A proven tool for fighting poverty on a large scale, microfinance provides very small loans to people, mostly women, to start or expand small, self-sufficient businesses. In fact, 155 million of the world’s poorest people have received a microfinance loan—giving them the opportunity to transform their lives. But as these organizations face meteoric growth, managerial operations needed to effectively scale these institutions are suffering. Industry leaders claim that finding a solution to this “talent gap” is critical to the future of the field.

Continuum, in collaboration with a remarkable team, has just begun work on a project to solve this social challenge. The project’s goal is to create an innovative leadership development solution for middle managers, and, in essence, groom the next generation of leaders in these crucial organizations. The team includes Continuum Social Innovation Principal Anna Muoio; Peg Ross, director of the Human Capital Center at The Grameen Foundation; Lynn Pikholz, President of the microfinance development company ShoreCap Exchange; and Lyndon Rego, Director of Innovation at The Center for Creative Leadership, an international leadership education and research firm. “This is a burly problem,” says Muoio, “and we need the power of all these different disciplines and expertise—from microfinance to leadership development to organizational effectiveness and innovation—to solve it.”

Over the last decade, microfinance has experienced explosive growth, with local banks expanding anywhere from 50 to 100 percent year-over-year to serve the needs of their clients. “But because of this enormous growth,” says Pikholz, “resources are stretched, staff isn’t adequately trained, and there’s no methodology in place for managing, grooming, and attracting talent.” For example, one microfinance bank in India has hired close to 1,000 loan officers and branch managers this year alone. The branch mangers, for instance, are largely in their mid-twenties with little experience in managing hundreds of employees, significant loan portfolios, and “non-textbook” situations, such as a local government officials urging people to default on their loan repayments or the death of a loan officer in the field. To put things in context: A comparable job in a city at a traditional bank would require seven to eight years of experience. “Microfinance institutions can’t reach their mission without help,” says Rego.

During the discussion, the team opened up the conversation to guests, who included individuals from the microfinance and financial service sector as well as graduate students from Harvard, Tufts, and Boston College. They helped to imagine what the solution would look like. All agreed that a trail-blazing mentality is needed to get the job done.

Although the project is still in its infancy, Grameen’s Peg Ross has already felt that working with Continuum has been eye opening. “This company has introduced me to a whole new way of finding a solution,” says Ross. “And with the work that the team will do on this project, they will effectively train the next generation of leaders.”

Click here to read “No Footsteps to Follow: The talent gap in the development finance sector in India,” field notes from the team’s initial trip to India in the fall of 2009.

With this in mind, we tailored our presentations to give the students a feel for Continuum’s social innovation process. The morning started out with a tour of the space and its project-specific installations, led by the studio principal Alex Hennen. Then, design strategist Brian Wen led a presentation and discussion on design strategy and ethnography in emerging markets.

Below are some impressions from the students:

“I began to realize all the types of people, methods, and practices that go into social design. It is a complex system.”
Alexandra Cantle

“[I got] a chance to see more ways that design can create social impact. It also was good to see the importance of video interviews and what they can reveal.”
Stephanie Treinen

 ”Being in product design, I’ve come to the realization (or more left the state of denial) that you really need to get out there and talk to people when doing research. Not just sit and google things on a computer.”
Ryan Robinson

“[I got] a better understanding of the effectiveness of systems thinking, the process involved, and the importance of beginning with people’s values, and how to work with and understand people in a ethnographic design context.”
Julian Rood

The conversation focused primarily on the disaster in Haiti. Frontline reports from Jean and Gerald underscored the extraordinary challenges the humanitarian community faces in delivering aid to a country hobbled by a threadbare infrastructure (including a lack of basic governance) and debilitating poverty. Taking a step back, we looked at a country that has been the recipient of over $4 billion in aid over the past 20 years. Pre-earthquake, there were over 10,000 private aid organizations working in Haiti, providing basic services in every arena of life. Depending on which source you choose to believe, the estimated cost of recovery hovers in the range of $7.2 to $13 billion. The main focus now is pure “rescue:” How to deliver and distribute it. This is the horse before the cart of reconstruction.

