5 lessons for social entrepreneurs on how to change the system

The Schwab Foundation for Social Entrepreneurship manages the largest network of late-stage social entrepreneurs in the world. Yet when you talk to most entrepreneurs in our community, they describe their impact as a "drop in the ocean". They say things such as: "I’m not even 5% of the way to where I want to be".

For a field long obsessed by the holy grail of organizational scale, the social entrepreneurship sector is coming to terms with the limits of incremental growth. The needs are just too large and too urgent, and the models for scaling that we have developed remain too narrow and take too long. Conventional scaling models borrowed from the private sector, such as branch replication and social franchising, seem woefully inadequate to meet the size of the need.

Perhaps not surprisingly, many highly successful social entrepreneurs who have achieved significant scale, along with the intermediary organizations and funders that support them, are starting to coalesce around the concept of "systems change". It can go by different terms, including "equilibrium change", "systems entrepreneurship" and "transformative scale", but many people still conflate these concepts with the operational scale of single organizations. On the contrary, we believe that you can run a small organization and still change a system.

How is a "systems change" approach or strategy distinct from a direct service model? What does the pathway to systems change look like and how do you get there? Clearly, there is huge appetite to learn from the successes and failures of other social entrepreneurs, and to understand what key decision points made all the difference to the outcome.

Answering these questions was precisely the goal of our research initiative. It spanned dozens of interviews, site visits and workshops with nearly 100 social entrepreneurs in the Schwab Foundation network, culminating in the report 'Beyond Organizational Scale: How Social Entrepreneurs Create Systems Change'. Its aim is to help practitioners understand what systems change means in the context of social entrepreneurship, how it is distinct from direct service or "business-in-a-box" models and, most importantly, what it looks like in practice - not as lofty exhortations and abstract concepts, but as a set of concrete activities, processes and leadership lessons.

The most important tool in the systems entrepreneur’s toolkit is the ability to embed the solution into the larger system being targeted. Social systems are often defined as complex adaptive systems - complex because they are made up of many dynamic components, and adaptive because participants in the system learn from past behaviour to change their actions. By embracing systems thinking and considering social issues as a function of systems behaviour, systems entrepreneurs are moving beyond service delivery models and are instead focusing on the architecture of the system itself.

As Jeroo Billimoria, founder of Child & Youth Finance International (CYFI) says, "scaling a concept, rather than an organization, requires a major mindset shift". Jeroo came to believe that getting children out of poverty was not possible through scaling incremental service delivery, but rather by shifting the underlying systems that were failing to support children as future economic actors. That change in mindset led her to make very different strategic choices. She decided to transition from her existing organization, Aflatoun, which provides a curriculum for financial education, to create a much smaller organization dedicated to the concept of "economic citizenship" for children.

The case of Village Reach illustrates how your evidence base can serve as the link between a direct service model and systems change. Over several years, Village Reach worked with the Mozambique Ministry of Health to redesign and modernise their immunization supply chain. The results were transformative. Vaccine availability increased from 40% to 90%, the rate of children under five who were fully vaccinated against childhood disease increased from 68% to 95%, and all this was achieved at a 20% reduction in government operating costs. When others replicated the approach in different countries, they achieved similar results. This gave Village Reach the evidence they needed to advocate for changes in global immunization policy, set by the WHO and other international bodies.

After years of persistent advocacy efforts, those vaccine policies were reformed in important ways, in part thanks to the robust, irrefutable evidence that Village Reach built up painstakingly over years. As a result, hundreds of millions of donor dollars were mobilized towards modernising immunization supply chains. Today, Village Reach is working in a coordinated fashion with partners across ten countries at national scale to modernise their immunization supply chains.

"Data and evidence are crucial to being successful at systems change", says Allen Wilcox, the former CEO of Village Reach, "and many of the social systems that we social entrepreneurs want to change are filled with players that resist change in order to preserve the status quo. They are generally highly risk-averse, which is why they are hesitant to make any changes in their current practices. So, to move them out of their comfort zone towards positive change, we've found it necessary to make it riskier for them to keep doing what they're doing than to change. Evidence is a necessary tool in doing that."

Systems change often requires new organizational skills and capacities that an organization might not necessarily have in-house. Organizations focused on service delivery do not always have experience or expertise in coalition building, negotiating legislative reform, or technical assistance and capacity building. Each organization we studied has had to hire people for these skills or develop the capacity internally. This has usually been an iterative process, with successes and mistakes along the way.

While the social enterprises we studied use their convening power to promote a shared agenda and guiding principles, they have not sought to prescribe solutions or endorse their own products and services. In fact, to be an effective convener, these entrepreneurs have learned that it is critical to be an objective actor, as Jeroo Billimoria discovered at CYFI.

