Julie Hanna is a serial entrepreneur who believes that information technology can be a democratizing force for social, political and business disruption.
To spread the word, Hanna has been traveling the world for years, from the Silicon Valley offices of Kiva, the microfinance nonprofit whose board she has chaired since 2009, to Stockholm, where I caught up with her recently at SIME Non-Profit, a terrific gathering of NGO officials, social entrepreneurs and marketing wizards.
Turns out Hanna isn’t just passionate about working with Kiva, which in its first eight years has shared an astonishing $500 million in loans from more than 1 million lenders to more than 1 million borrowers, with a repayment rate above 99 percent. She also believes that the global development community — both traditional donors and their consulting and NGO implementing partners — have a lot to learn from today’s emerging social entrepreneurs and Silicon Valley startups.
Over the past few years, it seems as if design firms from the San Francisco Bay Area and tech firms from Silicon Valley have captured the attention of the international development community. Why is that?
To me all entrepreneurs are sort of on a continuum: There’s a continuum of save the world, change the world, exploit the world. The great entrepreneurs are about changing the world.
We tend to think that for-profit businesses are more on one end, but everything sits on that continuum. Silicon Valley and the great tech companies are all about changing the world. I see that very much aligned and consistent with what social entrepreneurs and enterprises are doing.
If you look at the way we build companies, why is it that we in Silicon Valley have found ways to build the fastest-growing companies in the world? Well, if you break apart the anatomy of how we start and grow our businesses, there are some really valuable lessons on how to get that kind of velocity and speed at such a low cost. And those lessons are very relevant and exportable to anybody building an organization or enterprise.
What are some of the main lessons for development organizations?
The big question everybody faces is how to stay in a continuous innovation loop. The pace of change is so high, and it’s accelerating. The thing that can be learned from the way innovation is harnessed in tech companies is that it’s all about fast test-learn-iteration and cheap, small experiments, constant experimentation. If you look at any startup doing something like a mobile app, by the time they raise any capital, they usually have built the app, they’ve released it, and they have some early momentum and evidence of how it fits in the market. And that’s when the fundraising starts.
The key is is being hyper-small and tight, and then test and iterate. It’s like building a house: You may have a vision about building a 20-room house, but you’re not building a 20-room house — you’re building the front door first, the first room, and then you go from there.
Donors are starting to engage entrepreneurs and innovators. The U.S. Agency for International Development, for instance, offers Development Innovation Ventures grants that start small and are meant to take successful innovations to scale. What would be your advice on how to structure such programs?
I would advise every organization to read a book called “Lean Startup,” because what its author, Eric Ries, did is that he codified the way that we build product-centric companies in Silicon Valley in a way that is actually relevant to anybody in the industry now. The anatomy of how to do that and the culture and mindset are a real significant shift, they flip a lot of conventional wisdom on its head. That’s a great template for starting to infect an organization and bring about that mindset. It’s not just process, it’s truly culture, DNA, mindset.
How long does such change take?
One of the things that has struck me is: Kiva is a tech startup that’s purpose-driven, but there are also our microfinance partners, with a lot of people coming out of the NGO world. We value growth as a quantitative measure of impact, and the NGO part of the organization tends to look at that and say: “Why this obsession with growth? We’re having impact.” It’s a balancing of perspective — there’s growth of impact and there’s depth of impact. So, they were always in the very valuable conversation of negotiating what’s appropriately aggressive growth.
And is there a middle ground?
Yes. Let’s say if Kiva was absent the tech focus of the org, what you may end up is what’s common in the NGO community — the notion of, we’re doing good in what we do. Maybe the emphasis on growth and scale might not be as strong, I don’t know. We have board discussions about whether we’re targeting the appropriate growth targets. That’s what you do in a tech company, push yourself hard on that. You’re trying to find the edge of where you can go. And then there’s that push and pull. But what I see is that there’s this new generation of social entrepreneurs that think very differently in that regard…
… and they’re combining business and development to achieve shared value.
Yes. And whether they happen to structure what they’re doing in a nonprofit or for-profit context is secondary. They have a mindset of how to use technology, how to have impact at scale. It’s just a part of how they’ve grown up and how they think — they’re digital from the get-go. If I was a large NGO I would be looking at how to bring some of that DNA into the organiztion to infect the culture and help to influence it.
Many large organizations — in international development and beyond — struggle with such fundamental change…
I sympathize with the challenge. Part of what I’ve looked at is: How can we help tool this industry and give it the same advantage a technology entrepreneur in Silicon Valley would get? There’s a whole ecosystem of knowledge and tools and incubators where you can go and just accelerate your knowledge and progress. How do we create these types of environments and tools and extend those, in a way democratizing access to that way of creating impact at scale?
What are some tangible steps to take?
Two [of the] things we value most in Silicon Valley are technology and people. We value technology not just in terms of products but in terms of automating absolutely everything that can be automated — that’s how we can get efficiency and velocity. And on the people side, we know it’s all about talent — we’re in a constant talent war against one another, and we know that what attracts the greatest talent is not stock and best pay, it’s a mission orientation. So if you’re doing something socially driven, you already have a mission. So in a way, I’d say that every NGO should have an engineering staff.
