5 Lessons in Developing Social Tech Ventures
This blog was first published by Shift Design and can be read here.
Digital technology plays a powerful role in the response to social problems. It doesn’t provide the answers to everything and, by itself, it provides the answer to very little. But, when it works, it can equip social solutions with deeper reach and broader scale, with stickiness and sustainability, with the means of both standardising and personalising interventions, with a more accurate and detailed view of use and impact – and many other unique advantages.
To unlock these advantages and develop social technology that addresses real social problems – not just make life more convenient for the already comfortable or the worried well temporarily less worried – is difficult. Despite some wonderful examples of successful social tech, most projects fail to deliver genuine impact. For example, despite decades of assumptions about the transformative role of computers in schools and enormous investment, numerous studies have shown no positive impact or even negative effects. These kinds of assumptions represent one of several endemic flaws within much social technology innovation and delivery.
Through working on our own Shift products and ventures, like Historypin, BfB Labs, Good to Go and Buttons, by collaborating closely with our partners at the Nominet Trust, by supporting and advising other social tech teams and through my role on the Centre for Accelerating Social Technology Board, we have tried to identify and respond to some of these common mistakes.
We have emerged with 5 lessons from the front line of social tech development and investment. None of these insights is especially original or complex, nor do we claim to have any kind of recipe for success, but these have been learnt from the day-to-day challenges and opportunities of working on social technology projects – the same challenges and opportunities, we’re sure, that are experienced by many others.
1. Start building 3 strands of value from day 1
We believe that good social tech ventures (well, all social ventures really) are made up of three concurrent, intertwined strands of value – social value, user value and commercial value – which need identifying, understanding and nurturing from the very beginning of development.
- Social value – the ability of the product to deliver profound and measurable impact, tracked by specific metrics that reflect the intended outcomes of the venture
- User value – the ability of the product to meet the immediate needs of its target user groups, driving use, re-use, recommendations and sharing
- Commercial value – the ability of the product to generate sustainable and scalable revenue
It’s not rocket science, but it has helped us and others identify strengths and weakness, build a team with the right skills and experience, demonstrate progress and, ultimately, increase the chances of establishing sustainable, scalable and profitable social tech ventures that make a real, long-term contribution to solving a social problem.
It has also helped us ask and explore key questions about our products and ventures:
- What is the relationship between social value (what needs to be done to solve a problem) and user value (what needs to be done to meet user’s immediate needs)?
- Are social value and user value the same thing or is there a tension between them?
- Can commercial value be driven by both social value (delivering impact for commissioners or funders) and user value (providing sufficiently valuable services for users)?
- Do we have metrics for assessing our progress in each of these areas throughout design and development?
We have written in more detail about these 3 strands of value and they have been adopted by the Nominet Trust as the triple helix of social innovation, if you’d like to read more about this concept.
2. Throw products in at the deep end
It can be easy for tech for good project to avoid the question of how to deliver real user value and there are a couple of good reasons for this.
First, common routes to market for social technology, like education, healthcare or through public services, often separate their users from their customers. This means that products can be made available, distributed or provided without ever having to be chosen by users.
Secondly, the kinds of tests and trials that are most important to the progress of a social tech project are normally run in controlled environments, where the change amongst a group given access to the product are compared to change amongst a group that is not.
These are both valid and important. The first ensures that solutions reach the audiences that will benefit the most and the second that these potential benefits are real and measurable. However, both allow teams to avoid the question of whether products and services meet the immediate needs of users and whether they reflect their preferences and priorities.
While interventions can survive without meeting user needs, we would suggest they struggle to thrive. The difference between a product that is begrudgingly accepted and one that is actively chosen, re-used and shared is vast, in terms of impact, sustainability and scalability.
Social tech teams should to create ways to expose products to tests of real user value as early and often as possible. These “sink or swim” tests reflect well-established lean start-up methods and are hardly original, but perhaps less common within social tech design and development. Here are 3 examples:
- Open market test – This will force some fundamental questions to be addressed if they haven’t already, like: Have we segmented our target audience? Do we know what their immediate needs are? The aim is to get prototype products into an open market environment as early as possible and target the closest possible segment to your target audience. This could take many different forms, but Google Ads makes it particularly easy.
