- Email: [email protected]
Innovation for impact: Business innovation for inclusive growth
Journal of Business Research 69 (2016) 1725–1730
Contents lists available at ScienceDirect
Journal of Business Research
Innovation for impact: Business innovation for inclusive growth☆ Maria Elena Baltazar Herrera ⁎ Asian Institute of Management, 123 Paseo de Roxas, Makati City 1229, Philippines
a r t i c l e
i n f o
Article history: Received 1 February 2015 Received in revised form 1 July 2015 Accepted 1 September 2015 Available online 31 October 2015 Keywords: Innovation for impact Social innovation Inclusive growth Stakeholder engagement Co-creation Business model innovation
a b s t r a c t The research uses a literature review and case studies to build a framework that describes factors leading to successful innovation for impact (I4I): innovation that enhances corporate performance and creates significant, lasting social impact. Five organizational elements influence I4I: strategic alignment, responsible purpose, institutional drivers, stakeholder engagement, and business model management. Six institutional drivers influence I4I: values, leadership, culture, strategy, structure, and policies. Firms can achieve lasting social impact by targeting systemic factors using the ecology for inclusive growth. Stakeholder engagement increases opportunities for co-creation and enables business-model innovation through knowledge gathering and creation. Strengthening and aligning organizational elements increases the likelihood of I4I, improving corporate performance and enhancing business landscape. Institutionalizing I4I creates an engine for business-model innovation, a powerful source of competitive advantage. © 2015 Elsevier Inc. All rights reserved.
1. Introduction Innovation drives competitiveness (Ferauge, 2012; Herrera, 2007; Mintzberg, 1994) and is a mechanism for creating new market spaces (Herrera, 2015). This research focuses on innovation for impact (I4I), a form of corporate social innovation (CSI) that aims at creating significant social impact. I4I involves breakthrough changes in how businesses operate, providing a lens for understanding and addressing underserved markets, and leveraging approaches focusing on the market to address social concerns (Birchall, Carnegie, Draimin, Elkington, & Love, 2014). I4I is relevant to companies because stakeholders expect companies to address market changes responsibly and sustainably (Porter & Kramer, 2011; Smith, Drumwright, & Gentile, 2010), and innovation aiming to achieve social value improves competitive advantage (Herrera, 2015). A systematic approach to innovation clarifies intent, and guides innovation strategy and practice. Active stakeholder engagement increases knowledge sharing, and leads to co-creation opportunities, increasing the likelihood of companies responding to market opportunities early and successfully (Herrera, 2015).
Literature on collaborative forms of innovation and the creation of significant social impact is particularly sparse and should include descriptions of how companies engage in collaborative innovation aiming at achieving business value and social impact. This research contributes to filling the literature gap by describing organizational elements that drive successful I4I. This study has two research questions: What institutional mechanisms drive I4I? How are socially responsible companies using stakeholder engagement to drive I4I? This research reviews innovation, CSI, responsible innovation, corporate social responsibility (CSR), stakeholder engagement, cocreation, and inclusive growth literature and theories to provide a foundation for theory building. Three case studies evaluate and extend the preliminary framework for institutionalizing I4I: Phinma Corporation, China Mobile, and Filip + Inna. Information gathering includes a review of literature and documents and site visits, with over 30 interview respondents per firm. Respondents comprise managers, employees, partners, and other stakeholders. Owing to space constraints, this article describes only a selection of I4I initiatives.
2. Theoretical framework ☆ The author acknowledges institutional support from the Asian Institute of Management and Syn Tao Co., Ltd. The author thanks David Grayson, Cranfield University School of Management, and Philip H. Mirvis, Global Network for Corporate Citizenship, for their inputs; and Necylene Kate Gacilo, Asian Institute of Management, for research support. ⁎ Tel./fax: +63 2 8924011. E-mail address: [email protected].
http://dx.doi.org/10.1016/j.jbusres.2015.10.045 0148-2963/© 2015 Elsevier Inc. All rights reserved.
2.1. Innovation for impact (I4I): definition and stages This research defines I4I as a specific form of CSI that creates significant and lasting impact by addressing systemic factors underpinning social challenges. By contrast, responsible innovation focuses
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on creating shareholder value while addressing social concerns. Successful I4I results in enhanced social and shareholder value. CSI, hence I4I, has five stages: assessment, design or ideation, development, systematizing, and institutionalization (Herrera, 2015). 2.2. The ecology for inclusive growth (IG)
Analyzing contextual differences is possible by understanding the layers of influence using the Hexagon framework (Herrera, 2011): fundamental influences, institutional dynamics, and business landscape. Analysis of the business landscape enables strategic alignment and clarity of intent, both of which are critical for institutionalizing CSI (Herrera, 2015).
This research uses the ecology of IG to illustrate a systemic approach with a clarifying intent. This research adopts a definition for IG patterned after the World Bank's definition of social inclusion (The World Bank, 2007). IG aims for economic growth and equitable outcomes through providing access to resources and promoting equality of opportunity. IG treats individuals as active partners rather than as passive beneficiaries. A systemic approach to IG assumes current levels of equity to be the natural equilibrium resulting from the current ecosystem for economic participation. The framework includes four building blocks for IG: legal and regulatory environment that provides a legal basis for rights, responsibilities, and entitlements; guaranteed basic services; institutionalized safety nets; and access to capacity building (Fig. 1). Within this ecosystem, shared core values and beliefs, and the actions of individuals and multiple institutional actors affect the resulting equilibrium. I4I aimed at enhancing the ecosystem for IG has the potential for lasting social impact, and for enhancing corporate business landscape by improving general levels of economic equilibrium.
2.3.2. Responsible purpose Clarity in purpose and goals, supportive structures, and stakeholder engagement support responsible innovation (Pfitzer, Bockstette, & Stamp, 2013). Clearly articulated purpose concerning social impact enhances CSI (Herrera, 2015). Aiming I4I towards systemic factors, such as the building blocks for IG, helps create lasting impact.
