license to innovate: breakthrough strategies for social impact
TRANSCRIPT
License to Innovate – Breakthrough Strategies for Social Impact
A brief overview of the WBCSD-Deloitte reportMay 2016
• Aim: to encourage more companies to actively pursue social innovation as a means to achieve greater long term sustainability, financial growth, and social impact
• Why and how are companies developing and integrating business solutions with social impact into their core business?
• What are the successes and failures of early movers?
• What are some of the strategic considerations to keep in mind?
• Keep in mind: Social innovation is the process aimed at developing a solution Social impact is ultimately the outcome of this process
Aim & key questions addressed in the report
SupplyDemand• Greater prioritization of social
value, transparency and socially responsible business practices from consumers, talent, investors, and a widening set of shareholders
• Increased demand for products and services from a growing middle class in emerging markets
• Technology-enabled ability for business to reach more people at lower cost
• Unprecedented support for high impact businesses through new legal and financing structures
• Emergence of impact-focused “Born Social” companies with potential to disrupt industries
The business case for social impact
Barriers to innovating for social impact – 1
Lack of legitimacy and support
Limited resources and high opportunity cost
Strategic and operational misalignment
Maturity level of the potential solution
Company culture or specific people might be resistant to change in general, or specifically to parts of the “social impact” agenda.
Lack of internal human or financial resources may stall or prevent action. Expected rates of return may be lower than other opportunities.
When “social impact” is viewed as CSR or communications activity, operating structures and processes cannot be leveraged to develop new offerings and core business may not have an incentive to contribute.
Even if decision makers agree the company is well positioned to address a societal problem, they may not have the confidence yet that the business model will effectively deliver the desired outcomes.
Internal barriers
$
Complexity of addressing systemic social challenges
Difficulty of measuring & demonstrating impact
Not enough - or the wrong kind of - financing
Collective intelligence of diverse sectors and disciplines is necessary to address root causes of a social challenge. This involves investing time and effort.
Pressure by internal and external stakeholders to quantify the impact of their solution in a transparent way that clearly links the company‘s actions to social impact is high.
Specific needs and longer time horizons of social impact ventures at each stage of their development, make securing funding a competitive and resource-intensive undertaking.
External barriers
$
Barriers to innovating for social impact – 2
We spoke with companies about how they integrate financial growth and social impact…
On being responsible to a widening set of stakeholders –“Being a CEO is no longer [just] dealing with your employees, your customers, suppliers, your investors. This is dealing with governments, NGOs, with any interested party who decides to challenge your company.”
On realizing both financial growth and social impact –“We push to not compromise the financial returns. We stretch ourselves to develop solutions that have both social and financial impact. If we can make it our business to do both, we can realize much larger impact.”
On developing community-oriented solutions – “The community is not just another stakeholder but the reason for our existence”
On serving the “whole pyramid” – “Beyond the established offerings for high income populations, in the middle income segment and below we operate with a variety of access models such as tiered pricing, shared-contribution models with governments or co-pay models with individual patients. In low-income markets we run social business models…”
Five social innovation strategies
1Invest in External Solutions
Invest to advance external solutions already demonstrating profitability and
impact
2 Engage a Network
Engage in networked problem solving to identify and test possible solutions to
scale
3 Accelerate Externally Secure external services to accelerate
the solution development
Sandbox Solutions
Advance internally developed solutions into viable proof of concept through a
shared proving ground
4
5 Innovate In-House
Advance a pipeline of solutions fully in-house
Advance a pipeline of solutions fully in-house
Ownership by innovation phase for the five strategies
Common motivation Access and support the scaling of new solutions that are already demonstrating strong signs of growth and impact
Examples• Corporate venturing• Impact investing• Co-investment in commercial funds
In Practice DSM, a global science-based company, has a venture group that acts as an “outside-in” innovation arm, investing in 50+ startups
Strategy #1: Invest in external solutions
Advantages Disadvantages• Engage with a wider spread of innovations,
potentially serving as a defensive mechanism against disruption
• Cultivates a rich ecosystem of small innovators• Lowers investment risk by delivering a more fully-
baked solution• Allows for staged investment opportunities
• Does not support an internal culture of intrapreneurship and innovation
• The company must negotiate and compete with other funders for top innovators and IP
Common motivation Explore various ways a societal problem might be addressed, in order to select and advance the most high-growth and -impact ones
Examples
• Coalition of trading partners or industry peers focused on a common objective (e.g., tech companies focused on expanding internet access)
• Issue-focused ecosystem (e.g., the RE-AMP network on Climate Change)• Social Lab• Open innovation crowdsourcing platform (e.g., OpenIDEO, Kaggle)
In PracticeFirmenich co-founded the “Toilet Board Coalition” together with ~15 large multinationals and sanitation experts and organizations to accelerate sanitation solutions in developing countries
Strategy #2: Engage a network
Advantages Disadvantages• Builds on combined capabilities of many players• May solve the problem faster, as many are
experimenting with solutions• Makes it easier to recognize a company’s own blind
spots • Could shift societal or industry-wide standards and
garner public support
• Many competing objectives and ideas can slow progress
• Difficult to reward and attribute credit to the most productive contributors; incentives are collective rather than individual
Common motivation Build internal capacity to bring new solutions to market but needs external expertise to develop and demonstrate the impact of solutions
Examples• Accelerator • Design firm • Advisory services (e.g., consulting practice)
In Practice External incubators co-develop and co-invest in for-profit ventures with multinational corporations.
