Alastair Davis On Key Factors That Helped Scotland Become A World Leader In Social Enterprise

Alastair Davis joined Social Investment Scotland in 2009 initially to run the investment team, however in 2011, Alastair became SIS’s Chief Executive.

Before joining SIS he worked with Bank of Scotland’s community banking, where he developed his broad and extensive knowledge of social investment. In 2012, Alastair completed the prestigious ‘Strategic Perspectives in Non Profit Management’ programme at Harvard Business School and in 2017 was awarded a Fellowship of the Chartered Banker Institute.

Alastair is currently on the board of the North East Social Investment Company in England and the advisory boards of Big Society Capital and Scottish EDGE. Whilst not at SIS or on holiday on the high seas, Alastair enjoys spending time in the kitchen working on his latest culinary creations.

Alastair discusses Scotland's rich history of social enterprise, sharing reasons why the sector has grown considerably to create positive social impact. Alastair also provides strong tips for social entrepreneurs and advice on getting social investment.

Highlights from the interview (listen to the podcast for full details)

[Tom Allen] - Could you please share a bit about your background and what led you to work in the social investment and social enterprise sector? [2:52]

[Alastair Davis] - I think that I probably ended up in this sector quite by accident. It was never originally my intention and it wasn't something, or a sector, that I was particularly attracted to after university, but my career, in terms of leading up to the point of running an investment organisation, started off pretty traditionally. As you may expect, by working for one of the main banks in Scotland and one of the largest banks in the U.K., and learning my trade in that organisation. Eventually, I worked in an organisation or part of the bank called Community Banking. That part of the bank managed the bank's relationships with charities and not-for-profit organisations right across the U.K. and was one of the early pioneers of lending to charities and social enterprises.

But as everybody will be aware right across the world and in 2008, the financial service sector changed and there was an opportunity for me to leave banking behind and move to Social Investment Scotland. The advantage that we had there, was leading the deployment of quite a significant investment pot; just over 30 million pounds focused on charities and social enterprises. In a financial climate where the regular financial services sector was not investing in charities and social enterprises, the opportunity to deploy a significant amount of capital for impact was particularly attractive. Since joining Social Investment Scotland and taking over as Chief Executive two years later, we have really reinvented the organisation and grown it quite significantly, to the extent that it's now one of the most important drivers of the growth of the social enterprise sector in Scotland.

It's been a really inspirational journey. How did you find your purpose, and how did that change the way that you live and work? [4:58]

I wasn't particularly familiar with the social enterprise sector or the not-for-profit world until I joined that particular team within the bank, and I guess at that point was exposed to the huge variety of a diverse sector. I enjoyed working, particularly, with people who weren't just motivated by financial ambition or financial goals. Being able to see up close the impact that these organisations were making on people's lives was something that I enjoyed, that I enjoyed playing a small part in.

The opportunity really grew to make a difference, when I joined Social Investment Scotland in being free of the restraints of a big organisation.

I've been able to deploy a more entrepreneurial approach to social investment than what we were able to within the confines of the banking and financial system, and really that's allowed me to deepen my relationships with charities and social enterprises, to really get under the skin of what is it that they're trying to achieve.

To work with them to understand more about what it is that they need in terms of investment and support, and being able to then connect them up with either that investment or that support, or the expertise that they need to take things on to a next level.

I am very much a product of the financial crash although the opportunity personally, and for my career and the impact that I've been able to create, can be traced back to the financial crisis and the crash, and the changes that then subsequently have happened across the sector right across the world. It may have been bad at the time, but in hindsight it was probably the best thing that ever happened to me personally.

In previous episodes of Impact Boom, Alastair, many of our interviewees such as Peter Holbrook, David Brooks, Alex Hannant, and Robin Dick, have all pointed to Scotland as the leader in social enterprise. What do you think have been the key factors that have created this thriving social enterprise environment? [7:04]

It's very flattering, I think, to be recognised in a global context for experience and credibility in the social enterprise movement, particularly as it grows right across the world. I don't think that sometimes we maybe quite appreciate the fact that other countries and other organisations across the world are paying quite such close attention to what Scotland is doing. It's good to know, and good to be able to share some of that experience with your listeners.

