Posts Tagged ‘ innovation

Innovation and Scale

Sometimes the best place to look for something new is in the margins between large existing forms.

Innovation and scale are two concepts that are sought after by most for profit organizations and by many non profits and social enterprises.

The for profit world has spent five or more decades scaling their operations by working down the learning curve. We all know what that cure looks like—it gets flat when you reach high volume output, and most manufactured products have been at high volumes for a while. They get scale through big investments in automation, and when that isn’t enough they outsource functions to get scale in services like human resources and information systems. In this scenario, it is harder to squeeze out that next increment of savings and innovation cycles are shorter. All in all, you get less bang from those innovation bucks.

So is social innovation similar? Is it only possible to win if you scale? And does scale eventually level with incremental investment yielding smaller and smaller value increases?

Here are four fundamental differences that can make social innovation respond differently to scale and perform well as scale increases. Not all social enterprises embody all these features, but the most scalable ones do.

1. Social innovation leverages more entrepreneurs in creating new value.

In the for profit world, there are entrepreneurs and there are those that follow. In the social world, many of the value chains are in fact populated by entrepreneurs throughout the chain.

Microfinance is the obvious example. Muhammad Yunus is one of several master entrepreneurs. Every MFI contains entrepreneurs and most of the loan recipients are entrepreneurs as well. The innovations at the end of the chain create value because there is so much capacity to improve–increments are big in these situations and gains go directly to the entrepreneurs for basic needs.

2. Innovation in the for profit world tends to focus on productizing. Standards are set, experiences are defined, repeatability is sought. The consumer uses the same product or service as others in the market.

Social innovation requires productization as well but only up to a point. And the most interesting social innovations often require significant innovation at the delivery point to create something tailored to each client’s experience.

Teach of America does a lot to productize the preparing of talented young people to teach. However once in the classroom, there is ample room for innovation and ample necessity. Each student’s decision to take the Teach for America job is unique as well, and it creates repeatable but unique wins for Teach for America that are talked about extensively.

3. In the for profit sector the competition vs collaboration trade off leans heavily in the compete direction.

In the social sector the most interesting scale opportunities lean in favor of collaboration. Often the most scalable social enterprises are collaborating with existing social and for profit value chains to create new offerings and innovations.

Self-help pioneered lending in poor urban neighborhoods and then scaled by partnering with Bank of America and other large institutions.

4. Innovation and scale are often trade offs in the for profit world. As we standardize and productize to increase volume, the operation becomes less flexible and innovative.

The most interesting social enterprises see innovation and scale as virtuous reinforcing systems.

Grameen and Acumen did not try to own microfinance. Instead they disseminated microfinance knowledge and encouraged other players to play. This dissemination approach enabled the ecosystems to scale to $30 billion plus as the attraction factor drew medium and large organizations with plenty of incentives to invest, innovate and grow.

What Social Enterprises can Teach Corporations, and Vice Versa

One of the foundational concepts in our thinking is that bringing social enterprise leaders together with corporate leaders will create value through hybrid vigor.

The potential of that hybrid vigor was demonstrated during several meetings I participated in this week with social entrepreneurs and corporate executives. For example, a senior leadership development executive from a large bank explored how his leadership programs could be enhanced through connections with social innovation and with social innovators. The social entrepreneur at the meeting listened to his thinking and captured a great set of ideas about how to better communicate the value of the social enterprise experience to corporate executives.

These conversations have reinforced a sense I have had from a number of recent conferences on innovation and customer experience. Most companies tend to take too narrow a view of these opportunities, and their success suffers as a result.

Customer experience is a good example. Almost every company has executives whose are responsible for understanding custom interactions with the company’s products, services and brands. And yet too often this experience is narrowly viewed as just the actual interactions of products, services and brands as opposed to the overall lifestyle concerns and challenges faced by those customers. If you are trying to understand the mom segment, you should be interested in how moms deal with your products as well as what moms care about across a range of issues including ecology, education, safety and health.

Social enterprises approach these issues much more broadly. They attempt to engage their supporters around not just products and services but issues, advocacy, volunteerism and other types of engagement. They have a more robust set of entry points or engagement ladders. Using that model, a corporation could increase its innovation in branding, marketing and product extension. (One wonders how much Pepsi is learning about its customers and what they care about from its much discussed Pepsi Refresh Project.)

After all, every organization, for profit or nonprofit, wants to improve the way they innovate, problem solve, manage costs and interact with customers. The fact is that there is an enormous loss of value occurring every day because these two ecosystems are not as connected as they should be.

More to come on this topic.

Wall piece and detail by Ghanian artist El Anatsui. His tapestries are made from bottle caps and wire, a remarkable and beautiful merging of the indigenous and the industrial.