Connecting corporations and communities: Towards a theory of social inclusive open innovation

Abstract

Despite pervasiveness of the market forces and supplementary role of the state and in some cases, even civil society organisations, there are unmet social needs which remain unaddressed by the existing institutions. With industrial growth becoming jobless, the need for new models of social innovation is being felt all around the world to provide jobs to the youth, skills for the new economy and entrepreneurial opportunities for transforming resources and skills. The persistence of some of these unmet needs (also referred as wicked problems sometimes) or unaddressed problems for a long time shows that the existing institutional arrangements are inadequate for the purpose. Innovations are imperative. A socio-ecological system that recognizes and rewards innovation can withstand many external shocks, provided it is agile and innovates quickly to remain responsive to emergent challenges (Anderies, Janssen, & Ostrom. Ecology and society, 9(1)2004).

Whether corporations will follow an open innovation approach to blend grassroots ideas and innovations with their expertise in a reciprocal, responsible and respectful manner (Gupta et al., Journal of Open Innovation: Technology, Market, and Complexity 2: 16, 2016) is still an open question. The design of appropriatemanufacturing and frugal supply chain will then become closely linked with other features of open innovation ecosystem. The debate on the role of social innovation in multi-stakeholder context in European focused on how these innovations fostered trust among different actors and influenced policy (Defourny and Nyssens. Social Enterprise Journal 4: 202–228, 2008).

In this paper, we describe the market and social forces which influence the emergence of social innovations through various processes. We then look into the evolutionary pathways for social innovations (Mulgan, Innovations 1: 145–162, 2006), to avoid inertia and spur initiatives to bridge the social gap in an inclusive manner through mobilization of youth in particular. The ecosystem for social open innovations provides scope for connecting corporations and communities (Herrera, 2015; Gibson-Graham and Roelvink, Social innovation for community economies: how, 2013). Following the theory of reciprocal and responsible open innovation systems (Gupta et al., Journal of Open Innovation: Technology, Market, and Complexity 2: 16, 2016), we explore the way barriers are overcome on the way to reach the base of economic pyramid [BOEP] customer. Technological adaptability and institutional or market adaptability are explored to understand how communities get empowered to deal with corporations through an open innovation platform. The corporations need to be empowered to understand the decision heuristics followed by grassroots and community frugal innovators (Gupta, Innovations 1: 49–66, 2006). Just as communities need to be empowered to negotiate fair and just exchange relationship with corporations (Honey Bee Network, 1990–2017).

Finally, we conclude with the recommendations based on the experiences of grassroots innovators that can enrich both social innovations and social enterprises following commercial as well as social business models for meeting the unmet needs of the disadvantage section of the society.

Introduction

Despite pervasiveness of the market forces and supplementary role of the state and in some cases, even civil society organisations, there are unmet social needs which remain unaddressed by the existing institutions. With industrial growth becoming jobless, the need for new models of social innovation is being felt all around the world to provide jobs to the youth, skills for the new economy and entrepreneurial opportunities for transforming resources and skills. The persistence of some of these unmet needs (also referred as wicked problems sometimes) or unaddressed problems for a long time shows that the existing institutional arrangements are inadequate for the purpose. Innovations are imperative. A socio-ecological system that recognizes and rewards innovation can withstand many external shocks, provided it is agile and innovates quickly to remain responsive to emergent challenges (Anderies, Janssen, & Ostrom, 2004).

Whether corporations will follow an open innovation approach to blend grassroots ideas and innovations with their expertise in a reciprocal, responsible and respectful manner (Gupta et al. 2016) is still an open question. The design of appropriate manufacturing and frugal supply chain will then become closely linked with other features of open innovation ecosystem. The debate on the role of social innovation in multi-stakeholder context in European focused on how these innovations fostered trust among different actors and influenced policy (Defourny and Nyssens 2008).

