The coexistence of profit maximization and social initiative within the same firm may no longer be a distant dream. A recent research study by OSB’s professor Alain Daou, co-authored with Dr. Ute Stephan, Dr. Petra Andries, seeks to address the role of social goals, in addition to economic goals, in influencing open innovation and innovation performance. The research postulates that three critical elements within a firm are interconnected: strategic goals, innovation performance, and knowledge sourcing practices. The research spanning 1257 firms concluded that one possible reason for a firm's lack of innovation is their sole focus on economic goals. The study suggests that both strategic and social goals may be pursued simultaneously, without any inherent conflict, as the two are not mutually exclusive.
Companies with economic-strategic goals relied on internal R&D and knowledge creation processes, and sourced their external information without any collaboration with other firms. In contrast, companies with social-strategic goals added the external collaboration component; they relied on external knowledge creation and sourcing processes. This added component boosted their innovation performance and their ability to generate revenue.
Embracing change beyond hesitation
The aforementioned notions are still being challenged by executives and corporations. Dr. Daou explained that the fundamental rule of traditional business theories is profit maximization for shareholders. Moreover, many managers fear that they cannot focus on both social and economic goals as they are contradictory in nature. They assume that focusing on social goals will be a form of distraction that would result in losing money. Nevertheless, this study serves as a step in the right direction, proving that goal multiplicity can actually improve overall performance.
Preexisting theories are being contested with time
With the rise of Corporate Social Responsibility (CSR) and the prominence of shared value in concept and application in some firms’ value propositions, organizations are increasingly becoming aware of the need to collaborate with external stakeholders in order to innovate and gain a competitive advantage. This takes special significance in these challenging times due to COVID-19, as firms have been triggered and are being challenged to align social goals with their economic goals.
Skeptics should look to firms that are leading by example
Al-Tibbi, the MENA region’s first, largest and fastest growing digital health platform, is an excellent example of a firm that effectively applies goal multiplicity and open innovation. What started with a modest objective to provide the first Arabic medical dictionary, became a one-stop shop for online health care information and initial patient screening. Jalil Allabadi, founder and CEO, explains that the alignment of social and economic goals is something that companies need to seriously consider in the upcoming era. Along with its financial success, Al-Tibbi was able to alleviate regional medical afflictions by collaborating with a wide range of professionals. Through the unified system, patients saved money and received quality care, while practitioners earned approximately 20% more income, among other numerous benefits to the stakeholders involved. They even cooperated with governments amid the COVID-19 crisis, which demonstrates that collaboration between different, and sometimes opposing, entities can foster open innovation and enhance overall performance.
Creating business opportunities amid the commotion
Perplexing situations may be the time to start thinking outside of the box. Dr. Daou provides an admirable idea as an example of potential opportunities. The concept involves Lebanese wineries, who have considerable waste remaining from alcohol production on one hand, and an excessive demand for hand sanitizers on the other. He adds: “We’re looking to see if we can transform the leftover of biproducts of wastes from these industries into 70% ethanol, to make local hand sanitizers in case we have a shortage.” Such an initiative is highly feasible and may be realistic enough to apply in practice. A few benefits include reducing waste (environmental), boosting sales (economic), and supplying consumers with essential products in times of crisis.
Moving forward: it’s in the mindset
For one, managers should adopt a human-centric approach. Through this, they may access a new set of tools. One example would be for companies to focus on the people they are creating value for, thereby leading to better products, services, and internal processes. By empathizing with their customers and the social and environmental dimensions, firms would perceive their designs from a new angle, which would stimulate innovation. Another example would be to engrain the notion of a “circular economy” into the core values of any company. Firms need to endorse the interconnectivity between different actors within the economy, where collaboration between diverse players in the value chain is necessary. Going back to the idea of ethanol production, wineries may collaborate with healthcare enterprises, governments, laboratories, and others for the benefit of the system and greater society.
Collaboration rocks the nation
The transition is no easy deed, as Dr. Daou highlights if organizations are not willing to expand their economic-focused perspective: “This is a long-term strategy, and firms may have difficulty with this compared to the usual short-term growth strategies focusing only on economic goals. If they are willing and able to have this openness through long-term planning, and working on open innovation, they will surely benefit greatly from that in the long run.”
(Interview and article by Maria Nassif)
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