Chapter Two: Social Innovation

2.1 What is “social Innovation”?

2.2 Different players
2.3 Motivation: Why do it?
2.4 Enabling social innovation
2.5 The challenges of social entrepreneurship
2.1 What is social innovation?
‘Unlike traditional business entrepreneurs, social entrepreneurs primarily seek to generate
“social value” rather than profits. And unlike the majority of non-profit 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 (that has
now been replicated in 58 countries around the world), 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. A social entrepreneur uses
the same process of entrepreneurship that we saw in Chapter 1 but does so to meet social
needs and create value for society. Social entrepreneurs’ – individuals and organizations –
recognize a social problem and organize an innovation process to enable social change.
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.

1
  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.
Social innovation has a long tradition, with examples dating back to some of the great social
reformers. For example, in the 19th century in the UK the strong Quaker values held by key
entrepreneurial fi gures like George Cadbury led to innovations in social housing, community
development and education as well as in the factories which they organized and managed. As
Geoff Mulgan and colleagues point out: ‘the great wave of industrialization and urbanization
in the nineteenth century was accompanied by an extraordinary upsurge of social enterprise
and innovation: mutual self-help, microcredit, building societies, cooperatives, trade unions’.
2.2 Different players
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.
1. 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 lowcost
irrigation technologies to help subsistence farmers survive dry seasons.
• nshu Gupta, who has formed a channel for recycling clothes and fabric to meet the needs
of rural poor in India. He initiated Goonj in 1998 with just 67 items of clothing; today, his
organization sends out over 40 000 kg of material every month, in 21 states.
• 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.
Big business
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

2
make use of formal measures – such as the triple bottom line – to monitor and communicate their
focus on more than simple profit t-making.
1. 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 book, there is huge scope for
innovation 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.
Occasionally there is a radical innovation, for example in the UK the setting up of a National
Health Service to provide healthcare for all, free at the point of delivery or the establishment
of the Open University, which brought higher education within reach of everyone. But most
of the time social innovation in the public sector consists of thousands of small incremental
improvements to core services.
2. 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.
Some of these – for example Cancer Research UK and Macmillan Cancer Relief – have
created innovation management groups which work to use the kind of approaches we have
been exploring in the book to help improve their operations.
2.3 Motivation: Why Do It
It’s worth pausing for a moment to reflect on the underlying motivation for social innovation,
whether we are talking about passionate individuals, enlightened corporations, public sector
institutions or ‘third sector’ organizations.
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:
1. License to Operate

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

3
goes beyond public relations in many cases with genuine efforts to ensure social value is
created alongside economic value, and that stakeholder’s 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. It is easy to become cynical about CSR activity,
seeing it as a cosmetic overlay on what are basically the same old business practices. But
there is a growing recognition that pursuing social entrepreneurship-linked goals may not be
incompatible with developing a viable and commercially successful business.
This value is in both intangible domains like brand and reputation and increasingly in bottom
line benefits like market share and product/service innovation. And the downside of a failure
in CSR is that public perception of the organization can shift with a negative impact on
brands, reputation and ultimately performance. Concern in the UK over the tax arrangements
of Amazon, Starbucks and Google forced changes in their operating agenda, while the
backlash against fast-food meant that players like McDonald’s and KFC had to rethink their
approach.
2. 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.
3. 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

4
group with very different characteristics to those of the mainstream population can provide a
laboratory for the emergence of innovations 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 man-made
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.
Learning from such experiments can lead to the wider application of the underlying concepts,
for example GE’s best-selling portable ultrasound scanner emerged from a small project to
meet the needs of midwives working in rural villages in India. Other examples include
changing business models in banking and resilient logistics using lessons originally learned in
humanitarian crises.
2.4 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 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. Fuelling the whole is
the underlying creativity, drive, foresight and intuition to make it happen – entrepreneurship
– to undertake and take the risks.

5
 2.6 The Challenges of 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.