The White House Office on Social Innovation: A New Paradigm for Solving Social Problems

Article co-authored by Vanessa Kirsch and Kim Syman of New Profit Inc.

President Obama's new White House Office on Social Innovation and Civic Participation represents more than just another bureaucratic office. If leveraged effectively, this Office could transform how we solve our nation's most pressing domestic problems -- and ultimately move the needle on critical challenges in education, health care, poverty, joblessness, the environment, and more. Here's how.

Just as innovation in the private sector has been the key to our nation's longstanding economic prosperity, so too can innovation in the social sector provide the solutions we need to solve our nation's most challenging social ills. The social sector in its current form, however, fails to foster, support, and scale innovation. Fundamental shifts need to occur in the structure of the social sector in order for systems of innovation to truly take hold.

While many factors contribute to the current dynamics of the social sector, the lack of a clear metric of effectiveness -- such as profit -- makes it difficult for resources to flow to high-performing organizations that are achieving the greatest impact. Adam Smith's invisible hand is, essentially, directionless.

Hence, rather than capital flowing to social initiatives that are most effective, much of it goes to failing non-profits with suboptimal impact or whose footprint is limited and will not scale. Retailer John Wannamaker once famously quipped that "Half the money I spend on advertising is wasted. The trouble is I don't know which half." This is true in spades for philanthropic spending. The effectiveness of America's philanthropic dollars would be incalculably improved if they could be more astutely targeted.

The same principles apply to government funding too: government currently spends billions of dollars per year in education, workforce and economic development, public health, and related areas. But allocation of these resources rarely happens though a process that would enable us to identify and grow the most powerful innovations. For example, most contributions to entities that qualify for not-for-profit status are tax-deductible, but the same level of subsidy occurs regardless of performance, making these subsidies seemingly indiscriminate. We see education nonprofits that aim to help failing public schools receive the same tax subsidy regardless of whether they improve academic achievement. In short, the federal government is already subsidizing social innovation at massive scale, but not in a targeted or performance-based manner.

Enter the White House Office of Social Innovation and Civic Participation.

This Office can use its convening power to help break though some of the toughest barriers that have long prevented marketplaces that can grow social innovations from taking hold, like the lack of metrics that enable us to know what works and the need to invest in "bottom up" versus "top down" solutions. It can help catalyze a shift in the social sector that would better guide funding and support towards social enterprises that have impact.

How might the Social Innovation Office do this? It must have three priorities.

First, it must demonstrate a new way to solve social problems where government serves as an investor in innovations that are developed and identified by citizens outside of government who better understand the problems and can thus identify and support innovative solutions. The Obama Administration and Congress took the first step in this direction with the recently created Innovation Fund, included in the Edward M. Kennedy Serve America Act signed into law in April.

Second, the Office should guide more social innovators towards "bottom-up" initiatives, in preference to "trickle-down" philanthropy - because the societal impact of the former is typically greater. Bottom-up innovations, also known as disruptive innovations, enable a larger population of people who previously had limited access to expensive services to now enjoy them. By illustration, philanthropy has built most major concert halls, and funded most major symphony orchestras. These have enriched our culture, to be sure, but this largesse by the elites largely benefits the elites. Disruptive or bottom-up investments, like RCA's Victorola record players and Sony's transistor radios, brought music to those who couldn't afford the symphony in the concert hall. These disruptive innovations distributed music to a much broader population, even to the consumers who initially lacked concert hall fidelity, and transformed our society's consumption of music. Support for these types of disruptive innovations in the social sector could surface new, more effective, higher-impact solutions to our most stubborn social challenges, too.

Third, the Office should use the convening power of the White House to initiate a focus on impact and metrics. Specifically, the White House should help initiate a process by which categories of social innovations are agreed upon, and metrics can be defined for assessing the impact of innovations in each category on the social problems that they target. Just like independent rating agencies have developed methods for assessing the safety of investments in various securities, methods might emerge that help social investors categorize the type of impact that various social entrepreneurs hope to achieve, and to rate the present and potential effectiveness of their efforts to achieve that impact. Just as investors would never invest in securities whose risks were not balanced by potential returns, few philanthropists intend to dissipate their hard-earned capital propping up non-profits that are unlikely to succeed with their stated missions, and whose impact cannot scale. New methods for measuring risk and impact would help tremendously.

