The Innovator's Cookbook Part 4

Over the years, Aravind has carefully honed the flow of work through its outpatient departments and surgical wards-and both have reached impressive levels of efficiency. Cataract operations in Madurai, for example, are performed on four operating tables, side by side. Two doctors operate, each on two adjacent tables. When the first operation is over, the second patient is already in place. "Usually I do about 25 surgeries in a half-day session," a local doctor told the Indian writers of a case study.5 "Most [doctors] do this number." The intense throughput doesn't seem to compromise quality. Indeed, major complication rates are highly satisfactory: in virtually all "event" categories-such as iris trauma or prolapse-Madurai's 2002 figures were better than those of the United Kingdom (as doc.u.mented in a national survey by the Royal College of Ophthalmologists).

In this case, too, the need to serve low-income customers in challenging conditions spurred innovation. People in rural areas, for example, suffer from refractive blindness resulting from the prohibitive time, travel, and other incidental costs of getting a pair of gla.s.ses. Aravind studied data on the needs of patients, prepared lenses in advance, and set up mobile optical shops in remote villages so that patients could be examined near where they live and, if necessary, supplied with gla.s.ses on the spot.

Other Indian health care entrepreneurs, using processes developed in similar conditions, are already encouraging patients in more developed countries to get better value for money by traveling to Indian facilities for specialized services. Inst.i.tutions such as the Narayana Hrudayalaya Foundation (a cardiac care facility in Bangalore) and Escorts Heart Inst.i.tute and Research Centre, in New Delhi, are proving that services, though intangible, can be delivered in a surprisingly flexible way. A recent study by the Confederation of Indian Industry (CII) and McKinsey predicted that medical tourism in India could generate $2 billion a year in revenues by 2012.

THE IMPLICATIONS FOR WESTERN COMPANIES.

These models of innovation spell out a clear message for many companies in the developed world: if you're not partic.i.p.ating in the ma.s.s-market segment of emerging economies, you're not developing the capabilities you will need to compete back home. Our first recommendation to Western companies is therefore to go offsh.o.r.e, not just to the affluent segments, and not just for wage cost differentials, but to serve the ma.s.s market. Only there will you be forced to innovate in the ways required to succeed in the future. The recommendations that follow build on this basic idea.

Specialize It was Adam Smith who first noted the power of division of labor to increase productivity-the basis of the "dynamic economic theory" laid out in The Wealth of Nations. As the economist Brian Loasby6 points out, the power of specialization follows not from specialization itself but from the new capabilities it promotes. Viewed in this way, it becomes dynamic rather than static; it enhances incentives and opportunities for further innovation.

Companies can't have all the skills needed to deliver products or services; they must choose what they do themselves and collaborate with others for the rest. They should stick to one of three types of activities: managing infrastructure, managing customer relationships, or developing and commercializing innovative products.7 Specialization requires businesses to find partners that enhance and complement their capabilities. Such cooperation calls for the better coordination of resources across and within enterprises as well as a fresh approach to managing processes. Offshoring in emerging markets accelerates the building of capabilities on a global scale by helping companies to partic.i.p.ate in talent-rich process networks and then to orchestrate them.

Orchestrate Process Networks Companies can best accelerate the building of capabilities in two stages. The first involves setting up, accessing, developing, and ultimately orchestrating true process networks of the kind used by the motorcycle makers in Chongqing and, in the apparel industry, by the Hong Kong-based company Li & Fung, which deploys a network of 7,500 specialized business partners to create customized supply chains for each new apparel line. Such process orchestrators decide which companies can partic.i.p.ate in the network, define each party's role, and guarantee performance and fair rewards. This gatekeeper role distinguishes emerging process networks from more fluid aggregations of companies.8 The results are impressive. In the case of the motorcycle network, the undertaking is divided among independent activities, each with a clear owner accountable for performance. This "loose coupling" promotes flexibility (such as quicker responses to the customer's needs) and scalability (the ability to involve the largest possible number of partic.i.p.ants and, hence, to access a wide range of specializations). Mobilizing process networks is a formidable challenge requiring robust "performance fabrics": technology- and business-based ways of reducing the cost of interaction among network partic.i.p.ants. Successful orchestrators such as Cisco Systems, which has invested heavily in distributed learning platforms, focus hard on one key ingredient: creating shared meanings. The ability to build trust quickly is also a part of the recipe.

Orchestrate Innovation Networks Moving from orchestrating processes to orchestrating innovation is the second stage of efforts to speed up the building of capabilities. Orchestrators like Li & Fung are learning to build them more quickly across enterprise networks, not just gaining access to specialized resources. To succeed, companies must generate the friction that shapes and sharpens learning when people of different backgrounds and skills collaborate on real problems. Clear performance targets, an unconstrained environment for finding solutions, and the sharing of prototypes across organizational boundaries generally produce the most beneficial results. Processes must be developed, with the help of new generations of information technology, to ensure that innovations are disseminated across the network. As productive friction expands within it, a virtuous cycle reinforces shared meanings and trust.

