Letter from Jacqueline Novogratz – September 2012

[object Object]
Dear Salim,
September signals the end of summer and a sense of newness, of change, and of anticipation for the coming year.  I feel those stirrings more intensely this year, perhaps more now than at any time since starting Acumen. We’ve seen tectonic shifts in the world, in the impact investing industry, and in our companies. The world is swirling with violence ensuing from a misguided video, the Eurozone crisis, hiccups in India and China, a stalled US economy, and uncivil discourse.

Everywhere people are looking to new solutions and to new leadership, but where is it? In many ways, Acumen, as it grows, increasingly reflects the world around us. Our investee companies are, in a number of cases, reaching millions, and becoming more complex as they do. Global conversations around the roles of government, the private sector, and civil society are becoming more heated. Young people are looking to build careers that meld both public and private aspirations. All of this is good news. Yet it also poses challenges as organizations evolve.

Over the past six months, Acumen consequently has spent time reflecting not only on what the world needs, but on how we should respond to best meet those needs. We have focused on strengthening our operations and have added seasoned professionals with decades of private and public sector experience. We’ve also further globalized our Board and Advisory Council to reflect our work and values.

CNBC features Acumen Fund and Dow’s CGI commitment.
Jacqueline shares a personal story about leadership in a Washington Post video.

forbes 400Melinda Gates, Diane von Furstenburg, and Jacqueline speak on a panel at the Forbes 400 Summit on Philanthropy.

Our new leaders stand on the shoulders of Acumen’s extraordinary early builders, without whom we would not be here. I couldn’t feel more honored that Brian Trelstad, our former CIO, and our former country leaders Aun Rahman and Biju Mohandas have remained actively involved with us as Investment Committee members, board members of investee companies, and strategic advisors as they pursue exciting opportunities connected to Acumen’s work. This kind of continuity – one that allows for individual growth and organizational vibrancy – is something we hope to model. Indeed, I dream that over time we will see a legion of Acumen-inspired alumni working together in real ways across the world, both inside and outside Acumen; and I hope we also can be part of building new career paths that include moving among private, nonprofit, and public sector opportunities.

I am pleased to introduce our new leaders to you, starting with our global Chief Investment Officer, Robert van Zwieten, who comes to Acumen from the Asian Development Bank in Manila, where he oversaw the bank’s private sector investment activities in Asian frontier and emerging capital markets. Sachin Rudra now leads our India team, bringing more than 15 years of investment experience, first as a line manager in rural Bihar for Unilever, then as a McKinsey consultant, and most recently, as a successful private equity investor with Navis Capital, where he served as a Director for their India office. Our Pakistan team will be led by Farrukh Khan, who brings 30 years of experience as a highly respected investor in Pakistan and as founder and CEO of BMA Capital, one of the largest investment banks in the country.

In East Africa, we are excited that Duncan Onyango, a longtime supporter of Acumen in the region, has joined as Country Director. Duncan brings real knowledge of our work and extensive local experience, most recently leading Rift Valley Railways as Group Chief Finance Officer. These professionals join Godfrey Mwindaare, who leads our West Africa office after managing a private sector portfolio of about $4 billion at the African Development Bank. It’s thrilling to be building our future together with this dynamic global team.

I’m also excited to announce that Naveed Riaz, CEO of Citigroup Africa, has joined our Global Board of Directors. Paul Polman, CEO of Unilever, and Antony Jenkins, Group Chief Executive of Barclays, are now members of our Global Advisory Council. Each brings a track record of leadership in corporate citizenship and an understanding of the role that corporations can play in our interconnected world.

Obviously, people represent the heart of change. I’ve been inspired by the growth of the Acumen Fellows program. The seventh class of Global Fellows has just arrived in New York. The East Africa Regional Fellows program has just closed the call for applications after having received over 600 entries. And we are in the midst of calling for applications across Pakistan for our new Pakistan Fellows Program, so please join us in spreading the word.  I could not be more encouraged by this next generation, who are all so willing to work toward building new systems for change. I imagine adding hundreds of leaders that span geography, race, ethnicity, religion, and class every year, all bound by a shared commitment to a world where all people have greater choice and opportunity, where all individuals have dignity.

Of course, building profitable, scalable companies that serve the poor remains at the heart of all we do. It is the reason we invest heavily in people and ideas as well.

