Inspired post by Dave Pollard today on the challenge of scale and the confusion of control. Complicated systems require few connections in order to be manageable:
It is because business and government systems are wedded to the orthodoxy of hierarchy that as they become larger and larger (which such systems tend to do) they become more and more dysfunctional. Simply put, complicated hierarchical systems don’t scale. That is why we have runaway bureaucracy, governments that everyone hates, and the massive, bloated and inept Department of Homeland Security.
But, you say, what about “economies of scale”? Why are we constantly merging municipalities and countries and corporations together into larger and ever-more-efficient megaliths? Why is the mantra of business “bigger is better”?
The simple answer is that there are no economies of scale. In fact, there are inherent diseconomies of scale in complicated systems. When you double the number of nodes (people, departments, companies, locations or whatever) in a complicated system you quadruple the number of connections between them that have to be managed. And each “connection” between people in an organization has a number of ‘costly’ attributes: information exchange (“know-what”), training (“know-how”), relationships (“know-who”), collaboration/coordination, and decision-making. That is why large corporations have to establish command-and-control structures that discourage or prohibit connection between people working at the same level of the hierarchy, and between people working in different departments.
Why do we continue to believe such economies of scale exist? The illustration above shows what appears to happen when an organization becomes a hierarchy. In the top drawing, two 5-person organizations with 10 people between them have a total of 20 connections between them. But if they go hierarchical, the total number of connections to be ‘managed’ drops from 20 to 8. Similarly, a 10-person co-op has a total of 45 connections to ‘manage’, but if it goes hierarchical, this number drops to just 9.
This is clearly ‘efficient’, but it is highly ineffective. The drop in connections means less exchange of useful information peer-to-peer and cross-department, less peer and cross-functional learning, less knowledge of who does what well, less trust, less collaboration, less informed decision-making, less creative improvisation, and, as the number of layers in the hierarchy increases, more chance of communication errors and gaps.
But, what about complex systems?
So back to the purpose of this post, to answer these questions: 1. What is it about the ‘organization’ of the Internet that has allowed it to thrive despite its massive size and lack of hierarchy? And: 2. What if we allowed everything to be run as a ‘wirearchy’?
To answer the first question, the Internet is a “world of ends“, where the important things happen at the edges – and everything is an edge. “The Internet isn’t a thing, it’s an agreement”. And that agreement is constantly being renegotiated peer-to-peer along the edges. If you look at the diagram above of the co-op with the 45 connections, you’ll notice that the nodes are all at the circumference – around the edges. There is no ‘centre’, no ‘top’. And the reason the organization isn’t weighed down by all those connections is that they’re self-managed, not hierarchically managed. The work of identifying which relationships and connections to build and grow and maintain is dispersed to the nodes themselves – and they’re the ones who know which ones to focus on. That’s why the Internet can be so massive, and get infinitely larger, without falling apart. No one is in control; no one needs to hold it together. It’s a model of complexity. And, like nature, like an ecosystem, it is much more resilient than a complicated system, more effective, and boundary-less. And, like nature, that resilience and effectiveness comes at a price – it is less ‘efficient’ than a complicated system, full of redundancy and evolution and failure and learning. But that’s exactly why it works.
via What If Everything Ran Like the Internet? « how to save the world.
Share:
Dan Pallotta at a TED talk on why overhead matters in non-profits.
Here is the essence of the talk:
- Non-profits exist to alleviate social problems for which there is no market.
- Working at the level of causes means needing to take work to scale.
- Going to scale means that we need to grow the resources available (without using commerical or profit making methods).
- What is called “overhead” is actually the capacity to do this.
Perlotta makes a compelling argument for increasing overhead in the non-profit sector and talks about why we have to change our mindsets in order to see this as unproductive. The essence is that in situation where you have a fixed amount of funds, then limiting overhead means you can get more of the funds to clients. But in a situation where the amount of funds can grow, investing in overhead allows organizations to both meet their mandates AND to grow the scale of donors and impact to reach upstream for deeper change.
Overhead can be thought of in a variety of ways, including:
- Operations and capital maintenance, so people have good and safe facilities to work in
- Talent and benefits, for people who will never receive a bonus payment in their lives. Many of the people that work for charities by the way are folks that have been clients of non-profits in the past, so this alos makes good economic sense.
- Strategy, learning and research, to ensure that the methods being used are the best avialable and to help organizations makes sense of complex and changing environments.
- Communications – connecting with others nto make an overall impact on the sector or issue as well as attracting resources such as talent and money to bring the initiative to scale.
- Working with governments to help shape policy to address root causes. Otherwise known as “going upstream” this helps charities get at the root causes of their client’s distress and not simply be plucking babies out of the river without figuring out who is throwing them in.