Western companies go offsh.o.r.e for many reasons: among others, to cut wages (and thus costs), to gain access to distinctive skills that accelerate the building of capabilities, and to seek new markets. 9 Too often, however, investments in new markets focus only on the affluent segments of emerging economies. By targeting instead the specific and demanding needs of lower-income consumers, Western companies can address a far bigger emerging-market opportunity and create the ability to take innovative products and services from the emerging world and use them in new categories at home.

Beyond Big-Bang Innovation When Western executives discuss innovation, they tend to focus more on products than on processes and mostly on breakthroughs rather than incremental product innovations. Supercomputers, blockbuster pharmaceuticals, fuel cells, nanotechnology, lasers-innovations like these capture the imagination and attention of executives in developed countries.

Yet very few companies create significant shareholder value through breakthrough product innovations; most economic wealth comes from more modest ones that acc.u.mulate overtime. Process innovations may be even more important for building compet.i.tive advantage and generating wealth. Dell and Walmart Stores, for instance, have used them to generate enormous amounts of it.

In fact, most innovation involves creatively recombining existing components of technologies, products, or business systems. Schumpeter's "gales of creative destruction," for example, came not from isolated, discontinuous events but rather from ongoing efforts by entrepreneurs to find better ways of serving markets. Silicon Valley-for many, the epicenter of innovation-generates most of its economic wealth by incrementally enhancing technology.

If executives expand their view of innovation, they may be better prepared to see it in terms of inst.i.tutional capacity and pace. For example, developing a more modular and loosely coupled product architecture-as c.u.mmins and the Chongqing motorcycle a.s.semblers did-increases the inst.i.tutional capacity for innovation and thus promotes incremental improvement. Specialization, as in the example of the Aravind Eye Care System, helps an organization develop innovative processes more rapidly by providing it with lessons from a larger number of comparable experiences.

More important still, a broader view of innovation that values the role of incremental change communicates the power of bootstrapping. Companies that start out with limited capabilities-such as those in many developing economies-can rapidly build them over time through a series of modest process and product innovations. Ultimately, individual innovations may matter less than the inst.i.tutional capacity to sustain a rapid series of improvements and the pace at which they are developed and disseminated through the network.

NOTES.

1 Kenneth Lieberthal and C. K. Prahalad, "The End of Corporate Imperialism," Harvard Business Review 81:8 (August 2003), pp. 10917.

2 Dell, which in the United States epitomizes innovative production processes, admitted as much when price compet.i.tion from local companies forced it to retreat last August from its efforts to sell low-cost consumer PCs in China.

3 Lieberthal and Prahalad, "The End of Corporate Imperialism," pp. 10917.

4 John Hagel III, "Offshoring Goes on the Offensive," The McKinsey Quarterly, 2004 Number 2, pp. 8291.

5 Sankara Manikutty and Neharika Vohra, "Aravind Eye Care System: Giving Them the Most Precious Gift," Indian Inst.i.tute of Management case study, Ahmedabad, India, 2003 (revised 2004).

6 Brian Loasby, Knowledge, Inst.i.tutions, and Evolution in Economics (London: Routledge, 2002).

7 John Hagel III and Marc Singer, "Unbundling the Corporation," The McKinsey Quarterly, 2000 strategy anthology: On Strategy, pp. 14756.

8 John Seely Brown, Scott Durchslag, and John Hagel III, "Loosening Up: How Process Networks Unlock the Power of Specialization," The McKinsey Quarterly , 2002 special edition: Risk and Resilience, pp. 5869.

9 Vivek Agrawal, Diana Farrell, and Jaana K. Remes, "Offshoring and Beyond," The McKinsey Quarterly, 2003 special edition: Global Directions, pp. 2435.

The Process of Social Innovation GEOFF MULGAN.

Every truth pa.s.ses through three stages.

First, it is ridiculed. Second, it is violently opposed.

Third, it is accepted as being self-evident.

-ARTHUR SCHOPENHAUER Much of what we now take for granted in social life began as radical innovation. Little more than a century ago, few believed that ordinary people could be trusted to drive cars at high speed, the idea of a national health service freely available was seen as absurdly utopian, the concept of "kindergarten" was still considered revolutionary, and only one country had given women the vote. Yet these and many other social innovations went on to make progress from the margins to the mainstream.

During some periods in recent history, civil society provided most of the impetus for social innovation (see sidebar "What Is Social Innovation"). The great wave of industrialization and urbanization in the nineteenth century was accompanied by an extraordinary upsurge of social enterprise and innovation: mutual self-help, microcredit, building societies, cooperatives, trade unions, reading clubs, and philanthropic business leaders creating model towns and model schools. In nineteenth- and early-twentieth-century Britain, civil society pioneered the most influential new models of child care, housing, community development, and social care. At other times governments have taken the lead in social innovation-for example, in the years after 1945 democratic governments built welfare states, schooling systems, and inst.i.tutions using methods such as credit banks for farmers and networks of adult education colleges. (This was a period when many came to see civic and charitable organizations as too parochial, paternalist, and inefficient to meet social needs on any scale.) There is every reason to believe that the pace of social innovation will, if anything, accelerate in the coming century. There is certainly more money flowing into NGOs and civil society than ever before. Economies in both developed and (to a lesser extent) developing countries are increasingly dominated by services rather than manufacturing. Over the next twenty years, the biggest growth for national economies is likely to come in health, education, and care, whose shares of GDP are already much greater than are those of cars, telecommunications, or steel. These growing social sectors are all fields in which commercial, voluntary, and public organizations deliver services, in which public policy plays a key role, and in which consumers co-create value alongside producers (no teacher can force students to learn if they don't want to). For all of these reasons, traditional business models of innovation are only of limited use-and much of the most important innovation of the next few decades is set to follow patterns of social innovation rather than innovation patterns developed in sectors such as information technology or insurance.

