Empowering Social Impact with Lean Principles

Michael Krigsman: For those of us who are involved with startups and with technology, we've all heard, or many of us have heard, about the Lean Startup movement, minimal viable products, iterating and fast failure, things like that, concepts like that. What happens when you apply these concepts to doing social good, to making social impact? That's our topic today on CXOTalk.

I'm Michael Krigsman. I'm an industry analyst and the host of CXOTalk. You're watching Episode #314. Before I introduce our guest, please, please, right now, subscribe on YouTube and also tell your friends and your colleagues.

I'm really thrilled because we're speaking with Ann Mei Chang, who is the author of the book Lean Impact. It's a really, really good book. I've enjoyed reading it. She's going to tell us about applying Lean Startup techniques to making social impact. Ann Mei, how are you? It's great to see you. Thank you for being on CXOTalk.

Ann Mei Chang: I'm fantastic. Thank you so much for having me on your show, Michael.

Michael Krigsman: Ann Mei, tell us. How did you come to write the book Lean Impact? Tell us about your background, briefly.

Ann Mei Chang: Just to start with my own background, I studied as a software engineer in college and then worked in Silicon Valley at both big and small tech companies for over 20 years, some companies you may have heard of like Google and Apple and Intuit. It was an enormously challenging and exciting world to be in. I got to be part of building products like Google Mobile Maps that are used by hundreds of millions if not a billion people these days.

Then, about seven years ago, I decided to make a long-planned pivot to spend the second half of my career in the social sector or public sector doing something that would feel more meaningful, to make the world a better place. To do that, I went to work in government at the State Department at an international NGO called MercyCorps, and then, most recently, at USAID as the chief innovation officer.

Michael Krigsman: You had this background working in technology, but how did you come up with the idea of applying the techniques of Lean Startups to nonprofits and to providing social benefit?

Ann Mei Chang: It was really an evolution. There are not that many people who span both worlds. I spent so much of my career in the tech sector that Lean Startup was essentially in my blood. In fact, when I first went into government, it was a big shock in a way because things worked so differently in government than they do in Silicon Valley. One of those things was that, in government, we like to plan in a lot of details for years in advance and then execute on those plans because we're very risk-averse; we're a very planning oriented culture.

What I found myself doing was really encouraging people to plan a little less, do a little bit more, and really get out in the field and try things, learn, and iterate. It was sort of like just the instinct that I had. At the time, I hadn't actually picked up The Lean Startup yet. I was in D.C., and it wasn't as much a thing there yet, and so I didn't necessarily have a language for it. When I found out that Eric had written this book, The Lean Startup, and started learning about it, it gave me a language to talk about these concepts that I was really trying to explain to people and didn't really make sense to them up to that point.

Michael Krigsman: It just kind of was an evolution that you had been steeped in these Lean Startup techniques, principles, and approaches, and it just made sense to try to apply it to this completely different world.

Ann Mei Chang: Yeah. Coming from Silicon Valley and into this world of global development that I was in, everybody wanted to approach me and talk about technology and talk about, could I build an app, a website, or so forth? I certainly tried to help where I could, but what I started to believe, as I learned more and more about what was going on, is that while technology could make a big difference in many of the things that were being done, that a different way of working, a different mindset, a different approach that was exemplified by The Lean Startup, could help us just produce far greater impact at far greater scale.

Michael Krigsman: When you talk about lean impact, what is that exactly?

Ann Mei Chang: Maybe I should just back up a little bit for the parts of the audience maybe who aren't yet familiar with Lean Startup and talk a little bit about that. The Lean Startup is a book that was written by Eric Ries about seven years ago. What it did is it captures really the best practices of how innovation happens in Silicon Valley.

Eric talks about the Lean Startup as a methodology for building products and services under conditions of extreme uncertainty. This is certainly true for startup companies who are trying to create products and services that no one has ever done before, and so there's a lot of uncertainty there. In this world of uncertainty, rather than trying to think we have all the answers and come up with a great plan that we can invest a ton in that plan, I think we need to be a little bit more humble and really understand where our assumptions are, understand what the risks are, and test for them.

