CHAPTER TWO
SOCIAL INNOVATION
2.1 What Is ‘Social Innovation’?
In this module, we’re looking at the challenge of change – and how individuals and groups of
entrepreneurs, working alone or inside organizations, try to bring this about. We’ve seen that
innovation is not a simple flash of inspiration but an extended and organized process of turning
bright ideas into successful realities, changing the offering (product/service), the ways in which it
is created and delivered (process innovation), the context and the ways in which it is introduced
to that context (position innovation) and the overall mental models for thinking about what we
are doing (business model or ‘paradigm’ innovation).
Above all, we’ve seen that getting innovation to happen depends on a focused and determined
drive – a passion to change things, which we call ‘entrepreneurship’. Essentially, this is about
being prepared to challenge and change, to take (calculated) risks and put energy and enthusiasm
into the venture, picking up and enthusing other supporters along the way. If we think about
successful entrepreneurs, they are typically ambitious, mission-driven, passionate, strategic (not
just impulsive), resourceful and results-oriented. And we can think of plenty of names to fit this
frame: Elon Musk (Space X), Steve Jobs (Apple), Bill Gates (Microsoft), Larry Page and Sergey
Brin (Google) and Jeff Bezos (Amazon).
But we could also apply these terms to describe people like Florence Nightingale, Elizabeth Fry
or Albert Schweitzer. And while less famous than Gates or Bezos, there are some impressive
individuals around today who have made a significant mark on the world through getting their
ideas into action. As the Ashoka Foundation comments, ‘Unlike traditional business
entrepreneurs, social entrepreneurs primarily seek to generate “social value” rather than profits.
And unlike the majority of nonprofit organizations, their work is targeted not only towards
immediate, small-scale effects, but sweeping, long-term change.
For example, as well as Muhammad Yunus, the founder of Grameen Bank, Dr Venkataswamy
founded the Aravind Eye Clinics. His passion for finding ways of giving eyesight back to people
with cataracts in his home state of Tamil Nadu eventually led to the development of an eye care
system which has helped thousands of people around the country.
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A social entrepreneur uses the same process of entrepreneurship that we saw in Chapter one but
does so to meet social needs and create value for society. These are people who undoubtedly fit
our entrepreneur mold but target their efforts in a different, socially valuable direction. Key
characteristics of this group include:
Ambitious. Social entrepreneurs tackle major social issues – poverty, healthcare, equal
opportunities, etc. – with the underlying desire, passion even, to make a change. They
may work alone or from within a wide range of existing organizations, including those
which mix elements of non-profit and for-profit activity.
Mission driven. their primary concern is generating social value rather than wealth;
wealth creation may be part of the process but it is not an end in itself. Just like business
entrepreneurs, social entrepreneurs are intensely focused and driven, even relentless, in
their pursuit of a social vision.
Strategic. Like business entrepreneurs, social entrepreneurs see and act upon what others
miss: opportunities to improve systems, create solutions and invent new approaches that
create social value.
Resourceful. Social entrepreneurs are often in situations where they have limited access
to capital and traditional market support systems. As a result, they must be exceptionally
skilled at mustering and mobilizing human, financial and political resources.
Results-oriented. Again, like business entrepreneurs, social entrepreneurs are motivated
by a desire to see things change and to produce measurable returns. The results they seek
are essentially linked to ‘making the world a better place’, for example through
improving quality of life, access to basic resources or supporting disadvantaged groups.
Major social innovations include the kindergarten, the cooperative movement, first aid and the
Fair Trade movement, all of which began with social entrepreneurs and spread internationally.
The growth in social innovation has also been accelerated through enabling technologies around
information and communication. These days, it becomes easier to reach many different players
and to combine their innovative efforts into rich and new types of solution, for example
mobilizing patients and carers in an online community concerned with rare diseases or using
mobile communications to help deal with the aftermath of humanitarian crises – reuniting
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families, establishing communications, providing financial aid quickly via mobile money
transfers, etc.
