U.S. Social Innovation?

When I think of Social Innovation I usually think of technology or improvements in poverty-stricken third world countries. I think of areas with little or no economic foundation or significance. I think of areas or communities that aren't self-sustaining or could most benefit from innovation. Maybe it's due to my lack of exposure to social innovation but I enjoyed reading improvements and innovations that are being made right here in the U.S.

Last week we discussed the X Prize model that could improve education or illiteracy in poverty areas. Today, an article in the N.Y. Times outlines the improvements being made in Baltimore schools where interestingly, a Cuban immigrant, Andres Alonso, was hired by the school board to bring positive change through reform. Is Social Innovation confined only to creating new technology or can it also include changing behavior in areas of need?

In this Baltimore school district, 84 percent of students are on free or reduced-price meals, which is a measure of poverty. Dropout rates are incredibly high. The murder rate is six times that of New York City. Six administrators had been hired over the past six years.

Dr. Alonso's approach was to change the behavior and culture of these schools. Previously, administrators had focused too much on test scores, but Alonso worked to create a positive perception, get buy-in from faculty and parents, and go to the root of the problems.

In class we defined innovation as "the act or process of inventing or introducing something new." Can we use Dr. Alonso's success in Baltimore schools in other poverty areas in the U.S.? What about other countries? Would cultural differences, traditions, or other barriers prevent similar education reform?

Helping Africa Feed Itself

Currently, African nations are a net importer of food supplies. While worldwide production has generally increased, in parts of Africa production has remained stagnant over the past 40 years. This is despite the fact that 70% of Africans are engaged in agriculture. There remains upwards of 250 million undernourished Africans throughout the continent. Traditionally, as explained in this article from Reuters, investment in Africa in the agricultural sector has been from philanthropic organizations and developed governments.

Recently, however, for-profit private investors have begun, with the help of nonprofits, to invest in mid-sized African farms, helping to develop infrastructure as well as improved farming techniques and advances in farming technology. Specifically, the article describes the TransFarm Africa Transformation Fund (FTA), a private equity investment aiming for 15% returns from aiding mid-sized commercial farmers in processing and distribution that include small farmers in their operations. There are many other private firms involved in similar investments, all of whom are attempting to avoid the typical stigma of “land-grabbing” associated with private investment on the continent. To do this, they are collaborating with local business groups.

While foreign government and foundation investment is critical, the scale of food shortages are so great that private investment is needed. Evidently, there are many opportunities for private firms, and specifically social entrepreneurs to invest in African agriculture, with the social mission of helping the malnourished of the continent, while still generating revenue to create a sustainable business. As time goes on, and food shortages become more and more of an issue, not only in Africa, but also throughout the world, the opportunities will only increase. In terms of the future of social innovation and enterprise, this sector is poised for major growth.

Do you see issues arising with the exploitation of small farmers with increased private investment? In addition, will there be enough space for social entrepreneurs to get in on the action, where it seems that perhaps traditional businesses are also interested? What other opportunities do you see for the future of social innovation on the continent?

Tax and Aid (6)

There is little doubt that governments will have to play a major role in alleviating the world’s problems, from climate change to famine. Of course, nonprofits, foundations, and more recently, social enterprises are also major players. However, all of these organizations depend on world governments, be it funding, other forms of financial support, or policy, to survive and succeed. Social enterprises in particular, being businesses, need government support in the form of laws and policies to survive in an open market. Richard Brooks, in his article, Tax and aid: To trade with loaded dice, from November 29^th in the Guardian, discusses how large multinational corporations can inhibit governments, particularly those of very poor countries, from making a significant impact on these social issues.

He uses SABMiller as an example to highlight multinational tax avoidance, especially in poor countries: The SABMiller brewery located in Ghana only paid 0.3% of its revenue back as tax from 2007 to 2010. The company is using loopholes in local and international laws and creative financing arrangements to avoid paying taxes. In the country, corporate taxes form a significant amount of revenue for the government. Obviously, by avoiding these taxes, SABMiller is creating a significant negative effect on the governments operating income. Such tax avoidance is repeated by other multinationals throughout the world in both developing as well as developed countries. Obviously, this could be a huge source of revenue for governments, who could put the money to good use in helping their people. Specifically for poor nations, this would allow them to reply less on foreign aid, which considering the current economic climate and budget tightening, is likely to decrease.

