We often talk about blending different types of thinking in our approach to social problem solving. Much focus in the social innovation world has been placed on using co-design methods as an effective mechanism for ideation and prototyping new social solutions. However, we know too well that good ideas often fail because of poor foresight.
More recently, the global social innovation community has turned its attention to questions around growth and scale. Once we have methods to generate ideas and prototype them, how might we best approach sustainable growth and eventual scale? The themes of this year’s SIX Summer School are demonstrative of this kind of thinking.
At TACSI, we’re exploring concepts around strategy, business models and the financial aspects of what we do. Currently, I am working on the financial model for Family by Family.
One of the important things that we can do for a project is to build a financial model – a representation of the business model from a cost point of view. The idea is to map the program in its current form to understand the actual cost of running it. We then create an extension of that model to understand the scalability of the model, and then explore important metrics to make key decisions in how we run the program and look at scale questions. We can call this the inside-out perspective.
The other perspective we must consider is that of the market. In this case, the family support, early intervention and intensive placement support programs of child protection and family services within which Family by Family fits. Understanding the nature of the market, current programs, the needs of the market, and cost-benefit analysis in terms of the value for money for any program – among other things. We can call this the outside-in perspective.
In the technology start up world, we would call this the product-market fit. The key is to find the market where the value proposition of the product/service works. The same has to be true from a financial perspective. That is where a financial model is quite helpful.
While building the financial model, it is important to keep in mind both thestage of the program as well as it’s practice. Stage is about where the program is along the development lifecycle. Understanding practice is quite critical in making the right assumptions and testing the scalability of the program.
How are we going about building the financial model for Family by Family? I am working with Carolyn Curtis, the Director of Family by Family and Melissa Heilmann, our Financial Administrator.
Our first step has been to map out the current costs of running the program. In our case, it is the Marion site, the Playford site and what we call the Hub. This is created using the current budget and actual costs incurred in the program. While building the model, we will be focussing on some important metrics that will guide us through the process in terms of practice and in terms of costs of the program that will be valued by the market.
The metrics that will make the biggest difference are the number of sharing families per coach, number of seeking families for those sharing families and the cost per family. One variation of the cost per family is the cost per child. These three metrics will be the biggest determinants in terms of practice and cost.
One of the first outcomes of this is that the cost per family is quite high right now in our view. This was evident from the start for two reason – stage and scale.
The development cycle and the prototyping process means that the cost per family will go down in the future however, the other important question is scale. How does scale make a difference?
The second step has been to look at scalability. Here, the key question is: how many coaches can we add without increasing the size and cost of running the hub? We can scale in two ways. One, by adding another site and two, by adding more coaches in the current sites. The second option seems the simpler one. We created the first scale model by adding another coach to our Playford site. The demand is higher in Playford and we already have a waiting list. It is evident then that a second coach there will work from a practice point of view. From the financial model point of view, the cost per family decreases by 25% . That in our view is quite important and supports that hypothesis that scale will reduce the cost.
The scale question that still remains is how large can we grow whilst keeping the scale economics working. One thing we know from experience is that the benefits of scale will only work to a limit and then it tapers down and kicks in again at a much larger scale. For now, it looks like a Operations Manager with three sites with two coaches per site i.e. in total 6 family coaches is a good size scale that works well. The hub will grow a bit but not too much. The cost per family remains the same.
What is not fully tested are the various business models that can work for us? Should Family by Family manage all the sites? Is there an option of licensing the program with local NGOs in various states managing sites with support, learning and development from the hub? These are the kinds of business model questions that we are tackling.
To wrap this up, we need to complete the process by looking at it from theoutside-in perspective. What is the family support and child protection market like? What are the current programs? What is the cost of children in state care? What are the costs of various programs in Australia? What is the cost per child or per family that is currently being spent on? Answers to these questions will help us to understand and determine the assumptions that we have come out with from the inside-out perspective.
In all of this lies a basic assumption that there is value in the work that we are doing. That Family by Family is making a difference to the families and children. The evaluation due to be launched at our 1st birthday in October will help us answer these questions more objectively.Tags: business, co-design, Family by Family, investment, scale, TACSI