GLC, Advanced Entrepreneurship and Innovation (MGMT 4161)

Chapter – II –
Social Innovation
Introduction
Social innovation refers to the process of developing and implementing new, effective solutions
to solve social or environmental issues. Whether these come from national policies, governmental
or non-governmental entities, such solutions should meet current social needs better than it has
been done before.
Social innovation is meant to have long term impact at large scale. Social innovation is
traditionally advanced through non-profit endeavours, but the business community is also open
to address society’s challenges too.
Social innovations are new social practices that aim to meet social needs in a better way than the
existing solutions, resulting from - for example - working conditions, education, community
development or health. These ideas are created with the goal of extending and strengthening civil
society. Social innovation includes the social processes of innovation, such as open-source methods
and techniques and also the innovations which have a social purpose—like activism,
crowdfunding, time-based currency, telehealth, cohousing, virtual volunteering, microcredit, or
distance learning. There are many definitions of social innovation, however, they usually include
the broad criteria about social objectives, social interaction between actors or actor diversity,
social outputs, and innovativeness (The innovation should be at least "new" to the beneficiaries it
targets, but it does not have to be new to the world). Different definitions include different
combinations and different number of these criteria (e.g. EU is using definition stressing out
social objectives and actors interaction). Transformative social innovation not only introduces
new approaches to seemingly intractable problems, but is successful in changing the social
institutions that created the problem in the first place.
Definitions
According to Herrero de Egana B., social innovation is defined as "new or novel ways that
society has to deal with Relevant Social Challenges (RSCh), that are more effective, efficient and
sustainable or that generate greater impact than the previous ones and that contribute to making
it stronger and more articulated".

Instructor: Isubalew Daba (MSc. MBA, Ph.D. Candidate) Page 1

 GLC, Advanced Entrepreneurship and Innovation (MGMT 4161)

Why social innovation is important

In today’s hyperconnected world, one country’s societal problems can become ours. Nations are
facing slow economic growth, financial instability, political turmoil, hunger, poverty and disease.
These are all social issues that have to be addressed, one way or the other, and such big problems
generate big business opportunities. In fact, more than 80% of economic growth comes from
innovation and application of new knowledge.
A truly prosperous society in our days consists of both economic prosperity and social
prosperity. Traditionally, we assessed if a country was prosperous by looking at its GDP. Today, it’s
becoming more common to also consider peace and happiness, individual freedoms and liberties
and financial wellbeing.
When we look at prosperity from this angle, we see that prosperous societies have an innovative
approach to current social issues because our complex problems need new solutions. Social
innovation brings a new mindset that leaves behind the narrow way of thinking about social
enterprises and for-profit businesses as two mutually exclusive areas.
Social innovation is mistakenly seen by some as charity. It should be acknowledged that social
innovation is actually adding an extra dimension to innovation, sustaining economic and social
growth.
Embracing social innovation is not just about doing good for the society but also about doing
good business. Let’s see why we should question the utility of traditional corporate philanthropy
and instead take a closer look at the business value of social innovation.
History
Social innovation was discussed in the writings of figures such as Peter Drucker and Michael
Young (founder of the Open University and dozens of other organizations) in the 1960s. It also
appeared in the work of French writers in the 1970s, such as Pierre Rosanvallon, Jacques
Fournier, and Jacques Attali. However, the themes and concepts in social innovation existed long
before. Benjamin Franklin, for example, talked about small modifications within the social
organization of communities that could help to solve everyday problems. Many radical 19th
century reformers like Robert Owen, founder of the cooperative movement, promoted
innovation in the social field and all of the great sociologists including Karl Marx, Max Weber and
Émile Durkheim focused attention on broader processes of social change. In recent years, the
work of Gabriel Tarde on the concept of imitation has been rediscovered by social

