Meet Your New R&D Team: Social Entrepreneurs

Harvard Business Review

The smartest minds in social innovation are increasingly committed to engaging with the private sector to make significant changes in areas like health, education, and poverty. As Steve Davis, former lead in McKinsey's Social Innovation practice and president of the global health NGO, Path, has said: "The best social innovations are not necessarily widely adopted. The 'iPods' of poverty alleviation and literacy have likely been invented and put to use by small organizations in some corner of the globe, but there is no market for identifying these breakthrough ideas and ensuring widespread adoption."

While the public sector may be embracing market forces, most corporate social responsibility (CSR) departments still face significant obstacles when it comes to unlocking core capabilities. Gurus Michael Porter and Mark Kramer have tried to reframe the role of CSR by putting forth the concept of Creating Shared Value (CSV) as an alternate model, with "innovation and growth" as one of three primary value propositions. This framework has the potential to reverse the typical role of CSR, currently viewed as a way to "give back" to communities that a business operates in. What happens when you reverse that model and place these investments at the front-end of your corporate innovation strategy? Can you drive both new opportunities and new behavior within your organization while achieving social impact?

The Innovation Continuum

Corporate social impact investments can be re-thought of as a way to "de-risk" new models by investing in market innovators, such as social entrepreneurs, who don't typically provide market level returns as Matt Bannick, from the Omidyar Network, explains in the Stanford Social Innovation Review. How? Social entrepreneurs can serve as the "R&D function" for learning how to serve underdeveloped markets, according to Jim Koch, director of the Global Social Benefit Incubator at Santa Clara University, which has supported more than 160 social enterprises over the last decade. This approach can often position businesses to be first in line to benefit from new market strategies and scale up innovations that justify further business development within a lower-risk environment because they exist outside the main revenue stream. Consider these examples:

1. Power Generation: Husk Power Systems (HPS) creates small-scale power generation in rural communities in India by converting rice husks (a commonly available agricultural byproduct) into energy. The Shell Foundation provided HPS with market-based expertise and funding to help the company validate and scale its model. The relationship gave HPS the ability to reach more people, and Shell had a front-row seat to learn from HPS's many innovations, including bamboo-based power lines, pay-per-use tariffs, and ultra-low-cost, anti-theft smart meters, according to a recent report by the Monitor Group.

2. Mobile Messaging: In early 2008, frog embarked on Project Masiluleke, a Public Private Partnership (PPP) to address HIV in South Africa. We worked with a diverse network of partners as part of PopTech's Innovation Accelerator program. One of the critical early successes was to leverage a technology developed by the Praekelt Foundation in South Africa, an organization which has a close relationship with MTN, South Africa's second largest mobile network operator. Praekelt identified previously unused messaging space on their network that could be used to send HIV awareness SMS texts. They developed a system to insert these messages into normal data traffic and measure the response through South Africa's National AIDS Helpline. Not only did this service triple call volume into the National AIDS Helpline, it helped MTN identify a new channel to communicate with customers; a win-win for all parties.

3. Self-Guided Diagnostics: As part of the same initiative to address HIV in South Africa, we worked with iTeach, a local service provider for HIV and tuberculosis patients, to provide design support for a new model for self testing, in which HIV test kits could be distributed like pregnancy tests. These kits combine low-cost diagnostics with user-friendly instructions and mobile support services. It offers a much more cost-effective and scalable model for diagnostics in communities with an estimated infection rate of over 40%. There are significant ethical issues with applying this model to HIV in the USA. But it points toward a future in which end users play a much more significant role in the diagnosis and management of disease, supported by real-time remote counseling. New innovations, such as low-cost, gene-based diagnostics may allow us to identify and manage a wide variety of diseases more independently in the near future with far greater precision and lower costs than we do today. One leading example, GeneRadar, is being piloted for HIV diagnosis in emerging markets on the way to broader application in the developing world.

4. Top-Up Utilities: In many parts of the developing world, mobile minutes have become a de-facto currency, opening up a new world of financial transactions that were previously unavailable to the poor. The effects of this "Top-Up Revolution" extend beyond financial services, from mobile-payment systems (m-Pesa), to agriculture and energy (Simpa Networks). frog recently kicked off a collaboration with Sarvajal, a social enterprise in India that is combining local water distribution, cloud technology, and mobile payments to create a new sort of micro-utility that allows customers to engage in an "on-demand" basis to access clean water. frog is studying how perception and engagement with a utility changes when consumers can engage with a utility on their own terms, through small transactions that are made at the point of consumption through Sarvajal's "Water ATM." Social enterprises like Sarvajal could provide a tremendous opportunity for other utility businesses to learn about the future of energy consumption in developing markets — and beyond.

When social-sector initiatives like these are unleashed from the typical constraints of CSR, corporations often see side benefits in increased innovation, efficiency, and vitality. We've seen these partnerships increase organizational capacity by:

1. Changing corporate culture. Social innovation initiatives provide permission to "break the rules."

2. Driving efficiency. Tackling pressing humanitarian issues creates a sense of urgency, and provides permission to shortcut traditional business processes.

3. Increasing collaboration. Embracing non-traditional partners and collaboration models often changes the dynamics of traditional market competition.

4. Promoting transparency. Creating shared value amongst many partners and constituencies often means testing more open approaches.

5. Encouraging experimentation. The need to learn about drivers and indicators of adoption that might not fit within ordinary market measurement models fosters an environment that encourages experimentation.

To apply lessons from social innovation projects within a larger corporate innovation strategy, organizations need to think differently about how to leverage core competencies. As FSG, the global social impact consulting firm founded by Mark Kramer and Michael Porter, put it in a recent report :

"The effect this change of mindset can have on companies is profound. Rather than making small efforts to comply with local laws, companies that seek to create shared value aggressively pursue fundamentally better operational practices. Rather than seeking merely to improve their reputation, they innovate and work with others to actually discover solutions to social problems."

This "change in mindset" is not easy to achieve, and we have seen an increasing appreciation of design as a leading driver of this shift. But there can be an enormous payoff, in terms of the overall health and growth of your innovation strategy, in connecting your organization's core capabilities (and passions) to social innovation initiatives.

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