In essence, Lean Startup, I think of it as an entrepreneurial version of the scientific method that you have a hypothesis about a solution that will hopefully work to solve a certain problem. You build what we call an MVP (minimum viable product) to test that assumption. Then you measure the results. You gather data on what happened. Then you learn. You learn that it worked exactly as you hoped and you can double down, or maybe you learned that it didn't work as you expected and you either need to tweak your solution or pivot and take a completely different path.

Michael Krigsman: Okay, so this concept of minimal viable product, in technology that's what people talk about quite a bit when you're building companies. But, how do you then apply that to the world of nonprofits? It's not an easy translation to make for an outsider.

Ann Mei Chang: Yeah, that's a great question, and that's one of the many challenges that make innovating for social good harder. Minimum viable product is essentially trying to come up with the smallest, quickest, cheapest way to learn about something where you have a high degree of uncertainty. Again, in the social sector, we often are trying to solve problems that are long-time, intractable, and in conditions that are highly dynamic, and so there is a lot of uncertainty and there's a lot that we need to learn.

The question to ask is, what is the cheapest, quickest way we can learn something about whether something will work? Just as an example, in Africa, there has been an advent of a number of different companies that are offering home solar systems using a new business model using mobile money where people can pay a few cents every day using mobile money to be able to purchase their home solar system over time because people aren't able to have the upfront capital to be able to pay for these solar systems upfront.

One way you might do this is to build out these new systems with all the technology, manufacture them, and then hire a whole salesforce and distribute them. But, a company called Off Grid Electric, that I spoke to, they thought this was a great idea, but they knew it needed to be tested.

What they did was actually just send a person from village to village to collect money, manually, first, to see would people buy a solar system and pay it off over time. Is that something people would find valuable enough? Would they keep paying the money? Only after they showed that people would do that did they actually manufacture the systems and deploy them in a way that could really be scaled.

It's just one example. The MVP could be as simple as a flyer, which they also used to test out to see, hey, what kind of bundles would people be more interested in? Would they like to have a bundle with just some lights, is a radio important, or maybe even a TV? Would they be willing to pay more?

Answering these kinds of questions, the goal is to look at the simplest, quickest way that we can answer those questions. That's a minimum viable product.

Michael Krigsman: When it comes to service delivery, delivering social and beneficial services, it's a matter of taking small steps, experimenting, see what works, and then building on that. Would that be an accurate way of looking at it?

Ann Mei Chang: Yeah, it's taking the smallest step possible and optimizing for learning. One way I think about it is if you know exactly what you need to do, and you know it's going to work, and you know how you're going to scale it, then you should just execute on that plan. You should execute like a utility company might do because they know what they need to deliver and they know how to deliver it. If you're trying to do something that has a lot of uncertainty, then rather than focusing on delivering because you don't know if it's going to work, you should focus on experimenting and learning as quickly as possible until you have greater confidence in what you have to offer.

Off Grid Electric, I talked about, is more in the product space. On the service side of things, an organization I talked to, a nonprofit social enterprise in South Africa called Harambee was trying to address the issue of youth unemployment, which is at crisis proportions in South Africa. They wanted to see, like, how can we help these youth who are disadvantaged get their first formal sector job?

Rather than, again, coming up with a whole training curriculum, hiring a bunch of staff, building a bunch of infrastructure, the first started by testing some of these youth and having some assessments to see how they would do on the kinds of skills that they would need for jobs. They found that they didn't do very well at all, which is why they weren't matching these jobs.

They decided to take a different approach. They decided to test for learning potential and then help bridge that gap for the youth who had the potential to learn but just never had the opportunities. Again, instead of building up a whole system, they partnered with an employment firm and some consultants who, rather than hiring staff, they hired a contracting firm to offer the training to see, would this work? If they took these disadvantaged youth with potential, but without the skills, could they train them in a few days to develop the skills and then get the jobs?

