The Nation of Social Innovation

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Kai Hockerts

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Tjen penge og vær et godt menneske. Det lyder for godt til at være sandt. Men det er pointen i en social innovativ strategi. Tre danske virksomheder er virkelig gode til det. Lektor Kai Hockerts forklarer hvorfor. Og giver samtidig opskriften på succes med Social innovation.

Traditionally it has been the predominant task of companies to create shareholder value while it was the government’s role to address social problems. However, in recent years business has emerged an important motor of social change. A small number of innovative and entrepreneurial firms are repositioning Denmark as the Nation of Social Innovation.





A recent example of the new crop of Danish social entrepreneurs are Mads Kjær and Tim Vang. The two have founded, an online platform that aims at eradicating poverty. MyC4 allows private citizens to invest money in small African businesses, thus bringing microfinance to the fingertips of the individual investor. Only eight months after its launch the website has already attracted a million Euros from investors all over the world.


Over 600 entrepreneurs in Uganda, Kenya, and the Cote d’Ivoire have received microloans from MyC4 to fund such varied business ideas as medical clinics and primary schools as well as hairdressers and restaurants. By helping to create liquid financial markets for small sized loans MyC4 hope to kick-start small and medium sized enterprises across Africa thus building an important foundation for fighting poverty. While poverty eradication is the ‘raison d’etre’ of MyC4 the firm is no charity.


Investors receive on average 10.9% interest on their money. It is this focus on social impact paired with a sustainable business model that differentiates MyC4 from traditional Danish development organizations such as Danida or Red Barnet.


Max Havelaar Fonden.





Traditionally development activists lobby politi­cians to provide more development aid to poor countries and blast multi­na­tionals they perceive to exploit smallholder producers in underdeveloped countries.


However, the growing success of Max Havelaar Fonden is another example of successful social innovation. Fair trade has a strong developmental motivation, wanting to help disenfranchised and self-employed smallholders to develop capabilities for accessing lucrative mar­kets at prices that allow them a sustainable livelihood. Its primary instrument is the manipulation of trading relationships through three main tools:


· A minimum price, which will always be paid even if the world market price falls below this point, and a price premium of a given percentage, which is paid when the world market price rises beyond the minimum price.


· Pre-financing of ordered produce to allow smallholders to buy raw materials.


· Training in quality control and marketing know-how to build the capacity to also trade on the world market independently of fair trade.

From a minor concern relevant only to church groups and One World shops Max Havelaar Fonden has grown fair trade into a lucrative business taking up shelf space in major super­markets.


Among the list of Danish firms offering fair trade products certified through Max Havelaar Fonden are retailers such as Coop and Netto, as well as Danisco, Toms, Nestlé Denmark, Ben&Jerry’s, Estate Coffee, Dr. Oetker, Frellsen Kaffe, Hansen Flødeis, Naturkost, Starbucks, and Urtekram.







A third example for social innovation concerns Hertz Delebilen, the Danish Car-Sharing company. Private car-ownership can be a costly form of individual mobility. It binds a substan­tial amount of capital and causes the owner recurring annual costs for taxes, insur­ance, and maintenance. However, most of the time cars sit around idle taking up scarce parking space.


When used they cause air pollution, noise, traffic con­­ges­tion and accidents. Thus demand emerged for more efficient solutions, linking sporadic car use with pub­lic transport. The unique attributes of Delebilen are a focus on short-term rental (cars are available for as short a time as one or two hours), and decentralized availability of cars (clients often live with­in walking distance of a car-sharing location). Delebilen has vehicles in eleven Danish cities as well as at Kastrup and Aalborg airport. In Copenhagen alone Delebilen has thirty locations offering access to cars ranging from a Ford Fiesta to a Ford Transit. On Nyropsgade Delebielen even offers a Mégane Cabriolet.


The Ingredients of Social Entrepreneurship

Social purpose business ventures as the three examples described here are hybrid enterprises straddling the boundary between the for-profit business world and social mission-driven nonprofit organizations. Thus they do not fit completely in either sphere. In order to keep their balance these social enterprises need to discover and exploit opportunities to create both social and economic value. There are two important levers through which social purpose business ventures can create and exploit entrepreneurial opportunities. These are Activism and self-help.