When Jeroo began advocating for new policies and attitudes under the auspices of Aflatoun, she was met with considerable resistance from the decision-makers she was aiming to influence. Aflatoun was seen as a service provider with its own vested interests (promoting its curriculum), which prevented it from being an "honest broker" pursuing systemic goals. Jeroo’s decision to create CYFI as a new entity was largely due to a perceived need among key stakeholders for an objective convener who could effectively coordinate the various parties in the system to advocate for change.

As a convener, CYFI brings together key actors from the finance and education sectors to dismantle barriers, implement educational reforms and change regulations that prevent children from opening bank accounts and learning how to manage their own finances. Through this approach of creating collective ownership and coordinating action, rather than scaling a prescriptive programme, CYFI has collaborated with 139 central banks, ministries of finance and ministries of education, and has actively influenced policy change in more than 70 countries.

To a certain extent, the social entrepreneurship movement emerged two decades ago from a lack of faith in the public sector to solve social problems. But the question for many social entrepreneurs now is not whether to work with government, but how. After all, shifting a complex system often requires changing the laws, administrative rules, and official practices governing that system.

The systems entrepreneurs who we studied work with government in different capacities, as contractors (delivering services for a fee), consultants (improving the capacity of government to deliver services) or advisers (providing advice for policy development or legislative reform). In each of these cases, government engagement offers an opportunity to reform public services for entire populations, often with a sustainable funding source, constituting a shift in the way systems work for everyone.

Tim Hanstad, former CEO and Senior Advisor at Landesa, an organization that has worked with dozens of governments to secure land rights for 120 million poor families over four decades, offers six golden rules to successfully partnering with government:

1. Identify potential champions in government, nurture those relationships, be intentional about building trust, and recognize that this takes time. Formalize this role in job descriptions.

2. Understand the perspectives and priorities of the government representatives with whom you're working. If you make your case to them without understanding what their incentives are, you are much less likely to succeed.

3. Remember that governments are not monolithic. You have to work with people in individual departments. There are many stakeholders within government and they don't all share the same priorities. You have to look at government through a more sophisticated lens, rather than seeing it as one huge stakeholder.

4. Avoid politics. Don't align yourself with a particular partisan point of view or party.

5. Prepare for the long haul. Policy change is not something you can accomplish in a quarter. It’s a three to five-year time horizon.

6. Give government all the credit. You may act as a catalyst, but they are the ones making the final decisions, passing the legislation and changing the regulations. Whenever there's success, credit them with it.

Why is humility an essential trait for systems change work? On the most basic level, it is important to recognize how much we don’t know and can’t predict - particularly unintended consequences. On a deeper, human level, authenticity and trust are critical to creating collective ownership among key stakeholders who have an essential role to play in solving the problem, but who are also leaders bringing their own interests, institutions, agendas and egos to the table. Negotiating that terrain successfully requires attentive listening, honed bridging skills and intense self-awareness about how you are perceived by others.

In such a context, the inner qualities of a systems change leader become critical. A growing body of evidence suggests that these qualities can be cultivated through a focus on inner well-being and self-awareness.

"Systems change is inherently an inner and outer process", explains the Academy for System Change. "Because of this, the development of self is foundational."

Social entrepreneurs in the Schwab Foundation's network have linked a stronger focus on their inner well-being to a greater capability to build trusting relationships. In complex multi-stakeholder contexts where communication breakdowns are often the norm, this becomes a valued personal skill. Active listening and the capacity to maintain open communication and trust are the glue that can bind a coalition.

Taken together, these qualities enable social entrepreneurs to assume the role of a systems entrepreneur. They become an effective "honest broker", recognized as having the humility to put the collective interest ahead of their individual or organizational interest, especially when those start to clash.

Not all social entrepreneurs can or should become systems entrepreneurs, nor am I advocating for those considering systems work to abandon their direct service models. On the contrary, direct service and systems change work can be mutually reinforcing. Often the former is the source of legitimacy and serves as the evidence base to influence other actors in the system.

Many social entrepreneurs build on their direct service model to add distinctly new initiatives or business units with a systems approach. It can often make sense to keep such efforts "in-house", especially when the organization enjoys a strong reputation as a respected provider or platform. In other cases, a direct service model may be incompatible with creating collective ownership, and cause friction or mistrust about an individual’s true agenda or motivations.

While the report offers a detailed set of questions and case studies to help practitioners evaluate their readiness and fit for systems change approaches and strategies, here are three questions to get you started:

Does my organization have the necessary credibility and/or objectivity to influence the system’s actors?

Is my organization’s revenue model or funding source conducive to this type of work, or will we need to find additional funding to pursue a systemic approach?

Does my organization have the capacity to work at a systems level? Or does it need to build capacity internally to begin this style of working?

Read the Schwab Foundation for Social Entrepreneurship's full report 'Beyond Organizational Scale: How Social Entrepreneurs Create Systems Change' here.