They did that exactly and, at the end of it, they had trained 43 youth, build up very little infrastructure, and 38 of them were able to secure jobs at the end of it. The employers were happy with their skills and hired them. And so, that gave them the confidence to then do more, to develop a more formal curriculum, to hire their own staff and so forth.

Michael Krigsman: I want to remind everybody that we're speaking right now with Ann Mei Chang, who is the author of the book Lean Impact. It's a really good book. She applies the techniques of Lean Startup, such as minimal viable products, iterating and experimenting, and learning quickly, to social benefit programs and social good to make the greatest impact.

Right now, there is a tweet chat taking place. You can ask Ann Mei questions using the hashtag #CXOTalk.

Ann Mei, for people who are coming out of the tech world, what you're describing is a very natural way of working, and it's sort of what we expect. But, how is this different from the world of nonprofits to such a degree that you had to write a book about it?

Ann Mei Chang: [Laughter] That's a great question. I get that question a lot. I think the need is equally there that we are equally trying to solve tough problems at large-scale and so, when we're tackling social challenges, we need tools to innovate. It's also a lot harder, honestly. There are a number of reasons.

One of the biggest reasons is the nature of funding. If you're at a tech company or even just at any sort of business, you usually have a customer that you're trying to serve, and you build a product or service for them. The customer pays for that product or service, and so there's a direct feedback loop. If people don't like your product, they aren't going to pay for it. You learn very quickly if you're on the mark or not.

When you're talking about social good, a lot of times who are paying for your product is different than the customer, and so you have already this complication where your feedback loop involves two very different parties who have maybe two very different interests. And so, that complicates things. It makes it harder to drive your feedback loop.

On top of that, funders in the social sector, especially funders for nonprofits, tend to be very restrictive. They want to know your whole plan up front and then see you execute on that plan. They're often also very risk adverse. They're looking for immediate results. That also makes it hard to innovate. It makes it hard to pivot, experiment, and take risks. Some of these systemic constraints make it very difficult for nonprofits, in particular, to be able to do the sort of testing and iteration that's needed to innovate.

On top of the funding side of the equation, there's also some innate challenges. It's just harder to measure social impact like, are you breaking the cycle of poverty? Are you making a society more resilient and democratic? Are you developing? Are you helping kids get better education?

These are things that take time, often, to answer, much harder than, for example, seeing if somebody makes an e-commerce purchase. These kinds of challenges exist in the social sector that don't exist in the tech world or even in the business world.

Also, I think we need to be much more thoughtful and careful when we're experimenting with people who are vulnerable already. We can't do the Silicon Valley thing of move fast and break things because we're talking about real people here and real lives.

Michael Krigsman: What about the culture? It was very interesting what you were just saying about the outcome of social programs take time and can be very hard to measure in contrast to developing an app where you simply see, okay, how many times was our app downloaded? We can instrument that app and see how many people are using it and how they're using it.

Social programs are very different and, as you said, with an app, we can experiment and, if the app breaks, we release a new fix. With a social program, it's real people's lives, so it's much more complex. Given all of this, then how is it even possible to again apply these minimal viable product techniques to social programs?

Ann Mei Chang: Yeah, and so this is what a lot of the book is about. Lean Startup talks about the importance of starting small. I would say, in the social sector, it's even more important to do so when we're working with people who are vulnerable. If you're trying to do something new with just 5 or 10 people, you can be a lot more careful to unintended consequences, to make sure that people are made whole, and to just be much more vigilant than you can when you're trying to do something with 10,000. I would say that starting small becomes even more crucial.

To your question about how we measure these things, it does take time to, for example, see if you're going to make a change to your educational pedagogy, whether that's going to affect graduation rates for kids over time. That does take time, but you can actually look at some of the precursors, some of the early indicators that will correlate with whether that's going to happen.

A lot of times we call this, in the social sector, a theory of change. That we do A; that leads to B; that leads to C; that leads to D. If we test and optimize for those early precursors, that can give us much higher likelihood that, in the fullness of time, we'll be successful.