Instructor: Isubalew Daba (MSc. MBA, Ph.D. Candidate) Page 2

 GLC, Advanced Entrepreneurship and Innovation (MGMT 4161)

scientists in order to better understand social innovation and its relation to social change. Other
theories of innovation became prominent in the 20th century, many of which had social
implications, without putting social progress at the center of the theory. Joseph Schumpeter, for
example, addressed the process of innovation directly with his theory of creative destruction and
his definition of entrepreneurs as people who combined existing elements in new ways to create a
new product or service. Beginning in the 1980s, writers on technological change increasingly
addressed how social factors affect technology diffusion.
The article "Rediscovering Social Innovation" mentions how social innovations are dependent on
history and the change in institutions. The article discusses the ten recent social innovations
reflecting current change to include:
 Charter schools: Charter schools are a social innovation that provides an alternative
avenue for students to continue to develop and build upon their educational foundation
without many of the issues prominent in the public school system. These primary and
secondary schools are publicly funded and operate independently, which allows the
teachers and parents to collaboratively develop alternative teaching methods for their
students as related regulations are less stringent for Charter Schools.
 Community-centred planning: This social innovation allows communities to plan and
develop systems that cater solutions to their specific local needs by using their historical
knowledge and other local resources.
 Emissions trading: The Emissions Trading program was designed to address issues
associated with the continuous increase in pollution. The program provides solutions
such as setting a cap on the amount that certain pollutants can be emitted, and
implementing a permit system to control the amount of pollution produced by each
participating business. If a business needs to use more pollution than permitted, it can
purchase credits from a business that has not emitted its maximum permitted amount. The
goal of the Emissions Trading program is that, over time and with increased awareness,
society will limit the types and the numbers of pollutants emitted to what is only
necessary.
 Fair trade: Products including coffee, sugar, and chocolate are currently being traded
without high standards that result in tough conditions for farmers and a less sustainable
environment. Fair trade is a movement that certifies traders to exchange

Instructor: Isubalew Daba (MSc. MBA, Ph.D. Candidate) Page 3

 GLC, Advanced Entrepreneurship and Innovation (MGMT 4161)

With the farmers that produce these products. The idea behind this movement is that by
being paid a living-wage, being able to meet social and environmental standards and
promoting "environmental sustainability, the lives of these farmers will be improved.
 Habitat conservation plans: Habitat Conservation Plans is an effort by the US Fish and
Wild Life Service and the Environmental Protection Agency to protect species and their
endangerment by providing economic incentives to conserve their habitats and protect
these species from endangerment.
 Individual Development Accounts: This social innovation is made to support the
working poor with saving decisions that they have made to better enhance their lives. This
initiative will give $2 per every $1 saved by the working poor for college tuition,
purchasing a home, starting a business, and other similar and productive initiatives. This
is made possible by philanthropic, government and corporate sponsors that donate to
this cause.
 International labor standards: Labor standards differ country-to-country, with some
agreeably better than others. In effort to internationally align these, the International
Labor Organization, participating governments, and employees contributed to the
development of standards that protect workers’ rights to freedom, equity, security, and
human dignity".
 Microfinance: This social innovation is created to support those financially unable to
gain access to financial services such as banking, lending, and insurance. The ultimate goal
of Microfinance is to enable an escape from poverty by helping to improve the living
conditions and financial viability among the impoverished program participants.
 Socially responsible investing: "An investment strategy that attempts to maximize
both financial and social returns. Investors generally favor businesses and other
organizations whose practices support environmental sustainability, human rights, and
consumer protection."
 Supported employment: Supported employment is a social innovation geared towards
helping disabled or disadvantaged workers who are un- or under-employed due to their
condition obtain suitable employment. The Support Employment service provides access
to job coaches, transportation, assistive technology, specialized job

Instructor: Isubalew Daba (MSc. MBA, Ph.D. Candidate) Page 4

 GLC, Advanced Entrepreneurship and Innovation (MGMT 4161)

training, and individual tailored supervision in effort to help program participants

become more competitive applicants and better prepared overall for the job market.