Strategy #3: Accelerate externally
Advantages Disadvantages• Easy to get started with limited risk of downside due
to limited cost in the early stages• Likely follows an effective, demonstrated innovation
process• Allows for less bounded experimentation given
distance from company• Benefits from external expertise• Allows for staged investment opportunities
• Can lack transparency and/or company control of the process
• Potentially poses difficulty in reintroducing innovation into the company, if over time priorities shifted or leadership withdraws adequate support
• Is not conducive to building a more innovative culture inside the company itself
Common motivationOvercome external obstacles that make it difficult to bring business solutions for social impact to market and scale them by pooling resources and capabilities with others
Examples• Joint ventures and strategic partnerships to bring a solution to market• Evaluation services• Market entry advisory services• Government agreements (to navigate regulatory challenges)
In PracticeThe “Strategic Alliance for the Fortification of Oil and Other Staple Foods” (SAFO) by BASF and German Development Agency GIZ created standards, regulation and technical support, making vitamin A fortified food available in low-income markets.
Strategy #4: Sandbox solutions
Advantages Disadvantages• Allows company to pool expertise with other
organization(s)• Increases pool of capital available through co-funding
models• Enables company to test fit and impact of offering in
the external landscape• Brings solutions to market that may not otherwise be
able to overcome systemic barriers
• Can be challenging to introduce and trust new partners late in the innovation process
• Key stakeholders may be resistant to or take too long to engage in collaboration
• Creates vulnerability that others will see solutions before they go to market, generating potential for imitation
Common motivation Wants control of the end-to-end innovation process, and has the right conditions and capacity to do so
Examples • Part of a centralized R&D department• Separate incubator dedicated to generating social and environmental results
In Practice PepsiCo has increased R&D spending on health-focused research, while Philips developed an incubator in its Africa Innovation Hub
Strategy #5: Innovate in-house
Advantages Disadvantages• Closely aligns with other company and leadership
priorities• Given proximity to the rest of the business, is often
easier to integrate• Effectively utilizes company’s full range of capabilities
and business functions• Can yield new business models applicable to the
broader company
• Is subject to much of the bureaucracy and stalling that often accompanies a large corporate culture
• May be so influenced by a risk averse culture or company conventions that offering is not truly transformative
• Can create incentive challenges internally (e.g., How to punish for inactivity and not for failure?)
Recognizing a company’s readiness for social innovation
• Does the initiative connect with the culture and values of the organization and its stakeholders?
• Does the team running the social innovation process have a realistic, honest sense of the company’s strengths, potential blind spots, and areas where external support is needed?
• Is the company ready to move from focusing solely on the functionality of its offerings to evaluating the impact they achieve?
• Is the company prepared to invest the additional time and resources required to drive new customer adoption and achieve impact?
Choosing the best-fit strategy
“The WBCSD and its members, Deloitte among them, recognize that collaborative problem solving will be a critical part of how companies redefine the value they provide to society and innovate to solve global challenges. Developed well, these new business solutions may enable companies to better manage their risks, anticipate consumers’ demand, build positions in growth markets, secure access to needed resources, and strengthen their supply chains.”
David Cruikshank, Global Chairman, Deloitte Touche Tohmatsu Limited
Peter Bakker, President and CEO, WBCSD
Rapidly evolving social innovation agenda
www.wbcsd.org/social-impact.aspx
www.deloitte.com/us/license-to-innovate
Download the report
W. Robert de [email protected]
Megan [email protected]
Alina Staskevicius [email protected]
Contacts
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Davide [email protected]