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Ethos Perspectives
Social Innovation
OLD PROBLEMS, NEW SOLUTIONS
While the creation of new ideas to meet social needs is important, the true significance of social innovation is in the strategies of innovation that run across public, private and non-profit sector lines. Complex public goods—like a clean and safe environment—have to be created through collaborative innovation involving many contributors: the public, private and non-profit sectors, as well as citizens and neighbourhoods.
Cross-sector partnerships, though uncommon, can be most effective, especially when led by the private sector. For example, as part of social entrepreneurship pioneer Ashoka’s Hybrid Value Chain model, cement company CEMEX launched its Patrimonio Hoy initiative in 1998 in an effort to target the low-income, do-it-yourself homebuilders who constitute a growing percentage of new home construction in Mexico. These homebuilders typically start off with a small core structure and then add on, one room at a time, as cash flows and saving habits permit. Patrimonio Hoy accommodates low incomes by allowing customers to pay in small but regular instalments. After a certain number of payments have been made on time, the construction materials will be disbursed. Patromonio Hoy also provides design and technical assistance as well as home delivery of materials. To date, the programme has enabled over 12,000 families to improve their homes in a third the time and at four-fifths the cost, on average, of methods previously available to them.
Another example is the Acumen Fund in the United States which operates like a venture capital firm for the poor. It identifies technical innovations with high potential to solve demanding issues such as health technology, housing, and water, which may operate in either the profit or non-profit sector. Acumen Fund then supports these innovations via a combination of financial capital, in the form of loans, equity investments and occasional grants, and intellectual capital and technical assistance, delivered through a network of connections and partners. In each portfolio, Acumen fund focuses on the areas of effective design, pricing, marketing and distribution of critical goods and services to the poor.
VIRTUOUS CIRCLE OF INNOVATION AND ENTERPRISE
While some remain sceptical about the sustainability of social enterprises—and indeed many are unprofitable—they can play an important role in the social economy. A successful social enterprise can provide clients with employment, job training, and even markets for their products. As with its commercial counterparts, a well-managed social enterprise can be profitable, and would be able to plough back its surplus revenue to expand its operations and support its social causes. In that sense, social enterprise can also be critical for further social innovation. Funding from charities seldom flow to experimentation and innovation: when it comes to charity-giving, donors have low tolerance for risk and losses, and want their contributions to help clients directly. This means that, more often than not, charity dollars fund tried and tested programmes. Income generated by social enterprises thus frees organisations from the shackles of charity funding and gives them the liberty to try out new ideas.
One example of this is the Bangladesh Rural Advancement Committee (BRAC), a non-profit organisation (NPO) started at the end of 1971 to meet the needs of refugees in post-war Bangladesh. BRAC used profits from its first social enterprise, a printing press that supplied books and other printed materials to its schools and education programmes, to pilot a novel oral rehydration programme, a public health programme that was meant to teach parents how to make an electrolyte-rich fluid for children with diarrhoea to prevent them from being dehydrated. Dehydration claims millions of lives in developing countries each year. Subsequently, BRAC launched its second social enterprise, the Aarong Craft Shops, which helps 65,000 rural artisans market and sell their handicrafts. The revenue from Aarong then allowed BRAC to experiment and foray into microfinance and primary education. Today, BRAC’s integrated health, finance, and education programmes are active in 70,000 villages in all 64 districts of Bangladesh.
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