The ROI of Social Innovation
In a previous article (“Verso il Social Business”, HBR Italia, May 2011) we showed how social capital present within every company (informal networks made of trust, cooperation, auto-activation, etc.) can – if correctly understood and integrated into formal processes – be an important source of improvement to company performances. In this follow-up article we will look at the case of an early adopter that applied typical Social Business philosophies and technologies to the management of innovation processes. What we have discovered is although social technologies have been able to significantly increase the level of collaboration within organizations, this aspect is only a small part of the true return on investment (ROI).
The ideas that come from crowdsourcing or feedback from customers truly translate into ROI only when the changes are effectively implemented. Many social innovation adopters that we have observed have in fact been able to successfully apply open and collaboratively approaches to the collection and creation of new ideas; however, these high-potential ideas are then forced through a traditional top-down process to receive an approval that allows their implementation. The resulting deceleration of the innovation process not only puts the potential ROI at risk, but also has a demotivating effect on all those who contributed to and participated in the collaborative innovation process.
We are of the opinion that in order to reach a significant ROI, the social approach has to permeate the entire innovation process, from the idea exploration stage, to the involvement of management, until the implementation of the ideas. Being “social by half” simply does not work. The contribution that the approach based on networks and community strength can give to innovation processes extends to all its stages, as the “4E” Establish model shows in Figure 1 “The innovation process from a network perspective”.
This approach – very integrated with Organizational Network Analysis and with the informal roles codified there – highlights the features and specific dynamics of each stage from a network perspective. Experience in the field shows us that each stage has specific players and dynamics:
- Explore: in this stage the ability to intercept innovative proposals and bring them into the system depends on factors such as
- Weak links (the more stable and lasting links in fact tend to confirm paradigms and established beliefs) both inside and outside the organization;
- Variety and diversity of points of view, very relevant to surpass the system of values and meanings that have been established and open the road to new perspectives;
- Ability to listen/integration towards nodes/subjects that are less integrated and central in the system, often more exposed to the outside;
- Ability to connect and contaminate apparently different ideas (idea brokers, idea connectors);
- Ambiguity and redundancy, which in complex systems are the breeding ground for the new.
- Evaluate: the evaluation of ideas is a critical moment of traditional innovation processes; the more sensational the proposals, the more the evaluation standards tend to reject them; from a network perspective the evaluation stage is effective if:
- The perspective of the decision-making roles matches that of the less central and integrated nodes;
- The emergency mechanisms bring to attention the level of activity that is underneath each proposal (comments, rankings, visibility, endorsements, …) and they allow the system to reconfigure itself in a dynamic manner;
- The explorers that have proposed, made evolve and supported the ideas can bring their energy to the innovation process;
- Contributions from outside the system support the decision makers in making evolve the evaluation standards and criteria and more generally the managerial culture (risk, error, planning, tradition, etc.).
- Engage/Exploit: the implementation of new proposals can be greatly accelerated by adopting a Social Innovation model, provided that:
- The team of exploiters has links and overlaps with the team of explorers;
- The team of exploiters works in order to implement an innovation from which they will greatly benefit (the “pull” logic) and not only as an initiative to take forward (the “push” logic).
The ROI of Social Innovation
Social innovation platforms have proven to be very valuable for those organizations that first turned to Social Business. The promise of involving employees in an open, collaborative process of research and development of new ideas is certainly compelling. Some of these platforms, moreover, include innovation engagement dynamics (gamification) that represent real added value to increase the participation and involvement of users.
The observations that we have conducted on different initiatives have shown how users are in fact initially enthusiastic to participate in and explore these platforms by collaboratively developing new ideas. ROI, however, is not realized until the ideas are concretely put into practice (exploit).
In this partial application of the social innovation model – solely focused on the generation of ideas – we end up repeating the same approach as the “selection committee” typical of the “idea box”, thus closely following the very classic patterns that social innovation platforms should have replaced. The result is, in short, the same: a small group of “winners” emerging after a complex evaluation process. Even if the number and quality of the ideas developed in a collaborative and open manner may be higher, in the end the result does not appear to be very different, with consequent doubts on the effective ROI of social innovation platforms.
The case of a UK public company
The 4E model of innovation suggests that the shift from exploration to implementation of ideas is often mediated by some key individuals who are able to successfully bridge between the communities of explorers and those of exploiters. From a network point of view, we expect the communities of explorers to be dynamic, emerging and open, with participants who experiment with every opportunity in the most creative way possible. The communities of exploiters – on the other hand – are characterized by much tighter and more closed articulated connections, a fundamental requirement in order to rapidly and efficiently take a product from design to market.
We are convinced that, as much as committees concentrated on the approval of ideas are institutions with clear intentions and methods, they are not able to bring all of the intelligence present within their organizations into the evaluation process. The amount of information and evaluations that can be moved with a social innovation model is far more useful and effective than that of a restricted group of experts. In our experience the two components (concentrated evaluation and distributed evaluation) can co-exist with a great return.
In particular, we have observed that by reorienting the role of the selection committee from gate keeper to idea broker, the speed of adopting ideas can be accelerated. This is what happened in a social innovation experience at a public service company in the United Kingdom.
In the first year of activity over 1,000 people registered and commented, sent or participated in approximately 700 ideas. What we discovered is:
- During the launch of an idea, the activity generated by users (comments, “likes”, etc.) was equally as intense both for the ideas that would have subsequently been approved and for those that were later rejected;
- As time went on the activity gradually reduced for ideas destined to be rejected, until reaching activity levels that were on average three times higher for the subsequently approved ideas compared to the others;
- The ideas destined to be approved share very similar network features (see Figures 2 and 3, Egonet of an approved and rejected idea): it is possible to create a model of links for each idea with the system nodes (Idea Egonet), which is especially interesting for its predictive value.
The central node represents the idea. The other nodes represent the people that have interacted (comment or vote) on the idea. The line that joins two people together indicates a shared comment or a discussion on the idea.
Potentially, the typical metrics of Social Business – such as the convergence of different idea supporters, together with consistent activity levels around an idea – can be used to monitor the entire idea evolution process. Unlike the traditional stage gate selection process, the social approach to involvement and to realizing ideas and improvement projects sees teams of managers who activate themselves in facilitating and bridging between “those with ideas” to “those in the best position to realize them”. Instead of acting like a restraint or an approval gate (as they would under traditional evaluation methods based on committees), the team has to act with the role of broker, a key figure that supports and accelerates implementation and, therefore, the ROI. Ideas therefore proceed or fail based on the level of involvement that they are able to reach in the network of exploitation.
In this way, successful ideas are brought forward through the network by those who most benefit from their implementation (the “pull” model), contrary to the traditional process of pushing the idea forward (the “push” model). Ideas unable to earn sufficient support are “naturally” discarded. Transparency in the process provides a greater sense of ownership for realized ideas and, perhaps, less disappointment for the rejected ones because of the lack of visible support.
Social Business has matured to such a level as to raise important questions on the return on investment. The first to adopt these business approaches adopted an incremental approach – in small steps. Inevitably, when Social Business practices encountered traditional top-down management processes, the potential results were weakened or even stopped.
Unfortunately, being “social by half” cannot work. In order to obtain ROI, Social Business practices have to be maintained through the entire value chain, from creation to final implementation and realization of the related benefits. This means rethinking the role that a manager has within the innovation process: from gatekeeper to broker. This is in fact the line separating “non-returnable investments” from initiatives that successfully pay off.