“I’m sorry to say it, but impact unicorns are pure figments of the imagination,” says Olivier Kayser.
And unfortunately, he knows what he’s talking about.
In 40 years of working with impact, Olivier Kayser hasn’t come across a single one of those coveted unicorns.
When he runs workshops for aspiring social entrepreneurs, he typically sees people who are blindly in love with their own solutions.
But creating an impact unicorn requires something very different.
It’s no small feat to build a startup that not only scales quickly and reaches a valuation of at least a billion dollars—but also delivers significant social impact.
To reach that goal, you need to be deeply engaged in investigating a problem affecting large groups of people, understanding it thoroughly, and developing a holistic solution.
Kayser sees too little of that. And in his view, that’s the main reason why impact unicorns are mythical creatures that roam the worlds of dreams and hopes.
“To create an impact unicorn, you have to solve 100% of your customers’ problems—all the time,” says Olivier Kayser.
“The world needs impact unicorns. But today, they are more wishful thinking than reality.”
That’s why he’s written the report Designing Impact Business Unicorns.
Kayser’s legacy for the future
This is no ordinary report. And it’s not from just anyone.
Olivier Kayser has been a senior partner at McKinsey and vice president of Ashoka, the world’s largest and most influential organization for social entrepreneurship. For the past 17 years, he has run his own consultancy, Hystra.
Now 68 years old, Kayser has distilled a lifetime of knowledge and experience into this report.
“I thought this would be my legacy. I’m a fairly structured thinker, so I imagined it would take two, maybe three weeks to write,” says Olivier Kayser.
“And then, when you start putting things on paper, you realize just how confused and contradictory you actually are.”
The report ended up taking three years to complete.
A checklist for entrepreneurs and investors
Olivier Kayser’s life’s work is a titanic bouillon cube. Not in volume, but in the density of knowledge packed into its modest 32 pages.
The report is designed as a manual for those who want to build an impact unicorn. It presents a holistic model with six core components, each a prerequisite for success, along with two additional elements that strengthen the business model.
It’s simply a poor business decision not to solve your customers’ problems 100 percent—all the time.
Olivier Kayser, Founder, HYSTRA
It’s not to be seen as an IKEA assembly manual, Kayser emphasizes, but rather as a checklist for social entrepreneurs and impact investors who can draw solid inspiration from each individual component.
And it’s told through a collection of case studies that illustrate how specific business models create exceptional impact in the real world.
“I’ve always thought bottom-up. I need insights to come to me through concrete examples. And I realized I always refer to the same cases,” says Olivier Kayser.
“So telling through cases became a way to organize my thought process and bring it to life—in an attempt to make it useful for others.”
Less than 100 percent isn’t good enough
There’s one number ambitious social entrepreneurs need to keep their eyes on, Kayser stresses: 100 percent.
Anything less is inadequate.
Or as Hystra puts it:
“You must deliver 100% of the necessary value to 100% of your customers 100% of the time.”
Kayser illustrates this with one of the many examples featured in the report.
A company delivering water pumps to smallholder farmers in Africa had customer satisfaction ratings of 85% one year after installation. Their revenue had tripled, and families could now afford to send their children to school.
“So I said, ‘Well then, those pumps must be flying off the shelves’,” says Olivier Kayser.
But no. Sales were actually so bad that the company had put its salespeople on fixed salaries instead of commissions and was now considering a costly ad campaign.
The problem was the remaining 15 percent. Half of them should never have been customers in the first place—the water table on their land was too low for the pumps to reach. The other half experienced issues that rendered the pumps useless after a short time.
“So every time they sold 100 pumps, 15 customers lost years of savings on a product they couldn’t use. These angry customers spread bad word of mouth very quickly,” Kayser explains.
“It could have been solved from the beginning if the company had sent out a salesperson who not only sold the pump but also installed it and ensured it worked—and who had checked in advance where the water table was in the specific area.”
In other words: 100 percent!
“It’s simply a poor business decision not to solve your customers’ problems 100 percent—all the time,” says Kayser.
You’re here to solve a problem
Kayser acknowledges that insisting on 100% customer satisfaction may seem like overkill. But his point is that too many are content with 85%. And that won’t cut it—at least not if you want to create a unicorn.
He illustrates this with Nespresso.
“If you promise in your ad that every cup of coffee will be perfect, you can’t just sell coffee. You have to provide an espresso machine too,” he says.
“You need to understand that you’re not here to sell a product. You’re here to solve a problem—whether it’s coffee or poor housing. That’s why you need to expand the scope of what you deliver.”
For Nestlé, that meant they had to start designing, producing, and selling espresso machines.
“You can’t say you’re going to save the world — provided you can do it by selling items in pouches that sit on a supermarket shelf. If you limit your business model to that, you’re not going to save the world,” says Kayser.
When a utility company became a bank
To solve its customers’ problems 100 percent, Nestlé had to learn to manufacture and sell coffee machines.
