Understanding the Roots of the Problem, not just the Symptoms

Having the opportunity to work with technology entrepreneurs in the Fit Startup Factory and now social entrepreneurs via Social Change Labs has afforded me a unique perspective into the startup journey of each segment, and the unique challenges that they face. Although we preach the same methodology and approach to both parties (Business Model Generation, Customer Development, Lean Startup, etc.), there are obvious differences. In the next few posts I want to take a moment to explore some of those differences and would love to hear your thoughts as well.

In my first post, I discussed the differences regarding the starting point of entrepreneurial ideas, technology vs. social, and how that impacts the development of the business model. In my second post, we explored the challenge faced by social startups in serving multiple customer segments. Now we’ll look at how social startups need to truly explore the depths of the problem.

What is Really the Problem?

For social startups, unlike for many technology startups, the problems are usually quite obvious. Social entrepreneurs are fighting to solve critical issues of human rights, environmental protection, social governance, etc. These problems are well-known, but because of their low or non-existent economic potential, are often ignored.

For example, consider Grameen Bank and the micro-finance model which provides the poor with access to financial services. The poor can’t go to a bank for a loan and are forced into the hands of unofficial moneylenders and loan sharks with outrageous interest rates and heavy-handed repayment methods. The problem is obvious; but until Mohammad Yunus, given the inherent belief that the poor were untrustworthy along with the high costs of dealing in small loans, no one bothered to try and solve it. On the other hand, think about Twitter: the problem or the need wasn’t as apparent at the beginning; it wasn’t only until people started using it, and shaping it to their own needs that its true function and value became apparent.

However, the preconceived clarity of the problem can often be misleading for the social entrepreneur. For while the social problem is quite obvious, the actual roots of the problem, along with external influences upon that problem are often undiscovered. And this can push social entrepreneurs too quickly beyond the stage of understanding the problem into crafting a solution, only to realize the error of their efforts later.

In Abhijit V. Banerjee and Esther Duflo fascinating book on global poverty, Poor Economics, the authors delve into some of these roots and external influences on poverty, and why many current solutions have come up short. Without trying to paraphrase the entire book, I’ll illustrate just one example, hunger. One of the most basic human needs, and a clear sign of poverty is hunger.

Undernourishment leads to a variety of chronic health issues and impacts a person’s productivity, which lowers their overall earnings, thereby leading to less purchasing power for food, etc., i.e. a typical poverty cycle. So thus we should just distribute food to the poor, or at least make basic staples cheaper then, right? In their studies, Banerjee and Duflo show that such government food programs have not led to increased nourishment and thereby higher levels of productivity for the poor. Why not? With cheaper basic food, one would expect the poor to buy and consume more of the same, helping them emerge from this cycle of poverty, right?

In fact, with more disposable income, the poor have been shown to buy richer or more expensive food, rather than larger quantities of basic food. The core issue is not simply hunger; there is the need for simply joys in life, i.e. eating foods that you like or being able to spice up your day with different tastes. In a life bereft of much joys, it is the small things, like a nice meal, that makes all the difference. It is for this reason that in the slums of the developing world, the most common electronic purchase is often the television, often before a refrigerator, with families saving up for years to procure one. It is the small things to make life a little more bearable.

Without understanding actual behavior and getting to the root of the problem it would be impossible to make a dent in the issue of global hunger, not to mention a lot of wasted resources.

Exploring the Problem: an example

Ben1Gönüllüyüm (I am a Volunteer), a Social Change Labs semi-finalist, has taken the long road in the path of customer and problem discovery. The social problem they are dealing with is quite obvious: Turkey has one of the lowest rates of volunteerism in the world, estimated at only around 3-4% of the total population. But the question “why” and the correct solution to solve that question is a bit more elusive.

In the beginning, the assumed “why” for Ben1Gönüllüyüm was a disconnect between potential volunteers and non-profits; they just needed a platform to meet and exchange information. If potential volunteers could just learn about and explore different volunteering opportunities from non-profits themselves, they would jump right in and this problem would be solved, right?

Not so fast. It didn’t work. People were not interested.

Following, the team decided to step back from this idea and take time to learn and explore the volunteering culture in Turkey a bit more intimately. They got involved in different non-profit organizations and projects. They built a small-scale platform to encourage and enable volunteerism amongst students at their school, Özyeğin University. They spent time getting to know organizations and volunteers in order to better understand their motivations and challenges. They found that in volunteers were a niche market, i.e. dedicated, passionate people who were brave enough to step outside the norm, and it wasn’t until they get involved in non-profit organizations did they find people like themselves. They learned that most volunteering opportunities are spread through word-of-mouth, or specifically a committed friend convincing and dragging them along. Specifically, they began to understand the “pain” of the volunteer: outcast, uncool, involved in worthless efforts.