In terms of social enterprise, money lost from tax avoidance could actually go to promoting social businesses whether it is direct funding, or other financial support mechanisms. Obviously, intelligent policies and laws are still needed, but closing tax loopholes and preventing the offshoring of funds could promote assistance to social enterprises and social causes in general. All that is needed is the political will, which sadly, is really lacking. Do you think political will and capital could be generated if there was more of a focus towards tax avoidance being a social issue? At the moment, it is described by opponents as a way to expand government, and by proponents as the corporate world being negligent. Additionally, do you think poor governments could go about collecting taxes without scaring off these businesses, without help from developed nations (where it seems there is a lack of political will)?

Don’t Use the Word “Charity” (4)

This article is an interview with Will Prochaska, the director of Alive & Kicking, an African social enterprise using sports, specifically, the manufacture of soccer (and other sport) balls to provide recreation and promote health knowledge amongst children as well as create jobs for adults in low income areas in Kenya and Zambia. In this interview conducted by Kerry Ann Eustice of the Guardian, Prochaska discusses his enterprise and the challenges he has faced in developing and growing his business, particularly when he is committed to fair pay for his employees and his competitors are not.

He has established a sustainable business by differentiating his product with the help of retail outlets in both Kenya and Zambia. His marketing strategy involves going into retail outlets and highlighting the low quality and poor labor conditions in the manufacturing of his competitors’ products in other countries. He compares this to his own manufacturing process, educating his potential customers about the benefits of a locally produced product.

This is a very interesting example, particularly as it relates to other aspiring social enterprises in their development and growth. As, Prochaska indicates, his business had particular difficulty in establishing themselves as an independent operation, free of outside support, while still providing a valuable social service. To overcome this difficulty, the mentality of the entire organization had to change, some of which was achieved through more ownership and responsibility by staff within each operation. He also provides some advice to other enterprises, recommending that everyone involved in the organization needs to understand the need for the business to operate independently, while making the case for avoiding unrealistic expectations inside and outside the company by overtly pushing the social mission.

What do you think about Alive & Kicking’s marketing model? Would it be effective (and sustainable) in other situations for other businesses? In addition, do you agree with Prochaska that it is necessary to push away from the charity (or social enterprise) label to be sustainable?

A Surprising X Prize

I was excited to read in this article that the X Prize Foundation announced they would be putting up money for a competition with the goal of cleaning up oil from the BP spill.

However, when I went to the X Prize Foundation homepage, I didn’t find any more details.

What did catch my eye, though, was a little blurb that said “X PRIZEs are being developed that will end our addiction to oil and stem the harmful effects of climate change.” I would loooooove to see how this plays out…

I attended a rather depressing panel discussion sponsored by the E-Cubed club during lunch today: 3 professors (an economist, an environmental attorney, and a former astronaut who’s now in the Environment and Public Policy school) all basically said that they don’t have big hopes that any significant climate change legislation will be passed any time soon.

In light of that grim outlook, it’s great to read about prizes that could stimulate innovations that reduce our carbon footprint. After all, we need something to drive change. If it’s not going to be Congress, what will it be?

As we read in the X Prize article for this week’s class, the X Prizes excite people, “pulling” them toward a certain goal. If that goal can be an end to oil addiction, we’ll all be better off! Especially if the prize delivers on what it promises: growing awareness of the market for the winning (and even non-winning) technologies.

There are a lot of land use, environmental and infrastructural issues associated with the energy use changes we’d likely have to make to facilitate a massive switch to renewables and other technologies. Are these obstacles to big for a prize to overcome? In other words, does this challenge of breaking free from our oil addiction require more cooperation and investment than X Prize participants will be willing to give?

Masdar...Resistance is Futile, You will be Assimilated

Akin to the Borg, Masdar's zero waste city in the middle of the desert has no utility for resistance from detractors. The Masdar corporation has suffered recent set backs from pushing back their launch date to 2020, to loosing the provost at the Masdar Institute for Science and Technology, to dealing with a real estate projection which predicts future difficulty in finding enough residents to fill the future city of Masdar. But Masdar continues to push on, moving forward with their plans to build the underground personal transport system, No one said it would be easy, but is it worth it. Will the ideal of a zero waste world yield from examples like the city of Masdar? Does the push for a community of innovators to be inspired by such imaginative prowess create useful achievable advances in technology or do they lead to machinations like that of the LilyPad, the floating city. Designed by Vincent Callebaut as part of a competition sponsored by the Oceans conference in 2008. The Lilypad would house 50,000 people displaced by the changing landscape due to global climate change. The design is awe inspiring and maybe more science fiction then innovation. But if Masdar succeeds then maybe these more imaginative approaches to the Green movement will become more achievable just by virtue of precedence. And competitions like those sponsored by the Oceans conference or the X Prize Foundation might get us there faster. However using competition as a driver of social innovation is not a new concept. I have witnessed this method work well in the class room. Kids love competition, its a great tool to engage everyone in the learning process, but the results are mixed when used soley it to increase comprehension. But does it mean we should not try it all. X Prize Foundation president Thomas Vander Ark has interesting perspective on the issue. Having worked on both sides of the fence in the social innovation/reform field he understands that "although prizes are no silver bullet, I am confident that they will be a powerful change lever in the social sector." Let's hope that Masdar will make it!

