Impact pyramid
Why is it that despite the best efforts non profits fail?
Startups (for profit) fail spectacularly and more often. But there is a profound difference in those two types of failures.
One fail in its quest for finding a problem to solve. Sometimes the problem doesn't exist at a primary level even. While the other fails despite having identified a very fundamental problem which often needs urgently to be tackled.
Now let's merge this distinction among profits and non profits for sometime and take a more fundamental dig on them. There are already too much of meanings and stereotypes attached with terms like corporate, organization, startup, non profit etc. Fundamentally people, both outsiders and insiders, often don't acknowledge the core components of these entities. This often lead to failures. Well, some do get a certain things right and manage to outshine spectacularly.
Having worked with over 15 entities in a span of 5 years, from killed startups to IGOs, I spent a lot of time pondering over this very thing. Why is that despite having some clear advantages than startups, like a clear problem statement, a team of enthusiastic individuals, no pressure to scale or engage in sales/profits, a positive sense around the cause from family, society and civic community, boosting inspiration and racking support etc; non profits fail to impact in the way they have envisioned or solve the problem they had so passionately picked.
The underlying reason lies in a concept, which I call Impact pyramid. This structure, at a very fundamental level, defines the dynamics of an organization (call it a startup or a non profit or any similar entity) at the nascent stage. Major strategies of an early stage project are weaved around a certain level of the pyramid, as the project gains momentum.
Before everything else, let's dig some of the more and less obvious things about each of the above levels.
Vision
A majority of the projects gets killed before even taking off and numerous ambitious folks are left in their own world of delusion where they were the great visionaries and if things had gone their way, if people have given enough attention to their millionaire dollars idea then the world would have changed forever, for better. But then an idea is worth nothing. You may argue how your fans love your ideas but ever tried selling ideas?
Yet ideas are important. If combined with the right imagination and mapped with apt resources they form vision. And everything revolves around the vision. Once you make a choice of your market or industry or problem you lock your vision and give it the only shape it needs. But if not restricted to where it should belong, it will become one of the most overrated things. In impact pyramid they form the bottom layer. They are foundations for everything but tend to lay buried at the bottom. We will come to this again later.
People
The next things are people! They represent a closed community of set of people directly involved in shaping up a vision. A person who couldn't articulate his vision but got his friend believe in him, the guy who couldn't understand a thing but took a leap and pledged his money, the restless employees who are too ambitious and yet thought it was worth a try, and other countless people who went behind the scenes. They are the people with their hands on the steering wheel. If things doesn't work they fail, and if they do they succeed. Many of them tend to be sociopaths rather than the normal labor force which succumb to the traditional laws of economics. In the impact pyramid they represent nothing but the transactional joining piece between the vision and product.
Product
This is the face of everything. If a project fails, it directly means: the product failed. And it represents anything which makes it way to the people outside the above set. It may be the logo, the software, the call service personnel, the brand story in the Youtube ad, the sell-able piece, that piece's packaging, everything. In the recent times the Indian startups have failed to understand what a "product" means. They tend to hire a lot of product managers and often in a tech startup we see the definition and function bounded by the mere "software".
Now that we have defined these terms, let's examine them a bit further. Here is an interesting activity for you. Can you identify what are these?
1: To accelerate the world’s transition to sustainable energy
2: Make transportation as reliable as running water, everywhere, for everyone
3: Delivering happiness to customers, employees, and vendors.
4: To make people happy
5: To give everyone the power to create and share ideas and information instantly, without barriers.
6: To be the ultimate house of luxury, defining style and creating desire, now and forever.
7: belong anywhere
8: To provide resources to impoverished communities that will help individuals living within those communities to live healthier more productive lives
9: To provide a free, world‑class education for anyone, anywhere
10: We believe that reinventing the camera represents our greatest opportunity to improve the way people live and communicate.
Well, these are a mix of vision / mission statements of various famous companies. Now let's go to the next part of the activity. Can you identify who are these (do you think you could recognize them in picture, if you happen to walk past them)?
1: Martin Eberhard and Marc Tarpenning
2: Travis Kalanick
3: Nick Swinmurn, Tony Hsieh and Alfred Lin
4: Walt Disney
5: Jack Dorsey
6: Coco Chanel
7: Brian Chesky, Joe Gebbia and Nathan Blecharczyk
8: Bill Gates
9: Salman Khan
10: Evan Spiegel, Bobby Murphy and Reggie Brown
Now in case you couldn't I request you you to compare the serial numbers of the above two sets and think again. They are connected in that order.
