The Shifting Sands of Social Innovation

                With the increasing number of enterprises focusing on social innovation there’s a need to consider different scenarios and expectations with regards to an enterprise performing its stated mission. Whereas for-profit enterprises focus on returning profits and nonprofit organizations focus on social goals, social innovation looks to accomplish its mission while using profits to ensure that it is able to not only sustain its operation, but also take it to scale. In order to properly accommodate this unique endeavor a number of changes are being proposed as ways to offer businesses with less of a projected return due to social goals to still be enticing so as to draw talent and ensure that these operations don’t fail.

                One way to differentiate between the standard corporation and what has been deemed a Benefits or “B” Corporation has been to create a separate designation for these undertakings. Though currently still considered corporations for tax purposes, B Corporations have been able to find ways to sweeten the pot for people from academia with provisions to ease the burden of student loans for recent graduates from certain schools, using a provision not unlike those given to graduates that work in nonprofits. Additionally on a local level, cities like Philadelphia have given tax breaks to B Corporations in order to make them more likely to survive, and B Lab has also worked to link up various B Corporations so they can purchase discount services from other B Corps and keep costs low, while also promoting a more conscious brand. While these all provide a great way to bridge the gap, there should still be some move by the government to create a specific designation that differentiates their needs and goals from those of nonprofit and for-profit organizations.

                With that being said government involvement in anything is already tricky and depending on who one talks to either the source of all ills or the panacea. These beliefs are represented in the two methods by which social innovation is increasingly being funded. The first option uses what’s called the pay-for-success model where a private organization provides the funding for a project and is paid upon completion of a pre-specified benchmark and if the project is not completed the organization is not paid, but if they perform above expectations they can receive extra financial incentives. While this is great for those working on the project, it puts a lot of risk at the feet of the funders with little control for implementation if the people running the project change the terms after it is underway. These projects could also experience a chilling effect if there was a high-profile blunder, so overreliance on just this model is risky. On the other hand, the centuries-old government-sponsored Prize Model posits a question, receives plans and funds the best one. It provides financial incentive for innovators and backing to implement. With prizes the government provides the capital but also casts a wider net for more innovative ideas.