The Social Innovation Network

Attempting to guess where the future of social innovation is heading is an incredibly daunting task. Not only is technology evolving at warp-speed, but the field itself is just as quickly shifting to broaden its appeal and impact. One of the technologies that has certainly fueled the potentials of innovation has been the rise of social networking. With facebook and YouTube, massive numbers of people can connect with each other at a low (or no) cost. This interconnected web can direct energy towards large social movements and has the potential to make activism and social change trendy and hip and not just something for peace-loving hippies. The power of these tools can be seen in movements like the green-clad support of the "Iranian Revolution" and the public outcry that occurred with the deaths of the gay teens. How much actual positive change these movements have can be debated, however, they certainly show a shift in how we communicate and spread information through technology and graphic imagery.

With this knowledge and access to huge populations, social change and innovation now has a platform to bring together diverse minds and potential funders. With the rise of sites that seek to connect social innovation with actual human capital, many projects have been realized that seek to make lasting sustainable change in low income populations. An example is Architecture for Humanity, which brings together architects, designers, and entrepreneurs to solve housing issues around the world. Another project has been the Vlogbrother's Project for Awesome, which annually takes over YouTube for one day a year to post videos about charities and social innovations to raise awareness and potential volunteers. Social innovation has great potential to tap into these networks and resources to expand their mission and connect around the world. 

While social networking has and will continue to increases and spur innovation, it will also create challenges for social ventures in the future. With the ease of creating a facebook page for your cause or linking in to a thousand different networks, the question arises of how up-and-coming social ventures and innovation will stand out and actually receive needed attention to make change. On one hand, this will allow only the truly innovative ventures to rise to the top, while on the other, it could hinder great idea makers by placing them in the middle of undefined cyber noise. 

One project looking to help social innovators stand out above the crowd is an organization called LoudSource. Loudsource raises funds to help advertise social projects through a variety of media. From billboards and TV to ad on your iphone app, LoudSource has created a fairly simple business plan: 

There hope are then "that funding advertising maximizes individual impact by reaching completely new communities for people's favorite causes. By bringing unexpected ideas and creative solutions to mainstream channels, we will ultimately build momentum for some of the best work happening in the world." Looking forward, it will be the innovators and entrepreneurs who can harness the tools at their disposal to raise awareness and efficiently create lasting change. 

It will be interesting and inspiring to witness how the field of social innovation continues to evolve to meeting the challenges and opportunities that technology and communication are bringing to the world. Hopefully these changes will make progress that can be felt by all.

A few questions:

What other online tools have potential for evolving how social innovation is integrate into society?

Has the social networking movement done more to damage the plight of social innovators by making people want instant gratification and by creating generation of kids who have their focus pulled in a million different directions? Can these technologies be compatible with lasting sustainable social change?

Education, public policy and innovation

A recent New York Times opinion discussion noted that top French academics are coming to the U.S. to enjoy the increased salaries, freedom and competitive energy our academic environment provides. Many believe that our universities, with their competition and vast bank accounts, are somewhat responsible for the American culture of innovation -- think Stanford and Silicon Valley, or MIT and Harvard and the Boston biotech industry.

But in a time of decreased government funding for education and research, someone has to fund this innovation. The skyrocketing costs of tuition leave little room for doubt as to who is funding the continued progress of American academia. (Some universities raised tuition 15% this school year.)

The burden that major research universities levy on their students in the form of debt is unsustainable in the long-term. But the debt our own government is facing makes increased federal support for innovation a challenging proposition. Who should pay to create and maintain an academic environment that fosters innovation?

Is the X Prize Foundation doing enough?