One source of social entrepreneurial opportunity is activist interference in the market place. Acti­vists aim to influence politicians and managers through mostly confrontational and sometimes cooperative cam­paigns. Yet, upon realizing that they may best meet their goals through the support of social purpose enterprises, some activist groups have begun to explore that route more systematically. Activists can help social purpose businesses in two ways:


· Firstly, development activists provide legitimization in the market place for organisations such as MyC4 or Max Havelaar. Implicit or explicit endorsement from development organizations has helped to make fair trade a product distinction that customers trust. At the same time activist campaigns have put industry incum­bents like Kraft, Nestlé, Procter&Gamble, and Sara Lee on the spot.


· Secondly, activists in church groups, development initiatives, or local citizen committees provide free marketing and distribution to fair trade enterprises. Knocking on doors, staging boycotts outside local retailers until they list fair trade products, and spreading news by word of mouth all provide invaluable free marketing to these budding businesses. Similarly news about MyC4 has travelled via networks such as Social Edge or the U.N. Millenium Development goals.


Activism provides social enterprises with a set of social entrepreneurial opportunities primarily by making the key assets of activist groups available to the social enterprise. For budding social venture start-ups these resources can make the difference between survival and failure. However, activism-driven social enterprises are also at risk since public pressure groups usually have a short attention span. They operate in a world of campaigns and thus, ultimately, media atten­tion. As soon as social enterprises become established, activist groups begin to lose interest: they are not in the institution building business.



The beneficiaries of the social enterprise are a second source of social entrepre­neurial opportunity. Usually beneficiaries of social initiatives would be expected to be powerless. Why else would they need support and protection from social enterprises? However, often the needy can pull themselves up given the opportunity. Thus, roping the bene­fi­ciaries into the business can be another source of opportunity for social enterprises; they can provide the enterprise with valuable resources. Take the example of microfinance. A primary asset of MyC4 is the willingness of its African entrepreneurs to help themselves given the availability of some start capital.


Car-sharing is another phenomenon taking on market in­cum­bents by leve­raging on its clients. This type of social enterprise has grown out of the desire of a small number of people to share their vehicles. These people were critical about car ownership from an ecological point of view, but still had an occasional need to use a car. Starting as an informal self-help network founded by a handful of people, car-sharing organizations have mush­roomed all over Europe. Apart from putting up capital, car-sharing members also help sprea­d news about the business by word-of-mouth.


Social enterprises, drawing on self-help as a source of entrepreneurial opportunity, find this reflected in three primary categories.


Firstly, beneficiaries are a source of cheap and patient capital. While the individual contribution of each participant is small, the aggregate result can be consi­derable.


Secondly, recipients can provide cheap access to labor. They can also knock on doors and get the word out. In contrast to activist driven enterprises, beneficiaries bring the additional advantage of being the social enterprise’s clients. Thus their message will be percei­ved as more objective than that of a political activist.


Thirdly, self-help enterprises can be sure of their clientele. Where commercial operators might lose frustrated clients, the customers of social enter­prises have a higher level of patience. This is essential as they are often figuring out their business model on the fly. At least initially, this may result in lower quality products.


A drawback for self-help inspired social enterprises lies in their inertia. Here they are the exact opposite of activist enterprises. Having grown out of a very specific need of their beneficiaries, self-help enterprises will tend to stick to the interests of these recipients, even when it would make sense to employ the resources of the social enter­prise in new regions or to address new target groups.



In the developed world multinational companies are increa­singly faced with maturing and highly competitive markets. Social Entrepreneurship offers the opportunity to break out og this frame. It creates new market space that offers both economic and social value. Driving corporate social innovation requires the willingness to take risks in new and untested business areas. However, when successful, social purpose business ventures offer sustainable growth opportunities. A key requirement for successful innovation is a shift in perception from seeing activists as opponents and beneficiaries as powerless receivers of donations. Both can actually be forceful partners in building Denmark into a Social Innovation Nation.

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