2.3. Institutionalizing I4I: organizational elements
2.3.3.1. Strategy. Innovation, CSR, CSI, and I4I's importance for companies are apparent in how these elements fully integrate in corporate strategy.
Five organizational elements affect successful institutionalization of I4I: strategic alignment, responsible purpose, institutional drivers, stakeholder engagement, and business model management (Fig. 2). 2.3.1. Strategic alignment Stakeholder and macro-environment understanding are important for innovation (Ferauge, 2013). Alignment of strategy with the business context, both market and non-market, helps institutionalize CSI (Herrera, 2015).
2.3.3. Institutional drivers Institutional drivers are implicit and explicit, reflecting the importance of key internal capabilities, both formal, (explicit) and less formal (implicit) elements of institutionalization (Googins, Mirvis, & Rochlin, 2007; Herrera, 2011). Six drivers form a governance frame (Hexastar) for embedding and institutionalizing I4I into the business. Explicit drivers—strategy, structure, and policies comprising standard operating procedures—directly influence processes. Implicit drivers—values, corporate culture, and leadership—primarily affect employee and stakeholder propensities (comprising innovation, risk-taking, collaboration, openness to change, and social consciousness) (Fig. 2).
2.3.3.2. Structure. Structure is a critical element of governance mechanisms (Herrera, 2011; Googins et al., 2007). The level at which key decision-making and commitments take place and the level of delegation of certain activities affect the likelihood and success of I4I. 2.3.3.3. Policy and standards. Policy and standards cover mechanisms for implementation, issues management, stakeholder engagement, and ensuring transparency through monitoring and evaluation of
Fig. 1. Ecology for inclusive growth: building blocks.
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Fig. 2. Innovating for impact: organization elements.
CSR performance (Googins et al., 2007; Herrera, 2011). Policy and standards also cover innovation initiation, implementation, and assessment. 2.3.3.4. Values. Values ground corporate decision-making and drive priorities because values allow comparison of relative worth. Values influence behavior and decision-making. 2.3.3.5. Culture. Corporate culture involves multiple layers. Culture's most observable layer is behavior. The roots of corporate culture lie in the beliefs and value systems that employees share. 2.3.3.6. Leadership. Leadership reinforces culture. Leaders are a tangible referent for desirable attitudes and behavior. Having champions within top-level leadership who act as role models makes CSR and I4I more tangible and visible to the organization (Googins et al., 2007; Herrera, 2011). 2.3.4. Stakeholder engagement Stakeholder engagement facilitates knowledge gathering and syntheses, enhancing needs analysis (O'Sullivan & Dooley, 2009; Pfitzer et al., 2013), improves opportunity spotting (Maak, 2007; Prahalad & Ramaswamy, 2004), enhances risk–benefit analysis (Prahalad & Ramaswamy, 2004), promotes the development of shared goals, and creates a foundation for collaboration (Svendsen, 1998). 2.3.5. Business model The level of alignment among business model, business landscape, and current internal capabilities influences successful innovation. Key elements of the business should be internally consistent. 3. Illustrative case studies 3.1. Phinma Phinma Corporation is a Philippine holding company with interests in education (Phinma Education Network), energy, hotels, housing (Phinma Property Holdings Corporation), steel products, and strategic consulting.
3.1.1. Institutional drivers: governance mechanisms 3.1.1.1. Implicit: values, culture, and leadership. Nation building and professional management define Phinma's corporate identity. One strategic business unit (SBU) CEO explains these thrusts “are so part of the consciousness of the organization that it's already unconscious. It's so well-engrained that it's almost assumed” (Fig. 3). Respondents agree that company leadership contributes to maintaining a culture of responsibility throughout the organization. Results of the employee survey show that employees see Phinma as a contributor to nation building and producer of quality goods and services. 3.1.1.2. Explicit: structure, strategy, and policy and standards. Phinma envisions that “Life can be better” for Filipinos, especially the marginalized. Phinma works closely with all stakeholders to identify and address opportunities for social impact. The company's slogan is “Our business is our CSR and our CSR is our business.” Phinma policies provide wide autonomy to SBUs to engage stakeholders and pursue I4I within clear authority limits. All SBUs report regularly on their contribution to nation building and improvement of Filipino lives. 3.1.2. I4I in Phinma Any business venture must have clear potential to contribute to nation building and improving Filipino lives before screening for technical and financial viability. Phinma's twin emphasis on social impact and shareholder return drives I4I in each SBU. 3.1.2.1. I4I case studies 3.1.2.1.1. Phinma Education Network (PEN). PEN comprises four universities' catering primarily to lower-income families outside National Capital Region. PEN's strategy is to provide “high quality education at affordable prices, giving access to those who need it most” (Phinma Corporation, 2013). PEN's toughest challenge in making tertiary education accessible to lower-income families is deficiency in secondary school education. PEN has an open enrolment policy, requiring only a secondary school diploma. PEN has a student-centered approach to education, the ‘Success Ladder’, dividing each course into ‘success chunks’, a set of competencies necessary to progress to the next step.
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Fig. 3. Innovation for impact at Phinma Education Network.
