Yes Minister: Exploring the Policy Options to Scale Social Innovation

Screen Shot 2013-05-21 at 4.28.12 PMThe interest in social innovation has grown over the last 10 years but it’s not new – since the dawn of time individuals, families and communities, governments, and companies have developed innovative solutions to tackle social problems. What is new is the energy being invested into taking our social innovation abilities to a higher level. Around the world there are initiatives to connect innovators, share knowledge of what works, find ways to attract resources, and develop new partnerships that cross communities and sectors. And what is also new – Governments are starting to recognize that they are a critical partner in scaling proven social innovation.

At a Tipping Point?

From our point of view, the trend lines are extremely encouraging. A confluence of factors – including reduced government expenditure, a greater emphasis on evidence-based interventions, growing consciousness among investors, and a new generation of talented social entrepreneurs who are pushing boundaries and developing disruptive solutions – all point to a window of opportunity that cannot and should not be missed.
Schwab Foundation (2013). Breaking the binary: Policy Guide to Scaling Social Innovation

In April 2013 the Schwab Foundation for Social Entrepreneurship released a report revealing how governments are starting to significantly invest in policies to enable social innovation. The report provides examples from 10 diverse countries such as the US, Colombia and India. The Foundation believes that 2013 will be a “watershed” year – a proliferation of social innovation policy-making around the world. There is compelling evidence that this will be the case. For example, there is

While some countries have a single initiative, others are developing a portfolio of policies. The reasons for this activity are clearly influenced by local conditions and priorities but some of the motivations for governments to engage in social innovation cross national boundaries.

What might be driving Governments to Social Innovation?

The interest in engaging with social innovation appears to be driven by a number of factors that are pushing and pulling governments to act. These include

  • intense pressures on government finances – e.g., declining rates of economic growth and deepening government deficits – that mean “business as usual” is not possible;
  • complex social problems resistant to existing policies even with increased spending – e.g., poverty and homelessness;
  • new problems emerging – e.g., ageing of society and increasing social isolation – but limited resources are already locked into maintaining existing systems (bureaucracies, institutions and agencies);
  • advances in technology present opportunities for governments to engage individuals and communities in new ways – e.g., online platforms can create connections between citizens and the state to focus on a social problem, identify proven social innovations and scale them, and more generally to co-create public policy;
  • a wider interest in changing the relationship between the state and its citizens in regard to social problems – a shift from “it’s the government’s problem” to “lasting solutions require the participation of all sectors: government, business, community sector, and academy”;
  • growth of interest in social entrepreneurship and social enterprise and demands for greater access to existing markets and government funding programs for organizations that blend social and financial goals;
  • philanthropic interest (and capacity) to engage with systemic social problems;
  • rising public expectations that businesses should play an active role in tackling social problems that go beyond existing CSR efforts; and
  • recognition that innovating to meet social needs can generate significant economic benefits – creating new markets and industries.

These factors lead governments to adopt a variety of different roles in relation to social innovation.

Different Roles Governments are Playing

The initial phase of government activity, for most countries, tends to fall into one (or more) of the following roles:

  •  reducing barriers for social innovators to participate in existing systems – such as expanding eligibility criteria to existing government programs;

For example, Australia’s $3 billion national program to fund large scale R&D projects added social innovation to its criteria in 2009. In March 2013 the Prime Minister announced $[AUD]31m for a consortium of private, public and not-for profit partners to change the way people with autism live. The successful bid included 56 participants from not-for-profit Autism service providers, universities, federal and state government and commercial partners who provided additional cash and in-kind contributions exceeding $[AUD]63m – with the government’s contribution this project raised over $[AUD]100m. The consortium is focused on ambitious, and specific, social impact outcomes including increasing the number of young people with Autism Spectrum Disorders in tertiary and vocational education sectors by 20% and reducing the rate of unemployment of people with Autism Spectrum Disorders by 20%.

  • incentivising participation in social innovation using regulatory and economic instruments – such as legislation to introduce a new business type designed to operate with primarily social objectives, and extending tax benefits.

For example, the UK Government introduced legislation in 2005 to create Community Interest Companies (CICs) specifically designed for non-charitable social enterprises. There are over 6,000 CICs in the UK. In the US, as of January 2013, nine States have passed legislation for L3Cs – low-profit limited liability companies. Another new organizational form that has been established in eleven States in the US is the Benefit Corporation. And there are 700 B Corp’s in 27 countries. British Columbia passed legislation in 2012 to create Community Contribution Companies (C3). This legislation will come into effect at the end of July 2013.

  •  actively convening diverse individuals and groups to break down the silos that prevent growth and to promote the generation and sharing of ideas;

For example, The South Australian Government provided seed funding to create The Australian Centre for Social Innovation (TACSI) to develop new solutions to Australia’s social challenges and to spread new approaches to social problem solving. Their design lab has already developed Family By Family, a new proven approach to tackling the causes of children being removed from their families and placed in crisis care.

