Project findings and impact
Balance activities between trading activities and social/environmental aims in a social enterprise
Managing the balance between trading and social/environmental priorities can be difficult for some social enterprises, presenting competing pressures that can pull them in different directions. An excessive commercial orientation can dilute the social/environmental mission, while focusing too much on the latter can lead to problems of dependency on grant funding, donations, and volunteering. Nevertheless, compared to mainstream firms, social enterprises have the potential to leverage different income sources and innovate around their core business models. The more successful innovators are those that have a clear vision about the relationship between these priorities and recognise them as a tension that needs to be actively managed.
Achieving the right balance between the two strategic objectives provides a huge impetus to the direction and guiding values of the organisation, but there are often skills gaps that need to be filled in terms of business and innovation. Support is available, although this is mostly rather generic. Policy-makers, the support system and the wider ecosystem of social enterprises must recognise this need and focus their resources and their actions to help social enterprises to address this challenging situation and develop the appropriate skills.
Using innovation to support the development of trading activity and/or their social/environmental aims
The majority of social enterprises experience a paradox. Although they are innovative enterprises, in the sense of trying to develop alternative business models or creative combinations of services and products or ‘unconventional’ production processes, their familiarity with innovation methods, innovation techniques or innovation skills is rather low. As a result social enterprises are unable to plan their innovation activities in such a way to make it directly relevant or useful for the development of the enterprise.
The primary objective of innovation activity is either to sustain and preserve the main value proposition of a social enterprise or to enable the growth of its trading activity and/or the extension of its social/environmental impact. Success in these terms comes with a requirement for change: its management approach should allow more delegation, its supply chains need to professionalise, its marketing strategy must adjust, the distribution channels need to upgrade etc. Unless social enterprises can manage innovation, they will find it difficult to manage these transitions and will need extra support to help them through these periods.
Innovation is equally important when unexpected pressures occur as the result of sudden changes in the external environment, such as market shifts and funding cuts. Sometimes social enterprises need to renew themselves: this may include the renewal of offerings, processes, clients, beneficiaries etc. as their model might be tied up to conditions that are no longer valid. Innovation can then be used towards renewing the main value proposition of the social enterprise.
The challenges and enablers of the actual innovation process in a social enterprise
Innovation in social enterprises is in general ad hoc and often opportunistic. This can make social enterprises very flexible and responsive to opportunities, coming up with new ideas, but without a more planned approach they can also miss opportunities and fail to push innovation projects to completion. Many social enterprises are very good at coming up with new ideas, but find it harder to select, develop, and implement the most promising ones. The lack of a structured approach also increases the cost of innovation activities.
Another constraint for innovation management is the lack of time and space to explore new directions since they are too focused on day-to-day operations. Space for innovation needs to be purposefully created by setting aside time and resources for exploring and developing new ideas and giving individuals or teams responsibility for pursuing innovation activities. This is not easy to achieve, but can be helped through encouraging systematic routines for innovation.
Identifying external expertise or knowhow can moderate the cost of innovation but it requires from social enterprises to develop the skills to identify the right partners, to negotiate terms and conditions that are beneficial to them and to carry out the joint project.
The impact of innovation in terms of trading and social/environmental aims
When effectively managed, innovation has an important impact on the sustainability of social enterprises and helps them to meet their social/environmental mission. However, capturing evidence of this impact is a significant element of the process. Proving (valid and reliable) evidence for the impact of innovation is important for sustaining the funding from public authorities but also for convincing beneficiaries and finding other players to collaborate with.
Demonstrating and communicating this impact to the outside world can be difficult. Social enterprise benefit from assistance in marketing their vision and demonstrating additional value, both economic and social, to consumers and other stakeholders. As such, there is scope for training and support in robust and user-friendly impact assessment and evaluation techniques.
Support through the innovation system of their region/country/EU
Most support is not specifically designed for social enterprises. It is either standard support for enterprise and business, or focused on voluntary sector activities. Social enterprises do not necessarily take advantage of what is offered because they do not see it as relevant. Social enterprises specific programmes can help to address this issue. Greater awareness of social enterprises needs among mainstream business support would be beneficial.
The available support for social enterprises is not specifically designed to address innovation. Supporting innovation in a social enterprise can be about providing direct financial contributions toward innovation projects. Equally innovation can be supported within a social enterprise by providing a regular market, provided that the requirements of the buyer encourage innovative solutions. Support is also about soft resources such as the facilitation of linkages with academia and the connections with the wider innovation ecosystem of a social enterprise.
The provided support must attain a minimum threshold level since spreading support resources too thinly across several priorities (or several social enterprises) can have a detrimental effect. In any case support should be provided via a user-friendly way, avoiding bureaucratic, complex or time consuming procedures.
The framework conditions within which they try to pursue these activities.
Regional innovation systems for Social Enterprises innovation are quite varied and do not always match supply and demand. Regional Social Enterprises champions help to energise and integrate Social Enterprises innovation systems, encouraging the attraction of resources and interlinked support measures. Public procurement has a significant role to play here, although changing policy conditions make this difficult.
Most importantly, regional authorities have a critical role to play. They need to establish an integrated system by which, the society is convinced of the role of Social Enterprises, the market is prepared to accept the role of Social Enterprises, the public procurement is geared to support innovation within Social Enterprises (rather than just Social Enterprises) and an ecosystem of partners is set up for Social Enterprises to connect and develop new innovative solutions. This integrated system is probably the most challenging target but also the most valuable asset for promoting innovation within social enterprises.
The Spark Project aims to enable social enterprises to develop and deliver more sustainable and high impact innovations leading to increased growth. We are refining the framework conditions that influence their development and creating more effective models and tools for social enterprise support.
The project has developed two innovation roadmaps. One of them is for start-up social enterprises which includes the following phases:
- Choose the right team
- Discuss your strategic priorities
- Opportunity scoping
- Brainstorm and evaluate potential product-customer combinations and product-beneficiaries combinations and make choices
- Develop and validate the product
- Develop processes and key suppliers
- Generate value
- Make innovation a regular act
The project has also developed an innovation roadmap model for established social enterprises.
- Discuss your strategic priorities
- Opportunity scoping
- Evaluate product-customer and product-beneficiaries combinations and choose focus of innovation
- Review the business model behind the combinations and choose the aspects that need innovation
- Assess innovation talents and inclinations in your team
- Initiate the innovation process by allowing input inside the enterprise as well as external sources
- Make innovation a regular act