Research report: September 2007 In and out of sync The challenge of growing social innovations Geoff Mulgan with Rushanara Ali, Richard Halkett and Ben Sanders In and out of sync The challenge of growing social innovations Foreword Social innovation has become a popular phrase with politicians and investors around the UK. This report is about how private and third sector organisations innovate to respond to social needs. It seeks to explain why certain social innovations grow and why others don’t. It tracks many of those reasons back to the environment in which the innovation exists – how much demand there is for it. But this is not a defeatist argument. Using eleven case studies, the best literature available, and a strong analytical frame, this report highlights how many innovators have sought to change the characteristics of that demand – in effect to create a market for their innovation. And it shows how choices that are under the control of the innovator (like organisational form) can have a dramatic infl uence on success. At NESTA, we like to work on research that has clear and practical implications. This report does just that – ending with a set of recommendations for policy-makers and funders of social innovation, and with a toolkit for innovators themselves. We also like to work with outstanding research teams who represent leadership in their fi eld. In this case, we have been fortunate enough to work closely with a team from the Young Foundation headed by Geoff Mulgan and Rushanara Ali. The fi eld of social innovation remains relatively undeveloped. We hope that this project advances understanding considerably. However, as always, we welcome your input and your comments. Jonathan Kestenbaum CEO, NESTA September, 2007 NESTA is the National Endowment for Science, Technology and the Arts. Our aim is to transform the UK’s capacity for innovation. We invest in early stage companies, inform innovation policy and encourage a culture that helps innovation to fl ourish. 3 Executive summary This report is about how social innovations spread and grow. It aims to provide a theoretically and empirically grounded guide for the many people involved in social innovation: innovators, funders, policy-makers and commissioners. It draws on a growing body of research on patterns of growth, and distils its conclusions into a guide to help direct scarce resources more effectively to maximise social impact. To validate and extend the existing literature, There might be plenty of innovative ideas, but we undertook eleven case studies of social a failure to communicate them widely or to innovations. Although their patterns of growth develop them adequately. Or there might be no vary in detail, they highlight four necessary organisations with the capacity to implement conditions for putting innovative products, promising innovations effectively. services and models into practice sustainably and on a large scale: If any one of these factors is defi cient, the 1. For further information on potential of the innovation will not be realised. the Red Cross and Grameen, see: http://www.ifrc.org/ 1.‘Pull’ in the form of effective demand, However, smart strategies can compensate for and http://www.grameen- which comes from the acknowledgement of a weaknesses. If demand is judged to be weak, info.org/ need within society, and from the recognition the priority may be advocacy, rather than of that need by organisations (or consumers) organisational growth. If supply is weak, the with the fi nancial capacity to address it; priority may be further development of the innovation itself. A wide range of other types of 2.‘Push’ in the form of effective supply, strategies are also possible, including seeking which comes from: fi rst, the generation of to change tax treatments or regulation, alliance innovative ideas (by creative individuals building, gathering evidence, or demonstrating and teams, potential benefi ciaries and effectiveness on a small scale. users, often inspired by anger, suffering or compassion); second, the development of The case studies in this report all point to the those ideas into demonstrably workable critical importance of organisational choices. In forms; and third, their communication and the past, innovations have sometimes spread dissemination; through new organisations (such as the Red Cross and Grameen,1 or, in the last decade, 3. Effective strategies that connect ‘pull’ OhmyNews and The Big Issue), and sometimes to ‘push’, and fi nd the right organisational through existing organisations. The ways in forms to put the innovation into practice; which they grow can be thought of as forming and a continuum. 4. Learning and adaptation to ensure that At one end, innovators attempt to control how the innovation achieves social impact, and their innovation spreads by containing the continues to do so as the environment innovation within a single organisation, and in around it changes. some cases, by protecting intellectual property through legal means. At the other end of the When these elements are all in sync, spectrum, innovations such as rural micro- innovations achieve ‘resonance’ with their credit or community recycling spread in a much environment and come to appear natural, even looser way, with no-one exercising ownership obvious. However, many promising innovations or control. In these cases, the innovations have foundered because critical elements spread more like spores or seeds in the natural were missing or ‘out of sync’. There might be world, and implementation happens through a wide recognition of a need – but not on the range of existing as well as new organisations. part of organisations with power and money. In between these two poles, there exists a 4 wide variety of halfway houses in which limited • Underdeveloped capital markets to provide control is exercised over the innovation: fi nance for social entrepreneurs and a lack of licensing and franchising; structured open- other organisations trying to put good social source methods; federations or control innovations into practice, and then grow through professional networks. Which option them; is best for maximising the social impact of an innovation depends on many factors, including • Few and weak institutions and networks for the importance of tacit knowledge and key spreading innovation around communities relationships, and capital requirements. of practice (albeit with some impressive exceptions); In the case that organisational growth is seen as the best way to spread an innovation, • Few established methods and strategies for special challenges follow. Founders who played nurturing and growing social innovations (so decisive roles in advocacy may be ill-suited that most practitioners feel themselves to be for management as an organisation grows. improvising); and Governance structures designed to provide support for managers may be inappropriate • Under-developed labour pools from which when tough decisions are needed. Informal to draw managers and others to help with organisational cultures may become disabling growth. as scale increases and funding relationships become less direct and personal (e.g. with These weaknesses make it diffi cult for philanthropists and foundations), and more promising social innovations to get through impersonal and contractual (e.g. with public periods of diffi culty and underperformance commissioners). that characterise even the most successful ideas. They explain why many innovations However, social innovations’ biggest and still depend on the personal commitment of most lasting impacts are often not the result philanthropists, individuals within foundations, of organisational growth, but come from or champions within government. encouraging emulators, and transforming how societies think (with new concepts, arguments At a strategic level, the priorities for improving and stories). The most successful innovators the scaling-up and spread of social innovations do as much to change the conditions of include: demand as they do to create supply; they are campaigners as well as organisers. In the • The availability of more mature sources of long-run, while ideas are often best promoted fi nance, including sources of fi nance that through the example of real organisations, allow genuine risk-taking where there is the their power and impact can far transcend the potential for substantial social impact; organisations that fi rst put them into practice. • More developed exchanges and The missing middle: improving the social intermediaries; innovation system There are frequently strong pulls from politics, • Stronger knowledge and experience base for public agencies, civil society and the public for the whole fi eld of social innovation; and specifi c social innovations, and strong pushes from people with creative ideas. However, there • Stronger incentives and encouragement for is a striking absence of institutions that link the commissioners and managers in the public two. The fi elds of science and technology are and third sectors to adopt better performing replete with intermediary bodies charged with innovative models rather than sticking with linking the supply of ideas to effective uses familiar but less effective older ones. (e.g. the institutions involved in technology transfer, high technology venture capital, and Together, these would contribute to a more research foundations). By contrast, in the social mature social innovation system, analogous fi eld there are: to the many and diverse systems which exist around the world to promote