Social Innovation – a Charity or Business as Usual?
Innovation in today’s business environment is a must. Opportunities for innovation can be a problem to solve, a demand to satisfy, needs to meet. However, increasingly inspiration for innovation does not come only from underserved or emerging markets, but also from the social sector. Learn more about social innovation in this article by Gunjan Bhardwaj, head of Ernst & Young´s Global Business Performance Think-tank.
Innovation in today’s business environment is a must. The major difference between outstanding, innovative firms and the rest is that these innovative companies recognise the utmost importance of constant innovation, and know that the most essential innovations are those creating value for their customers (Pearson, 1998: 99). Indeed, great innovators are known for being able to solve even the most challenging problems, and for their ability to quickly identify opportunities to innovate.
It should not be seen as charity or philanthropy, but rather as a strategic R&D investment
Opportunities for innovation can, as earlier stated, be a problem to solve, a demand to satisfy, needs to meet. However, increasingly inspiration for innovation does not come only from underserved or emerging markets, but also from the social sector. Over the last couple of years, many important, smart corporations have started to identify business opportunities in the social sector, such as public education, welfare-to-work programmes, the inner city, and public health care (Kanter, 1999: 124).
Definition of social innovation
These innovative companies have learned to see social problems as economic problems, and now attempt to solve recurrent problems of the social sector, thus stimulating their own development. Actually a new paradigm, going beyond corporate social responsibility, is rising for innovation: social innovation. Social innovation can be defined as the partnering of private corporations and public interests in order to create beneficial and long-lasting change for both parties. Before this paradigm shift, corporations used to support the social sector through money and donation, or by giving their employees’ time to volunteering.
Actually a new paradigm, going beyond corporate social responsibility, is rising for innovation: social innovation
These traditional means did not lead to sustainable changes in the social sector. Now, social innovation really involves the essential capabilities of businesses and implies that companies “use” or take advantage of, social needs or problems as chances to develop ideas and technologies, and to address the needs of new markets. It should not be seen as charity or philanthropy, but rather as a strategic R&D investment (Kanter, 1999: 124-125).
In 1994 IBM launched its Reinventing Education programme (Kanter, 1999: 124-125). Since then, thanks to this initiative IBM develops and implements technological innovations to address different problems education is faced with, through partnerships with schools all over the world (IBM 2008a). The PowerUp game, a 3D virtual game aiming at attracting students to careers in engineering (IBM, 2008b), and the IBM Reading Companion, a web-based literacy programme using voice recognition to help adults and children improving literacy capabilities, are part of the programme (IBM, 2008c).
In the 1990s, Marriott International established its welfare-to-work programme Pathways to Independence (Marriott International, 2008). This programme helps welfare recipients to improve their job skills and work habits, and, in addition, guarantees participants a job offer at the end of the programme (Kanter, 1999: 125). In fact, Marriott, thanks to this programme, has made possible the transition of more than 3,000 welfare recipients into the hospitality industry (Tisch, 2004: 171-172).
In 1997, some American companies, among which United Airlines, were the first members of the new Welfare to Work Partnership (Tisch, 2004: 170). Through this programme, the airline wants to hire welfare recipients by finding new means to transport people from inner cities to jobs in the suburbs (Kanter, 1999: 126).
In India, Unilever actively fights against Iodine Deficiency Disorder (IDD), which is the world’s most common cause of mental disorders. Hindustan Lever Ltd., the Indian subsidiary of Unilever, in collaboration with non-profit organisations and the government, educates the poor about the necessary iodine consumption through infomercials, and has developed in 2001 a unique technology to guarantee the protection of a certain level of iodine concentration in salt, at a molecular level (Prahalad, 2006: 171-206).
Advantages of social innovation
Solving social issues compels firms to push their capabilities as far as possible in order to come up with innovative solutions representing benefits for both them and the society. Through this significant involvement, companies engage real efforts to solve the problems, as it would be the case for any important project, since they clearly are aware of all the knowledge and new capabilities that can emerge from this collaboration. Indeed, the community has a very different approach and perspective.
Employees tend to be even more creative when the firm for which they work puts the emphasis on innovation aiming at helping the world
When a company works in partnership with the public sector to develop innovative solutions, such as new technologies, the company does not only get the chance to have its products tested and to receive constructive feedback, but it also gets the opportunity to build a certain position politically speaking. This can be done for instance through the building of relationships with the government, or through the improvement of their public image. Thus, social innovation represents a great opportunity for business development and learning (Kanter, 1999: 124-132).
Moreover, employees tend to be even more creative when the firm for which they work puts the emphasis on innovation aiming at helping the world. In fact, social innovation goes beyond business and requires from the companies a powerful commitment to their values (Kanter, 2008: 48-49).
Constraints and Limitations
Nevertheless, social innovation is more complex than usual business relationships. Public sector actors, like government or non-profit organisations, have different aims and goals than profitability and typical business incentives. Therefore they can even sometimes become suspicious of corporations’ motivations, thus contributing to the complexity of the partnership. On the other hand, companies may see the social sector as underdeveloped with regards to business (Kanter, 1999: 126).
Establishing a clear and honest business agenda when starting this kind of partnership is definitely essential. Also, a strong commitment from both sides in terms of financial investment, but also in terms of staff commitment, is crucial (Kanter, 1999: 126-131). Finally, as in any other type of partnership, trust is the key to success.
Gunjan Bhardwaj, advisor, senior editor and member of the editorial board. Gunjan is the leader of the Global Business Performance Think-tank of Ernst&Young. He is also the solution champion for Pricing strategy and effectiveness as well as Innovation management in the advisory services of Ernst & Young with a focus on Pharmaceutical and FMCG sector.
Gunjan is also a guest professor for Growth and Innovation management at European Business School (EBS) in Germany and a member of the scientific advisory board of Plexus Institute in the US which researches on complexity in health sciences.
Gunjan has published a number of papers and articles in various Journals and magazines and has been a frequent speaker in conferences on marketing and innovation related topics. He is also the chief editor of the quarterly journal of Ernst & Young’s advisory practice called Performance.
IBM (2008a) Reinventing Education.
IBM (2008b) PowerUp game lures students to engineering.
IBM (2008c) IBM Reading Companion grants improve literacy skills.
Kanter, R.M. (1999) From spare change to real change. Harvard Business Review, May-June, pp. 123-132.
Kanter, R.M. (2008) Transforming giants. Harvard Business Review, January, pp. 43-52.
Marriott International (2008) The Marriott Timeline.
Peason, A.E. (1998) Tough-minded ways to get innovative. Harvard Business Review, May-June, pp. 99-106.
Prahalad, C.K. (2006) The Fortune at the Bottom of the Pyramid. Wharton School Publishing.
Tisch, J. (2004) The Power of We. Kindle Edition