Just as an example of that, there's a nonprofit called Summit Public Schools in the U.S. that set out with a goal to educate kids in high school such that 100% would graduate college no matter what their family background. This is something that'd take a long time. And so, when they first started out with their first school, they introduced a lot of the cutting edge techniques.

What they found is that, eight years later when their first cohort graduated college, that they were doing dramatically better than the average, but it wasn't good enough to them. It wasn't yet 100%, which was the goal they set out to achieve.

Then they realized that if they were going to start with another cohort and change their methodology, it would take another eight years, and they couldn't afford to do that. It turned out, the founder picked up Eric's book, The Lean Startup, and decided that they needed to figure out how to iterate and learn much more quickly and get data much more quickly if they were going to have any hope of coming up with a better solution in this generation, and so they did.

In this very difficult world of education, they used data to be able to measure, on a weekly basis, different approaches to education. They would vary the mix of different elements such as project time, individual self-paced learning time, lecture time, and mentorship time, and see what worked. Each week, they would have different assessments to see how the students were progressing. They would have focus groups and so forth that would measure the progress. With that, over the course of a year, in a few classrooms, they were able to evolve and develop an award-winning, personalized learning approach that has now been adopted by over 300 schools across the country.

Michael Krigsman: On the topic of metrics, we have a very interesting question from Twitter; from Arsalan Khan, who is a regular listener. Arsalan, we're always glad when you're here. Arsalan asks, "Are there any social impact indices and metrics that can be used when technology is applied to social impact programs?" He actually has two questions. That's number one. Number two is, "How transferrable are they to other countries outside the U.S.?"

Ann Mei Chang: The question is about social impact metrics. I think some people have tried to aggregate metrics across social impact, and I think that's very challenging because the nature of trying to reduce infant mortality versus trying to increase college graduation rates versus trying to improve women's empowerment is very, very different. I think that metrics that are useful generally need to be specific to the problem you're trying to solve.

Again, I would point to the theory of change where you look at, what is your ultimate goal of what you're hoping to achieve, and work back from there. It's, in essence, a funnel that shows you, in each step of the way, how much success are you going to have until you get to the end.

I'll use a simple example that I describe in the book, which is, if you're trying to reduce the incidence of malaria in a region by distributing mosquito nets, your end goal might be to reduce the incidents of malaria by 80%. But, if you look at the early precursors, you're going to give out mosquito nets. The first thing that has to happen is people have to hang up the mosquito nets. Then they have to sleep under the mosquito nets they hung up, and so forth. Then that should lead to fewer incidents of malaria over time.

Rather than waiting for years to determine whether malaria has decreased, you can check tomorrow to see did people actually hang up their mosquito nets? If they didn't hang up their mosquito nets, there's something you can do immediately the next day. You could decide to go out and hang it up for them. You could decide to issue instructional pamphlets that show them how to do it. You could have training classes in the village to show people how to do it.

There are a number of things you could do and, if you optimize the number of people who hang up those mosquito nets, you're far more likely, a few years later, to have less transmission of malaria. And so, it's looking for what are those early precursors for whatever is the social impact you're trying to achieve. What are the earliest indicators that will tell you that you are on track and that, if you optimize those things in the beginning, you're more likely to be successful.

Michael Krigsman: What about the culture or the mindset? Startups are trained; startups are under this intense pressure from investors. They're going to soon run out of money, many of them, most of them, unless they deliver something really fast, so they're under this pressure to identify the minimal viable product and just get it out there as quickly as they can. Most of them are not playing with people's lives, so they can do that and, a lot of times, the minimal viable products are not that great. What about the nonprofit world in terms of that mindset and the culture?

Ann Mei Chang: That's a great question. I think that the culture derives from incentives, and incentives derive from goals. If you think about it, I believe that innovation, at its foundation, the birthplace of innovation is in an audacious goal. You imagine President Kennedy challenged us to send a man to the moon.

