Social innovation is a broad term that tends to overlap with other concepts.  Leading scholars at Stanford University established a Center for Innovation and the Stanford Social Innovation Review – from which this BLOG post is abstracted.  This article describes a number of important social innovations, as well as the differences between similar terms.
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Social entrepreneurship and social enterprise have become popular rallying points for those trying to improve the world. These two notions are positive ones, but neither is adequate when it comes to understanding and creating social change in all of its manifestations. The authors make the case that social innovation is a better vehicle for doing this. They also explain why most of today’s innovative social solutions cut across the traditional boundaries separating nonprofits, government, and for-profit businesses.


Rediscovering Social Innovation
By James A. Phills Jr., Kriss Deiglmeier, & Dale T. Miller
Stanford Social Innovation Review Fall 2008

Over the last 20 years, we have seen an explosion in applications of business ideas and practices to nonprofit and government works. 1 We have also watched businesses take up the cause of creating social value under the mantle of corporate social responsibility, corporate citizenship, and socially responsible business. Indicative of growing cross-sector exchanges, we have witnessed the proliferation of terms that juxtapose the word “social” with private sector concepts, producing such new terms as social entrepreneurship, social enterprise, and of course our favorite, social innovation.

We contend that social innovation is the best construct for understanding—and producing—lasting social change. In order to gain more precision and insight, we redefine social innovation to mean: A novel solution to a social problem that is more effective, efficient, sustainable, or just than existing solutions and for which the value created accrues primarily to society as a whole rather than private individuals. …

The underlying objective of virtually everyone in the fields of social entrepreneurship and social enterprise is to create social value (a term we define later). People have embraced these fields because they are new ways of achieving these larger ends. But they are not the only, and certainly not always the best, ways to achieve these goals. Social entrepreneurs are, of course, important because they see new patterns and possibilities for innovation and are willing to bring these new ways of doing things to fruition even when established organizations are unwilling to try them. And enterprises are important because they deliver innovation. But ultimately, innovation is what creates social value. Innovation can emerge in places and from people outside of the scope of social entrepreneurship and social enterprise. In particular, large, established nonprofits, businesses, and even governments are producing social innovations. …

In addition, social innovation is grounded in the robust academic literature on innovation. Relative to the research on entrepreneurship, research on innovation defines its concepts more precisely and consistently. As a result, this research is a stronger foundation for building knowledge about new ways to produce social change.  Indeed, even the godfather of entrepreneurship, the Austrian economist Joseph Schumpeter, was interested in entrepreneurs only as a means to the end of innovation. In his classic Capitalism, Socialism, and Democracy, the “creative destruction” associated with entrepreneurship is primarily a vehicle for producing economic growth.

The advantage of examining the pursuit of positive social change through an innovation lens is that this lens is agnostic about the sources of social value. Unlike the terms social entrepreneurship and social enterprise, social innovation transcends sectors, levels of analysis, and methods to discover the processes—the strategies, tactics, and theories of change—that produce lasting impact. Social innovation may indeed involve finding and training more social entrepreneurs. And it may entail supporting the organizations and enterprises they create. But it will certainly require understanding and fostering the conditions that produce solutions to social problems. …

To be considered an innovation, a process or outcome must meet two criteria. The first is novelty: Although innovations need not necessarily be original, they must be new to the user, context, or application. The second criterion is improvement. To be considered an innovation, a process or outcome must be either more effective or more efficient than preexisting alternatives. To this list of improvements we add more sustainable or more just. By sustainable we mean solutions that are environmentally as well as organizationally sustainable—those that can continue to work over a long period of time. …

To summarize, it is essential to distinguish four distinct elements of innovation:

  1. First, the process of innovating, or generating a novel product or solution, which involves technical, social, and economic factors.
  2. Second, the product or invention itself—an outcome that we call innovation proper.
  3. Third, the diffusion or adoption of the innovation, through which it comes into broader use.
  4. Fourth, the ultimate value created by the innovation.

This reasoning gives us the first half of our definition of social innovation: A novel solution to a social problem that is more effective, efficient, sustainable, or just than existing solutions. (We elaborate what constitutes a social problem in a moment.)

Explaining what social means is both central to our argument and especially vexing. Some of the finest thinkers in the fields of social entrepreneurship, social enterprise, and nonprofit management use social to describe very different things: social motivations or intentions, the social sector as a legal category, social problems, and social impacts. …

Most people use the term social sector to mean nonprofits and international nongovernmental organizations (NGOs). Yet the complexity of social problems, as well as the growth of cross-sector approaches that involve business and government, means that definitions of social that are tied to organizational form are swiftly becoming outdated.

Another use of the word social is to describe a class of needs and problems. Indeed, in our own definition of social innovation, we say that these innovations address social problems. This formulation gives us a bit more traction, because although there might be debate over the social character of specific innovations, there tends to be greater consensus within societies about what constitutes a social need or problem and what kinds of social objectives are valuable (for example, justice, fairness, environmental preservation, improved health, arts and culture, and better education).

A final way that people use the word social is to describe a kind of value that is distinct from financial or economic value. A number of leading writers allude to social value or similar terms.16 Drawing on this work, we define social value as the creation of benefits or reductions of costs for society—through efforts to address social needs and problems—in ways that go beyond the private gains and general benefits of market activity. Because these benefits can involve the kinds of social objectives noted above, they may accrue both to disadvantaged or disenfranchised segments of society and to society as a whole.