Scotland has a long history of community enterprise. You can trace it back to the mid-19th century in terms of some new models of worker participation, worker cooperatives that were set up to deal with some of the social challenges of the industrial revolutions.

I think that has created a strong foundation for the growth of what we would probably say at that point in time was a movement.

I think the other thing to remember in terms of the landscape and the geography and the demographic makeup of Scotland is that it's not just about urban centres, and that most of the country is remote and rural. I think that that has meant that communities and local people have been forced into situations where they have had to create entrepreneurial solutions to local problems, and be more self-sufficient in terms of what it is that they need to make their communities a success. Particularly in the highlands and islands of Scotland, some of the most remote and fragile landscapes and communities anywhere in Europe, there are fantastic examples now of robust social enterprises that have got a strong track record of creating social impact in a sustainable way.

I think that that foundation has allowed the sector to build strong relationships with the Scottish government, and I think that since we have had our own Parliament in Scotland we have been able to really deepen the relationships as a sector with the Scottish government and the various administrations that have been in place. That has resulted in continuation of strong and significant financial support, but also at the highest levels of government, whether it be the First Minister and Deputy First Minister are aware of the social enterprise movement, the strong ecosystem of support that we have, and to support the growth and development of the social enterprise sector. Then successive movements, and in particular at the moment in terms of our ten year strategy for the social enterprise sector in Scotland.

All of those things in combination; the unique characteristics of the country, the strong heritage, and then the strong government support, have meant that we have been able to retain that strong ecosystem and culture of social enterprise support and development, which obviously has begun to attract attention from across the world.

I'm always conscious to say that doesn't mean that everything is perfect. We still have challenges as a sector, and I'm sure we'll come on to talk about that in a lot more detail soon, but it is, certainly, something that we are proud of, it's something that we certainly don't want to lose, and it's certainly something that, as a movement, we have to work together to retain.

You certainly do have a few eyes on you as a country from around the world, which is a great thing. You mentioned some challenges, Alastair. What do you find to be some of the biggest challenges in working in the social enterprise sector in Scotland, and how have you worked around them? [10:41]

I think there's probably two main challenges that I would highlight in terms of building on what we just said in terms of the track record and the heritage of the movement. I think that as social enterprise has gained traction internationally, and there have been different models and formats of social enterprise that have emerged right across the world, that has created some challenges for the social enterprise sector in Scotland.

Traditionally, social enterprise in Scotland has in many ways been quite an orthodox movement, has been defined under particular legal forms. I would say that, although those still remain true and very relevant for many social enterprise formats in Scotland, some of the models that we see in a more global context, where there have emerged some countries that perhaps don't have such a strong heritage, have perhaps challenged some of those more traditional models of social enterprise.

We see that in particular from young people who have a desire to create a business that is not only impactful and creates a social impact, but perhaps might involve an element of financial return for them as a director. I think that in some parts of the sector we have struggled to accommodate that, and with what have been slightly rigid definitions and structures.

However, I think that as that innovation has progressed, and we've been able to perhaps bring that innovation in an appropriate way, we've managed to find a way to recognise as a community that social enterprise is indeed a spectrum. There are a range of different models, and what we need to focus on is the impact of those social enterprises and business forms, rather than just their legal structure.

That's probably the first challenge that I would say that we see, and continue to see, in Scotland. The second aspect would be that, although we are a proud nation, as I mentioned earlier, now have our own Parliament, we are still part of the United Kingdom, and as you'll have heard from other commentators from the broader UK scene, social enterprise is just as prevalent and important in other parts of the United Kingdom, particularly in England. There have been significant developments that have taken place south of the border to support the growth and the development of social enterprises right across the UK. The focus is different, there's more of a focus on how social enterprises can deliver public services on behalf of the state, and we don't see that same pressure in Scotland.

It does create, not only advantages for organisations like Social Investment Scotland to take advantage of, or Big Society Capital, who are a wholesale social investor. We are still able to access investment from them as a UK-wide institution that perhaps mainly focuses on England, and some of the tax advantages that exist for social enterprise in terms of our tax system that is still retained at a UK level. It's been able to take advantage of the benefits and support that's available within both ecosystems, both at a Scottish level and at an English level. Sometimes that's a challenge, just to be able to navigate that and to tell the story of how that fits into the broader picture of social enterprise across the UK.

