Many corporations aspire to find innovative solutions to society’s problems. The problem is that most corporations fail to achieve innovations that have both business and societal payoffs. One reason for this is that corporate social innovators—the employees who drive the development of new products, services, and business models that combine profit and impact—face significant organizational challenges. Specifically, they face three distinct dilemmas: they must balance social and financial objectives, they face a double edged sword of legitimacy, and they lack a dedicated home. What can corporations do to help their social innovators? Setting clear targets, offering executive support, and creating room for experimentation would be a good start.
Many corporations aspire to find innovative solutions to society’s problems. Motivated by a growing sense of social responsibility and profit potential, these companies view social and ecological problems as opportunities to develop new products, services, and markets. The problem is that most corporations fail to achieve innovations that have both business and societal payoffs.
One reason for this is that corporate social innovators—the (typically) mid-level employees who drive the development of new products, services, and business models that combine profit and impact—face significant organizational challenges. Drawing on our combined experiences of leading social innovation, and more than 150 interviews with senior and mid-level managers at seven large multinational corporations, we’ve found that corporate social innovators in large multinational corporations face three distinct dilemmas:
Corporate social innovators must balance social and financial objectives. Solutions have to be impactful yet profitable. But forces inside corporations naturally push for higher profit and lower uncertainty—two things that social impact ventures generally can’t guarantee. For example, at times corporate social innovators at Pearson would aim to create products specifically for low-income learners, but internal pressure compelled them toward designing offerings for an easier-to-serve population. Once they drifted away from their mission and focused on solutions for more traditional customers, it became more difficult to switch gears and effectively serve low-income consumers.
Corporate social innovators face a double edged sword of legitimacy. Internally, corporate social innovators are often suspected of pursuing philanthropic activities and not real business. Externally, corporate social innovators are thought of being purely motivated by profit, and not driven to make social impact. They often find themselves having to fight skepticism on both fronts. For example, corporate social innovators at Philips, working to improve access to healthcare through affordable low tech solutions experienced internal barriers which prevented products for segments other than high-end customers from being developed. At the same time, they also struggled to secure partnerships with outside public organizations, as those come with building mutual trust and understanding over time.
Corporate social innovation lacks a dedicated home. Corporate social innovation may sit under CSR, new business units, or the mainstream business. Each have their own resources and goals, making it hard for corporate social innovators to develop initiatives in either of them. Sitting under CSR fuels philanthropic associations and limits access to resources that are available to other divisions. Sitting under a new business unit offers room to experiment, but support from other divisions may be undercut by a perceived lack of fit and margin dilution. The mainstream business applies metrics and processes not fit for purpose. So innovators often find themselves looking for a home without success.
For example, when innovators inside Interface championed innovations to reduce CO2 emissions, some failed to get traction. They were stalled by line managers who lacked capabilities to judge new innovations, insufficient time to develop new innovations, and the absence of a formal program to support innovators. By failing to tie innovations into their formal role or their manager’s targets, these corporate social innovators struggled to advance their initiatives.
While innovation is difficult to achieve in corporations, this is amplified for corporate social innovation. So how can corporations help corporate social innovators overcome these challenges?
First, senior management should work with corporate social innovators to establish clear targets for their initiatives that allow both financial and social objectives to be met. For example, Pearson’s Tomorrow’s Market Incubator has a mission statement that clearly articulates its scope: innovations for low income markets. While these innovations mean that prices need to be kept low, ventures have to be designed to reach scale. The incubator’s director of social innovation Teodora Berkova told us she requires that innovations must create enough customer value with sufficient margins. Meeting these design conditions is the real innovation. Subsequently, the business has to accept that, because it is more complex to serve this segment, upfront financial commitment from the business is required to sustain experimentation over a long period of time, and executive support has to help corporate social innovators keep track with the business case and their social mission.
Second, innovators also need executive support to win over the skeptics and gain legitimacy among key decision makers, both internal and external. Internal legitimacy is most directly gained by showing a positive business case for the innovation. However, it often takes time to demonstrate this, feeding internal skepticism in the face of corporate short-termism and profit maximization. To gain internal legitimacy, employees developing Philips’ Community Life Centers leveraged three things: 1) CEO Frans van Houten’s public commitment to increasing access to healthcare, 2) ongoing support from executive vice-president Ronald de Jong, and 3) corporate targets to improve access to care. Early pilots and sales created internal momentum.
To get buy-in from external stakeholders, including governments, NGOs, and the public, it’s important to reinforce that the company has true social motives. Publicizing the real investments being made and the continued efforts underway can be effective – as can enlisting partners and co-investors from the public and third sector. For example, Philips’ innovators engaged public partners by pointing to the CEO’s commitment and resource allocation for pilots. Partnerships with NGOs helped build community trust, complemented a lack of local know-how and specific medical capabilities, and allowed for co-investments to offset risk.
Last, while research remains inconclusive on where corporate social innovation should live, it is important to ask what conditions are required for success. A few things seem essential: strategic alignment, room for experimentation, tailored performance metrics and processes, and leadership across the organization.
Consider Interface: to make corporate social innovation part of their strategy, the company introduced Mission Zero, a strong mission statement to eliminate any negative impact the company has on the environment by 2020. This mission helps align new initiatives. For example, to help the company produce more sustainable new carpet tiles, one innovator sought recycled nylon from fishing nets discarded by artisanal fishers in developing countries. This became the Net-Works program, focused on creating a community-based supply chain. Leadership allowed the innovator to freely experiment with a new business model – she could deviate from short-term financial targets to help accomplish Mission Zero. Executive support and buy-in from different functions enabled the venture to leverage Interface’s resources, and allowed Net-Works to develop inside an innovation unit. After seven years, the project has helped recycle 224 metric tons of discarded fishing nets, saved oil and reduced CO2 emissions, and raised income levels of 40 communities.
Awareness of these challenges and their solutions allow senior managers to better support corporate social innovators, unlocking their potential for realizing positive social change at scale and building new business.