“Innovation” has become such a buzzword lately, particularly among people working on social change. But let’s take a step back and talk about what the word could really mean. Innovation is more than just new ideas. To me, it means taking a completely new approach to how we finance, structure, and prove social change.
The nonprofit world has never lacked new ideas to address problems. In fact, you could argue that nonprofits are innately entrepreneurial, being borne out of a recognized market failing and a new idea to remedy it.
The need, then, is not more new ideas. Rather, true innovation lies in reinventing a field built on social change.
Here are some ways that is starting to happen:
New support mechanisms. The avenues for sending money to social-change efforts are increasing significantly. What started 10 years ago with venture philanthropy has now expanded into nonprofit campaigns to raise growth capital, foundation loans and other investments in organizations, social-impact bonds, and investments that seek both financial and social returns. And that creates an opportunity for social-change efforts to be much more flexible and (we hope) successful, because access to enough and the right kind of money can often make or break a great idea.
A converging economy. We used to suffer from pretty strict delineations among the public (government), private (business), and nonprofit sectors, but that is changing. True innovation is happening where those lines blur—like businesses that make a profit solving social problems. Or governments developing new mechanisms to finance and evaluate nonprofit efforts, such as the Department of Justice’s Pay for Success program.
Proof of social change. Nonprofits used to be viewed as benevolent charities that received donations to support their good work. That’s not enough anymore. Nonprofit donors and social investors are increasingly demanding a social return on investment—proof that the organization is making a difference—in exchange for their money. And nonprofits are now competing not only with other nonprofits but also with for-profit social entrepreneurs. So nonprofits can no longer focus on how many children they've read to, meals they've served, or animals they've saved. They must track and prove how they have changed lives, changed systems, or changed communities.
Although these innovations are encouraging, there is room for so much more. What if:
• The best and the brightest of Generation Y worked to remake existing organizations from the inside out instead of just starting their own social-change groups?
• The social-capital market that’s emerging to provide financial vehicles for budding social businesses also included support for social entrepreneurs in the nonprofit world?
• Venture-philanthropy funds (growth capital for nonprofits) shared investor prospects with social-venture funds (growth capital for social businesses) and vice versa?
• All nonprofits interested in growth and with a proven model for success had access to enough capital and management expertise to expand?
• A nonprofit that solves social problems received as many resources and as much respect and attention as a business that solves a consumer need?
These things require sweeping, fundamental changes to the current structures of the nonprofit, government, and private sectors. To me, that’s real innovation.
Nell Edgington is president of Social Velocity, a consulting firm that helps nonprofits embrace innovation, expand programs, and achieve financial sustainability.