And it all reminded me of something I heard the founder of a social enterprise working in Haiti say, post-disaster: “Rescue is important, but doesn’t lead to anything more than rescue.” That’s not to say immediate relief isn’t a must have—but what’s the role design can play in the long-term recovery (and we’re talking decades) facing the poorest country in the Western Hemisphere? That’s the big question to ask—and some of what we touched on during the panel conversation.

You can view the video of the conversation here.

Yes, we all know: Change is here. It’s taken up residence in the White House (we hope). It’s having its way with every system—financial, housing, political—to which we faithfully subscribed and that kept our world running. And now change has come to Design Observer, one of the most authoritative blogs on design. Change Observer will be the new venue for Design Observer to highlight the activity, development, best and worse cases at the burgeoning intersection where design meets social impact. It’s a way for the contributors (specifically the new additions to the team, Julie Lasky of ID Magazine and Ernest Beck, a former Wall Street Journal reporter) to focus their keen editorial insight on important efforts underway in social innovation. It’s a way to begin to affect change through increased knowledge and understanding. And it’s much needed.

The need to drive awareness around the impact design can have when applied to some of the world’s most intractable problems is one of the insights that emerged this summer during a “Design for Social Impact” workshop Continuum led with support from The Rockefeller Foundation. The goal of the workshop was to think about how we could create the “infrastructure” to increase the design industry’s systematic contribution to the social sector. (The outcomes of this workshop can be read here)  Bill Drenttel from Design Observer was a key participant in these conversations—and took the lead in thinking about how a robust site—in his terms, an “uber site”—could most effectively report on the activities, knowledge and progress of the collaborations that emerge from this sector.  The belief is: If we can increase awareness about the efficacy of these collaborations, we’ll start to see an increase in involvement.

As Maria Blair, our partner at The Rockefeller Foundation, stated to the 20 leading design professionals during the workshop:

“I came here understanding very little about the design industry. And you came here knowing very little about the world of NGOs. A road map that outlines how we get that experience, knowledge and understanding on our way to the long term vision is a very exciting path forward.”

We’re thrilled to watch the launch of Change Observer this summer, a critical first step forward on this path we hope will lead to an increased (and systematic) involvement of design firms in the social sector. We welcome the Change to the Observer.

Download the Social Impact Report here.

I have just finished a book that has provoked the most unusual vision: The Temple of Apollo. Intoxicating vapors rise from the earth’s deep chasms. The Oracle of Delphi unleashes an unbridled stream of murmurings. The holy priests wait below, open-mouthed, to reshape these cryptic invocations into enigmatic prophecies. Fire and brimstone kind of stuff.

No William Gibson book is this. No manga of ancient Greek mythology, but rather Michael Kinsley’s new book-birthed-by-blog, “Creative Capitalism, A Conversation with Bill Gates, Warren Buffett and other Economic Leaders.” So why the Delphic vision? Perhaps because this book is less a conversation (between the third richest man in the world and the richest man in the world) than a scramble by the modern day priests and priestesses of our economic system to make sense of the oracle-like proclamation by Bill Gates at the World Economic Forum in Davos in January of 2008.

It is in this 2,774 worded speech or that Gates, a self-proclaimed impatient optimist, launched his provocative, compelling and, to some, cryptic call for a world where “creative capitalism” takes its turn at addressing some of our most intractable and pressing global inequities.

From the get-go Gates stresses that technology innovation can only get us so far in tackling tough social problems. Efforts by governments, charities and the philanthropic world—even his own mighty and well-endowed foundation—can only get us so far. What’s needed is system innovation. Big, broad, burly system innovation. And the system he claims needs a substantial application of innovation is our free-market capitalist system—the system that, albeit now hobbled and in need of lifelines, served as his springboard into the rarified stratosphere of unprecedented personal wealth.

The most successful capitalist in the history of the world puts it this way:

“But to provide rapid improvement for the poor, we need a system that draws in innovators and businesses in a far better way than we do today. Such a system would have a twin mission: making profits and also improving lives for those who don’t fully benefit from market forces. To make the system sustainable, we need to use profit incentives whenever we can.”