SIS invests loan finance in third-sector organisations across Scotland, and it manages the Scottish Investment Fund on behalf of the Scottish government, which is a multi-million pound programme of investment in the sector. Could you please share some of the success stories, and what you believe are the key ingredients that have been there to see the organisations that you support thrive? [14:22]

Absolutely. The Scottish Investment Fund is a fund that is backed by the Scottish government, and was the fund that I joined Social Investment Scotland to manage. A 31.8 million pound programme of investment; a mix of grant and loan in third-sector organisations right across Scotland.

That government support is one of the key success factors, not only of the social enterprise movement more broadly, but of Social Investment Scotland as well, because it provided a level of capital that we had not seen before as an organisation. It provided government endorsement to the concept of social enterprise, and provided a grant and loan mix that many organisations point to as being a defining moment in their success and growth as an organisation.

One of probably, three successes I would highlight in terms of what we have achieved as an organisation, is the successful deployment of that fund. It went to 69 organisations, and actually the vast majority of them, certainly over 60, continue to trade, and continue to trade successfully. That's probably a level of success that you would not normally see in mainstream finance. That has undoubtedly had a significant effect upon the growth of the social enterprise sector in Scotland, particularly for larger and more complex organisations.

The second success that I would point to more recently is being able to use the success of that fund, (the money that was being repaid from customers that were able to do so that had received investment from the Scottish Investment Fund), to seed a new social investment fund in Scotland that was backed both by Scottish government and Big Society Capital as I mentioned earlier. Social Investment Scotland are the only organisation in Scotland to have received investment from Big Society Capital, and they are a wholesale social investor with 600 million pounds to invest, with the majority of that money coming from dormant bank account assets, so money that people have often forgotten about in accounts in small amounts. Big Society Capital have been allocated that capital to invest in the social enterprise sector right across the UK.

Being able to attract 8 million pounds from them to create a 16 million pound fund in 2014 is another success story for the organisation, and basically that has provided larger amounts of capital, in some cases up to 2 million pounds, to support organisations to increase the scale and scope of their activity, and our fund was designed based directly on feedback of organisations. I would point to that as being a particular success story as well.

The third and final thing that we are particularly proud of, and has allowed us to gain attention right across the world, has been our relationship with ASDA, who are part of the Walmart group, globally the world's largest retailer. We've had a partnership with them since 2015. And in Scotland, like many countries across the world, we have a levy on single-use carrier bags in supermarkets. We pay 5 pence for a plastic bag. That money is designed to come into charities, and the proceeds from that particular supermarket in Scotland have come to Social Investment Scotland to use both for loan finance, but also to support social enterprise's scale-up to access retail supply chains.

I'm particularly keen on supporting social enterprises that want to sell product, and sell product to the mainstream, a bit like fair trade has been in the past, and that relationship has allowed us to secure relationships, so far, for two social enterprises who are now selling the product on the shelves of a supermarket in hundreds of stores right across the United Kingdom. I think that that has been a definite stew of activity. It's brought social enterprise to greater prominence with the general public, and it's been an experience, an interesting learning experience, to work with a major corporate organisation and a major retailer that's operating at the scale that ASDA are.

There's three things that have emerged over time that have been important in their own way that have been supporting the success of Social Investment Scotland.

It sounds like SIS is providing some fantastic support. When it comes to successfully getting finance as a social entrepreneur then, what are the top three recommendations that you'd make to help organisations on their journey? [19:17]

I think the first thing that I would say to social enterprises trying to raise investment is not to forget that you actually are an enterprise, as much as the social part, and that some of the normal business metrics that regular businesses would use to attract finance are just as important to a social enterprise trying to raise investment as a regular business.

The first thing would be to say that social enterprises need to know their numbers, and so they need to know their plan. They need to own their business plan and understand the different variables that sit behind it, because that's what we are going to focus on as investors.

The second thing is, quite often I don't believe that social enterprises are bold enough with their ask of their investors. Raising investment is different to applying for a grant.