Developments since 2000

Academic research, blogs and websites feature social innovation, along with organizations
working on the boundaries of research and practical action. Topics include:
 Innovation in public services was pioneered particularly in some Scandinavian and
Asian countries. Governments are increasingly recognizing that innovation requires
healthcare, schooling and democracy.
 Social entrepreneurship, which is the practice of creating new organizations focusing on
non-market activities.
 Responsible Research and Innovation, which takes into account effects and potential
impacts on the environment and society. It includes Engagement of all societal actors
(researchers, industry, policymakers and civil society); Gender Equality; Science
Education; Open Access; Ethics; and Governance.
 Online volunteering, a free service launched in 2000 whereby individuals from all over the
world contribute to the needs of development organizations and public institutions
 Open source innovation, in which the intellectual property involved in a product or
service, is made freely available.
 Complex adaptive systems, which have built-in mechanisms to help them adapt to
changing circumstances.
 Collaborative approaches which involve stakeholders who are not directly responsible for
some activity, such as stockholders and unions collaborating on business issue and
business collaborating with government on regulatory issues.
 Innovation diffusion
 Localized influences that make some localities particularly innovative.
 Institutional or system entrepreneurship which focuses on agents who work at a
broad system level in order to create the conditions which will allow innovations to have
a lasting impact.
 Business, particularly in services.

Instructor: Isubalew Daba (MSc. MBA, Ph.D. Candidate) Page 5

 GLC, Advanced Entrepreneurship and Innovation (MGMT 4161)

 Social innovation in tourism development, which involve creation of innovative and

appropriate development strategies to involve local communities as a key agent in the
decision-making and planning of tourism destinations.
Different Players of Social Innovation
Actors and the social networks in which they are involved are governed by modes of interaction,
dynamics of power and the social, cultural, and institutional frame they are embedded in. Modes
of interaction describe how decision making and leadership are managed in social innovations
and how this relates to self-regulation, co-creation and policy- making. Transformations in
governance are an influential context factor for social innovations that are developed by different
actors. The opening of political processes and participatory approaches give market and civil
society actors leeway for developing their ideas for social initiatives. It is evident that social
innovation initiatives engage a wide variety of actors and networks in a diversity of roles and
functions, which is part of what allows the initiatives to respond to social problems.
A Variety of Actors and Players of Social Innovation
Social innovations are initiated in and provided by all parts of society, including public sector
bodies and companies, NGOs and other actors of civil society. Public sector actors can act as
promoters of social innovations, providing resources such as funding, increased support for
networking, capacity building and digital technology, or through new legal frameworks,
commissioning as well as by applying research and working alongside social innovation.
Companies engage in social innovation initiatives by developing new business models, providing
specialised competences, and resources such as hard infrastructure. Civil society is a source of
social innovation. It includes networks of political activists who are engaged in a wide range of
issues, such as human rights, marginalized groups, sustainability, gender equality etc. Despite
local roots, strength of civil society lies in cellular organization not centrally governed or
coordinated. Civil society stands for key actors and promoters of social innovation, and their
mode of organization can be considered a social innovation itself as it allows the formation of
social movements and other innovative social engagements.
 Developers are the inner core of social innovation initiatives, initiating and operating the
solution. These actors are seen as being able to translate knowledge about unsatisfactory
circumstances into an innovative idea in order to improve the situation.

Instructor: Isubalew Daba (MSc. MBA, Ph.D. Candidate) Page 6

 GLC, Advanced Entrepreneurship and Innovation (MGMT 4161)