The PEN system begins with remediation, easing transition to tertiary level education, and ends with preparation for licensure examinations and placement. Success chunks focus on providing marketable skills so that even those who leave possess skills that qualify them for better jobs than prior to enrolment. PEN uses innovative approaches to education, maximizing technology and concentrating faculty time on interactive approaches. In addition to financial and businessperformance metrics (e.g., ROI, student enrolment), PEN tracks student retention, passing rates in licensure exams, and employability. PEN performance in licensure exams is among the highest nationwide, attracting more students. PEN uses stakeholder consultations and partnerships to drive curriculum innovation, career guidance and partnerships. 3.1.2.1.2. Phinma Property Holdings Corporation (Phinma Properties). Phinma Properties focuses on “providing decent and affordable housing” and “improving the quality of life in host communities.” Phinma Properties approach to housing development addresses multiple factors of accessibility. Phinma Properties is the first commercial developer to focus on low-priced medium- and high-rise housing in urban locations, addressing travel time and cost concerns that traditional suburban locations for low-cost housing do not address. Phinma's pioneering box system maintains quality, shortens development time, and lowers prices. Phinma Properties creates mechanisms and provides capacity building to enable self-managed communities. Phinma Properties partners with local governments to provide highquality, affordable, socialized housing for low-income segments. The business model applied entailed setting up joint ventures with owners of idle properties in accessible areas in Metro Manila; consequently, the company gained substantial ground in the development of highquality affordable housing. A culture of professional management, stakeholder engagement, and innovation, and a commitment to help the marginalized molds Phinma's business portfolio and drives business-model design. Phinma's clear focus on shareholder and social value drive I4I at all levels. Stakeholder engagement uncovers opportunities and approaches to innovation, enhances success, and enables systematization and institutionalization. Collaborative I4I at all levels results in continuous change in SBU business models.
3.2. China Mobile Limited China Mobile is the largest mobile-service provider in China, operates the largest mobile network globally, and has been in the Dow Jones Sustainability Indices for seven consecutive years. The UN Global Compact recognizes China Mobile's sustainability practice as Best Practice in China.
3.2.1. Institutional drivers: governance mechanisms 3.2.1.1. Implicit: values, culture, and leadership. China Mobile commits to building better communities and making the “China Dream” possible, and “becoming a global industry leader both in business and sustainability.” China Mobile has a culture of multi-stakeholder collaboration and innovation (Fig. 4). 3.2.1.2. Explicit: structure, strategy and policy, and standards. China Mobile's commitment to CSR and innovation is explicit in its mission, vision, and values, and begins at the level of the Board and CEO. The company strategy is to accelerate business innovation and create new competitive advantage to promote China's sustainable and steady development. China Mobile's headquarters provide high-level guidance and monitoring, but each SBU is autonomous and can pursue its own CSR projects within corporate policies. Each provincial office is typically a separate SBU. China Mobile holds regular stakeholder consultations; the approach to I4I is strongly collaborative. China Mobile has explicit commitments to many important social-impact goals: universal access to services, creation of life-changing applications, and greening operations. 3.2.2. I4I in China Mobile At the SBU level, I4I begins by identifying sectors important to the local economy, identifying social concerns, and matching these to potential technology solutions. Some examples include mobile applications for higher safety in mining and for greater efficiency in agriculture. For these projects, China Mobile uses a tripartite approach, with institutional customer and local government partners. 3.2.2.1. I4I case study: mHealth project. China Mobile provides a medicalinformation booking service using SMS, providing navigation assistance (location of and directions to hospitals) and information on hospitals, doctors, departments, and medical policies. China Mobile is also developing several projects offering remote consultation and diagnostic services. The Guizhou mHealth project began in 2009 after the identification of health care as a key provincial sector. After a one-year pilot period, a collaborative workshop recommended the creation of a single, standardized solution covering all 88 counties of the province, a solution requiring a significant China Mobile capital investment. In January 2012, 75 of 88 counties, covering 88% of the population, use the mHealth system, enhancing access to health services, improving financial protection, easing government administrative burden, and reducing corruption. Continuous stakeholder engagement throughout the project ensured project success. Although the Guizhou project generated modest long-term revenue, the company did not expect full recoup of its
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Fig. 4. Innovation for impact at China Mobile.
project investment, an eventuality considered in initial approval (Grayson & Anesa, 2012). The project yields significant goodwill and has a customer base comprising majority of the provincial population. In 2015, responsibility for mHealth commercial applications rests with China Mobile Government and Enterprise Service Company in Beijing, indicating potential for nationwide leveraging of lessons from the pilot mHealth projects. China Mobile's focus on creating social impact through collaboration with stakeholders and application of its own corporate capabilities drives I4I, and helps create new products and markets. 3.3. Filip + Inna Lenora Luisa “Len” Cabili, Founder and Creative Designer, launched Filip + Inna intending to create a brand “Filipinos everywhere can be proud of.” The brand's mission is to revive and preserve ancient traditions by working with indigenous groups of artisans, providing opportunities for livelihood and capability enhancement. 3.3.1. Institutional drivers: governance mechanisms 3.3.1.1. Implicit: values, culture and leadership. Len's childhood with an artistic family, immersed in the culture of Mindanao, a culturally diverse island home to 18 indigenous peoples (IPs), instilled respect for traditional art and culture. Len is the heart and soul of this young enterprise. Her values are the corporate values (Fig. 5). 3.3.1.2. Explicit: structure, strategy, and policy and standards. “We are the turtles of fashion.” Len likes to say. Filip + Inna's business model relies
on the creation of a limited number of high quality, hand-crafted clothes combining market inputs from Filip + Inna's international retailers, Len's design sensibilities, and the tradition, artistry, and skills of partner artisans. Filip + Inna's long-production cycle takes into account the need of artisans who work from home and need to assist with planting and harvests. Artisan groups follow a self-management system, using standard procedures for self-evaluation and reporting. 3.3.2. I4I in Filip + Inna Filip + Inna launched in New York with a women's clothing collection, the location chosen to achieve a price point high enough to provide a reasonable income for artisans. Every team of artisans belongs to a single tribe and village, preserving that tribe's unique heritage. Collections begin with prototypes using material and forms that Len provides, with embroidery and embellishments the artisans create. From these prototypes, Len selects designs for commercial collections. The company sells the prototypes that do not fit the collection in trunk shows as unique pieces. Filip + Inna collections are small and extremely targeted. Each collection targets a specific clientele and takes into account inputs from partner retailers. The first production team of about 10 skilled artisans among the T'boli in Lake Sebu increased to 60 embroiderers after three years. Because of Len's engagement with the T'boli, many young men and women seek training in the once vanishing skill. Others leave overseas positions to come home. Filip + Inna partnered with John Robshaw Textiles and T'boli abaca weavers on the Back to the Loom project. The project aims to train new weavers, jumpstart an interest in abaca fabric, and finance
Fig. 5. Innovation for impact at Filip + Inna.
