In this installment of the social enterprise and development blog series, Clara Marquardt speaks with Dr Helen Haugh, a Senior University Lecturer in Community Enterprise at the Judge Business School. The interview examines the nature of social innovation and innovation by social enterprises. A study of social innovation offers insights into the comparative advantage and distinctiveness of social enterprise as well as its impact on the meaning of innovation. Critical questions concerning the risk of ‘excessive innovation’ emerge alongside an interesting perspective on the ‘great stagnation’ discourse.
Social innovation and social enterprise
Social innovation is “the process of inventing, securing support for, and implementing novel solutions to social needs and problems which are more effective, efficient, sustainable, or just than existing solutions and for which the value created accrues primarily to society as a whole rather than to private individuals” [1]. Social innovation can be a product, a production process, an idea, a piece of legislation, a social movement, an intervention, or some combination. Social innovation is central to ‘what social enterprises do’, it is central to the creation of social value.
Nevertheless there is a risk of overlooking social innovation by focusing on social enterprise as an organizational form or on the social entrepreneurs behind the organisations.
In a 2005 Social Enterprise Research Agenda by Dr Helen Haugh from the Judge Business School, Cambridge University identified “opportunity recognition and innovation” as one of eight relevant research themes which would strengthen academics and practitioners’ ability to support social innovation [2].
Dr Helen Haugh is a professor at the Judge Business School, Cambridge University. Her research interests include social enterprise in community development and social enterprise as a development strategy for developing countries.
A growing understanding?
Dr Haugh argued in 2005 that the renewed interest in social enterprise “has been policy-driven, rather than research-led… Robust evidence of [social enterprises’] value and contribution remains illusive, and theories concerning their creation, management and performance have yet to be crafted”. Eight years on her analysis provides insights into where the discourse has evolved and where questions remain.
While she maintains that the interest in social enterprise continues to be driven by policy there has been an enormous amount of progress on the theoretical front: “as often happens when practice precedes scholarly research, the theoretical frameworks are developed after the phenomenon is in existence”. Researchers have placed an emphasis on “exploring the antecedents, processes and outcomes of social innovation”, an emphasis on understanding the ‘black box’ which generates social innovation. Such an understanding is critical if social innovation is to be sustained.
In line with the criticism that a lot of research remains fragmented, inconsistent and low in explanatory power [3], Dr Haugh however agrees that “tensions and questions” remain: “a lot of research has [for instance] been criticized because of lack of control groups as data is gathered from people running social enterprises”.
Such criticism notwithstanding a growing body of evidence is extending our understanding of social enterprise and innovation.
Social enterprises’ comparative advantage
The argument that social enterprises or social entrepreneurs are ‘simply more innovative’ is an unsatisfactory response to a set of complex questions: What is the comparative advantage of social enterprises relative to other (institutional) agents including markets, commercial businesses, governments and charities? To what extent can social enterprises create more social value relative to inputs?
A clear understanding of different organisations’ strengths is important if social value creation is to be maximized. Dr Haugh suggests that social enterprises have a particular advantage in that “by trying to achieve multiple roles and to balance economic, social and environmental responsibilities they gain greater legitimacy in the eyes of the public”. The UK social enterprise Patients Know Best which sought to develop a patient-controlled system which collates an individual’s healthcare records illustrates this argument. The fact that they could pledge not to use individuals’ health care data for commercial gain gave them a decisive advantage over for-profit companies seeking to enter the market.
Interestingly, this argument can be turned around. Social enterprises’ legitimacy could be undermined as their ‘social’ orientation clashes with profit generation. Dr Haugh points out that the argument hinges on which definition of social enterprise the public adopts: “if your view of social enterprise is that it is situated on the non-profit side of economy then the adoption of strategies that generate income might undermine their legitimacy. But if the view is that they are trying to change capitalism to make it more socially and environmentally friendly, then that could increase their legitimacy”.
Linked to the legitimacy ‘bonus’ is the argument that social enterprises may be able to call upon more inputs, more cheaply. As normative organisations founded on shared values, they may mobilize civic energy and voluntary commitment into the service of the common good.
Because social enterprises are working closely with communities, Dr Haugh further argues that they have a “better understanding of the needs of communities”. Social enterprises may “overcome information asymmetry via proximity” and may in the process generate “more responsive and flexible solutions” to social problems.
UK government policy in areas such as healthcare is shifting from delivery to co-creation, i.e. patients do not just receive but rather co-create services. Dr Haugh sees enterprise models that foster relationships between clients and service providers as well positioned to benefit from this shift. On the other hand “this needs to be weighed up with the costs of needing to be more flexible and responsive” – costs which may limit social enterprises’ potential to scale up their operations.
Is there something distinctive about social innovation?
The distinctiveness of social enterprises’ value creation process links to the nature of the innovation they undertake. Are social enterprises contributing to a shift in the meaning of innovation?
