Social innovation: a simple model

Several years ago I attended a talk given by a manager from MaRS, a Toronto innovation hub. Of the twenty some slides in her PowerPoint deck one caught my attention. It showed that social innovation could occur anywhere along a spectrum ranging from non-profits to businesses. I was impressed by the simplicity of the model.

Several years later, when I launched into consulting I went looking for this slide- it took me a while but I found it! I have since modified it to incorporate Social Business and I use it frequently in my public talks. I have been surprised by its universal appeal.

As you can see, a simple way to look at organizations is along a continuum of returns, ranging from purely social on the left to exclusively financial on the right. Social innovation can occur anywhere along the spectrum.

Grant funded non-profits: The traditional non-profits. They depend on grants and donations to survive. They are all about delivering social value. Examples include local churches, many NGOs, local social agencies and charities. The major challenge for these organizations is financial sustainability.

Revenue generating non-profits: In their struggle to survive, many charities shift their activities to the right along the spectrum.  They embark into revenue-generating activities to help support their worthy purposes. For example, I buy green coffee beans that I roast at home from the Green Beanery, a non-profit whose earnings support Probe International. I offered another example from Newfoundland in a previous blog.

Traditional Business: When I took my MBA over 20 years ago we were thought that business’ goal was the maximization of shareholder value- as measured by profits. Fortunately, this is changing (read Porter on Creating Social Value). Other stakeholders are pushing businesses left along the continuum. Few businesses can hope to achieve long-term success anymore without reducing their environmental footprint, being a source of social good, and creating valuable goods and services.

Social purpose business: These companies are created with a profit objective in mind but with a strong social commitment. An example is Bullfrog Power, a Canadian “clean” energy provider.

Social Business: In my opinion, this model offers the best of the business and non-profit worlds. As defined by Nobel Peace laureate, Pr. Yunus, the goal of a social business is to create organizations that operate like businesses and focus on social purposes. The business objective is to overcome a social problem not to maximize profit. Danone’s venture with Grameen in Bangladesh is a great example. It seeks to solve a problem, malnutrition, by selling affordable and nutritious yoghourts. The goal is to improve the health of children, not generate a financial return for investors (but the venture has to be profitable enough to be self-sufficient). You can find many more examples in my previous posts.

This model in not meant to illustrate all possible types of organizations. Its aim is to show that it is no longer possible to look at the world in a bi-polar way: business vs. non-profits. A variety of models exits and social innovators and entrepreneurs can operate anywhere along the spectrum.

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