Laying the foundation for social enterprise success.
Five startup principles from the making of Mighty Ally
What a special and humbling experience. The start of a new venture.
There’s nothing like the moment your baby is ready to see the light of day. Especially in the social sector, when a new mission-driven organization is finally able to start impacting lives of those it serves.
But there’s no guarantee of success. In fact, 38% of new social ventures fail within a year and only 5% last more than 10 years, according to research from the Failure Institute (yes, that’s a real thing).
And failing in the social sector can be uniquely painful. You’re not just letting down your team and investors or donors. More importantly, the group of people it's intended to benefit can suffer.
So what to do?
We’ve just completed the formation phase ourselves here at Mighty Ally. And while we’re no scholars on the subject of success, we’ve each had a few solid wins – and losses – in our careers and brought those learnings into this new nonprofit. Below are five principles we’ve recently put through the paces.
PRINCIPLE #1 – START WITH AN A-TEAM
Most businesses start with an idea in the shower. Or in the social sector, seeing an unfilled need in the world. As humans, we’re naturally idea generators. But before taking that initial spark much beyond notes on the back of a napkin, it’s wise to recruit allies.
It’s statistically very difficult to succeed in any new endeavor alone. In fact, many impact investors will pass on single-founder ventures or require that additional co-founders be recruited. So while it might sound counterintuitive, the old adage goes: first who, then what.
Note that “people” doesn’t just mean business partners. It should also imply a board of directors and advisors. These are folks that can be an invaluable resource for advice and connections in the formative phases.
With Mighty Ally, I had my own lightbulb moment. But I quickly started talking with my co-founders Sarah and Kathleen about the fledgling ideas. It was only together that we fine-tuned the inspiration enough to start sharing the concepts with others. We even approached potential board members while we still had two radically different approaches at play (an agency model or a software platform). And it was only with their help that we decided to pursue the agency in earnest.
On the other side of the coin, I’ve seen firsthand great potential that was saddled by both dead weight and light weight on a leadership team. So it’s critical not to rush into decisions about co-founders or directors. Former Mighty Ally advisor Clint Smith wisely counsels to think in terms of the people needed to get from one startup milestone to the next.
In short, it’s better to have an A team with a B idea than the reverse. Because it’s a lot harder to change people down the road than it is to pivot ideas. So get the people part right, first, and move on to principle #2.
PRINCIPLE #2 – GROUND DECISIONS IN DESIGN THINKING
The last 15 years have ushered in a radical new method of launching new ventures. Design thinking. It’s a human-centered, prototype-driven process for innovation that’s every bit as relevant for new social sector organizations as it is for products.
Gone are the days of turning an idea into weeks of writing a lengthy business plan, months forming a new company, then launching it to see if people care.
Design thinking is a never-ending cycle that starts with a point of view. Then dictates that you immediately take that point of view out into the real world, talking to potential customers, beneficiaries, or donors. That preliminary understanding phase leads to deep insights about the people you’re aiming to serve: both their current pains and potential gains. Those insights lead to ideating on solutions, which leads back to a stronger point of view. That strengthened point of view then becomes a prototype, which gets validated back out in the real world. And the cycle continues, as seen in the graphic below.
As soon as we had the spark of this Mighty Ally agency idea, we made a list of dozens of people we could interview to get their feedback. The idea was rough and our attempts to explain it were even worse. It didn’t come naturally, to be sharing a concept with people when we barely had our heads around it ourselves. But with a little humility, we found that people kind of liked being invited in on the ground floor. And their input was invaluable.
After the discovery interviews, we sketched out the personas that we’d be serving. Personas are semi-fictional representations of constituent types based on market research and interviews. With each persona, we attempted to fill out an empathy map to capture both our learnings to date and where the knowledge gaps still existed. Making ourselves document what our constituents think, feel, hear, and say was illuminating. We immediately saw that we still had a lot to learn about our audience, especially in segments like foundations with which we had never done business.