Furthermore, these actors have the ability to not only invent but also to develop and
implement the idea in order to make it a social innovation.
 Promoters of social innovations are involved in social innovation processes as partners
that provide infrastructural equipment, funding, and connect initiatives to superior policy
programs.
 In addition, supporters refer to actors facilitating the spread and diffusion of social
innovations through, for example, dissemination or lobbying activities.
 Knowledge Providers: Accounting for the importance of knowledge as key resource in
social innovation processes, a further category is devoted to actors that provide special
knowledge relevant to spur and enrich the development process (knowledge providers).
Motivation and why to do it (Social Innovation)
In today’s hyperconnected world, one country’s societal problems can become ours. Nations are
facing slow economic growth, financial instability, political turmoil, hunger, poverty and disease.
These are all social issues that have to be addressed, one way or the other, and such big problems
generate big business opportunities. In fact, more than 80% of economic growth comes from
innovation and application of new knowledge.
A truly prosperous society in our days consists of both economic prosperity and social
prosperity. Traditionally, we assessed if a country was prosperous by looking at its GDP. Today, it’s
becoming more common to also consider peace and happiness, individual freedoms and liberties
and financial wellbeing.
When we look at prosperity from this angle, we see that prosperous societies have an innovative
approach to current social issues because our complex problems need new solutions. Social
innovation brings a new mindset that leaves behind the narrow way of thinking about social
enterprises and for-profit businesses as two mutually exclusive areas.
Social innovation is mistakenly seen by some as charity. It should be acknowledged that social
innovation is actually adding an extra dimension to innovation, sustaining economic and social
growth.
Embracing social innovation is not just about doing well for the society but also about doing
good business. Let’s see why we should question the utility of traditional corporate philanthropy
and instead take a closer look at the business value of social innovation.

Instructor: Isubalew Daba (MSc. MBA, Ph.D. Candidate) Page 7

 GLC, Advanced Entrepreneurship and Innovation (MGMT 4161)

9 Reasons Why We Need Social Innovation In Business

We’ve heard how important it is for businesses to innovate in order to continue to grow and be
successful. Many think of technology as the figurehead of innovation, but there is another quality
that is just as important and contributes to the well-being of a business internally and externally.
That is social innovation.
Social innovation is the adoption of new practices to address social needs, like working
conditions and health. We’ve seen more demand for businesses to socially innovate in the last few
years as consumers’ demands change. Below, nine thought leaders share why they think it’s
important and how businesses can practice social innovation.
1. Understand What Social Innovation Means: Social innovation has different meanings
to employees. Rather than rush to a solution, a business should first seek to understand
what a solution should look like. Listen to the definitions of social innovation from
employees. Hear out their ideas on how the company can be more innovative on social
challenges. Then, a business can collectively arrive at the right way to practice social
innovation.
2. Adding Value to the Rest of the World: It's long been believed that the purpose of a
business is to return value to shareholders. But that doesn't have to be incompatible with
adding value to the rest of the world. One of my favorite examples of social innovation is
MIDCO, a regional Internet/cable TV provider in the Midwest. They give each team
member a stipend that they can use to support a non-profit of their choice.
3. It Fits Naturally With Company Culture: Social innovation can be ingrained in a
company's culture—or even in a whole industry's reason for existence. Especially in a
capitalist society, it's critical for businesses to play a role in shaping the future of our
society or do what's right for the world. Social innovation can help across the board
internally with issues like morale and motivation, and it can also impact public relations and
financials.
4. It Allows Teams to Share Social Preferences: Social innovation is important as it can
define and reinforce company culture. Each employee needs to be included and to feel
important as a valued member of a team. Social innovation can bond employees and also
bring compassion and understanding into the workplace. Introducing social topics

Instructor: Isubalew Daba (MSc. MBA, Ph.D. Candidate) Page 8

 GLC, Advanced Entrepreneurship and Innovation (MGMT 4161)