In public health social enterprises have pioneered microfranchising and mobile health (mHealth) technologies as delivery and communication mechanisms. In agriculture social enterprises have promoted microcredits and microinsurance. In both areas microfinance stands out as the social innovation and the social sector is encouraged to learn from Coca Cola’s highly effective product marketing and distribution strategy [4]. These innovations can be contrasted with the de novo invention of vaccines or high yield seeds.
In the area of ‘governance innovation’ the question becomes whether any social enterprise can advance without innovatively redefining how businesses are run to ensure that environmental, social and economic purposes are embedded within their operation. In the UK, social enterprise emerged as a means of socializing entrepreneurship via multi-stakeholder engagement, or the hiring of staff from disenfranchised populations – social enterprises’ operation itself was part of the ‘social value’ creation process. More recently however, the focus has shifted towards the US model of social enterprise, which sees merely enterprises’ purpose and output as providing a social benefit [5]. This shift has raised critical questions about whether innovation in governance is a necessary part of social innovation: do organisations’ internal and external objectives need to be congruent? Can social enterprises ‘exclude’ their own employees while ‘including’ marginalized customers?
The larger question which these examples raise is one of product, process, paradigm and system innovation. A question of innovation occurring on different levels: innovation in the delivery of products, a changing of markets and institutional structures and the shaping of the way a society conceives of a particular issue.
Are social enterprises linked with a shift from capital and technology-intensive product innovation towards process and system innovation? A shift from inventing new products or technologies towards improving the efficiency with which existing technologies are employed and combined?
Such a shift would suggest that the solution to many social problems is not to be found in new gadgets, but rather in a combination and re-conceptualization of existing resources.
Dr Haugh accepts that social enterprises may be raising the profile of these alternative types of innovation. But she maintains that the social economy “is and will continue to generate all types of innovation [even though] barriers [which have not yet been fully understood] may stifle specific types of innovation”. Room for further research remains.
Can innovation be ‘excessive’?
“Everyone talks about rock these days; the problem is they forget about the roll” [6]
“Social entrepreneurship is used almost interchangeably with social innovation”, notes Dr Haugh. More than 80% of academic definitions of ‘social enterprise’ include ‘innovation’ as a central capacity. At the same time, recent trends in the development literature towards a ‘positive deviancy approach’ acknowledge that solutions are often already existent among the target group. It is against this background that the notion of ‘innovation as a holy grail’ needs to be questioned.
The social enterprise sector is subject to numerous pressures in the direction of novel rather than incremental innovation. Years of (failed) development attempts have delegitimized anything but ‘new’ solutions and created a development sector impatient for breakthroughs, impatient for innovation as a ‘development shortcut’. These conditions are exacerbated by the business element of social enterprise – competition. Competition encourages a focus on gaining recognition for individual projects rather than for key developments in the sector.
For social enterprises, the combination of a weak evidence base on which new ideas have to be based and an investment culture that privileges the novel, means that a new model may be able to gain support more easily than an incremental adaption of a previously tried model. Social enterprises’ issue specific focus may further push them towards seeking a unique, original central idea. Finally, the difficulty of scaling up social enterprises limits the potential for mergers which could bring together different models.
A critical assessment may conclude that the result of these pressures is an indiscriminate search for innovation which is less effective than the incremental extension of existing services to a new beneficiary group. “It makes no sense to keep reinventing the wheel…we need to give greater priority to replicating successful models, rather than constantly encouraging new solutions to the same problems” [7].
In many ways this assessment resonates with the history of the NGO sector, which for a long period was critiqued for ineffectively learning from past mistakes and failing to adapt and improve existing models [8].
In a social enterprise context, the development of mHealth technologies illustrates this line of reasoning: mHealth is itself a promising step forward, but it may be linking mHealth technology with training programs for community health workers, a ‘traditional’ social ‘good’, which will generate the decisive breakthrough [9].
The novelty which is needed may be less about novelty per se than about understanding what others have done, about studying why others have failed and in adapting and improving models.
Commercial versus social innovation
“In a world buffeted by change, faced daily with new threats to survival, the only way to conserve is by innovating” [10]
The ‘excessive innovation’ criticism can be contested. Is innovation not particularly important where resources are scarce and problems have eluded resolution for a long time? Not necessarily.
The unique circumstances in which social enterprises operate and the demands they are seeking to fulfil may require a more cautious approach to novel innovation than would be appropriate in the commercial sector.
On the one hand the resource constraint aggravates the trade-off between incremental and novel innovation, between fashionable new social enterprises and less ‘sexy’ established operations.
Moreover innovation is inherently risky, especially where innovation occurs in untested environments and depends on a broad range of stakeholders as in the case of social innovation. Unlike with commercial innovation, for social innovation the cost of project failure exceeds the private cost to the entrepreneur. Interventions destabilize social equilibria and people may become reliant on new services. Project failure may then entail adverse consequences as the social needs which motivated the innovation persist.
Furthermore, any novel innovation initially has a limited population penetration. This is particularly true for social innovation which needs to be accompanied by gradual social change and growing acceptance. While top-down diffusion may be acceptable in the commercial world, it presents problems for enterprises with a social orientation. A good example is the contrast between the development of mHealth technologies and the development of mass media (TV and radio) health campaigns [11]. The former ‘novel’ approach, while increasingly wide spread, continues to ‘exclude’ many people. The latter approach leverages traditional and existing tools to reach a wider audience.