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establishment of new loom houses. Filip + Inna utilizes fabric from the project and provides advice on design, marketing, and additional revenue mechanisms, such as cultural tourism. By 2014, three-year-old Filip + Inna opens its first store in the Philippines, with retailers in Bahamas, India, and Greece. Collections from two new-production collaborators, the Blaans and the Manobos, launch in 2014, with seven more IPs in the pipeline. Using similar partnering approaches, Filip + Inna launched male and children clothing lines, personal accessories line including those using traditional from brasswork, and home décor and accents lines. Filip + Inna's entire business-model design aims at attaining both shareholder and social goals. Close collaboration with both distributors and artisans allows Filip + Inna to pursue successful I4I, achieving market success, creating social impact, and maintaining profitability.
4. Implications This study has important implications for researchers, managers, and companies with an interest in I4I. Strategic alignment with the business landscape and a clear responsible purpose provide a foundation for I4I. A systemic approach to social impact has the potential to improve the immediate business landscape, creating a virtuous cycle. Stakeholder engagement is an important mechanism for knowledge gathering and synthesis, enhancing all phases of innovation from opportunity spotting through systematization and institutionalization. Conscious management of the business model to align with the business landscape, strategic purpose, and stakeholder concerns contribute to increase the likelihood and success of I4I, enhancing the probability of successful business-model innovation. Companies can use the study's conceptual framework to improve I4I implementation, using institutional drivers to encourage and guide I4I. Managers can use the IG framework to analyze factors affecting the current equilibrium in society to clarify goals for I4I. Furthermore, companies can use collaborative forms of stakeholder engagement and open approaches to innovation to create opportunities for co-creation. Future studies can explore conditions that influence each institutional driver, factors that influence the virtuous-cycle effect, and relative effectiveness of different types of stakeholder engagement.
5. Discussion This research shows that I4I exists in many forms but always involves CSR, innovation, and some type of stakeholder engagement. Strategic alignment and a clear, responsible purpose enhance I4I implementation. Focusing on a systemic factor increases the likelihood of creating lasting impact. The IG framework provides a basis for developing a systemic approach to analyzing current situations and developing social-impact goals, allowing the analysis of a social outcome critical for emerging economies.
This research shows that institutional drivers ground the governance mechanism for I4I by providing clear directions and guidelines for innovation and social responsibility. Active stakeholder engagement is an effective tool in all stages of successful I4I. Willingness to adjust the business model to fit external and internal situations enhances successful I4I. Given the sparse literature, in-depth narrative descriptions such as the one in this study may be more helpful in understanding I4I and building systemic theory than a large-scale—yet superficial—survey of many companies. Case studies provide more accurate and nuanced understanding of how companies can implement and encourage I4I. However, whereas case studies provide depth, they have limitations in breadth. Future studies should explore situations and parameters within which this study's propositions are valid. As a final note, the study indicates that institutionalizing I4I creates an engine for business model innovation, a powerful source of competitive advantage. Addressing systemic factors enhances success and increases the potential for a virtuous cycle. Successful I4I allows companies to address change and complexity and greater expectations of responsibility and sustainability. References Birchall, A., Carnegie, T., Draimin, T., Elkington, L., & Love, C. (2014). Breaking through: How corporate social innovation creates business opportunity. http://www.kpmg. com/Ca/en/IssuesAndInsights/ArticlesPublications/Documents/5441-KPMG-SocialInnovation-Report-FY14-web-Final.pdf (Accessed 01 July 2015) Ferauge, P. (2012). A conceptual framework of corporate social responsibility & innovation. Global Journal of Business Research, 6(5), 85–96. Ferauge, P. (2013). The complementarity of corporate social responsibility and innovation: Evidence from Belgian firms. Global Journal of Business Research, 7(5), 99–113. Googins, B.K., Mirvis, P.H., & Rochlin, S.A. (2007). Beyond good company: Next generation corporate citizenship. New York: Macmillan Publishing. Grayson, D., & Anesa, M. (2012). Shared value from m-Health for China Mobile. Cranfield: The Case Centre. Herrera, M.E.B. (2007). CSR and value creation. Doing good in business matters: CSR in the Philippines (Frameworks). Makati: Asian Institute of Management and De La Salle professional schools. Herrera, M.E.B. (2011). Towards strategic CSR: Aligning CSR with the business and embedding CSR into the organization. Makati City: Asian Institute of Management. Herrera, M.E.B. (2015). Creating competitive advantage by institutionalizing corporate social innovation. Journal of Business Research, 68(7), 1468–1474. Maak, T. (2007). Responsible leadership, stakeholder engagement, and the emergence of social capital. Journal of Business Ethics, 74(4), 329–343. Mintzberg, H. (1994). The rise and fall of strategic planning: Reconceiving roles for planning, plans, planners. New York: Free Press. O'Sullivan, D., & Dooley, L. (2009). Applying innovation. New York: Sage Publications. Pfitzer, M., Bockstette, V., & Stamp, M. (2013). Innovating for shared value. Harvard Business Review, 91(9), 100–108. Phinma Corporation (2013). Official Website. http://www.phinma.com.ph/index.php Porter, M.E., & Kramer, M.R. (2011). Creating shared value. Harvard Business Review, 89(1–2), 62–77. Prahalad, C.K., & Ramaswamy, V. (2004). Co-creation experiences: The next practice in value creation. Journal of Interactive Marketing, 18(3), 5–14. Smith, N.C., Drumwright, M.E., & Gentile, M.C. (2010). The new marketing myopia. Journal of Public Policy and Marketing, 29(1), 4–11. Svendsen, A. (1998). The stakeholder strategy: Profiting from collaborative business relationships. San Francisco: Berrett-Koehler Publishers, Inc. The World Bank (2007). Social exclusion and the EU's social inclusion agenda. Paper prepared for the EU8 social inclusion study. Washington, DC: The World Bank.