It goes without saying that the Office should also use its convening power to break down an antiquated assumption that all social innovation is the province of the non-profit sector. Our language, accounting conventions, capital markets and tax codes all amplify the binary belief that profit is the opposite of philanthropy and incompatible with social innovation. It isn't. For example, for-profit micro-lending is quickly upstaging non-profit spending by the World Bank as effective mechanisms for helping people escape poverty in nations around the world. All enterprises that hope to sustain their work need capital to survive and grow. We urge the White House to embrace this perspective and use its convening power to lift up social innovation without regard to tax status.

Some people might wonder whether government should even be in the business of fostering and directing social innovation. After all, the government's track record in initiating impactful innovations has been decidedly mixed: On the one hand, federal subsidies spawned America's system of state universities, which extended the availability of higher education to far more people than could be admitted to elite private colleges. And the miraculous potential of molecular medicine has emerged thanks, in no small measure, to funding from the National Institute of Health.

On the other hand, vast sums of taxpayer dollars have been wasted on innovations that proved foolish. Over $60 billion has been spent equipping schools with computers, for example, but with no measurable impact. And the billions wasted on oil shale as a solution to America's dependence on foreign oil in the 1970s parallel the billions being dissipated on biofuels in the present decade.

But with record unemployment, rising job loss, a high school dropout crisis, strained communities, and unprecedented economic restructuring, we don't have a choice but to innovate.

If the White House Office of Social Innovation can improve the context for social innovation, its impact will extend far beyond a new government bureaucracy -- it will transform the way we solve problems; create a powerful new alignment around impact; and foster an environment where government, the vast reservoirs of American philanthropy, and socially innovative entrepreneurs will spend less on things that don't work, and more on things that do.

Comments

[tedbashley]

This can work. If modern methods of evaluating and improving methods are followed it will work. It's called SPC (Statistical Process Control). It is the process that enabled the Japanese auto industry to smash Detroit. W.E. Deming tried to sell the method to Detroit, but they declined. Toyota, Nissan and Honda used the method to build better cars than Detroit and capture a large part of the world auto market. A government that uses these methods to manage its programs will succeed just as Toyota has succeeded. SPC, It works.

[jsehgal]

I would agree with this comment but SPC applies to mass production. Human beings are notortiously individually different. However, if SPC experts can develop and get agreement on the metrics, sure. It could be a great start.

[DragonMama]

I would argue that there's been no improvement with the addition of computers to schools. As a former teacher (mommy-tracked) married to a current teacher, if it wasn't for computers in the classroom it would be VERY hard to convince the kids that what we're teaching them is relevant to today's rapidly changing world. I was in elementary school in the 80s in a school lucky enough to have computers, I learned basic programming starting in 3rd grade and it has lead to me being more comfortable with the emerging digital landscape than most people who are within 5 years of my age (I am 32, people around age 25 now are about as comfortable and proficient with computers "out of the box" as I am from my experience). Our high school dropout rate would likely be even higher if we didn't have relatively recent computers in our schools, especially in economically disadvantaged areas where the kids may not have computer/internet access at home.

[Randian]

Great,

Another academic offers his two cents on how to fix it resulting in creation of another government office and function in hopes that this one will be apolitical and function better than all the rest.

I suspect his hypothesis is correct, the problem is when you move to the design phase, we are still talking about the U.S. government.

The NIH is a perfect example, the key contribution of the NIH to advances in medicine and science are primarily related to infrastructure support. The NIH has a notorious history of funding safe but primarily redundant experiments which will do little to actually advance the fields. That said, NIH spending allows labs to stay open and this creates opportunities for a few who do make the huge steps forward.

