The Fatal Flaw of Donor-Driven Development

I’ve worked in nonprofits, government agencies, and companies for five years, all with the goal of improving the opportunities for people like those I met in China. While I understand there are people with far more experience, I continually run into one fatal flaw: those organizations were not dependent on the people they were serving.

Nonprofits are funded by U.S. donors. Convincing those donors that they are successfully implementing change does not require input from the people they’re trying to help. This is why ineffective and redundant nonprofits can exist for years without reform. It doesn’t matter if they are successful, it matters if they can convince their donors they are. Government agencies are dependent on the U.S. Congress for funding, and therefore the U.S. citizens. This reliance is not necessarily a problem, but when that agency’s influence is abroad, then the aid recipients are once again not part of the feedback loop. The agency is not dependent on the people it’s trying to help.

In contrast, businesses have a fantastic natural feedback loop. If people like their product, they show that value by paying for it. If the company makes a product the consumer doesn’t like, they go out of business (ideally, of course). Yet few companies create products for the aid recipients mentioned above. Most companies see this market as too poor to make a reasonable profit.

In some cases, such as active war zones, they’re right but in most cases their doubt reflects their inexperience in these emerging markets. As an example, today nearly 70% of people in Tijuana have a smartphone. In many target markets that number is more like 95%. This misconception isn’t their fault. The “developing world” has truly transformed over the last thirty years. There are far fewer people in extreme poverty, with some estimates at 74% and others at 58% reduction. There are more democracies and free markets than ever before. In short, the market for products that help people in developing countries exists nearly everywhere. We just need to build them. Using this business model sustains and expands  social impact and, most importantly, allows beneficiaries to say no. The model doesn’t work for all situations -- but it can work for far more than it currently does.

I’m very proud to say that our team is building one of those markets. Our incentives are aligned with our beneficiaries and, when successful, its social impact can spread to enormous markets all over the world such as India, China, Vietnam, and many more. In every single meeting, our entire focus is on what value we’re bringing to our users. We are forced to create value for our users because if employees don’t use our site, we don’t have a business. Not all nonprofits succumb to the incentives I’ve outlined above, and many do phenomenal work to improve lives, but few use this principle as the cornerstone of every decision. We are excited to start changing this paradigm by launching Vize in May, and I hope you will join us! We’ll continually update this blog with our progress and further thoughts and reflections on our work.

- Bryce Watson