Innovation and Scaling for Impact

How Effective Social Enterprises Do It

Christian Seelos, Johanna Mair

• Publisher: Stanford Business Books
• Year: 2017
• ISBN:
  9781503600997
• Edition: 1
• Topic: Business
• Subtopic: Nonprofit Organizations & Charities
• Index: Business

Innovation and Scaling for Impact forces us to reassess how social sector organizations create value. Drawing on a decade of research, Christian Seelos and Johanna Mair transcend widely held misconceptions, getting to the core of what a sound impact strategy entails in the nonprofit world. They reveal an overlooked nexus between investments that might not pan out (innovation) and expansion based on existing strengths (scaling). In the process, it becomes clear that managing this tension is a difficult balancing act that fundamentally defines an organization and its impact.

The authors examine innovation pathologies that can derail organizations by thwarting their efforts to juggle these imperatives. Then, through four rich case studies, they detail innovation archetypes that effectively sidestep these pathologies and blend innovation with scaling. Readers will come away with conceptual models to drive progress in the social sector and tools for defining the future of their organizations.

PART I

Innovation, Scaling, and Impact A Complex Relationship

In the following chapters we develop the argument that a deeper strategic conversation around innovation and scaling enables better decision making and demonstrate how this works. As a first step, we present a central framework that establishes clear terminology. The framework treats innovation and scaling as distinct processes within organizations. Next, we evaluate innovation and scaling based on their potential for creating positive impact. Lastly, we develop a diagnostic framework that enables organizations to identify their innovation pathologies that make innovations unproductive and waste scarce resources. Clarifying terminology and identifying innovation pathologies are essential first steps for organizations that seek productive decisions about innovation and scaling for impact.

1

OF RED AND GREEN ZONES

How Innovation and Scaling Create Impact

Most people feel they understand the world with far greater detail, coherence, and depth than they really do.¹

We often call things innovative. We talk about innovative people, innovative organizations, innovative products, or innovative approaches to alleviating poverty. But when we ask ourselves what exactly it is that we are trying to say when we use this label, we are often unable to give a clear answer. It can seem as though innovation is merely a subjective judgment about something. The absence of a shared basis for how we use the term leads to inconsistency. This may not be a problem when we use the word innovation in a casual conversation. But we have witnessed—in workshops, at conferences, and in discussions with colleagues—how unproductive it is to argue over subjective interpretations of innovation. The ambiguity around the term is a strong barrier to learning and knowledge accumulation and to making productive decisions. This ambiguity also explains why managerial research has largely failed to generate practical insights for organizations and why so many organizations continue to struggle with whether and how to be more innovative.

As we explained in the Introduction, we have had to reconsider our own use of the word innovative in relation to social enterprises. These organizations often have unconventional hybrid structures, financing mechanisms, and engagement processes with various stakeholders. All of those differences seemed innovative to us because they did not fit the standard model of a typical organization in Western competitive markets. Eventually, through our fieldwork, we developed a clearer set of criteria for what innovative implies. We felt that it was crucial to link innovation explicitly to the creation of impact.

This chapter attempts to deliver a clear perspective and a consistent set of criteria. As a basis for making this book helpful for you, our readers, we specify and operationalize innovation. By operationalizing we mean defining it in a practically useful manner that relates to concrete decisions and actions in organizations. That way we also introduce a consistent terminology for analysis of our four featured social enterprises, which we use throughout the book.

Our perspective on innovation is a synthesis of what we consider to be useful frameworks and distinctions offered by the innovation literature and insights derived from our deep engagement with organizations over many years. We will not sell you a paint-by-numbers guide to operationalizing innovation. Rather, we offer a grounded perspective that is conscious of the complexities of innovation and scaling but integrates a minimal, or core, set of concepts that we feel is necessary and sufficient for making productive decisions on innovation and scaling for impact. From this core set of concepts we build frameworks that you can adapt to any type of organization. We strongly believe that organizations that invest time and effort to create clear, internally shared, consistent, and actionable language and mental models around innovation are in a much better position to accumulate knowledge, to measure and compare innovation efforts, and to make strategic decisions about innovation and scaling.