Well, if there were profits in serving the poor, our capitalistic enterprises would have figured that out long ago. So Gates heralds the need for another market-based incentive to compel businesses to serve the poor: recognition. The thinking is as follows: recognition leads to enhanced reputation and visibility which appeals to customers (and investors) eager to reward companies doing good with their hard earned money. It also attracts the best talent, unarguably a company’s greatest asset, driven by a desire to find deeper purpose in work than serving solely at the altar of the bottomline. And as such, recognition becomes a valuable “proxy” for profit. And where profits are possible, recognition is icing on the cake.

The challenge, as Gates puts it, “is to design a system where market incentives, including profits and recognition, drive the change.” It is this new system that he calls Creative Capitalism which also provides a foundation where:

“…governments, businesses, and nonprofits work together to stretch the reach of market forces so that more people can make a profit, or gain recognition, doing work that eases the world’s inequities.”

Gates’ words seem particularly prescient in light of Obama’s inaugural address where he heralded a “new era of responsibility.” Hopefully Obama’s smooth but sharp eloquence will arm us with the fortitude to endure coming tough times. But more important, #44 stressed the necessity of joining imagination with common purpose to compel us forward:

“Now, there are some who question the scale of our ambitions — who suggest that our system cannot tolerate too many big plans. Their memories are short. For they have forgotten what this country has already done; what free men and women can achieve when imagination is joined to common purpose, and necessity to courage.”

Gates raised a similar point when he wondered just what could happen if we started to think of a system that elegantly and powerfully joined sentiment (or concern, words that undoubtedly make hard-lined economists squirm) with self-interest, the high-octane fuel of our capitalistic engine. Both men call for a higher order of thinking and different brand of partnerships to deal with our problems: a purpose driven mash-up.

Gates briefly paints several scenarios of creative capitalism in action. He cites the vehicle of tiered pricing (or differential pricing where different classes of buyers are charged different prices for the same product); to enlightened and innovative government policy that create market incentives for businesses to engage in this sector (stimulus, say, to drive pharmaceuticals to develop drugs for unsexy diseases—like for TB instead of MPB, male pattern baldness); facilitating the access of businesses in the developing world into first world markets (aspects of fair trade initiatives); and more “commercial” endeavors like the Bono sponsored Project RED (the idea of consuming our way to a better world which has nevertheless funneled over $50m from wealthy westerns wanting GAP t-shirts and Armani suits to efforts to fight serious diseases).

All this talk of hybridizing and bastardizing sends Kinsley’s stable of thinkers—from Lawrence Summers to Richard Posener to Richard Reich—into a 307 page tailspin of discourse. The majority of the blog-length “chapters” reflect on the perils and pitfalls of mix-breeding pure capitalism which, many also argue, has done more than any other system to raise the quality of living around the world. (Even Gates admits “The world is getting better,” historically speaking and before qualifying this by saying but it’s not getting better fast enough—and for everyone.) It’s the rising tide lifts all boat concept. But the group goes on to wonder why should the entire capitalist system now do what Bill is advocating rather than what he did?

Fair point; but in many ways, debating this or parsing with a fine-toothed comb every “is” “should” and “could” of his speech misses the point—and really, the opportunity for a creative conversation around creative capitalism. I was shocked that there was essentially only one entry (“Creative Capitalism Has Its First Tool” by Loretta Michaels, a cofounder of HMS Wireless) that risked imagining “What if?” What would this all look like?

It was this lone entry that focused on the current experimentation around the practical (and legally essential) design of viable corporate structures to support the effort to blend for-profit activities with social enterprise endeavors. Michaels highlights the emerging L3C  idea that would create “charity hybrids.” These low-profit, limited liability corporations would be designed to attract private investment and philanthropic capital (leveraging the now complicated-to-execute Program Related Investments) for ventures designed primarily for social benefit and then for profit concern. This would not only allow a different class of investors to participate in social enterprises (individuals, government agencies, pension and endowment investments); but it would also allow foundations to make investments in these ventures via loans, equity purchases and the such. And unlike a charity, an L3C would be free to distribute profits, after taxes, to owners and investors. This experimentation has a ways to go to smooth out the ruffles and most likely there’s not one-size-fits-all application; but L3Cs have already made it into some states laws.

