The World Economic Forum’s Global Agenda Council on Social innovation defines social innovation as “the application of innovative, practical, sustainable, market-based approaches to benefit society in general, and low-income or under-served populations in particular”.
Traditionally associated with social entrepreneurs, this tool is increasingly being adopted by business. This is a trend to be welcomed, supported and replicated as companies - big or small, multinational or national - can contribute to taking the practice of social innovation to a significantly larger scale.
While philanthropy, social responsibility and corporate governance all already play a role, we will probably see more powerful contributions when companies embed social innovation into their core business strategies and operations. For the World Economic Forum’s new report on Social Innovation, we spoke to over 30 companies about their experiences of pursuing such initiatives within their business, and below are 5 key lessons:
1. Identify how social innovation can create business value
For companies, social innovation is not just a good thing to do. There is a business case for pursuing social innovation. Our interviews revealed a number of measurable business benefits – reduced costs, increased profits, strengthened supply chains, more innovation, new revenues, legitimised license to operate.
For some companies, it is a tool to respond to risks that will affect their business in the visible future. For example, as experts predict a shortage of cocoa by the year 2020, many chocolate manufacturers are working with social enterprises and NGOs to make cocoa farming more economically attractive to farmers, including smallholders.
For others, it is a “long tail” investment in developing business with future consumers, including low income populations currently not served by their products or services. Micro-insurance products, LED lamps, micro-nutrient fortified food products, cashless payment systems, affordable health devices – companies are exploring a range of innovation opportunities. Social innovation can also be a means to build relationships with local governments or strengthen their “license to operate” in society. While specific opportunities and benefits will depend on the company, its core assets and capabilities and the industries and geographies in which it operates, below are some generic opportunities and benefits.
2. Guide from the top; mobilise across the company
Not surprisingly, CEOs and senior leaders are best placed to chart the vision and mobilise a company’s resources. In the companies we studied, CEOs played critical roles - integrating social goals into the company’s vision and business plans, empowering and challenging their teams to come up with social innovation ideas and supporting intrapreneurs who came to them with great ideas.
The support of the CEO and senior management is critical to ensure that social innovation initiatives take centre stage and do not remain “one-off projects”, are closely linked to company strategy and are able to mobilise support from across the company.
At MasterCard, for instance, when CEO Ajay Banga made financial inclusion a top corporate priority, related targets were included in the company’s 10 strategic objectives. The company also made a public commitment to connect an additional 500 million people, including millions of small merchants, to the formal financial system by 2020. As a result, teams around the company started identifying new opportunities to use existing business capabilities to serve financially excluded customer segments. Senior leaders can also lead the way in implementation – when Royal DSM started its change management work on innovation and sustainability, CEO Feike Sijbesma and other board members assumed key roles in the process as Chairs or Sponsors of internal and external initiatives.
3. Support social innovation “intrapreneurs”
“If you are the CFO or HR head of a company, you know exactly who your peer is in another company. If you work on social innovation initiatives that is not the case,” said one of our interviewees. Social innovation ideas often struggle to find clear owners within a company. While we did hear stories where individuals were able to turn their ideas into a success, individual efforts can only go so far.
Not unlike other business ideas, successful initiatives managed to secure collaboration across the house – including from business units, innovation and strategy teams and corporate responsibility or corporate affairs teams. The key lesson for companies is to sensitise teams across the house to identify ideas, challenge them to make them viable and business relevant and support them to implement. Development programmes, competitions, awards, internal communication tools, innovation budgets, intrapreneurship workshops can all be tools to support “intrapreneurs”. SAB Miller for instance, created the Mackay Awards, an internal recognition for initiatives that grow the business while generating clear social and environmental benefits. Centrica took advantage of an internal talent development program to create a social innovation challenge for its high-potential professionals and subsequently implemented the winning proposal: IGNITE, United Kingdom’s first corporate impact fund investing in energy enterprises. IGNITE investees are improving access and lowering energy cost for communities by finding new ways of generating, supplying, using and saving energy.
4. Incubate ideas with patience and rigour
In many ways, coming up with social innovation ideas is the easy bit. What’s harder is converting them into feasible concepts, prototypes or business models and more importantly, scaling them to a point where the business benefits are clear and measurable. They pose unfamiliar design challenges. They often take longer to get to market and to reach profitability. And often, as recognised by Phillips, they can get stuck in conventional structures and information flows.
In 2013, the company found that its Africa sales teams were generating numerous inclusive innovation ideas aimed at marginalized communities including LED lights with solar panels and medical devices for villages with few resources. Though these ideas were passed on to business units, the latter were not picking it up as their existing retailers responded that they would be of no interest to their existing higher-income customers. In 2014, the company created a new structure - the Africa Innovation Hub, which went to market with a “pay-as-you-go” model that works outside of its existing distribution chain and rents out LED lights to low-income households for a daily fee (thus helping customers who struggle with a large upfront payment).
Like in the case of Phillips, social innovation initiatives may need new structures, specialised funding to support experimentation, and performance thresholds and timeframes that may be different from other ideas. At the same time, if they are seen as too “special”, it will be harder for executives to understand, implement and improve as part of their day-to-day business processes. It is important that the idea is relevant to front-line businesses and has the future potential to achieve performance metrics that are desired by business units. Experiment, evaluate performance through tailored metrics and do not hesitate to stop the ones that don’t show potential so you can spend more time supporting the ones that do.
5. Work with others, especially those closer to social issues
Almost every company we studied found partners to work with – civil society organisations, social entrepreneurs, academic organisations and local experts. Partners can bring in complementary skillsets, trusted relationships and a sense of what works and doesn’t in that local context. In 2014, Merck developed a new, reliable, easy-to-use method to help with the clinical management of HIV patients in partnership with the University of Yaoundé in Cameroon. The partners ran field tests for two years until the system could withstand extreme heat and humidity, was compatible with variable power systems, and was impeccably easy to use – product specifications that presented new challenges for Merck’s product developers. Companies should invest time to be close to the customers and partners when pursuing social innovation. Foster a culture of ongoing interactions with people from other sectors – the recently launched Sustainable Development Goals (SDGs) provide an opportune framework for companies to explore such partnerships.
Social innovation, especially in an established company, may call for significant change management. While the logic, capabilities or processes needed may not be very different from “business as usual”, using them with the explicit intent to solve a societal challenge is.