Acumen historically hasn’t invested in mobile technology as a sector – we felt others were more equipped to do so. However, a host of new applications building on the distributive power of mobile phones are providing low-income individuals with powerful tools for contributing to and benefiting from the global marketplace. Consequently, we are beginning to invest in these opportunities in a more deliberate way.

Sproxil, founded by Nigerian entrepreneur Ashifi Gogo, enables individuals to check whether pharmaceutical products are counterfeit or legitimate in markets like Nigeria, where up to 70 percent of all drugs are counterfeit or substandard. Using a scratch-off label on medicines, customers text numbers to a call center and immediately receive a reply confirming whether or not the drug is counterfeit. Already, Sproxil has enabled millions to verify the quality of essential products.

Virtual City has developed a mobile application that improves transparency and productivity along the agricultural supply chain in East Africa. Founded by Kenyan entrepreneur John Waibochi, this company promises to be a game-changer for smallholder farmers, co-operatives, and corporations interested in sustainable agriculture. Already, the company has reached more than 350,000 smallholder tea producers, increasing their incomes by an average of 9-13 percent in the first harvest.
So how does it work? To understand its significance, you have to imagine how things used to work. Prior to Virtual City, farmers would haul their tea to input centers. Co-op members would weigh the tea, typically under-counting by 10-20 percent. This widespread practice did little for trust. The tea would then be trucked to large storage facilities and another portion of tea would be lost along the way. Ultimately, up to 40% of all agricultural produce in Africa is lost due to a combination of factors, including poor storage, infrastructure, and corruption.

Virtual City is changing this with a simple technology. Farmers now weigh their tea leaves with a digital scale. The co-op member inputs the weight along with the farmer’s ID into a PDA, which immediately transmits the information to the trucking station so they know how much to expect upon the truck’s arrival. The member then hands the farmer a receipt for her tea, which she can use to verify her earnings when she collects them. John dreams that soon the farmers will hold virtual bank accounts that include receivables owed to the farmers for their tea, so that they could pay, for instance, school fees based on those receivables rather than have to borrow at usurious rates from the local moneylender.

The combination of transparency and traceability (connecting tea to where it is grown) has enabled the British retailer Marks & Spencer to complete a pilot project called “From Bush to Cup,” whereby a Kenyan co-op grows, processes, and even packages tea for retail sales in the UK. All of this has meant fewer losses at the time of weighing and in transport. Already, more than 350,000 farmers have seen an average 11 percent increase in their incomes. The advances in technology across East Africa are thrilling, so keep watching this space.

As for patient capital investing, we continue to learn on all levels. One focus in this next year will be better calibration of trade-offs and how we measure success. In the meantime, we welcome our new leaders, board members, and advisors with the knowledge that they will help push us to new levels in the fight to change the way the world tackles poverty.

Thank you for being part of the journey,
JN first name signature
Jacqueline Novogratz


The World’s Most Innovative Companies 2012


By Jeff Dyer & Hal Gregersen

Why are some companies able to create and sustain a high innovation premium while others don’t?

The answer is not complicated: People, process, and philosophies (what we call the 3Ps). They differentiate the best in class from the next in class when it comes to keeping innovation alive and delivering an innovation premium year after year.
Hal GregersenOn the people front, the behaviour of leaders matters—big time. In our initial study on disruptive innovators published with Clayton Christensen in The Innovator’s DNA, we found five “discovery skills” that distinguished innovators from non-innovators. Innovators ask provocative questions that challenge the status quo. They observe the world like anthropologists to detect new ways of doing things.  They network with people who don’t look or think like them to gain radically different perspectives. They experiment to relentlessly test new ideas and try out new experiences. Finally, these behaviours trigger new associations which allow them to connect the unconnected, thereby producing disruptive ideas.



Click here to view complete list.

As part of our research we developed an assessment to determine how much individuals engage these skills. We found that top management teams’ innovation skills make a serious difference. In fact, leaders of high innovation premium companies scored at the 88th percentile on our assessment of the five skills of disruptive innovators. By comparison, CEOs of average companies scored at only the 62nd percentile. Put differently, innovative leaders spent approximately 31 percent of their time actively engaged in innovation-centered activities compared to only 15 percent by leaders of less innovative companies.  Doubling the time a senior leader personally invests in getting new ideas usually delivers significant returns.