Using an NIH model for social change is not likely to be sufficiently more efficient than the current mess

[DragonMama]

"redundant" experiments are rarely as redundant as they appear to the non-scientific community. Test-retest is part of the scientific method, hypotheses and theories need to be re-evaluated by diverse sources (and diverse subject pools) to make sure that they get the same results each time. One example problem common among human medical experiments - frequently only men are used, in case there is any risk of fetal harm in women who don't know they're pregnant. Also, potentially lethal drug combinations may not be known from initial trials because the subject pool may not have contained enough people on both medications in the test group to show the adverse reactions. We only find these things out via lawsuits or repeated experiments - I'd personally prefer to pay for the repeated experiments.

[tomas0808]

Countries that don't have massive disparity between rich and poor don't need to solve social problems because they don't have them.

And don't start that crap about the American way of doing things makes the cream rise to the top. If that were true, Norway wouldn't be the world leader in electric cars...

etc etc etc.

[Randian]

Such as teh former Soviet Union?

[scubafox]

An ignorant "Randian" comment. Russia now has massive disparity between the rich and poor. It's no accident that this is true in the U.S.

1. Massive offshoring that enriches the few and undercuts wages for the many by putting them in competition with low-wage Mexico and lower-wage China.
2. Massive "real" unemployment (over 10% even in good times, over 20% now ... google "There's no 'free market' for Labor").
3. Massive theft & profiteering: Enron, Madoff, Exxon chairman Lee Raymond's $400M retirement package, William McGuire's $1.6 billion stock options, and $2.5B bonus for Lehman's New York staff.
4. Increased regressive taxation, decreased progressive taxation; including higher taxes on wages than on capital gains ... with much of the gains hidden offshore.
5. Fraud: Mortgage brokers pushing people into unsustainable fixed-rate balloon loans to pump up fees with promises they'd be refinanced ... to get even more refinancing fees.
6. Rampant highly-leveraged speculation and market manipulation.

[sc300nc]

What makes you think another gov't office will be any more effective than what we have? More bureaucracy does not lead to more efficiency or effectiveness. Just more promise that are never fulfilled and another taxpayer burden.

[myvoice09]

Totally agree! Point well made.

[OhgReaTone]

Changing paradigms quickly results in innovation. By merely changing the way we view a problem - the problem itself changes - often leaving us with hope for positive change. ..............

http://thefiresidepost.com/2008/10/07/the-criminal-paradigm-fiddling-around-on-the-roof/

[Randian]

So change is better than stability. Something different has to be inherently better than what was before.

So what is the evidence that evolutionary forces exist in governmental structure?

Oh, I forgot Change is here.

[roseau]

We already know that some combination of mission-driven initiative and for-profit effort will be necessary to solve social problems. And honestly, innovation is overrated. Many of the best solutions to social woes come from very basic and simple approaches. If we commit to them. Let's back it up further. The real hurdle to solving 'social problems' is changing everyone's mindset about social problems. People who have money/power/security do not feel that they have anything to GAIN by improving the lives of people who have not. A new agency will need to first lead the way in re-framing the discussion so that a new war on poverty/drugs/teen pregnancy or whatever is something that ALL Americans feel matters to this nation. Articulate ideals, sell vision, get results.

[wehrke]

Why I applaud the new approach, there is one underlying issue that has not been addressed and that will cause this initiative to fail. That is the scourge of political correctness. What you will find is that your metrics will be tweaked to accommodate interest groups that have a pet agenda or solution.

A good example of this is Title 9. In a past 60 Minutes piece they illustrated how title 9 has indeed lived up to its goals of providing better funding for women's athletics, yet at the same time it has devastated male athletic programs in an effort to be "equal". It has always been the situation that more men than women are interested in athletics, but we have determined that it is more important to be equal and not recognize different preferences between the sexes.

[DragonMama]

chicken or the egg - WHY "has there always been" a difference in athletic preference between the sexes? Men's athletics gets outside funding/sponsorship much easier than women's does, something that Title 9 does not equalize.

You ask about underlying issues but fail to consider them in the example you use to highlight your point. This points to confirmation bias, not rational discussion based upon logic.

[professor]

"Boys" and "girls" athetics do not belong in schools where learning is supposed to take place. How about them apples? Neither pro nor con.

[GardenerNorCal]

Another new government agency? That should help keep spending under control.

And from this article why not call it what it is the Office Propaganda.