What Is Social Innovation?

Social innovation refers to innovations that are social both in their ends and in their means. Their purpose is to meet social needs and they tend to create greater social capacity to act and to be diffused through organizations whose primary purposes are social. Business innovation is generally motivated by profit maximization and diffused through organizations that are primarily motivated by profit maximization. There are, of course, very many borderline cases, for example, models of distance learning that were pioneered in social organizations but then adopted by businesses, or for-profit businesses innovating new approaches to helping disabled people into work. But these definitions provide a reasonable starting point.

A good example of a socially innovative activity in this sense is the spread of cognitive behavioral therapy, proposed in the 1960s by Aaron Beck, tested empirically in the 1970s, and then spread through professional and policy networks in the subsequent decades. A good example of socially innovative new organizations is the Big Issue, which publishes Big Issue magazine in the UK, and its international successor network of magazines sold by homeless people.

Thousands of recent examples of successful social innovations have moved from the margins to the mainstream. They include neighborhood nurseries and neighborhood watch groups, Wikipedia and the Open University, holistic health care and hospices, microcredit and consumer cooperatives, the fair trade movement, zero-carbon housing developments and community wind farms, restorative justice and community courts, and online self-help health groups.

Yet despite these trends, the process of social innovation remains understudied. While processes of commercial innovation have been the subject of considerable academic research, the parallel field of social innovation has received little attention and rarely goes beyond anecdotes and vague generalizations.1 This neglect is mirrored by the lack of practical attention paid to social innovation. As compared with the funds spent on commercial and military innovation, the amount spent by governments, non-governmental organizations, and foundations to develop innovative solutions to common needs is small. While national strategies abound to support innovation in business and technology, no comparable strategies at the national level exist to understand and support social innovation.

Where Severe Innovation Deficits Exist * Aging populations that require, for example, new ways of organizing pensions, care, mutual support, housing, urban design, mobility, and new methods of countering isolation.

* The growing diversity of countries and cities, which demands innovative ways of organizing schooling, language training, and housing, to avoid the risks of conflict and mutual resentment.

* The rising incidence of chronic diseases such as arthritis, depression, and diabetes. Some historically acute diseases (such as cancers and heart disease) are becoming chronic. It is widely acknowledged that the key solutions will have as much to do with social organization as with medical provision.

* Many of the behavioral problems that partly result from affluence are worsening, including obesity, bad diet, and inactivity, as well as addictions to alcohol, drugs, and gambling. None of these is easily addressed by traditional models.

* Difficult transitions to adulthood-there is a great need to help teenagers successfully navigate their way into more stable careers, relationships, and lifestyles.

* Crime and punishment in some countries (including the United Kingdom) show a majority of convicted criminals reoffend within two years of leaving prison-a striking pattern of failure.

* The mismatch between growing GDP and stagnating happiness (and declining real welfare according to some measures).

* The glaring challenges that surround climate change-how to reorganize cities, transport systems, and housing to dramatically reduce carbon emissions, and how to adapt to climate change that may already be irreversible.

The Young Foundation's precursors were among the world's most important centers for understanding social enterprise and innovation and for doing it. Under Michael Young, widely seen from the 1960s to the 1990s as one of the world's most effective social entrepreneurs, they helped create dozens of new inst.i.tutions, including the Open University and its parallels around the world, the magazine Which?, the School for Social Entrepreneurs, and the Economic and Social Research Council. The inst.i.tutions pioneered new social models such as phone-based health diagnoses, extended schooling, and patient-led health care.2 This tradition of practical social innovation is now being energetically revived from the Young Foundation's base in east London, where we are working with cities, governments, companies, and NGOs to accelerate their capacity to innovate, and launching new organizations and models that can better meet people's needs for care, jobs, and homes.

The combination of our inst.i.tutional heritage and current activities prompted us to seek a better understanding of social innovation-and particularly innovations that take the form of replicable programs or organizations. We are particularly interested in fields where there is the greatest gap between needs and current provision, which can often be gauged by how angry or dissatisfied people are (see sidebar "Where Severe Innovation Deficits Exist"). As the great Victorian historian Lord Macauley wrote: "There is constant improvement precisely because there is constant discontent."

This article provides a summary of our findings about the processes of social innovation and it outlines the frameworks we have developed for understanding how to accelerate social innovation and how to improve the chances of new ideas succeeding.

WHO DOES SOCIAL INNOVATION?.