Many innovations create benefits for society, primarily through increasing employment, productivity, and economic growth. Some even generate social value above and beyond their obvious economic impact. The computer dramatically enhanced individual productivity, learning, and creativity. The automobile promoted feelings of freedom and independence while uniting people who would otherwise rarely see each other. Pharmaceuticals save lives. Deodorant probably strengthens our social fabric. And so these products benefit not only individuals, but also society as a whole.

Yet that does not make these products social innovations. According to our definition, an innovation is truly social only if the balance is tilted toward social value—benefits to the public or to society as a whole—rather than private value—gains for entrepreneurs, investors, and ordinary (not disadvantaged) consumers. We want to differentiate social innovations from ordinary innovations because the world is already amply equipped to produce and disseminate ordinary innovations. It is only when markets fail—in the case of public goods—that social innovation becomes important as a way to meet needs that would not otherwise be met and to create value that would not otherwise be created. …

Many innovations tackle social problems or meet social needs, but only for social innovations is the distribution of financial and social value tilted toward society as a whole. This leads us to our complete definition of social innovation: A novel solution to a social problem that is more effective, efficient, sustainable, or just than existing solutions and for which the value created accrues primarily to society as a whole rather than private individuals. A social innovation can be a product, production process, or technology (much like innovation in general), but it can also be a principle, an idea, a piece of legislation, a social movement, an intervention, or some combination of them. Indeed, many of the best recognized social innovations, such as microfinance, are combinations of a number of these elements. …

Social innovations are created, adopted, and diffused in the context of a particular period in history. Although our definition of social innovation transcends time, the mechanisms of social innovation—the underlying sequence of interactions and events—change as a society and its institutions evolve. Therefore, the dynamics driving one of the most fruitful periods of social innovation in the United States—the Great Depression—differ from those driving contemporary social innovation. To understand social innovation fully, we must also examine the historical period.

The economic downturn of the 1930s led to the rise of large social movements, which put pressure on governments to relieve citizens’ suffering. In the United States, the federal government responded with the New Deal. Under the New Deal, the Works Progress Administration (WPA) created jobs for the unemployed; the Social Security Administration gave senior citizens, many of whom had little or no money, monthly stipends; and the Federal Deposit Insurance Corporation (FDIC) reassured rattled Americans that they could trust banks with their money. These social innovations were driven by a more expansive and direct role of government in solving social problems, and they took place amid a climate of suspicion and antagonism among the sectors. …

In recent years, nonprofit and government leaders have looked to businesses to learn about management, entrepreneurship, performance measurement, and revenue generation. Government and business leaders have sought nonprofits’ wisdom on social and environmental issues, grassroots organizing, philanthropy, and advocacy. And business and nonprofit leaders have engaged with governments to shape public policy. As a consequence of this cross-pollination, a host of social innovations have emerged. …

A source of contemporary social innovations is the shifting roles and relationships between the three sectors. Businesses are leading the way on many social issues, working with governments and nonprofits as partners rather than as adversaries or supplicants. Similarly, nonprofits are partnering with businesses and governments in social endeavors. Meanwhile, governments have moved away from the antagonistic roles of regulator and taxer and toward the more collaborative roles of partner and supporter.  These shifts in roles and relationships are central to the effectiveness of a number of social innovations, such as emissions trading (a.k.a. “cap and trade.”) …

Many social innovations involve the creation of new business models that can meet the needs of underserved populations more efficiently, effectively, and if not profitably, at least sustainably. They do this by having lower cost structures and more efficient delivery channels, and often by blending market and nonmarket approaches, in particular by combining commercial revenue with public or philanthropic financial support. These hybrid business models involve trade-offs and are rife with tensions, but they do overcome many of the limitations purely commercial or charitable organizations face when attacking social problems and needs. …

Our conception of social innovation has implications for thought leaders, policymakers, funders, and practitioners. It captures not only the ends to which agents of social change aspire, but also the full range of means through which we can attain those ends. The fields of social entrepreneurship and social enterprise examine only a subset of paths—specifically, the creation of new and typically nonprofit ventures. Yet large, established nonprofits and government institutions also produce significant social change, as do the businesses that increasingly contribute their resources to building a more just and prosperous society. People creating social change, as well as those who fund and support them, must look beyond the limited categories of social entrepreneurship and social enterprise. In fact, this broadening of scope echoes Ashoka founder Bill Drayton’s claim that “everyone is a changemaker.” …

The processes through which social innovations emerge, diffuse, and succeed (or fail) need to be seen as distinct rather than conflated with our definitions of social innovation, social entrepreneurship, or social enterprise. We believe the most important implication is the importance of recognizing the fundamental role of cross-sector dynamics: exchanging ideas and values, shifting roles and relationships, and blending public, philanthropic, and private resources. In principle, many people accept the trend of dissolving sector boundaries; in practice, however, they continue to toil in silos. …

Increasingly, innovation blossoms where the sectors converge. At these intersections, the exchanges of ideas and values, shifts in roles and relationships, and the integration of private capital with public and philanthropic support generate new and better approaches to creating social value. To support cross-sector collaborations we have to examine policies and practices that impede the flow of ideas, values, capital, and talent across sector boundaries and constrain the roles and relationships among the sectors.

The world needs more social innovation—and so all who aspire to solve the world’s most vexing problems—entrepreneurs, leaders, managers, activists, and change agents—regardless of whether they come from the world of business, government, or nonprofits, must shed old patterns of isolation, paternalism, and antagonism and strive to understand, embrace, and leverage cross-sector dynamics to find new ways of creating social value.

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