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.
Strategic Choice 1 | Social Mission
A mission-oriented global IT services enterprise or a profit-seeking company? Canadian-born Jeremy Hockenstein, DDD’s CEO and a co-founder, had visited Cambodia in November 2000 on vacation from his job as a McKinsey consultant in the United States. Hockenstein was struck by the level of poverty in the country, and the lack of opportunities for young people to build careers. He was able to build a successful business since he concluded that Western demand for IT outsourcing services could be satisfied by Cambodian workers, given the right resources and training. However, he decided to run DDD as a social enterprise. That's why DDD’s social mission was to help economically disadvantaged or physically disabled young adults.
Strategic Choice 2 | Recruit, Train, and Operation
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.
Strategic Choice 3 | Combine Degree & Experiences
I reckon that this is a pretty smart decision which means that after you graduate from DDD, you already have working experience and a university degree. After three to four years working at DDD, the operator would then complete his or her university degree and graduate from DDD. Graduates either were promoted within DDD or left to join other organizations that valued their professional experience and technical skills.
Strategic Choice 4 | To Expand Outside The Capital City
Although staying inside Phnom Penh was an option, DDD still decided to open two new offices outside of Phnom Penh to reach disadvantaged youth who were unable to move to the capital city to further their education at the end of 2003. But, where should be the next? Among so many options, DDD chose Battambang, Cambodia’s second-largest city of nearly one million people, located roughly 180 miles northwest of Phnom Penh since human resources are vital to DDD.
Strategic Choice 5 | Differentiate
In 2003, DDD also opened an office in Vientiane, Laos. Creating new sites allowed DDD to differentiate each office’s services, as well as to seek local work to bolster the offices’ revenue. As a result, DDD was breaking even on its operating expenses at the start of 2009 and secured several large multi-year contracts from U.S. and European clients.
Strategic Choice 6 | Donations
To maintain its swelling social programs, training, and operator scholarships, as well as its fundraising and expansion planning, DDD continued to rely on donations and sponsorships in 2009. It was similar to the University of The People which was launched by educational entrepreneur Shai Reshef in 2009.
Strategic Choice 7 | Standardization
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.
Strategic Choice 8 | Partnership
Due to its small size, partnerships were very important to DDD. In 2008, DDD began a partnership with the Center for Information Systems Training (CIST) in Phnom Penh. CIST is a French NGO that provided two-year IT training scholarships to disadvantaged Cambodian youth and helped them find jobs in the local IT market after graduation. CIST agreed to select and train affiliates of DDD operators for three to six months, with the cost shared between the two organizations. In addition, DDD also leveraged these partnerships to learn about new digitization processes that it could build on to win future work.
Strategic Choice 9 | Outsource
Because the recruitment and training practices in Phnom Penh differed from those of Battambang and Laos, DDD had very few company-wide guidelines on recruitment. Therefore, in Phnom Penh, the recruitment and training were outsourced to CIST, but in Battambang, it was done in-house.
Outsourcing is the business practice of hiring a party outside a company to perform services or create goods that were traditionally performed in-house by the company's own employees and staff. Outsourcing is a practice usually undertaken by companies as a cost-cutting measure. For its financial health, outsourcing to CIST was a good choice compare to fully performed in-house.
Strategic Choice 10 | Allocation
How works were allocated among DDD’s offices was a strategic choice. These offices were largely specialized. The Laos office primarily performed xml tagging services, Battambang academic data entry and survey work, and Phnom Penh digitization of print publications. Retraining the operators and project managers in Battambang to take on some of the work from the Phnom Penh office was not considered a viable option as it would require considerable financial and human resources. Of course, DDD can reform these offices to be consistent instead of specialized. However, that means the different types of resources will be used to do the same tasks.
Strategic Choice 11 | Other Countries
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 in order to minimize costs, potentially further straining local resources.
Strategic Choice 12 | Strategies for Expansion
Developing a coherent global strategy and business model was critical for securing fundraising and donor support. DDD’s board of directors identified four potential strategies for expansion. Organic growth, partnership(with a local entrepreneur, an international NGO, or outsourcing firm), social franchising.
Organic growth is the growth a company achieves by increasing output and enhancing sales internally. This does not include profits or growth attributable to mergers and acquisitions but rather an increase in sales and expansion through the company's own resources. Such a strategy could be initiated immediately, as DDD would not have to go through some time-consuming processes such as negotiating with potential partners. In addition, DDD would be in complete control of the strategy and management. However, it would put a severe strain on the company’s managerial resources. Without a local partner, DDD would have to lay out significant capital upfront to develop sites and local management teams.
Another option was a partnership or joint venture with a local entrepreneur. 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
Chen, J. (2022, February 8). Organic growth. Investopedia. Retrieved May 21, 2022, from https://www.investopedia.com/terms/o/organicgrowth.asp
Digital Divide Data, a case study by Mathew, A., Rod, G., Villalobos, J. & Yates, D., pages 1-12.
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