- Mock market test – A very common market research technique that aims to recreate an environment where target audiences have some real choice. For example, for an education app, students could be given a choice of how they’re going to spend a lesson from a range of applications on offer.
- Token payment test – Even if products will always be made available for free, willingness to pay or make a part payment is a potentially powerful demonstration of real user value.
These methods will suit some social technology projects more than others. Furthermore, it is relatively easy to design these tests to give yourself the result you want (an equally common problem with focus groups!). But, if teams really want to know how much their products meet the immediate needs of their target audience then there are plenty of deep ends that gives them the chance to learn.
3. Don’t make up new categories of stuff
Very few teams set out to try and establish a new category of products or services, but many do.
A common scenario might look something like this…
The team defines a problem (e.g. digital exclusion) amongst a specific target audience (e.g. older users with low digital skills and confidence) and identifies a potential solution. Through a series of cycles of design and testing, they develop a product that effectively drives the desired behaviours and outcomes (e.g. a tool that helps the friends, family and mentors of older users gradually build up a collection of sites and services they’re confident using, therefore increasing digital inclusion).
Throughout this process, they have defined the product in two ways: first, via the brand and identity of the tool itself and, second, as a type of social intervention (i.e. a digital inclusion tool). This may well have included some analysis of similar tools, which helped inform elements of UI design and marketing.
It is very common that, through this process, this product will be launched into no-man’s land – defined by an internally driven or sector focused category of interventions, rather than a user/customer lead category of products and services. If you search for “digital toolkits” you will find a lot of social technology projects floating in this space.
We can talk about this with first hand experience, because its exactly what we did in our work on Buttons in 2009. We followed a fairly pure model of behavioural design that didn’t take into account the question of where the product would fit into the world, for users or customers.
Despite passing independent impact evaluations with flying colours and proving effective in controlled environments, Buttons never really recovered from this flaw. It has helped over 40,000 users gain digital skills and confidence and maintains a modest community, but because it doesn’t fit squarely into an existing or growing product category, for either users or customers, it has no scalable route to market or business model beyond funding or sponsorship. Using the methods and discipline we now use, it is clear that there are several existing categories that Buttons could have targeted which would have pushed it towards stronger existing needs and helped it thrive.
Ultimately, this lesson has helped us focus on designing and developing for existing categories of products and services. These existing categories target existing user segments, meet existing user needs, are purchased or commissioned by existing customers and reflect existing patterns of behaviour and motivation.
These existing parameters and forces represent invaluable surroundings for social tech development and marketing. Most fundamentally, they provide a real hook within the lives of user and the purchasing habits of customers. They also offer an ongoing sense check on whether products are targeting specific and meaningful user segments, as well as routes to market, example business models and competitors, from whom market share can be won.
This may sound like a way of making all social tech more generic and conventional. But by aligning early product concepts with these existing forces, which could be within consumer, business or public service sectors, social tech teams can harness and redirect them. They can play a disruptive and radical role. Having to make up the game and all the rules is, in comparison, a much harder route to innovation – and that we feel should be left to the likes of Google and Apple.
4. Always build a business, never just deliver a project
This lesson has been learnt from years of trying to balance the short-term needs of project delivery with the longer-term ambitions of product design and venture building at Shift. From our experience of working with dozens of other social tech projects, we have not been alone in this.
There seem to be two main reasons why this tension emerges:
- Available revenue – In an ideal world, every social tech team would be able to access the type and level investment that allows them to focus on core product development, testing, marketing and measurement. In reality, R&D funding for social tech is modest and impact investment has only just started to creep towards a role as innovation-friendly seed funding. So social tech teams often have to accumulate a series of grants, commissions and delivery partnerships to support product design and development.
- Traditional culture – There is a valid chicken and egg question here in relation to (1), but, regardless, there are often cultural and organisational barriers to effective long-term planning, iterative design processes and the gradual accumulation of value. Charities and non-profits are naturally very focused on delivery and execution, as are those that move from government or agency backgrounds into social tech teams.