  •  experimenting with new forms of commissioning to leverage private finance, encourage social entrepreneurship, bring innovative community-based programs to scale, and promote rigorous program evaluation;

For example, the US Government established the Social Innovation Fund in 2009 to enable public-philanthropic partnerships. As of 2012, $95 million in federal funds have been awarded, and $250 million in additional private funds (from over 150 private philanthropic funders) have been leveraged through the program, impacting over 100 cities in 33 states. Another example that has had international coverage is Pay for Success or Social Impact Bonds that are designed to reward private investors who successfully tackle a social problem, enabling them to share the savings to the public purse. Payment is tied to contractually agreed outcomes. The first Social Impact Bond (SIB) was pioneered in the UK to reduce re-offending rates of short-term prisoners. There are now 14 SIBs that are issued or being developed in the UK targeting homelessness, health and social costs of the elderly, and preventative and early intervention services for children and families. In the US, the federal government directed $100m of existing funding in the 2012 budget toward Pay-for-Success programs and in 2012, the City of New York issued a $9.6 million social bond for prisoner rehabilitation. And in Australia, the Government of New South Wales launched three pilots in 2012 in the area of child protection, foster care and juvenile justice. Many others are exploring SIBs.

  • seeking to embed social innovation principles within the public service by encouraging cross-department collaborations and proactively engaging users and citizens in the review and development of policy.

For example, the Danish Government has created MindLab, a cross-ministerial innovation unit which involves citizens and businesses in creating new solutions for society, working with civil servants in three parent ministries. In 2010, the UK Government launched its “Big Society” policy to unleash the capacities of individuals, families and communities to have more of a say and control on how public services are organized and delivered and to develop a “relational state”.

Where is it all heading?

It is very difficult to predict how the interest in social innovation will develop but some developments seem likely:

  1. The pressure is likely to continue to build on governments to deliver more with less resources as well as tackle significant social problems. More governments can be expected to explore how to enable social innovation within their countries.
  2. Most of the interest will be in social finance – governments will continue to experiment with investment tools, such as Social Impact Bonds, and develop enabling structures to attract private sector investors.
  3. A focus on public service innovation. Social innovation has long been associated with social entrepreneurs who stand outside of systems but there is increasing interest in agents of change who operate within systems. Expect more initiatives like MindLab and public policy innovation units as well as awards and incentives to civil servants and departments who engage in social innovation that reforms/transforms existing rules and practices.
  4. Advances in technology that can enable collaboration and sharing of information (e.g., big data projects) are likely to encourage governments to engage their citizens (even if just symbolically or to respond to a crisis) to examine social problems, promote social innovation and co-create policy.
  5. The growing global network of social innovators and social entrepreneurs will become even more focused and vocal about scaling proven social innovation and will put more pressure on governments to adopt best practices – regulatory, economic etc – from around the world.
  6. The interest in social innovation is likely to grow within the business community. High profile initiatives such as the B Team and the Breakthrough Capitalism initiative may reflect significant shifts in how tackling social problems might be organized. Look out for the KPMG Report.
  7. The rising awareness of social innovation will lead to greater scrutiny of any associated policies. If social innovation policies remain additive and largely peripheral experiments to government activities/funding then they are likely to be left alone. But, if social innovation initiatives lead to a redistribution of public resources, they will be contested by those who currently benefit from the status quo and those who believe that it indicates a government shirking its responsibilities and being duplicitous – hiding cuts behind a promise of community empowerment.
  8. There is likely to be some movement in formal research and education – a few more research centres and the development of social innovation curriculum for students – but academia is still a long way behind the practice of social innovation. This could change. Schools of Public Policy and Innovation streams within Business Schools could start to dedicate more resources to its study as social innovation becomes more mainstream with government and business. Social innovation may also be a bridging mechanism for Universities committed to University/Community partnerships and developing knowledge translation and exchange. Expect also to see research collaborations around evaluating the performance of social innovation policies.
  9. Some governments may use social innovation as a criteria for managing/evaluating their contracts with nonprofits and charities both at home and overseas. Some nonprofits will struggle to meet the new expectations and may find it easier to create separate entities than to develop new solutions within their existing organizations.
  10. New alliances between the public, private and nonprofit sector will continue to develop in areas that previously were dominated by a single sector – such as education, health, and social services. A new cadre of leaders able to bridge the different “logics” of each sector will need to emerge. As organizing arrangements blur sectoral boundaries there will be a greater need to articulate each sector’s unique role to build the conditions to maximize social innovation.
  11. One obvious growth area is likely to be the rise in social innovation intermediaries – not only to support innovation for individuals and cross-collaborative forums (see “backbone organizations” within the Collective Impact approach developed by FSG) but also to develop the social finance marketplace to advise those seeking funding and to develop portfolios for investors.
  12. The use of social innovation as a term will continue to be deployed very differently around the world to signal very different priorities. The main differences will continue to be around the primary motivating agent – e.g., nonprofits, social entrepreneurs, private enterprises – degrees of collaboration – e.g., one organization, partnerships within sector, cross-sector collaborations  –  and around qualifying outcomes – e.g., individual or societal benefits, scale, impact, durability, systems change etc. This provides a lot of flexibility to policy makers in how they use the term but the underlying interest in the subject will remain: how to enable and work alongside diverse stakeholders to develop effective solutions to complex social problems.

And…irrespective of government action – individuals, families and communities will continue to develop solutions to their everyday problems irrespective of how these solutions are labelled and will continue to connect with like-minded individuals around the world.

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