Innovation is deeply engrained in corporate DNA, as the engine to outperform competition in increasingly saturated markets. Evidence of business’ tremendous innovation power reaches us every day under the form of new or improved products, some of which are glorified for their disruptive effects on entire sectors. But although we are surrounded with great innovations, you will probably struggle to name compelling examples of social innovation driving real progress on pressing societal issues such as malnutrition, access to safe drinking water or healthcare.
So why have so few corporations done for social and environmental challenges what Apple has done for the computer industry or Amazon for the publishing industry?
Make no mistake; corporations haven’t simply failed to recognize the opportunity. A myriad of pilots have lived and died, or are still in the process of testing innovative solutions to these challenges, such as micro-insurance or telemedicine. But something is preventing these promising pilots from growing into large scale solutions that would not only offer a competitive edge to companies, but also bring durable solutions to pressing societal needs.
FSG took a closer look into this paradox in the Harvard Business Review article “Innovating for Shared Value”. In order to identify the key ingredients for social innovation driving large scale social and business benefits, we studied dozens of examples of corporate innovation to single out the common drivers of shared value creation. We found that the scarcity of compelling examples derives from the complexity of the recipe, made of five mutually reinforcing ingredients:
- Purpose: Leaders in social innovation are redefining the purpose of their company to be about meeting critical social needs. To do so, they embed the social mission into their corporate culture, until it ultimately infiltrates their products and services. Through this process, the electronics company Philips became a leading manufacturer of green products, which calls for a company-wide effort to constantly rethink existing business models and products, in order to develop solutions for carbon footprint reduction.
- Defined Need: Large scale social innovations are rarely born under high level themes such as “health” or “education”, but are instead grounded in the thorough understanding of very specific needs. While these can often be addressed by leveraging existing corporate competencies, they sometimes require breaking new grounds. Indeed, before developing its innovative water purifier Pureit, Unilever conducted extensive research into low-income Indian customer habits, which pointed to the need for the company to venture into the new segment of consumer durable products.
- Measurement: Leaders in social innovation also establish upfront a data-driven understanding of how social innovation will impact a problem, and how the resulting change in the social condition will create business value. When IBM developed Smarter Cities, the business case modeling revealed a market worth some $57 billion, and $10 billion potential sales for IBM by 2015, linked to cities’ more efficient management of energy, water, traffic, parking, public transit or crime. This determined the level of investment committed to develop the technology and expertise to increase connectivity by tracking information within and between systems.
- Co-Creation: To successfully venture into these unfamiliar grounds, companies forge unconventional partnerships to bring in the unique expertise needed throughout the innovation cycle, and tap into civil society, academia or philanthropy’s experience tackling complex societal issues. Indeed, when Becton Dickinson developed the world’s first safety engineered syringe to protect health workers from needle stick injuries which spread HIV and other infections, building partnerships with governments, international agencies and NGOs became a systematic practice for the company to achieve its mission.
- Innovation Structure: Last and not the least, in order to nurture innovation until maturity, the innovation structure needs to be thoughtfully chosen. This can mean applying an extra social filter on existing R&D process or shielding the innovation in a separate unit. As Unilever’s water purifier Pureit represented a substantial shift from existing business lines, with a higher risk profile, the team worked from a separate unit directly reporting to the head of the pilot country. After a successful scale-up in India, the product was progressively reintegrated into corporate functions.
We all know that an elaborate dish takes more than picking the right ingredients; much will depend on the talent of the cook. The same applies to social innovation, where success can often be traced back to the talent and determination of a visionary leader within the company. Also, the ingredients need to be skillfully dosed and worked into the mix, and for this part FSG’s latest article should prove useful.
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The Shared Value Initiative is a vibrant community of practitioners driving the adoption and implementation of shared value strategies among leading companies, civil society, and government organizations. Community members are provided a wealth of opportunities to learn, engage, and connect with peers on issues of vital importance to business and social impact. Join the shared value practitioner community at sharedvalue.org>