When you have goals that are achievable with business as usual or with some minor improvements to business as usual, there's no reason to take risks or innovate. I think that often is true in the way nonprofits are funded. They're funded to do something that we know how to do and that we can deliver relatively immediate results and do so with high confidence. But again, if we have problems that we're trying to solve, which that's not going to be sufficient in solving, I would argue that we need to set much more audacious goals.

The first place that I start with, with Lean Impact, is to say we need to think bigger. The core of Lean Impact is about thinking bigger and starting smaller. Instead, I think, when it comes to social good, we often think too small and start too big. How do we flip that around and set an audacious goal because, when you have a goal that is 10 times what you're doing today or 100 times what you're doing today, and you're just not going to get there with your current path, then it forces you to take risks, and it forces you to test and iterate to find a better way? When you start setting up the incentives that way, then I think the culture starts to shift around really being more agile because you're trying to do something you can't do just by doing the same old thing.

Michael Krigsman: Once again, I want to remind everybody we're talking with Ann Mei Chang, who is the author of the book Lean Impact. It's a really good book. It's very well written. Of course, there's a tweet chat that's happening right now using the hashtag #CXOTalk. Please join us, and you can ask your questions for Ann Mei.

Ann Mei, you were the chief innovation officer at USAID, and innovation is really top of mind for you. Let's overlay the concept of innovation into what we've just been talking about.

Ann Mei Chang: Sure. Innovation seems to have become the most overused word in the English language these days. Everyone is talking about innovation, whether it's in Silicon Valley, in business, in government, or in the social sector.

Michael Krigsman: Amen to that. Amen to that. Yes. [Laughter]

Ann Mei Chang: Yes, and I think that there's a reason for this. It's because the pace of change around the world has only continued to accelerate, and so we recognize that if we're going to keep up and stay relevant, we're going to have to innovate. All of us are going to have to innovate because the world isn't standing still.

In the world of social good, I think that the notion of innovation has been somewhat misunderstood, as it's been translated, that people think of innovation as coming up with some flashing new ideas, using the latest kind of exponential technology. That is a piece of innovation, but it's not all of innovation.

One of my favorite quotes comes from Thomas Edison who said that genius is 1% inspiration and 99% perspiration. I would say the same thing is true for innovation. There's that 1% that is the big idea, the invention, the new thing to do, but innovation is really about the 99%, which is the blood, sweat, and tears that goes into taking that germ of an idea and testing it, iterating, improving it, developing a business model, figuring out how to build out the infrastructure and, ultimately, scaling it. That blood, sweat, and tears is really what the book is about and what I think the essence of innovation is about.

A friend of mine has a quote that I love, which says that innovation is the path, but impact is the destination. I think we always need to keep that in mind that the reason to innovate is not to have a flashy press release but, rather, to dramatically increase our impact and scale.

Michael Krigsman: When you apply that lesson that the goal of innovation is to impact or, in business, we call it outcomes, when you apply that to social benefit programs, can you give us some examples of what that means in practice?

Ann Mei Chang: Yeah, there's a great example that I love because it shows a whole cycle of evolution of how an organization might think about impact. There's an invention, a 700-year-old invention that can improve productivity and learning potential. That's eyeglasses.

This is not a new invention. It's something that's been around for 700 years. Yet, there are an estimated 2.5 billion people around the world that can benefit from it that don't have eyeglasses today.

A nonprofit called VisionSpring decided to tackle this problem. They started out by doing what most nonprofits do, which is go directly to the people and set up shop. They brought on a number of people they called vision entrepreneurs who, in El Salvador and India, ended up selling these low-cost glasses to people in rural communities that didn't have access.

It was very successful. They had great stories of how they transformed people's lives who couldn't see at all or could see badly and were now able to work or learn in ways that they never could before. They had these compelling stories, but they had this bigger vision of this 2.5 billion number. They recognized that, as much as they were making a difference, they were losing money and they were never going to raise enough money to get to that many people.

