Scaling for impact is a crucial ability for social enterprises, enabling them to deliver a more significant impact. This was discussed in online training session 3 titled “Beyond Borders: Expanding Impact through Advanced Strategies” with Fajar Anugerah on 8 Sep 2023.
Fajar Anugerah, Head of Business Development at Terattai, defines scaling for impact as a process of increasing the size and / or reach of a social enterprise to achieve a greater social impact. The reason behind the need for scaling for impact is to reach more people in need, have a more significant impact on the problem they are addressing, and become more sustainable and self-sufficient.
Challenges often faced by social entrepreneurs, according to Fajar, include a lack of resources, a lack of capacity, cultural challenges, and regulatory challenges. Regulatory challenges usually involve issues related to finance and protecting business activities in new markets.
One of the participants, Hasnita Taslim, Founder and CEO of PT. Disabilitas Kerja, shared her perspective on the challenges they face. “PT. Disabilitas Kerja is the first disability recruitment company in Indonesia. The challenge is the lack of awareness among companies to provide opportunities for People with Disabilities (PWDs) because PWDs are still stigmatised by society. However, there are 28 million PWDs in Indonesia. When we discuss with company HRD, we still encounter HR personnel who ask, “Why should we hire people with disabilities when even ‘normal people’ are still unemployed? Can people with disabilities perform as well as those non-disabilities? Can those people with disabilities work?” said Hasnita.
In response to this question, Fajar explained that not only in social enterprises but also in regular businesses, we need to understand that we don’t sell to everyone. We sell to our early adopters. We target early customers who are more likely to use our products or services. We strive to make them happy and ask them to promote us. Therefore, in this case, it is essential to focus on companies that are already convinced to hire PwDs.
Fajar added that there are our main innovative scaling up strategies: first, leveraging technology with a similar application or software; second, cross-sector collaboration involving people from different backgrounds; third, replication models such as franchising, decentralised production, and reaching new markets; fourth, regulatory changes that alter norms and enact social change.
Then, it continued with an online training session #4 on “Product-Market Fit Mastery: Building Sustainable Social Enterprises” with Gilang Gibranthama, Co-founder & CMO of Matchmade, on 11 Sep 2023.
Gilang invited participants to get to know the product and understand the customers of the social enterprise. Using the theory of diffusion of innovation, we can determine where the social enterprise stands and how the products or services provided are adopted by the community.
This theory believes that innovation diffuses throughout society in a predictable pattern. Some groups of people will adopt an innovation immediately after hearing about it, while others will take a long time to adopt it. When an innovation is adopted by a significant number of people, it is said to have “exploded.”
In this theory, social enterprises can predict their position, whether they are in the innovators, early adopters, early majority, late majority, or Laggard stage. To determine which stage they are in, we need to estimate the size of the target market and determine the Serviceable Obtainable Market (SOM).
If our customers have reached 2.5% of the SOM, then we are in the innovators category. If our customers have reached 13.5%, they are already in the early adopters category, and if they have reached 34% of the SOM, they fall into the early majority category. If they reach 68%, they are classified as the late majority.
Next, Gilang discussed how social entrepreneurs can ensure whether they have reached the product-market fit stage. There are several things that need validation, for example, through fundamental questions like whether the social enterprise has identified the right problem and the right solution.
According to Gilang, usually when a CEO wants to provide a solution to a problem, the first thing to validate is whether it is the right problem. This can be answered by addressing the following derivative questions: Who has this problem? Is it big enough for social enterprise? Or is it too big to handle? Also, has anyone else tried to solve it? If not, why should I be the first to succeed? If yes, why did they fail? And what makes me different from them? Or perhaps, there is someone still trying to solve this problem, but we don’t know.
There are common mistakes in interpreting the problem: First, the problem exists, but it’s not big enough or aligned with our target (for example, we want our SE to go to IPO, but the problem is too small). Second, the problem exists, but it needs an industry to solve it, not just a single company. Third, the problem exists, and many people have tried to solve it, but they failed (and we don’t learn from them).
In this session, Yafonia Hutabarat, the COO and Co-founder of PetaNetra, shared their case. As far as they know, they are the first augmented reality app based on navigation in Indonesia. But they also understand why indoor navigation on an app is so rare; it’s because the technology itself is still in development. It is hard and requires a lot of research. We see our problem is real; every time we have user testing, they are really interested in our product. But the technology itself needs to be developed further.
Responding to the challenges faced by PetaNetra, Gilang responded, “I think this is a very good example. I see some start-ups working on a similar problem but have a different approach for blind people. The next question to validate is, are you sure your solution is the best? The fact that someone else is solving the same problem validates that it’s the right problem. How do you validate whether our solution is the best solution?” said Gilang.
He then added, “We have three indicators: firstly, validated by the market. This means you have to have paying customers. Secondly, you have replicating customers. You’ve sold it to one person; are there other people who want to buy it? And thirdly, a small degree of customization between customers. If your current business requires a lot of customization, like an agency or boutique, then your business won’t be scalable.
For example, Go-Message, an app under Gojek. This is an example of the wrong problem but the right solution. The market size of this product is too small compared to the company’s goals. The solution is validated and has replicable customers. Another example of the right problem and the right solution is Tokopedia: the problem with e-commerce/marketplaces is difficulties in managing funds from the buyer to the seller. Then Tokopedia provided escrow; funds for the seller will only be disbursed after the buyer has received the goods.”