There are many lenses through which to understand social innovation. Today most discussion of social innovation tends to adopt one of two main lenses for understanding how change happens. In the first, social change is portrayed as having been driven by a very small number of heroic, energetic, and impatient individuals. History is told as the story of how they remade the world, persuading and cajoling the lazy and timid majority into change. Robert Owen (founder of cooperatively run factories), Octavia Hill (inventor of many ideas of housing management, heritage protection, and community housing), and Michael Young are three exemplars drawn from British history who combined an ability to communicate complex ideas in compelling ways with a practical ability to make things happen. Countless other similar social innovators can be cited from around the world-and the leaders of social innovation have included politicians, bureaucrats, intellectuals, business people, as well as NGO activists. Some are widely celebrated-Muhammad Yunus (the founder of Grameen Bank and other microcredit enterprises), Kenyan n.o.bel Prize winner w.a.n.gari Maathai, and Saul Alinsky, the evangelist of community organizing in the United States.

There are also many less well-known but deeply impressive figures, such as Jeroo Billimoria, who founded the India-wide Childline, a twenty-four-hour help line and emergency response system for children in distress;3 Vera Cordeiro, who founded a.s.sociaco Saude Crianca Rensacer in Brazil;4 and Taddy Blecher, who founded the Community and Individual Development a.s.sociation (CIDA) City Campus, the first private higher education inst.i.tution in South Africa to offer a virtually free business degree to students from disadvantaged backgrounds.5 These individual stories are always inspiring, energizing, and impressive. They show just how much persistent, dedicated people can achieve against the odds, and they serve as reminders of the courage that always accompanies radical social change.

The second lens is very different. Seen through this lens, individuals are the carriers of ideas rather than originators. If we ask which innovations had the most impact over the past half century, the role of individuals quickly fades into the background. The far-reaching movements of change, such as feminism or environmentalism, have involved millions of people and dozens of intellectual and organizational leaders, many of whom have had the humility to realize that they were often as much following as directing changes in public consciousness. As with individual innovators, these movements are rooted in ideas grown from discontent. But their histories look very different. Environmentalism, for example, grew from many different sources. Precursors in the nineteenth century include movements for protecting forests and landscapes. In the twentieth century, environmentalism sp.a.w.ned scientifically inspired movements to protect biodiversity, movements to counter the pollution of big companies or gain redress for their victims, movements of direct action such as Greenpeace (which itself drew on much older Quaker traditions), and Green parties around the world. Environmentalism has also sp.a.w.ned a huge range of social innovations, from urban recycling to community-owned wind farms.

Whether we are focusing on individuals or on broader movements, both of these lenses with which to view social innovation bring with them useful insights. Both call attention to the cultural basis for social innovation-the combination of exclusion, resentment, pa.s.sion, and commitment that makes social change possible. Both also confirm that social innovations spread in an "S curve," with an early phase of slow growth among a small group of committed supporters, followed by a phase of rapid takeoff, and then a slowing down as saturation and maturity are achieved. Both accounts also rightly emphasize the importance of ideas-visions of how things could be different and better. Every successful social innovator or movement has succeeded because it has planted the seeds of an idea into many minds. In the long run, ideas are more powerful than individuals or inst.i.tutions; indeed, as John Maynard Keynes noted, "The world is ruled by little else."

But neither story adequately explains the complexities of social change. Change rarely happens without some brave people willing to take risks and take a stand. Leadership matters even in the most egalitarian and democratic movement. Equally important is that social change depends on many people being persuaded to abandon old habits. The great religious prophets sp.a.w.ned great religions because they were followed by great organizers, evangelists, and military conquerors who were able to focus their energies and create great organizations.6 Generating Ideas by Understanding Needs and Identifying Potential Solutions The starting point for innovation is an idea of a need that isn't being met, coupled with an idea of how it could be met. Sometimes needs are glaringly obvious, such as hunger, homelessness, or disease. But sometimes needs are less obvious or not recognized-for example, racism or the need for protection from domestic violence-and it takes campaigners and movements to name and describe these.

Needs come to the fore in many ways-through angry individuals and groups, campaigns, and political movements as well as through careful observation. They may come from informal social movements (such as online self-help groups), religious movements (instrumental, for example, in the global campaign for debt relief in Africa), existing voluntary organizations (like the organizations for the deaf that led to the development of digital hearing aids). Some of the best innovators spot needs that aren't being adequately met by the market or the state. They are often good at talking and listening, digging below the surface to understand people's needs and dislocations, dissatisfactions, and blockages (Michael Young got many of his best ideas from random conversations on street corners, buses, and even in cemeteries). Empathy is the starting point, and ethnography is usually a more relevant formal tool than statistical a.n.a.lysis. Personal motivations also play a critical role: people may want to solve their own problems, and they may be motivated by the suffering of their friends or family.

Some of the most effective methods for cultivating social innovation start from the presumption that people are competent interpreters of their own lives and competent solvers of their own problems. An individual or an inst.i.tution seeking to find answers to the management of chronic diseases or to the problem of alienation among teenagers may do best to find how people are themselves solving their problems. Another method is to find the people who are solving their problems against the odds-the ex-prisoners who do not reoffend or the eighteen-year-old without any qualifications who nevertheless finds a job. Looking for the "positive deviants" gives insights into what might be possible, and usually at much lower cost than top-down solutions.

