Offer patient funding and incubation support
In comparison with opportunities that are more familiar to business, socially innovative ideas often need more time to get to market and reach profitability. Companies can support their scoping and implementation by offering dedicated financial resources and targeting lower financial performance thresholds in the short term.
In 2012, Barclays launched the Social Innovation Facility to catalyse social innovation across the company’s business units. The company made a number of design choices to ensure that the Facility encourages experimentation balanced with prudence and business relevance. First, it ring-fenced £25 million for the first three years of the Facility’s operations, allowing it to create excitement within business units, build a pipeline of ideas, and make flexible, longer-term investment decisions. Second, it created a formal application process that recognizes ideas can be at different stages of conceptualization and product development. Ideas that are in the early “discovery” phase go through a shorter, more agile application process and receive lower amounts of funding than those that are closer to establishing their business case. Third, it established strong governance and elaborated clear criteria to ensure rigour in the evaluation process. A diverse Governing Council of senior Barclays leaders sets the strategy and oversees the investment decisions, with each investment idea evaluated against four criteria: commercial attractiveness, ability to generate social impact, alignment with company strategy and ability to scale into a successful business.
Integral to the design of the Social Innovation Facility is the principle of co-investment. The business unit that generated the idea and requested funding from the Facility is expected to co-invest and is ultimately responsible for its implementation. Such a requirement ensures that the ownership of each initiative being funded lies with the business units themselves.
“We take prudent risks, but risks nonetheless so that we are really planting some seeds of innovative ideas. And if we fail, we fail fast.”
Diane Eshleman, Managing Director and Global Head, Citizenship and Reputation, Barclays
To ensure ownership beyond the initial funding, the Facility evaluates ideas based on performance metrics that are closely aligned with each business unit’s view of success rather than on set standardized hurdle rates. Its rationale for maintaining such flexibility is that it will maximize the chances that the idea will be supported and scaled after the funding from the Facility ceases.
Once an idea is selected, the Facility signs a formal contract with the business unit in question and releases its share of the funding in tranches linked to the achievement of key milestones agreed at the time of the initial investment. By the end of 2015, the Facility had funded over 35 proposals across its business units and operating regions. As with any innovation facility that is prepared to experiment with early-stage ideas, some of the propositions did not get off the ground or were stopped early, many evolved and pivoted as the development cycle progressed, and some are now successfully integrated into business units and launched into the market.
The long-term nature of social innovation propositions means that many of the investments are still in development, being incubated with partners or tested through a pilot phase. In Uganda, Barclays is leveraging the Social Innovation Facility to partner with civil society organizations Grameen Foundation and Care International to develop innovative technologies and mobile-based financial products that are relevant and accessible to disadvantaged communities.
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