Transitional Philanthropy: Leveraging Innovation to Build Sustainability

There is a way for philanthropy to focus its resources that doesn't require long-term funding obligations and has been shown to increase its effectiveness.

It is common for Traditional Philanthropy to permanently fund great non-profit enterprises or small demonstration projects, with the expectation they will scale in size and impact over time. There are significant limits to these models.   We need a radical shift from traditional to transitional philanthropy – a 21st century form of philanthropy using leveraged funding to support innovative ideas, systems, and technologies for integration into larger social systems. Transitional Philanthropy has the potential to help drive the large-scale, systems change that is needed to reform health, education, and a broad range of social problems. 

In advocating Transitional Philanthropy, I am applying lessons learned from my experience as a venture capitalist. In that role, I backed innovations and management teams that could grow to dominate their market segments.   This strategy worked for JetBlue, Office Depot, and Apple. Later when I became a supporter and advisor to social enterprises, I mistakenly tried to apply the same standards to address large social causes of our day. I sought out and supported a few social enterprises with great innovations. I pushed them to raise more and more money so they could grow to replace systems that were not working well. But this was an unrealistic expectation. While some great social enterprises have grown effectively - such as KIPP schools, Teach For America, iMentor, and Visionspring - very few of them have scaled to totally disrupt or replace entire social systems.  

 We need to apply a different approach to supporting social innovations. We need to celebrate innovation, confirm it works, and then look for ways to embed these ideas into the larger system, whether it be for education, health, poverty, or any other significant cause. The idea that one nonprofit innovator will have the best model to scale falls flat when compared to integrating several great innovations from multiple sources into a collaborative network embedded in the larger social system. For example, instead of supporting one charter school nonprofit and growing it, why not take the innovations from many charter schools and integrate their ideas into public school systems like Match does in Boston? Innovation, proven with research, often shows there is a better, logical, and cost-effective way to embed new models into a broader system.

             Transitional Philanthropy can help support the social innovations that need annual donor funding until they achieve scaled impact. Just as how some biotechnology startups create innovative drugs, which, if proven useful, are bought by large drug companies that then scale these innovations into the manufacturing and distribution systems. Forcing a biotech startup to think about building a distribution system makes no sense.   The same can be said for many social innovations. Rather than assuming that the social enterprise will replace a government function like providing health and education services, why not assume that the social enterprise creates the innovation that, if successful, can be embedded into the larger social system?   There are various ways to look at this.

Focus on Music

          For example, a group of us who share a love of music were sad to see many music programs cut from public schools. Rather than start a new nonprofit to bring music back to inner cities, we created the Quincy Jones Musiq Consortium to find ways to unify the 75 nonprofits from around the country already working on this issue.   We looked for innovations from smaller efforts that could be integrated into the existing public school system. After a few years, we created a joint venture called Amp Up NYC, bringing together Berklee College of Music; Berklee City Music, an after-school music program active in 40 cities; Little Kids Rock, which was providing modern music training and instruments to over 100,000 kids nationwide; and the New York City Department of Education public school system. We used philanthropy to fund a three-year program to train music directors, give them Berklee Pulse, a free on-line teaching tool, provide basic instruments, build a supportive on-line community of music directors across schools, and raise awareness and support research about music’s role in improving the school environment and success rates for graduates. The NYC public schools committed $6.8 million of teacher time for professional development. After less than two years, we have trained enough music directors to engage over 41,000 kids in the Amp Up NYC system. By the end of three years, 60,000 kids will be participating, NYC public schools enjoy a new, vibrant, sustainable music system, and the philanthropic support will end.

Focus on Global Health

           Organizations like Last Mile Health (LMH), a Liberian nonprofit, are applying the same approach to global health.   LMH aims to build a national force of 4,000 community health workers to provide basic, front-line health care at the village level and prevent another pandemic like Ebola from devastating Liberia again. Instead of trying to hire, train, and supply its own teams in every Liberian village, LMH has developed successful models in a small number of villages and districts in Liberia and is now advising the Liberian government, other nonprofits, and multilateral institutions on how to embed their ideas into the existing health system. Philanthropy will continue to fund LMH as it advises and trains groups in Liberia and other countries. LMH is becoming a deep innovator that works with others to create a scaled social intervention.       

This Transitional Philanthropy approach is also being used at the MDG Health Alliance to move from a permanent global health aid model to a sustainable, local, government-funded strategy to address the challenge of supplying bed nets to prevent malaria. Multiple studies have shown that over ten years the lives saved and enhanced by providing bed nets generate a gross domestic product (GDP) increase 15 times greater than the cost of the intervention itself. But bridging the funding of that ten-year gap has been a problem. The MDG Health Alliance is partnering with the World Bank, USAID, and other organizations to test performance-linked bonds as a way to fund programs without relying on grants from nonprofits or multilateral institutions. If these experiments work, the same approach could be used to fund other development projects that generate solid economic impacts in the long term, such as training community health workers or treating neglected tropical diseases.

Focus on Education

Another version of the Transitional Philanthropy approach is aligned action, which seeks to bring like-minded stakeholders together to strengthen an ecosystem around a social problem and attack its pressure points. New Profit, a nonprofit venture philanthropy fund whose board I chair, has created Focus Funds to take advantage of high potential, but unrealized, opportunities to enhance social impact. Our Early Learning Fund, for example, is working with top researchers at academic institutions such as University of Virginia and Harvard; on-the-ground practitioners like AppleTree and Acelero Learning; funders like the LEGO Foundation and Packard Foundation; and others to identify, assemble in new ways, and amplify a set of approaches that have the potential to help local providers deliver high-quality, pre-kindergarten education to children in under-resourced communities at a large scale. This aligned action approach also creates a learning community, so that all involved have access to the data and insight that enables improvement of their results for children over time. Being involved in these aligned action teams allows the donor to identify key innovations to fund that can be scaled into the larger systems.

Our early experiments with Transitional Philanthropy suggest it is most effective when:

• The funding is time-bound with specific, measureable targets and goals.
• The effectiveness of the innovation being funded has been demonstrated through research and a return on investment analysis, when possible.
• Government partners, policy experts, and others who understand and help manage the existing system are active partners, willing to make available their resources to support the integration of the innovation into the system.
• The organizations involved have leaders with “managed egos,” who care more about the ideas and solutions than the organizations themselves.
• There is well-trained talent in the public entities operating the larger systems who can work with the innovative nonprofits to bring in their ideas. There are times when it is useful to fund and embed additional talent into the public organizations during the transition period.
• A limited-life, collaborative team of “honest brokers” who act as “collaborative glue” is in place to supervise and measure progress around refinement of the innovation, confirmation of its effectiveness, and integration of it into the larger system (written about in my previous piece, Solving the World’s Biggest Problems takes Ensembles, Not Soloists).

            Does Transitional Philanthropy apply in all areas of the nonprofit world? Not necessarily.  I believe it is best used to help improve a larger system that is unable to create and test innovations on its own.  For systems that are not dominated by government-linked structures such as museums, nonprofit hospitals, and performing arts organizations, a permanent, traditional philanthropy strategy is probably still needed.  But in cutting-edge areas of social innovation that require government and public systems to adopt them - such as education, health and poverty - the Transitional Philanthropy model should be considered. It can be a powerful way to achieve transformative and permanent systems-wide social change.