Needs then have to be tied to new possibilities. New possibilities may be technological, for example, using cell phones to support banking or healthcare or using the Internet to create hyperlocal media. Indeed, the Internet is now generating a host of new business models that are set to have enormous impact in the social field from collaborative consumption to data mining.7 Other possibilities may derive from new organizational forms, like the Community Interest Company recently launched in the UK, or the special purpose organizations increasingly used in global development (for example, in developing new drugs for HIV/AIDS). Or possibilities may derive from new knowledge. For example, we now understand the importance of early childhood development in shaping future life chances. Innovators generally have a wide peripheral vision, and they are good at spotting how apparently unrelated methods and ideas can be used together.

Few ideas emerge fully formed. Instead, innovators often try things out and then quickly adjust them in the light of experience. Tinkering seems to play a vital role in all kinds of innovation, involving trial and error, hunches, and experiments that only in retrospect look rational and planned.

New social ideas are also rarely inherently new in themselves. More often they combine ideas that had previously been separate. Examples of creative combinations include diagnostic health lines (which combined the telephone, nurses, and diagnostic software), magazines sold by homeless people, the linkage of gay rights to marriage, applying the idea of rights to animals, and the use of swipe cards for renting bicycles in transit stations. Many of the most important ideas straddle the boundaries between sectors and disciplines.

Some organizations use formal creativity methods to generate possibilities, like the six hats method devised by Edward de Bono and now used worldwide,8 the various methods involving users developed by the design company Ideo, and the consultancy What If?, all of which aim to free groups to think more laterally and to spot new patterns. Some of these methods force creativity. For example, they encourage developers and designers to engage with the toughest customers or those facing the most serious problems.

Creativity can be stimulated by other people's ideas, which are increasingly being collected and banked. Nicholas Albery, a regular collaborator with Michael Young, founded the Inst.i.tute for Social Inventions in 1985, which produced regular editions of The Encyclopedia of Social Inventions and The Book of Visions. In 1995, Albery helped launch the Global Ideas Bank, a rich online source of ideas and experiences (it also produces regular editions of The Global Ideas Book)9 In some cases, ideas can be bought on the open market. The Web-based company Innocentive, for example, offers cash rewards for innovators who have workable solutions to problems they solve, based on an a.s.sumption that often in a neighboring sector a similar structure of problem may already have been solved. There are also now many innovation laboratories, some linked to universities, some linked to companies, and some focused on particular problems, including the MIT poverty action lab (JPAL).10 All societies come up with many possible social innovations. Some never get beyond a conversation in a kitchen or a bar. Many briefly take organizational form but then fade as enthusiasm dims or as it becomes obvious that the idea isn't so good after all. But the key to success is to ensure that there is as wide as possible a range of choices to draw on. As n.o.bel laureate Linus Pauling observed, "The way to get good ideas is to get lots of ideas and throw the bad ones away."

Developing, Prototyping, and Piloting Ideas The second phase of any innovation process involves taking a promising idea and testing it in practice. Few plans survive their first encounter with reality. It is through action that they evolve and improve. Social innovations may be helped by formal market research or desk a.n.a.lysis, but progress is often achieved more quickly through turning the idea into a prototype or pilot and then galvanizing enthusiasm for it.

Social innovations are often implemented early. Because those involved are usually highly motivated, they are too impatient to wait for governments or big foundations. The experience of trying to make them work speeds up their evolution, and the power of example then turns out to be as persuasive as written argument or advocacy. For example, Michael Young usually moved very quickly to set up an embryonic organization, rather than waiting for detailed business plans and a.n.a.lyses. The Language Line organization, a case in point, began as two people with telephones and a tiny contract with the neighboring police station, and is now a global firm worth hundreds of millions of dollars.

A key virtue of quick prototyping is that innovations often require several goes before they work. The first outings are invariably flawed. The UK National Health challenge faces social innovation. Service took forty years to move from impossible dream to reality; the radio took a decade to find its form (its early pioneers wrongly a.s.sumed that members of the public would purchase airtime to send messages to their friends and families, as with the telephone); what became Wikipedia was a failure in its first outing.

In business, people talk of the "chasm" that innovations have to cross as they pa.s.s from being promising pilot ideas to becoming mainstream products or services. There are likely to be quite long phases when revenues are negative and when investors have to hold their nerve. Exactly the same challenge faces social innovation. Several methods have been designed to speed up this period, including faster prototyping, intensive hand-holding by venture capital companies, and the use of rigorous milestones against which funds are released. A period of uncertainty, however, is unavoidable.

There is now a much richer range of methods available for prototyping, piloting, and testing new ideas-either in real environments or in protected conditions halfway between the real world and the laboratory. The relatively free money of foundations and philanthropists can be decisive in helping ideas through this phase. Governments have also become more sophisticated in their use of evidence and knowledge,11 with a proliferation of pilots, pathfinders, and experiments. Incubators, which have long been widespread in business, have started to take off in the public sector and among NGOs, although practice and understanding remains very patchy. Businesses have adopted new devices like three-dimensional printers, which have made it easier to turn ideas quickly into prototypes; parallel methods are being developed in the social fields to crystallize promising ideas so that they can be quickly tested.