The work of fundraising for deep social change needs to make the argument that investing in overhead is an investment in real change and not just meeting client needs. In many ways it is a BETTER investment, because it means that you can address underlying issues which makes it possible to solve some problems and move resources into other places. If you want to make real social change, find an organization that has a sophisticated approach to issues and you increase your chances of making shift happen. None of the clear victories of the last century came without these kinds of activities in place. Eliminating polio? How do you think that happened?
Share:
It’s an old saw with me, but Dave Snowdon puts it very nicely and succinctly:
Numbers are good, but they are never the whole picture. Its easy to focus on them, they give the comfort of apparent objectivity and used to support human judgement they have high utility. The problem is when they replace judgement rather than supporting it. Of course in the ordered aspects of any enterprise statistics and numbers can do a lot of the work for you, but in a complex situation they can be dangerous. Applied to ordered aspects (boundary conditions, probes and the like) they have utility, but for the system as a whole they are more problematic.
Share:
Very interesting little article from David Wilcox about the differences between social entrepreneurs and social innovators. Here is how he describes those differences, from a tactical perspective:
4 Differences Between Social Entrepreneurs & Social Innovators
Here are four reasons why social entrepreneurs are significantly different than nonprofit social innovators:
1. Two Worlds
Most foundations and many nonprofits came into existence through a significant donor or donation. The people who shepherd the outcomes for those donors must be attentive and accommodating. Quite simply, donors drive much of the nonprofit world’s activities.
Most social entrepreneurs start with their very personal obsession to improve lives by solving a challenge or inequality, prefer to spend as little time as possible fund raising, and often bring innovations to the table that decades of nonprofit work have not uncovered.
Social enterprises typically begin with a small loan, such as the $46 that funded Professor Yunus and the invention of microfinance. As Yunus points out in every speech he gives, “When I saw a problem, I started a business to solve it.”
2. The Against Position
In branding, claiming the against position means using a competitor’s dominant spend and mindshare to carve out an anti-space–the Un-cola for example.
Social entrepreneurs are quintessential against positioners. At the New York Forum on Africa held in Gabon, Professor Yunus stated it clearly: “I looked at how traditional banks do business and we did the exact opposite.”
In very practical terms, these stubborn, opinionated entrepreneurs frequently show up after the aid and development models have failed or at least failed to become sustainable. Their arrival on the scene is less a Kumbaya moment and more a “disruptive innovation” one.
3. Core Competencies
Successful nonprofits are either great at fundraising or great at measuring impact. The superstars are good at both. These critical capabilities assemble billions of dollars to accomplish good works and they represent an important innovation source for the world.
Social entrepreneurs fundraise too, but they hate it. Seldom do they surface innovations in fundraising. A primary goal for most social entrepreneurs is to demonstrate that appropriate capacity building enables their innovation model to solve problems profitably and reduce dependence on fundraising altogether.
4. Buying Impact/Measuring Success
Jason Saul of Mission Measurement exhorts funders to stop thinking about giving to charities and to shift to buying impact. As valuable as this change to the donor frame would be, the repercussions would also result in significant reductions in the total charity population.
Funds should flow to the organizations making and reporting measurable progress actually solving key challenges. But impact buying reinforces the prevalent tendency in the nonprofit world to spend significant dollars on measurement. Funding those added “measurement investments” makes solutions more expensive and less sustainable.
Successful social entrepreneurs create business models where measurement is integral to the normal course of solving a challenge. This one innovation actually can make the difference between a profitable and a non-profitable model. Healthpoint Services in the Punjab is the first to couple the delivery of clean water and healthcare. This disruptive innovation touches villagers each day: when they pick up their water they are also exposed to an urban quality healthcare clinic offering services at a much lower cost.
So what does Healthpoint management measure?
Here’s one: At what monthly water subscription price do half the villagers become customers in 90 days? For Healthpoint, measurement is not a separate expense, it is a core business activity.
I do a lot of work in the non-profit, social benefit sector and find that there is a real stifling of innovation there, especially in the traditional services sector. It’s not that there isn’t an understood need for radical change in how services are delivered, but there are a number of factors weighing against these strategies being created. Riffing on David’s observations, here are four things that get in the way of social innovation…
1. Funding Ãœber alles
Funding and the attendant accountabilities that come with it determine much of the scope of what can be offered. Whether it is government funding or private funding, social innovators have to work within highly constrained fiscal environments. In many cases, they cannot even raise money outside of their operations for fear of losing charitable status. IN Canada recently, organizations that have been trying to create social innovation in the environmental sector have had their government funding revoked, their charitable status questioned and their operations audited. In times of scarce resources, leaders are unwilling to jeopardize what little they have to take a risk on new ways of doing things.
