Hu Yoshida

Social Innovation as a Business Strategy

Blog Post created by Hu Yoshida Employee on May 17, 2018

 

The future is full of social challenges that will drive a need for Social Innovation. Addressing this need will require collaboration across government, business, and non-profits. In order for these innovations to be sustainable, corporations will need to integrate Social Innovation into their business strategy so that profits are tied to social innovation.

 

Many of the social challenges will come from an exploding world population. According to Wikipedia the world population grew from 2 billion in 1927 to 7.6 billion in 2018 and is expected to grow to 9.8 billion by 2050. The most rapid growth will be in countries with lower standards of living, and people in countries with higher standards of living will be living longer, putting a growing strain on health care and retirement systems. However, if the growth in population should decline, there may be even greater problems as fewer young workers struggle to support a burgeoning elderly population. Soylent Green is not the type of solution that we would like to contemplate.

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More people will consume more resources, like water, energy, infrastructure, goods and services. Some of these resources are already very limited like clean water, carbon fuels, and the rare earth metals required for new technologies. More people will also create more pollution and waste which will lead to health issues, climate change, and food shortages. With climate change we will see an increasing pattern of floods, droughts, global warming and rising sea levels that threaten to inundate our coastal urban areas.

 

By 2050, 70% of the world’s population will live in cities, where problems like unemployment, slums, crime, homelessness, traffic congestion, sanitation, urban sprawl, and overwhelmed social services will increase. More and more people will migrate from rural areas seeking a better life but without the skills for urban employment, and refugees fleeing poverty and oppression in other countries will create challenges for integration into the mainstream society. Social problems will be especially challenging for mega-cities with populations over 10 million. For example, many of these mega-cities are hundreds of years old, built on antiquated underground water and sewage systems that are difficult to update without disrupting the infrastructure above it. Istanbul, a mega-city that is over 1000 years old loses an estimated 34% of their potable water due to leakage.

 

There can be tremendous opportunities for companies to achieve great profits in such densely populated areas. Many analysts predict that new markets like IoT could reach $1 trillion by 2025. This could create tremendous wealth for some and create a wider gap between the haves and have nots. Gentrification, the influx of more affluent residents into urban neighborhoods, can drive up the cost of housing and retail space, displacing poorer people and small businesses, creating an even wider gap. This will lead to alienation and discrimination which is the breeding ground for terrorism where individuals or a groups of individuals take violent action against the public to advance their political, religious, or ideological goals. Public safety will be a major concern for urban areas, particularly urban areas with high visibility.

 

There is a clear and pressing need to address social problems if we are to have a healthier, safer, and sustainable lifestyle for ourselves and our children’s children. Although many companies have a CSR (corporate social responsibility) program where they donate funds to social causes, sponsor charity events, and encourage employee participation in outside social initiatives, this does not go far enough. Wanting to do good is not enough. Sustainable social change can only happen when corporations integrate Social Innovation into their corporate strategy for delivering business outcomes. By helping to solve social challenges, a Social Innovation strategy will help corporations build a sustainable business model and long-term viability. They can do this by building new markets, strengthening supply chains with access to sustainable resources, investing in talent diversification, enabling new consumers, and helping to create a social environment that is conducive to business growth. Social Innovation includes the process of transforming an idea or invention into a solution that creates value for society and stakeholders.

 

Corporationss that are only focused on short term profit, may be first to market with new technologies, but may create even greater social problems. The late Stephen Hawkings warned that AI could be the worst event in civilization and he urged creators to employ best practices and effective management when creating AI. Hitachi integrates the principles of Kaizen in their approach to AI so that AI is used to empower workers rather than displace them.

 

Hitachi has always been conscious of the environment and the need for social innovation beginning in 1910 when Hitachi was established to build electric motors to improve the efficiency in mining operations.  In 2009, during the global economic crisis, Hitachi announced our strategy to strengthen our Social Innovation business. Hitachi announced that we would be “concentrating to build a more stable earnings structure with a focus on the Social Innovation business, which comprises social infrastructure supported by highly reliable and highly efficient information and telecommunications technology.” When you map that 2009 statement on Social Innovation business forward to today, you can see how it fits to our IoT strategy comprised of OT (social infrastructure) and IT (information and telecommunications) technologies. Through IoT, Hitachi will be able to address many of the social problems described above while improving our bottom line. 

 

Since then, Hitachi has delivered innovative solutions from clean water to smart cities that have addressed social problems and improved our bottom line so that we can continue to grow the company and invest in new Social Innovation projects. As our Hitachi Vantara CEO Brian Householder has described it, we are working to a double bottom line, delivering solutions and outcomes to benefit business and society.

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