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Nonprofits

When Collaboration Doesn’t Make Sense

When should organizations build new capabilities in-house, rather than work with a partner?

Collaboration: It’s a buzzword. Some are even calling it “the new competition.” Nonprofits and social enterprises often see collaboration as synonymous with more funding, visibility, and social impact. But collaboration usually comes at the expense of building new capabilities in-house. When partnering with other organizations, it’s important to be selective and strategic; partnerships can incur high transaction costs, and maintaining relationships takes work. Given the many demands on organizations, partnerships shouldn’t always be at the top of the list.

Some of the most successful organizations and companies in the world have grown without partnerships. Instead, they’ve built their own services holistically around their customers.

In the private sector, a crucial element of Apple’s success is the extent to which it controls all aspects of its business. Apple designs both its hardware and software. It sells Apple products through its own network of retail stores. This level of control allows the company to create a seamless user experience, standardize marketing and presentation, and ensure quality production.

The Apple of the social sector is BRAC, which works to improve the lives of the poor in Bangladesh and throughout Asia through socially minded, vertical integration. BRAC started as a microfinance fund, but quickly realized that it needed a more holistic approach to raise Bangladeshi villagers out of poverty. One of the biggest challenges in development, according to BRAC, is that solving one problem leads to another.

In 1972, the organization made a strategic decision: It would address all its clients’ needs comprehensively, fixing each new problem in succession. Instead of layering its products and services on top of those offered by other organizations, BRAC developed its own all-inclusive set of programs. Today, the “What We Do” portion of BRAC’s website reads like a universal list of assistance programs—far surpassing the breadth of offerings from Grameen, the Gates Foundation, the United Way, or even the US federal government.

Given that BRAC was established in newly sovereign Bangladesh in the 1970s, it couldn’t rely on other organizations to meet the needs of its clients. This holistic approach made sense in its early days. The lack of infrastructure in a developing economy meant that it didn’t have many options for quality partners. But for the last 40 years, it has kept this focused strategy, even as the organization and Bangladesh have evolved.

The Economist compares BRAC to Samsung, which is known in Korea as a chaebol, or “conglomerate.” Samsung started off manufacturing wool in the 1950s but quickly found that “to expand, it had to make its own textile machinery; then, to export, it built its own ships; and so on.” BRAC is a social development chaebol. To expand, BRAC used its original microfinance groups as a social platform to deliver scaled-up services in health, education, business development, and livelihood support.

BRAC is now the largest nonprofit in the world when you take into account the number of people it serves and the number of people it employs. Arriving in Dhaka, the capital of Bangladesh, the first things you notice are the names on the skyscrapers: not HSBC or Barclays, but BRAC, Grameen, and ASA—titans of the social enterprise movement. By starting with grassroots development and scaling itself into a conglomerate, BRAC has singlehandedly transformed a developing nation. The Economist reports that BRAC now “runs dairies, a packaging business, a hybrid-seed producer, textile plants, and its own shops—as well as schools for dropouts, clinics, and sanitation plants.”

At the Capital Good Fund, we’ve had several offers for collaboration over the past few years. Some partnerships have blossomed, but with others, we’ve realized that perhaps we would be better off creating the services ourselves. If we are interested in maximizing social outcomes, we need to provide more and more of our clients’ needs in-house—for example, our own free tax preparation, one-on-one financial coaching, small loans, and soon, a health component.

The downside of not collaborating means that organizations such as BRAC quickly become colossal bureaucracies. The BRAC blog recently wrote, “To work within a process-driven organization like BRAC is to swim in a sea of acronyms that are largely meaningless to outsiders. But is such a beast necessarily ugly? Not if it also builds in a capacity for innovation and quick response—that is, pilot, perfect, scale up. When demand is spotted, the organization … moves.” This sounds remarkably similar to the Modus Operandi of Apple, a company renowned for its innovation and high internal standards. As Steve Jobs said, “Be a yardstick of quality. Some people aren’t used to an environment where excellence is expected.” But if you and your organization are a yardstick of quality, we bet you can accomplish a lot, with or without collaboration.

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COMMENTS

  • BY Jeff Mowatt

    ON May 14, 2013 03:46 AM

    I thnk the case fails when we consider creating value in supply chains. As a social business, that is one distributing no dividends and using surplus for a primary social objective, we operate as a software developer.

    There’s a case to be made in most business for keeping software development in house, where direct employees have a greater understanding of the rganisational needs.

    There’s also a case for building a social economy. We have for example a Bangladesh based software developer with whom we’ve struck a distributor agreement for their medical records products. Though we haven;t yet made a sale, it’s a matter of helping each other flourish and grow, which overcomes geogtaphical and political boundaries.

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