[Blog 05] Lean Startup for Social Impact

After reading the last Blog, a reader sent me this question:

Why do you think you will succeed while Lean Impact failed?

I would like to address this in the current Blog.

First of all, it will not be easy.

Second, my organization Education for Good has been making serious effort in this direction and we have made some encouraging progress so far. I will highlight some of them below, including some major new initiatives in the pipeline.

Third, it is so vital to the social sector that it deserves concerted effort from many quarters to ensure that social-purpose organizations will be able to master and apply the Lean Startup methodology in order to enhance the success rate not only of social ventures but also the development of new products and services by existing organizations.

Before I share with you what Education for Good has done, let me give you some background information about myself.

After my rather ‘lengthy’ education in Hong Kong and the UK (B.Soc.Sc., MA, Ph.D, MBA), I worked for two corporations in my early business career, the Lam Soon Group and Shui On Group respectively. I spent ten years with the latter where I learnt and developed my managerial and leadership skills, and contributed to making the Shui On Group one of the most well managed companies in Hong Kong.

Then in 1992, I ventured into entrepreneurship and started my own management consultancy, K K Tse & Associates Ltd.

My core competencies were adapting leading-edge management approaches developed in the West and Japan, and making them relevant and actionable by local businesses. Our specialties included Total Quality Management, Business Process Reengineering and Strategic Leadership Development.

I started my early retirement in 2000, at the age of 52.

Since my ‘retirement’, I have been active in promoting social entrepreneurship in Hong Kong and mainland China. When I came to know about Lean Startup around 2013, I wasted no time to study and master it. I thought this was (and is) a godsend to the social sector, as it would greatly enhance the success rate of social ventures of all sorts.

At that time, I had already co-founded Education for Good, a social enterprise focused on providing social entrepreneurship education and nurturing social entrepreneurs. However, we had encountered great difficulty in guiding and mentoring would-be social entrepreneurs for the lack of an effective startup framework.

Lean Startup helps solving the above difficulties. So for the past few years, we have been developing training and coaching programs based on the Lean Startup methodology. The results have been most encouraging.

All these have been possible mainly because it has been exactly what I did as a management consultant: turning a proven approach developed elsewhere and making it relevant and workable in the local context.

It is against this background that we managed to achieve some remarkable results as far as Lean Startup is concerned.

Not a Smooth Path

Although we did not have much problem mastering the Lean Startup methodology and designing short and intensive workshops (typically 2 full days) for startups, we did encounter most of the difficulties experienced by Lean Impact.

In addition, we soon found out that training by itself was not enough; startup teams need coaching in order to effectively deploy the Lean Startup methodology.

Eventually our standard and proven package was a 2-day intensive workshop plus six months of coaching. During the 6-month coaching period, a trained Lean Startup Facilitator (trained by ourselves) will have two 2-hour meetings with the startup teams every month.

Please note that we only worked with startup teams, not individuals as such. We did begin with individual entrepreneurs, but found it totally ineffective. The simple reason is that if the entire startup team does not know what the Lean Startup methodology is about, there is no way that the entrepreneur could implement it, and it was impossible for the entrepreneur to ‘teach’ the entire team on the subject.

We usually have five to six teams going through the 2-day workshop together and we provided the coaching on an individual team basis.

So much had been proven to be an effective model. The question was the same as Lean Impact has come up with: the startup teams said that they could not afford it.

We had to find some innovative solutions. Through a number of trial and error, we came up with two ways to get paid for our service.

Pay-for-Result

The first approach was what we called Pay-for-Result.

We charged the startup teams a fee for attending the 2-day workshop. The Pay-for-Result mode applied only to the six-month coaching. We agreed with them a fee for the coaching but they did not have to pay us upfront. They paid us only if they were satisfied with the results of the coaching at the end of the 6-month period.

We were able to offer this payment method because we were confident that the startup teams would greatly benefit from our coaching and they would be so satisfied with the results that they would be happy to pay for the service.

I still remembered the first time we used this approach.

A startup team comprising of four undergraduates was winning a business plan competition and they were determined to follow through their project to the point of not looking for a full time job after graduation.

We were impressed by their passion and offered them participation in the 2-day training workshop for free. After the training, we knew that they needed the coaching for a few months. So I talked to them and asked them to follow our coaching. They were happy to take it up except that they said they had no money to pay us.

At the end, I came up a three-party agreement to engage a facilitator to coach them. We agreed on a fee for the six-month coaching. I would personally pay the facilitator on their behalf in the first instance. They would repay me at the end of the six-month period if they were happy with the results.

At the end of the 6-month period, they paid me back in full and continued to engage the facilitator for further coaching. They even offered directorship of their company to the facilitator.

