Social innovation: Today’s entrepreneur’s tool for value creation through Business Model

Innovations.

Submitted to: Dr. Bilal Mirza

Submitted by: Ossama fazal
Maha Naeem
Emad Rashid
Sarah Zulfiqar
 Social innovation: Today’s entrepreneur’s tool for value creation through Business Model
Innovations.
Abstract
In Pakistan innovation in Business models is observed through social entrepreneurs which is
mainly due to social innovation. Social innovation is the name of new strategy, concept, idea that
an organization uses to meet the social need of different factors related to working condition as
well as community education, development. And this concept is currently gaining more attention.
This paper discusses these emerging innovations in business model of micro finance industries.
Research has found that there is high correlation between the economic performances of those
firms which are socially innovative in microfinance industry. Microfinance is the availability of
loan, saving, insurances, and other financial service to people who do not have entrée or a source
of access to the conventional financial or banking system. MobiCash, EasyPaisa, UBL Omni can
operate with a ‘dual bottom line’ in supporting inclusive innovation and social entrepreneurship.
Introduction
Social innovation is the name of new strategy, concept, idea that an organization uses to meet the
social need of different factors related to working condition as well as community education,
development. The social innovation concept embraces the strengthening of society .
In the recent years the concept of social innovation is prevailing . Social innovation is
considered by some socialists as a buzz of words or they consider it as a passing fad which is too
imprecise to be practically useful. While some socialists and scientists, however, understand
important values in the concept of social innovation because it recognizes a important type of
innovation .
Noticeable social innovators affiliated with social innovation including Pakistani Akhter Hameed
Khan, Muhammad Yunus from Bangladesh, who is the founder of Grameen Bank. This bank
introduced the idea of microcredit for the support of innovator in numerous countries which are
developing. It also stimulated program such as the Info lady Social Entrepreneurship
Programme of Dnet (A Social Enterprise).
Social innovations include the social process of innovations ,
The methods include in the process of social innovation are

 methods and techniques from open sources

 special purpose innovations like
o activisms,
o online volunteering,
o microcredit .
 stated that social innovation is different from business innovations and they further identified
that government’s support is required in the process of social innovations. In the last decade
remarkable research have been made in the arena of social innovation.it has been identified that
concept of social innovation has its roots related to the management, entrepreneurship, and
public management .

The boundaries of social innovations has not been identified yet , and there is an enough room
for the contribution to both theory and practice . Till now research made in the arena of social
innovation had been diverged between agented as well as structuralized approaches . A new
conceptual framework has been formulated for investigating the social innovation as an initiating
factor of social alterations and innovations. . The processes at the small level performed by
individual and groups that engender innovations are considered and best conditions for
innovations have been identified. For last 15 years, Social innovation has grown an increasing
amount of consideration in the research of management and among practitioners .

Business Model Innovation (BMI)

Over the last 15 years, research has been made immensely in the concept of business model
innovation (BMI) . An important phenomenon has been identified by the literature of BMI but it
has lacking in theoretical groundwork, and empirical investigation is not growing . Important
boulevards for future researchers has been identified and showed the complexities in this theory.
Innovations, and other torrents of literature could be helpful to overcome much of the gaps in the
BMI literature .

Microfinance Industry

Microfinance is the availability of loan, saving, insurances, and other financial service to people
who do not have entrée or a source of access to the conventional financial or banking system .
Microfinance industry is fighting with the prevalent and obstinate dilemma of poverty. Millions
of people are trapped in the cycle of existence because they have no access to capital or finance
which is required to invest in such activities that would be helpful for them to escape the cycle of
subsistence . Mobile banking solutions are rapidly emerging all over the world. Major mobile
phone manufacturers, banks and telecom operators are seeking to enter this new market .
Manufacturers and software platform owners integrate solutions into their existing products like
Apple Pay or google wallet . Banks build apps that allow users to pay in stores using the phones
camera or NFC chip . Network operators are utilizing their large network of agents and retailers
to provide banking services to their customers .

In this paper an effort has been made to explain the definition of social innovation. The factors
are elaborated that explain the importance of the term social innovation and make it useful for
social entrepreneurs as well as social entrepreneurships. Social innovation in microfinance
industry has been discussed in this paper. Today’s entrepreneurs do not take everything for free
they take social innovation concept as their weapon and indulge it in their business model, which
leads to business model innovations.
Paper will discuss following points

 There is a rapid growth in social innovation literature after 2002

 Discusses the social value creation as a conceptual bridge to the social innovation.
 MobiCash, EasyPaisa, UBL Omni are using or can use the concept of social innovation
for value creation and customer relation management.
 MobiCash, EasyPaisa, UBL Omni are embedding the social innovation in their business
model, hence it leads them to have business model innovation.
 Social innovation has an impactful effect on business models of microfinance industry.