Productive operationalization starts with being sufficiently precise and transparent about the term—something we rarely see in organizations. It requires finding terminology that is clear to decision makers in organizations and distinguishes innovation from other activities that also create impact. What also matters is consistent application of the term and careful adaptations that come from accumulated experience of when, how, and with what consequences innovations are enacted in an organization over time.

In this chapter we show how innovation contrasts with other impact-creating activities to illuminate what it is and is not. Clarifying what innovation actually does in an organization has several advantages: It creates shared and realistic expectations about what innovation can and cannot achieve, distinguishes which types of innovation an organization favors, and develops a shared sense of requirements that clarifies why, when, and at what pace an organization can and wants to innovate. This perspective on innovation is clearly different from the view of innovation as a competitive necessity in the business sector, where the dynamics in your industry in many ways define the why, what, and when of innovation. As we said in the Introduction, a number of organizational and environmental factors necessitate a much more conscious, careful, and intentional approach by social enterprises deciding about innovations. Otherwise, innovation is too often just a distraction for organizations that undermines the potential to create long-term impact at a meaningful scale. Let’s explore those factors now.

ILLUSIONS OF UNDERSTANDING

Cognitive scientists believe that we all suffer more or less from illusions of understanding. Studies have shown that we are overconfident about the extent to which we know and can explain the workings of seemingly simple objects that we use in our daily lives, the terms we use in our work, or organizational phenomena that we observe.^1,2 But, when challenged, our explanations often reveal significant holes, invalid assumptions, and inconsistencies. In the social sector, we confidently and frequently use ambiguous words such as impact, resilience, scaling, and innovation. These terms resonate with many, perhaps because there is plenty of room for various interpretations of their meaning. Consequently, anyone can choose his or her own favorite meaning. This is how buzzwords are born and readily diffuse through a sector. The development sector, where the painful reality of fundamental needs of millions creates a constant state of desperation for new solutions, is an easy victim of this dynamic. Unfortunately, deciding and acting on illusions of understanding often have negative consequences. Reality has little patience for well-intended ignorance.

Innovation is a good example. It is among the most frequent terms used in almost any field these days. The development sector has readily adopted it from the business sector with little reflection on fundamental differences. When we ask social enterprises or funders what innovation is and how they use the term internally, we get a bewildering range of definitions, assumptions, and expectations. It seems that anything that appears novel or surprising is called an innovation, even if the act of creating it was not innovative and did not involve any significant risk or uncertainty.

Here is an example: when we first visited BRAC in Bangladesh, more than ten years ago, we were taken to one of its field sites. BRAC staff encouraged us to interact directly with the villagers. We visited kindergartens where boys and girls naturally played together, and when asked they voiced aspirations for their future lives that were totally unexpected, given the local circumstances. They wanted to become educators or medical doctors and clearly had expectations for their futures that were very different from their families’ current realities. Illiterate women from very poor families worked together in support groups and dealt confidently with money, loans, and interest payments. This was all surprising and novel to us. We saw an incredible innovation in how on-the-ground development work is done. But for BRAC it was a day like any other. All this “innovation” we observed was mostly routine work for them. Its staff had operated kindergartens and organized groups of women for more than a decade. Instead of innovating, BRAC was scaling well-established programs to serve more people better. After many discussions and field visits, it finally dawned on us: If we want to study innovation, we need to suppress our natural tendencies to treat outcomes of organizational work that seem novel and surprising as innovations. Instead, we need to look carefully at the organizational processes that generate these outcomes. This insight raised central questions that we explore in this book: What are the characteristics of processes that we call innovative or innovations? What is the role of innovation in creating positive impact? And what is the relation between innovation and scaling?

Being sensitized by this perspective on innovation, we increasingly noticed that neither leaders of social enterprises nor their funders seem to have a shared and consistent understanding of what innovation means. Therefore, innovation activities are often ad hoc and associated with unrealistic expectations. Organizations may use innovation language and perception management opportunistically to jump on available grants that seem to require the extensive use of the term innovation as a prerequisite for funding. It is difficult to coordinate activities within and across organizations if everyone has a different mental model of innovation.