We would never scale somebody back, it's not the case that with some grants you may apply for 50,000 pounds and they might only give you 20, so social enterprises need to be bold with their ask in terms of what they require in terms of their financing needs. It's always better to build in some headroom at the point of application, rather than having to come back when things change. That would be my second piece of advice.

My third piece of advice to social enterprise is, again, to recognise that it is not a grant, and an investment is a different type of relationship with a funder. It's very much a partnership. An investor will sit with you on the different stages of your journey, and that's not about just making sure that the money gets repaid, but they will take an interest in your organisation right across the repayment period of the investment, to understand your performance, to understand the challenges that you're facing, to understand the opportunities you may be seeing as a business, and how that might lead to the need for greater investment. That means that there's normally certain information that has to be provided back to your investor, and that's not something that organisations should be afraid of, but recognise it as a genuine partnership. I suppose one of the key differences between social investment and more regular investment in that the investors are genuinely interested in seeing not just that financial return of course, but also the social impact that the organisation is creating.

Just a few things to be aware of, but my general advice, as always, to organisations, is not to be scared of it. I think many organisations are not used to...

Many of the more established organisations are not used to raising investment, and can often find it to be something that's off-putting.

Social investors want to invest their money in you, and I think opening up that conversation, and an honest dialogue, can make the difference in securing that investment capital.

Recently on the podcast, various leaders have been pointing towards teams as a key thing that investors look towards when they provide funding. What do you believe are the most important attributes of a social entrepreneur? [22:21]

Two things, and I guess that reflects both the social part of it and the entrepreneurial part of it.

A successful social entrepreneur will understand their numbers, know how their business is progressing, and have a team that supports the achievement of those objectives, and that builds on what I was saying earlier in terms of what you need to know to be able to raise finance.

But probably the key difference for a social entrepreneur is being able to understand how that particular social enterprise is making a difference, how the investment that they raise will increase their social impact.

But really to be able to understand, how that organisation is making a difference, to sell that story, to sell that vision, and to be able to communicate that out to their customers, to their investors, and to their stakeholders. Because if they're not able to do that, then to be quite honest, they really are not a social entrepreneur.

Being able to build a team that supports those twin objectives. Making sure that the business dynamics of the organisation are robust and secure, with people that understand all of that aspect of it.

Recognising that it is not a regular business, and there is a social purpose at the end of the day, and being able to understand that and communicate that, is a key thing that we would regularly look for when making a social investment. Particularly in a team rather than in a single social entrepreneur.

In 2012 you participated in the Strategic Perspectives In Nonprofit Management programme at Harvard Business School. For you, Alastair, what were the key takeaways from the programme? [24:03]

I had always had an ambition to spend time in the US. And after visiting Boston before that, and visiting Harvard, was quite captivated by it, so it was a particular personal ambition of mine to spend some time in that type of environment. The visit and the incorporated course at Harvard also allowed me to reconnect with some of the roots of Social Investment Scotland. We were founded on US models of community investment, and in 2011, 2012, it was just as I had taken over as Chief Executive, and we were reformulating the organisation's mission and strategy and business plan for the next five years or so. To be able, as part of that visit, to reconnect with some of the organisations that our founders had visited back in 2000 and 2001 was particularly special.

Being able to participate in that course at Harvard with about 150 nonprofit leaders from right across the world was undoubtedly something that went on to shape the strategic vision of Social Investment Scotland. It was people who were in exactly the same position running not-for-profit organisations in a variety of different sectors, all focused on trying to make a difference. It was a safe space for people to share their challenges, for people to share things that they might not normally be able to share with their teams or their boards or with their stakeholders. Being able to network and spend time with each other in that environment created ideas, created energy, and has created some lifelong relationships with people that were there.

The most important thing that came out of that course for me was the importance of mission, and the importance of a mission for any social enterprise. Being able to say in a clear statement how your organisation is making a difference, and being able to analyse it by using the why questions.

If you ask an organisation what they do, and repeatedly saying why, why, why, you will eventually get to the real reason that that organisation exists. Being able to encapsulate that in a mission statement that you can then use as a foundation for your strategy, but also to use as a framework to assess opportunities as they might come along, has been particularly important.

