The awakening of China’s astonishing economic growth has inevitably hurled the country to the edge of being in desperate need to tackle the intensifying society problems such as widening wealth gaps, social divides, environmental pollution, inequitable access to health care, education and endowment insurance.
The momentum for social innovation is picking up since then. Under government endorsement, various initiatives have been springing up. As quoted from Wikipedia, social innovation refers to new strategies, concepts, ideas and organizations that meet social needs of all kinds — from working conditions and education to community development and health — that extend and strengthen civil society. Social Innovation is emerging worldwide as people realize that it is time to work together to find new solutions to the challenges facing our society. Those engaged in social Innovation apply their own definition of social Innovation, but all definitions have one thing in common: working together towards a sustainable society.
swissnex china has invited Transi.st, an active social innovation incubator” tech+impact” in Shanghai to share their insights on what is happening in this arena.
Innovation is not usually the first word that comes to mind when one thinks about China. Instead, most people, Chinese or foreigner, would perhaps tend to think of an emerging economic and political juggernaut. A juggernaut built on the productive awakening of a large and industrious population after decades of slow economic growth, heavy investment in infrastructure and an export led economy. Factory for the world: making things faster and cheaper than anywhere else without adding hardly any incremental value from creativity, design or invention. A more nuanced perspective might include the resultant challenges that have come as the cost of this awakening: disparities in economic opportunities and outcomes, social displacement for migrant laborers and rural peasants, uneven or inadequate social services and support for the elderly, the young or the physically handicapped; and of course environmental degradation.
However, it is precisely from this context of growth and dynamic change creating large scale challenges that has created opportunities for real social innovation in China.
Around the world, for many if not most startups, the biggest problem is not usually building the best product. Instead it is finding a problem worth solving. Startups and young companies are resource constrained. Any product that they can offer will literally be the proverbial “Version 1” with significant failings and shortcomings. It is only over time, as the company grows, as the product feature set matures, and as the company’s delivery and service of the product becomes more robust, that the customer’s experience with the product can approach solving or alleviating most of the pain they feel. Therefore, the original pain is so much that the startup’s barely viable, minimal product is still doing enough to justify the real risks of working with a young and uncertain product and company. This is the true reason why most startups have a difficult time getting market traction. It’s not because the product isn’t good enough, of course it isn’t good enough it’s an immature product from an immature company; they aren’t getting traction because people don’t care enough about the problem being solved to use an incomplete solution.
This is not the case for true social innovators. These startups are grounded in a perspective of customer first, or in actuality, society first or humanity first. Their ambitions are to solve challenges that are massive and acute and fundamental. Armed with purpose, they attract talented teams that display their commitment through the inevitable ups and downs of their startup’s life. This difference between mainstream startups who may be more mercenary, more focused on their own product idea (or copying the product ideas from foreign success stories) and social startups is even more stark in China. Years of large venture capital funds riding a wave of market opening and rapid sectoral growth spread generous returns for many participants without the need for taking substantial early stage risks. Entrepreneurs were incentivized to pitch VCs on whatever startup ideas could convince investors to give the most funding, not necessarily ideas that could convince customers to give the most revenue.
But in this market, and perhaps particularly at this time when it may seem that some of China’s social challenges are reaching breaking points, social entrepreneurs and innovators can see these challenges as problems worth solving and problems worth building companies around.
This is why our company and other Chinese impact investors are more excited than ever to be engaged in this sector. While the ecosystem is still developing, and while there are still fundamental, definitional questions to be explored around governance, regulations and transparency, this is also a moment when we and the social entrepreneurs we support are needed more than ever. Whether their companies are building innovative energy solutions for the homes of marginalized communities or education and quality of life applications for frontline workers or reinventing the way urban waste is disposed of, these companies are moving beyond simply demonstrating that Chinese entrepreneurs can embed social impact into their core operating models. They are scaling their solutions and leading the way towards a healthier market where all companies, even mainstream and traditional industries, remember that they are members of society and must be accountable to all stakeholders.