Chapter 2

Social Innovation
LEARNING OBJECTIVES
By the end of this chapter you will develop an understanding of:
 social entrepreneurship and social innovation  social entrepreneurship as an organized and
disciplined process rather than a well- meaning but unfocused intervention  the difficulties in
managing what is just as much an uncertain and risky process as ‘conventional’ economically
motivated innovation  the key themes needed to manage this process effectively
2. What Is ‘Social Innovation’?
In this course, 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: Bill Gates
(Microsoft), Richard Branson (Virgin), James Dyson (Dyson), 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 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. These are people who undoubtedly fit our
entrepreneur mould 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
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 programme, 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.
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.
By engaging stakeholders directly, companies are also better able to avoid conflicts, or to resolve
them when they arise. In some cases, this involves directly engaging with activists who are leading
campaigns or protests against a company.
Sometimes there is scope for social entrepreneurship to spin out of mainstream innovative activity.
Procter and Gamble’s PUR water purification system offers radical improvements to point-of-use
drinking water delivery. Estimates are that it has reduced intestinal infections by 30 – 50%. The
product grew out of research in the mainstream detergents business but the initial conclusion was
that the market potential of the product was not high enough to justify investment; by reframing it as
a development aid, the company has improved its image and opened up a radical new area for
working.
In some cases, the process begins with an individual but gradually a trend is established which other
players see as relevant to follow, in the process bringing their resources and experience to
the game. An example here is the Fair Trade range of products, which were originally a minority idea
but have now become a mainstream item in many supermarkets.
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 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.
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.
Supporting and Enabling 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.
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
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 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.
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.
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.
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 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, fl ood 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
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. Felling the whole is the underlying creativity, drive, foresight and intuition to make it happen –
entrepreneurship – to undertake and take the risks.
So how does this play out in the case of social entrepreneurship? Table 2 gives some examples of
the challenges
TABLE 2 Challenges in social entrepreneurship What has to be managed...
Challenges in social entrepreneurship
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 As we’ve seen elsewhere in the book 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 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 fi rm 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 decision-maker. 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. The role of pilots which then get taken up and gather support is well- proven, for
example the Fair Trade model or microfinance
Continued TABLE 2 Challenges in social entrepreneurship What has to be managed...
Challenges in social entrepreneurship
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. The principle has been applied to other materials, for example recycling
old cassettes to make mats and soft furnishings 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
Innovative organization/ rich networking
Social innovation depends on loose 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
2. 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.
The problem isn’t just the difficulty of finding resources. Table 2 lists some other examples of the
difficulties social entrepreneurs face when trying to innovate for the greater good.
2. Key Terms Defined
 Social enterprise - an organization that tries to pursue a double bottom line or a triple bottom line.
 Social entrepreneurship - applying entrepreneurship to achieve social goals rather than (but not
excluding) financial reward.  Triple bottom line - simultaneous assessment of a company’s
performance against its financial and shareholder performance, its internal and external stakeholder
expectations and responsibilities, and its environmental responsibilities.
2. Discussion Questions
1. Give a man a fish and you feed him for a day. Teach a man to fish and he can feed himself for life.
How could you put this principle into practice through a social entrepreneurship venture – and what
would stop you making a success of this?
2. ‘Some problems have no solution’ – a somewhat pessimistic Japanese saying. How could a social
entrepreneur challenge this?
3. Jasmine Chang has approached you – as an innovation adviser – with a novel treatment for
childhood diarrhoea. How would you advise her to take this idea forward to make a difference?
4.
4. In many ways, taking a socially valuable concept to market has much in common with ‘conventional’
new product development. Where do you see the similarities and differences?