Contents lists available at ScienceDirect
Journal of Business Research
Innovation for impact: Business innovation for inclusive growth☆ Maria Elena Baltazar Herrera ⁎ Asian Institute of Management, 123 Paseo de Roxas, Makati City 1229, Philippines
a r t i c l e
i n f o
Article history: Received 1 February 2015 Received in revised form 1 July 2015 Accepted 1 September 2015 Available online 31 October 2015 Keywords: Innovation for impact Social innovation Inclusive growth Stakeholder engagement Co-creation Business model innovation
a b s t r a c t The research uses a literature review and case studies to build a framework that describes factors leading to successful innovation for impact (I4I): innovation that enhances corporate performance and creates significant, lasting social impact. Five organizational elements influence I4I: strategic alignment, responsible purpose, institutional drivers, stakeholder engagement, and business model management. Six institutional drivers influence I4I: values, leadership, culture, strategy, structure, and policies. Firms can achieve lasting social impact by targeting systemic factors using the ecology for inclusive growth. Stakeholder engagement increases opportunities for co-creation and enables business-model innovation through knowledge gathering and creation. Strengthening and aligning organizational elements increases the likelihood of I4I, improving corporate performance and enhancing business landscape. Institutionalizing I4I creates an engine for business-model innovation, a powerful source of competitive advantage. © 2015 Elsevier Inc. All rights reserved.
1. Introduction Innovation drives competitiveness (Ferauge, 2012; Herrera, 2007; Mintzberg, 1994) and is a mechanism for creating new market spaces (Herrera, 2015). This research focuses on innovation for impact (I4I), a form of corporate social innovation (CSI) that aims at creating significant social impact. I4I involves breakthrough changes in how businesses operate, providing a lens for understanding and addressing underserved markets, and leveraging approaches focusing on the market to address social concerns (Birchall, Carnegie, Draimin, Elkington, & Love, 2014). I4I is relevant to companies because stakeholders expect companies to address market changes responsibly and sustainably (Porter & Kramer, 2011; Smith, Drumwright, & Gentile, 2010), and innovation aiming to achieve social value improves competitive advantage (Herrera, 2015). A systematic approach to innovation clarifies intent, and guides innovation strategy and practice. Active stakeholder engagement increases knowledge sharing, and leads to co-creation opportunities, increasing the likelihood of companies responding to market opportunities early and successfully (Herrera, 2015).
Literature on collaborative forms of innovation and the creation of significant social impact is particularly sparse and should include descriptions of how companies engage in collaborative innovation aiming at achieving business value and social impact. This research contributes to filling the literature gap by describing organizational elements that drive successful I4I. This study has two research questions: What institutional mechanisms drive I4I? How are socially responsible companies using stakeholder engagement to drive I4I? This research reviews innovation, CSI, responsible innovation, corporate social responsibility (CSR), stakeholder engagement, cocreation, and inclusive growth literature and theories to provide a foundation for theory building. Three case studies evaluate and extend the preliminary framework for institutionalizing I4I: Phinma Corporation, China Mobile, and Filip + Inna. Information gathering includes a review of literature and documents and site visits, with over 30 interview respondents per firm. Respondents comprise managers, employees, partners, and other stakeholders. Owing to space constraints, this article describes only a selection of I4I initiatives.
2. Theoretical framework ☆ The author acknowledges institutional support from the Asian Institute of Management and Syn Tao Co., Ltd. The author thanks David Grayson, Cranfield University School of Management, and Philip H. Mirvis, Global Network for Corporate Citizenship, for their inputs; and Necylene Kate Gacilo, Asian Institute of Management, for research support. ⁎ Tel./fax: +63 2 8924011. E-mail address: [email protected].
http://dx.doi.org/10.1016/j.jbusres.2015.10.045 0148-2963/© 2015 Elsevier Inc. All rights reserved.
2.1. Innovation for impact (I4I): definition and stages This research defines I4I as a specific form of CSI that creates significant and lasting impact by addressing systemic factors underpinning social challenges. By contrast, responsible innovation focuses
1726
M.E.B. Herrera / Journal of Business Research 69 (2016) 1725–1730
on creating shareholder value while addressing social concerns. Successful I4I results in enhanced social and shareholder value. CSI, hence I4I, has five stages: assessment, design or ideation, development, systematizing, and institutionalization (Herrera, 2015). 2.2. The ecology for inclusive growth (IG)
Analyzing contextual differences is possible by understanding the layers of influence using the Hexagon framework (Herrera, 2011): fundamental influences, institutional dynamics, and business landscape. Analysis of the business landscape enables strategic alignment and clarity of intent, both of which are critical for institutionalizing CSI (Herrera, 2015).
This research uses the ecology of IG to illustrate a systemic approach with a clarifying intent. This research adopts a definition for IG patterned after the World Bank's definition of social inclusion (The World Bank, 2007). IG aims for economic growth and equitable outcomes through providing access to resources and promoting equality of opportunity. IG treats individuals as active partners rather than as passive beneficiaries. A systemic approach to IG assumes current levels of equity to be the natural equilibrium resulting from the current ecosystem for economic participation. The framework includes four building blocks for IG: legal and regulatory environment that provides a legal basis for rights, responsibilities, and entitlements; guaranteed basic services; institutionalized safety nets; and access to capacity building (Fig. 1). Within this ecosystem, shared core values and beliefs, and the actions of individuals and multiple institutional actors affect the resulting equilibrium. I4I aimed at enhancing the ecosystem for IG has the potential for lasting social impact, and for enhancing corporate business landscape by improving general levels of economic equilibrium.
2.3.2. Responsible purpose Clarity in purpose and goals, supportive structures, and stakeholder engagement support responsible innovation (Pfitzer, Bockstette, & Stamp, 2013). Clearly articulated purpose concerning social impact enhances CSI (Herrera, 2015). Aiming I4I towards systemic factors, such as the building blocks for IG, helps create lasting impact.
