All too often, great design solutions for the developing world fall victim to dependency on charitable giving to achieve their goals. Few social enterprises have a truly sustainable business plan, so it is no surprise that there is no flood of wealth coming from traditional investors to fund these enterprises. This post focuses on understanding the investor’s two bottom lines, which will yield a Part 2 post advising social enterprises on how to attract more funding.

A recent Harvard Business Review article on “Funding Social Enterprises” opened my eyes with a new perspective on how I manage my own little “investments” in social enterprise.

Charitable Giving as an Investment

If you were to think of your annual charitable giving as an investment fund, how would you rate the fund’s performance? Traditional investors look at Return on Investment (ROI) in a pure financial sense. They only put money in if they expect to get more money out in the end. On the other end of the spectrum, HBR looks at charitable donors as another kind of investor. Charitable “investors” seek ROI in terms of pure social impact. They put money in expecting to make a difference in the problem that the organization addresses. It’s nice to get free money, but charitable funding is hard to forecast and competition is steep to win donors’ dollars.

When seeking traditional investment funding, social enterprises face insurmountable challenges when trying to compete against other enterprises, since their ability to promise financial returns is hampered by selling to the poor or increasing costs in order to benefit the cause (environment, health, education). With financial restructuring, new approaches offer a mixture of financial and impact-based ROI to help social enterprises appeal to traditional investors. For a nice summary of those blended financial investment models, I point you to the HBR article, which delves into the financial offerings much more rigorously.

Demand Evidence of ROI

Charitable investors are willing to take a -100% ROI (completely ludicrous for a traditional investment) in order to see social ROI. However, social ROI varies wildly from donation to donation, and it is only by the grace of donors’ emotion-induced investment blindness that most charities continue to receive funding.

To make smarter charitable investments, donors should seek organizations that demonstrate visible accountability for the aid they receive. The more granularly the organization can demonstrate ROI, the better.
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We were delighted to see Emily Pilloton, founder of Project H Design and author of Design Revolution, appear as a guest on the Colbert Report last night. The highlight of the interview was the rousing response from Pilloton’s call for a new measure of success according to “the triple bottom line: Planet, People and Profit”.

Pilloton chose excellent visual aids to show Colbert how design can improve lives. Selected from her book, Design Revolution: 100 Products that Empower People, Colbert walked to the interview table wearing Spider Boots, donned a pair of Adaptive Eyewear, and marveled at Pilloton’s ability to move 200 pounds of water with the ease of a “very, very suspicious flight attendant” using the beloved Hippo Water Roller.

Watch the interview on Comedy Central’s website.

Here is Josh Silver’s 5-minute presentation of the optometrist-free glasses at TEDGlobal 2009 in July. In it, he explains that he is 30,000 on the way to putting glasses in the hands of one billion people by 2020. As with many humanitarian designs, the foremost obstacle he faces is bringing down the $19 cost of each pair. He is an atomic physicist by day, which just goes to show anyone can be a humanitarian designer.

We’re excited to see that Microsoft has chosen to focus its 2009 Imagine Cup theme around the Millennium Development Goals. The Imagine Cup challenges students around the world to solve world challenges in nine technology categories:

Design // Short Film // Photography

Robotics // IT Challenge // Mash Up

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Software // Embedded // Game

This year’s worldwide finals will be held in Cairo, Egypt in July. Last year’s winners, chosen from over 200,000 contestants, seemed mostly to focus on technogadgets to raise awareness of personal consumption patterns in the developed world, so we’re glad to see Microsoft encouraging all this brainpower to consider the bottom-of-pyramid developing world population. Winning 2008 teams will receive business and technology training as part of the Imagine Cup Innovation Accelerator program, to be held in Mountain View, CA in early April this year.

CbD will be watching the Design Invitational category most closely; entries to Round 1 are due March 1.

20081227-the-goals8You may remember the fairy tale of the Three Little Pigs: when threatened by the big bad wolf, each chose to build a shelter to shield himself from the wolf’s huffing and puffing. The house of straw and the house of sticks fell away, but the house of bricks stood strong.

These days, the global “big bad wolf” is earthquakes. Unfortunately, most homes built on fault lines continue to be rebuilt with the same materials and the same construction techniques that crumbled with some seismic huffing and puffing.

20090204-modern-day-fairytaleBuild Change, a nonprofit from San Francisco (quite familiar with earthquakes), is working to change that. The amazing thing is, they impact the developing world without providing funding or materials – only consultation and training. Founder Dr. Elisabeth Hausler (pictured at left) realized after one earthquake with 20,000 casualties: “it’s not the earthquake that kills people, it’s the building collapsing.”

Build Change works with international agencies and local experts to help each region identify best practices that meet its needs, source locally available materials, and test low-cost construction methods. Once they have developed a model, Build Change conducts training and distributes construction manuals so the region can permanently change how it constructs buildings. From project to project, Build Change collects and disseminates a repository of earthquake-resistant building techniques.

Why do some buildings crumble and some buildings remain standing?

Sichuan earthquake: Unconfined precast concrete buildings crumble, while confined masonry buildings remain standing.

The Indonesian island of Sumatra has suffered three of the world’s top 10 largest earthquakes since 1900, and all three of those earthquakes have occurred in the past five years. For perspective, SF’s two famous earthquakes don’t even make the list. Build Change works in Northern (Aceh) and Western Sumatra, and is seeking support to rebuild the area damaged by the May 2008 earthquake in the Sichuan province of China.

Build Change’s methods remind us of another adage which should be remembered in all developing world projects.

Give a man a fish; you have fed him for today. Teach a man to fish; and you have fed him for a lifetime. — Author unknown