Their first pivot is that they change their model to set up a hub and spoke model in more urban areas where they could sell higher end eyeglasses and, with the profits from that, cross-subsidize outreach to more rural areas. This allowed them to become financially sustainable so that they could fund their own operations. That was a huge step forward, but they also recognized that, while they were financially sustainable, it wasn't enough because, to build out the infrastructure to get to the 2.5 billion people around the world, it would take decades.

And so, they pivoted again, and they decided to work through partnerships. They partnered with a large organization in Bangladesh called BRAC that had a network of community healthcare workers that were spread throughout the country in basically every corner of the country and were able to work with them to add eyeglasses to their basket of goods. And so, it was a benefit to BRAC because they had something of value, an additional item of value that they could offer to the people they were trying to serve and, also, from VisionSpring, they had this distribution network built in.

Together, in that partnership, they've been able to, to date, distribute over a million pairs of eyeglasses. VisionSpring, today, has now reached over 4.5 million people, again, having built a number of additional partnerships.

Even that's not enough. As a nonprofit, we think, 4.5 million, that's pretty good, right? But, it's tiny compared to 2.5 billion. And so, their most recent pivot is that they recognize that this was still not going to get to the scale that was needed, and they spun out an organization called The Eye Alliance, that's a public/private partnership that's focused on collective action to heal both market failures and policy failures that are the reason why people aren't getting access to eyeglasses. That businesses aren't manufacturing and distributing them, and that governments aren't including them in the social services that they provide for citizens.

In an early win, they have signed an MOU with the government of Liberia, who is now integrating eyeglasses into their national community healthcare worker network, as well as into their public schools. Now this will spread across the country through government effort. If we can start doing that across many, many other countries, you can imagine eventually getting to that 2.5 billion people. It's this kind of evolution of continuing to look at the audacious goal, in this case 2.5 billion, recognizing where we are relative to that goal, and being willing and able to pivot along the way as we learn to get better and better and closer and closer to a path that will get us to that goal.

Michael Krigsman: We have another question from Twitter, and that is, "Do these techniques apply best to any particular type of nonprofit such as those that are involved with technology, for example, or are these techniques applicable across the board?"

Ann Mei Chang: Yeah, I would say the techniques, Lean Startup techniques, are fairly applicable across the board. Most of the examples I gave today are not technology-based. Certainly, I would say lean grew out of the technology space, and it's much easier, in many ways, to apply lean principles when you're working with technology because you have built-in systems when people are online to run an A/B test where you can show one version of a product to some users and another version to another set of users. Then, in an hour, figure out what the difference was in terms of their response. It's much faster and it's much quicker.

It can look a little bit different when you're distributing eyeglasses or when you're training disadvantaged youth. But, the same principles apply, which is to find the smallest, quickest experiment that you could run to learn, learn from that, and then decide whether to double down, take a slightly different path, or pivot altogether.

One thing I would add in that is I want to be clear that Lean Impact isn't only about nonprofits. In this day and age, social good is something that we're all thinking about, not just nonprofits. Many years ago, it was like social good is the domain of nonprofits and making money is the domain of business. I see those two worlds really blurring and coming together, which I think is a very positive thing.

Now, businesses are thinking more about doing good and nonprofits are thinking more about how they become financially sustainable and scale by making some profits or at least getting some revenues. What I'm seeing, and I did interviews with other 200 organizations in the course of writing this book, and what I'm seeing is, more and more, the most interesting, most groundbreaking organizations are operating at the intersection. They may be for-profits, they may be nonprofits, but they have some elements of both.

Michael Krigsman: Ann Mei, in your book, one of the things that you talk about is the Value Proposition Canvas developed by my friend Alex Osterwalder, who has been a guest on this show more than once. Can you explain for us the concept of product-market fit in the context of social impact?

Ann Mei Chang: Sure. For people who aren't familiar with product market fit in the business world, typically when you're developing a solution, you start by trying to find what we call product-market fit. To do so, you vary your product. You look at what things you may need to change about your product, and you vary your market. You try to find an intersection where your product is something that's needed, wanted, and demanded by your market.

