Isaac Jeffries On Innovation Opportunities For Social Entrepreneurs & Impact Businesses

Isaac-Jeffries-Social-Enterprise-Australia

Isaac Jeffries designs and builds social enterprises, in Australia and in the developing world.

He works at Business For Development, an NGO that creates sustainable businesses that lift thousands of families out of extreme poverty.

Isaac also works with The Difference Incubator, as an advisor to social enterprises and not for profits who are looking to become financially sustainable.

Most of Isaac’s work centres around building strong business models – if you can make an enterprise resilient, it has the best possible chance of changing the world.

He’s also passionate about young people getting involved in social enterprise, both to develop their skills and to find creative ways of addressing important problems.

Isaac provides insights into the social entrepreneurship sector in Australia, shares experience on building impact businesses in the developing world & challenges and opportunities for people looking to deliver positive social impact.

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 enterprise and development sector? [2:07]

[Isaac Jeffries] - I first got interested in business when I was 12. My friend and I (in year 7) started a competitor to our high school's canteen. We thought prices were too and their opening ours were too short. We set up our own rival and in 18-24 months we ended up running them out of business.

I find business and working with customers really interesting and find it naturally engaging. That led me wanting to study business at university. [Isaac describes his studies at Swinburne.]

I got a job at ANZ in their strategy department. That taught me a few things very quickly. I found out I don't like finance and strategy full stop. What I really missed was having that sense of meaning and purpose behind what I do.

I turned down a graduate job at ANZ in favour of working at Servant's Community Housing. [Isaac talks about his work at Servants.]

I then met Bessi Graham and Paul Steele who were starting up The Difference Incubator (TDi). TDi started with the belief that a social enterprise is a new type of business that can work and exist, but it's going to need a lot of help to get off the ground. We had a lot of social entrepreneurs who said, 'we need to take on investment in order to grow and scale.' And we had a lot of investors who said, 'we have money ready to place but we need groups who are strong enough that they can actually do something with the investment capital.' Our job was to match make and put the two together. [Isaac explains more about his role at TDi.]

My other full time job is with Business For Development. We build impact businesses that can lift thousands of families out of extreme poverty at a time; usually in the developing world and usually based in agriculture.

What are the key learnings you’ve taken from working to build impact businesses in the developing world? [5:27]

I've had to learn a lot about farming very quickly. One of the first things my colleague Paul Vouter said to me was, 'development is agriculture and agriculture is development.'

If you want to help someone in the part of the world we're working in, you've got to teach them how to farm or give them the opportunity to earn a lot more from their farming than they are currently doing.

[Isaac talks in detail about the needs of the people he works with in farming.]

What I've learnt is that it is really hard to build an impactful business in the developing world. I suppose there's no magic formula and these sorts of businesses don't happen on their own.

It takes a lot of design and strategy to try and make it work.

I believe there are four things that an impact business needs to do in order to be successful and I believe it's easy to get any three of those four. The four things you've got to focus on are:

How many families can we lift out of poverty?
How much can we increase their income?
What's the internal strength of the business (the internal rate of return.)
What's the realism of the business.

Of those four numbers, you can do well on any three of them, but the last one will be almost impossible. You can have a plan for a business that engages a lot of people, it lifts them out of poverty and the business makes money, but the problem is it won't be realistic. Or you can make it realistic but you've got to suddenly work with half as many people or you can only afford to increase the incomes half as much as you hoped to.

You need to be really careful and diligent about how you plan everything, identify opportunities and buyers in order to build something that's sustainable.

Where do you see the most potential in Australia for social innovation? Are there any particular social or environmental challenges that you’re particularly passionate about? [8:15]

One of my personal passion areas is around homelessness. [Isaac sits on the board of Servant's Community Housing.]

One of the biggest areas for innovation we have at the moment is with the NDIS (National Disability Insurance Scheme.)

I've worked with a lot of organisations in the last six months who are looking to become 'NDIS ready'.

What I've seen is a lot of organisations would like to have a smooth transition to this new system without changing anything about their own philosophy or beliefs and I'm not sure that that's going to work out too well for them in the future.

What excites me is that this in Australia is that the NDIS is going to force a lot of providers to treat people with a disability as their customer rather than their beneficiary and what that is going to mean is that we design a lot of programs that are well suited to creating employment, improving social skills, creating friendships, mentoring, dignity and meaning. A lot of good is going to come out of this, but I'm not sure that all the groups who are out there today are successfully going to make the leap.

What do you see as the most important traits of a social entrepreneur? [9:48]

The two things that keep coming up for me are the combination of passion and discipline. By passion I mean you've got to have someone who is driven about three things:

The cause. I've never changed anyone's mind about a cause. I've never said, 'I know you want to save the whales, but you should really care about immigration policy.' You need to bring it with you and know a lot about it. It's got to be something you like to argue about at dinner parties.
A customer rather than a beneficiary. If you're relying on customers, you need to genuinely care about that person and what you're going to do and how you're going to solve a problem for them. If you see a customer as a cash cow, it's going to be really hard to build things that they desire and it's really easy to be quite adversarial with them.
To be passionate about their team. Starting any business like this is tough, so you need to care about the people you work with.

On the discipline side, the two things that stand out are...

A social entrepreneur needs to be really good at saying no to good things, in order to say yes to the best things.

That's the essence of strategy for me; the ability to make trade-offs.

The other thing I see that needs a lot of discipline is monitoring the numbers. I really enjoyed what Wouter Kersten said on a previous episode of Impact Boom, where he said Cash Flow Is More Important Than Your Mother. If an entrepreneur comes to us and start with that approach, it's really easy for us to help them take that even further.

