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How social innovation is shaking business foundations

Long relegated to the fringes of the industrial world, social innovation is now finding its way into business practices and strategies. The related notions of emergence and self-organization are creating new, bottom-up models. Before trying to manage them, better to understand them.

June 2013
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Little by little social innovation is penetrating diverse domains such as design, production, and customer service as it migrates inwards from the periphery of the industrial world and filters through organizational models, manners of reflection, and practical applications. From conception to roll out, the impact of this development, and the methods by which it operates, gives rise to a multitude of questions. Patterns have emerged and orientations mapped out for the future of methodology, analytical techniques, and data processing.

Social innovation did not emerge yesterday. In the wake of the 1992 Rio “Earth Summit” it was promoted as one way to address the need for an enlarged definition of sustainable development. In contrast to technological, economic, and commercial innovation it differs in two important ways. On the one hand its legitimacy as a solution is defined by the problem: it fills holes left by gaps in market and public institutions when it comes to meeting social needs and imperatives. On the other, its modalities align according a logic that promotes cooperation and participation. Constituents enter into a dialogue and open interaction is encouraged. At its heart the model relies on the enlightened self-interest of its primary stakeholders for whom, in an ideal world, shared values guide the way. In practice, widely divergent interests, needs, and sensibilities hold sway as becomes evident when strong wills come together to create a framework to govern the process of innovation.

Long relegated to the fringes of the industrial world the dynamic emerged and grew among outliers such as NGOs in the developing world or in social and community organizations. It has also deep roots in the free software movement. It is well suited to an environment where ideas burst forth faster than the speed of innovation and diversity is the rule. Indeed, the reliance of more mainstream enterprise on the work of digital pioneers has created a backdoor through which the new mentality has been able to seep into the corporate world by stealth.

The force created by the related notions of emergence and self-organization are creating new models of management in which the momentum is more ‘upward’ than ‘downward’. Experts at McKinsey espouse the virtues of crowdsourcing and an open approach to strategic direction setting. On closer inspection the outlines of a movement are being sketched out. Ones which could translate into a paradigm shift in modes of governance and operations. How best to understand and indeed enter this new culture?

The limitations of idealistic approaches to enterprise are exposed by their inherent reliance on certain baseline assumptions. Even though board rooms started integrating loftier goals into the more basic imperative of maximizing profit, the jury is still out on whether CSR will help form the corporate DNA of tomorrow. More fruitful would be a sober analysis, based on operating principles, to identify what I have labeled for the purposes of discussion “emergent properties”.

Emergent properties arise from a homogenous state or system of organization to spontaneously construct large scale patterns. The aim of our discussion is to identify the faintly detectable murmurings, or elements, of an evolution that is already well under way by relying on our actual experience of real-world innovation.

The inclusion principle

In enterprise, social innovation has been made relevant through a desire to cater to a broader cross-section of the public. It specifically targets areas frozen out of strategic direction to include: underdeveloped services; marginal populations; unusual needs; etc.

If nothing else, social innovation can be understood as fulfilling a need that has yet to be clearly formulated, or leading from the front. Through cooperation and exchange it becomes possible stay a step ahead. This proactive approach must be conducted in the spirit of shared responsibility, responsiveness, and collaboration if it is to be effective. In a sharp departure from more traditional practices, and their reliance on the mass, fundamentals are shifted to focus on customization and a collaborative experience. Future services are mapped out and designed through an ability to empathize. The process is supported by discoveries in neuroscience which inform many of its guiding notions, particularly when making use of a cluster of cells known as “mirror neurons”. The implication is a total immersion inside the head of a target in order to assimilate current preoccupations, and eventually move beyond them to anticipate any future ones, while keeping an eye on any potential bumps in the road ahead.

The appearance of “social trade”, and the way it has evolved among large retailers, provides a compelling recent illustration. In order to facilitate communication and better understand customers, connected technologies such as smartphones and other mobile devices are being harnessed to reveal consumption patterns, habits, and behavior. The result is personalized services to simplify daily life.

In purely chronological terms, a socio-technological process unfolds to produce society enhancing outcomes. Marketing imperatives such as studies to identify potential consumers and create new opportunities can produce positive externalities. Barriers separating marginalized populations from more conventional society can be reduced by addressing handicaps related to cognitive deficiencies, vision, illiteracy, or age (30% of seniors over 75 are sight or mobility impaired). Data is made available in real, or virtually real, time.