When it comes to social good, we need to think about it slightly differently because our market is generally fixed. If you're working with disadvantaged youth who have never had a job in South Africa, you can't all of a sudden decide, oh, well, I'm going to go to the youth who have already graduated college because they're going to want my product and be able to afford it.

When we're talking about social good, usually the market is the thing that we're trying to address, and so it's a little bit different. We then have fewer degrees of flexibility, and we need to focus more on how we vary our product or service to really meet the market. That means often deeply understanding the "market" or the beneficiaries that we're trying to serve.

One great example I like is there's a nonprofit or social enterprise, rather, in Myanmar called Proximity Design. The husband and wife team, when they decided to work with smallholder farmers in Myanmar who are some of the most disadvantaged people living on less than $2 a day, they decided to pick up and move to Myanmar so that they could be close to their customers and really understand their needs. This allowed them to engage farmers in the process of designing their products and be able to test them with real farmers in real conditions on often a daily basis, as they're iterating and improving their products.

For example, they created a lightweight, portable, and low-cost travel pump that allows people to pump groundwater out to be able to irrigate their crops. From a product market fit standpoint, you might design a very fancy travel pump. But, if your smallholder farmers can't afford it or it's too heavy for them to be able to move around or whatever, that's not going to work. You can't just go upmarket and offer it to wealthier farmers because that's the whole point is to help the poorest and most disadvantaged farmers.

They really focused on that audience, understood their needs intimately, engaged them in the design process, engaged them in the iteration process and, as a result, they've been able to develop a number of products and services that have really helped smallholder farmers in Myanmar. Now they've, to date, reached about 80% of the smallholder farmers and, on average, increased their incomes by $250 a year, which is a lot when you're talking about starting out with less than $2 a day.

Michael Krigsman: To be very, very clear about what your "market" is or the population that you're trying to serve, who they are and being precise about what they need, that's kind of the essence of this.

Ann Mei Chang: Yeah. I think, in the social sector, it's essential to understand who your market is, who are, generally, your beneficiaries, but also really understand what their needs are, not what you might project their needs are. This is another thing that makes it harder in the social sector.

When I was at Google building products like Google Maps and Gmail for mobile phones, these are products I use myself, so I had an innate, pretty good understanding of what was required and what people might want. When you're working with people who are very, very different from you, who may come from a different culture, a different upbringing, different priorities, our assumptions can often be wrong.

A simple example that I think was really instructive is a company called d.light that offers solar lanterns, generally, to low-income countries. When they first were developing their solar lanterns, they decided to test these solar lanterns with people and just got a few different options out there. Before they were manufacturing their own, their MVP was just to take a bunch of solar lanterns that exist in the market that were maybe too expensive, but see what people liked and they expected that people would like because this is what we like in the U.S., this sort of warmer, more yellow colored lights. That's sort of what feels good to us in the U.S.

It turned out that most people actually preferred the blue, harsher lights, more fluorescent style light because that felt more aspirational to them. The yellower lights reminded them of burning candles in their home, whereas bright blue light, blue-tinged lights, seemed more like the fluorescent lights they saw in town, and that felt more aspirational to them.

It's a simple example, but it highlights the point that our assumptions can often be wrong. We need to really get close and intimate to the customers we're trying to serve to understand what their real needs and priorities are versus what we might project.

Michael Krigsman: Okay. It's pretty interesting. I think this issue of really understanding your market and trying to go beyond your own personal experience and personal bias equally applies to startups as well and business products.

Ann Mei Chang: I think it equally applies to startups. But, with startups, the customers we're trying to serve are often not quite as different as when we're working in the social sector, and so we have a little bit of a head start, I would say.

Michael Krigsman: That's for sure. We're almost out of time, but one of the things that you speak about in the book that I really want to hear about is this notion of vanity metrics and not to be seduced by vanity metrics. Can you explain that for us?