2.3. Institutionalizing I4I: organizational elements
2.3.3.1. Strategy. Innovation, CSR, CSI, and I4I's importance for companies are apparent in how these elements fully integrate in corporate strategy.
Five organizational elements affect successful institutionalization of I4I: strategic alignment, responsible purpose, institutional drivers, stakeholder engagement, and business model management (Fig. 2). 2.3.1. Strategic alignment Stakeholder and macro-environment understanding are important for innovation (Ferauge, 2013). Alignment of strategy with the business context, both market and non-market, helps institutionalize CSI (Herrera, 2015).
2.3.3. Institutional drivers Institutional drivers are implicit and explicit, reflecting the importance of key internal capabilities, both formal, (explicit) and less formal (implicit) elements of institutionalization (Googins, Mirvis, & Rochlin, 2007; Herrera, 2011). Six drivers form a governance frame (Hexastar) for embedding and institutionalizing I4I into the business. Explicit drivers—strategy, structure, and policies comprising standard operating procedures—directly influence processes. Implicit drivers—values, corporate culture, and leadership—primarily affect employee and stakeholder propensities (comprising innovation, risk-taking, collaboration, openness to change, and social consciousness) (Fig. 2).
2.3.3.2. Structure. Structure is a critical element of governance mechanisms (Herrera, 2011; Googins et al., 2007). The level at which key decision-making and commitments take place and the level of delegation of certain activities affect the likelihood and success of I4I. 2.3.3.3. Policy and standards. Policy and standards cover mechanisms for implementation, issues management, stakeholder engagement, and ensuring transparency through monitoring and evaluation of
Fig. 1. Ecology for inclusive growth: building blocks.
M.E.B. Herrera / Journal of Business Research 69 (2016) 1725–1730
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Fig. 2. Innovating for impact: organization elements.
CSR performance (Googins et al., 2007; Herrera, 2011). Policy and standards also cover innovation initiation, implementation, and assessment. 2.3.3.4. Values. Values ground corporate decision-making and drive priorities because values allow comparison of relative worth. Values influence behavior and decision-making. 2.3.3.5. Culture. Corporate culture involves multiple layers. Culture's most observable layer is behavior. The roots of corporate culture lie in the beliefs and value systems that employees share. 2.3.3.6. Leadership. Leadership reinforces culture. Leaders are a tangible referent for desirable attitudes and behavior. Having champions within top-level leadership who act as role models makes CSR and I4I more tangible and visible to the organization (Googins et al., 2007; Herrera, 2011). 2.3.4. Stakeholder engagement Stakeholder engagement facilitates knowledge gathering and syntheses, enhancing needs analysis (O'Sullivan & Dooley, 2009; Pfitzer et al., 2013), improves opportunity spotting (Maak, 2007; Prahalad & Ramaswamy, 2004), enhances risk–benefit analysis (Prahalad & Ramaswamy, 2004), promotes the development of shared goals, and creates a foundation for collaboration (Svendsen, 1998). 2.3.5. Business model The level of alignment among business model, business landscape, and current internal capabilities influences successful innovation. Key elements of the business should be internally consistent. 3. Illustrative case studies 3.1. Phinma Phinma Corporation is a Philippine holding company with interests in education (Phinma Education Network), energy, hotels, housing (Phinma Property Holdings Corporation), steel products, and strategic consulting.
3.1.1. Institutional drivers: governance mechanisms 3.1.1.1. Implicit: values, culture, and leadership. Nation building and professional management define Phinma's corporate identity. One strategic business unit (SBU) CEO explains these thrusts “are so part of the consciousness of the organization that it's already unconscious. It's so well-engrained that it's almost assumed” (Fig. 3). Respondents agree that company leadership contributes to maintaining a culture of responsibility throughout the organization. Results of the employee survey show that employees see Phinma as a contributor to nation building and producer of quality goods and services. 3.1.1.2. Explicit: structure, strategy, and policy and standards. Phinma envisions that “Life can be better” for Filipinos, especially the marginalized. Phinma works closely with all stakeholders to identify and address opportunities for social impact. The company's slogan is “Our business is our CSR and our CSR is our business.” Phinma policies provide wide autonomy to SBUs to engage stakeholders and pursue I4I within clear authority limits. All SBUs report regularly on their contribution to nation building and improvement of Filipino lives. 3.1.2. I4I in Phinma Any business venture must have clear potential to contribute to nation building and improving Filipino lives before screening for technical and financial viability. Phinma's twin emphasis on social impact and shareholder return drives I4I in each SBU. 3.1.2.1. I4I case studies 3.1.2.1.1. Phinma Education Network (PEN). PEN comprises four universities' catering primarily to lower-income families outside National Capital Region. PEN's strategy is to provide “high quality education at affordable prices, giving access to those who need it most” (Phinma Corporation, 2013). PEN's toughest challenge in making tertiary education accessible to lower-income families is deficiency in secondary school education. PEN has an open enrolment policy, requiring only a secondary school diploma. PEN has a student-centered approach to education, the ‘Success Ladder’, dividing each course into ‘success chunks’, a set of competencies necessary to progress to the next step.
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Fig. 3. Innovation for impact at Phinma Education Network.
