The word "scale" gets used a lot in sanitation, and sometimes with confusion. So we at FLUSH wanted to make sure we could help clarify what this word is actually about and how to use it to improve our performance to create universal access to safe sanitation.
Understanding Scale – Profit vs. Impact
Scale is a word used to talk about a way to grow businesses – or enterprises. Growing a business, in general, is a gradual, linear process that takes a lot of resources; scaling, on the other hand, is about growing a business exponentially and achieving greater goals.
Scaling goals differ for traditional businesses and social enterprises. For traditional enterprises, this goal is about maximizing profit – increasing revenue quickly with more incremental growth in resource costs. By contrast, social enterprises in water and sanitation consider scaling to increase impact by reaching more people efficiently.
Scale to reach more people is a bit relative, of course. FLUSH recently talked with a representative from the Toilet Board Coalition, which works with small and medium-sized sanitation social enterprises to grow and scale their businesses. They shared with us that, while some businesses use the term 'scale' to mean reaching a million people, others may use it to mean reaching entire country populations. Context is key.
Scaling via Breadth or Depth
Scaling to increase impact for social enterprises can also look different. This could include growing the customer base, developing new products and services, and diversifying into new sectors or geographic regions. At a high level, this can be done in two different ways –by expanding either the breadth or depth of their work.
Scaling with breadth is the most popular choice for sanitation social enterprises. This often looks like expanding the services and product market geographically – by expanding borders or going to entirely new geographic places to provide the same services. Often, enterprises replicate their business model elsewhere or franchise it to other agencies or enterprises (sometimes through consulting services or licensing). The idea behind this method is that the business model has a significant impact if only it could be in more places providing more people with its products or services.
The trick with geographic scale is that, often, sanitation social enterprises have labor-intensive work that requires building deep relationships with their communities. As a result, these business models can be tricky to replicate geographically because of the higher costs involved – hiring new teams, building new treatment facilities, and installing entirely new infrastructure in new places. This is the same for franchising the model, as the replicating agency may need to start from scratch with their resources, which is costly and difficult at the onset. That said, it can be a more cost-effective method overall if the franchisee is already a sanitation enterprise looking to use someone else's technology.
Sometimes, the breadth-type of scale can also increase impact by growing stronger partnerships between different organizations. This can unlock potential markets in new sectors. For example, maybe this means a sanitation social enterprise has a new pool of consumers because they collaborate with an agricultural organization that can expand their reach without changing their workstreams.
This could also look like a smaller social enterprise merging or getting acquired by a larger entity. This can allow a smaller team to continue their work with a sudden and substantial increase in resources and communities that they may not have had the ability to access before. This also allows smaller social enterprises to improve their capacities and competencies that they wouldn't have been able to otherwise.
The other traditional avenue to scale is through deepening the social enterprise's context-specific work. Often this looks like creating new services or product lines that align with their mission to serve more people in their original market. The idea is to address social challenges from multiple angles, thus increasing their impact where they are. This kind of scale allows social enterprises to grow their business by diversifying their activities. This can help them innovate on internal systems without paying more for additional resources, especially if their current resources can be pooled and mobilized for new activities.
Depth may also look like setting up standards for their sanitation work. These standards could improve the efficiency of internal processes and operations while lifting the full sanitation ecosystem of a community or country. By standardizing work, enterprises could scale impact in a way they couldn't have been able to accomplish before. The challenge with setting standards can be that it requires aligning and coordinating many different stakeholders with competing objectives and figuring out what exactly should be standardized.
There's also, of course, scale through influence. This could mean sharing lessons or valuable working principles contributing to a social enterprise's success. This doesn't mean the social enterprises are sharing company secrets with everyone. Rather, they are moving the needle in their sector by sharing knowledge that could help other enterprises working elsewhere leapfrog in finding solutions or tackling tricky challenges. Is this breadth or depth? We can't quite decide.
Preparing to Scale
Sure, there are different ways to scale, but how do you decide? This is the first step for a social enterprise that wants to scale – figuring it out.