2.2 Players of Social Entrepreneurship
Social innovation involves the same core entrepreneurial process of finding opportunities,
choosing amongst them, implementing and capturing value, but it plays out in a number of
different ways, which we explore briefly.
i. Individual Start-ups
In many cases, social innovation is an individual-driven thing, where a passion for change leads
to remarkable and sustainable results. They include people like:
Amitabha Sadangi of International Development Enterprises (India), who develops low-
cost irrigation technologies to help subsistence farmers survive dry seasons
Mitch Besser, founder and medical director of the Cape Town-based program,
mothers2mothers (m2m), which aims to reduce mother-to-child transmission of HIV and
provide care to women living with HIV. He founded mothers2mothers with one site in
South Africa in 2001. It has grown to more than 645 sites in South Africa, Kenya,
Lesotho, Malawi, Rwanda, Swaziland and Zambia.
Tri Mumpuni, executive director of Indonesian NGO IBEKA (People Centred Economic
and Business Institute), strives to bring light and energy into the lives of rural populations
through the introduction of micro-hydropower plants to more than 50 villages.
ii. Not Just Passionate Individuals
But social entrepreneurship of this kind is also an increasingly important component of ‘big
business’, as large organizations realize that they only secure a license to operate if they can
demonstrate some concern for the wider communities in which they are located. ‘Corporate
social responsibility’ (CSR) is becoming a major function in many businesses and many make
use of formal measures – such as the triple bottom line – to monitor and communicate their
focus on more than simple profit-making.
iii. Public Sector Innovation
Providing basic services like education, healthcare and a safe society are all hallmarks of a
‘civilized society’. But they are produced by an army of people working in what is loosely called
‘the public sector’ – and as we saw at the start of this course, there is huge scope for innovation
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in this space. In many ways this sector represents a major application field for social innovation:
while there may be concerns about costs and using resources wisely, the fundamental driver is
around social change.
iv. Innovation in the ‘Third Sector’
There is also a long tradition of innovation in the so-called third sector: the voluntary and
charitable organizations which operate to provide various forms of social welfare and service.
2.3 Motivation: Why Do It?
Just as mountaineers climb peaks simply ‘because they are there’, sometimes the motivation for
innovating comes because of a desire to make a difference. Psychological studies of
entrepreneurs suggest they often have a high need for achievement (n-Ach), which is a measure
of how far they want to make their mark on the world. High n-Ach requires some evidence that a
mark has been made – but this doesn’t have to be in terms of profit or loss on a balance sheet. As
we saw earlier, many people find entrepreneurial satisfaction through social value creation, and
even those with a long track record of building successful businesses may find themselves drawn
into this territory. For example, Bill Gates’ withdrawal from running Microsoft to concentrate on
the Gates Foundation and other activities is the latest in a long line.
Another important area where individuals have been a powerful source of social innovation
comes from the world of ‘user-innovators’. As we argue this class of innovator is increasingly
important and has often been at the heart of major social change. Experiencing problems first-
hand can often provide the trigger for change, for example in the area of healthcare.
2.3.1 Why Organizations Do It
As we’ve seen, it isn’t just individuals who undertake social innovation: it is increasingly part of
the offering by all kinds of business organization. There are several reasons for this, and we
focus on three:
Social innovation as securing a ‘license to operate’
Social innovation as aligning values
Social innovation as a learning laboratory.
i. License to Operate
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There is growing pressure on established businesses to work to a more socially responsible
agenda, with many operating a key function around CSR. The concept is simple: firms need to
secure a ‘license to operate’ from the stakeholders in the various constituencies in which they
work. Unless they take notice of the concerns and values of those communities, they risk passive,
and increasingly active, resistance and their operations can be severely affected. CSR goes
beyond public relations in many cases with genuine efforts to ensure social value is created
alongside economic value, and that stakeholders benefit as widely as possible and not simply as
consumers. CSR thinking has led to the development of formal measures and frameworks like
the ‘triple bottom line’, which many firms use as a way of expanding the traditional company
reporting framework to take into account not just financial outcomes but also environmental and
social performance.
ii. Aligning Values
A second reason for engaging in social innovation on the part of organizations is the motivational
effects they get from aligning their values with those of their staff. Most people want to work for
organizations in which there is a positive benefit to society. Many see this as a way of fulfilling
themselves. Think of the motives for working in healthcare or education and the sense is often
one of vocation (a calling) rather than because of the more formal rewards.
