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CSIknowledge: Five keys to corporate social innovation

Many well-meaning corporate social-innovation pilots never reach their potential. Marc Pfitzer and Valerie Bockstette discuss how to beat the odds

The term "innovation" appears at least daily in Guardian Sustainable Business. That's because innovation is the key to addressing the social and environmental challenges we face today. We need innovation to create more affordable health care services. We need innovation to bring nutritious food to every corner of the planet. We need innovation to improve educational outcomes. And most of all, we need innovation to counteract global warming.

Where will all this innovation come from? Civil society certainly is nimble and creative, but often lacks scale. Government certainly has resources and clout, but often lacks agility. Thus, businesses must play a key role in driving innovation to address these pressing needs – in ways that strengthen the bottom line. Corporations must find ways to create shared value for both society and their businesses.

This is, however, easier said than done.

Large companies, which can access today's most promising talent pool, can theoretically out-innovate anyone else. But in practice, deeply engrained processes, cultures and incentive systems tend to quash innovations that threaten the status quo.

Trying to embrace social innovation, which requires breakthroughs that address societal needs and change conventional ways of doing business, seems a near-impossible feat. The road is paved with dozens of well-meaning corporate social-innovation pilots that never reached their impact potential.

And yet, some companies have managed to overcome conventional thinking and traditional business models. They've managed to bring social innovation into their businesses and profited as a result. They've hurdled obstacles such as short-term profit horizons, tunnel vision and lack of imagination.

Beating the odds

How did they do this? We asked the same question, studying numerous examples of corporate social innovation to find the recipe for success. We found five things that companies successfully innovating for shared value have in common:

1. A purpose: Leading social-innovation companies are stating – or restating – their corporate purposes around meeting societal needs. For example, rather than producing sportswear, they create a healthier society; rather than making food, they enable nutrition; rather than producing ERP software, they optimize use of the world's resources. Defining your business around a societal purpose fundamentally alters the DNA of the business.

2. A defined need: Investments are not anchored to a mere theme, such as "poverty". Rather, investments aim to address a clearly defined need, such as "increasing the yields and incomes of smallholders in our supply chain by 200% in five years". A well-researched and data-driven needs statement allows a company to craft a clear business case and measure progress.

3. Measurement: Innovative companies are smart about measuring the impact of these investments on society and making the link to their bottom line. They decide how to do this upfront and track just a handful of indicators that show the value creation for society and for their business, underpinned by a deep understanding of how these connect. For example, health care companies might realize that giving people without health care the information to change their behavior and seek that care will generate new revenues. These companies could unlock business value by tracking changes in health outcomes and understanding the nuances of how their activities affect those outcomes.

4. Partners: Companies look beyond their own walls to find partners in social innovation. NGOs are no longer just grantees or antagonistic voices to be placated; rather they're becoming innovation co-developers. Unconventional partners from civil society, academia and philanthropy can add value in all stages of innovation: scoping, design, rollout or scaling. Social innovators establish and nurture expert and institutional networks in the areas they target for social innovation.

5. An innovation-enhancing structure: Finally, because policies and processes inside companies can often hinder innovation, successful companies set up a structure to situate, shield, measure and incentivize social innovation efforts. There is no "right" way to structure social innovation: You can set up a separate fund, a separate department, a cross-functional task force or a number of other options. What matters is intentionally choosing a structure that's most likely to boost innovation given the company's specific culture.

Which of these elements are most important? All of them. We found that these five ingredients are necessary; the absence of any stops corporate social innovation in its tracks. You can learn more about these concepts – and find examples of successful social innovators – here.

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