There is no topic in the nonprofit world that comes up as often as scale, but people don't always mean the same thing. The most common definitions are "more" and "bigger" -- more customers, more services, etc. Some people want to increase their impact. Some people want to be more effective. Many times people use these terms as proxies for each other. We will explore these issues later.

There is probably an "appropriate" scale for every organization. We don't all need to be giants, but we probably all want to be a little bit bigger.

Today we have four objectives - to introduce a new framework for scale and sustainability. We want to explore new business models, we want to provide a forum where all stakeholders can participate in a discussion about our field, and we want this dialogue to move us toward concrete action.

We have developed a model for taking innovation to scale. The old model is that you try an experiment, it gets replicated, and once you develop a "best practice" manual, the innovation will move to scale. This model is missing three pieces. The first gap is standardization -- if everyone doing tax prep differently, how can you scale up a single way of doing things? The private sector creates infrastructure that we do not. Finally, the private sector invests in the roll-out of innovations and best practices.

We did case studies of ten organizations who have achieved scale and offer services similar to ours. The first lesson is that profitable products drive private companies to scale up delivery. In the private sector, demand drives growth, whereas our goal is often to convince our market that they need our products. Geographic expansion allows organizations to create enough customers to be profitable. Infrastructure investments are critical to growth. Technology is critical to efficiency and cost savings -- but these investments can be in the neighborhood of tens of millions of dollars. Partnerships are critical in the for-profit world -- partnerships allow companies to gain specific knowledge, expertise or capability. Capital is raised several times over the process of growth, and the investment was over ten million dollars. Several organizations changed their legal structure in order to raise capital and facilitate growth -- in the nonprofit world, we tend to get stuck in the 501c3 structure that limits our growth. Regulatory changes can support or enable growth -- banking regulations changed to allow more banks to serve the populations that we're interested in. Different management skills are needed in different stages of an organization's growth. Companies must be able to adapt quickly to changing market conditions.

Organizations start with a product innovation -- this begins the growth process. This growth process will be limited, however, until you focus on organizational innovation -- changing the structures and processes that support the delivery of your products. In order to really scale up, however, you will eventually need to focus on industry-wide innovation.

Through the Annie E. Casey Foundation, we have been supporting five different pilot sites to test these innovations. These sites were in Chicago, Louisville, Tulsa, Atlanta and Baltimore. We wrote up these pilot projects as case studies. These sites were conceived of and implemented separately, but the lessons that they learned are all quite similar. Some things went well and some did not. Some challenges arose simply because these programs were just starting up. These pilots did raise some important issues for us.

In Chicago, we integrated tax preparation services into the benefits package that employers offered. In Louisville, we integrated tax prep with job training. In Tulsa, they worked with H&R Block. In Atlanta, they brought a professional tax preparer into a low-income neighborhood. In Baltimore, they brought tax prep services onto the job site, and the employer actually fronted the money for a faster tax refund.

Here are the lessons. First, all five sites identified infrastructure as the key challenge -- all sites partnered with other organizations to provide infrastructure that they could not. They borrowed rather than built their own infrastructure. Because their strategies were based on partnerships, relationships became the largest challenge for all of the groups. These challenges were typical relationship challenges -- partners left their jobs, got promoted, got other responsibilities, etc. Getting infrastructure through partnerships does not mean that you won't have a lot of work to do. Next, you need to better understand the expectations of your partners. Be very careful about your assumptions for how a partnership might work.

The third lesson is that you must use market research to understand what the market wants. Sites were going to offer great packages of services, but the customers didn't seem interested -- they saw very low take-up rates. We need to understand what the market is and what they want. Convenience is very important to our market.

The fourth lesson is that true costs must be accounted for. Each of these sites had budgets, but no one really understands what the real costs were to deliver services. How much time did the partner spend? How much time did we spend on managing the relationships with partners? We need to reduce per-unit costs, and we need to understand the real costs in order to scale. Some of these items also do not generate economies of scale.

Partners need to understand the value proposition of a service in order to support it -- and it must be supported by data. Roll-out of a new service will not be effective if it is based only on good will. Good will will fade over time. Companies need clear, concrete business benefits in order to continue supporting a partnership.

Community agencies need to increase their organizational capacity in order to scale their services.

The size of the solution must match the size of the problem. Small pilot projects may never be able to point the way towards a full-scale solution. If you are designing for scale, you would never start with small-group workshops. These pilots were set up to "fail" in terms of a large-scale solution. They provided good services that are quite valuable to their small communities, but the results that they achieved were not large enough to create change nationwide.

There are a number of issues facing the EITC and tax preparation field. We are at a crossroads. How can we achieve scale in free tax preparation programs. How can we achieve broader asset goals?

Can programs continue to grow without new assets? Do we have the right mix of products and services? How might the National Community Tax Coalition (NCTC) and the other national entities facilitate future growth and program efficiencies in the free tax preparation field? You have more national organization than many other fields that we have worked with.

How do industries scale up? We have developed a generic model. Each industry has five basic groups -- customers, investors and funders, industry members, trade associations, and policy-makers and regulators. In simple for-profit industries, the key relationship is between customers and providers -- investors are relatively hands-off. In some industries, the industry trade association allows smaller players to compete against the large competitors. In subsidy-dependent fields like yours, the funders are critical because the customer cannot pay for their own services. In these fields, the customer is the least consulted group.

In industries dominated by smaller players, access to a common infrastructure can enable networks of organizations to work cooperatively, save costs, and compete against larger players.

When we think about scale in Philadelphia, we are not interested or able to do everyone's tax preparation. We want to measure our impact in terms of making sure that the rest of the tax industry cannot rip people off.

Your pilot programs seemed interesting in terms of experiments, but they cannot tell us anything about scale. Instead, we should be studying the larger, established, successful programs. Most people in the foundation and nonprofit world still believe that innovations grow out of pilots. Foundations are learning that you cannot grow to scale if you do not design for scale from the very beginning. These pilots were intended to design and test new business models. Foundations also create a funding tension -- they want to support new and innovative programs, which probably won't scale very effectively.