Government 2.0, Sustainability

The Economist on social innovation

I read Let’s hear those ideas at the Economist with great interest, to get a sense of how social innovation might be represented to a business/finance audience.  It is quite a good piece, but one aspect of it stood out for me:

However, so far the enthusiasm for social entrepreneurship has run ahead of its effects. The problem has not been a lack of good ideas… The problem is instead one of speed and scale. Successful innovations have spread only slowly, if at all. In business, entrepreneurial firms that do well grow fast; but social entrepreneurship does not yet have a Microsoft or a Google. Policymakers hope that with encouragement from the state social entrepreneurs’ best ideas can be spread faster and wider.

While I agree that we need to diffuse social innovation more widely (and as rapidly as possible), the idea of scaling, of creating the next “Microsoft or a Google” in social innovation perhaps misses part of the point.

Ezio Manzini has spoken about small, local, open and connected [site no longer available] social innovations being an appropriate path forward for diffusing social innovations.  In his recent talk he talked about how such innovations have economies of scope, as opposed to the more traditional view of economies of scale.

Through connecting and synergising, social innovations have the potential to maintain the important local-ness and human scale while replicating the benefits to a wider group.  I’m sure I’ve read in one of his papers (though I can’t seem to find the reference) that in fact trying to increase the scale of social innovation may actually reduce the sustainability of the activity, suggesting that trying to scale such innovations is perhaps looking to solve the wrong problem.

This is not to say that social innovation doesn’t need support.  The Economist article points to some great initiatives in the US and the UK that are allocating funds to support social innovation.  More of that is definitely needed.

Something to consider, though is Ezio’s suggestion that Government needs to consider how to engage with such initiatives, leaving enough room for innovation to occur, while building the frameworks that support the longevity of initiatives.  This is a different way of working for Government agencies and I suspect it will take some adjusting for this transition to occur.

My hope is that funds are directed to create the enabling structures that support more social innovations — e.g. supporting the communities who are already innovating and encouraging further innovation — rather that taking specific ideas and trying to scale them to apply to conditions that are poorly aligned with those that saw the innovation emerge in the first place.  While the latter approach may work in some circumstances, I suspect that it may backfire if not done with care.

(I note that Raul has an alternate take on the article over at the ASIX blog.)

Business 2.0, Sustainability

Intrinsic and extrinsic value

I’ve been having some further thoughts relating to my previous post on value creation, platforms and trust, and the terms “intrinsic” and “extrinsic” value keep coming to mind.

Intrinsic value = “belonging to a thing by its very nature”

The way I’ve been thinking about the concept of “intrinsic value” is the underlying value a business/organisation provides, just by existing.  It’s the value, taken from the community/customer/environmental perspective, that is generated by the business simply existing.  It is the business’ core purpose — the reason that employees will be passionate about coming to work, and customers will be passionate about spreading the word.

In the case of Airbnb, the business exists to support people sharing their spare space.  This provides community value, whether you are a buyer or seller – it enables the community to do things it wouldn’t otherwise be able to do — i.e. afford to travel longer, generate financial return for disused space.  It also has environmental (and one could argue economic) value because it maximally utilises resources.

Similarly, GoGet creates a more convenient mode of transport at a lower cost to the customer.  It also reduces demand for resources (space for parking, one car shared among many people) and places the returns for efficiency back to the company, so they are incentivised to improve efficiency of vehicles etc.

Extrinsic value = “being outside a thing; outward or external”

What I conceive “extrinsic value” to mean is the economic value the business derives from its activity — i.e. financial return to the business.  This is the reward to the company/organisation for providing the intrinsic value that is its core purpose.

A strong intrinsic value proposition makes it much easier to generate these type of returns, as well as providing the broader social and environmental returns that might also be possible.

This is a shift in business thinking from extracting value from the market, to how to creating value for and with the market, and a refocusing on intrinsic value proposition —core purpose — to achieve deeper returns.

These terms might mean different things to different people (I know it means something very different in financial markets, for example), so I wonder if using this language makes sense?  But in any case, I hope it’s an useful take on focusing on core purpose to achieve business outcomes.

Business 2.0

Purpose, trust, value and platforms

I came across this post [article no longer available] link see on Airbnb via the Collaborative Consumption email newsletter. This quote in particular struck me:

Airbnb should be a modern day case study for a new kind of 21st Century business–a company that creates immensely more value than it extracts from customers. They are adding value to their users’ lives in multiple dimensions all at the same time.

