Kirsten Moy
Aspen Institute

The first thing you want to do is turn them on. When you respond to the answer select the answer. Let's give it a try. When it flashes green it knows that you have responded.

1a. What area of the country are you from?

Northeast
Northwest
West Coast
Midwest
South
Texas

The majority of the people are from Texas.

2a. Who shot J.R. Ewing?

Pamela
Bobby
Sue Ellen
Cliff
Kristen

Who shot JR? The answer is E - Kristen.

Why don't we go ahead and see who is in the room and what you think about scale

Questions for Opening Session

1. What type of organization are you?

A. for-profit corporation
B. 501(c)3
C. governmental or public sector entity
D. cooperative
E. other

Here's our first question. Did anyone not respond? The bulk of people are the not for profit sector.

2. What field/sector do you work in?

A. financial services
B. social services
C. housing
D. small/microbusiness
E. other

What kind of business are folks in? The answers are coming in faster for this one. You know your business. Financial services and a fair number in housing.

3.Let’s get a sense of the size of the organizations in the room. My annual budget is:

A. less than $500,000
B. between $500,000 and $1 million
C. between $1 and $5 million
D. between $5 and $25 million
E. between $25 and $50 million
F. over $50 million

What is your operating budget? Fair number of small organizations and a good number between one and five. There are not so many in the middle.

4. What does scale mean to you?

A. serving many more people
B. serving some meaningful % of the population
C. growing significantly in terms of budget, annual production, or asset sized.
D. achieving some economies of scale
E. reaching sustainability
F. becoming big enough to influence policy or the practices of the private sector
G. other

A wide range. This is fascinating. This group says each of these. I don't think I've seen a distribution like this. You've never been in Texas!

5. Is scale an important goal for your organization?

A. Yes
B. No

Everyone sees scale as important.

6. Where do you think your organization is at in terms of scale?

A. nowhere near scale
B. close
C. already there
D. don’t think about it or not important

Most people don't think they are near but a few think they are close or already there!

7. Where do you think your field as a whole is at in terms of scale?

A. nowhere near scale
B. close
C. already there
D. don’t think about it or don’t know

Most people feel the industry or field are at scale but there are a few that are already there.

Greg - The question about what scale is is where the answers have the widest distribution and that is why we started out doing this research. Everyone that talked about scale were talking about and meaning different things. The goal in the next day and a half are to think about how organizations achieve scale and to see if we can get on the same page about what scale is.

We don't believe that every organization has to go to scale. There are some things that are better done in a small way.

Kirsten - we're going to jump to one of our favorite diagrams. I'm going to give you a couple of statistics. The number of people that need services compared to what we provide - there has been a steady shortage of houses (5.2 million) that we are short for affordable housing. We estimate the market for micro-enterprise is about 10 million. The micro-enterprise market currently serves 200,000 people.

A Model
There is a non-profit model that says you have some idea and maybe there is a pilot and then you get a few people doing it. Then someone writes a best practice manual - then poof! we expect the innovation is going to be at scale.

A Better Model
The private sector doesn't go from best practice to scale - it goes through several additional steps - standardizing, infrastructure build out and then wide scale roll out.

Things don't happen without infrastructure. Without conscious building of infrastructure things don't happen at scale.

Our Process
We selected a series of case studies that people thought had achieved some level of scale.

We read and interviewed and tried to discover the patterns that cut across these different examples.

Lessons
None of these lessons are going to be new to you but the consistency across all these examples was surprising. Profitability was very important. Demand was a clear indicator and these two things were looked at together (profitability and demand). You needed to have high profitability and demand. Geographic expansion is something that neighborhood organizations are just starting to think about.

Infrastructure and technology were critical. Technology is a key to making organizations more efficient. Infrastructure is not just technology but includes processes that deliver services and products. We looked at a banking system that went to scale and they gave each bank they bought the same technology platform.

Partnership was interesting. In the non-profit world we look at people that share our values as people we want to partner with. In the profit world they look at the ability to provide a service or product at the price they can afford and they don't care as much about shared values.

More Lessons
For many of these organizations capital was raised several times. Organizational structure was a surprise to us. Several organizations changed their structure in order to grow. We are beginning to experiment with for-profit structures in the non-profit world.

Regulation was another lesson. Just through regulation you can bring serious money to the issues we really care about.

The last two are important but we don't think about them much. When you grow you need much stronger managers to run those organizations. Adaptability is a key ingredient. A number of organizations find a product that they are comfortable with but they need to be able to roll out new products as the market changes and as they grow.

Achieving Scale
There are at least three levels of scaling activities. One is about products. Within that you have scaling issues that include management systems, infrastructure and capital. If you stay focused on the product you end up going along a certain trajectory. If you begin to look at the organizational issues you can grow but then you bump into some regulatory or industry issues. The next level of scaling activities take place at the industry level.

Product Level Needs
in the Community Development world we don't have the money to do the market research to figure out the products that customers really need. We need patient capital to experiment and learn with. At the organizational level we need the funding community to move away from project level funding. We need flexible capital for things that are not glamorous for a funder.

On the industry level - there is a pull between being local and being large enough to get the infrastructure and technology you need to serve the people you want to serve.

Kirsten -

Basic model of key players
Most of the people are not focused on the structure. Most Community Development organizations stay within a geographic location. You can't grow to scale when you stay within a small geographic region. We couldn't do the map for all industries but we could identify the key players and look at the patterns that are evident in many industries.

There are customers, industry members, investors, regulators, trade associations, etc.

Structure 1
In most industries there are customers that interact with the organization directly. There are also funders but in this structure they provide restricted funding for organizations.

Structure 2
In this structure there are still customers interacting with the organization directly but there are a lot of little players and a few big ones. The industry intermediaries help the little guys compete with the big guys.

Structure 3
This is the subsidy dependent model with subsidy dependent organizations. In this model the regulators play an important role. Investors and funders become really important. The funder is often the ones we are most loyal to in this model. The customer is often left out in the cold.

If we are really focused on the customer how did we miss the explosion of small funding organizations that sprung up in most communities?

Smaller players
In an industry dominated by smaller players access to common infrastructure, networks, training and development can happen across an industry. Having a strong industry structure can get you more with regulatory support.

Summary
W here we are going with this is to have a session today and tomorrow on collaborative business models. This will position the field for scale and growth. Collaborative business models can help do all these things. Better management talent and access to larger pools of capital will be possible.

We have a couple people here that will take us through different ideas on collaborative business models and also different ways to raise money. Can we raise money from individuals. What about the internet? What about portals that are emerging?

That is a preview of things to come.

I wonder if since you started doing this work, is this field moving forward? Are people taking this in and doing something with this?

Kirsten - the interest we are most getting are from CDCs, Charter Schools, Child Care, but not community development.

You have different stages of development and a lot of CDCs are still product focused.

Kirsten - we know that there are some organizations that are using that chart and people are adapting it. How do we help them implement it?

Why didn't you choose large players in the CDFI industry to help understand what their models are? Why wasn't there an analysis of those big players? There were a couple we looked at. The real reason is we wanted to focus on the private sector because we needed to learn the lessons from them.

A large number of organizations create a product, sell the company off and go off to start another.

There are some organizations that have changed their mix.

That is an organizational approach to scale but not a systems approach to scale.