Some ideas that seemed good on paper fall at this stage. Michael Young, for example, launched a do-it-yourself garage because he was convinced that most drivers would prefer to invest some of their time building the garage in exchange for lower costs of production. They didn't. But even failed ideas often point the way to related ideas that will succeed. As Samuel Beckett put it: "Try Again. Fail again. Fail better."

a.s.sessing, Scaling Up, and Diffusing Good Ideas The third stage of the social innovation process comes when an idea proves itself in practice and can then be grown, replicated, adapted, or franchised. Taking a good idea to scale requires skillful strategy and coherent vision, combined with the ability to marshal resources and support and identify the key points of leverage, the weak c.h.i.n.ks in opponents' walls. Often the innovative and creative "bees" (social entrepreneurs or inventors) need to find supportive "trees" (big organizations with the machineries to make things happen on a big scale). That in turn may demand formal methods to persuade potential backers, including investment appraisals, impact a.s.sessments, and newer devices to judge success, such as "social returns on investment" or "blended value."

Communication is essential at this stage. Social innovators need to capture the imagination of a community of supporters through the combination of contagious courage and pragmatic persistence. Good names, along with brands, ident.i.ties, and stories play a critical role. Some social innovations then spread through the organic growth of the organizations that conceived them. Some have grown through federations-including many NGOs like Age Concern or the Citizens Advice Bureau. Governments have often played the critical role in scaling up social innovations. They have unique capacities to do this by pa.s.sing laws, allocating public expenditures, and conferring authority on public agencies. Businesses grow ideas through a well-established range of methods, some of which are becoming more commonly used in the social sector, including organic growth of an originating organization, franchising and licensing, and takeover of similar but less effective organizations.

This growth phase is potentially becoming much faster. With the help of the Internet, innovations can spread very quickly, and indeed there can be little point in doing local pilots because the economics of Web-based pilots may make it as inexpensive to launch on a national or continental scale. Marginal costs close to zero accelerate the growth phase-but also the phase of decline and disappearance.

Our recent work on scaling up has shown why it is so hard for social innovation to replicate, and it has pointed to more effective strategies for handling scale.

Two necessary conditions are a propitious environment and the organizational capacity to grow. These are rare with social innovations. It may take decades to create the environmental conditions for growth-persuading consumers and public agencies to pay for something new. The organizational challenges are no less severe. In charities and social enterprises, the founders who were just right for the organization during its early years are unlikely to have the right mix of skills and att.i.tudes for a period of growth and consolidation. Often founders cling on too long, and trustees, funders, and stakeholders do not impose necessary changes. By comparison, in business the early phases of fast-growing enterprises often involve ruthless turnover of managers and executives. Indeed, growth in all sectors nearly always involves outgrowing founders. Wise founders therefore put in place robust succession plans, and very few successfully remain in executive roles for much more than a decade. Similar considerations apply to organizations that create other organizations. Christian Aid, Catholic Agency for Overseas Development, and Tearfund, for example, are all social innovations with global reach today that outgrew their founders and founding inst.i.tutions (the British Council of Churches, the Catholic Women's League, and the Evangelical Alliance, respectively).

In business, the experiences of companies such as Microsoft, Procter & Gamble, and Amazon suggest that pioneers that create markets through radical innovation are almost never the companies that go on to scale up and dominate them. The skills and mind-sets required for creating a radically new market not only differ from, but actively conflict with, those needed to grow and consolidate. Big companies are often better placed to move new ideas from niche markets to ma.s.s markets, and many have concluded that they should subcontract the creation of new and radical products to start-up firms, thus concentrating their own efforts on consolidating markets and buying up companies or licenses that they see as promising.12 Learning and Evolving In a fourth stage, innovations continue to change: learning and adaptation turns the ideas into forms that may be very different from the expectations of the pioneers. Experience may show unintended consequences or unexpected applications. In professions, in compet.i.tive markets, and in the public sector, there is an increasingly sophisticated understanding of how learning takes place. New models such as the collaboratives in health (used by the UK National Health Service to improve innovation and practice in fields such as cancer and primary care) and closed research groups (used, for example, by a number of major cities to a.n.a.lyze their transport strategies) have helped to embed innovation and improvement into fairly conservative professions.

These examples highlight innovation as a learning curve, rather than as the "Eureka!" moment of a lone genius. Ideas start off as possibilities that are only incompletely understood by their inventors. They evolve by becoming more explicit and more formalized, as best practice is worked out, and as organizations develop experience about how to make them work. This phase involves consolidation around a few core principles that can be easily communicated. Then, as the idea is implemented in new contexts, it evolves further. It forms new combinations, learning once again becomes more tacit, until another set of simpler syntheses emerge.