Even now, five, six, seven years on from that, even as a team at Social Investment Scotland we talk about the mission, we talk about mission drift, we use it as a framework to assess new opportunities, and regularly do say no to things that come across our desks because they don't fit with the strategy or the mission of the organisation.

It's something that I will never forget. It's learning that I remember in many cases quite vividly. It's a learning experience that I quite often refer back to even all of those years later. I think that's the hallmark of a good sharing experience, that it's not just something that you forget a few days after returning to the office. It was quite fundamental to, not only my development as a leader, but also to the development of the organisation.

Alastair-Davis-Social-Investment-Scotland

Alastair, the social enterprise world form will be taking place in Edinburgh in 2018. Looking towards that forum taking place, how have you seen the social enterprise sector change over the last five years or so, and most importantly, where do you see it heading? [27:24]

Even in the time that I've been in the social enterprise sector, which is almost 10 years, there has been a huge change in the dynamics of it as a sector, and one of the most interesting things that we see in Scotland is the emergence and the influence of young people on the social enterprise sector. I think that that's particularly exciting for the movement as a whole, it's exciting for everybody that's involved with it at the moment.

You see the prevalence of younger entrepreneurs, so probably those in their 20s and early 30s, who see business activity as being something that should be impactful in some way, as being quite a natural part of their business model. It's not an add-on, it's not a nice-to-do, and it's not a corporate responsibility focus. It's something that's integrated within the very DNA of their business.

You mentioned in the introduction that I'm part of the advisory board of an organisation called Scottish Edge, and that's basically a seed funding competition for early stage businesses in Scotland. Actually just last night they held the finals for round 11, which invested about a million pounds in these businesses, and it was really fascinating to see the social thread that runs through many of these organisations, probably without them even knowing that they could be considered a social enterprise. They probably wouldn't identify themselves as being a social enterprise. But because of something that's either happened to them as individuals or their families, or as entrepreneurs, they are creating businesses that have purpose, and I think that we need to make sure that we harness the opportunities of that. That's been a significant change, not only over the last 10 years, but something that we need to focus on in the next 10 years and beyond.

The second change that we have seen, and perhaps Social Investment Scotland has played a part in this by the growth and scale of its investment activity and the number of organisations that we've been able to support, is just the general awareness of social enterprise, and more specifically social investment as a concept within the Scottish economy. Maybe we'd question whether, if you stopped a man in the street and asked him what a social enterprise was, whether they'd be able to give you a convincing answer, but many of the people that are more influential in the government or other stakeholders will be aware of social enterprise and the opportunities that it presents for the future development of the Scottish economy.

Things that we've done as a sector in Scotland, like our social enterprise census, being able to quantify the scale of activity of social enterprise in Scotland, have been important drivers of that.

As we look to the forum returning to Edinburgh where it started 10 years ago, there's a real moment, for reflection, but also thinking about how you use that foundation of the last 10 years, and longer than 10 years, to drive the future development of the sector in Scotland, and how that affects activity across the rest of the world.

I'm keen that we are much more bold as a movement and as a sector in Scotland. I don't think we should be hiding the success stories. We should be more confident in the role that we play in the role of social enterprise right across the world.

Not allow that to be something that creates a sense of arrogance, but to continue to focus on the people in Scotland whose lives we're trying to change, and create really innovative and interesting responses to some of society's greatest challenges in Scotland and across the UK, and perhaps elsewhere. I would hope that we don't lose that sense of pioneering innovation that we've been so proud of as a sector, looking back.

It sounds like there's some really inspirational initiatives and organisations over there Alastair. Drawing closer to the end now, would you like to quickly tell us about a couple of the local social enterprises that you believe are really inspiring, and addressing some really important community challenges? [31:24]

Absolutely. Two examples that I hope that people who come to the social enterprise world forum at Edinburgh in 2018 might hear a bit more about. One organisation that focuses particular on homelessness. That's called Social Bite. Essentially Social Bite is a small chain of sandwich shops created by two quite inspirational young social entrepreneurs in Edinburgh. They now have four or five outlets. They have been supported by investment from Social Investment Scotland, but that's really what's been the driving force behind them, has been the incredible vision of the social entrepreneurs that founded the organisation.