In this paper, we describe the market and social forces which influence the emergence of social innovations through various processes. We then look into the evolutionary pathways for social innovations (Mulgan 2006), to avoid inertia and spur initiatives to bridge the social gap in an inclusive manner through mobilization of youth in particular. The ecosystem for social open innovations provides scope for connecting corporations and communities (Herrera, 2015; Gibson-Graham and Roelvink 2013). Following the theory of reciprocal and responsible open innovation systems (Gupta et al. 2016), we explore the way barriers are overcome on the way to reach the base of economic pyramid [BOEP] customer. Technological adaptability and institutional or market adaptability are explored to understand how communities get empowered to deal with corporations through an open innovation platform. The corporations need to be empowered to understand the decision heuristics followed by grassroots and community frugal innovators (Gupta 2006). Just as communities need to be empowered to negotiate fair and just exchange relationship with corporations (Honey Bee Network, 1990–2017).

Finally, we conclude with the recommendations based on the experiences of grassroots innovators that can enrich both social innovations and social enterprises following commercial as well as social business models for meeting the unmet needs of the disadvantage section of the society.

Part I

Theory of social innovation

Social innovations emerge to meet the need unmet due to failure of markets, state and even civil society or augment, transform and restructure the existing ways of meeting s uch needs. Sometimes, technologies emerge which can be applied to deliver existing services better to meet the unmet or under-met needs of the disadvantaged section. Social innovations may involve several channels for serving the society such as social business/enterprise, social innovation based profit or non-profit enterprise, association, cooperative, groups or even individual social change agent. Sometimes, social innovations involve mobilizing people through new social movements. These movements may have a single or multiple locus of institutional core or anchor. The Honey Bee Network is a new social movement without any legal structure or boundary. But it has spawned several institutions such as Society for Research and Initiatives for Technologies and Institutions [SRISTI], Grassroots Innovation Augmentation Network [GIAN] and National Innovation Foundation [NIF] which provide institutional anchor to sustain the movement. It has also networked numerous other institutions, individuals and groups which may partly or wholly subscribe to the network philosophy in serving the society. Social networks play a very critical role in evolution, testing, diffusion and further modification of social innovations (Moore and Westely 2011, Chalmers 2013).

The social business can be defined as an economic activity addressing an unmet need of the disadvantaged people or making an existing delivery system more efficient, effective and accountable to different stakeholders including the people to be supported. Social business can have profit or non-profit purpose but its goal is not profit maximization (Yunus 2010). In the case of profit-oriented enterprise, a large part of the profit goes back to the people. Amul Dairy Cooperative movement is able to give back more than 80% of the value of the milk provided by the farmers to them as payment. In the 20% margin, it manages the entire supply chain, logistics and other manufacturing infrastructure. Incidentally. Amul is th ebigegst brand of India worth 30,000 cr rupees (USD 5000 mill). A business may share entire surplus with the people involved in the provision of raw material and/or consumption of the final product and service, as is the case with many cooperatives. Such businesses may or may not grow very far depending upon the resources they set aside for replacing the infrastructure [depreciation], skill development and enhancement of capabilities of staff as well as customers, R&D, innovations for designing new products and services to expand market and serve existing clients more empathetically. Social business can be evaluated on the parameter of inclusiveness. There are six kinds of exclusion which a social business or an enterprise should try to overcome completely or substantially. Every social enterprise/innovation/business must serve the people in relatively inaccessible areas, engaged in neglected sectors, having skills for which market has come down or doesn’t exist, suffer from seasonal or temporal exclusion and belong to social classes which have historically remained suppressed, bypassed, exploited and under-served and governed by structures which give priority to serve the poor. If social, sectoral, seasonal, spatial, structural and skill-based exclusion is not overcome, then an enterprise is not inclusive or inclusive enough. Existing corporations may not have inclusivity in all their functions. They may not hire sufficient women or staff from neglected social classes. But, they may serve them better than others. It may not always possible to have inclusivity in all functions and all services and yet such inclusion is desirable. For example, a social health enterprise may not have medical doctors coming from tribal or scheduled caste background and yet it may serve the most neglected people in the most affordable and accessible manner. The medicine may be affordable but manufactured by Multi-National Corporations and not small distributed businesses.