Organizations which align with the values of their staff tend to have better retention and the
chance to build on the ideas and suggestions of their staff – high involvement innovation. This is
also critical in those organizations which operate with a small core staff and a large number of
volunteers, for example in the charity sector or in the case of social care.
iii. Learning Laboratory
One other area where participating in social innovation may be valuable is in using it as an
extension of innovation search possibilities. Social innovations often arise out of a combination
of widespread and often urgent need and severe resource limitations. Existing solutions may not
be viable in such situations and instead new solutions emerge which are better suited to the
extreme conditions.
As we have seen, meeting the needs of a different group with very different characteristics to
those of the mainstream population can provide a laboratory for the emergence of innovations
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which may well diffuse later to the wider population. There is clearly enormous demand for such
innovation to meet widespread demand for healthcare, education, sanitation, energy and food
across populations which do not have the disposable income to purchase these goods and
services via conventional routes.
Humanitarian emergencies – such as earthquakes, tsunami, flood and drought or manmade crises
such as war and the consequent refugee problems – provide another example of urgent and
widespread need which cannot be met through conventional routes. Instead, agencies working in
this space are characterized by high rates of innovation, often improvising solutions which can
then be shared across other agencies and provide radically different routes to innovation in
logistics, communication and healthcare.
2.4 Supporting and Enabling Social Innovation
2.4.1. Supporting Social Innovation
Social innovation is seen as having a major role in improving living standards, and so it has
attracted growing attention from a variety of agencies aiming to support and stimulate it. For
example, there are investment vehicles, like the Big Society Capital fund in the UK and
specialist venture funds like Acumen in the USA, which provide an alternative source of capital.
And there are coordinating agencies – like the Young Foundation in the UK, which provide
further support for the mobilization and institutionalization of social innovation.
Another increasingly significant development is the setting-up by established organizations and
successful business entrepreneurs of charitable foundations whose aim is explicitly to enable
social entrepreneurship and the scaling ideas with potential benefits. Examples include the Nike
Foundation, the Schwab Foundation, the Skoll Foundation (established by Jeffrey Skoll, founder
of eBay) and the Gates Foundation (established by Microsoft founder Bill Gates and which
increasingly receives support from financier Warren Buffett).
2.4.2 Enabling Social Innovation
The process begins with seeking out opportunities, often new or different combinations which no
one else has seen, and working them up into viable concepts which can be taken forward. It’s
then a matter of persuading various people – venture capitalists, senior management, etc. – to
choose to put resources behind the idea rather than backing off or backing something else. If we
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get past this hurdle, the next step is beginning to transform the idea into reality, weaving together
a variety of different knowledge and resource streams before finally launching the new thing –
product, process or service – into a market. Whether they choose to adopt and use it, and spread
the word to others so the innovation diffuses, depends a lot on how we manage using other
knowledge and resource streams to understand, shape and develop the market. We also know that
the whole process is influenced and shaped by having clear strategic direction and support, an
underlying innovative and enthusiastic organization willing to commit its creativity and energy,
and extensive and rich links to other players who can help with the knowledge and resource
flows we need. Fueling the whole is the underlying creativity, drive, foresight and intuition to
make it happen – entrepreneurship – to undertake and take the risks.
2.5 The Challenges in social entrepreneurship
While changing the world with social innovation is possible, it isn’t easy! Just because there is
no direct profit motive doesn’t take the commercial challenges out of the equation. If anything, it
becomes harder to be an entrepreneur when the challenge is not only to convince people that it
can be done (and use all the tricks of the entrepreneur’s trade to do so) but also to do so in a form
that makes it commercially sustainable. Bringing a radio within reach of rural poor across Africa
is a great idea – but someone still has to pay for raw materials, build and run a factory, arrange
for distribution and collect the small money from the sales. None of this comes cheap, and
setting up such a venture faces economic, political and business obstacles every bit as hard as a
bright startup company in medical devices or computer software working in a developed country
environment.
i. Recognizing opportunities:
Many potential social entrepreneurs (SEs) have the passion to change something in the world –
and there are plenty of targets to choose from, like poverty, access to education and healthcare.
But passion isn’t enough. They also need the classic entrepreneur’s skill of spotting an
opportunity, a connection, a possibility which could develop. It’s about searching for new ideas
that could bring a different solution to an existing problem, for example the microfinance
alternative to conventional banking or street-level moneylending.