Keywords
Social innovation, Social entrepreneurship, Social value, customer relation management, Value
Creation, Business model innovation

Research Question

 How MobiCash, EasyPaisa, UBL Omni can use social innovation for value creation?
 Can social innovation increase the brand equity of MobiCash, EasyPaisa, UBL Omni?
 Social innovation is responsible for CSR of MobiCash, EasyPaisa, UBL Omni or not.

Literature Review
Social Innovation

Social innovation is the name of new strategy, concept, idea that an organization uses to meet the
social need of different factors related to working condition as well as community education,
development . The social innovation concept embraces the strengthening of society .

Importance of Social innovation

suggest the role of government programs to indorse the associations among the SMEs for
improvement of innovation capacity of them by increasing the social capital. Further researched
the funded programs of social innovation in Ireland, Denmark and Wales. But not all strong
economies show the effect of social innovation on business activities. Most of the companies
now a days are required to provide innovative solutions to the deep rooted problems like human
depression problem.
The economic theory maneuvers the managers to focus on the wealth maximization of
shareholders. assess how organizational theories and empirical researches responded to the
tension of corporate level involvement in widespread social life.
Social innovation is a composite course that intensely alters the basic routines, resource and
authority flows, or views of the social system in which social innovation occurs . Applications of
marketing and diffusion theory are helpful to some extent in understanding the courses or
successful strategies connected with social innovation . It is unwise however to rely merely on a
model of market to understand the diminuendos of growing social innovation, with a view of
complex nature of the supply-demand association with the respect to the social innovation
market . Instead, literature has proposed a distinctive model of system transformation associated
with a small but important group of social innovations and dependent on discontinuous and
cross-scale change .

The Five Conditions of Collective Impact of social innovations are

 Common Agenda: All stakeholders must have a shared vision for a change; which
includes the common comprehension of the problems and a collective effort for solving
the problems by an agreed solution.
  Shared Measurement: Data collection and data measurement should be done through an
aligned effort and each participant will be held responsible

 Mutually Reinforcing Activities: all the activities of the participants must be coordinated
through a mutually reinforced course of plan of action.

 Continuous Communication: there must be a consistent and open communication among

all participants for building trust and mutual objective and for the creation of motivation.

 Backbone Support: a separate organization with staff having particular skill is required
for the creation and management of collective impact of innovations. This impact serves
as a backbone for a coordinated effort .

Micro Finance Industry

Micro finance initially had limited defined as availability of small and medium term loan to the
small entrepreneur and small business which have no access to the banking or credit services
directly. Basically two mechanism for the delivery of this service

 relation among bank and individual entrepreneur and small business

 A model which is group based of several entrepreneurs who came together for loan and
auxiliary services.

find positive relation among human capital and innovations. Partial support for the positive
effect of trust and associational activity on innovation. For balancing the outreach and poverty
improvement, a concentrated growth strategy must be cost effective at its initial stages. But an
extensive growth strategy needs a huge investment in infrastructure, increase in recruitment and
in social capital .

Microfinance Institutions (MFI) are hunted to combine translucent sustainability with poverty
reduction. But microfinance institutions are different from each other according to their markets,
culture and technologies. EasyPaisa by Telenor is an effort of Telenor to socially innovate itself
in the market. . Lacking in awareness of non-monetary performance is an obstacle for social
innovation. But Technological innovations are attractive when they are combined with methods
to support community building and education .

Business model innovation

Business model innovation is a perfect thing. Simply it require neither new technology nor the
new brand market creation. It is the second name of delivering the existing product being
produced with existing technology in the same market with some changes which are invisible to
the outer world . Business model innovation is the expansion of new, exclusive notions which
support the financial abilities of an organization including its mission and the processes for
bringing those concepts to fruition. The primary goalmouth of business model innovation is to
find new revenue sources through improvement of product’s value and delivery of products to
customers .

Isolated business models has widened its entering in new market by leveraging current resources
and capabilities of a firm for getting advantage of current prospects.

“Interactive business models require a firm to combine, integrate and leverage both internal
resources with ecosystem's capabilities to create new business opportunities” .

Millions of people are trapped in the cycle of existence because they have no access to capital or
finance which is required to invest in such activities that would be helpful for them to escape the
cycle of subsistence . Mobile banking solutions are rapidly emerging all over the world. Major
mobile phone manufacturers, banks and telecom operators are seeking to enter this new market .
Manufacturers and software platform owners integrate solutions into their existing products like
Apple Pay or google wallet . Banks build apps that allow users to pay in stores using the phones
camera or NFC chip . Network operators are utilizing their large network of agents and retailers
to provide banking services to their customers . Stated the five lessons learned from the
experience of organizations out of which three are conventional thinking, finding complementary
associates, and continuous experimentation done by the organization. But the two are related to
the social business models; one is social oriented profit shareholders are involved and second one
is objectives are stated according to the social profit. These new parameters are relating the
business model with the social innovation. Organizational units could produce more innovative
products and can enjoy the better performance . Social capital is a collective stuff relating civic
appointment, reliability and reciprocity in social networks. It is capable of being identified in
social, political and economic contexts, often associated with strong communities .