There is similar activity and experimentation in the realm of B Corps  spearheaded by organizations spanning the spectrum from Method  to Monitor. B Corps, although granted no special tax status, expands the legal language so that directors of organizations can consider the welfare of stakeholders (employees, customers, community and the environment) and not just shareholders in making decisions.

And then there’s Muhammad Yunus  of Grameen Bank  fame who is proselytizing for a new form of “social business.” In his recent book, “Creating a World Without Poverty: Social Business and the Future of Capitalism,” Yunus not only envisions a world where the free market can help to solve problems of poverty, hunger and inequality; but he discusses Grameen’s powerful partnership with Danone Foods to create a social business to produce affordable and nutritious yogurt for malnourished children in Bangladesh. To Yunus, social businesses are not charities. They are businesses that have to recover their full costs while achieving their social objectives. The company can earn a profit; but the investors, after recouping their original investment, take no more. The company is cause driven not profit-driven—and financially sustainable while doing it. A discussion among Kinsley’s court deconstructing existing experimentation in the realm of “creative capitalism,” however it’s defined, would have been a lot more interesting.

In any event, marching through a commentary on each entry would weary me and most likely bore you. So I’ll refrain. But there are many provocative questions or ideas peppered throughout. To illuminate but a few:

• Michael Kremer , a professor at Harvard, (“You Can Make Profits and Save the Poor”) suggests using advance market commitments (AMCs) to allow several sponsors to commit to help finance purchases of a needed products (such as vaccines, etc) if developers agree to cap the long-run price of the product.

• Nancy Koehn,  a professor at Harvard Business School, (“Gates: The Right Place at the Right Time”) gives a historical perspective and claims that there are 5 powerful forces working on the system of global capitalism that are already pushing it along the path Gates outlines. From resources to the rise of millennials, changing corporate forms to the catalyst of transparency, she sees “young enterprises” starting to exert (or position) themselves for change in this arena.

• Esther Duflo, the professor of Poverty Alleviation and Development Economics at MIT, (“What Makes Creative Capitalism Hard?”) gives an open-eyed assessment of the challenges: mainly how the “warm glow” of recognition risks being tied to no actual benefit. But she offers a solution around aligning public recognition and social value—and stresses the need for companies to “rigorously assess” the impact of their projects and publish these so we can actually, as a system, start to learn what initiatives make for success, or for failure. She also suggests that we creatively experiment with different forms. Some we will get  right. Some we won’t. But we’ll learn and refine and redevelop: a process well understood by designers. In essence, she calls for a “social sector” R&D lab. What a great idea.

While all this might seem like ho-hum semantic square-dancing for academics and theoreticians, it’s an issue a group at Continuum has been exploring for ourselves. As a global company, we feel an increasing global responsibility. (To Milton Friedman-ites, I understand that Friedman, in his seminal 1970 essay “The Social Responsibility of Business,” argues that a corporation is an“artificial person” unable to have responsibilities in even a vague sense.) So I’ll just say the people of Continuum feel a global responsibility. And more than a few of us are haunted by the perplexing distribution of our industry’s general focus and intent—where 90% of the world’s design talent is focused on addressing the needs of the richest 10% of the world.

And galvanized by the work we did with Rockefeller Foundation  this summer and the issues we began to explore with a group of leading design professionals, we are still asking the question of how design firms can move from intermittent cases of engagement with the social sector to a more systematic approach that unleashes and leverages the power of our talents on some of the world’s most intractable problems.

Ultimately, how can we help design our own version of creative capitalism that will allow us to join our imagination to a common purpose—without designing ourselves right into bankruptcy?

If you’re at all interested in this conversation, here’s the link to Gates speech and Kinsley’s blog.

And if so provoked, apply your own creative thinking to what a creative capitalism could look like and send me a note. I’d like to know.