Corporate Social Innovation
One in every eleven people has diabetes. Between 2000 and 2016, there was an increase in premature mortality caused by the disease. Diabetes causes blindness, kidney failure, heart attacks, and lower limb amputation. Imagine having to take a blood sample every few hours, read every food ingredient label, and calculate the carbohydrates on menu items at the restaurant so that you can monitor and maintain your blood sugar levels.
The good news is that diabetes can be treated and prevented. Novo Nordisk, a Danish pharmaceutical, Sanofi and Eli Lilly are the major insulin producers in the world. The Danish company’s Novo Nordisk Way operates on the Triple Bottom Line by putting patient and societal needs at the center of its business.
In 2002, Novo Nordisk established the World Diabetes Foundation to educate and empower local communities and support the poor who may not be able to afford the healthcare needed. The organization trained healthcare providers, partnered with government and regional organizations, and funded medical research and media campaigns to reduce the stigma related to the disease.
Corporate Social Innovation
In addition to such social innovations, the company promotes open innovation and partnership with others to defeat the disease. These actions require investment, time, and patience—results from such programs are not measured in quarters or a single calendar year. This mindset and corporate social innovation (CSI) culture have helped Novo Nordisk to create tangible social impact, generate new revenues in underserved markets, and brand recognition and reputation that attracts key talent to the company.
Companies that relegate philanthropy and citizenship to corporate social responsibility (CSR), sustainability, or even human resources (HR) teams miss the opportunity to create real business and social value. Business leaders lose out on growing the pie when innovation and social venture activities are planned and implemented in their own silos.
One of the challenges for social ventures within companies is the lack of investment or funding, mainly if such activities are housed outside of existing business teams. Senior managers tend to view such projects against the traditional metrics related to research on existing business lines or innovations on supply chain efficiencies. In comparison to these projects, social innovations are seen as too risky with less tangible payoffs. Business leaders may also resist investing in social innovations to protect existing businesses. If Novo Nordisk is successful in preventing diabetes, this will affect the sales of its insulin products.
Protecting existing business lines focuses on the short-term and is narrow-minded. It does not consider the impact of having a healthier and wealthier society for the business. Corporate social innovation, when business activities integrate social impact with innovation, meet investors' demand for long-term growth, employees search for meaning at work, and communities looking for businesses to take responsibility on social issues.
Technology and Business Model Innovation
CSI can take the form of technology or business model innovation. Often the innovation impacts multiple generations and changes systems at the micro and macro levels. Arogya Parivar, Novartis's for-profit initiative to provide affordable healthcare to the underserved Indian market, has created jobs for locals, alleviated suffering, and improved healthcare for communities. An estimated 65% of India's population does not have access to healthcare, a market targeted by Arogya Parivar.
The initiative arranges and invests in health camps where local doctors conduct basic checks on villagers. Arogya Parivar also recruits local health educators, often women, to visit villages to raise awareness about diseases and preventative health measures. Neither at the health camps nor health meetings with villagers are Novartis products mentioned. The business value for Novartis comes from the relationships that their medical representatives build with doctors, distributors, and pharmacies to make medicine available in remote and rural areas. These representatives also work with the local community to develop affordable products adapted and customized for the local market.
Arogya Parivar became profitable just after thirty months in operation and increased sales by twenty-five times within seven years. The success in India encouraged Novartis to replicate the business model in Kenya, Vietnam, and Indonesia.
Supply Chain Disruption
Interface, a global manufacturer of carpet tiles and flooring, committed to transforming its petro-intensive business to have zero impact on the planet (not just to reduce the environmental footprint of operations) by 2020. Ray Anderson, the founder of the company, set this target years ahead of his peers in 1994. Within twenty-five years, his team summited their Mount Sustainability.
Rather than harming their profitability while their competitors went out of business and carpets went out of fashion, Interface saved $450 million by avoiding waste expenses. They worked with suppliers to transition their materials into recycled or bio-based materials. They established ReEntry Reclamation and Recycling programs to save more than 300 million pounds of carpet and carpet waste from landfills.
They didn't let failure stop them from reaching their mission. When their pilot Fair-Works program failed, they launched another pilot, Net-Works, that focused on creating a socially inclusive supply chain. Under Net-Works, Interface partnered with nylon supplier Aquafill and the Zoological Society of London to recover fishing nets and convert them into recycled nylon to be used in their products. They purchase discarded fishing nets from poor communities, resulting in less virgin material used and a new source of income for communities.
Interface enhanced its brand value and reputation with customers by responding to consumer needs and attracting and engaging with employees to develop an innovative culture in its journey to transitioning its supply chain.
Often CSI starts from the bottom up. Mexican cement manufacturer, CEMEX, encourages its employees to share their ideas to change their communities positively. They identified the low-income community as a potential new market. This community had difficulty accessing building materials, limited personal savings, lack of storage for tools and materials, minimal access to financing, and poor planning skills.
So CEMEX started Patrimonio Hoy to enable this community to acquire and maintain affordable housing. It created a new consumer market where these new homeowners paid $14 a week for seventy weeks in exchange for building materials, financing, and consultation by CEMEX architects.
The program benefited 480,000 families in just over a year. The immediate impact is that families no longer worried about the safety of their children, and they became more knowledgeable in managing their finances. The indirect impacts included increased aspirations in the children when they saw their parents' saving and building efforts rewarded.
The company implemented SHIFT, an internal online collaboration platform where teams could crowdsource and exchange knowledge and ideas based on interests and common challenges. This approach enabled solutions to be developed more quickly and effectively, without the traditional barriers of location and logistics.
The success of these projects developed new markets and revenue streams for the business. Employees were more engaged, and the company created a social impact for the communities they served. Instead of relegating these projects to isolated CSR or sustainability teams, the projects were embedded within the business, such as at Novo Nordisk and CEMEX. They had clear budgets and teams invested in the success of the social innovation projects. Rather than hold these projects to traditional return on investment timelines and metrics, senior leaders understood that social innovation is riskier and has different success indicators than conventional research or innovation projects.
At Novartis and Interface, the business leaders were open to changing their business model and supply chain. There was an openness to failure and a mindset that these were opportunities to learn to do things better.
I will explore the importance of partnership and collaboration to corporate social innovation next.