Conceptual Framework

The theories has discussed the concept of social innovation and its impact on the organizational
performance.
  Institutional theory
 Structuration theory
 Behavioral theory

Institutional theory states the variety of norm, culture, value, conventions and rules effect the
understanding of a society. It discuss the two perspectives at individual level as well as at
institute level. Structuration theory being used in various directions of the social sciences such as
entrepreneurship, technology application, organizational culture, organizational theory, strategy
and management, and business ethics. Behavioral approaches are mostly useful in the individual
perspective of social innovation, which focuses on the interpretation of an individual regarding
the social system (Cajaiba-Santana, 2014b).
Theoretical framework
Hypothesis 1: There is a positive correlation between the firm’s performance and firm’s social
disclosure.
Hypothesis 2: Social performance is positively correlated with economic performance of
organization.
Hypothesis 3: Social innovation increase the brand equity.
Hypothesis 4: Social innovation is responsible for CSR
How can use social innovation for value creation?

 Can social innovation increase the brand equity of MobiCash, EasyPaisa, UBL Omni?
 Social innovation is responsible for CSR of MobiCash, EasyPaisa, UBL Omni or not.

Research Methodology
Sample and Procedure
The research study focuses on the micro finance industry and data is collected from various firms
like MobiCash, EasyPaisa, UBL Omni. There are many firms available in market. Further the all
demographics of customers have been taken in this research. Data has been collected from the
customers for measuring the CSR, while the performance data of organization is collected from
secondary data sources.
Data collection: data is collected with the help of questionnaire which has been adopted from
the research of . We distributed 300 questionnaires and out of them 270 responses were obtained.
After missing value analysis, the final sample consists of 250 responses. Data has been collected
from the customers for measuring the CSR, while the performance data of organization is
collected from secondary data sources.
Measurement
Variables has been measured with the help of items, certain number of items are assigned to a
specific variable; for satisfaction 3 items, for perceived value 3 items. To measure the variable of
brand equity 3 items has been used, for price we used 3 items.
Data Analysis
Data has been analyzed in three steps
a. The reliability of data has been analyzed
 b. The regression analysis is run to check the dependence of social innovation on the
hypothesized variables
Measurement Reliability
The seven construct showed high internal consistency and reliability with Cronbach alpha value .
674 while Cronbach Alpha.
Regression analysis
To analyze the effect of different constructs on social innovation regression analysis is done and
following results have been found out.
Hypothesis 1: There is a positive correlation between the firm’s performance and firm’s
social disclosure.
Firm’s performance as dependent variable and social disclosure as independent variable high
significance is observed between variables, regression analysis shows high correlation with the
Significance value of .000 and with df 1. So H1 is accepted.

Model Sum of df Mean F Sig.

Squares Square
Regression 13.674 1 13.674 24.754 .000b
1 Residual 136.990 248 .552
Total 150.664 249

Hypothesis 2: Social performance is positively correlated with economic performance of

organization.
Firm’s economic performance as dependent variable and social performance as independent
variable high significance is observed between variables, regression analysis shows high correlation
with the Significance value of .000 and with df 1. So H1 is accepted.

Model Sum of Df Mean F Sig.

Squares Square
Regression 16.432 1 16.432 30.359 .000b
1 Residual 134.231 248 .541
Total 150.664 249

Hypothesis 3: Social innovation increase the brand equity.

Customer satisfaction as dependent variable and trust in brand as independent variable same
result as high correlation is observed.
Research Findings
In Pakistan innovation in Business models is observed through social entrepreneurs which is
mainly due to social innovation. And this concept is currently gaining more attention. This paper
discusses these emerging innovations in business model of micro finance industries. Research
has found that there is high correlation between the economic performances of those firms which
are socially innovative. MobiCash, EasyPaisa, UBL Omni can operate with a ‘dual bottom line’
in supporting inclusive innovation and social entrepreneurship.
Recommendations for future research
This study can be used as a base and researcher can further explain the moderating and mediating
effects of social innovation on the firm’s perception in customer mind as well as the performance
of firm. Further this research can be used as a base for finding the effect of social innovation in
other industries. Further this study has a limitation like more data can be found and deep research
can be made on a specific organization like MobiCash. This study has taken various different
organizations in a collective manner.
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