The guiding principles of social innovation ensure that while initiatives may respond to the pressure exerted by social and political interests they remain driven by more conventional motives such as the bottom line. Free competition and the logic of the markets remain paramount and decisions are often dictated by material more than any social aims. Under these terms, social innovation can be understood as just one among many more recent approaches to conquering the market. The usual corporate constituency of customers, shareholders, and employees is broadened through an open and collaborative strategy. The behavior of consumers is part of the process and as they become more active participants they are empowered to influence choices at a strategic level and at more critical stages of the development cycle.

Inclusiveness becomes a virtue and serves as much to reinforce tenuous links with a heterogeneous public as to elevate ordinary consumers to a more central role in commercial decision-making. 

Broadening the tent increases dynamism and is perfectly adapted to the growth of a knowledge-based society. It makes possible the communication and diffusion of innovation to a wider public by reaching out to those members of society with less of an inclination, or the cognitive capacities, to absorb the latest technological advances.

The shift is underpinned by the more user-friendly interfaces that have emerged as a reflection of new ways of thinking. The information age can become more than a mere fulfillment of promises made in the 1970s for a world based on zeros and ones and has expanded to create a new and more inclusive society rather than create a mere enhancement of what went before it.

The acceleration of technological change has altered human aspirations and behavior making possible the introduction of a range of new products and services. A shift in some guiding paradigms is impossible to ignore and is easily identified in firms that have succeeded in adapting to demands in a novel way. Additionally, the social and political conversation has changed substantially.

The voice technology associated with mobile handsets has allowed IBM to offer illiterate Indian villagers the power to exchange information through the medium of recorded messages on their phones. Users are able to educate themselves through easily accessible data such as weather reports (essential for making planting or harvesting decisions), doctor locations, trader information, and the best prices for crops. Along similar lines is the rising popularity of self-organizing Barcamps or Webinars, particularly in Africa, that seek to expand the knowledge base of participants. Temporary networks create a decentralized and efficient platform for exchange on a range of well-defined topics.

The principle of emergence

New ways of thinking follow new ways of doing so the process of social innovation demands a global approach to solution building marked by non-linear feedback loops where both are intertwined. The fact that one cannot be considered without the other requires a mental leap in which theory, methodology, and modes of reflection are turned on their heads.

At the heart of this evolution lies the concept of emergence as defined in the 1920s and updated to find growing application across a wide range of disciplines from neuroscience to management theory. 

Based on the simple assumption that individual agents acting autonomously can create intelligent solutions, it explains how complex systems can arise from the ambivalence that free thought and localized decisions create. Where needs are diverse no one entity can control outcomes. A process of innovation relies on the interaction between neighbors and a spirit of reciprocity to create solutions.

Therefore, global needs are defined and spontaneously constructed through an interactive process that relies on individual needs. The profound implications of this idea have the power to shake up the idea of organizations and how they define themselves. Preconceived notions about hierarchy, management, resources, and production capacities must be re-centered on the collectivity and the range of individuals that make up a society. “Think globally, act locally” is transformed to “think locally, act globally” and based on common values or interests. Ideas are bounced back and forth in an interactive process that encourages the emergence of innovative solutions. To facilitate this spirit of exchange, barriers between stakeholders must be reduced which implies a shift to a more passive role for management. Intervention should be used sparingly and oriented toward a desire to maintain a semblance of order among immediate neighbors and their surrounding environment. Managers occupy a less rarified position in which leadership becomes more about animating a process to which they are intimately connected and even swept up in. Such is the redefined role of a leader.

The appearance of a new culture of management, under which the self-organization of ideas is permanent, represents a sharp departure from the hypothetico-deductive model that preceded it and held sway since the dawn of the industrial age. Models are increasingly drawn from the natural world with references to phenomena such as epigenesis, morphogenesis, and symbiosis. This new approach to organization relies less on what is actually observed and more on what can be intuited. Groping for solutions amidst a constantly shifting landscape favors less of a reliance on centralized bureaucracies and more on the disruptive power of innovation. An interactive process punctuated by the appearance of feedback loops creates a state of permanent instability and reconsolidation that defies a compartmentalized breakdown of elements and tasks. Within this context, the argument for sustainable practices is made more attractive to the boardroom. Personal autonomy is celebrated and each member of a constituency acts according to individual needs. A strong ethical compass orients decisions based on social and lifestyle beliefs. Businesses are stripped of the power to impose their will from above because any disruption of the delicate dynamic would hinder the process of emergence.