Some organizations appear particularly good at maintaining the momentum from innovation rather than being stuck in a particular form or market. For example, the Samaritans in Australia have become a provider of welfare services rather than just a telephone counseling service; the ECT Group in the UK started as a community transport organization and evolved into a major supplier of curbside recycling services, and it is now moving into providing primary health care services. Generally, bigger organizations have more "absorptive capacity" to learn and evolve-but small ones can gain some of this ability through the skills of their staff and through taking part in the right kind of networks.

This linear account of innovation provides a useful framework for thinking about change, but the stages are not always consecutive. Sometimes action precedes understanding. Sometimes doing things catalyzes new ideas. Feedback loops also exist between every stage, which make real innovations more like multiple spirals than straight lines. These patterns also manifest themselves differently in different sectors. Real-life innovation is a discovery process that often leaves ideas transformed and mutated, and it sometimes sees them jump from one sector to another. For example, innovations to reduce obesity can be found in public health programs, in self-help groups, and in large commercial organizations such as Weight Watchers.

COMMON PATTERNS OF SUCCESS AND FAILURE.

Social innovation doesn't always happen easily, even though people are naturally inventive and curious. In some societies, social innovations are strangled at birth. This is particularly true for societies where power is tightly monopolized, where free communication is inhibited, or where there are no independent sources of money. Generally, social innovation is much more likely to happen when the right background conditions are present. For social movements, basic legal protections and status, plus open media are key. In business, social innovation can be driven by compet.i.tion, open cultures, and accessible capital, and it will be impeded where capital is monopolized by urban elites or government. In politics and government, the conditions are likely to include competing parties, think tanks, innovation funds, contestable markets, and plentiful pilots, as well as creative leaders like Jaime Lerner in Curitiba or Antanas Mockus in Bogota. In social organizations, the acceleration of social innovation is aided by pract.i.tioner networks, allies in politics, strong civic organizations (from trade unions to hospitals), and the support of progressive foundations and philanthropists. And in all of these fields, global links make it much easier to learn lessons and share ideas at an early stage, with ideas moving in every direction (for example, the movement of restorative justice from Maori culture in New Zealand to mainstream practice around the world).

Most innovations in business and technology fail. So do most social innovations. Sometimes there are good reasons for failure. An idea may be too expensive, not wanted, insufficiently useful, not good enough relative to the alternatives, or flawed by unforeseen side effects. But many ideas fail not because of inherent flaws but because of the lack of adequate mechanisms to promote them, adapt them, and then scale them up. In business, there is a reasonable flow of good innovations in part because of the pull of compet.i.tive markets, but also because of public subsidy of technology and private investment in incubators, venture capital, and start-ups. The equivalent potential supports for social innovation-foundations and public agencies-are much weaker. Governments typically provide 30 to 40 percent of NGO finance in countries like the United States, Germany, the UK, France, and j.a.pan, but these governments are generally poor at recognizing and replicating good innovations, particularly when these come from other sectors. It is notoriously difficult for government to close even failing programs and services, and there are few incentives for either politicians or officials to take up new ideas. Failure to adapt is rarely career threatening, and anyone who does promote innovations risks upsetting powerful vested interests. It's all too easy to conclude that the apparently promising new idea depends too heavily on particular circ.u.mstances such as a charismatic individual, or that the evidence just is not strong enough.

Social innovators generally find governments unresponsive. But there are also good reasons for public sectors to be cautious about innovation. Innovation must involve failure, and the appet.i.te for failure is bound to be limited in very accountable organizations or where people's lives depend on reliability (for example, around traffic-light systems or delivery of welfare payments). In part for this reason, improved service delivery from public inst.i.tutions and NGOs usually occurs via incremental improvements to existing models rather than via the invention of entirely new ones.

Innovation is therefore easier where the risks are contained, where there is evident failure, where users have choice (so that they can choose a radically different model of school or doctor rather than having it forced on them), and where expectations are carefully managed. More generally, innovation is likely to be easier when contracts for services reward outcomes achieved rather than outputs or activities, or when there is some compet.i.tion or contestability rather than monopoly provision by the state. How public sectors "dock" with the social or nonprofit sector is also important, particularly given that public funding tends to overshadow other revenue sources for many innovations. Funding outcomes rather than activities helps; so, too, does funding directed to genuinely risk-taking ideas, experiments, and trials. Yet we are not aware of a single government that has developed a fully fledged machinery for accelerating social innovation in a major sector.

Public bodies usually move too slowly for impatient entrepreneurs and activists. But in one important respect they typically move too fast: far-reaching restructurings tend to be driven through much too quickly, ignoring the long time it takes to establish new cultures, procedures, and skills, let alone new patterns of trust.

WHY WE NEED TO KNOW MORE ABOUT SOCIAL INNOVATION.

The expanding field of research on business innovation has obvious relevance to social innovation. Some of the distinctions are relevant between total, expansionary, or evolutionary innovations, 13 or between incremental, radical, or systematic ones.14 So is the research on competing models,15 the sociological work on the role of intermediaries who help make markets work more efficiently, spotting connections and opportunities,16 the a.n.a.lyses of how much innovation is best understood as creative reinterpretation, 17 and the work pioneered by Everett Rogers on diffusion.