The PEN system begins with remediation, easing transition to tertiary level education, and ends with preparation for licensure examinations and placement. Success chunks focus on providing marketable skills so that even those who leave possess skills that qualify them for better jobs than prior to enrolment. PEN uses innovative approaches to education, maximizing technology and concentrating faculty time on interactive approaches. In addition to financial and businessperformance metrics (e.g., ROI, student enrolment), PEN tracks student retention, passing rates in licensure exams, and employability. PEN performance in licensure exams is among the highest nationwide, attracting more students. PEN uses stakeholder consultations and partnerships to drive curriculum innovation, career guidance and partnerships. 3.1.2.1.2. Phinma Property Holdings Corporation (Phinma Properties). Phinma Properties focuses on “providing decent and affordable housing” and “improving the quality of life in host communities.” Phinma Properties approach to housing development addresses multiple factors of accessibility. Phinma Properties is the first commercial developer to focus on low-priced medium- and high-rise housing in urban locations, addressing travel time and cost concerns that traditional suburban locations for low-cost housing do not address. Phinma's pioneering box system maintains quality, shortens development time, and lowers prices. Phinma Properties creates mechanisms and provides capacity building to enable self-managed communities. Phinma Properties partners with local governments to provide highquality, affordable, socialized housing for low-income segments. The business model applied entailed setting up joint ventures with owners of idle properties in accessible areas in Metro Manila; consequently, the company gained substantial ground in the development of highquality affordable housing. A culture of professional management, stakeholder engagement, and innovation, and a commitment to help the marginalized molds Phinma's business portfolio and drives business-model design. Phinma's clear focus on shareholder and social value drive I4I at all levels. Stakeholder engagement uncovers opportunities and approaches to innovation, enhances success, and enables systematization and institutionalization. Collaborative I4I at all levels results in continuous change in SBU business models.
3.2. China Mobile Limited China Mobile is the largest mobile-service provider in China, operates the largest mobile network globally, and has been in the Dow Jones Sustainability Indices for seven consecutive years. The UN Global Compact recognizes China Mobile's sustainability practice as Best Practice in China.
3.2.1. Institutional drivers: governance mechanisms 3.2.1.1. Implicit: values, culture, and leadership. China Mobile commits to building better communities and making the “China Dream” possible, and “becoming a global industry leader both in business and sustainability.” China Mobile has a culture of multi-stakeholder collaboration and innovation (Fig. 4). 3.2.1.2. Explicit: structure, strategy and policy, and standards. China Mobile's commitment to CSR and innovation is explicit in its mission, vision, and values, and begins at the level of the Board and CEO. The company strategy is to accelerate business innovation and create new competitive advantage to promote China's sustainable and steady development. China Mobile's headquarters provide high-level guidance and monitoring, but each SBU is autonomous and can pursue its own CSR projects within corporate policies. Each provincial office is typically a separate SBU. China Mobile holds regular stakeholder consultations; the approach to I4I is strongly collaborative. China Mobile has explicit commitments to many important social-impact goals: universal access to services, creation of life-changing applications, and greening operations. 3.2.2. I4I in China Mobile At the SBU level, I4I begins by identifying sectors important to the local economy, identifying social concerns, and matching these to potential technology solutions. Some examples include mobile applications for higher safety in mining and for greater efficiency in agriculture. For these projects, China Mobile uses a tripartite approach, with institutional customer and local government partners. 3.2.2.1. I4I case study: mHealth project. China Mobile provides a medicalinformation booking service using SMS, providing navigation assistance (location of and directions to hospitals) and information on hospitals, doctors, departments, and medical policies. China Mobile is also developing several projects offering remote consultation and diagnostic services. The Guizhou mHealth project began in 2009 after the identification of health care as a key provincial sector. After a one-year pilot period, a collaborative workshop recommended the creation of a single, standardized solution covering all 88 counties of the province, a solution requiring a significant China Mobile capital investment. In January 2012, 75 of 88 counties, covering 88% of the population, use the mHealth system, enhancing access to health services, improving financial protection, easing government administrative burden, and reducing corruption. Continuous stakeholder engagement throughout the project ensured project success. Although the Guizhou project generated modest long-term revenue, the company did not expect full recoup of its
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Fig. 4. Innovation for impact at China Mobile.
project investment, an eventuality considered in initial approval (Grayson & Anesa, 2012). The project yields significant goodwill and has a customer base comprising majority of the provincial population. In 2015, responsibility for mHealth commercial applications rests with China Mobile Government and Enterprise Service Company in Beijing, indicating potential for nationwide leveraging of lessons from the pilot mHealth projects. China Mobile's focus on creating social impact through collaboration with stakeholders and application of its own corporate capabilities drives I4I, and helps create new products and markets. 3.3. Filip + Inna Lenora Luisa “Len” Cabili, Founder and Creative Designer, launched Filip + Inna intending to create a brand “Filipinos everywhere can be proud of.” The brand's mission is to revive and preserve ancient traditions by working with indigenous groups of artisans, providing opportunities for livelihood and capability enhancement. 3.3.1. Institutional drivers: governance mechanisms 3.3.1.1. Implicit: values, culture and leadership. Len's childhood with an artistic family, immersed in the culture of Mindanao, a culturally diverse island home to 18 indigenous peoples (IPs), instilled respect for traditional art and culture. Len is the heart and soul of this young enterprise. Her values are the corporate values (Fig. 5). 3.3.1.2. Explicit: structure, strategy, and policy and standards. “We are the turtles of fashion.” Len likes to say. Filip + Inna's business model relies
on the creation of a limited number of high quality, hand-crafted clothes combining market inputs from Filip + Inna's international retailers, Len's design sensibilities, and the tradition, artistry, and skills of partner artisans. Filip + Inna's long-production cycle takes into account the need of artisans who work from home and need to assist with planting and harvests. Artisan groups follow a self-management system, using standard procedures for self-evaluation and reporting. 3.3.2. I4I in Filip + Inna Filip + Inna launched in New York with a women's clothing collection, the location chosen to achieve a price point high enough to provide a reasonable income for artisans. Every team of artisans belongs to a single tribe and village, preserving that tribe's unique heritage. Collections begin with prototypes using material and forms that Len provides, with embroidery and embellishments the artisans create. From these prototypes, Len selects designs for commercial collections. The company sells the prototypes that do not fit the collection in trunk shows as unique pieces. Filip + Inna collections are small and extremely targeted. Each collection targets a specific clientele and takes into account inputs from partner retailers. The first production team of about 10 skilled artisans among the T'boli in Lake Sebu increased to 60 embroiderers after three years. Because of Len's engagement with the T'boli, many young men and women seek training in the once vanishing skill. Others leave overseas positions to come home. Filip + Inna partnered with John Robshaw Textiles and T'boli abaca weavers on the Back to the Loom project. The project aims to train new weavers, jumpstart an interest in abaca fabric, and finance
Fig. 5. Innovation for impact at Filip + Inna.