When reading the X Prize article, I found myself intrigued by the notion of using competition to fuel social progress. Like Vander Ark, I agree that “a prize mechanism is very useful” when dealing with ambiguous problems (15 minutes, 2008). This intrigue turned to disappointment, however, upon review of the foundation’s website.

Despite Vander Ark’s expression of confidence in the foundation’s ability to “identify several entry points where prizes can make a big difference,” ‘Education and Global Development’ is the only of the group’s four prize areas (energy and environment, exploration, education and global development, life sciences), for which there are no planned future prizes listed on the organization’s website (15 minutes, 2008). This speaks to either a lack of interest in the educational sector or, as Vander Ark referred to in the article, evidence of a lack of investment “spent in this field because the returns to investors have been weak” (15 minutes, 2008).

In either case, it is disappointing that in the 2 years since the article was published, the potential to improve educational issues through competition that Vander Ark spoke of has remain untapped. This is especially true due to the widespread education and literacy issues currently present within both the developed world, such as the US, and developing countries.

Although developing solutions to issues related to getting laymen to the moon or producing a car with lower fuel emissions is arguably more exciting than coming up with a sustainable method of educating inner city children, I contend that the latter is equally if not more important (Home Page). Thus, I hope that the X Prize Foundation soon lives up to Vander Ark’s words and funds a prize competition aimed at “focus[ing]…attention on an important education goal” (15 minutes, 2008).

As of now, the foundation’s website contains no concrete evidence of plans for doing so. They are however soliciting ideas for the focus of such a competition, be it on the national or international scale. I encourage interested parties to participate in this solicitation. Ideas can be submitted at the following link: http://www.xprize.org/x-prizes/propose-an-x-prize

Sources:

15 minutes. (2008, Winter). Stanford Social Innovation Review , p. 3.

Home Page. (n.d.). Retrieved 11 30, 2010, from X Prize Foundation: http://www.xprize.org/

(PC - PR) + (SIB - GR) = PBI

At Carnegie Mellon we try to explain everything through mathmatical models. That's an exaggeration, of course, but our quantitative focus did help me have some fun with a few concepts we are covering in class.

The equation above stands for:

(Philanthrocapitalism - Philanthropist Risk) + (Social Impact Bonds - Government Risk) = Prize Based Innovation

This week, while reading an interview with Thomas Vander Ark, president of the X Prize Foundation , in the Stanford Social Innovation Review I learned about prize innduced innovation. During the read I could not help thinking about the similarity of Social Impact Bonds and X Prize's approach. Both innovation methods aim to create solutions to challenges that past efforts have failed to overcome. However, by creating a prize model the risk of failure is taken off the shoulders of the government and instead shouldered by the contest participants. In venture philanthropy the risk of a venture is taken on by the granter whether is be a venture capital fund or foundation and off of the entrepreneur / innovator. In this model, all the fund's chips are tied up with one team.

Prize based innovation takes the constraints of SI bonds and venture philanthropy and throws them out the window. No limit on number of teams. No risk to public dollars or welfare. But giving up constraints also means giving up control. Prize based innovation cannot say, here's an amazing group I want to get behind with my dollars. There is limited oversight. It takes an adventurous and humble spirit to run a innovation fund based on a prize structure, one not needing to take the credit for an advancement. Do people remember the Orteig Prize ? No. They remember Charles Lindbergh.

Our additional readings this week looked at the development of what has been dubbed, "the world's first zero-carbon city". The upcoming 50,000 resident city of Masdar wil be powered by wind and sun energy while becoming a global leader in CO2 trading. Masdar is located in oil rich Abu Dhabi. So far the emirate has contributed $15 billion to Masdar's development. This resembles the prize based innovation pursued by X Prize, except the UAE is pursuing the challenges on its own without putting out the call to other governments in the world to compete.

Over the last decade or so the world has seen the UAE and Abu Dhabi throw around a lot of money to accomplish incredible feats. In door ski mountains. Man made islands shaped like a map of the world. Plans for the first rotating tower. They've been putting their relatively recently acquired wealth to innovative use.

When I look back through history, it was the first half of the twentieth century that the world looked at the United States as the birthplace of aweinspiring innovations. The Wright Brother. Henry Ford. Thomas Edison. During this era the United States was experiencing relatively new levels of wealth. As the USA has gotten used to its place as a world leader has it become too conservative in its scope of innovation? One only needs say the word "Internet" to seemingly leave my question obsolete. But have we reached the levels we once imagined for ourselves? What happened to the Jetsons? What happened to my rocket car? Hopefully, X Prize is setting up a contest , but if the present is any predictor, the UAE may beat them to the punch.