In practical terms, this tension manifests in different resources and skills:
The needs of project delivery
- Delivery team
- Project & Partnership management
- Short-term outputs & outcomes
- Monitoring & Reporting
The needs of building a business
- Design & development teams
- Product management, market research, long term business planning
- Long term value & impact
- Evidence of scalable impact, user traction & commercial potential
Our Historypin venture has lived this tension for much of its life. Between the early beta launch in 2010 and around mid 2014, Historypin was able to generate significant revenue from service delivery and funded impact projects, which amounted to around £2.5million. However, this came in the form of around 80 project deliverables from around 50 partnerships. We’re confident that all of these partnerships delivered impact against our social aims, but only some of them provided opportunities to develop the core Historypin product and build a long-term business. We estimate that around 80% of resource over this period went into winning, managing, delivering and reporting on accounts and projects and around 20% into the development of a sustainable, scalable product-based business.
Since mid-2014, Historypin has made a significant step away from this model by securing strategic investment, which has allowed it to redevelop its core product and develop standardised services and which is unlocking far greater scale and impact.
But, more widely, how can this tension be avoided?
The neat answer is through the creation of a strong enough proposition at each stage of development to secure fit-for-purpose funding and investment that supports core product design and the gradual development of replicable revenue streams. Shift is very focussed on this approach, which is reflected in the ownership and investment structure we’ve established for our ventures and the deliberate transition from grant funded R&D to impact investment, which was made by BfB Labs in 2015 and will be followed by our two healthy eating ventures in 2016.
The messier answer is that some combination of project delivery and product development revenue is often inevitable. In these cases, a strong roadmap, development focused team and culture and the hyper efficient management of delivery can all support progress towards a more scalable impact and revenue model. Moreover, these project-based revenue streams can also be significant assets if managed well and aligned with the core product and mission, as they represent evidence of customer need and revenue potential.
5. Focus funding partnerships on milestones
There is a crucial role for grant funding within social tech. It can support the higher costs of early stage research and development, which needs to understand and respond to complex social problems. It can also reduce the risks for impact investors and, as as result, unlock significantly larger pools of capital.
But, we believe, it needs to behave less like traditional grant funding and more like zero equity impact investment to be really effective.
A way of reflecting this within grant funding partnerships is to build these relationships around the question:
Where am I dropping you off and who is picking you up?
Commercial investment in tech ventures is obsessed with this question – if you don’t make your investee more investable, you lose your capital.
Similarly, this question defines our relationship with the largest impact investor in BfB Labs. We meet every week and focus on the point we need to reach to attract the next round of investment and keep the venture moving towards scalable impact and revenue.
This investor isn’t trying to rush the venture to a point of exit and they share deep commitments to preventing mental illness, but they know that the social and commercial value of the business relies on an increasingly robust and compelling investment proposition.
Because of the nature of the partnership with the Nominet Trust over the last 3 years, that is the kind of conversation we have put at the centre of reporting discussions, but, in our experience, that’s not natural for grant funding partnerships and we feel strongly that it should be.
Too many social tech projects emerge from early stage grant funding unable to secure further support or to graduate to larger pools of more sophisticated investment, such as equity based impact investment. As CAST has articulated very well, part of this problem relates to the “missing middle” within the social tech funding ecosystem. But, another part relates, in our view, relates to the “missing milestones” of grant funded projects, which is the responsibility of both social tech teams and grant funders.
In practice, this approach can translate into a different conversation between these partners.
Funders should be asking questions like: exactly which milestones are you aiming to reach with our funding? And what is the milestones after that? What value will you need to demonstrate and to whom? What is the quality of your evidence and who it will satisfy? What do potential funders and investors think of your business plan and investment proposition?
Social tech teams, in turn, should ask questions like: what potential funders, investors or commissioners can you line up for us to talk to? Can you help us develop a clearer, stronger roadmap? Can we tell you less about how many project meetings we had and more about our progress along our roadmap?
We have written more about our obsession with roadmaps and milestones here.
We presented these lessons at an event on 9th March, 2016 at Google Campus London, which was hosted in partnership with the Nominet Trust. The event generated some interesting responses and discussion which you can check out here.