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As we’ve seen elsewhere in the course the skill is often not so much discovery (finding
something completely new) as connection (making links between disparate things). In the SE
field, the gaps may be very wide, for example connecting rural farmers to high-tech international
stock markets requires considerably more vision to bridge the gap than spotting the need for a
new variant of futures trading software. So, SEs need both passion and vision, plus considerable
broking and connecting skills
ii. Finding resources
Spotting an opportunity is one thing, but getting others to believe in it and, more importantly,
back it is something else. Whether it’s an inventor approaching a venture capitalist or an internal
team pitching a new product idea to the strategic management in a large organization the story of
successful entrepreneurship is about convincing other people.
In the case of SE, the problem is compounded by the fact that the targets for such a pitch may not
be immediately apparent. Even if you can make a strong business case and have thought through
the likely concerns and questions, who do you approach to try to get backing? There are some
foundations and non-profit organizations but in many cases one of the important skill sets of an
SE is networking, the ability to chase down potential funders and backers and engage them in the
project.
Even within an established organization, the presence of a structure may not be sufficient. For
many SE projects the challenge is that they take the firm in very different directions, some of
which fundamentally challenge its core business. For example, a proposal to make drugs cheaply
available in the developing world may sound a wonderful idea from an SE perspective but it
poses huge challenges to the structure and operations of a large pharmaceutical firm with
complex economics around R&D funding, distribution and so on.
It’s also important to build coalitions of support. Securing support for social innovation is often a
distributed process, but power and resources are often not concentrated in the hands of a single
decisionmaker. There may also not be a board or venture capitalist to pitch the ideas to. Instead,
it is a case of building momentum and groundswell And there is a need to provide practical
demonstrations of what otherwise may be seen as idealistic pipedreams.
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iii. Developing the venture
Social innovation requires extensive creativity in getting hold of the diverse resources to make
things happen, especially since the funding base may be limited. Networking skills become
critical here, engaging different players and aligning them with the core vision
One of the most important elements in much social innovation is scaling up, taking what may be
a good idea implemented by one person or in a local community and amplifying it so that it has
widespread social impact. For example, Anshu Gupta’s original idea was to recycle old clothes
found on rubbish dumps or cast away to help poor people in his local community. Beginning
with 67 items of clothing, the idea has now been scaled up so that his organization collects and
recycles 40 000 kg of cloth every month across 23 states in India.
iv. Innovation strategy
Here the overall vision is critical: the passionate commitment to a clear vision can engage others,
but social entrepreneurs can also be accused of idealism and ‘having their head in the clouds’.
Consequently, there is a need for a clear plan to translate the vision step-by-step into reality.
v. Innovative organization/ rich networking
Social innovation depends on movable and organic structures where the main linkages are
through a sense of shared purpose. At the same time there is a need to ensure some degree of
structure to allow for effective implementation. The history of many successful social
innovations is essentially one of networking, mobilizing support and accessing diverse resources
through rich networks. This places a premium on networking and broking skills
The problem isn’t just the difficulty of finding resources. The following lists are some other
examples of the difficulties social entrepreneurs face when trying to innovate for the greater
good:
Resources: Not easily available and may need to cast the net widely to secure funding
and other support
Conflicts: While the overall goal may be to meet a social need, there may be conflicts in
how this can be balanced against the need to generate revenue. For example, Lifeline
Energy wanted to provide simple communication devices for the developing world and
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provide employment to disabled people. The costs of the latter made the former difficult
to achieve competitively and set up a major conflict for the management of the enterprise.
Voluntary nature: Many people involved in social innovation are there because of core
values and beliefs and contribute their time and energy in a voluntary way. This means
that ‘traditional’ forms of organization and motivation may not be available, posing a
significant human resource management challenge.
Lumpy’ funding: Unlike commercial businesses where a stream of revenue can be sued
to fund innovation in a consistent fashion, many social enterprises rely on grants,
donations and other sources which are intermittent and unpredictable.
Scale of the challenge: The sheer size of many of the issues being addressed – how to
provide clean drinking water, how to deliver reliable low-cost healthcare, how to combat
illiteracy – means that having a clear focus is essential. Without a targeted innovation
strategy, social enterprises risk dissipating their efforts.
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