Often the insights from business pose important challenges to social innovators. We know, for example, that in some sectors the best market structure for innovation seems to be a combination of oligopolistic compet.i.tion between a few big companies and a much larger penumbra of smaller firms (the model that exists in sectors such as microchips, software, cars, and retailing). Yet in most social fields, monopolistic governments sit alongside small units that are usually too small to innovate radically (schools, doctors' surgeries, police stations), which may be one reason why far-reaching innovations are so rare.

We know that disaggregated industries tend to adapt better to volatility, and that big structures are better under stable conditions. We know that innovation is often serendipitous-seeking one solution, firms stumble on another, quite different one. The organizational choices faced by social and commercial organizations also run in parallel. Some companies organize innovation largely in-house as part of their mainstream business (like 3M); some create semiautonomous corporate venture units (like Nokia); some grow through acquisition of other innovative companies as well as their own innovation (Cisco for example); others use widespread networks (like the Original Design Manufacturing companies in China). Again, in the social field there are similar advantages and disadvantages in keeping innovation in-house (as, for example, in the UK National Health Service in the past), integrating innovative NGOs into big public systems (as has often happened in housing), or using networks (the traditional method of innovation in fields as diverse as public health and urban planning).

In other fields, social organizations have been ahead of business. The fashion for user networks in business innovation is emulating long-standing practices in NGOs (Michael Young pioneered patient-led health innovations a generation ago, including what became the Expert Patients Programme in the UK National Health Service); similarly the open-source methods have taken models from academia and civic organizations directly into the heart of business.18 Important differences also separate social innovation from innovation in business. There are likely to be very different motives, which may include material incentives but will almost certainly go far wider to include motives of recognition, compa.s.sion, ident.i.ty, autonomy, and care. The critical resources are likely to be different: in businesses money provides the bottom line, but social innovations usually seek out a different mix of resources including political recognition and support, voluntary labor, and philanthropic commitment. Social organizations tend to have different patterns of growth: as a rule they don't grow as fast as private ones, but they also tend to be more resilient. Judging success is also bound to be very different. Scale or market share may matter little for a social innovation concerned with a very intense but contained need. In some of the most radical social innovations, partic.i.p.ants' lives are dramatically improved by the act of collaboration, such as in the reorganization of social care as self-directed support.19 These are all reasons to call for more rigor, sharper concepts, and clearer metrics in understanding social innovation.

Existing Research on Social Innovation and Related Fields Fortunately our understanding of social innovation is not a completely barren territory. There have been many case studies of social innovations within different fields (including health, education, and criminal policy), and useful attempts have been made to understand social innovation in some universities, including Stanford, Duke, and Harvard. However, these endeavors have focused on individual case studies rather than investigating common patterns or aggregating learning.20 As such, they have not yet provided widely acknowledged models or sufficient practical insights for pract.i.tioners: often rich accounts of individual social innovations do not add up to a clear picture of patterns (and generally the quality of theoretical work in this field has been low, with little progress since the pioneering work in the 1980s at Manchester and Suss.e.x universities linking social innovation to broader patterns of technological change). Nor has much use been made of the advances made in parallel disciplines.

As well as the study of innovation in economics and science, there is a small emerging body of research into the capacity of formally const.i.tuted social organizations (nonprofits, NGOs, charities, and voluntary and community organizations) to innovate in the delivery of public services and to build up innovative capacity more widely.21 The Young Foundation working with others in the Social Innovation Exchange has mapped the methods in use around the world, and shown the common patterns."22 There is also some limited emerging work on the replication of successful voluntary sector initiatives23-which, though valuable, investigates one aspect of the process of innovation in isolation from its wider and precursory elements.

Considerable work is now under way on measuring the outputs and outcomes of public and social organizations, including the fascinating work led by Dale Jorgenson at Harvard on valuing the informal economy and family work, and the recent work led by Tony Atkinson at Oxford University on the value of public services. These go far beyond the rather crude claims that are sometimes made for the productivity and efficacy of social organizations. Yet the truth is that very little is known about productivity in the civic sector-and although in mature fields it is possible to compare similar public, private, and nonprofit organizations, there are few general patterns. The serious work on understanding social value and productivity is still at a very early stage, without much in the way of theoretical foundations or practical applications.

Why What We Don't Know Matters The absence of sustained and systematic a.n.a.lysis is holding back the practice of social innovation. Specifically, a lack of knowledge makes it harder to see the main gaps in current provision of funding, advice, and support. This is likely to result in fewer potential innovations being initiated. A lack of knowledge about common patterns is almost certain to make it harder for innovators themselves to be effective and for ideas to be improved into a sustainable form.

The practice of social innovation remains roughly at the point where science was more than a century ago, when invention and innovation were left to the enthusiasm and energy of determined individuals like Thomas Edison and Alexander Graham Bell, who beavered away in their laboratories until the occasional "Eureka!" moment gave the world a new invention. As it came to be understood just how important science was to the economy (and to warfare), invention and innovation were taken out of the attics and garden sheds. Ideas were backed with large-scale public funding, R&D departments in big companies and university departments, and the systematic testing of new ideas became the norm. We live today with the results of that revolution, along with a stream of new products that come onto the market every year.