In what ways can social enterprises be innovative?

13.02.2013 Blog

Social enterprises and social innovation are closely related concepts but the relationship between them is not well understood or explored. For example, the assumption is often made that all social enterprises are inherently innovative. A recent paper from the Third Sector Research Centre explores this idea in greater depth and highlights the lack of existing empirical research to substantiate this claim. Through a series of case studies, Fergus Lyon and Celine Chew contribute to an understanding of the various ways that social enterprises can be innovative, the different approaches that are taken, and some of the associated challenges and implications.

Both ‘social enterprise’ and ‘innovation’ are contested terms with many interpretations and usages. The article reviews these numerous definitions and the way they have developed over time before determining that both concepts are best regarded as social constructs; applied differently in different contexts.

The authors draw on case studies of three UK based charities/organisations that are mainly financed by social enterprise activity (e.g. trading for a social purpose). Each depicts a particular aspect they consider as innovation, namely, a ‘user-driven’ model for social enterprise activities; the development of innovative services for training and education which are specifically tailored to a diverse range of groups; and an alternate ‘mixed income’ model for the funding of services.

Case study A: This charity aims to support disabled people to live independent lives and has adopted a ‘user-driven’ model which guides all of its social enterprise activity. This recognises the vital importance of the ‘lived and shared experiences’ of disabled people as users of public services playing a key role in the co-creation and co-production of the organisation’s output.

Although a user-driven model isn’t exclusive to this organisation, and is widely used in the public sector, adopting the model in this context has been effective in achieving its core mission by helping disabled people become independent by creating an innovative culture throughout the organization. Most notably, a major social enterprise initiative was set up to ‘overcome barriers to work’, operated by and for disabled young people themselves and was achieved by them securing apprenticeships with local private sector businesses.

Case study B: This non-profit organisation focusses on environmental conservation, aiming specifically in this case, to reverse the process of degradation in local parklands without major interventions or cost.

It has created innovative education and training programmes for diverse target audiences who have an interest in the environment (e.g. conservation professionals, landowners and farmers, local authority land use managers, and advisors, student and college groups) and includes practical one day training workshops and bespoke courses tailored specifically to the group in question on topics such as wildlife-friendly land management. The Institute of Fundraising Wales has assisted the organisation in developing a more targeted marketing approach to promote their services to new audiences in the community.

Case study C: The aim of this social enterprise is to improve the future prospects of children, families and local communities through a ‘commitment to excellence’ in early-years education, training and research.

It has an equitable fee structure, with a range of fees depending on the client’s financial position and ability to pay. The organisation focuses on being enterprising and operating like a business in order to be less reliant on grants and donations. It has diversified its income sources as much as possible, to minimise the risk of income fluctuations that can occur due to unpredictable external factors.

Adopting a more enterprising and innovative approach to income generation that can adapt to different funding opportunities and challenges has resulted in a diverse portfolio of income sources including: nurseries and child care centres fully funded by government contract fees, those fully funded by paying clients, those operating under a tiered fee structure and those funded by student fees for training they offer on early years education.

The authors analyse the nature of the innovation they observed in the case studies using Bessant and Tidd’s (2007) 4P’s framework which identifies four broad categories where change can take place:

New product/service innovation: changes to what an organization offers:
All of the case studies illustrate the development of something novel for the sector that was not previously present: new ways of improving the employability of disabled people, new course provision for varied audiences and a new way of bringing diverse child care services under one roof.

Process innovation: changes to the ways products and services are created or delivered:
This is evident in case A, where the user (as key beneficiary) plays a leading role in strategy development and management of the organisation.

Positioning innovation: changes to the context in which the services are framed and communicated:
This was seen clearly in case B where new markets for existing training courses were created amongst target audiences who hadn’t used the courses before.

Paradigm innovation:  changes to the underlying mental models which shape organisations’ activities:
The authors show how social enterprise itself is an example of this, in which charities and voluntary organisations attempt to preserve their social mission whilst funding their activities through business and trading activity. Case C also demonstrates paradigm innovation through the development of a socially inclusive equitable fee structure which allows equal access to childcare irrespective of income-group.

The key challenges faced in all three case studies relate to reducing dependency on public funding and grant aid and either securing alternative funding from the private sector or becoming more financially sustainable by generating income from paying users. In addition to this, adopting commercial principles whilst preserving the social mission, and maintaining a common framework of quality and standards were key concerns.

The authors’ conclusion includes some of the implications of these challenges:
• They highlight the potential consequences of pressure to develop a more business-like approach in an increasingly competitive market, in particular the loss of social values which are supposed to be the central guiding principles of organisations such as these.
• They close with the assertion that innovation emerging within social enterprises is often a more strategic response to wider social, environmental and economic factors that is driven by governmental policy, rather than an intrinsic consequence of their unique structure or culture.

The paper points out the diverse innovative features that are present within these three social enterprises which is useful for us to gain a more comprehensive understanding of innovation in practice within the third sector. However, the authors also question the inherent capacity of social enterprises to be innovative, and continue to raise questions about the heightened ability of the third sector to provide services to local communities where the state or market is falling short.

These findings are highly relevant to researchers engaged in both social enterprise and social innovation, and will inform our thinking within the TEPSIE project as we seek to understand the relationship between social enterprise and innovation. The full article by Celine Chew and Fergus Lyon is well worth reading and can be downloaded from the TSRC website