From that foundation they have continually challenged and disrupted the homelessness movement in Scotland, and through not only enterprising activity, through their sandwich shops, have then gone on to open a restaurant. They have then moved into the provision of supportive accommodation for people that are homeless. They have even spun off a craft beer called Brew Gooder that supports clean water projects in Africa. Not necessarily anything to do with homelessness, but part of the overall family of social enterprises that exist. They have been involved in creating significant business dinners in Scotland, the Scottish Business Awards, bringing people like George Clooney and Bill Clinton to Scotland to speak and to raise the profile of social enterprise.

It really shows the power of quite an incredible visionary social entrepreneur called Josh, who I hope that people will have the opportunity to hear from. Really that's now entered mainstream consciousness. We have got a homelessness action plan in Scotland, a vision to end homelessness in Scotland. Whereas that social enterprise would never lay claim to doing all of that on their own, they have been able to challenge and disrupt, in a socially enterprising way, some of the conventions and preconceptions about homelessness in Scotland. That's Social Bite.

The second one that is particularly close to my heart is one of the first investments that I led on after joining Social Investment Scotland. There's an organisation called the Spartans Community Football Academy. Scotland is a footballing nation, I'm not interested in football one bit, but this is essentially a community football facility in Edinburgh, in a particularly deprived community of Edinburgh with a range of different social challenges in terms of antisocial behaviour, drug use, areas of deprivation in terms of food poverty. Really this organisation in particular, working through young people, and then extending those relationships into their families, have been able to create real and measurable social impacts and social change on that particular community through the power of sport. It's essentially a football facility where you can hire pitches and facilities on a commercial basis, but with that activity being able to support a whole range of other social activity that supports the people that live in that area.

For example, one of the things that has nothing to do with football is the fact that children in that particular local community have particularly poor dental health, and have poor teeth from quite an early age. So using some of the interventions they designed, they actually have a dental health programme that teaches children how to brush their teeth, and gives them learning that they can then take back into their families to help their families brush their teeth. Which can seem like something that's quite simple and actually has nothing to do with football, but shows that, from that facility and from that community asset, there's been a range of different community impacts that has been created.

They've raised quite significant investment from us, but I think the particular thing that's been attractive and inspirational and rewarding about that investment has been the ability that they have had, to point directly to the social impact that they've been having within that local community. For example, one of the most stark statistics that they have is about the significant drop in knife crime that has taken place within that community. That's something that's been recognised by the police. Basically because they're providing a safe space for young people to hang out on a Friday evening, or Saturday morning, or a Sunday afternoon, rather than hanging about on the streets.

That sounds like a couple of really great initiatives there, Alastair. To finish of then, could you please recommend a couple of great books to our listeners? [36:32]

Absolutely. One of the joys that I've had at Social Investment Scotland has been about building a team, and particularly in terms of building a team as a first-time Chief Executive. I hadn't been a Chief Executive before when I took over at SIS, and to be honest in many ways didn't really know what I was doing, so I have looked to external learning and also to books to guidance. These are not books that are particularly unusual or will be unknown to people, but I've found them particularly useful.

The first one has been a book that's written by a guy called Daniel Pink, who people will be familiar with, called Drive. I think that looks at motivation and teams in the workplace, and that's been particularly important for a social enterprise.

In the financial sector we're not able to pay the financial services salaries that other organisations might benefit from, but what we are able to offer people is what I sometimes call the warm fuzzy feeling inside, in terms of being able to participate in work activity that is rewarding and makes a difference.

That work explores how that can actually be more powerful than financial reward. That's one thing, in terms of building a team, that's been useful.

The other book, I guess some ways to contrast with that, is something that I read more recently. We've grown significantly as an organisation. When I took over we had four people, I had four staff. On Monday number 21 starts, in the new year number 22 starts, so that's not always easy. The second book is called The Five Dysfunctions of a Team by a guy called Patrick Lencioni. Very easy read, you can read it in about an hour, and that explores some of the challenges in terms of growing a team and developing a culture. That's something that I refer back to quite often and reflect on, as we perhaps experience some of the challenges of growth.

Nothing particularly unusual, actually nothing that's particularly social in either of those two books, but things that have been important for me in terms of developing my leadership skills and growing Social Investment Scotland.