Lessons From Leaders
For example, Fabrizio Freda, CEO of Estée Lauder (# 23 this year; #44 last year) excels at challenging the status quo by “playing the outsider”. He learned this lesson early in his career, as he moved from Procter & Gamble to Gucci and back to P&G again.

Fabrizio Freda“The experience outside [P&G] gave me a lot more authority in challenging the status quo,” says Freda, “I stayed the challenger forever.”*  The trilingual (Italian, French, English) executive has lived throughout Italy — Naples, Rome and Florence — and in Germany, Switzerland and Belgium.  During his time at Gucci, Freda oversaw international marketing and strategic planning. While at P&G, he worked in many divisions including cough and cold, laundry, health and beauty, and most recently, as president of global snacks. Freda is the quintessential observer—and as he observes he both watches and listens. After arriving at Estée Lauder, he spent six months on a “listening tour”, zigzagging across Lauder’s worldwide operations in 140 countries. “I strongly believe in the power of listening,” says Freda. Listening, he says, helps him connect the dots. “The way my thinking and creativity goes is listening, connecting and creating.”

S.D. Shibulal, co-founder and CEO of Infosys (#19 this year; #15 last) is both observer and experimenter. In his 30 years at Infosys, Shibulal says, “There is nothing that I have not done.”  He was the first sales person, has done account management, launched its internet consulting practice, is a network expert, helped design and launch its first ecommerce application, and has been the head of both delivery and sales. To get a new perspective, Shibulal took a five-year sabbatical to work for another firm, Sun Microsystems.  He’s also known as an experimenter and “gadget freak”. Shibulal has always been fascinated with taking things apart and putting them back together.  When he buys the latest device, he never uses it as it is.  He examines it, takes it apart and refits it to his needs, turning fad into art. Before PDAs were popular, he had assembled his own version with different parts from a RadioShack store. That’s why at Infosys, where geeks are a dime a dozen, he is revered as a “gizmo guru”.

The Process of Innovation
We’ve found that successful leaders not only personally understand how innovation happens but they try to imprint their behaviours as processes within their organisation.
Jeff BezosJeff Bezos (Amazon, #3) looks to surround himself with people at Amazon who are inventive. He asks all job candidates: “Tell me about something that you have invented. Their invention could be on a small scale – say, a new product feature or a process that improves the customer experience, or even a new way to load the dishwasher. But I want to know that they will try new things.”  When the CEO asks all job candidates whether they’ve ever invented anything, it sends a powerful signal that invention is expected, and valued. Bezos is also a great experimenter (with multiple patents to his name) and claims that, “I encourage our employees to go down blind alleys and experiment. In fact, we have a group called Web Lab that is charged with constantly experimenting with the user interface on the website to figure out improvements for the customer experience.”  The point is that leaders like Benioff [of salesforce.com] and Bezos don’t just do it themselves, they think about replicating themselves and their behaviours throughout their organisations.
In contrast, we’ve seen many innovators who don’t seem to care about coaching or building innovation skills in others. They are good at creative problem solving so why delegate it to others who aren’t as good at it? This can be a huge barrier to building an organisation with true innovation capability. So having innovative leaders is necessary but not sufficient for sustaining an innovation premium.
Apple’s performance under Steve Jobs, versus other leaders, powerfully illustrates the importance of innovative leadership. From 1980-1985 during Job’s initial tenure at Apple, the company’s innovation premium averaged 37 percent.  Without Jobs, Apple’s premium dropped far below zero (an “Innovation Discount”) from 1985-1998. But with Job’s back at the helm Apple’s innovation premium eventually jumped to 50 percent. Job’s impact is undeniable. But what will happen now? Did Jobs sufficiently build innovation capability throughout Apple? Does Apple have sufficient innovation skills within the top management team and processes that encourage and support folks as they try to “think different” like Steve Jobs?
What we do know is that if the leaders of a company don’t “get” innovation, the organisation doesn’t stand a chance. The bottom line is that leaders of innovative companies consciously set the example by modeling innovation behaviours—and imprinting those behaviours within their organisation as processes. Their personal actions help to make innovation matter to others.
This article was originally published by Forbes. To read the full article go here.