Ann Mei Chang: Yeah, so vanity metrics is a term that Eric Ries coined in The Lean Startup. It refers to absolute numbers, typically, that sound really good but don't indicate whether something is actually any good. Just as an example, in the social sector, if you look at your favorite nonprofit's website, they'll usually tell you how many people that they've reached, touched, served, benefited in some way.

If I say that I have touched a million people or helped a million people, what does that mean, really? I may have done something for them. I may have trained them. I may have given them a product or service, but did it make their lives better? It doesn't say that.

Even if we knew we made their lives better, could somebody else have made their lives better or done more with the same amount of money? Is it the most cost effective solution, is another question. The third is that even if we made their lives better and we're more cost-effective than other solutions, and so we did the best we could with the money, do we have a path to scale, or are we only reaching a small tiny fraction of the people who could benefit?

Instead of thinking of these absolute numbers of how many people did we touch, which tends to drive organizations to just reach more people without sufficient regard to how well it's working or how we're going to scale, in The Lean Startup and Lean Impact, we talk about actionable metrics or innovation metrics that are generally at the unit level. It's looking at, for every 100 people we reach, what percentage excepts what we have to offer? What percentage are successful? What percentage changed their behavior, and at what cost? What's the unit cost for each person that we reach?

If you think about these unit metrics, if you're able to optimize for them so that the percentage behavior change has increased or the dollars that are required for the training decrease, those are all things that will be highly leveraged and increase, just magnify impact over time as you scale. Those are the metrics that, when you're focused on innovation, you want to be tracking on a regular basis to understand, are we moving the needle on these metrics that matter versus the aggregate numbers, which is just a measure of activity, not of progress?

Michael Krigsman: That's a real key thing, that vanity metrics are a measure of activity, not progress.

Ann Mei Chang: Yes.

Michael Krigsman: Ann Mei, as we finish up, what advice do you have for social impact programs or businesses that want to engage in social impact as opposed to nonprofits, anybody who would like to adopt the Lean Startup techniques you've been describing, and they're not sure what to do?

Ann Mei Chang: There are a couple of simple ways to get started. I think, as with everything, it's important not to let perfect be the enemy of the good. There are two things I'd suggest that are easy things you can do today.

The first is, as Steve Blank says, get out of the building. Rather than trying to perfect a solution in the confines of your office and in meeting rooms, get out of the building and try things with people, talk to people, talk to your customers, put things in front of them, and see what they do. Not just what they say but see what they do. You don't have to have the perfect minimum viable product. But, once you get out in front of people and start seeing what they're doing, you're going to start learning, and it will start the cycle of you then improving things, and both your test itself as well as your product or service. That's the first thing I would say.

The second thing I would say that is difficult to do often in the social sector is to play devil's advocate, both for yourself and for your colleagues. I think because we are all trying to do good in this world, there's a tendency for us to just pat each other on the back because, hey, you're doing good. So, whatever you came up with, we want to encourage people because, after all, you're trying to make the world a better place.

I think we do ourselves a disservice when we don't ask the hard questions to say, "Okay, it's great you're doing good, but here are the things that might go wrong. Let's understand those things so that we can actually deliver good." I think a lot of times, whether it's a business or a nonprofit, we are too easily satisfied by doing some good. I think we should raise the bar, just as companies are required to maximize shareholder value. I think, if we're talking about making an impact, we should be required to be maximizing social impact.

Michael Krigsman: Thus, your concept of having a big, bold, audacious goal.

Ann Mei Chang: Exactly. Think big. Have a big, audacious goal, and start small to figure out what's the best way to get there.

Michael Krigsman: Okay. Well, we're out of time. That's been a very quick 45-minute conversation. We've been speaking with Ann Mei Chang, who is the author of the book Lean Impact. Ann Mei, thanks so much for being with us today. I really do appreciate that.

Ann Mei Chang: Thank you so much for having me, Michael. It's been a pleasure.

Michael Krigsman: Check out CXOTalk.com. We have lots more videos. And, be sure to subscribe on YouTube. Have a great day, everybody, and we'll see you soon. Take care. Bye-bye.