December 16, 2021
TPL Insights: Building Peak-Performance Cultures #98 – Making a Big Digital Pivot While Staying True to Your Original Mission
With paraphrased content from Michael Schlein’s HBR Article December 14, 2021
A company’s digital evolution can result in startling changes. Shopify, for instance, started out as an online store for snowboard equipment and is now an e-commerce platform worth billions. For mission-driven organizations, a digital pivot can offer a powerful opportunity to maximize impact. But bold moves can also cause mission drift: diluting or distorting an organization’s core work to create positive change in the world.
This is something Michael Schlein, President & CEO of Accion, grappled with through his own digital journey. Today, Accion is a leader in harnessing fintech for inclusion. As a global nonprofit, they find, invest in, and support disruptive and innovative early-stage companies, all working to address the financial needs of 3 billion people for whom the financial system fails. Michael’s company is leveraging the power of technology to dramatically reduce costs, create new touchpoints, and reach people they’ve never been able to reach before.
Only a dozen years ago, Accion was a very different organization. Since the early 1970s, Accion had pioneered the commercial model of microfinance, harnessing the power of the capital markets to build some of the most successful microfinance institutions throughout Latin America. Microfinance institutions aspired to fill the enormous gaps in the banking system, and the industry has grown to reach hundreds of millions of low-income people globally. But as the economy moved online, they had to ask themselves whether this was the best way to fulfill their mission. Here’s how they did it:
A Legacy of Change
A high-performance mindset and culture of experimentation and evolution can lay the foundation for a transformational pivot. By pointing to the times Accion had taken big risks to stay on the forefront of industry shifts, they solidified their culture and affirmed that change was very much integral to their identity.
Founded in 1961, Accion began as a humanitarian NGO focused on community development in Latin America, relying on a model like the Peace Corps (which began the same year). Years later, Accion staff started making small loans to individuals and small businesses, with encouraging results. Accion went on to build a network of NGOs focused on microcredit in Latin America. This network relied on branches, agents, and in-person transactions to provide small loans, often as little as USD $100, to micro and small business owners historically overlooked or ignored by traditional banks.
Taking on Digital Transformation
When Michael became CEO of Accion in 2009, he made it a priority to expand its focus on innovation and find new ways to accelerate their work. At the time, their impact investing efforts were broken into two categories: microfinance and “other,” which was a test-and-learn avenue to explore alternative business models and companies that were not regulated lenders.
Over time, “other” became fintech. They expanded their teams that initially put fintech on Accion’s radar. Just six years after launch, their seed-stage fintech venture initiative, Accion Venture Lab, had successfully invested in more than 40 seed-stage fintech companies around the world, and offered coaching and strategic support to these companies. They also partnered with Quona Capital, an independent investment firm co-founded by former Accion employees, to create the world’s first global fintech fund for the underserved, with a focus on growth-stage companies. The fund was significantly oversubscribed, strengthening its goal to accelerate more proven revenue models with success in reaching underserved clients.
In 2018, after several years of these highly successful forays into fintech, they faced a crossroads: proceed deeper into fintech, or invest in the digital transformation of legacy microfinance institutions. The fintech route would involve two proposed funds, backed by major investments by Accion, to energize fintech companies leveraging technologies like AI, satellite imaging, data analytics, and mobile platforms to revolutionize financial services for the underserved. It would allow them to find and grow promising new products, platforms, and business models that could quickly scale, but would also cement a major shift in Accion’s institutional identity.
Some staff and board members were concerned that going deeper into fintech could cause mission drift. Many microfinance institutions started as NGOs with clear social missions, which enabled them to develop a strong system of human touchpoints that low-income people need to learn about and apply financial tools. These concerns raised doubts around fintech’s efficacy and potential impact on their identity as an organization. But their culture and pioneering history enabled them to find answers that illuminated a path forward and allowed them to evolve naturally. They embraced fintech for inclusion and the creation of the new fintech funds — and they also committed to launch new programs to modernize and upgrade legacy financial institutions.
Their approach was quickly validated by external responses — and by unprecedented shifts they couldn’t begin to anticipate. Their new efforts focused on inclusive fintech and modernizing financial institutions were met with significant demand, allowing them to broaden our reach and deepen their impact. They exported the most powerful insights in digital innovation across their internal and external networks of microfinance banks, fintech startups, investors, funders, and policymakers to build inclusive financial ecosystems for those who’ve been left out.
The Parts of a Pivot
This wasn’t an easy process. There’s always going to be a strong case for sticking with an approach that has proven successful. A few factors allowed Accion to make this pivot successfully.
Foster a High-Performance Mindset and Culture of Innovation
Accion’s transformational embrace of fintech wouldn’t have been possible without a culture that gave them permission to experiment — and potentially fail. This culture is built from the top down and bottom up: by creating the time and space for every employee to try new things, and by the board ensuring their CEO has permission and support they need to take risks.
Leaders who feel they lack this cultural component can weave together previous risks, experiments, and stories of success to create a narrative that complements your mission and opens an exciting path forward. For Accion, this meant tapping into the innovative spirit that drove their initial transformation from a humanitarian NGO into a pioneer in inclusive finance and impact investing. It also meant acknowledging the success of fintech disruptors, including those they’d already engaged with and supported through their initial forays in investing in fintech for inclusion.
Build a Deep Understanding of the Opportunities and Risks Brought by Digital Disruptions
By following the successes and failures of digital innovators in your field, you can apply lessons to your mission and take a test-and-learn approach to harnessing digital innovation. At Accion, they paid attention to game-changing moments like the explosion of M-Pesa in Kenya, which undeniably demonstrated the power of digital financial tools to expand access to financial services and improve the lives of poor clients.
At the same time, they paid attention to valid criticism, including increased threats to consumers’ interests, rights, and privacy. They established a thorough due-diligence process to ensure their investees were committed to inclusion and clients’ best interests, and through portfolio engagement, they gave companies the support and advice they needed to focus on meeting their clients’ needs.
Remember that Difficult Choices Often Don’t Require a Zero-Sum Approach
Leaders can smoothly transition into new strategies while slowly transitioning out of older ones — or while adapting legacy strategies to better harmonize with newer goals. While establishing their new fintech fund in 2018 represented a dramatic shift for their overall strategy, it didn’t require weakening their relationship with microfinance institutions or abandoning efforts to digitally transform them to succeed in the modern economy. Indeed, Accion is actively engaged in the digital transformation of microfinance institutions around the world, as well as the millions of small businesses that rely on them for financial services. Leaders should ask if a strategic pivot is a truly binary choice or whether there is more value in a multi-pronged approach. This can help organizations foster the next generation of innovation while accommodating the clients and other stakeholders benefitting from the prevailing strategy.
Organizations of every kind and in every place will continue to work to understand where they belong in a constantly evolving, digital-first landscape. At Accion, they are focused on ensuring that the latest digital innovations can empower the world’s most vulnerable people to adapt, rebuild, and thrive. And they are now able to anticipate and address the increasing speed of change that is happening in their sector.
Michael Schlein wrote this article in hopes that his experience navigating a difficult strategic shift can inform similar organizations grappling with how to change in ways that make sense for their mission and their clients, who are confronting unprecedented challenges of their own. There a several important lessons embedded herein for leaders who aspire to a digital transformation. Give us a call and let’s discuss.
Consultants in Retained Search & Leadership Advisory