Digital Divide Data, a case study

Digital Divide Data(DDD) is a social enterprise that delivers digital content, data, and research services to clients worldwide. DDD's innovative social model enables talented youth from low-income families to access professional opportunities and earn lasting higher incomes. This model, established by DDD in 2001, is now called "impact sourcing” and has been implemented by dozens of firms around the world. The company would deal socially and go on to win an award for social entrepreneurship. What started as a small company of a dozen employees has turned into a company with 500 staff with multiple offices in Cambodia and Laos, serving clients in the USA and Europe. In 2008, Digital Divide Data had operating revenues of around $2 million and was providing scholarships to disadvantaged youths. DDD’s mission of providing sustainable sources of employment and education to disadvantaged youth was already validated by nine years of successful operations. Looking towards the future, the decision to expand was motivated by DDD leadership’s desire to lift more people out of poverty and empower disadvantaged youth through market-driven, world-class IT services. Now, selecting the right business model for expansion was the first step toward the development of an achievable expansion strategy to attract more potential donors and supporters.

DDD relied on a small U.S.-based management team, supplemented by expatriate volunteers and short-term assignees on the ground in Cambodia and Laos. Growing the number of paid U.S. staff to manage expansion plans was not very feasible given financial constraints. DDD was eager to design an expansion strategy that could provide the same level of employment opportunities and social programs but would require less infrastructure, resources, and financing than was typically necessary when starting new sites from scratch. But whichever growth strategy they selected—whether it be organic growth, partnerships, joint ventures, or social franchising—DDD’s leadership team knew that more was at stake than mere global scale. 

In 2008 DDD’s board of directors set a goal that was to grow its existing operations to 1500 people. While the main objective was to help more people in farther reaches of the world, the expansion would also add capacity and enable DDD to take on larger contracts in the publishing market. However, DDD’s management was eager to make sure future expansion took place in locations that had been thoroughly vetted. Although its management had already conducted exploratory talks with potential partners in India, China, and Vietnam, they didn’t know whether the partnership was the best approach to expansion. Another decision was on how DDD should start its expansion. While more people would be needed to support a larger organization, DDD has to change its management approaches to keep control over the size of its U.S. staff to minimize costs, potentially further straining local resources. 

sly into its operations and sales force and learn the practices. 

Rank-and-file staffs are the employees in an organization who are not in any leadership or managerial positions. Rank and file employees form the majority of the workforce in the organization as opposed to the leaders such as the department heads, general managers, or presidents. In short, they are the front lines. In DDD, operating a computer, basic business skills, teamwork, email writing, English, and software are required. For DDD the situation posed several human resource management challenges. The company’s limited financial resources made it hard to compete for and attract local management talent. DDD often found that it had to rely on the appeal of the company’s social mission to recruit trained professionals. The company also faced difficulties retaining internally-trained managers and high-performing operators and experienced Cambodia’s IT employees could go elsewhere to earn a higher salary than what DDD could offer. At the same time, skilled managers were hard to find, and expensive because they were in high demand. To fit well with DDD, an individual moreover needed to not only meet the role’s technical requirements but also be passionate about DDD’s social mission. In addition, infrastructure was also a big barrier. DDD’s Battambang office was significantly less developed than Phnom Penh. The majority of roads were unpaved and only a handful had street names. The electricity supply was unreliable and broadband connections were limited and very expensive, and T1 connections, where available, cost several thousand U.S. dollars per month. The poor infrastructure made it difficult for DDD to transfer skills from the Phnom Penh office, as its managerial staff was reluctant to relocate to Battambang. Meanwhile, most of northern Cambodia’s educated workforce tended to move to Phnom Penh rather than stay in the region, so recruiting talented operators and managers locally was a constant challenge. Because DDD depends on a dedicated U.S.-based sales staff to develop Western business contracts and also relied on expatriate project management expertise, standardizing project management and operations processes among the three sites is a strategic decision for its efficiency. To ensure that the training curriculum was standardized and specific to the services each office provided. 

While more people would be needed to support its expansion, to become a larger organization, DDD has to change its management approaches to keep control over the size of its U.S. staff to minimize costs, potentially further straining local resources. Training recruits was a critical component of DDD’s model. DDD trained and employed young Cambodians and Laotians in IT outsourcing, with the goal that they would graduate from DDD and continue to earn competitive wages for themselves and their families. Moreover, DDD also recruited recent high school graduates whose prospects for jobs and post-secondary education were limited, due to lack of resources or disability. In mid-2008, the company began to address some operational issues by recruiting Western expatriate volunteers to work with the current management. Through an internally developed training curriculum, recruits learned basic skills such as typing and how to operate a computer, as well as business-specific skills such as business etiquette, teamwork, and email writing, trainees were expected to learn the basic tools and software that they would use in the course of their work. Moreover, the curriculum has even been customized to reflect each site’s product and service offerings.

Due to its small size, partnerships were very important to DDD. Among the available options, a partnership or joint venture was a good one. Although selecting the right partner and negotiating the terms of an agreement was time-consuming, a partnership would give DDD access to a committed local partner with detailed knowledge of the local labor pool, legal requirements, and business practices, and facilitate the expansion. However, DDD would have to develop processes for incentivizing partners to follow DDD’s standards for recruitment, social programs, and most importantly quality control. Moreover, DDD’s board was also considering social franchising, a method of expansion for social enterprises. It works similarly to commercial franchising and enables a not-for-profit organization to scale and expand the reach of the operations and provide the same services in new markets and locations working with a local social franchisee partner. Social franchising required the development of a standardized set of manuals and procedures for recruitment, training, project management, and daily operations. Basically, it is like a social edition of McDonald's or Starbucks. DDD would help franchisees establish their business and also provide ongoing support, just like McDonald's provides support for its franchises. But, the franchisee selection process is also time-consuming and DDD’s management felt franchisees needed to be incentivized to develop local revenue sources, rather than rely on DDD’s U.S.-based sales and fundraising teams. In this case, determining where work would be allocated could prove challenging in the more loosely controlled structure of a franchise network. In addition to the partnership, collaborating with international organizations was also a good option. Since such a partner would already know the business, DDD could potentially tie more seamlessly into its operations and sales force and learn the practices. 

References

Digital Divide Data, a case study by Mathew, A., Rod, G., Villalobos, J. & Yates, D., pages 1-12.