Now here's the final part of the activity. Identify these and what they represent in our lives (what is the probability that you can recognize these items in real life too):
1: Model 3/Tesla
2: Uber
3: Zappos
4: Disneyland, Mickey Mouse
5: Twitter
6: Chanel No 5
7: Airbnb
8: Bill and Melinda Gates Foundation
9: Khan Academy
10: Snapchat
Well did you notice one thing? If you did then my job is almost done here.
The first set consisted of the companies vision statements. You never gave half a fuck to these companies mission or vision statements. In fact they seem pretty useless too. Read them again. If not for their brands no one will give a penny for those lines, right?
The second set consisted of the founders of those companies. You must have heard a few of those names. But only when they either had their names attached with their brand names or got lot of footage in media in the past decade.
The third set is precious. Refuse recognizing more than one name from the list and you will be judged by your recruiter, your geeky Tinder match, your young investment advisor, the drunk bunch of friends discussing the fate of humanity and so on.
So we learned this: No one gives a fuck to the vision. But it important for the inner community to come together and create a product. This product is darling for the outsiders. If you can sell the product then your vision statement lives on, and you may earn money or fame or both.
Now let's revisit the opening line: Why is it that despite the best efforts non profits fail?
It is because they put a lot of efforts in surfacing up their vision statement. They sell their vision and not their product. Now let's look at some more stereotypes:
Why is it that for profits never claim they want to make profits but market their product, while the non profits always claim to be making change and have nothing else much to market?
Why is that the investors of for profits see over compensating talents as an essential task why the funders of non profits look down upon the organizations when they include their admin costs and salaries while raising funds?
Why is that the for profits with bizarre useless ideas succeed while non profits with most noble solution fail?
Why is that one can find for profit founders defending their product while non profits founders defending a problem (as if proving the existence of the problem is all they care)?
Now let's dive a bit more and summarize the each constituents of the impact pyramid:
1) Emotional range and locus:
Vision: Limited to the founders
People: Limited to the team itself
Product: Full fledged
2) Life span:
Vision: Eternity, or till the organization exists
People: Cyclic basis, as the company matures and society spins team will reboot
Product: Extremely short span. If it is not reinvented every time, it dies
3) Visibility:
Vision: Sometimes totally invisible or even inexistent
People: Restricted
Product: The meaning of its existence lies in its visibility
4) Effects and impacts:
Vision: Claims to impact something, but not much
People: Impacts organizational dynamics
Product: Changes market / society behavior
5) Economics:
Vision: Worth nothing
People: May attract investors
Product: Can impact market dynamics at large scale
This impact pyramid is not only restricted to organization development but even society and market evolution. Let me conclude this essay with two short case examples.
Case 1: Porn industry vs anti-apartheid
Imagine pre 1970s. We are not also sure if oral sex even existed before the era of porn which now, lets be honest, is a part of every teenage growing up. But porn didn't flourish under any leadership or impact investments. Every religion and political party, across nations viewed it as unfavorable nuisance. While porn industry had a clear advantage of coming up with "irresistible products" the anti-apartheid leaders had no such luxury. The former never needed a vision statement or even a dedicated team, while the latter gave birth to numerous heroes screaming the vision statement till their last breath. Ignore the morality factors, and we have a clear winner of success. Oh! And by the way, apartheid practices cost our society billions of hidden dollars, all because of a lack of the lack of ability to spin off a mere product.
Case 2: Investment banks
A common man either fears the banks or hates them. They are the pioneer of creating and selling abstract product much before internet happened. While the vision statement of banks reads caring for its customers, the underlying principal is making profit. A tech startup may take pride on number of users who use its product free of cost, but a bank never accepts that. It wants a bite in every piece of cake and they have been doing it so well. Sometimes it's not even the people. The young naive kid who comes to you selling the toxic ULIPs or raising funds for the next closed ended funds never looked smarter to deserve a minute of your attention if not for that brand name on his ID card. While the porn industry made the behavioral shift from the market itself, banks have taken a different route and represent the top to bottom product (about which I will speak more with my theory of vectors of market chaos).