But isn’t there a wealth of knowledge available on innovation that could serve as a source for clarification and inspiration? That was our assumption—and hope—when we started reviewing the extensive managerial and organizational literature on innovation. What did we find?

Innovation Research Is Not Practical

To clarify thinking about innovation, one could potentially read the thousands of managerial papers and books that have been published on the topic in recent years. They share insights on many aspects of innovation in organizations and promote solutions and recipes for increasing their innovativeness. A number of authors have reviewed the vast and rapidly expanding organizational innovation literature. Many are skeptical about the practical use of our knowledge. A review from 1994 already noted that “the most consistent theme found in the organizational innovation literature is that its research results have been inconsistent” and that it is “low in explanatory power and thus offers little guidance to practitioners.”³

Despite this skepticism, today we know a lot about how organizations develop and execute new ideas internally as part of innovation processes. We also have a good understanding of how and under which circumstances organizations adopt ideas and innovations from the external environment. And we know many characteristics of the organizational and environmental factors that influence innovation processes. A comprehensive 2004 review of the innovation literature documents this progress in knowledge.⁴ The authors identified a large number of factors that researchers have found to influence innovation in organizations. Despite all this knowledge, however, the authors of the review criticized innovation research as lacking creativity and innovativeness and as portraying innovation as unrealistic, inaccurate, and linear.

Other authors agree. In a more recent review,⁵ scholars synthesized thousands of scholarly papers on organizational innovation in an effort to identify actionable determinants within the realm of organizational and individual power. That review documents impressively how our collective understanding of the factors that influence innovation in organizations has grown. We understand quite well how at least some of them work in isolation. But the complexity generated by numerous coexisting factors and their particular constellations in any given organization, whether from the business or the social sector, challenges our ability to translate that knowledge into practical advice. The authors of the review summarized their evaluation of the state of the innovation literature: “However, as our review has demonstrated, innovation research is fragmented, poorly grounded theoretically, and not fully tested in all areas. Even the latest innovation models fail to consistently capture across and within sector factors.”⁵

Social Sector Innovation Research Lacks Adequate Depth

Research on innovation in the social sector unfortunately is not particularly useful either. In a recent review of the innovation literature with a specific focus on social sector organizations, we found the knowledge base to be relatively thin and equally problematic for providing guidance.⁶ What are the implications of this sobering review of existing innovation research? Research matters, but it does not furnish organizations with recipes they can follow to guarantee “innovation success,” despite the hopes raised by hundreds of innovation books. We therefore caution against naïve assumptions that there are easy and quick answers to the questions of what innovation is and how to build innovation capabilities. Unfortunately, organizations are left to translate this fragmented knowledge base into useful decision frameworks themselves. The potential advantage of doing the translation work is that it forces organizations to unearth, question, and—if necessary—correct hidden assumptions. Ideally, they will create an innovation language that is intelligible to decision makers and specifies clear roles and expectations for innovation in support of their longer-term ambitions for the organization. In the next sections we offer some ideas for getting started with this work.

DEVELOPING A FRAMEWORK THAT LINKS INNOVATION AND IMPACT

We evaluate innovation by its potential for creating impact. The term impact creation refers to the benefits created for the people and communities that an organization serves. Linking innovation to impact creation has a number of advantages. It implies that innovation needs to “prove itself.” Innovation must be evaluated by its outcomes and the impact it generates compared to the effort expended. Innovations may thus fail or succeed, and innovations may be more or less productive. We replace the positive ideology of “innovation is good” with an evaluative perspective that considers innovation as one potential way to create impact. The focus on impact creation also links innovation to concrete org...

Table of contents

• Cover
• Copyright
• Title Page
• Contents
• Acknowledgments
• Introduction: Social Enterprises Require a Distinctive Perspective on Innovation and Scaling
• Part I: Innovation, Scaling, and Impact
• Part II: Case Studies
• Part III: Recommendations for Organizations and Their Supporters
• Conclusion: A Guide to Productive Innovation and Scaling for Impact
• Notes
• Index