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Evidence in business: can companies do well by doing good?

The quest for evidence has been rumbling along for decades. But how do businesses fit into this? If we demand evidence of impact from our public services and charities, surely we should be doing the same of companies? Yet – beyond health – it is rare for a company to have tested and revealed whether what they sell actually works.

This week, we launched a new report with Pearson, the education giant, exploring the role of evidence in a business context. Pearson have boldly committed to testing their product and services to see if they are effective against educational outcomes, and, if found not to be effective, they will stop selling it even if it is making them money. Pearson is using the standards of evidence we use in Nesta Impact Investments to help them measure and communicate this impact.

This is a commendable move. Pearson’s commitment to being evidence-led is a bold – and novel – claim by a FTSE 100 company, particularly one in the education sector. Unlike in healthcare or other regulated sectors, there is currently no evidence criteria in place for a company to reach before they can sell education products or services in the UK. But Pearson, like us at Nesta, believes that measuring and sharing evidence of impact is a moral duty for anyone delivering such products and services. And we also agree that evidence could act as a source of competitive advantage, helping products and services stand out in a crowded market place.

We know that some companies do measure their impact and that many companies experiment and use data. Capital One for instance undertakes over 60,000 experiments a year to test different advertising strategies. Colleagues at Nesta have explored the links between a business’ use of data and the impact on business growth. Yet rarely are these sophisticated analytical approaches directed at testing the actual impact of products and services. Beyond health, few companies test and reveal whether what they sell actually works. Too often impact is interpreted in terms of financial returns - if people buy it, then it must be good.

Yet the tide is turning. Governments are increasingly demanding evidence, so too are impact investors, as well as consumers, and others alongside. Is there then a need for companies to get ahead, to be able to measure and articulate the impact of what they sell before there are requirements in place for them to do so?

To achieve this we need systems and frameworks that make impact measurement part of the day-to-day, we also need to deepen our understanding of what good and proportionate evidence is, and how to interpret and use it, as well as agreeing what failure is, just as much as defining what success looks like. So we recognise that there is much work to be done. And it may be hard. But we believe that this is a goal worth pursuing.

We have said before that our use of standards of evidence is an experiment, it is the first time – as far as we know – that they have been used in a for profit venture fund. It may also be the first time such a framework has been used in an education company like Pearson. So we admit this is new and unexplored territory, we may need to refresh and adapt how we approach impact measurement, and we are very much in the market to learn from what others are doing. But we strongly believe that companies should and could get better at measuring their impact to make the difference that they claim. We look forward to seeing how this debate develops...

Nesta and Pearson’s report From Good Intentions to Real Impact was launched at Nesta this week at an event chaired by Sir Michael Barber, Chief Education Advisor at Pearson. You can catch up on what was discussed here.

Further details about how we use the standards of evidence in our Impact Investment Fund are available here. We are also using the framework across other areas of Nesta’s programmes.

Details about Pearson’s Efficacy Framework are available here.

If you have questions or comments please contact Ruth Puttick – [email protected]

Author

Ruth Puttick

Ruth Puttick

Ruth Puttick

Principal Researcher - Public and Social Innovation

Ruth was Principal Researcher for public and social innovation. Ruth joined the Nesta policy and research team in 2009, working on a range of projects across innovation, investment a...

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