And it is based on those key insights that the team started to build a new model, a new solution. The crux of their project now centers on a crowdsourced map of volunteerism, getting volunteers to “check-in” as they volunteer and enabling them to connect with each other across a larger community. And thus, via this map, volunteers can show how they are part of a larger change happening across the country and help convince their friends and family to take part as well.

Lesson learned: before they could think about solutions, they needed to understand the problem better first.

Fundamentally, for social entrepreneurs, the key danger is assuming they understand the problem, because everyone knows the problem. People write about the problem all the time in the media, complain about while riding on the bus, and discuss them in political debates. But that is only the surface of the problem, the symptoms that everyone knows. However, it is the social entrepreneur’s ability to truly understand the problem, deeper than anyone else, which enables them to derive truly workable solutions that actually solve real “pains” and create sustainable, lasting change.

Summary: social entrepreneurs have to make sure they are not misled by the obviousness of the symptoms, but rather spend time delving into the roots and external influences on the social problem they want to solve.


The Customer Segment(s)

Having the opportunity to work with technology entrepreneurs in the Fit Startup Factory and now social entrepreneurs via Social Change Labs has afforded me a unique perspective into the startup journey of each segment, and the unique challenges that they face. I want to take a moment to explore those differences.

In my previous post, I discussed the differences regarding the starting point of entrepreneurial ideas, technology vs. social, and how that impacts the development of the business model. Today we’ll examine the difference in focus when it comes to customer segments.

The Customer Segment

Residing in the cornerstone of every startup sits the ever-powerful, mythical customer, and it is the ability of the startup to serve this customer in a unique and highly valuable manner which transforms it from a promising startup idea into a sustainable corporation. When it comes to social startups, one of the key struggles involves serving multiple customers, or multiple stakeholders, each with their own unique needs, wants, and restrictions. Fundamentally, it is the capability of a social startup to cater to and bring these disparate groups together that forms their core value and drives impact.

Some well-known examples of social startups that have navigated this treacherous slope successfully:

  • Kiva: individual micro-donors, micro-finance institutions, and local entrepreneurs
  • Samasource: large corporations, local training partners, and unemployed youth, women, & refugees
  • Tom’s Shoes: fashion and socially-conscious consumers, local non-profits, children in Africa without shoes

Obviously, multiple customer segments are not unique to social startups. With the rise of internet platform business and social networks, technology entrepreneurs are often dealing with two or more customer segments as well. Consider Giysicini, a Fit Startup Factory tech startup, which serves individual fashion-conscious consumers and well-known clothing brands. For the individual user, they offer the ability to create a digital wardrobe, try different clothing combinations, and get recommendations for what to wear; for clothing brands, they offer the opportunity to connect with highly segmented markets, explore fashion preferences and observe user trends.

But, for social entrepreneurs, it is the ability to manage the complexity of multiple markets that makes or breaks the idea, making the entire endeavor a very careful balancing act. Each market requires its own value proposition; each market require its own channels and relationships. And sometimes each market’s needs or values can be in conflict with other segments.

Multiple Customer Segments: an example

Developer Factory, a Social Change Labs semi-finalist, has a very straightforward value proposition: help unemployed youth develop employable skills by teaching them how to code. However, their model is far from straightforward.

Normally, one could just open training courses and charge the students. But because of their focus on social impact, i.e. access to unemployed youth, charging students for the full costs of such a course would be counterproductive. Therefore, the team is working on different models, trying to understand different values that are being created and who would actually pay for those values. Currently they are working with three different customer/stakeholder segments:

  • Corporations or firms looking for programming talent
  • Unemployed youth with some theoretical training but no practical experience
  • Seasoned programming professionals looking to give back to the community

As a team, their goal is get corporations to outsource programming projects to the venture, then work on those projects with the students, using them as practice-based training and experience, which is a key gap in most university undergraduate programs. Seasoned programming professionals will serve as volunteer mentors and teachers (crowdsourcing) to increase the knowledge base and expand the reach of the program. Corporations get projects done as well as early PR with potential future hires; students get hands-on, fundamental programming skills at below-cost prices; programming professionals have a chance to give back to the ecosystem and gain further notoriety in the sector.

Fundamentally, the model looks good on paper, but there are some key questions:

  • Corporations
    • Will the corporations see the added value of working with students, and potential future hires, rather than the disadvantage of inexperience?
    • How much are corporations willing to pay for/support such this endeavor if they have no guarantee to hire and retain that talent later?
  • Programming Professionals
    • How committed with programming professionals be to the course as volunteer mentors?
    • How can they be motivated? What can serve as suitable rewards?
  • Programming Students
    • How much can they charge students in order to maximize access while ensuring commitment to finish the course?
    • What is the minimum level of theoretical knowledge necessary before adding practical training?

And the conflict in needs and values becomes apparent. Expanding the scope to serve more, but less-talented students would expand social impact, but probably not satisfy corporate clients looking for high-quality work and frustrate volunteer mentors who want to coach eager, talented individuals. Placing graduates directly in companies after the course would create strong value for corporations, but take away freedom and flexibility from students. Also, charging more for the courses would decrease the venture’s dependence on corporate sales but then may discourage many youth that need the training. And so forth.