Startups (for profit) fail spectacularly and more often. But there is a profound difference in those two types of failures.
One fail in its quest for finding a problem to solve. Sometimes the problem doesn't exist at a primary level even. While the other fails despite having identified a very fundamental problem which often needs urgently to be tackled.
Now let's merge this distinction among profits and non profits for sometime and take a more fundamental dig on them. There are already too much of meanings and stereotypes attached with terms like corporate, organization, startup, non profit etc. Fundamentally people, both outsiders and insiders, often don't acknowledge the core components of these entities. This often lead to failures. Well, some do get a certain things right and manage to outshine spectacularly.
Having worked with over 15 entities in a span of 5 years, from killed startups to IGOs, I spent a lot of time pondering over this very thing. Why is that despite having some clear advantages than startups, like a clear problem statement, a team of enthusiastic individuals, no pressure to scale or engage in sales/profits, a positive sense around the cause from family, society and civic community, boosting inspiration and racking support etc; non profits fail to impact in the way they have envisioned or solve the problem they had so passionately picked.
The underlying reason lies in a concept, which I call Impact pyramid. This structure, at a very fundamental level, defines the dynamics of an organization (call it a startup or a non profit or any similar entity) at the nascent stage. Major strategies of an early stage project are weaved around a certain level of the pyramid, as the project gains momentum.
Before everything else, let's dig some of the more and less obvious things about each of the above levels.
Vision
A majority of the projects gets killed before even taking off and numerous ambitious folks are left in their own world of delusion where they were the great visionaries and if things had gone their way, if people have given enough attention to their millionaire dollars idea then the world would have changed forever, for better. But then an idea is worth nothing. You may argue how your fans love your ideas but ever tried selling ideas?
Yet ideas are important. If combined with the right imagination and mapped with apt resources they form vision. And everything revolves around the vision. Once you make a choice of your market or industry or problem you lock your vision and give it the only shape it needs. But if not restricted to where it should belong, it will become one of the most overrated things. In impact pyramid they form the bottom layer. They are foundations for everything but tend to lay buried at the bottom. We will come to this again later.
People
The next things are people! They represent a closed community of set of people directly involved in shaping up a vision. A person who couldn't articulate his vision but got his friend believe in him, the guy who couldn't understand a thing but took a leap and pledged his money, the restless employees who are too ambitious and yet thought it was worth a try, and other countless people who went behind the scenes. They are the people with their hands on the steering wheel. If things doesn't work they fail, and if they do they succeed. Many of them tend to be sociopaths rather than the normal labor force which succumb to the traditional laws of economics. In the impact pyramid they represent nothing but the transactional joining piece between the vision and product.
Product
This is the face of everything. If a project fails, it directly means: the product failed. And it represents anything which makes it way to the people outside the above set. It may be the logo, the software, the call service personnel, the brand story in the Youtube ad, the sell-able piece, that piece's packaging, everything. In the recent times the Indian startups have failed to understand what a "product" means. They tend to hire a lot of product managers and often in a tech startup we see the definition and function bounded by the mere "software".
Now that we have defined these terms, let's examine them a bit further. Here is an interesting activity for you. Can you identify what are these?
1: To accelerate the world’s transition to sustainable energy
2: Make transportation as reliable as running water, everywhere, for everyone
3: Delivering happiness to customers, employees, and vendors.
4: To make people happy
5: To give everyone the power to create and share ideas and information instantly, without barriers.
6: To be the ultimate house of luxury, defining style and creating desire, now and forever.
7: belong anywhere
8: To provide resources to impoverished communities that will help individuals living within those communities to live healthier more productive lives
9: To provide a free, world‑class education for anyone, anywhere
10: We believe that reinventing the camera represents our greatest opportunity to improve the way people live and communicate.
Well, these are a mix of vision / mission statements of various famous companies. Now let's go to the next part of the activity. Can you identify who are these (do you think you could recognize them in picture, if you happen to walk past them)?
1: Martin Eberhard and Marc Tarpenning
2: Travis Kalanick
3: Nick Swinmurn, Tony Hsieh and Alfred Lin
4: Walt Disney
5: Jack Dorsey
6: Coco Chanel
7: Brian Chesky, Joe Gebbia and Nathan Blecharczyk
8: Bill Gates
9: Salman Khan
10: Evan Spiegel, Bobby Murphy and Reggie Brown
Now in case you couldn't I request you you to compare the serial numbers of the above two sets and think again. They are connected in that order.