Another valuable – and scary! – design thinking exercise we forced ourselves into was identifying the riskiest assumptions in our burgeoning model. Any and every new venture is riddled with assumptions. There’s simply no way for a founding team to fully understand its market and potential pitfalls months or even years in advance. So instead of being surprised down the road, a framework like the Riskiest Assumptions Canvas allows entrepreneurs to come to grips with – and try to disprove! – the various factors that could ultimately crumble their model.
After a few whiplash-inducing trips around the double loop, it’s time to put a stake in the ground.
PRINCIPLE #3 – ESTABLISH BOTH A BUSINESS AND LOGIC MODEL
There is no single more important principle for social enterprise success than this: establish both a business model and logic model. A cardinal sin among social entrepreneurs is going straight from idea into launch into execution, while keeping all the moving pieces of the model in their head.
A business model defines how an organization generates, delivers, and captures value. Think about this definition of a startup: a temporary organization searching for a business model. This definition implies that a business model is a fluid, ongoing exercise… not a one-time Word document plan that you produce, show your Mom, and later forget.
The most widely used format for business models is the – wait for it – business model canvas. It’s a simple but powerful one-page template used for visualizing an organization’s value proposition, customers, channels, activities, partners, resources, costs, and revenues. And if you launch a new venture without first putting yourself through a few rounds of the BMC, you’re putting your enterprise at risk.
A common complaint in the social sector is that people often start nonprofits without doing enough homework to find that dozens of similar organizations already exist. Once we put our initial business model paper, we searched high and low to find out if anyone was doing anything like it, and documented our findings in a robust competitor analysis. Luckily, our model was pretty unique and this massive gap in the market gave us even more confidence to proceed with conviction.
As a side note: if this talk about business models and competitors seems unnecessary for nonprofits, here’s a cold hard truth. NGOs are businesses too. Just because a portion of revenue comes from donors and you don’t pay taxes, doesn’t mean this critical strategy work can be overlooked. Launching a venture with nothing but a social mission is a recipe for disaster, as it takes a viable business model to support any social impact of any size.
A similar framework to the business model canvas demands that social entrepreneurs accurately capture exactly how they will make a difference in the world. This framework is called a logic model – a tool used to document program components so that inputs are mapped to activities, outputs, outcomes, and ultimate impact. The quintessential flow chart was popularized by the United Way some 30-odd years ago.
Just like investors demand a thorough business model before capital consideration, most foundations now require a documented logic model before considering a grant. For funders, they need to see exactly how their investment into programs will generate measurable results. Even if outside funding isn’t on the immediate horizon, a logic model is also an important basis for startup board members and staff to set key performance indicators and track their activities to determine whether or not they’re actually making a difference.
The beauty of creating both a business and logic model early on is that the two documents provide a constant guidepost for all future decisions. And these tools work hand in hand with a third framework: brand strategy.
PRINCIPLE #4 – ALLOW TIME & SPACE FOR BRAND STRATEGY
Even before the business and logic models have been solidified, it’s important to spend adequate time and energy developing the brand. In the previous three principles, startup efforts centered mostly on what to do and who to do it with. Brand strategy weaves together the why and how, and helps determine how the grand vision will be taken out into the world.
Brand strategy refers to the deliberate process through which an organization defines its core ideology, vision, positioning, and personality. This planning is a prerequisite to the type of outputs many people think of when they hear the word brand, like logo design and copywriting. But while brand strategy greatly influences both visual and verbal identity, it is not any of those things.
Thanks to Simon Sinek, it’s now well known that any brand discussions should start with why.
From there, the proprietary brand strategy process we created a few years ago moves into a determination of core values (the how). This step is often a perfect companion to exercises around a brand’s character: a tool that’s transformative for any new social enterprise and a whole lot of fun to boot. Brand characters – or archetypes – help personify an organization. Using various online tests and in-person workshop exercises, a venture can place itself into one (or two) of 12 characters, ranging from Caregiver to Outlaw, Lover to Magician.