It is the ability of the Developer Factory to solve these myriad of issues to everyone’s mutual benefit that will be its ultimate determinant of success.

Finally, more than just the challenge of multiple markets, with the focus on social impact and social change, social entrepreneurs aim to expand the depth and reach of their core value without losing sight of sustainable financial objectives. But that’s something we’ll save for the next post. Let me know what you think.

Summary: social startups are often challenged by the need to serve multiple customer segments, but it is the ability to bring those groups together via a creative model that creates their core value and drives social impact.

Understanding the Starting Point

Having the opportunity to work with technology entrepreneurs in the Fit Startup Factory and now social entrepreneurs via Social Change Labs has afforded me a unique perspective into the startup journey of each segment, and the unique challenges that they face. Although we preach the same methodology and approach to both parties (Business Model Generation, Customer Development, Lean Startup, etc.), there are obvious differences. In the next few posts I want to take a moment to explore some of those differences and would love to hear your thoughts as well.

The Starting Point

In the Lean Entrepreneur, Brant Cooper and Patrick Vlaskovits define the starting point for entrepreneurial ideas as usually one of the following: segment, problem, product, technology. For example, the entrepreneur first identifies a lucrative customer segment, then figures out what problems they are experiencing, before designing a product to solve that problem and figuring out the technology to deliver that solution. Each of the starting points are valid, and each carries its own challenges.

Starting With the Problem

For social entrepreneurs, the starting point seems to always starts at the problem:

  • Why don’t more people volunteer in Turkey? (ben1gönüllüyüm and Bir Elin Sesi Var)
  • How do we get people to consume less resources? (Eşya Kütüphanesi)
  • Why do small non-profits have trouble accessing individual donations? (Bağış Portalı and birayda)
  • How can we reduce our carbon footprint from plastic bags? (BagAway)

From there these social entrepreneurs try to delve into the extent of the problem, i.e. who is experiencing this problem, who actually cares enough to do something about it, and who holds the keys to actually initiating a solution.

An Example: Starting with the Problem

Eşya Kütüphanesi is an online platform to facilitate the sharing of household products amongst a larger community. The problem was simple: do people really have to “purchase” and “own” everything they use? Could some things be shared, borrowed, etc. to create higher levels of efficiency, and thereby reducing consumption and its effects on the environment?

Once they realized this was the problem they were passionate about and were excited to solve, the team started exploring different customer segments that recognized this problem, considered it significant and wanted to do something about it. this obviously involved lots of customer interviews, a plenty of revisions of their business model and initial assumptions. It’s not easy changing established habits, but within the larger population they discovered a group that was active sharers and borrowers within their own circle of friends, nicknamed Generation G.

Now they are in the process of figuring out the right product/service to effective facilitate these sharing transactions and the type of technology they will need to scale the solution outward.

Starting with the Segment

Then there are social entrepreneurs who start with the segment, a disadvantaged, marginalized portion of the population, i.e. the homeless or youth with mental disabilities (Mor Menekşem).

Usually they have some connection to the population – either they are personally themselves from that population, or have a family member or friend who has been marginalized. To develop effective solutions for the niche market requires an in-depth appreciation of their life, their day-to-day struggle, and the inherent problems that go along with it. Then the right solution and required technology can be determined.

An Example: Starting with the Segment

Mor Menekşem aims to create employment opportunities for the mentally disabled by running a greenhouse to raise purple violets and sell them as a brand for mental disability awareness. One of their team members serves as the Turkish Mental Disability Federation Chairman, and from the beginning the team was focused on developing a social enterprise to serve and aid the mentally disabled.

As they delved into the current conditions of the mentally disabled in Turkey, two big issues came up: employment opportunities catering to the mentally disabled were almost non-existent, and there was low awareness of mental disability in the general population. It is a problem that is oft hidden away from the public eye, and resources to support individuals and families are scarce.

Thus was born the idea of Mor Menekşem, transforming a simple flower into a socially-conscious consumer product that can serve as a symbol for the mentally disabled. Now the team is working to better understand the consumer segment of this equation, i.e. the type of people that would be excited to support such an effort through their purchase decisions.

Basically, unlike technology entrepreneurs, you rarely ever see social entrepreneurs enamored with a product or a technology first. It is the problem or it is the segment that drives them. It is solving that problem, or serving that segment that serves as the core of their business model.

There are definitely technology entrepreneurs who start with the segment or the problem, but unfortunately, more often that not, we come across entrepreneurs who are sold on their own product idea but are not actually solving a significant problem or meeting a significant need. Perhaps what we need to help technology entrepreneurs start thinking more like social entrepreneurs, actually embedding themselves with the population they want to serve and learning to empathize more with the people and the problems they face rather than simply developing and then trying to sell a product. The technology is only as good as its fit with the problem or need it is trying to solve (i.e. the Segway).

What do you think?