Indeed, emergence offers a legitimate alternative to more traditional hierarchical principles of organization which are reductionist, static, and based on decomposition. The new approach creates a dynamic environment for interaction between individual entities and promotes collective intelligence.

The paradigm shift is illustrated in the following diagram of two paradoxical models as outlined above:

massote2 eng

On the left is the rational approach where everything is organized, structured, predictable, planned, coordinated, and secure. It resembles what would be expected under the precepts laid down by traditional theories on project management. On the right, the flow is based more on self-adaptive groupings at the level of structures and interactions. The environment is responsive, mobile, boundless and guided by notions of “idiosyncratic risk.” It should be recognizable to those familiar with social innovation or reactive management.

The illustration is hardly an exercise in wishful thinking and many contemporary organizations are already set to operate in a dynamic state. Industrial processes related to the assembly and testing of supercomputers for example are subject to the logic of reverse planning.

The rise of new approaches is unquestionably linked to the spread of the networked society and the ease with which communications can take place between two distant points of the planet. No correspondent is ever more than 20 clicks of a mouse away. Real time exchanges riding on a tidal wave of data and images facilitate the expression of aspirations or frustrations—even social insurrection—and are made possible through the miracle interconnectivity.

Organizational structures are not exempt from the rules governing wider society: interconnectivity, transparency, and a world where all is known, seen, and heard. This is precisely the reason why commentators place such emphasis on the base or what some have described as the “multitude.” Rather than filter down from the top the force of reasoning, ideas, and power increasingly flows from the periphery and the base.

How do we approach the new reality? What tools and processes lie at our disposal?Moving beyond technology based solutions to complexityLarge organizations are already well equipped to handle social innovation and its mobilization of a collaborative economy that facilitates improved interpersonal relations. They already possess the technological tools required to manage the data explosion. Crowdsourcing is one example. Social networking and its reliance on open approaches to technology in order to facilitate the diffusion, advocacy, and discussion of sources of information is another. Outsourcing has expanded to include processes and services. Finally, virtual solutions are being supplied to facilitate professional conferencing on a small and large scale through interactive technologies such as Webinars and Barcamps.

The search for solutions is no longer a matter of reinventing the wheel and 95% of necessary information already exists in some form or another. The art is in knowing where to look for it and finding value that can be adapted to the ethos that govern the creation of business and economic intelligence. At the expense of a certain degree of reflection and deeper thought the Web is acting as an engine to accelerate progress. The solutions being created rely on agility, transparency, and a multi-disciplinary approach.

Theories on complexity are another more recent response to the problem of attempting to channel large amounts of data through the network to areas where it can be processed effectively. The solution is a galaxy of technologies and tools that are trans-disciplinary, connected, and can be deployed to introduce coherence.

In a complex world there is no such thing as absolute truth and ambivalence becomes the rule. Approaches are simultaneously antagonistic and complimentary. Conflict avoidance becomes a virtue because to behave otherwise would create more inconveniences than advantages. An insistence on the acceptance of diversity and a celebration of collective truth change the previous paradigm. At any instant one opposing force might be in the ascendant over another. Ensuring equilibrium creates positive externalities for the wider group. The art is to successfully integrate these dueling voices into the collective and assure its resilience and sustainability. In a complex world the mirage that results from an over-reliance on a single approach can be eliminated by exploiting the network to harness the synergies that are created when an array of forces are brought to bear on a problem. As with evolution, emergent solutions are created through a process of continual adaptation within an ever-changing environment.

This open process can be explained by borrowing from language used to describe the principle of circularity and its contrast to more linear models. In the strategic planning phase of a project, for example (needs analysis and solutions), emergent properties take center-stage. As innovations are made concrete and operational, a rational (project management) approach imposes itself. In dynamic systems progression occurs by way of cyclical events towards an attractor or what can be understood as an acceptable solution.

To create an environment that favors a combination of social and technological innovation many organizations have adapted their management structures to insist on personal development and a capacity for cooperation. This is a promising first step. To the extent that organizations are able to integrate the necessity for open communication and mutual respect they are developing their own conception of responsiveness, an inclusive society, empathy, and immersion.

Because of the sheer volume of information being processed under the new reality a very real bottleneck has appeared. Unless best practices are observed, the ability to manage and synthesize knowledge could be crippled and vital information overlooked. The unfortunate result could translate into a serious loss of productivity!

