Social sector must embrace risk

For social impact organizations to scale in the same way entrepreneurial tech companies do, investors need to increase their tolerance for non-moral failure. They need to foster a culture of innovation and risk-taking. … Most importantly we have to stop pumping support into struggling ventures because we are afraid to see them fail and be prepared to back again those who have learned from their failures. Smart people are more willing to attempt disruptive change when they know their value will not be destroyed if it doesn’t pan out.

– Sir Ronald Cohen and William A. Sahlman in HBR blogs on the importance of building a tolerance for failure and risk-taking in social enterprise. Two related thoughts:

  • The corollary piece of advice is to start small – venture capital has ample homerun cushion to pay for all those strike outs and singles. Small, iterative projects that succeed or fail advance learning in the organization and promote risk-taking without betting the store.
  • Being willing to stop doing something marginal is far more difficult to do than walking away from an absolute failure. The former is an important skill to cultivate – smart people with high aspirations and a lack of tolerance for “just OK” in an area where “great” is well within reach.
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