What is the Impact Chain?

Let’s start by drawing a distinction between Output (what you produce) and Outcome (the societal benefit that you create). You need to define and measure both accurately. 

Consider an education venture whose goal is to help high school children from low-income neighbourhoods improve their maths grades. The venture’s strategy might be to run extra classes outside school staffed by volunteer maths teachers. In this case, the venture’s output is the number of classes that they run, the number of youth from low-income backgrounds enrolled in those classes, and their attendance rates. These are metrics that the venture can easily measure. 

However, the venture also needs to measure the outcome of those classes. Did they achieve their goal of helping students improve their grades? The venture therefore needs to measure the improvement in maths levels between when the students started studying with them and when they finished. This is the actual benefit to society created by the venture. 

We can also talk about the long-term impact of the venture. Impact is harder to measure than output or outcome. It is the diffuse, long-term set of positive consequences that result from the intervention.  

There are three concepts that you need to be aware of when stating the impact of your venture’s work:  

  • Deadweight: any changes that would have happened whether or not your venture had done anything. 
  • Alternative attribution: figuring out how much of the change was caused by the work of others (other organisations, the government, individuals etc.) and subtracting this from the total that your venture can “claim”.
  • Drop-off: calculating how much the effect of your venture’s work will decrease over time.
 

To be able to convince social investors of the effectiveness of your venture, you need to be able to:

 

  • Measure the precise outputs that you will deliver. 
  • Measure the outcomes that will be achieved by your output. 
  • Describe the long term impact that your outcomes will facilitate. 
  • If possible, partner with a research institution to measure the impact. 

Case Study

Venture 1: SolaRise

Output:

  • Number of Solar Kits Sold.

Outcomes: 

  • % Reduction in household use of kerosene.
  • % improvement in average household income within 1 year following installation of solar kit.

Impact:

  • Improved education for children in off-grid households
  • Improved health of off-grid villagers
  • Improvement in rural off-grid household income

 

Venture: Education Venture

Output: 

  • Number of classes delivered.
  • Number of students taught.

Outcomes:

  • % improvement in maths grades for low income students.

Impact:

  • Improved job prospects and lifetime earning potential.  

Exercise

Create a table and in each column write down the relevant input, output, outcome, and long-term impact for your venture. For example, for our solar venture, it might look as follows: 

Input (Cost): 

  • $100 per solar kit.
  • Number of hours of staff time

Output

  • Number of Solar Kits sold

Outcome

  • Amount of kerosene saved per customer.

  • Cost of kerosene saved per customer annually.

  • % increase in average household income 1 year later after installing solar kit.

Impact

  • Reduction in disease from no longer breathing in kerosene fumes.

  • Improved household incomes.

  • Improved education outcomes as children are able to study in better lighting conditions in the evening at home.

  • Saving in time from no longer having to collect kerosene from local stores.

  • Improvement in quality of life from having new products such as solar fans, and mobile phones that can now be charged at home or without battery.

Tips

We recommend that you choose your impact metrics carefully, and with the following characteristics in mind. Impact metrics should be: 

  • Few: don’t try to measure more than about 3-5 items. Even just 2-3 are fine in most instances. 
  • Simple: pick metrics that are easy to understand and report, even if they do not necessarily capture the full picture. If you feel like they don’t capture the full picture, make sure you include this in the narrative you provide anytime you write up your impact measurement (e.g. in your business plan, in your annual reporting).  

 

Easy to measure: pick metrics that you can measure relatively easily, without having to undertake a great deal of extra work or going out of your way to do so. Ideally you should be able to record data as you go along, in the ordinary course of business.  

  • Objective: pick metrics that can be independently checked by others, using data which is unambiguous. 
  • Useful: don’t measure items simply because they are easy to measure. Choose items that genuinely help you refine and improve your delivery strategy. 

 

Appropriate to the stage of your business: Impact measurement can be incredibly resource intensive. Earlier stage ventures should keep their measurement resource light, but still rigorous enough to provide a compelling case for the impact your work is having. While sometimes it will be possible and useful to get an independent assessment, this isn’t always a good use of your resources. However, as you become more sophisticated, investors might expect more sophisticated data, maybe independently verified.

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