services for rural families to enhance productivity of indigenous cows in India.

The winner of the competition was SolSource 3-in-1.  SolSource has developed a patent-pending appliance, which uses solar energy for portable cooking, heating and electricity generation.  Today, 2.5 billion people in the world still rely on biomass such as wood and dung as their primary source of fuel.  In such households, women tend to spend 4 to 8 hours a day collecting fuel.  Moreover, it is estimated that 1.6 million people die each year of biomass emissions in or near the home.  The SolSource 3-in-1 appliance is just 6 kilograms, is emissions-free, and costs just $26.  Most strikingly, the team has been balancing graduate studies with spending up to six months each year for the past four years in the Eastern Himalayan region of Southern China.  They have piloted 10 devices in the region, and have fine-tuned their product based on a rigorous understanding of the problem.  SolSource has already received a number of accolades.  It was ranked as one of the “40 Transformative Design Projects of 2010” by ID magazine.  It is also the recipient of the MIT IDEAS Award for innovative design, the Yunus Innovation Challenge for indoor pollution abatement, and the Clinton Global Initiative Outstanding Commitment Award.  As the new winner of the MIT Development Track Business Plan Competition, SolSource is ready to launch!

University business plan competitions are certainly not what they used to be.  Of course, there isn’t much of a “used to be.”  The longest running university business plan competition in the US only goes back to 1984.  As one of the final round judges for this year’s New York University social venture competition, the experience was electrifying.  NYU ranks with the top universities in giving away the greatest prize money for the winners—$75,000 for the regular venture competition and $100,000 for the social venture competition.  This year, there were over 160 business plan submissions from teams across schools.  The teams are narrowed down to five finalists who present to a packed auditorium of students, faculty, investors and journalists.  The stakes are high—the winners not only get the prize money, but the prestige of winning gets them the attention they need from potential investors, customers and partners.

In today’s world of university competitions, teams must have much more than a plan to get to the final rounds.  They must have the expertise, a prototype of a product, one or more pilot customers, and a team that is committed to the venture upon graduation.  In that sense, it is much more than a student competition—it is a commitment toward being a change-maker as an entrepreneur.  Given the strengths of this year’s finalists, as judges, we had great difficulty in choosing just one winner. So, we chose two.  We decided that $25,000 would go to a venture called Water Canary and $75,000 would go to the venture America Smiles.

Water Canary was set up by a team of NYU business students and scientists that have developed a low cost water testing device for use in disaster relief.  Currently, it takes relief organizations days to determine whether the water supply in a particular locality is contaminated after a natural disaster.  Currently available testing equipment is also expensive and requires expertise to operate.  Water Canary has developed a device that can determine whether the water supply is safe in just one minute.  It requires no prior expertise to operate and can transmit that data wirelessly to relief organizations.  This way, relief organizations can map out a geography quickly and move fresh water to the most affected areas first, greatly increasing their efficiency.  Water Canary has partnered with UNICEF and begins pilot trials of its device in Uganda early next year.

America Smiles was set up by a team from the NYU College of Dentistry.  Currently, over 40 million people in the US lack timely access to dental care.  From a preventative health care perspective, this is a huge problem, as poor dental health can lead to a variety of diseases ranging from heart disease to diabetes.  Starting with a partnership with the NYU College of Dentistry, America Smiles plans to set up makeshift dental clinics in poor neighborhoods, with resident dentists providing oral care.  According to America Smiles, resident dentists are under-utilized and need more practical experience.  By providing oral care to the poor on a rotational basis, they get additional training, and the uninsured get a desperately needed service.  The revenue model for the venture is also quite intriguing.  Currently, most dentists in America do not accept Medicaid patients because of the low reimbursement rate.  However, for America Smiles, the rate of Medicaid reimbursement is sufficient as the cost of resident dentists and other inputs are comparably low.  We also expect that the model will attract attention from state and federal governments given the current focus on preventative health care approaches.

Congratulations teams and we all look forward to hearing about the success of your ventures down the road!

Social ventures are set up by entrepreneurs looking to fill a need for social services that would normally be provided for by the government—but that government might be negligent, despotic or simply asleep at the wheel.  They also tend to develop innovative products or business models, which allows them to sustain themselves differently than traditional charities.  Where they tend to struggle is in reaching the millions, usually hundreds of millions of people that require that service.  How does an organization quickly and effectively educate the 100 million illiterate children in India or provide safe drinking water to the 1 billion people on the planet that lack access to it?  Attempting to recreate the services of a government, and that too in a self-sustaining capacity is daunting to say the least.

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One of the less talked about, yet far-reaching aspects of the recently passed health care bill involves mandatory calorie declaration on restaurant menus.  Starting in 2011, the new law, which applies to any restaurant chain with 20 or more locations, directs the Food and Drug Administration to create a new national standard for menu labeling.  This will apply to menus, menu boards and even drive-throughs, and will affect over 200,000 restaurants across the country.

In the US today, the biggest contributor to health problems and the rising cost of health care is overeating.   read more…

“It is not possible to know what is possible,” says Frances Moore Lappé, author of the best-seller Diet for a Small Planet and 18 other books on hunger, poverty and environmental crises.  The story of Yacouba Sawadogo, an indefatigable farmer in Burkina Faso in West Africa, is a striking testimony to this notion.  Burkina Faso lies in a region of Africa known as the Sahel, a semi-arid zone between the Sahara desert and the lush savannas of Central and Southern Africa.  From the late 1960s to the early 1980s, due to global warming, this region experienced the rapid encroachment of the Sahara desert.  This resulted in a famine that killed 100,000 people and left another 750,000 people on food aid.  Millions of residents in Niger, Mali, Burkina Faso, Chad and Mauritania abandoned their engulfed farms and moved to nearby cities, putting further pressures on resources. read more…