The design of institutional platforms that reduce or eliminate the ex ante and ex poste transaction costs of product and service providers and users in a given situation of social inequity may depend on the degree of openness for mutual learning between formal and informal sectors existing in the eco-system. Higher the openness, greater may be the flexibility in designing open innovation platform. The conventional framework of open innovation has referred to corporate willingness to learn from outside but less often about the extent to which a corporation shares its knowledge with outsiders. The central tenet of the Honey Bee Network has been openness in sharing, learning and valorizing people’s knowledge through cross pollination and linkage with formal science and technology, business and financial sectors.

Many farmers and artisans share their innovations openly without caring about the possible revenue they could have generated by keeping it confidential or restricted. A concept of technology commons was developed to ensure that despite IPR protection, people to people sharing is allowed and encouraged. However, the grassroots innovations can be accessed by a commercial company only through license (Sinha 2008, Gupta 2012. This is a hybrid version of open and close system of innovation. Generally, most grassroots innovators benefit from the feedback they get from the community members including users and non-users of their innovations. In some of the open innovation communities in formal sector, similar values exist.

There has been a long debate about the difference between social innovation, social enterprise and social business. The social innovation is a creative and compassionate solution for an unmet need of a disadvantaged social segment so far excluded from the benefits of development. It is not necessary that the solution may emerge only from the people who are affected by the problem. When it does, it becomes an example of social innovation from grassroots. When it is developed by outsiders such as a corporation or a public sector agency or a voluntary organisation, it becomes innovation for grassroots. One can also have social innovations emerging at grassroots though with or without involvement of people as designers and/or users or both. When such solutions have to be provided to several communities on an ongoing basis, one needs an operational, logistical supply chain. Such manufacturing and supply of solutions may take place on commercial basis or not for profit basis. It can also happen that moderate profits are generated but not shared with the promoters as applicable in section 8 companies or what Prof. Yunus calls as social business. The programmed development and delivery of goods and services at the door of needy communities with or without full cost recovery is called social enterprise. The line between social innovation and enterprise is fuzzy. Once an activity acquires an entrepreneurial propulsion backed up by a budget and a revenue recovery system, it acquires an enterprise format. The cost of services or products may be met by third party or through CSR funds, through crowd funding or endogenously by the community itself [Fig. 1].

Fig. 1

Emergence of social innovation

The emergence of social innovations in any society indicates that some of the unmet social needs have spurred experimentation for searching a solution. Market failure occurs when the cost at which solution is available is beyond the reach of majority of those who need the solution. The state failure takes place when public policy either does not target the most affected people or uses indicators which do not ensure that the most needy benefit from existing delivery systems. Civil society failure happens when even the voluntary organisations find it either infeasible or lack resources to reach the unreached social segments. In such a situation, some of the affected people or other individuals may develop an accessible, affordable, adaptable solution available to the most needy ones. If these initiatives are converted into innovation through open learning and open sharing, then social innovation also becomes an open innovation. Sustainability of such solutions depends upon the degree of reciprocity among provider, consumer and facilitator of the delivery systems. To illustrate, in many of the semi-arid regions with limited irrigation potential, high climatic fluctuation, markets are often weak because of poor infrastructure. Even the public systems are weak because often the state uses such locations as punishment postings for laggard officials. Since neither the bureaucratic system nor the political system is much inclined to serve the interests of such people, the instances of apathy and inadequacy are rampant. In one such case, during our learning walks, Shodhyatra, we came across a practice for pest control which are very sustainable and extremely affordable. The problem of termite attack in wheat in drylands is quite pervasive. Most farmers being poor, cannot afford chemical pesticides which are also not very effective in such cases. The private sector agencies and public sector scientists have not paid adequate attention. A farmer shared a very interesting and extremely affordable solution. He mentioned that while irrigating the wheat crop, they put cut pieces of cactus like Euphorbia or Opuntia in the irrigation channel. The latex of these cacti dissolves in the water and spreads in the field to help control termites. This is an open innovation socially extremely useful and affordable by the poorest people and developed also by the poor people.

