You’ve identified the problem – now it’s time to develop innovative, impact-driven solutions. Tools like the impact ladder and SWOT analysis can help you move forward.
This section is for you if …
- you’re planning to launch an impact startup – or already deep in the process with your team.
- you know what problem you want to solve, along with its causes and effects
- you understand your target group, their needs, and the other stakeholders involved.
- you’ve created a persona or a representative profile of your target group.
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Not quite there yet?
Check out the section that fits your current stage.
In this section, you’ll learn how to …
- develop innovative approaches to tackle a social challenge.
- build hypotheses about the impact potential of your ideas.
Review existing solutions and identify opportunities for innovation
Many social challenges already have solutions – developed and implemented by bold, committed people. If you’re familiar with these solutions, you can adopt specific aspects or fill the gaps they leave behind.
1. Do your research
Start by exploring existing solutions, initiatives, and projects related to your problem. Look into government programs, nonprofits, private initiatives, tech-based approaches, and local efforts. The goal is to understand what’s already being done – and what’s missing.
2. Use a SWOT analysis to evaluate existing solutions
Analyze how existing solutions work: Who do they reach? How effective are they? What impact have they had?
A SWOT analysis can help you identify strengths and weaknesses, spot opportunities, and understand the risks. Here’s how to apply it:
- Identify strengths: What does this solution do well? What sets it apart? Why has it been successful?
- Identify weaknesses: Where are the gaps or challenges? What could be improved? What limits its impact?
- Identify opportunities: Examine the external factors that can have a positive impact on your solution. What trends, tools, or partnerships could make it even stronger? Is there potential for scaling or improvement?
- Recognize risks (threats): What risks could undermine its success? Are there competitors, funding gaps, or negative trends that might get in the way?
3. Develop at least two solution ideas
Look for areas where new approaches can close gaps or push the field forward. These could include new technologies, creative business models, or fresh partnerships. Maybe there’s an existing idea that hasn’t been tried in your region – that could be your starting point.
Create at least two solution ideas that differ in one key aspect. This allows you to compare them later with your target group. For each version, write a clear hypothesis about why it might work better. That way, you’ll be able to test and learn which approach has the most impact.
First steps toward a potential business model
At this stage, you should start thinking about how to distinguish between your customers (those who pay for the solution) and your target group (those who benefit from it). This distinction is especially important for social enterprises and impact startups, since the people who benefit aren’t always the ones footing the bill.
Real-world examples:
Customers and target group are the same
An app designed to support people with depression: Users pay for access to the app’s features and directly benefit from tools like therapy modules, mood tracking, and peer support networks. In this case, the paying customer and the target group are one and the same.
Customers and target group are different
A company that makes sustainable water filters for use in developing countries: Here, the customers are aid organizations or governments that purchase the filters. The target group is the local population, who gains access to clean drinking water. In this case, a third party pays for the solution on behalf of the people who benefit from it.
The target group is part of the value chain
A coffee company wants to sell fairly traded, sustainably produced coffee in Germany. It ensures eco-friendly farming practices, fair wages, and safe working conditions, while keeping transport as sustainable and short as possible. In this model, impact is created across the value chain, and the customer in Germany pays for the product.
If none of these models apply
Think about how you can still create impact. That might include donating a share of your revenue or partnering with one or more nonprofits. But make sure your product or service also meets high sustainability standards on its own.
This chart highlights key questions to help you start developing a business model. Your model can combine multiple strategies.
Align your solution with customer needs
The value proposition canvas helps make sure your solution truly fits your customers. It has two parts: the customer side and the offering side. If your business creates direct impact for your customers, you’ve already worked through the customer side while analyzing the problem, your target group, and key stakeholders.
If you realize in this step that your customers are actually a third party helping you create impact, go back and fill out the customer side of the value proposition canvas again. Then move on to the offering side. This includes:
- Products and services: List what you offer. Include everything your impact startup provides – both tangible and intangible, like community or support.
- Problem solvers (pain relievers): Show how your solution helps solve the customer’s problems. Make sure these are tailored to the specific pain points you’ve identified. Focus on solving the biggest one.
- Gain creators: Explain how your solution adds value and makes life better for your target group. What benefits do they get? Go beyond functionality – think about emotional connection and loyalty too.
In the end, compare both sides. The value proposition canvas is a tool you’ll come back to again and again. Reviewing and refining it helps make sure your solutions stay effective.
Test the impact potential of your ideas with the Impact Ladder
To build an impact-driven business, you need an impact logic that shows how your activities lead to long-term outcomes. The impact ladder helps you to clearly formulate your measures and goals. It shows the individual stages — from the inputs (resources), through the activities, to the results and long-term effects. Try to fill the impact ladder from top to bottom.