Social enterprises must define what their innovation is that they want to scale. Is it their model for creating different products and services? Or is it their business model that others can easily replicate in other contexts? Or is their way of working – as in their culture and team values – that should be shared with others working on similar efforts to progress the sector's ethos as a whole? This step can't be rushed – it can be challenging to bounce back from a failed scale if it's not well planned out before. It's important to ensure that the innovation for scale aligns with the social enterprise's mission.
After defining the innovation to scale, a social enterprise must make sure it can scale given internal and external environments.
Companies (regardless of traditional or social goals) must be internally prepared to scale. The key components for any scale are capacity and capability. This means that the company must have the capacity internally to grow and that its systems can handle the rapid growth. Can the team and equipment handle the scaling efforts?
Part of the work also includes forecasting what internal has to change to make the scaling work. What will it take to scale the impact? What bottlenecks could come up for the social enterprise with the scale? What new teams have to change to accommodate the upcoming changes? For example, management teams and structures may have to shift. Or, the price has to increase in some places to offset growing costs with a new geographic location (without sacrificing quality, of course).
Another internal requirement, of course, is financing for scale. The social enterprise needs to make sure they can allocate or secure the resources to scale – whatever they may be. This could look like finding the right impact investor or philanthropist to provide a lot of money (such as grants, debt, or equity funding) for the scaling efforts. It also means that some business models need to make sure there's substantial demand to have a work pipeline that helps the enterprise guarantee revenue somewhere while growing.
Some business models are easier to scale than others, of course. For example, suppose the social enterprise is a digital platform. It could be much easier for them to scale their services than a brick and mortar service provider simply because their capabilities may be nimbler to changing contexts and services.
Outside of the social enterprises, there could be external barriers they may face to scaling their work. For example, perhaps the local infrastructure isn't ready for the social enterprise's products or services, making it hard to reach people or expensive to operate. Or maybe the policies and regulations in the areas prohibit them from doing what they're good at. Maybe misplaced subsidies hinder them from covering costs or reaching the right consumer base. These external barriers could be just as difficult to overcome as the internal requirements – perhaps even more complicated.
One Stanford Social Innovation Review article shared a great framework for helping social enterprises interested in scaling walk through the processes clearly with a five-step process. The steps are: Readiness, Receptivity, Resources, Risks, and Returns. We highly recommend the framework for learning how to start planning for scale in a social enterprise.
Iterating Sanitation's Scale Conversation
Unfortunately, the focus on replication or geographically scaling sanitation social enterprises has limited the sector from thinking about other, potentially easier, and more impactful pathways to scale. Not all sanitation social enterprises should focus on only geographically scaling. Firstly, geographically scaling before fully covering communities in need in one area means that people will continue to be left out in accessing good, safe sanitation systems. Secondly, geographic scale is expensive and would eventually mean that many labor-intensive sanitation social enterprises could grow too quickly and eventually close, leaving people without their vital sanitation services.
Lastly, we could end up in a world where the sanitation sector comprises many fragmented, little sanitation social enterprises spread out across many places. These enterprises could struggle to reach impact goals because they stretch resources too thin while competing for local pools of public and private funding opportunities. This hurts the enterprise's gross margins and, ultimately, financial sustainability.
Of course, scaling for a sanitation social enterprise may change over time, too. They could start with expanding their boundaries in a city and then decide to deepen their community services. And maybe after these scales, they decide to replicate and/or franchise their model in other towns or countries. The sanitation sector has examples of social enterprises that have done this kind of work and have successfully increased their impact. The key is being clear on the innovations for a social enterprise to scale. All of these types of scale can create more jobs, which impacts communities in need.
Another challenge in sanitation and beyond has been to figure out how to let social enterprises scale in impact while also scaling profit like traditional enterprises. The ultimate win is scaling impact while also scaling profit, though that's famously complicated even beyond sanitation markets. We at FLUSH believe being clear on the scale you're looking to achieve before doing it is the first step to discussing the opportunity with your team, partners, and potential financiers.
Special thanks to Alex Knezovich from Toilet Board Coalition for providing key feedback to this blog post!