How can businesses innovate together with nonprofits?

25 November 2013 17:29

(updated: 18 December 2016 17:31)

How can businesses innovate together with nonprofits?

One of IBM’s values is “innovation that matters for the world”. At IBM, Corporate Social Responsibility (CSR) is an integral part of the company’s core strategy, and as CEO Sam Palmisano puts it: “it’s in the DNA of our culture”.

The institutionalization of CSR moves IBM’s community involvement from philanthropy to partnership; from sole-creation of value to co-creation of value. And this is where the opportunity for innovations through nonprofit-business relationships lies – both for society and the partners. Most large companies in Norway have some kind of relationships with nonprofits, often in the form of sponsorships of sports, art or social causes. But even with relatively large resources involved, many of these relationships seem to remain at the philanthropic stage. Therefore, great opportunities for innovations through partnerships are missed. The question is: how can nonprofit-business relationships move into integrative collaborations that can create synergistic innovative solutions to social issues that affect both parties? Innovation possibilities in nonprofit-business relationships do not necessarily require large resources, just a great idea. Let us see how a small rock festival and a local savings bank in Norway turned a traditional sponsorship into co-created innovations.

Have you heard about Vinjerock? It is a music- and outdoor recreation festival located at Vang in Valdres with about 3 100 paying spectators; relatively small, but nevertheless part of one of the few innovative sponsorships in Norway. One of their main collaborators is the local savings bank, Vang Sparebank. The bank is listed as one of the official sponsors of the festival. Often, this is where the story about sponsorships ends: logo exposure at a webpage, maybe some logos also at the festival arenas and tickets to bank employees. And if the company really wants to activate the sponsorship, it publishes an ad in the local newspaper stating how proud it is to be a sponsor.

What kind of value does such a relationship create? Vinjerock receives money to create more of the type of value they already are creating: music festival experiences for the audience. Vang Sparebank might achieve some associational value in terms of credibility and corporate reputation, and maybe some internal effects in terms of employee pride and identification. Importantly, these types of values could have been achieved by sponsoring many other objects, like the local football team or an environmental organization. Yes, value has been created for both parties, but not in terms of new business solutions or social innovations.

But luckily, this is not where the story ends. This is not a traditional sponsorship, where resources are exchanged as a transaction between the partners and value is sole-created. It is the story about Innovangsjon (sic.; Innovangsjon is a word composed by «innovasjon»; Norwegian for «innovation» and «Vang»), a co-op established by Vinjerock and Vang Sparebank. The co-op works to enhance the industrial and commercial development in the region, housing and integration, and general branding of Vang as a destination. The aim is to make Vang an attractive place to live and work for young people (for more information take a look at their web page). Social value creation for the local community from these projects is obvious, but this is a great business idea also for the sponsorship partners (for example, who do you think finance the new housing projects?). Both parties depend on a strong local community, so why not co-create it?

As argued by CSI-researcher Lars Jacob Tynes Pedersen, CSR is often treated as window dressing, where the social initiatives are detached from the core operations of the company and regarded as communication tools to build corporate reputation. This approach to CSR limits the opportunities of co-creating innovations that provide value for both society and the involved partners. Most large service providers in Norway are prominent sponsors of sport, art and social causes. These relationships are almost exclusively philanthropic or transactional, rather than true integrated partnerships. Here is a short list of suggestions to what businesses and nonprofits should consider to determine the potential of co-created innovations:

  • Is there a social problem that affects both partners?
  • Do the partners have linked interests for social betterment?
  • Do the partners have complementary resources to develop solutions to the social problem?

During the course Managing Corporate Reputation at NHH this fall, CSI-partner DNB has been the business case that students have been working on. One of the students’ tasks has been to evaluate CSR initiatives at DNB and look for partnership and innovation opportunities. At Center for Service Innovation we consider innovation through nonprofit-business collaboration as a promising topic for research, master theses, and teaching.