Wholesaling Social Change: Philanthropy's Strategic Inflection Point

Wholesaling Social Change: Philanthropy's Strategic Inflection Point

There are times in almost every sector that forces of change come together to fundamentally disrupt the way that sector works. Former Intel chairman Andy Grove calls this a strategic inflection point, "when forces shift...from the old ways of doing business...to the new." Organizations and business practices that dominated the sector before the strategic inflection point rarely survive the change intact. Those who embrace the new realities and adapt to a new way of doing business come out stronger, while those who do not either fail, merge, or become irrelevant. Ultimately, it's the consumer who wins.

Examples of this are everywhere. Bookstores used to compete by having the best inventory at the best location until Amazon.com came along and fundamentally changed the book retailing business model. Companies like Barnes & Noble adapted and survived, while many locally owned booksellers failed to adapt and went out of business. Newspapers were much sought after investments until online classifieds and 24/7 cable news stations gained traction. Media companies like the Washington Post diversified their businesses and built competitive online Web properties, while companies such as Knight Ridder did not and have been broken up and sold to different buyers. The Baby Bells used to make money hand over fist from land lines and long distance calling until cell phones became ubiquitous. Now the six, formally dominant regional Bells have collapsed into two and are locked in a life-or-death struggle with cable companies in almost every market.

In every one of these cases, no one factor was responsible for the tsunami of change. But more often than not technology played a disproportionately large part in accelerating it.

Philanthropy's Strategic Inflection Point

The philanthropic sector is on the brink of its own strategic inflection point. Extraordinary agents of change already are impacting the sector. One such agent is money. Warren Buffett's multi-billion-dollar gift to the Bill and Melinda Gates Foundation rocked philanthropy but is only the tip of the iceberg. The sheer amount of money that will be transferred between generations over the next fifteen years will dwarf Buffett's contribution. Another such agent is people. Never before in human history have so many people had so much wealth and so many ideas about how to use it for the greater good.

As with books, newspapers and telephones, however, the greatest agent of change is technology. Technology, especially the Internet, has changed the fundamentals of the sector in a way that cannot be ignored. It has changed many aspects of the world for both donors and the recipients of their generosity. And, perhaps more importantly, it has changed the methods by which social change can happen, making it possible to effectuate change as never before.

Changing the Lives of the Donors. Technology has changed the way that many wealthy people and their children live their lives. Many are part of the "Always On" generation. They understand the power and potential of technology because they have harnessed it for twenty years (in some cases since they were children). In fact, many, including the founders and early employees of companies such as Microsoft, Cisco Systems, and eBay, have created or will inherit wealth as a direct result of technology. Living in a world of fast broadband connections, iPods, massive multiplayer role playing games (MMRPs), and social networking sites like Facebook, this new generation of philanthropists will not be content to give their money away in old "high-touch" ways.

Changing the Lives of Beneficiaries. Less documented but no less transformational is the fact that technology fundamentally has changed the way that the beneficiaries of philanthropy live their lives. Contrary to popular belief, the world, as New York Times columnist Thomas Friedman has noted, already has been "flattened" for low-income individuals. In increasing numbers, they not only have technology at home but they have a desire to use it to improve their lives. They understand that the Internet makes it harder to shut them out of the economic mainstream because of race or geography. Extensive research by the Pew Internet Research Project and my own organization, One Economy Corporation, reveals three important realities: (1) more than 60 percent of low-income people in the United States have computers in their homes; (2) low-income people with Internet access use it for practical quality-of-life purposes (e.g., looking for a job, finding affordable child care, or continuing their education) to a greater degree than people with higher incomes; and (3) their children already live in the Always On world, where they increasingly mix education, entertainment, social interaction, and civic engagement in new and innovative ways.

Changing the Methods for Effectuating Social Change. The Internet has five transformational functionalities: aggregation, dissemination, customization, collaboration, and vocalization. Together they have fundamentally changed the way many sectors do business. Amazon.com is a great example of this. It aggregates books, records, toys, and dozens of other products in one place and makes them available worldwide through its Internet-based fulfillment system. Users can customize the site so it remembers them every time they visit and stores their credit card information, preferences, and even wish lists. The site also provides its online community of users with a place to voice their opinions and collaborate with each other. When considered as a whole, the end product of all this activity is an extraordinary, virtual network that makes every community member's decision-making about a book or vendor immeasurably better.

These same functionalities have the potential to fundamentally improve the way that social change happens. In fact, it is already happening, with extraordinary results. There is no better example of the phenomenon than what Environmental Defense has achieved with its Scorecard and Action Network. The Scorecard site aggregates information about environmental problems nationwide and disseminates that information by allowing users to type in their zip code, click "go," and call up information about pollution and toxins in their own neighborhoods. Through the Web site, people can also send faxes directly (at no charge) to major polluters and government agencies (vocalization) and personalize the site to stay abreast of developments of interest to them (customization). With over 800,000 members, the Action Network site has become a gateway to online activism centers for over 170 leading environment, health, and population advocacy organizations (collaboration). The network's partners also mobilize activists by e-mail, inviting them to weigh in when needed by sending personalized messages (handcrafted by Action Network) to key policy makers locally, nationally, or around the world.

Similarly compelling applications among them CompuMentor's TechSoup, which has sold 1.7 million technology products at reduced cost to nonprofit organizations in 190 countries; YouthNoise.com, whose online community serves 700,000 young people a month; and One Economy's own self-help site, theBeehive.org, where 25,000 low-income people have built business plans, five million young people have received homework help, and $2 million in earned income tax credits have been refunded through online filing can be found throughout the sector.

What Does This Mean for Philanthropy?

Environmental Defense, Youth Noise, and others are beginning to show us that twenty-first-century philanthropy can underwrite social change on a wholesale basis in a way that twentieth-century philanthropy could not. And the common thread that unites such diverse organizations is their ability to develop, quickly and cost-effectively, programs and applications that can touch millions of people in every state and almost every region of the globe. Faced with that reality, post-strategic inflection point philanthropy needs to acknowledge that it has tools it never had before and to act accordingly. That does not mean abandoning "old" ways of giving that have worked and will continue to work for years to come. It does mean intentionally pursuing and funding new technologies and applications so as to create more impact, more quickly. The tools and desire to make the world a better place are there. The ball is in our court.

Prior to the creation of One Economy, Hecht was Senior Vice President at the Enterprise Foundation. He has also written three books: ManagingNonprofits.org(2001) with Rey Ramsey; Developing Affordable Housing: A Practical Guide for Nonprofit Organizations (2nd Edition, 1999); and Managing Affordable Housing: A Practical Guide for Building Stable Communities(1996), all published by John Wiley & Sons.