Pablo Sanchez

Participative Innovation: The Transition to a New Model of Social Capitalism (Part 2)

Editor’s Note: This is the second part of a reflection by Pablo Sánchez and Fernando Casado Cañeque, Academic Director of the Base of the Pyramid Laboratory in Spain. Part one may be found here. This post originally appeared on NextBillion Español.

Exploring the trend we discussed in the first post (on the potential for low-income communities to be strategic partners in inclusive business models and cooperation projects) it is participative innovation models are beginning to have a huge impact and are being successfully applied in many inclusive business models. These integration processes range from the active participation of small producers in production processes providing innovative solutions, to the creation of business divisions formed by local teams in developing countries that provide the knowledge necessary for offering products and services tailored specifically to those markets.

The advantages of this integration of innovation processes are not limited to making some business models and/or projects more efficient. They’re also valuable for building community trust so citizens will be conscious of their skills and knowledge to lead their own development processes and address their own needs. This allows them to spend time in the innovation process; adopting new strategies in the supply chains and promoting participative innovation as a platform to focus on other areas. Whether it’s improving product quality, increasing the environmental sustainability of the production processes or discovering new market niches, these actions all improve the social conditions of the population.

Even though all of this can be put into practice, it is necessary to deconstruct preconceived notions about how we see both developing countries and the innovation process itself. In other words, it is necessary to uneducate ourselves.

It is important to understand that the paradigm shift that we are experimenting with now is not a simple change in how to integrate suggestions on innovation and/or to encourage innovation within poor communities. Rather, it is a proposal to change both the current business models and the design of the development cooperation projects. In other words, participative innovation processes are a new link in the transitional process of individualistic capitalism governed by individual profit maximization and unforeseen external events, to inclusive capitalism, which considers social value and the search for mutual benefits for all parties.

Therefore, in some ways, we are moving to a version of Capitalism 2.0. If the goal of capitalism 1.0 was to maximize profit, in 2.0 it is to generate the maximum social, economic and environmental value. If in 1.0 the process of decision-making was hierarchical and behind closed doors, 2.0 proposes participative and inclusive decision-making, incorporating the agents of interest throughout the value chain in the process. If 1.0 talks of influencing consumers to become buyers, 2.0 talks of convincing individuals to become strategic allies. If 1.0 talks of three isolated sectors (public, private, and social) that frequently compete with one another, 2.0 proposes to negotiate initiatives through various integrated sectors, working together to achieve common goals. If capitalism 1.0 proposes to “reduce pollution,” “lower emissions” and “minimize impact,” 2.0 proposes to utilize strategic innovation and knowledge management to increase value creation, and to create models of sustainable production and consumption that impact the triple bottom line.

In short, the transition takes us to a state that passes from accumulation to cooperation, from competitiveness to complementariness, from confidential and exclusive knowledge to open networks of shared knowledge. Innovation, logically, will be the motor that drives the change toward this transition. But this innovation can only happen in one way: socially, inclusively and with the participation of those most exposed to the challenges that need to be resolved.