Is there a danger that a greater focus on technology and automation will be seen by some development professionals as a threat?
There are always protectionist responses to change, but I think it’s important to recognize that this is a huge and growing force, so the question is: How do you harness it to advance your goals?
How did Kiva’s definition of success, and the way you’ve evaluated it, change over time?
When I stepped in as chair, we were at around maybe $30 million or $50 million in loans; we’ve grown 10 times since then. At the time, we were reacting to the growth. We had a banner year — Oprah would do something and the world would come to our door, and we’d have to chase the growth trying to keep the wheels on.
The following year, we had two big events: We launched in the United States, had a huge backlash to lending in the U.S. And then the halo around microfinance came off, and we came under a lot of scrutiny.
All of a sudden, the world wasn’t rushing to our door, so we had to figure out how we get more into the driver’s seat of managing our own growth. With that, we drew on the discipline on how you “metric” yourself. We put a lot of metrics about what we call the funnel of attracting, engaging, retaining lenders, borrowers and so on.
At some point, in this discussion around what’s appropriately aggressive growth — breadth versus depth — we also began to quantify what catalytic growth looks like.
If we wanted growth at any cost, we’d have gone for low-hanging fruit. So for instance, we would’ve said we’ll find a lot of people in Lima, Peru. But the microfinance market in Lima was actually becoming quite saturated, so we decided we’re not going to become catalytic here, so where do we provide subsidized capital? Let’s go to the Peruvian jungle, which is much harder to reach, you can’t grow that fast, but it’s more catalytic. We just wanted to go to some of the riskiest parts of the world where capital wasn’t reaching.
That’s how we balanced breadth and depth objectives. We measure the percentage of loans that are catalytic, meaning this is capital that reaches people who otherwise would have zero access to any other microfinance or capital.
That must’ve made for some contentious board meetings.
Yes. It can be an endless ping-pong game if you don’t step back and think with the end goal in mind. That’s why it’s really most useful to have the debate. Once we did that, things became clearer.
In the development community, there’s a lot of talk about working yourself out of a job…
One of the reasons I work with Kiva is we work hard and are constantly checking ourselves top-down, inside-out on integrity. We always try to be brutally honest with ourselves, questioning ourselves, asking: Are we behaving, are we making decisions on the ground with our goals in mind? Is what we’re doing internally what our community thinks we’re doing and what we’re projecting? That’s an endless exercise that you have to commit to. You’re never perfect; keeping the compass as an organization is a top-line objective.
Also, one of the things I really admire about Matt [Flannery], the CEO, is he is the carrier of that integrity, and from the beginning, he has never constrained Kiva by his attachment. It’s become a movement and we’re in service to it.
And yet you have to change the organization to adapt to the massive scale you’ve reached.
Scaling up is challenging. But that very thing, where you’re clear about your culture and your values, is one of the things that is easy to underestimate as to the role it plays in scaling up. Because you can’t just scale up doing the things how you used to do them.
Once you’re clear about your strategy, your goal, your objectives, your culture, your values, you can cut people loose to all run as fast as you can in the same direction. You can’t orchestrate it as tightly as when you were smaller - the only rules of the road now are the culture, the values that you’d agreed on before. They are the rules of the game.
We’ve had some shifts. We started moving upstream to make loans to small businesses in the U.S. A lot of people would say that’s not the face of poverty; you’ve abandoned your mission. Even within the organization, there’s a lot of discussion: Is that really our mission? And those are healthy tensions, and it’s important to resolve them because if you don’t, you sort of get divided.
What’s been your most difficult decision to take as a member of the Kiva board?
Two things. One, because Kiva is so public and really belongs to the community and represents so much in the brand and what we stand for, you feel an awesome sense of responsibility to be a keeper of that. So when we’ve come under criticism and scrutiny for not having lived up to that, there’s always very difficult decisions to make.
For instance, we were under such an assault to have launched in the U.S. that I think 10 percent of the money in our loan funds got withdrawn. Lots of letters about how we had betrayed our mission. That caused us a lot of soul searching: Did we make a mistake? The decision to stay in the U.S. and take an unpopular decision in the short term because we knew it stood for something important in the long term was very difficult.
The decisions about growth and impact — breadth versus scale — are always challenging decisions.
What have you learned from Kiva and especially its NGO side as you call it?
I think I probably came in thinking there’s really no difference between a tech company and the nonprofit world. And now I appreciate that there are some important differences that one has to recognize and acknowledge. The biggest one probably has been the learning around that it’s sometimes not as easy as saying growth equals impact, that there are more nuanced considerations in that, whereas had we been a pure tech company, we may have looked at it that way. That brought a very important dimension to the company, for us to say that we’ll grow less fast because we want to grow the right way in service to our mission.
Was it a benefit for Kiva to grow at a distance from the traditional foreign aid scene?
Yes. Like with most innovations, you kind of have to know just enough to be dangerous sometimes, or know what’s not possible to try it. That’s why often disruptive innovations don’t happen from within an industry.
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