Business models like Airbnb’s are based on value that is co-created with customers. Airbnb creates “immensely more value” by providing the enabling platform for value to be generated, and is rewarded for its contribution to the community.

Michael’s post goes on to discuss the importance of a clear purpose as the foundation stone to build an organisation culture capable of disruptive innovation. I would go further to suggest that for a business like Airbnb, where there traditional models of value-exchange are blurred, that purpose needs to look beyond the financial bottom line – “adding value to their users’ lives in multiple dimensions” is a great way to express that sentiment.

In addition to a clear purpose, there is also a need for trust, a point that Peter Merholtz picks up in this recent post.

Netflix, Nordstrom, Southwest, Zappos, USAA — these are all companies renowned for great customer experience. And they provide remarkable latitude to both customers and employees, a latitude that suggests trust.

As Peter notes, such trust extends beyond employees, it also requires trust in customers — including not punishing the majority of your customers to avoid problems with the minority (Zappos’ liberal return policy, for example). Airbnb is, of course, also a great example of this kind of trust (as are ventures like Kiva and Zopa).

To my mind, these concepts — Purpose, Trust, Co-created value, Platform — represent keystones for socially innovative business.

Business 2.0, Sustainability

Social innovation in business

I’ve been doing a lot of thinking (but clearly not a lot of blog writing!) about the idea of social innovation in a business context.  This ties into some previous thoughts I’ve posted about values and sustainability as a lens for innovation.

Two articles that I’ve come across recently expand on this concept.  The first is from Tim Draimin and focuses on shifting from Corporate Social Responsibility to Corporate Social Innovation.

In the article Tim references Michael Porter’s thoughts:

Michael Porter suggests that CSR has evolved.  He speaks about a concept he calls “shared value” or “corporate policies and practices that enhance the competitiveness of the company while simultaneously advancing economic and social conditions in the communities in which it operates.”

The thinking goes that while traditional CSR programs are often viewed as an adjunct to the core business, something that happens “to the side”, the idea of CSI is that the benefit comes from the core business itself.  (While I do have reservations about the Corporate Social Innovation moniker, I do think the concept has merit.)

This is akin to what Adam Werbach outlines in his book Strategy for Sustainability when he talks about North Star goals and aligning sustainability goals with core business activity.  To my mind this also very much aligns with the concept of “betterness models” as put forward by Umair Haque.

I was reminded of this article (which I read quite a few weeks ago now) when I came across Dan Gray’s post on delivering short-term “quick wins” for sustainability within the context of a longer-term sustainability agenda.

In his post he says:

The authenticity of your commitment stems from the materiality of your actions – i.e. beyond the thin veneer of charitable giving, cause-related marketing etc., that commitment should be self-evident in the very products and services you provide, and the manner in which you conduct your daily business.

And goes on to quote Jonathon Porritt:

In an ideal world, all actions taken by a company to enhance its own commercial success should simultaneously generate benefits for society, over and above those that come directly through the use of that company’s products and services.

There are, of course, a number of cultural drivers that make consideration along these lines important for businesses moving forward, and I think they tie into the shift we’re also seeing in relation to social technologies (social networks etc.).  A quick summary of my current thinking is that people are seeking:

  • Human connection: as organisations have grown in size and become more and more depersonalised, people are wanting more human interactions and personal response.
  • Authenticity and transparency: from greenwashing to the GFC, the market’s trust has been eroded.  People are looking for organisations to say what they mean and mean what they say.
  • Co-creation and collaboration: people are taking a more active role in developing the products and services that they use.  And if they don’t find what they’re looking for, they will often create it themselves.
  • Environmental and social responsibility: global warming, looming limits to natural resource consumption, pollution and waste; respect for human dignity with fair wages and conditions — people want to support organisations that take these issues seriously, not just as something “to the side”.

Building a business (or service/product/brand) that resonates in this new “economy of meaning” requires a rethinking of an organisation’s role in more than “market” or financial terms.  But also, I think, a re-evaluation of an organisation’s relationship with customers/constituents, stakeholders, and the environment.

And I believe that it is in this rethinking that significant opportunities for innovation can be found.