Social innovation by women: a case study of recipe competitions

We conduct recipe competitions during the Shodhyatras to celebrate local culinary creativity and innovation as a social innovation. Women use their knowledge of edible and therapeutic weeds or companion plants (weeding is mostly done by women), waste from fruit and vegetables like the pericarp, etc. Tables 1 and 2 lists uses of weeds reported in three villages of eastern Uttar Pradesh (Dey, Singh and Gupta, 2015 Women share their knowledge and innovations in open, beyond the caste, class or other boundaries. This helps them to effectively cope with the stress period in the households. It was recommended that to strengthen the agency/aability of women, we need platforms like The Honey Bee Network where peer group exchange of knowledge and expertise is encourage and facilitated. Such institutions will also maintain an open database of such knowledge which can be recalled, retrieved and redistributed whenever needed. It has to be in a media and language with which the women in the region are comfortable and conversant. “The knowledge transfer across generations, particularly among women is vital for maintaining sustainability quest of vulnerable communities.” (Dey, Singh and Gupta, 2015).

Table 1 Some of the plants used in recipe competitions conducted during Shodhyatras

Table 2 Existing knowledge system around weeds found in three villages of eastern Uttar Pradesh

Social Innovation and community resilience

In addition to the examples of open exchange of knowledge, expertise and resources decribed in Tables 3 and 1, there are many other examples in the Honey Bee Network [honeybee.org, Sristi.org] of indigenous knowledge and innovation which impart resilience to the communities. Harbhajan Singh, a small farmer from Hisar decided to irrigate cotton field in alternate rows. The water requirement went down by half. The pests attack also got reduced because of less succulence in the plant. The pesticide cost and its adverse environmental effects also got reduced. The challenge in diffusing such social innovations really is that the user cannot be expected to pay for such open source information. Therefore, third party agency has to bear the cost of diffusion. When social entrepreneurs and innovators fail to mobilise resources either through crowd funding or subsidies/grants, such extremely affordable and democratic sustainable innovations fail to diffuse. The process of development then does not become inclusive enough.

Table 3 Taxonomy of social innovation approaches (six Bs of basic design approaches)^a

Insistence on full or partial payment by users for such knowledge, practices or sometimes even tangible solutions [such as low cost devices for physically challenged people] may lead to exclusion of the most needy and the poorest ones. In this paper, we have argued for a framework that reduces transaction costs on supply and demand side and make such intermediation possible that needs of the most disadvantaged people don’t remain unmet. The way institutions are designed and monitored, it is becoming more and more difficult even by public institutions to serve the extreme cases of public interest. Limits of market, state and civil society are seldom brought to the heart of popular discourse. But such limitations are not inherent in a capitalistic system (Yun, 2017). The open Innovation conference by SOITCM (Riga, 2017) is actually aimed at transcending such limits.

Emergence of social innovation (Fig. 2)

There are several reasons why needs of some of the social segments remain either unnoticed/unsensed or if noted, remain unmet. The failure of markets, state or even civil society may cause such gaps in meeting the needs persist for a long time. The transaction costs of meeting such needs may be high due to terrain, basic infrastructure, lack of local demand or a combination of other technological, cultural or institutional factors. There are five A’s which explain why needs may remain unmet even if some of the transaction costs are met. The solutions may not be affordable or accessible or even acceptable. It is not enough to have acceptable solutions because needs may change over time and the change may not be uniform for different community members. In such cases, the adaptability of solution and its availability becomes important parameter for supply chain management. What use an affordable, acceptable and accessible solution is, if it is not available. Certain needs therefore remain unmet for long time though policy makers or corporations may claim that they have solutions for the same. Suitable interface among natural, social, ethical and intellectual capital helps in overcoming transaction costs (Gupta et al., Gupta et al. 2003, Gupta 2006).

Fig. 2

Evolutionary pathways for social innovation

There are several ways in which the community members try to articulate their need. They may protest through violent or non-violent means and if policy doesn’t change, the inertia may follow. This may aggravate the frustration and in extreme cases, may give rise to insurgency. The non-violent constructive Gandhian approach may lead to co-creation of solutions through joint action between people and the formal institutions (Guha 2006). People learn to be helpless sometimes. Their self-esteem goes down and the downward spiral of low esteem, low aspirations and low expectation leads to other adjustment with whatever problem exists or may trigger exit through migration or abandonment of the enterprise.