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establishment of new loom houses. Filip + Inna utilizes fabric from the project and provides advice on design, marketing, and additional revenue mechanisms, such as cultural tourism. By 2014, three-year-old Filip + Inna opens its first store in the Philippines, with retailers in Bahamas, India, and Greece. Collections from two new-production collaborators, the Blaans and the Manobos, launch in 2014, with seven more IPs in the pipeline. Using similar partnering approaches, Filip + Inna launched male and children clothing lines, personal accessories line including those using traditional from brasswork, and home décor and accents lines. Filip + Inna's entire business-model design aims at attaining both shareholder and social goals. Close collaboration with both distributors and artisans allows Filip + Inna to pursue successful I4I, achieving market success, creating social impact, and maintaining profitability.
4. Implications This study has important implications for researchers, managers, and companies with an interest in I4I. Strategic alignment with the business landscape and a clear responsible purpose provide a foundation for I4I. A systemic approach to social impact has the potential to improve the immediate business landscape, creating a virtuous cycle. Stakeholder engagement is an important mechanism for knowledge gathering and synthesis, enhancing all phases of innovation from opportunity spotting through systematization and institutionalization. Conscious management of the business model to align with the business landscape, strategic purpose, and stakeholder concerns contribute to increase the likelihood and success of I4I, enhancing the probability of successful business-model innovation. Companies can use the study's conceptual framework to improve I4I implementation, using institutional drivers to encourage and guide I4I. Managers can use the IG framework to analyze factors affecting the current equilibrium in society to clarify goals for I4I. Furthermore, companies can use collaborative forms of stakeholder engagement and open approaches to innovation to create opportunities for co-creation. Future studies can explore conditions that influence each institutional driver, factors that influence the virtuous-cycle effect, and relative effectiveness of different types of stakeholder engagement.
5. Discussion This research shows that I4I exists in many forms but always involves CSR, innovation, and some type of stakeholder engagement. Strategic alignment and a clear, responsible purpose enhance I4I implementation. Focusing on a systemic factor increases the likelihood of creating lasting impact. The IG framework provides a basis for developing a systemic approach to analyzing current situations and developing social-impact goals, allowing the analysis of a social outcome critical for emerging economies.
This research shows that institutional drivers ground the governance mechanism for I4I by providing clear directions and guidelines for innovation and social responsibility. Active stakeholder engagement is an effective tool in all stages of successful I4I. Willingness to adjust the business model to fit external and internal situations enhances successful I4I. Given the sparse literature, in-depth narrative descriptions such as the one in this study may be more helpful in understanding I4I and building systemic theory than a large-scale—yet superficial—survey of many companies. Case studies provide more accurate and nuanced understanding of how companies can implement and encourage I4I. However, whereas case studies provide depth, they have limitations in breadth. Future studies should explore situations and parameters within which this study's propositions are valid. As a final note, the study indicates that institutionalizing I4I creates an engine for business model innovation, a powerful source of competitive advantage. Addressing systemic factors enhances success and increases the potential for a virtuous cycle. Successful I4I allows companies to address change and complexity and greater expectations of responsibility and sustainability. References Birchall, A., Carnegie, T., Draimin, T., Elkington, L., & Love, C. (2014). Breaking through: How corporate social innovation creates business opportunity. http://www.kpmg. com/Ca/en/IssuesAndInsights/ArticlesPublications/Documents/5441-KPMG-SocialInnovation-Report-FY14-web-Final.pdf (Accessed 01 July 2015) Ferauge, P. (2012). A conceptual framework of corporate social responsibility & innovation. Global Journal of Business Research, 6(5), 85–96. Ferauge, P. (2013). The complementarity of corporate social responsibility and innovation: Evidence from Belgian firms. Global Journal of Business Research, 7(5), 99–113. Googins, B.K., Mirvis, P.H., & Rochlin, S.A. (2007). Beyond good company: Next generation corporate citizenship. New York: Macmillan Publishing. Grayson, D., & Anesa, M. (2012). Shared value from m-Health for China Mobile. Cranfield: The Case Centre. Herrera, M.E.B. (2007). CSR and value creation. Doing good in business matters: CSR in the Philippines (Frameworks). Makati: Asian Institute of Management and De La Salle professional schools. Herrera, M.E.B. (2011). Towards strategic CSR: Aligning CSR with the business and embedding CSR into the organization. Makati City: Asian Institute of Management. Herrera, M.E.B. (2015). Creating competitive advantage by institutionalizing corporate social innovation. Journal of Business Research, 68(7), 1468–1474. Maak, T. (2007). Responsible leadership, stakeholder engagement, and the emergence of social capital. Journal of Business Ethics, 74(4), 329–343. Mintzberg, H. (1994). The rise and fall of strategic planning: Reconceiving roles for planning, plans, planners. New York: Free Press. O'Sullivan, D., & Dooley, L. (2009). Applying innovation. New York: Sage Publications. Pfitzer, M., Bockstette, V., & Stamp, M. (2013). Innovating for shared value. Harvard Business Review, 91(9), 100–108. Phinma Corporation (2013). Official Website. http://www.phinma.com.ph/index.php Porter, M.E., & Kramer, M.R. (2011). Creating shared value. Harvard Business Review, 89(1–2), 62–77. Prahalad, C.K., & Ramaswamy, V. (2004). Co-creation experiences: The next practice in value creation. Journal of Interactive Marketing, 18(3), 5–14. Smith, N.C., Drumwright, M.E., & Gentile, M.C. (2010). The new marketing myopia. Journal of Public Policy and Marketing, 29(1), 4–11. Svendsen, A. (1998). The stakeholder strategy: Profiting from collaborative business relationships. San Francisco: Berrett-Koehler Publishers, Inc. The World Bank (2007). Social exclusion and the EU's social inclusion agenda. Paper prepared for the EU8 social inclusion study. Washington, DC: The World Bank.