2. The For Position.
Most who are working in the traditional and mainstream social services sector are constrained by societal expectation of what services should be. Some exist in a regulatory environment that makes them little more than non-governmental delivery channels for government services. In the work I have done over the years in Aboriginal child and family services this has been a huge frustration. Agencies that want to transform the nature of these services are unable to do so because they get locked into having to deliver services the same way the Ministry for Children and Family development does it. This is frustrating for families and communities who accuse their own community-based agencies of being little more than Aboriginal faces on non-Aboriginal government services. Social innovation os hampered by an inability to take an Against position.
3. The wrong Core Competencies
Many mainstream social service agencies have gone to a management model of leadership that values the MBA as the primary qualification. Increasingly, CEOs of charities are being hired from traditional business schools and they don’t even have the range of experience or innovative approach that social enterprise CEOs have. This is the result of risk aversion…if we can hire a good manager to be careful with our money, we will survive the funding crises in the sector. the problem of course is that the work becomes narrowly defined on operational efficiencies and strategies that are about problem solving and fixing rather than taking the long view about the complexity and disruption facing the sector. Relying too much on risk aversion constrains the ability to innovate other than incrementally. It won’t surprise you that I believe leadership that hosts the margins of the social field for co-creation and emergence is critical to finding and precipitating real social innovation.
4. Becoming a slave to measurements
Alongside the management approach to services and the constraints on funding comes a slavish amount of accountability to targets. These targets are often chosen because they are easy to measure but they sometimes have little or no relevance to the context. I like Healthpoint’s metric of asking “At what price do half the villagers become customers in 90 days?” I also like what is happening in the field of developmental evaluation, which provides a set of tools and resources for working in complexity with safe fail prototyping of new actions. But in the current climate, with managers and funders demanding easy to see outcomes, their is a hard sell. A group I have been working with that is trying the impact the social determinants of health finds itself often wanting to know what changes have been happening in quarterly periods. That is simply not the right way to look at things, but without numbers, funding is held up. The flip side is that the wrong numbers get the wrong stuff funded, and rarely are the numbers representative of innovation.
Perhaps the biggest reason why social innovation and social entrepreneurship are different is the location of power. In social innovation power is often vested in the funder and the extend to which the funder is wedded to status quo or simply risk averse is the extend to which social innovation is constrained. In social entrepreneurship, power rests largely with the entrepreneur and there are many more degrees of freedom to pursue radical innovation. And it’s your money to lose!.
I think an application of more strategies from David’s list to the shadow list of problems that I’ve seen would accelerate social innovation. Probably the best way to innovate in the social sector is to steal from social enterprise. One leader I know makes strong recommendations for her network to watch TED talks as a daily practice, and that simple form of cross pollinating opens minds for sure.
What strategies have you experienced that have acce;erased real, deep and lasting social innovation?
Share:
Here is a case of getting seduced by the numbers and sucked into the wrong thinking. This article is looking for interesting ways to measure the growth of the global middle class. It does a generally poor job of it. The whole article is a bit of a dodge. Using made up numbers to render a quantifiable mark for an abstract concept, concluding in a blithe statement about a billion car pile up.
But the money quote I think is in the conclusion, about what this materialist and upwardly mobile trend in the world says:
The people of this burgeoning middle class also expect their governments to be representative and accountable, and they are sure to put increased pressure on the nondemocratic systems in many developing countries. Seen in this light, the rising incidence of protests and dissent in China, Russia, Thailand, and the Arab world is not surprising.
Which is actually interesting. And a little understated. Because I think one of the implications of the growing “middle class” is the fact that the world can become much more connected through alternatively mediated means. You have power and water, a mobile phone and an internet connection and you join a very interesting club, globally speaking. Furthermore, people can not only demand accountability from their own governments but from governments whose foreign policies affect them. I mean, look at the famous photo of Phan Thi Kim Phuc, the Vietnamese girl running scared and naked from her village, which had just been napalmed. 40 years ago no one could do anything about this situation. These days, photos like that could provoke a massive decentralized response of outraged middle class people. Such people might learn how to fly planes, for example. Or leak documents. Or go all Anonymous.
On a smaller scale, the growing middle class can use its material wealth to do things other than buy cars. For example, a newly middle class Egyptian could buy food to support an occupation of a park in New York. The new models of philanthropy can be many to many, inverting the idea of “giving to the poor.”
The article has a pretty narrow and outdated view of its own subject (“First World” – really?) and it ignores the deeper, dare I say, foreign policy implications of a middle class that may yet reach the critical mass needed to slow the 1% and redirect that serious wealth to needier parts the rest of the 99%.
In the rest of the world, I wonder if this is what the new middle class is doing. In North America we do a whole lot of “I’ve got mine.” Class mobility in this continent is woeful, and class nobility, especially among the local 85% (of which I am a member) even worse.
Ultimately, it doesn’t matter how many of us there are. It matters what we do with these numbers.