Top 10 Challenges for Using Lean Startup for Social Innovation

The Lean Startup has helped businesses of all stripes manage risk and maximize their potential by listening to customers, running experiments, and driving fast feedback loops. Nowhere do we find bigger problems and greater uncertainty than in efforts to tackle the most intractable challenges facing people and our planet. So, why does it seem like adoption of Lean Startup for social good has lagged?

The need is real, but a number of unique dynamics conspire to make social innovation harder. By recognizing and navigating these obstacles, we can deliver far more effective solutions at far greater scale. We have a responsibility to society to do more.

The nature of funding poses the single greatest challenge. While companies are built on flexible financing from equity, debt, and revenues, most mission-driven organizations depend at least in part on donors. Their interests, requirements, and limitations are the source of the first five challenges:

  1. Two Customers. The need to satisfy two entirely different categories of customers—beneficiaries and funders—makes it more difficult to create tight feedback loops. Not only are we missing the valuable signal that willingness to pay provides, but funders may also have idiosyncratic priorities that are at odds with the optimal path to impact.
  2. Enforced Waterfall. Many institutional donors require a detailed design up-front, followed by implementation that adheres faithfully to that plan. Of course, this is the opposite of the early testing and fast iteration that are at the heart of lean approaches. As we know, we’re unlikely to identify the best solution on the first try.
  3. Constraint Mindset. In contrast to the Silicon Valley tendency to think big and aim for “hockey stick” growth, nonprofits tend to plan within the constraints of available funds or the parameters of a grant proposal. The result is a low-risk, conservative approach that achieves slow, linear growth at best.
  4. Silos. Donors tend to focus on silos—by sector, geography, or demographic—making solutions that cross such boundaries difficult to deploy. Organizations can twist themselves into a pretzel to satisfy the divergent requirements placed on them by each of their funding streams.
  5. Tight Overhead. Both individual donors and foundations tend to associate low “overhead” costs with effectiveness. While we certainly want to avoid waste, excessive focus on non-program expenses can be short-sighted and prevent investments that can drive long-term growth such as research & development, staff training, and productivity enhancing tools.

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