into daily or weekly virtual meetings is a great way to allow teams to share social
preferences with one another.
5. Implement a Group Chat Solution: When employees work remotely, it is challenging
to keep everyone connected. It is essential to implement a group chat solution. We use
Slack, and it acts as our primary company communication tool. People can see who is
online and ask each other questions in real time. In my opinion, it allows for better
communication than a traditional office environment.
6. Seek Employee Resource Groups: This is how we push ourselves to do better, as
individuals, as companies and as a society. While we all come from various backgrounds,
cultures and diverse thinking, we have an opportunity to align ourselves around common
goals, or causes. Employee Resource Groups or Intentional Communities are a great way
to practice social innovation and continue to educate, embrace and align our actions in
support to create inclusive environments and drive innovation for good.
7. It Lets You “Stay With the Times”: The success of a business depends on its ability to
adapt to the environments around them. Social innovation is one of those evolutions that
allows a business to ―stay with the times.‖ One-way businesses can practice social
innovation is to redesign and reconsider working conditions. Look for opportunities to
improve the everyday life of employees by identifying pain points like length or
frequency of breaks, paid time off, comfortable desk chairs and others.
8. Think of It as a Force for Good: Social innovation is just as important as technical
innovation in business. Without social innovation, businesses risk losing employees and
businesses alike in today’s markets. Think of social innovation as becoming a force for
good. Reduce your business’s carbon footprint by digitizing files, encouraging recycling
and employee carpool, replacing lights with LEDs, and other initiatives. Not only do you,
as a business, work toward sustainability, but you also help your employees develop these
habits for their own lives.
9. It Ensures Long-Term Success: Many companies place a high emphasis on
technological innovation, which is important and beneficial to a firm. But social
innovation is just as crucial to long term success. Stakeholders are increasingly
demanding that companies pursue safe and sustainable environmental practices.

Instructor: Isubalew Daba (MSc. MBA, Ph.D. Candidate) Page 9

 GLC, Advanced Entrepreneurship and Innovation (MGMT 4161)

Social innovation unlocks solutions to environmental challenges and spearheads efforts

to create these sustainable practices. Another facet of social innovation is its focus on
empowering employees to expand their skill sets and impact the community at a local or
even global level. By listening to its employees and consumers, a business can shift its
operations to be more inclusive and environmentally friendly utilizing a bottom-up
approach. One way businesses can practice social innovation is through meaningful
partnerships. For example, certain food companies partner with Fair Trade International in
order to ensure that supplies and labour are ethically sourced and focused on the health
of the planet.
Enabling Social Innovation
Best practices for good corporate social innovation
Now that we had a look at the megatrends and needs in social innovation, let’s see some of the
principles that contribute to the success of corporate social innovation.
1. Strategic intent: Corporate social innovation has to be embedded in the core business
strategy and should consider the organization’s vision. For this, top management support
and accountability are mandatory.
For example, Unilever integrated CSI in their core business through the Unilever
Sustainable Living Plan. They committed to growing their company while tackling
environmental issues and social inequalities. To do so, they integrated CSI in all their
business operations: product design, marketing, sourcing, customer engagement etc. Their
ambition to grow is supported by innovation and their strategy includes goals like
reducing their environmental impact by half by 2030 and improve health and wellbeing
for 1 billion people.
2. Leverage the power of different markets: Through corporate innovation companies
can identify new, underserved markets to expand to. These can be either within local
markets or in emerging economies. By leveraging these markets, organizations can serve
unmet needs with new products or services.

Instructor: Isubalew Daba (MSc. MBA, Ph.D. Candidate) Page 10

 GLC, Advanced Entrepreneurship and Innovation (MGMT 4161)

3. Strategic collaborations: Many companies that succeed at innovation have involved

external stakeholders in their innovation process. In fact, 54% of businesses say that co-
creation has helped improve their social impact.

Deloitte researched the opportunities and challenges brought by strategic social

partnerships. For effective collaborations in innovation initiatives, consider these five
factors that successful partnerships usually meet:
 Include non-profits, social and public organizations
 Back up your mission financially
 Clearly define the business goals that are led by a business unit and not CSR
departments

Instructor: Isubalew Daba (MSc. MBA, Ph.D. Candidate) Page 11

 GLC, Advanced Entrepreneurship and Innovation (MGMT 4161)