From another angle the operation of social enterprises may serve as an experimental laboratory for government service models. The cumulative knowledge gained from repeated implementations and incremental changes of a model in different circumstances, whether successful or not, is therefore not just of private value but also of social value.
Finally given the high context-specificity of social innovation competition is likely to reduce the potential for incremental innovation. New organisations would need to implement an incremental innovation in the same (geographical) environment as the original model to maximize their chance of success. This however is unlikely due to the market’s competitive nature (and may be undesirable as the service landscape would become too fragmented). This suggests that it is critical for social enterprises to communicate and share ideas, allowing existing enterprises to adopt suggestions for incremental innovation.
And in practice…
“Given that private sector models of income generation are being used”, competition between social organisations will always generate tensions – one aspect of which may be the emphasis on novel innovation.
But at the same time Dr Haugh points out that there are formal and informal platforms for refining and sharing models being developed. Dr Haugh raises an interesting idea: in the social enterprise sector social innovation may spread not necessarily via the scale of individual enterprises, but via consumer imitation and lead users. She cites the example of different communities innovating to perfect delivery modes. The sharing of information and best practices among social enterprises, communities and commercial enterprises is happening in the field of community transport and green energy: “when a community in the northeast of Scotland was planning to set up a community-owned wind farm, they actively communicated with other communities which had set up such a model”.
Social innovation and the ‘great stagnation’
Within the economic and public discourse the idea of a great stagnation, whereby the 21st century will be characterised by a declining rate of innovation, has been a recurrent theme based on both quantitative proxies of innovation and ‘public perception’ – “after all we are still riding cars and dying from cancer” [12].
This pessimistic argument clashes with the image of an (excessively) innovative social enterprise sector.
One way of reconciling the two is by maintaining that: “there have only been a few truly fundamental innovations. While there will be more innovation, it will not change the world like the phone” [13]. Social innovation is merely harnessing existing technologies and therefore bound to run into diminishing returns.
On the other hand an optimistic view, adopted by the Austrian economist Joseph Schumpeter in his work Capitalism, Socialism, and Democracy (1950) suggests that “the entrepreneurial alertness takes place in the mind of the politician and the consequences can be compared with those of a technological innovation”[14].
Dr Haugh adopts the optimistic view and contests the ‘great stagnation argument’. In fact “social innovation could prosper exactly where commercial innovation slows down”.
In times of economic hardship people have to do more with less, and community needs are exacerbated. There might be fewer resources to innovate in the private sector and less resources to fund innovation and service provision within the public sector. Such conditions drive and provide opportunities for social innovation.
The (supposed) slowdown in the rate of innovation has been attributed to a growing ‘burden of knowledge’, which implies that it takes longer and longer for young innovators to catch up with existing research as a condition for inventing something new. As a result the typical age of first innovation has risen since the 1980s. In this regard social innovation as a new and developing field may benefit from the absence of a ‘burden of knowledge’ – whether this is desirable or merely furthers ‘excessive innovation’ is debatable.
Finally social innovation may expand the pool of innovators – a major opportunity. The motto of Ashoka “everyone is a changemaker”, reflects this. People across countries and communities are empowered to innovate. Developing countries are no longer confined to the follower role, but can themselves push the boundaries of the knowledge frontier – “Jugaad innovation” (frugal innovation) in resource scarce settings is a case in point [15]. Cross-sector fertilization is transforming the role of bureaucracies, governments and commercial businesses. Governments are no longer merely establishing regulation, businesses no longer merely fighting regulation and the social sector is no longer merely monitoring either sides’ mistakes – collaboration has the potential to increase innovation.
The next and final article in the blog series will explore the characteristics of budding entrepreneurs – the future drivers of social innovation – from the perspective of Beyond Profit, a student run social enterprise organisation.
[1] “Rediscovering Social Innovation” (Deiglmeier et al, 2008)
[2] “A research agenda for social entrepreneurship” (Haugh, 2005)
[3] “Innovation is Not the Holy Grail” (Seelos et al, 2012)
[4] Melinda Gates (2010)
[5] This shift is seen in e.g. the development of the UK Social Enterprise Mark since 2010
[6] Keith Richard
[7] “Investing in social franchising” (Richardson et al, 2012)
[8] This has clearly changed in the past few years, see for instance the Engineers Without Borders’ Failure Report (first published in 2008)
[9] “Using mobile technology to train community health workers” (Dalberg, 2012)
[10] Peter Drucker, management consultant and leading ‘business thinker’
[11] This approach is being employed very effectively by DMI (Development Media International)
[12] For a recent expression of this view see “Has the ideas machine broken down?” (The Economist, 2013)
[13] Tyler Cowen, an economist at George Mason University
[14] Cited in “Environmental issue entrepreneurship: a Schumpeterian perspective” (Albrecht, 2002)
[15] “Jugaad innovation” (J. Prabhu et al, 2012)