The most hopeful scenario which has been the foundation of the Honey Bee Network is innovation at the grassroots level (Gupta 2013, 2006). These innovations may be supported endogenously by individual innovator or his community, through crowd funding of private or public grants and in rare cases through corporate social responsibility. The open innovation framework may trigger institutionalization of social innovation if the needs are met adequately and the communities and/or individuals try to improve the ideas on their own. Grassroots innovations provide an opportunity for engagement to not only corporations but also high net worth individuals and any other person who wishes to contribute small amounts through crowd funding.

In the figure two, evolutionary pathways for social innovation are described. Either through some extreme event, accident or otherwise, one may sense the unmet need. Deliberate attempt to study the reasons for unmet needs may also uncover them. If the institutions responsible for meeting the needs are overawed by the scale of the problem, limited scope of their mandate, inadequate resources or inability of users to use what is available, the inertia may follow (Geels 2004). But, if either some individuals or community feels impatient, empathetic, or has prior experience of solving problems, it may take initiative (Smith and Tushman 2005). Availability of resources, mentors and ecosystem support may also reinforce the willingness to take initiative. The initiatives may emerge endogenously or exogenously [Fig. 2]. They may or may not evolve into an innovative solution. Various facilitative or inhibitory factors may influence this transition. Sustainability of social innovations may depend upon the openness of the learning and exchange platform. Product and process innovations may be accompanied by service and system support by third party agencies or individuals. In a dynamic social situation, neither need remain constant nor the design or delivery system. Continuous derivative innovations are necessary including by the bypassed communities.

The interplay between inertia and initiative may lead to innovation in product, process, service and system including the excluded regions, communities, sectors, skills or other factors. Continuous improvements and inclusivity may contribute to sustainability in bridging social gap. Whether the solutions so generated require repurposing available institutions or technologies, redesigning them, recalibrating them or rejuvenating them depends upon how institutions transform themselves for bridging the social gap. The corporations may also develop inertia and thus may not take initiative to generate social innovations. Small enterprises, communities may also remain timid and limited in their vision without exploring open innovation to learn and share their approach to solving problem. It is true that grassroots innovators follow open innovation far more than large corporations. For every one Tesla which opened all its patents, there are tens of thousands of farmers, mechanics, labourers, artisans, etc., who share their solutions to meet the social gap openly.

The ecosystem for social innovation may however need both the community level initiatives but also corporate contributions beside public policy support. Both closed loop innovations and open collaborative innovation have a role to play in institutional transformation. The design of a mobile phone is a closed loop innovation backed by hundreds of patents. But it also provides open platforms on which different factors can design participative and open access knowledge base and communities. Institutional transformation may involve repurposing the existing institutions or sometimes redesigning. When that is not easy to accomplish recalibrating the monitoring indicators and success factors may become necessary to rejuvenate the institutions. The ecosystem of social innovation does not grow only through transformation of existing institutions. There are situations in which disruption of established norms and values become necessary to achieve the larger social good so long as the core values of reaching the unreached remain intact. The classical banking model, trying to serve rural communities through branch network left almost 40 % people of our country unbanked. New payment gateways and channels have made banking accessible to the most remote corners of the country which had not been reached through conventional model. More innovations are called for to incorporate the barter economy still prevalent in tribal areas. The strength of the ecosystem lies in constant recalibration of indicators of performance. More and more difficult problems must occupy the agenda for action with change in social norms of sensitivity and accountability.