 Set a clear strategy to include impact measurement procedures, rules around

communication as well as an exit strategy
 Consider specific goals and challenges that the collaboration can solve
Google is also using the power of innovative partnerships to help refine products like
Google Earth and Google Maps. They teamed up with local NGOs, universities and World
Bank to support their goals (track environmental degradation, spread of viruses, community
mappings etc.) which in return gives Google more accurate information that improves their
services.
The Challenges of Social Entrepreneurship
Social enterprises are fast emerging as an entity of the alternative economy. When the traditional
economic systems of a country or market-based solutions fall short to ensure well- being in the
society, social enterprises can spearhead disrupting models to solve burgeoning social problems.
But the social enterprises face a myriad of challenges and adversities. Some of these challenges
are more contextual and some are generic in nature. Among the many challenges the following
four appears to be more obvious and general regardless of the context and other influencing
factors.
 Lack of funding support: Funding is by far the biggest challenge for the social
enterprises. Literature identified that most social enterprises failed to secure start-up
capital. Given that most of the social entrepreneurs are individual entities, it is therefore
difficult to accumulate enough funds at the beginning. Over time some ventures flourish
but a vast majority of the ventures struggle to maintain its existence and sustainability due
to capital or ongoing sources of income. The traditional support mechanisms, such as –
bank or financial institutions that foster the development of social enterprises is quite
scarce as compared to commercial enterprises. This is quite evident in most of the
countries as the extant literature suggests and apparent from the discussion with the
participants. This is to a lot extent due to the fundamental misconception that socially
driven organisations are not profitable and there is risk involved whether to money being
lend will be given back or not. Therefore, social entrepreneurs struggle to accumulate the
required capital and mostly invest their own savings to tackle social problems.

Instructor: Isubalew Daba (MSc. MBA, Ph.D. Candidate) Page 12

 GLC, Advanced Entrepreneurship and Innovation (MGMT 4161)

 Ability to scale-up: Social enterprises primarily spring up from the social inequity or the
market failure when the traditional systems are not enough to meet the needs. The
primary problem-involving majority of the social enterprises is that, it lacks the ability to
scale-up the enterprise to the next level. Most of the time it starts with immense
enthusiasm or a social outlook to address any specific problem. However, the lack of
support and structured polices affect the social enterprise to scale it up to the next level.
Partly due to the discontent across the societies and the scepticism towards socially
driven actions which is mostly neglected. This also affects the sustainability of the social
enterprises. Given that most begin with addressing social problems where the
government support is scarce, the expansion opportunities become limited overtime due
to resource constraints. Social entrepreneurs aspire to create social value by addressing
various social problems existing in the societies. This aspiration, however, is not deviant
from economic objective as it can also aim to earn profit through the innovative business
model. The traditional conceptualization however, associates the social enterprises largely
with the notion of philanthropy or non-profit venture. The duality of this identity has
remained a big problem for social enterprises. Some social entrepreneurs earn money
through their ventures considering this as a more ethical way to do business, some do
this with the mission to create a social impact and some try to create social value and
develop a sustainable business model. Thus, it is apparent that the identity of social
enterprises has become more ambiguous due to the diverse identity.
 Lack of proper business strategy: Another major challenge that most social enterprises
face is the lack of proper business strategy leading to non-competitive products. Given
the focus largely remains on social needs that to some extent impede the development of
the actual product or service offered by the social enterprise. This also hinders the
development of a proper business strategy to compete in the market as many of the social
enterprises compete with commercial enterprises. In addition, another fact is that the
social entrepreneurs often embark on the journey without having any prior business
background which is entirely out of goodwill. Due to this most of them would not have
the required managerial skill allowing them to plan, undertake strategic planning,
financial forecasting etc. Therefore, the poor strategy

Instructor: Isubalew Daba (MSc. MBA, Ph.D. Candidate) Page 13

 GLC, Advanced Entrepreneurship and Innovation (MGMT 4161)

Argument can be a precipitant to the challenge of fund raising, hinting on that the
organizations that are documented by literature as facing financial challenges might
actually be facing a strategy deficiency and not a financial deficiency.

Instructor: Isubalew Daba (MSc. MBA, Ph.D. Candidate) Page 14