Please note that I actually paid the facilitator upfront so as to ensure that both the facilitator and the startup team would be serious about the arrangement. If we just said that we would provide the coaching and the team needed to pay us only at the end of the six-month period, it would sound like a ‘voluntary’ engagement. By signing a three-party agreement and let the facilitator receive the fee upfront, the whole thing sounded more business-like.

The insight of this arrangement for us was this: although startups are usually short of funds, they are willing to pay for service that is really valuable to them. By allowing them to ‘pay for results’, it makes them easier to allocate their limited cash on hand.

Pay-by-Third-Party

Another way that we secure funding for our Lean Startup training and coaching service is to have interested third parties to pay for them.

One example is Oxfam Hong Kong. In early 2016, Oxfam approached us to provide Lean Startup training for some of their grantees. They have been providing grants to a large number of grantees (mostly NGOs) to deliver programs related to poverty alleviation. While they were not changing this grant approach, they would like to see if some of their grantees could generate some income on their own and eventually become less dependent on grants to run their programs.

Education for Good was asked to provide Lean Startup training to a number of their grantee teams. We counter-proposed that the training must accompanied by coaching for a number of months (finally agreed to be six months).

So we started to provide 2-day intensive training and 6-month coaching to six teams in 2016. The results have been so positive that we have been asked to offer the same program in 2017. This time around they even allowed us to nominate teams to take part regardless whether or not they are Oxfam grantees.

Also in 2016, we have been asked by another organization (CarbonCare InnoLab) which had secured funding from the Jockey Club to incubate a number of environmental-focused startups.

Education for Good provided the 2-day training and six-month coaching to four teams. The results were also very positive. Subsequently we secured a new contract from them to provide similar training and coaching for four cohorts (totaling 16 teams) over a 3-year period.

The insight of this arrangement for us is that although startups themselves might not be able to afford the training and coaching, it might be possible to find a third party to pay for it.

The critical factor is that the prospective third party must appreciate the power of the Lean Startup approach and is convinced that the organizations providing such training and coaching have proven expertise and track record to deliver it.

Not the End of the Story

Pat-for-Result and Pay-by-Third-Party enabled Education for Good to provide training and coaching to social-purpose startups for a reasonable fee. This made our effort viable and sustainable. But this is not enough; we are keen to scale the impact so that more social good organizations could benefit from it.

We continue to search for ways to spread the use of the Lean Startup methodology on a financially sustainable basis.

One bold initiative that we have begun in 2017 is to joint venture with an established social enterprise to launch a brand new service.

Education for Good and Dialogue Experience (which has successfully launched Dialogue in the Dark and Dialogue in Silence) became equal partners in creating a new line of business – Inclusive Sport. It involves engaging people with physical disabilities (initially persons on wheel-chairs) to play sport with able-bodied persons, something that Dialogue Experience did not have any prior experience with but could build on their network of corporate clients.

What Education for Good would contribute is in the area of Lean Startup. Leveraging our proven capability in training and coaching others, we would like to prove that we could indeed create a new and profitable business line and be able to share the profit from it as our compensation for the effort.

It so happens that I am a co-founder of both Dialogue Experience and Education for Good and both organizations believe in what we could offer.

As an equal partner with Dialogue Experience, we will be able to generate a steady stream of income when we succeed. It will not take long to know the results. In 12 months, we will know whether or not we will be able to create a sustainable business.

This approach will have major implications for Education for Good, such as:

• As a provider of Lean Startup training and coaching, it will greatly improve our financial position and will enable us to explore working with other organizations in similar ventures

• As an advocate of the Lean Startup approach, we would like to impress on all social-purpose organizations that this is an effective approach not only for starting new ventures, but also for creating new products/services, as well as redesigning existing services.

How You Could Contribute

You may or may not intend to start a social venture in the near future. If you do, my advice is that you must invest in mastering the Lean Startup methodology.

Even if you may not be starting one yourself, you might have friends who are doing it. Your contribution to their success is to convince them to learn and make use of the Lean Startup approach. It will save them time, energy and resources, and greatly improve their chances of success.

There are other options open to you if you are now convinced that the Lean Startup approach is indeed a godsend to the social sector. You could read, write and share stories about it. Even sharing this blog will definitely help.

And if you are working for a corporation or philanthropic foundation, you could convince them to consider funding Lean Startup training and coaching for social-purpose organizations.

Above all, you could consider becoming a trainer and/or facilitator of Lean Startup on a part-time or full-time basis.

If you want to discuss with me any of these options, please feel free to write to me at the email address below.

Your feedback is most welcome. Please send it to kakuitse@gmail.com