14 Dec 1999  Research & Ideas

From Spare Change to Real Change: The Social
Sector as a Beta Site for Business Innovation

U.S. companies have too often viewed the social sector as a dumping ground for their spare cash, obsolete equipment, and tired executives, but that mind-set, says HBS Professor Rosabeth Moss Kanter, has hardly created lasting change. In this excerpt from an article in the Harvard Business Review, she issues a call for corporate social innovation, an approach, says Kanter, that's more R&D than it is charity.


Despite its long economic boom, America's social problems abound. To ensure future economic success, the country needs dramatic improvement in public schools, more highly skilled workers, jobs with a future for people coming off the welfare rolls, revitalized urban centers and inner cities, and healthy communities. Traditionally, businesses have supported the social sector in two different ways: they contribute their employees' time for volunteer activities, and they support community initiatives with money and gifts in kind. Both activities can accomplish many good things and should be encouraged, but neither activity engages the unique skills and capabilities of business.

Consider the typical corporate volunteer program. It almost invariably draws on the lowest common skills in a company by mobilizing people to do physical work – landscaping a school's grounds or painting walls in a community center. Such projects are good for team building and may augment limited community budgets, even build new relationships, but they don't change the education system or strengthen economic prospects for community residents. In many cases, it is just as effective for the business simply to write a check to community residents or a small neighborhood organization to do the work.

And that, indeed, is what many companies do. A great deal of business participation in social sector problems derives from the classic model of arm's length charity – writing a check and leaving everything else to government and nonprofit agencies. Businesses have little involvement in how these donations are used. In fact, this model actively discourages companies from taking an interest in results. Companies receive their benefits up-front through tax write-offs and the public relations boost that accompanies the announcement of their largesse. There is little or no incentive to stay involved or to take responsibility for seeing that the contribution is used to reach a goal. However well meaning, many businesses treat the social sector as a charity case – a dumping ground for spare cash, obsolete equipment, and tired executives on their way out.

Such arm's-length models of corporate philanthropy have not produced fundamental solutions to America's most urgent domestic problems of public education, jobs for the disadvantaged, and neighborhood revitalization. Nor will they, because traditional charity can't reach the root of the problems; it just treats the symptoms. Most business partnerships with schools, for example, are limited in scope: they usually provide local resources to augment a school program, such as scholarship funds, career days, sponsorship of an athletic team, or volunteer reading tutors. The criteria for involvement are minimal, often hinging only on geographic proximity to a company site. The 600 school principals I surveyed said they are grateful for any help from the business sector. But what they really want today, when public education is under attack, are new ideas for systemic change that private enterprises are uniquely qualified to contribute.

As government downsizes and the public expects the private sector to step in to help solve community problems, it is important that businesses understand why the old models of corporate support don't create sustainable change. In partnership with government and nonprofits, businesses need to go beyond the traditional models to tackle the much tougher task of innovation.

Social Innovation: The Benefits to Business

Sometimes business attempts to find innovation in the social sector are discounted by critics as public relations ploys. But as the depth and breadth of each company's commitment should make clear, that would be an extremely costly and risky way to get favorable press. The extensive efforts described [in this article], with their goal of creating systemic change, also cannot be justified only on the grounds that they make employees or the community feel good – even though that obviously motivates people to work hard. In reality, the primary business justification for the sustained commitment of resources is the new knowledge and capabilities that will stem from innovation – the lessons learned from the tough problems solved.

Bell Atlantic's Project Explore [a networked learning initiative with the Union City, NJ schools -- see below for details] was expensive, and it was not philanthropy. It was funded out of operation and technology-development budgets. Certainly, Bell Atlantic people felt good about helping inner-city schoolchildren succeed. And the company generates a continuing and growing revenue stream from selling network services to the education market, which it learned how to approach from its extensive experience in Union City.

But the ultimate business justification for Project Explore was the know-how Bell Atlantic developed about networking technologies. As John Grady, now HDSL product manager but then the first Union City project manager, puts it, "the Union City trial provided the first evidence that HDSL technology could work." In April 1997, Grady and three other Bell Atlantic employees received a patent for a public-switch telephone network for multimedia transmission – a direct consequence of the innovations developed in Union City. That patent ultimately led to the introduction of Bell Atlantic's new Infospeed DSL product line in 1999.

Rosabeth Moss Kanter

Project Explore Bell Atlantic's Project Explore, in Union City, New Jersey, enabled communication and learning to move beyond the classroom. In addition to installing computers in the schools, Bell Atlantic gave computers to 135 innercity students and their teachers to use at home. Project Explore became a catalyst for increasing the use of technology to transform middle- and high-school classrooms, to improve students' skills, and to involve parents in their children's education. See "One New Jersey School District Gets a Technology Makeover," Wall Street Journal Interactive Edition, November 17, 1997.

Excerpted from the article "From Spare Change to Real Change: The Social Sector as Beta Site for Business Innovation" in the Harvard Business Review, May-June 1999.

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