Innovation's Final Frontier: Part I

Companies all over the world are in a race to innovate. For developed countries like the U.S., innovation is often regarded as the final growth frontier. Innovate or die. It seems that every executive is scrutinizing every square inch of their company looking for ways to ‘innovate’ -- all except for in one area: the corporate foundation.

The idea of corporate giving was essentially born in America when the Rockefellers, Fords and Carnegies decided that it was their responsibility to build strong communities, which would in turn support their businesses. It was a good idea, rooted both in kindness and strategy: having strong communities leads to a strong economy, which is good for business.

However, if you take a look at most corporate foundations these days, you’ll find that not much has changed since they were founded, often decades ago. So what’s the deal? Innovation in philanthropy is a huge trend outside the walls of the corporate foundation.  Many non-corporate, traditional foundations and philanthropists have embraced more innovative approaches to helping our world. Two leading trends include:

1. Venture philanthropy, which applys venture capital principles to support high-impact nonprofits, and


2. Catalytic philanthropy, which is a new approach that goes beyond investing and embraces other tools, including stakeholder engagement, to support social change.

Consider this: some of the most innovative and impactful philanthropists of our time are the founders of corporations. Jeff Skoll founded eBay, Bill Gates founded Microsoft, and William Hewlett and David Packard founded  Hewlett-Packard.

But when you compare the impacts of the Bill and Melinda Gates Foundation to what the Microsoft Foundation or even the CSR department of Microsoft has accomplished -- it’s not even close.

I have two theories that can help explain this conundrum:

1. Corporate foundations are risk averse. Being innovative involves taking on more risk and the boards of these foundations are usually much more conservative and still have a mindset that ‘sprinkling good’ is better than investing to address the root cause of a societal or environmental problem.

1. The innovative culture and drive for better outcomes doesn’t cross over because corporate foundations aren’t usually held accountable for their results the same way as their profit-generating cousins. Corporations innovate because they want to seek higher profits and better returns, but corporate foundations have no motivation to improve their results. Money trickles in from the parent company (often as a smart tax write-off) regardless of their performance.

Companies are missing out on a huge opportunity. Like so many other forms of innovation, innovating in one area can lead to improvements in others. One idea is to borrow the innovative spirit that’s found within corporate walls and transfer that to corporate foundations.  Even more, to create shared value , a company can simultaneously improve its competitive positioning in the marketplace and improve social and environmental conditions in the communities that support it.

Also, there is so much to learn from the social entrepreneurs blazing new trails and finding new solutions to old social and environmental problems. Why don’t companies invest more in these areas, help solve some of the difficult problems our world has been facing for decades (and that they’ve been supporting through their foundations) and at the same time identify the innovations that will create shared value for the company and the community?

Check back next week for Part Two in this series to hear more ideas of how companies can leverage innovation for their foundations.

Image source: Penny Allen