Corporations and communities: mutual empowerment (Fig. 3)

Corporations have been trying to reach the base of the economic pyramid¹ by providing flexibility at institutional or market level or in the design of technological solutions. Corporations have succeeded in delivering small sachets of cosmetics, tea or coffee to millions of villages. And yet, the open source multimedia, multilingual content for educating children has not reached even a few thousands village schools (Gupta et al. 2000). The supply change efficiency in delivering consumption goods fails to mimic similar efficiency in overcoming anemia among 60% women. Several factors have been discussed earlier responsible for neglect of unmet needs. Corporations need to be empowered to bring in flexibility and adaptability in their technological and institutional functioning. Their ability to develop frugal designs would increase when corporate designers will work with grassroots innovators to learn from their heuristics. Not all designs are modifiable or are climate resilient, environment friendly or gender neutral. But greater connect with the community might develop empathy and a reciprocal and responsible innovation system may evolve. Amul cooperative model has demonstrated that scale need not prevent close affinity with client’s interest. Amul transfers more than 80% of the value of marketed milk products to the milk producers. With almost 30,000 Cr worth brand, it has shown that a completely inclusive service model can be built to provide comprehensive care for household livestock enterprises.

Fig. 3

Mutual empowerment of corporates and communities

The open innovation platform bringing corporations and communities together to generate, adapt and deliver social innovations can have four possible approaches. Openness is measured here in terms of willingness to share one’s knowledge and resources with others that is inside out; and the opposite that is desire to learn from others i.e. outside in. The most indifferent and pessimistic situation is (cell1) when both inside out and outside in are low [Fig. 3]. Such organizations do not want to share with other organizations or the communities what they are good at. Nor do they want to learn from them. It is ostrich kind of behavior which will not lead to much reciprocity or responsibility between corporations and communities. In the second case, the inside out is high and outside in is low. Such ecosystems of organizations encourage pollination of ideas, open sharing of their knowledge as done by Tesla. This pioneering company in electrical cars opened all its patents to encourage competition and installation of more charging stations for customer convenience. Those who have high outside in and low inside out [cell 3] behave like a sponge seeking ideas from others but not sharing much with them. Many large corporations crowd source ideas from outside for frugal and/or social innovations with or without payment. They seldom give feedback to the idea providers as to what did they do with the ideas received and value generated. If they will let idea providers know, how valuable those ideas were, their confidence in their own innovative potential could increase manifold.

The reciprocities between corporations and communities can be pursued through several mechanisms with or without intermediation of third party.

• a) While sourcing ideas, even if corporations don’t use these ideas as such but these ideas trigger further investigation, they should acknowledge the idea provider and share some benefits with them. Without their initial trigger, the corporations may not have reached the point they actually reached. A very large industrial house and a national research lab jointly found a lead of developing graphene kind of material from natural resource very useful and interesting. Their representatives even visited the tribal community which provided the original lead. Eventually, through R&D they developed a process which could make a graphene compound providing a lot of potential for commercial advantage. They refused to acknowledge either the community or National Innovation Foundation [NIF] which mediated in the exchange and facilitated their visit in good faith. The patent was filed without any attribution to the Foundation and the tribal community, the question of sharing benefits didn’t arise. The Foundation is opposing the patent on various grounds and deeply regrets an unethical behavior on the part of the formal institutions in this regard. The capacity of this Corporation and the concerned national R and D lab needs to be improved so as to deal with generosity of knowledge rich, economically poor community with a sense of reciprocity and responsibility.

• b) The mutual capacity building among corporation, community and civil society organizations are required when each fo the actor fails to appreciate constraints and strength of other partners.

• c) The corporations learn the art of frugal innovations from grassroots innovators and youth and share the art of frugal supply chain with the communities.

• d) The generosity of communities may sometime motivate the corporate executives to take time off and extend their personal social capital in aid of social innovators.

• e) Social innovations need not be sustained only through profit based social businesses but can also rely on open source do-it-yourself culture or third party subsidization of the cost of providing services.

• f) The involvement of youth and children in social innovation movement can prove very helpful since they have much less inertia than elderly people.

• g) one can hybridize patent system with open source system through the concepts like Tech Commons.

There are numerous ways in which social innovations are nurtured and mutually rewarding relationships can be forged among corporations, communities and civils society organizations. What matters is not only the mutual reciprocity and responsibility but also willingness to learn from each other, build each other’s capacity and have graciousness to realise that creative, frugal innovations may emerge from even informal sector, children and bypassed communities.