Food critics and bloggers are constantly rating what is in and what is out. (In case you are wondering: sour is in, bitter is out.) The social sector is having a similar discussion, especially post-pandemic – trends show that innovation is out, and impact is in. While this dichotomy brings attention to an important conversation facing the sector, it does little to explain the rationale behind the trend – or more accurately – the balance that is needed to really make a difference.

In my seminars, I often say, “We don’t live in an either/or world anymore. We live in a both/and world.” Genius isn’t about adopting innovation or impact, but instead understanding (and getting comfortable with) the tension between the two and learning to navigate it successfully.
Innovation is vital to the social sector, but its meaning and value are often misunderstood. In our practice, we define innovation as “something different that has the potential for impact.” Remember – only about 20% of social ideas are viable. But innovation isn’t always related to something brand new (in fact, innovation is frequently mistaken for invention). Sometimes, the smartest and most impactful way to be innovative is not to invent something new, but to reapply an idea in a new AND improved way. We call this “leapfrog innovation.” For example, selling produce at grocery stores is certainly not innovative, but selling misshapen produce (known as “ugly” food) to reduce food waste is. When it comes to actually practicing innovation, we prefer a higher-level process called “lean startup,” which is borrowed from the commercial world’s continuous cycle of create-learn-repeat. Lean startup walks innovators through a disciplined process for creating social innovation and, in our research, we have found that the process doubles or triples the viability of social ideas.
Impact is also crucial for the social sector. We have said before that “impact is the bottom line for the social sector.” Research and greater focus on impact measurement and accountability have helped define impact and shifted the paradigm for the sector, helping advance our progress exponentially. Another benefit of impact is that it leads to additional sources of capital, such as impact investing and social impact bonds. When it comes to impact and scale, we practice what we have coined as “social alchemy” – turning ideas into gold.
With decades of research at our disposal, we now have the luxury of knowing what works well for the social sector. To take advantage of this knowledge and maximize innovation and impact in the social sector, understanding your true aim is critically important. Here is our quick recipe for success:  

For community-based organizationsbalancing the tension between innovation and impact means knowing the difference between the two and focusing on impact when enough research is available to guide the implementation of best practices. Organizations should focus on programs where best practices are well-established and customize them for the community to maximize impact, but they should also implement programs for which best practices are non-existent or unclear and where impact measurement is key to figuring out what could work. Think of it like baking a cake. When you use a great recipe, you know that your cake will turn out well. The same is true of research-based programs yielding impact. But, when you don’t have a recipe, you have to experiment and measure your results to determine what works best and keep improving the recipe. When you’re operating without a recipe in the social sector, it pays to follow lean startup carefully, adapting your program as new information and research emerge to increase your chances for impact.

For funders, balancing the tension between innovation and impact means developing a funding portfolio with 60-75% of funding going to impact-driven solutions (similar to private equity) and 25-40% going to innovation-driven works (similar to an R&D fund or venture capital). Think of it like sugar in your diet. Innovation, like sugar, enhances your culinary experience. But, like sugar, it’s easy to go overboard. When you overdo it, too much focus on innovation leads to unhealthy and unwanted outcomes, such as ineffective programs and funding innovation for innovation’s sake. As a community of funders, it is imperative to have meaningful and regular dialogue among funders to create a proper balance between innovation funding and impact/scale funding. 

For incubators and acceleratorssuch as Social Venture Partners or Innovation Labs, balancing the tension between innovation and impact means being clear about which type of solution is your sweet spot and ensuring a strong handoff between the start-up (leapfrog innovation) and mezzanine (social alchemy) stages. Are you better with innovative startups or with growth strategies for impactful, scalable programs? If you are focusing on innovation, what rigor do you require upfront? If you are focusing on impact, are you looking at a growth strategy that includes both impact and scale? Think of it like the difference between cooks and bakers. It is difficult to be good at both, because each requires a different skillset. The same is true for innovation labs and other social venture groups. We recommend incubators and accelerators focus on the area in which they have the greatest strengths and work as an ecosystem to ensure a smooth transition from one phase to the next. There is nothing more frustrating than innovative ideas being suffocated by too little growth capital, too little emphasis on impact measurement or a lack of ability to scale.
So, is impact in and innovation out? No, that is a false choice. I am reminded of the Thomas Edison quote: “Genius is one percent inspiration, and 99 percent perspiration.” If Edison were still alive, I think he’d agree that the recipe for social genius is 20 percent innovation and 80 percent impact in a given community. We’d love to hear your thoughts about the tension between innovation and impact and how you navigate them successfully in your social sector organization.

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