An Ethical Dilemma of Inequality and Exclusion

The readings for this week made me think about an ethical dilemma between poverty, inequality and social innovation. In the New York Times’ article In Arabian Desert, a Sustainable City Rises, by Nicolai Ouroussoff, after presenting the innovative city-project of Masdar and its benefits, the author reflects about “the growing division of the world into refined, high end enclaves and vast formless ghettos where issues like sustainability have little immediate relevance”. Ourousssoff stresses an important point: innovation can entail exclusion and inequality.

During these seven weeks of course, I have learned the basic principles about l Innovation. Well, I think that the discipline focuses in poverty reduction, but inequality is hardly mentioned. Actually, I am concerned that some innovations reduce poverty, but they increase inequality. To clarify my point let me divide the successful cases of social innovation into three categories: 1) Social Innovations that reduce poverty; 2) Social Innovations that reduce poverty, but increase exclusion; 3) Social Innovations that reduce poverty and inequality.

In the first category, I would include for instance the French peanut butter paste to battle hunger in Africa. It is a social innovation who fights against poverty, even if it not reduces inequality directly.

Regarding the second category, this is which I distrust for a matter of ethics. It refers mainly to products that are price discriminating. For example, the DANONE yoghurts of 10 cents in Africa, or the adjustable glasses for poor people. In my opinion, they increase exclusion in the long term, because there would be two kinds of goods, one for the rich people and one for the poorest. It is unfair. The solution should be that both (poor and rich) can afford a visit to the optometrist, or both can buy the fancy yoghurt. The solution in this case should be policies to improve health and jobs. In the long run, these kinds of social innovations are not solving the sources of the problem. Contrary, they increase the sense of exclusion in poor people, and it can be dangerous for social stability.

The projects that reduce both poverty and inequality are the third category of Social Innovation. In this category, I would place the initiative of Aravid Eye Care Systeme in India, to make eye surgeries. People receive the same service, independently of their income, and it serves to reduce at the same time inequality and poverty.

Moreover, most of innovations related with information technology fall into this category. One of the biggest sources of inequality in developing countries is the unequal access to information. Poor people don’t have complete information from the markets; indeed they cannot take the best decisions. Without information, markets don’t work properly. Innovations that increase the amount of information available for marginalized people, or increase the education level to interpret that information, succeed reducing both poverty and inequality. For example, the new uses for mobile phones, such as the Farmer’s Friend or Google Trader or banking services follow this pattern.

To conclude, in the conceptual frameworks we studied at the beginning of the course, I did not find an explicit distinction of projects in function of inequality reduction, neither in the readings about how to measure social impact. Nevertheless, to attain long term solutions to development problem, it is essential to distinguish between social innovations, or social enterprises that reduce inequality from those who do not. Social impact measures should take this into consideration. Did I miss something in the readings? Do you think that Social Innovation should focus only in poverty reduction and not inequality?

Prize Model for Social Problems?

Competitions can bring out the best in us. The result of the X Prize competition was the most efficient, low-cost method for transportation to space. Using the prize competition model to solve illiteracy through education is a creative example of how to find the best way to solve the problem.

After reading the article about Thomas Vander Ark and the X Prize Foundation, my first question was, why aren't there more global prize competitions to solve social problems?

The article poses several reasons to counter this question but one stuck out to me: the return of capital to investors has been weak. Finding a low-cost, efficient solution seems to be the problem with many social ventures. Funding these ventures is always an issue.

Safe drinking water is a problem for 2 billion people in the world. One example of the prize competition that might prove successful would be to provide safe drinking water to these people.

Why can’t we create an effective market system that allows individuals and corporations to donate money to these social ventures? As we discussed in class, when the U.S. government provided tax benefits for charitable contributions the floodgates of capital opened up. What if a website was created where individuals and corporations could donate capital to the winners of each social venture prize competition to expand relief for such programs? Companies could also sponsor a water purification device in a community, like “adopting a highway” currently exists in the U.S. We might even use the idea of paying for carbon credits to extend beyond just a company’s carbon footprint, but to where companies could pay for any overconsumption.

Although challenging, with the creation of an efficient capital market system to fuel products and ideas from prize competition winners in social innovations, what social problems couldn’t we solve? How can we best use that system to generate returns so investors are likely to contribute?