Now here's the final part of the activity. Identify these and what they represent in our lives (what is the probability that you can recognize these items in real life too):
1: Model 3/Tesla
2: Uber
3: Zappos
4: Disneyland, Mickey Mouse
5: Twitter
6: Chanel No 5
7: Airbnb
8: Bill and Melinda Gates Foundation
9: Khan Academy
10: Snapchat
Well did you notice one thing? If you did then my job is almost done here.
The first set consisted of the companies vision statements. You never gave half a fuck to these companies mission or vision statements. In fact they seem pretty useless too. Read them again. If not for their brands no one will give a penny for those lines, right?
The second set consisted of the founders of those companies. You must have heard a few of those names. But only when they either had their names attached with their brand names or got lot of footage in media in the past decade.
The third set is precious. Refuse recognizing more than one name from the list and you will be judged by your recruiter, your geeky Tinder match, your young investment advisor, the drunk bunch of friends discussing the fate of humanity and so on.
So we learned this: No one gives a fuck to the vision. But it important for the inner community to come together and create a product. This product is darling for the outsiders. If you can sell the product then your vision statement lives on, and you may earn money or fame or both.
Now let's revisit the opening line: Why is it that despite the best efforts non profits fail?
It is because they put a lot of efforts in surfacing up their vision statement. They sell their vision and not their product. Now let's look at some more stereotypes:
Why is it that for profits never claim they want to make profits but market their product, while the non profits always claim to be making change and have nothing else much to market?
Why is that the investors of for profits see over compensating talents as an essential task why the funders of non profits look down upon the organizations when they include their admin costs and salaries while raising funds?
Why is that the for profits with bizarre useless ideas succeed while non profits with most noble solution fail?
Why is that one can find for profit founders defending their product while non profits founders defending a problem (as if proving the existence of the problem is all they care)?
Now let's dive a bit more and summarize the each constituents of the impact pyramid:
1) Emotional range and locus:
Vision: Limited to the founders
People: Limited to the team itself
Product: Full fledged
2) Life span:
Vision: Eternity, or till the organization exists
People: Cyclic basis, as the company matures and society spins team will reboot
Product: Extremely short span. If it is not reinvented every time, it dies
3) Visibility:
Vision: Sometimes totally invisible or even inexistent
People: Restricted
Product: The meaning of its existence lies in its visibility
4) Effects and impacts:
Vision: Claims to impact something, but not much
People: Impacts organizational dynamics
Product: Changes market / society behavior
5) Economics:
Vision: Worth nothing
People: May attract investors
Product: Can impact market dynamics at large scale
This impact pyramid is not only restricted to organization development but even society and market evolution. Let me conclude this essay with two short case examples.
Case 1: Porn industry vs anti-apartheid
Imagine pre 1970s. We are not also sure if oral sex even existed before the era of porn which now, lets be honest, is a part of every teenage growing up. But porn didn't flourish under any leadership or impact investments. Every religion and political party, across nations viewed it as unfavorable nuisance. While porn industry had a clear advantage of coming up with "irresistible products" the anti-apartheid leaders had no such luxury. The former never needed a vision statement or even a dedicated team, while the latter gave birth to numerous heroes screaming the vision statement till their last breath. Ignore the morality factors, and we have a clear winner of success. Oh! And by the way, apartheid practices cost our society billions of hidden dollars, all because of a lack of the lack of ability to spin off a mere product.
Case 2: Investment banks
A common man either fears the banks or hates them. They are the pioneer of creating and selling abstract product much before internet happened. While the vision statement of banks reads caring for its customers, the underlying principal is making profit. A tech startup may take pride on number of users who use its product free of cost, but a bank never accepts that. It wants a bite in every piece of cake and they have been doing it so well. Sometimes it's not even the people. The young naive kid who comes to you selling the toxic ULIPs or raising funds for the next closed ended funds never looked smarter to deserve a minute of your attention if not for that brand name on his ID card. While the porn industry made the behavioral shift from the market itself, banks have taken a different route and represent the top to bottom product (about which I will speak more with my theory of vectors of market chaos).
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