(Re)defining and solving a problem
By Tim
Instead of saying, “impact investing isn’t a realistic source of investment because they require a history of successful projects,” we pivoted to, “how can our organization change that to become more attractive to impact investors?”
In class, our IM860 professor highlighted an Albert Einstein quote. The quote suggested if Einstein had one hour to solve a problem, he would spend 55 minutes defining the problem and 5 minutes solving it. I do not think this quote was in the front of our minds while we were working this semester, but it turned out to accurately characterize the approach of our team.
In our project brief, our client was interested in refining a business model to attract investment for solar irrigation pumps for small farmers in Senegal. This much was clear, but many questions remained. What were investors looking for? What were the current barriers holding investors back? Why did the organization need investment for to begin with? What exactly would the investment fund?
Pandemic restrictions prevented us from meeting our clients or seeing their work in-person. As a result, collecting information to define the problem was a challenge. Every two weeks, we met with our client virtually to ask new questions, slowly revealing new information to build a shared understanding of the problem facing our client.
Slowly we built a relationship with our client and uncovered the answers to these crucial questions. Over the course of the semester, we began to understand some of the biggest issues facing our client. During the time in-between conversations with our organization, we fervently gathered research on impact investing and agriculture in Senegal. An understanding of these broader topics was foundational to our understanding of the project, but we could have never developed a useful solution without these bi-weekly conversations with our client. Each week, we came to our meeting with new ideas or new hypotheses which were often slowly debunked through the course of our discussion. It did not take long to understand that our client had already investigated many of the solutions we proposed, and that they had not worked. Through these conversations, new obstacles and new information was revealed.
Finally, as the end of our project timeline was approaching, and after many of our most promising ideas had been ruled out, rather than feeling discouraged, we developed a new approach. Instead of ruling out our ideas, we stopped asking “why not?” and started asking “what if.” Armed with the knowledge of why these solutions were not working, instead of continuing to brainstorm new approaches or new workarounds, we decided it was best to address those sticking points directly. Instead of saying, “impact investing isn’t a realistic source of investment because they require a history of successful projects,” we pivoted to, “how can our organization change that to become more attractive to impact investors?”
In the end, we were able to leverage the research we gathered on different types of investors. We took what we knew about microfinance (which provides only small amounts of investment, but doesn’t require credit) to develop a startup strategy for our client. We also connected our research on impact investors and development banks (which typical lend large amounts to more mature organizations aligned with government priorities) to develop long-term recommendations for our organization to consider once their operations are more established. Our overall recommendation was to start small, demonstrate the value of solar pumps for farmers, and then to build on successful projects to attract larger investors like impact investors and development banks to scale impact.
Our recommendations began with several models for efficient business operations along with creative strategies to signal trustworthiness in managing money. Next, we highlighted the sources of investment which were most likely to grant small amounts of money to fund a handful of demonstration projects as the organization starts up. And finally, we built upon our early recommendations to address the original problem. Armed with a solid business model and a track record of successful projects, the organization would be ready to seek relationships with larger investors to scale benefits throughout the region.