Considering the context, the strategic orientation of enterprises is increasingly driven by the imperatives of an evolutionary process. If customer service is found wanting in its ability to address problems and complaints than discussion might merely transfer itself to web-based discussion forums… with unpredictable consequences to say the least.

Towards a new toolkitLooking at the current picture one can’t help but be struck by the glaring lack of a comprehensive methodological approach to the business of uncovering, interpreting, and exploiting examples of emergence. The economic intelligence pushed by the vast majority of professional-services firms is colored by an over-reliance on statistical models that require mountains of quantitative and qualitative data. Falling back on the reassurances of business analytics can result in a limited picture and clearly a new set of brushes may be required.

The instruments of the future have yet to be developed and will require a healthy dose of pluck and imagination. While the outlines of a range of emergent phenomena have come into sharper focus over the last several decades they have eluded any powers of prediction. Emergent properties burst forth unexpectedly at each major leap forward in the innovation cycle. As a new layer of complexity is added the vantage point shifts. The view expands as the paradigm is altered revealing previously undiscovered perspectives.

The principle of emergence suggests an unpredictable, constantly changing landscape where new patterns arise and expand into new equilibriums and orders. Forecasting and imagining these possible futures favors inferences based on abductive or inductive reasoning to reach conclusions (using a form of intuitive reasoning or “guessing” that consists of eliminating improbable solutions it stands in direct opposition to the system-based approach). Our present technological landscape is nevertheless largely populated by structures based on far more traditional concepts of deduction.

When surveying the programming techniques deployed in the creation of IT-based solutions one is immediately struck by the prevalence of client-server or even peer-to-peer architecture with a sprinkling of multi-agent systems. These techniques are distinguished by the intellectual framework in which they were designed: one is marked a hierarchical approach while the other, with its nod to asymmetrical flows of information, is egalitarian. The arrival of the mobile internet devices has placed the idea of mobile agent technology (autonomous agents that allows processes to migrate from computer to computer) at the center of discussions. The conversation has been extended beyond systems architecture to find application in approaches to management. A line running from hierarchical structures through decentralization and eventual relocation must now be extended to include complexity in any discussion of enterprise culture. As approaches such as matrix management are generalized it now falls on social innovation to carry the torch of progress. To fulfill its potential it will be necessary to introduce the dynamic at the heart of the action, to diffuse it across a broad constituency, and to introduce “couriers” to carry the message to localized hubs of decision-making. The result would be models centered on the individual, well-placed to harness the potential for cross-pollination that exists when network dynamics and interactions between an enterprise and its environment overlap.

In organizations based on such principles, mechanisms to direct resources and competences become vital to overall health. In contrast to prevailing norms at the level of processes, the most critical operations would take place at the edges, either upstream or downstream, where they can best interact with key stakeholders.

At the upper levels of the chain the primary task is discerning emergent properties in a dynamic that has been borrowed from the world of theoretical physics. Rather than succumb to the temptation to fall back on equations to model a given situation, they are held in reserve until exploratory work has been completed, priority is placed cataloguing and assimilating all aspects of any emergent properties. By placing more emphasis on the identification of these properties planning and preparation can proceed more intelligently.

Aside from minor adjustments for more adaptive performance processes are left constant through the production phase of development. When they eventually go off-line, it becomes ever more imperative that organizations remain vigilant and attentive to the targeted environment.

ConsequencesThe process of emergence is by its very definition spontaneous; a product of self-organizing phenomena that are the result of already present agents in a state of constant interaction. Thus the impact of social innovation can already be understood as a paradigm shift. And yet, our world is a wired ecosystem in which upwards of two billion web users spend one third of their time in communication with correspondents around the globe. Does not the shear breadth of the discussion imply a shift from social innovation to what could better be described as collective innovation?

The sheer volume of data being produced by advances in information technology (every few minutes millions of pieces of data are generated) is growing and pushing cognitive capacities to their limits. Change arrives at breakneck speed and the powers of intelligent decision making are struggling to stay afloat in a sea of constant interaction where unpredictable events have become commonplace. For reasons both biological and physical the human brain is drowning in the new reality. When expressed in isolation the power of rational thought is inevitably reduced as it gropes to define the outlines of a complex world. Reliance on emotions leads to irrational choices. A more holistic approach to intelligence in which the human brain, the Web, and society act in unison could mean the death of the power of the individual but the birth of the power of the collective. Unless we accept this new reality, to better prepare and adapt to it, we may only be treading water.

PIerre Massotte
Chairman, Institut de l'Innovation et du Développement (I2D)