Something similar is true for several of the impact businesses highlighted in Hystra’s report as examples of high-performing business models.
Take the Colombian electricity company Codensa.
They wanted to sell more electricity but realized their low-income customers couldn’t afford to buy electric appliances—simply because the only available financing came from predatory lenders.
Codensa’s solution was a loan program offering low-interest loans to purchase fridges, air conditioners, and similar goods.
Impact entrepreneurs are remarkably unaware of what’s happening in their own sector in other places.
Olivier Kayser, Founder, HYSTRA
The solution proved extremely effective. Since Codensa already sent out electricity bills, they had the infrastructure to run a lending operation. And because borrowers were already customers, Codensa could assess their creditworthiness based on payment history.
As a result, within a few months Codensa had 1.3 million customers and a loan portfolio of $500 million.
Now compare that to microfinance — small loans to people with limited credit in developing countries.
“Microfinance is fantastic, but progress has been incredibly slow. And on top of that, institutions in the field typically charge a 15% handling fee,” says Kayser.
“Codensa’s model is much cheaper because the company already has credit assessment embedded in its system and already sends out bills. That model hasn’t spread, but we could have given billions of people access to finance if the utilities in developing countries had just seen the light, so to speak. It could have spread like wildfire. That would have been a unicorn.”
Subsidies are a crime
Despite the fact that effective mechanisms recur across sectors and geographies, their spread is hampered by the fact that social entrepreneurs are poor at learning from one another, Kayser believes.
“Impact entrepreneurs are remarkably unaware of what’s happening in their own sector in other places. They are extremely focused on their own story. And because they don’t know similar models elsewhere, they can’t distinguish between what is truly essential and what is just due to the context of their own story.”
And that’s not the only obstacle to spreading the most impactful business models. Equally obstructive are free handouts.
Whether they come in the form of subsidies or foundation grants, Kayser sees them as problematic.
He feels strongly about this. Because free money stands in the way of developing models with exponential growth—and thus with impact that could ultimately save lives.
“There’s not enough money for all the worthy causes in the world. So using subsidies for things that don’t need them is a crime,” Kayser says. And he doesn’t stop there:
“In practice, you’re helping to kill people. You’re choosing not to save lives with that money. People die of hunger every day. And if they had received the money, they might have survived. So using these scarce funds for something that doesn’t need it is the equivalent of killing someone. We should go to jail for that.”
Foundations hinder healthy business
Kayser also has harsh words for philanthropic foundations—especially those engaged in both grant-making and impact investing.
“It’s striking that the philanthropic side is perfectly fine with giving you money they’re certain they’ll never see again. The money leaves the organization, and that’s totally okay,” Kayser says.
“But when you talk to the investment side, they immediately start asking when the money might come back. And if there’s even a 20% chance it won’t, they panic. One side accepts a 100% loss without issue. The other fears the slightest risk.”
That’s why they start imposing restrictions on recipients—restrictions that, according to Kayser, are counterproductive and hamper the development of sound business models:
“Look at the business plan. And if you believe in it, give money to the team that will execute the plan. Hold the management accountable. If they don’t deliver results, fire them.”
Finish the product before scaling
If we want impact unicorns, there’s only one way forward: Find sustainable business models that continuously generate the revenue needed to sustain the impact.
“If you reduce CO2 emissions or sequester carbon in the soil, and someone is willing to pay you for it, that’s not a subsidy. It’s a service to the community. And the more carbon you store, or the more water you save, the more you’ll be paid,” Kayser says.
“There’s no upper limit to how much money you can earn that way. It’s completely different from subsidies or philanthropic donations — which are by definition limited.”
And that brings us back to where we started — 100 percent.
“Whatever problem you’re trying to solve, you must solve it 100% for all your users, all the time,” says Olivier Kayser.
That’s obviously a challenge for social entrepreneurs obsessed with raising money quickly through a flashy slide deck, Kayser remarks dryly.
“But if you start small and make sure you solve the whole problem all the time, you obviously won’t be financially sustainable at first. But once you have the solution in place, you can scale up,” he says.
The problem arises when you start big — pressured by investors to hyperscale a solution that doesn’t work.
“Then you suddenly have 2,000 stores and have to reinvent your business model. And at that point, it becomes so complex that it’s impossible,” says Kayser.
“Don’t scale an unfinished product.”
Build on existing infrastructure
So, will we ever see an impact unicorn?
“Maybe,” says Olivier Kayser after a pause.
“We’ve seen that ivy can spread very quickly on trees because it doesn’t have to build the whole infrastructure. So if you can build on existing networks and assets, it can go much faster than if you have to create your own infrastructure,” he says.
For now, Olivier Kayser has at least condensed his lifetime of impact knowledge into a report that may — hopefully — help push progress forward.
That’s no small feat.
“I’m 68 years old. I hope I get to see an impact unicorn. But I don’t think I will,” says Olivier Kayser.
“Maybe you will.”
