Five strategies to help companies switch from traditional do-good strategies like philanthropy to creating real profit while solving social problems.
Many executives spend a considerable amount of time, and money, on “doing good,” “giving back,” getting involved in the community, serving on nonprofit boards, and fundraising. But there’s no reason why this can’t also help your business. My latest book, Social Innovation, Inc., is based on my research measuring the value of these efforts at many of America’s leading corporations. What I found was that many corporations view social issues as a responsibility, rather than a business opportunity. While many have suggested companies think this way, few have shown them how. Social Innovation, Inc. shows companies how to transform traditional do-good strategies like philanthropy and volunteering into business strategies that create value through solving social problems.
The five strategies for social innovation are:
1. Create revenue through sub-market products and services. By focusing on markets previously considered impossible to address profitably, including the vast number Americans without health insurance, food deserts of inner cities, and the millions of underserved in developing countries, companies are innovating new products and services designed to address these needs profitably. Think about Walmart’s $4 generic prescription program or micro- finance as two examples. These are business strategies, not charity, and often have an even greater impact than pure charity because they can tap the resources of the business itself.
2. Enter new markets through backdoor channels. Today’s biggest barriers to entering new markets—both in the United States and abroad—are often not political or cultural, but social: lack of talent, poverty, insufficient infrastructure, uneducated consumers, and so on. Tesco, the big European grocer, used this strategy recently to enter the U.S. market, addressing food deserts by developing smaller-footprint stores that sell fresh fruits and vegetables.
3. Build emotional bonds with customers. Today, companies are bumping up against brand parity, where most commodity products are similar in terms of price, quality, and convenience. Companies need a more powerful, differentiated value proposition, and many are looking to social impact as a way to deepen customer loyalty and build-in an emotional component to the customer experience. Pampers did this by partnering with Unicef. Now, when moms buy diapers (a commodity) they can save a life too. Walmart is engaging its customers in fighting hunger through volunteering opportunities and other direct involvement campaigns. OfficeMax is providing free school supplies to teachers who otherwise would have to pay for them themselves. This is more than just cause marketing or tacking a pink ribbon on your product—it’s about empowering the consumer to solve social problems they care about. This turns consumers into brand ambassadors and directly helps the bottom line.
4. Develop new pipelines for talent. Many businesses are concerned about the quality of education today, but rather than just donating more money to education reform, companies are getting more directly involved, solving the education problem in ways that also benefit their business. Cisco set up a Networking Academy to train underserved populations on how to become Cisco-certified technicians, Travelers Insurance supports a Finance and Insurance charter school in Hartford, CT, to develop a pipeline of new talent into their business.
5. Influence policy through reverse lobbying. Rather than lobbying against new policies or regulations that advance society, corporations are pro-actively reaching out to the government to find ways to solve problems in ways that also benefit the business. Safeway’s campaign for universal healthcare is one example; carbon trading is another. When companies get a seat at the table their ability to influence the outcomes are much greater.
So what can your business do right now to get in the social innovation game?
1. Change your mindset. Many companies think about every social issue as a matter of “charity” or a potential PR threat. It’s not just about “giving back,” today, it’s ok to expect an economic return for doing good. No one faults Toyota for making a profit by selling the Prius. Executives need to turn our business brains back “on” when we think about social issues, and ask ourselves: how can we address this need through the business.
2. Find the right social opportunity. Don’t wait for social issues to come to you – identify social barriers or enablers to your key business strategies and affirmatively develop your own social strategy. For Travelers, hiring minority insurance agents was a key business priority and education offered the right solution. For OfficeMax, deepening their connection with teachers was a key business priority, and partnering with Adopt-a- Classroom to raise visibility of self-funded school supplies offered a way to do that. Finding the right opportunity takes market research, careful analysis and sometimes trial and error.
3. Innovate. Quite often, your business will have a lot more to offer than just donated money. You can leverage your employee talent, customer base, brand visibility, R&D capabilities and store footprints with a little creativity. Walmart innovated by using its market power to lower the price of prescription drugs. Tesco innovated by designing a smaller-footprint store that could still be profitable. OfficeMax innovated by leveraging its supplier channel to donate products to teachers.
4. Communicate. It used to be that companies were reluctant to talk about their “good works” for fear of being seen as disingenuous. But today, consumers, employees and investors want to know. People want to do business with others that share their values. And if you don’t tell your story, others will do it for you. Businessweek, Fortune, Fast Company and CRO Magazine all rank socially responsible companies. Investors look to firms like KLD, Innovest and Asset4 to provide data on companies’ social and environmental performance. Just last year, Bloomberg started streaming environmental, social and governance data about companies through its 2,500 client terminals.
5. Measure. To continue to invest in these strategies, they have to generate value for the business. Don’t just measure your activities (what you did), measure your performance (what you achieved). Did customer retention go up, are you recruiting more talent, have new “social” products been profitable, have you increased market share? All of these questions are questions that companies would expect of any other business strategy – social innovation should be treated the same.
6. Start small, then scale. Many social innovations start small, but ultimately must get to a certain level of size or reach to generate any meaningful impact on the bottom line. OfficeMax started off their “Day Made Better” program with a pilot, then scaled nationally to roll out the program in each of its major business markets. Tesco focused initially on a few cities Nevada, California and Arizona, now it has over 100 Fresh and Easy Neighborhood Markets in the U.S. So start small, but carry a big vision.
Social innovation offers a new way for you to think about growing your business. Because many of the best markets are already well-tapped, many of the best customers are already well-served and many of the best employees are already well-compensated, we need to find ways of creating new value – creating new opportunities for business growth. That means we need to create new markets, build new bonds with customers and develop new talent. Social innovation offers us that unique opportunity to do both: advance our business and advance society.
Jason Saul is the author of Social Innovation Inc.: Five Strategies for Driving Business Growth Through Social Change.