Being socially innovative and running a social enterprise are not one and the same thing.
However, these two terms are often used hand-in-hand when discussing organisations and businesses who pursue social objectives.
There is a distinct difference between these two terms and differentiating between them is actually rather important when assessing the significance of the impact each has on its associated industries.
This article aims to identify the difference between the two terms along with providing a real life example to support the importance of this distinction.
Although there are many similarities between social enterprise and social innovation there are two crucial differences.
The first is ‘discovery’ and the second is ‘disequilibria’.
Addressing a newly identified social need differentiates social innovation from social enterprise.
Similarly, social innovation creates disequilibria within an industry whereas a social enterprise does not.
The term ‘social enterprise’ is used to describe any organisation who uses business tools to achieve social objectives.
The precise criteria which an organisation has to meet to be classed as a ‘social enterprise’ varies slightly from country to country.
This makes defining social enterprise in a global sense quite a challenge to say the least.
However, regardless of the precise criteria which has been outlined all definitions of social enterprise incorporate the same fundamental principles.
For an organisation to be a ‘social enterprise’ it has to trade using business tools, make the majority of its profit from the sale of products or services, not rely on funding or charitable donations, pursue social objectives and reinvest a decent percentage of its profits back into the organisation.
Social enterprise ultimately refers to how an organisation is set up, how it generates profit, what is does with those profits and how it aims to promote its social objectives.
Social innovation is associated with the discovery of a previously unexploited social need, the ability of an organisation to continue to exploit the social need in a sustainable way, and most importantly in doing so it needs to generate disequilibria within its industry.
Let’s look at each of these factors in turn.
For a social entrepreneur or social enterprise to be truly socially innovative it is not enough for them to simply address a social need.
Being socially innovative requires the individual or organisation to identify a previously un-addressed social issue.
This could be the development of a new green technology, the support of a disadvantaged group of people who are not currently being supported or even creating a more productive or efficient method for dealing with a current social need.
However this is approached it must provide something new.
Once a social need has been discovered the organisation must then be able to exploit this need in a sustainable way.
By this I mean the organisation must be able to identify a sustainable business model which enables them to meet this need in a financially viable way.
Lastly, socially innovative organisations need to generate disequilibria within their market.
Disequilibria refers to an organisation creating disruption and imbalance within their industry in a way that forces the market to replicate and follow in their foot-steps.
In non-social terms you could consider Apple as a company who has created disequilibria in their market.
Since they launched the iPhone and the iPad the majority of the market has attempted to replicate their products in one way or another.
A fantastic example has been provided by Professor Kai Hockerts from the Copenhagen Business School in his recent MOOC on Social Enterprise. It focuses on the green technology ‘Greenfreeze’ which was created by Greenpeace in the mid-1990s.
Greenfreeze is an environmentally friendly refrigerator technology which is used in fridge-freezers. Greenpeace piloted their new technology in partnership with the East German manufacturer ‘Foron’.
After a wide-spread marketing campaign Foron received 70,000 pre-orders for their new refrigerators.
However, Greenpeace did not create Greenfreeze for financial reasons, they created it for environmental reasons and when they put Greenfreeze into the public domain the majority of Foron’s competitors used it and replicated their work.
Foron had suddenly lost their major competitive advantage and in the years that followed they eventually went bankrupt.
Over 300 million refrigerators use Greenfreeze technology today which means the refrigerator industry is now a much more environmentally friendly industry.
Global companies such as Bosch, Whirlpool and Panasonic sell refrigerators all around the world using the Greenfreeze technology.
Therefore, should we consider Foron’s story to be a failure or a success?
From a ‘social enterprise’ point of view it has failed.
However, from a ‘social innovation’ point of view it was a success.
Not only was it a success but Foron, but the Greenfreeze technology completely transformed the entire industry as a result of the level of disequilibria it created.
Social innovators are recognised and respected not just for the work they do but also by their ability to change industries.
Their success is often measured by the number of people who replicate their work.
While a social enterprise can perform very good work, they do not move the social agenda forwards within their associated industries.
They provide a much needed service and their work should not be overlooked.
But social innovation is a much more powerful force as it has the ability to move industries, provide direction for new businesses and make a greater collective difference to the social need it originally set out to address.
In the example used above, Greenpeace developed Greenfreeze to make refrigerators more environmentally friendly.
Through their social innovation they certainly achieved their goal as the industry now almost exclusively uses Greenfreeze and similar technologies.
If Greenpeace had simply followed and replicated what others were doing no social innovation would have resulted and the industry would be in the same position it was 25 years ago.
Social enterprises can be socially innovative: they just need to pursue something previously unaddressed, ensure they can meet the need in a sustainable way and generate disequilibria in their associated market.
I in no way mean to belittle the fantastic work that is performed by social enterprises, and the world would be a far worse place without them.
Social enterprises provide a much needed service for many people and many environments.
But I would challenge them to do more.
For those who are not thinking with an innovative mind-set, I would encourage you to do so.
What could you do to better address your social need? How could you radically improve what you do and what you offer? Do you have the potential to be socially innovative? If you believe you do, push yourself and take your social enterprise to the next level.