Innovation Through Social Enterprise: Finding New Ways to Solve Old Problems

Innovation should not be confined to technology alone – social enterprise uses innovative business models to “reorganise the system” and solve social issues, writes David Brookes, Managing Director of Social Traders.

Prime Minister Turnbull’s National Innovation and Science Agenda released in December last year represents positive political leadership in creating an Australia that values new ideas, business and technology.

Let’s not assume however, that innovation is limited to, or synonymous with, technology.

Charles Leadbetter, former adviser to UK Prime Minister Tony Blair, social innovation thinker and renowned author of The Frugal Innovator – Creating Change on a Shoestring, identifies that innovation is the recuperation of old ideas mixed with new approaches.

More often than not, the role of technology in innovation is to enable the reorganisation of existing resources and systems to deliver better outcomes. Citing AirBnB and Uber as examples, Leadbetter points out that neither hotels nor taxis were innovations per se; but the way both Uber and AirBnB have re-organised the existing system within their respective industry sectors is truly innovative. In both instances, technology facilitates the innovation but is not the innovation itself.

In this way, social enterprise itself also represents innovation since it finds new ways to solve problems. Often in the face of market failure, social enterprises provide employment and access to essential products and services by applying innovative business models.

In Australia there are a number of contemporary examples where social enterprises have demonstrated innovation to solve existing problems. The following two examples come from enterprises within Social Traders’ own Social Investment Portfolio.

To address the problem of poor access to healthy food in low socioeconomic communities, 2&5 operate a shop in Norlane, Geelong, one of the most economically marginalised suburbs in Victoria. 2&5 sell fresh, healthy food in an area that is unable to support a fruit and vegetable shop. To do this, they grow food on a local plot of land and use excess stock – for pickling and making jams – to sell at upscale markets in the region. They measure success by the kilograms of fresh produce sold in their shop – kilograms that translate into affordable and accessible fresh food for a community that otherwise struggles to access it. Through this innovative approach they are able to keep costs down, minimise waste and provide a market-based solution to address the problem.

In inner Melbourne’s North Fitzroy, The Integrated Medical Centre (TIMC) is a medical practice owned and operated by community health service cohealth. TIMC has been established as a means of generating revenue for cohealth by doing what they do best – providing healthcare.

By providing GPs, psychology, physiotherapy, pathology, podiatry and midwifery at market rates to the more affluent members of the local community, TIMC generates profit that funds community healthcare programs run by cohealth that are essential for those in the community most in need. By broadening its client base to encompass those that are more affluent and able to pay for medical services, TIMC has been able to take advantage of a market opportunity for the benefit of their traditional clients – those that can’t afford access to healthcare.

Healthcare and fresh food are things we all need – they are clearly not new, nor are the myriad of support services that provide access for those in need. The essence of the social enterprise innovation in both of these examples, is identifying where there are gaps in the traditional models of provision – both the commercial market and welfare – and finding new market-led approaches to address and solve these old problems.

In a recent article, Time for a National Agenda for Social Innovation, Rob Koczkar, CEO of Social Ventures Australia, advocates for greater focus at a national level towards exploring innovative approaches to solving the social challenges we face, such as unemployment, mental illness, homelessness and indigenous disadvantage.

As the intersection between traditional business and welfare, I believe that social enterprise needs to be recognised as part of the solution to solving these challenges.

This intersection is well depicted by social enterprise Thankyou which recently announced its new retail venture – Thankyou Baby – where the profits of nappies and baby products will fund maternal health projects in developing countries. The $600,000 start-up capital required to launch Thankyou Baby has been sourced through a crowdfunding campaign. Just as with their original bottled water product, Thankyou is demonstrating innovation in its ability to generate capital via crowd funding as well as lead consumers to organise themselves around a product on the basis of understanding what its social impact will be.

By doing this, Thankyou is using successful, well-established retail categories to divert – what would normally be personal profit for shareholders – to address persistent problems in the developing world.

Through Social Traders national research, we know there are over 20,000 social enterprises in Australia operating in all industry sectors from tourism and transport to mining, hospitality and health services. We estimate that social enterprise contributes approximately 2 to 3 per cent of Australia’s GDP and employs up to 300,000 Australians. These social enterprises are trading businesses that exist to address social problems.

Around 2,000 of these social enterprises are committed to the creation of employment for disadvantaged groups, and collectively exist to address labour market failure; employing those that the market deems too difficult to employ – generating jobs for 35,000 Australians that would otherwise be long-term unemployed or marginalised from the mainstream labour market.

The development of a cohesive strategic policy framework to support the growth of social enterprise in Australia aligns closely with the employment, growth and innovation priorities of our national and state governments.  

Social Traders believes strongly that government has a lead role to play in recognising social enterprise as part of its Innovation Agenda and supporting it as a viable, sustainable and innovative solution to our most entrenched social and community challenges.

If governments committed 1 per cent of their procurement budget per annum to purchasing from social enterprise, this would create 150,000 jobs, with 110,000 going to the long-term unemployed and those at risk of unemployment.

So let’s not confine innovation to technology alone – let’s broaden our thinking and policy settings to include new and innovative ways of doing business to meet the challenges of society.

About the author: David Brookes is Managing Director of Social Traders and an Executive Director on Social Traders’ board. He has responsibility for executing the organisation strategy, staff recruitment and external stakeholder engagement. Previously, David held senior executive roles with Amcor, Toyota and Rio Tinto across government, media and community relations portfolios.