While it might feel like a waste of time for startup leaders to be debating the touchy feely stuff like characters and qualities, these early conversations often prove pivotal. For example, we had chosen a particular core value of being “fighters”, based on our own personal characteristics and knowing it would take some serious grit to embark on this ambitious endeavor. And our brand character profile is an equal combination Hero and Sage. Those findings single-handedly helped us land our name, choose our spirited color palette, pick our fonts (one bold, one sophisticated), and make other important early decisions about our tone, design, approach to clients, and more.
With personality in place, proper long-term planning work in brand strategy should entail a combination of vision, 10-year-target, and 3-year-picture. A vision describes the change you want to see in the world. A 10-year-target is a one-sentence big hairy audacious goal (BHAG) that begins to make the vision feel real. And the 3-year-picture is a list of bullet points that allow others to “see” what you’re saying. And there are various frameworks for arriving at each.
The final step is defining a value proposition or two and target market(s). This phase is based largely on what competitors and potential collaborators are already doing, what they’re missing, and what you’re good at. This sweet spot is better known as positioning and it’s the basis for ensuring your organization stands out from the pack and resonates with potential supporters.
All of the above eventually gets funneled into a brand strategy blueprint, which sits alongside the business model and logic model tools. With these three documents in place, almost every future decision can be viewed through a previously established lens. And that helps bring these big-picture discussions down to the real world, which entails our fifth and final principle.
PRINCIPLE #5 – TURN VISION INTO TRACTION, EARLY & OFTEN
The saying goes, “vision without execution is just hallucination”. Traction – a concept coined by Gino Wickman in the book by the same name – is the process of bringing accountability and execution into an organization. Operations, you might call it or “taking the vision down to the ground and making it real”.
There’s an entire set of tools offered in the book Traction, called the Entrepreneurial Operating System (EOS). But while the full program is probably overkill for most startups, some lessons learned in EOS should certainly be applied to any social enterprise, regardless of size.
First, it’s important to turn the vision, 10-year-target, and 3-year-picture goals mentioned above into short-term, tangible objectives. This can be done in a variety of formats, as long as you list the main 5-6 priorities that must be accomplished in the next 12 months (and who is responsible for them). Then break that list into quarterly TO DOs and lather, rinse, repeat every three months to develop a cadence of throwing the stick, and moving toward it.
Second, it’s wise to get into a good rhythm of team meetings at this early stage. Many social entrepreneurs find it easy to get so immersed in the program work itself that they don’t take time to stop, think, and meet with co-founders and team members alike. At Mighty Ally, we simply have a standing Monday meeting that allows for critical alignment on priorities and the opportunity to put out fires before they start. This is especially important for dispersed teams like ours.
The final component of traction is measurement. Based on the business and logic model – which hopefully turned into written 1-year and quarterly objectives – how will you know if you’re on or off track? We recommend a simple dashboard that’s reviewed in said weekly meetings. It can be as rudimentary as a spreadsheet, listing objectives and the week’s progress against those marks. Or, more tech savvy entrepreneurs will embrace an online dashboard such as Geckoboard. The format isn’t important (heck, a whiteboard is better than nothing). What’s valuable is the exercise in accountability and becoming an organization that keeps its eye on the data.
Starting a business is easy – more than 6 million of them crop up every year. It’s the making it work part that’s hard.
But we believe that by laying the proper foundation in a social enterprise early on, the short-term pain is well worth the potential long-term gains.
It’s been noted that we – as a collective social sector – are on the cusp of something special. Forbes refers to this being the “fourth phase of the corporation” – the epoch of integrating purpose and profit.
That kind of prognostication gets us at Mighty Ally pretty excited about what’s next in this space. To be fair, we haven’t made enough progress yet as a people, since the world still contains way too much absolute poverty and human suffering. But while there’s no guarantee about the future for any of us, we’re eager to apply the principles above and committed to playing our part.
With our allies and our all might.