If you have an entrepreneur who doesn't particularly care about the financials, they're probably going to struggle when things get difficult.

TDi’s CEO and Founder Bessi Graham recently described the social enterprise movement in Australia as ‘self-obsessed’ and ‘internally focussed’ at an event called ‘Why We’re Breaking Up With Social Enterprise. This saw Social Traders Managing Director David Brookes respond to say that they see the coming five years as a time for growth for the social enterprise ecosystem in Australia. How you have seen the social enterprise sector transform and change over the last 5 years and where do you see it heading? [11:59]

I see a difference between where the industry is heading objectively and how most people I know in the industry feel about it at the moment. I suppose I feel two emotions.

I think when you look at how our industry has developed we have a lot to be proud of and I have a lot of optimism about where we're going. At the same time, I know a lot of social enterprise founders, investors, employees and entrepreneurs who are heartbroken. They've lost so much money and time and they've put their houses on the line and they've failed.

It is so hard to be a social enterprise at the moment. The failure rate for startups is astronomically high and there's nothing about being social that makes that any easier.

It might make it more important. It might add fuel to your fire but it doesn't make the process of building a business that is financially sustainable any easier. I know entrepreneurs who have had incredible loss and difficulty and they feel burnt out, resentful and like they haven't been supported, and that investors have ignored them. Then I've got investors who feel that they have tipped a lot of money into this but that a lot of their deals have fallen through. When I go to social enterprise events that doesn't seem to be something that is spoken about on the stage. It's the kind of thing that gets spoken about over a beer, but it's not the kind of thing that a lot of us are willing to publicly acknowledge.

It's not a very popular thing for me to say even now, because it's not criticism about the industry, it just feels like we all experiencing a lot of failure but we're not willing to talk about it.

What I'm also starting to see is that there is a first generation of people who have been really interested in social enterprise but are currently suffering from burn out and I think they might take a step back for a few years.

What we're going to see now is that social enterprise is really exciting and appealing to not-for-profits, to NDIS organisations and to young people. I see a lot of university students and when previously the theory was, 'you can't do good and make money at the same time,' but you say that to a 19 year old and they say, 'of course you can!' Those are the people who are going to be fuelling our industry for the next 5 years.

I know a lot of people in this industry who are critical of Thank You Group. I'm not, I love them. What Thank You have done is make social enterprise a household name. They've planted a seed that it's possible to have impact through buying a product. It doesn't need to be a charitable donation, it can be something that is good for you and good for the beneficiary. When you teach young people about a business model that works, they have a frame of reference. [Isaac unpacks this a bit further.]

We’ve recently seen the Victorian Government launch Australia’s first social enterprise strategy to improve sector support. Looking at social enterprise from a policy perspective, what do you believe are the key steps government need to take to help foster and support an innovative social sector? [17:12]

I think we're lucky with the environment that we operate in and I think that the steps that have been taken are really good.

What I want to see are steps that develop resilience rather than grant dependency. I see a lot of entrepreneurs out there who feel like they should be supported by being given grants and free money and it's actually really quite damaging.

If you have a business that constantly requires the founder to go away and write more grants, it's really hard to then focus on building up the organisation and adding to your customer base and scaling up over time.

I think social procurement is an interesting opportunity but perhaps I have a different perspective to where others are coming from.

I see that social procurement is a good way of finding new customers, but it's got to be based on self interest rather than altruism.

What I'd like to see is social enterprises given more opportunity to win contracts and tenders but the customers support them because it does something in the self interest of the customer.

I would not advocate for regulation that says, 'all business must buy from a social enterprise,' because what that does is it allows complacency.

The government has the ability to stamp out a lot of evil, unethical business practices and raise the minimum standard and that means that social enterprises no longer are undercut in the same way that they are today.

I don't know many social entrepreneurs who feel like they are suffering from oppressive bureaucracy but I know a lot who are suffering from customer disinterest.

Any assistance that policy can give in terms of giving entrepreneurs access to programs, advice and capacity building is really useful, but it doesn't mean that social enterprises should be immune from competition.

What advice would you give to businesses which would like to use their business models as a way to generate positive social impact? [19:28]

There is a model that I really like to use called the 'three lenses of innovation' [originally created by IDEO]. If you would like to be a social enterprise that is sustainable and impactful, you need to have three things down pat. Those three things are desirability, feasibility and viability. [Isaac unpacks the three lenses further and gives some useful examples to assist in understanding this model (such as Streat).]

My favourite type of impact is the one that the customer doesn't notice.

If you can run a business where you customer buys a product, not because they're feeling generous, but because it solves a problem for them and in the process they change someone's life; for me that's the dream. I look forward to the day when Nutella's hazelnuts are empowering small holder farmers somewhere in the world. I don't want to have to switch brands to feel like I'm a good person. But in the process of buying something quite mundane, you have the ability to change someone's life.

What other inspiring projects or initiatives have you come across recently which are creating positive social change? [22:51]

One of the really inspiring ones I've seen recently, is a farming app in India called DeHaat. [Isaac talks about how this app can improve the lives of farmers in the developing world.]

In Australia, one of the social enterprises that I've been able to watch develop is Mr GP. [Isaac talks about this enterprise which is designed to get men to go to the doctor. He talks about why this is causing some controversy and why he thinks the initiative is going to save lives.]

To finish off, what are the top 3 books you’d recommend to our listeners? [25:53]

[Isaac lists the top 3 books for social enterprises and the top 3 books for young people, which are listed below.]