A range of impact models
There are several ways to structure your impact logic – like the IOOI model, Theory of Change, LogFrame, or the impact chain. In this playbook, we use the Impact Ladder.
1. Fill in the Impact Ladder for your solution ideas
Now it’s time to test whether your ideas can solve the social problem you’ve identified and create the impact you’re aiming for. Work through each step of the impact ladder to map your logic. Start with Step 1:
Step 1: Activities take place as planned (output)
Define the concrete actions or activities needed to implement your idea. These are your first outputs and the foundation for everything that follows. Ask yourselves:
What specific activities do we need to carry out?
Step 2: Target group is reached (output)
Estimate how many people in your target group you’ll reach with your solution. This is another output and a key metric for measuring your project’s success. Ask:
How many people in our target group do we want to reach with our solution?
Step 3: Target group engages with the solution (output)
Define how you expect your target group to accept and use your solution. This step is crucial to understanding how your idea creates change. Ask:
How should our target group respond to and engage with our offering??
Step 4: Awareness or skills of the target group change (outcome)
Describe the knowledge, attitudes, or skills your target group should gain. This is where impact begins – these are measurable outcomes that track progress. Ask:
What specific knowledge, mindset, or skills should our target group develop?
Step 5: Target group changes behavior (outcome)
Define what new behaviors you expect to see in your target group. Behavior change is a key milestone on the way to deeper outcomes. Ask:
What concrete actions or behaviors should change within our target group?
Step 6: The target group’s living conditions change (outcome)
Describe how your solution improves the living conditions of your target group. This is the core outcome of your work. To define it clearly, ask:
What specific improvements in their lives are we aiming for?
Step 7: Society changes (impact)
Spell out your long-term goal – the broader societal change you want to help create. This is the ultimate impact. Ask:
What long-term change in society are we working toward?
Once your Impact Ladder is in place, think about the resources, means and inputs you’ll need to carry out your activities. That includes funding, staff, materials, technology, as well as knowledge and networks.
One Impact Ladder per target group
You’ve identified multiple target groups for your solution? In that case, it’s best to create a separate impact ladder for each group. Then look closely at where these ladders intersect or overlap. That said, try to keep the number of target groups as small as possible – otherwise, your impact logic may lose focus.
Next chapter: Test your solution ideas
You’ve made real progress: you’ve developed innovative solutions to address your problem and built an Impact Ladder.
The next step is to test your ideas with your target group to see if they hold up in practice. That’s what we’ll tackle in the next chapter.
Tips from PHINEO experts:
Common mistakes when building your Impact Ladder
The target group isn’t clearly defined in your goals
If it’s unclear who your solution is actually for, your goals won’t be effective.
What you can do: Link each impact goal to your target group. Example: “Children from educationally disadvantaged families, ages 6 to 8, are able to read better.”
The goals are not formulated in a clear sentence. At best, they are listed as bullet points.
What you can do: Write your goals as clear, specific sentences. The more precise your goals are, the easier it is to define indicators for measuring success.
The goals are framed negatively.
What you can do: Phrase goals in a positive way. Positivity drives motivation and energy. Example: “Children ages 6 to 8 are able to read” is much stronger than “Children ages 6 to 8 no longer read poorly.”
You’ve combined multiple goals with “and.”
For example: “Children gain more knowledge and greater self-confidence.” These are two separate goals that require different indicators and different ways of measuring progress. What you can do: Break them down into two clear sentences – one for each goal.
You’re addressing different target groups in the same goal.
What you can do: Create a separate Impact Ladder for each target group. Then think about where those ladders overlap.
You’re counting everyone who uses your service as part of your target group.
What you can do: Be specific about who your actual target group is, who belongs to a sub-group, and who falls outside your focus. What really matters for impact: that your actual target group is the one engaging with your solution.
You’re aiming for unrealistic outcomes.
The fact that people in highly vulnerable situations – such as those experiencing homelessness, long-term unemployment, or addiction – actually use your solution may already indicate a change in behavior. Expecting them to transition quickly into full-time employment may not be realistic. What you can do: Reassess your assumptions realistically and talk them through with others. Keep your goals grounded in reality.
You’re mixing up Step 4 and Step 5 – or linking them with “and.”
Here’s the difference: Step 4 is about internal change – new knowledge, skills, awareness, or attitudes. Step 5 is about external action – what people actually do differently as a result.
Many people struggle to tell the difference between Step 6 and Step 7 of the Impact Ladder.
Here’s a simple rule of thumb: Up to and including Step 6, the focus is on individuals – people you reach directly or indirectly through an intermediary group, like parents, educators, or caregivers. -
Step 7, on the other hand, is about broader societal impact or change within a larger system. That doesn’t have to involve an entire country – it could refer to a neighborhood, a district, or a specific region, depending on the scope of your project.