Social Innovation Inc: Seeking to transform the way businesses approach social change

How businesses should engage with social issues has long been a subject of debate. At one end of the spectrum are those who think businesses have a duty to engage in social issues.  At the other end are those who think that businesses should just worry about making money.  Jason Saul in his new book “Social Innovation Inc: 5 Strategies for driving business growth through social change” argues that both are possible.  But it will require transforming the way most businesses think about social change.

The case for a new paradigm: Recognizing the Social Capital Market

The reason that social change, Saul argues, should be a central business concern is that there is an emerging market for tackling social problems, which he terms the “Social Capital Market”, that is potentially worth billions even trillions.

“Social change may be the last untapped business market. It is home to some of the largest profit pools today: the uninsured, delivering alternative sources of energy, eliminating food deserts, alleviating poverty, and eradicating disease.”

Saul writes “simply put, social change has become a valuable economic commodity: people are willing to pay for it, sacrifice for it, invest in it, and work for it”.  But there is a problem.  Even businesses that have expressed interest in social issues may be working with the wrong paradigm. The current approach, Saul argues, is based on a ‘social contract’ model where businesses engage in social issues as a way to “give back”.  The downside of this approach is that not only have businesses failed to realise the potential of the emerging Social Capital Market but many approach social change with an inbuilt conservatism – social problems are approached as risk management issues rather than as something to be solved. The solution, Saul argues, is to engage in social innovation, innovations that deliver financial returns by tackling social problems.

Social Innovation Inc and 5 Strategies: No longer running on the fumes of goodwill

The big “Aha!” about social innovation is that if you can hook directly into a company’s business engine, the resources, level of commitment, and ultimately social impact will be much greater than when you’re running on the fumes of goodwill.

Saul defines social innovation as “Strategies that are specifically designed to generate economic value through positive social change”.  The implication is that social innovation should be a core business activity that is:

focused primarily on driving business value – leveraging the machinery of business to solve social problems… it is not about putting profits second, or doing good and hoping that it adds up to something beneficial for the business.  It is a more direct linkage, forged by intentionally putting positive social change in the way of the business.

Put even more succinctly: “social innovation is about innovating creative, market-based solutions to social problems that result in high growth, profitable business opportunities”. Through this lens, Saul offers five different strategies for businesses interested in social innovation:

  1. Create revenues from submarket products and services – tapping into needs not currently served by the market that are currently almost exclusively served by nonprofits and governments.  (Saul’s example – the work of Wellpoint to create an insurance product for uninsured young adults in the US).
  2. Enter markets through backdoor channels – access markets that were previously considered impenetrable because of ‘social’ barriers  (Saul’s example – Tesco opening small outlets offering healthier ready-to-eat meals and fresh produce in US “food deserts” – areas underserved by grocery chain stores).
  3. Build emotional bond with customers – social change efforts as a way of developing a brand to secure customer loyalty.  (Saul’s example –  OfficeMax’s a Day Made Better service to provide stationery supplies to teachers in schools who had previous paid for school supplies out of their own pocket).
  4. Develop new pipelines for talent – invest in the future workforce. (Saul’s example – Hartford Insurance Company investing in local school programs).
  5. Influence policy through reverse lobbying – lobbying government on social changes that directly impact the success of the core business. (Saul’s example – Safeway supporting the policy of Universal Health Care).

Thoughts

In many ways I find Saul’s argument refreshing. The proposition is a simple one – businesses are about making money and they can do this by engaging in social change projects.  The examples provide supporting evidence – that well-known companies such as Walmart, Tesco, Wellpoint and McDonalds can engage in social projects such as make medicines more affordable, provide healthy foods, insure the un-insured, and provide care for orphans – and at the same time make significant financial returns. There is also no need to fret about finding ways to measure such social change as the standard business metrics will do. There is also no need to create new types of organizations such as social enterprises or deal with the challenges of hybrid organizations – business can just integrate social innovation into existing structures.  In addition there is also no need to worry about which social problems to tackle – just the ones that the business can leverage for economic gain. And businesses need not be embarrassed by their approach.  They can unapologetically engage in social issues as their motives are transparent to all. It is hard not to be positive about the prospect of some of the largest businesses on the planet using their resources to tackle social problems.

But…Saul in his last few pages, however, does identify some of the problems of viewing social innovation purely through a business lens.  I wish that he had explored this a little further. He makes a passing reference to the fact that some social problems may have been directly caused by business activity. Even when the economic motivation for engagement in social problems might not be compelling, the moral one might certainly be.  Saul also mentions that some social problems don’t appear to have market potential (e.g., racism, youth violence, institution building, civic participation, gay rights, abortion and guns) but it is unclear what would be done about these except that they should be tackled by government. He also talks about participation with governments (not particularly nonprofits) but he doesn’t explore how their different sets of values might interact.  For example, while it might be liberating to know that businesses are tackling social problems for financial gain, how might that effect partnerships with others who have engaged without obvious benefits. His use of the term ‘social capital’ market is probably the most jarring for those who view social innovation more in terms of participation where social capital refers to social ties and the quality of  relationships that is lost by a purely economic focus.  As Sasha Dichter reminded me today in his blog:

One of the biggest problems about looking at everything through an economic lens is that you inevitably place more value on the things that are easy to count and easy to measure.

But Saul’s book is aimed at business readers. This book is targeted at middle and senior managers in business and Saul’s objective is to persuade them that there is a market here and that existing approaches are inadequate – doing well by doing good no longer cuts it. The focus on economic returns should certainly catch the attention of corporate leaders and company boards. Saul argues that the timing is right for social innovation:

“We are living in a profound, strategic moment. The world has never before faced greater social ills – poverty, hunger, homelessness, disease, lack of education, poor health care, threats to bio-diversity – the list is overwhelming.  At the same time, business has never before been so empowered to solve these problems.

What company in the land could afford to ignore social innovation when it could lead to new markets, opportunities in existing ones, the creation of new profitable partnerships and higher levels of customer loyalty…and at the same time offer a chance to make a significant social impact. If that gets businesses to the table who are interested in seriously tackling social problems then I’m all for it :)

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