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Welcome To The Solution Economy

The companies working to better society and the planet are creating their own economy, but it's up to us—and our governments—whether or not they succeed.

Welcome To The Solution Economy

[Image: Abstract via Shutterstock]

Imagine the world if we were able to double, triple, or even quadruple the number of problem solvers, the diversity of solutions, and the scale of social impacts.
Imagine if every government emulated NASA and opened up its toughest challenges for the world to solve.

Excerpted from The Solution Revolution: How Business, Government, and Social Enterprises are Teaming up to Solve Society’s Toughest Problems.

Imagine if thousands more investors built off a patient- capital approach, sharing early-stage funding risk to sow the seeds of dignity and wealth.
Imagine if tens of millions of citizens started building better city blocks and other supportive communities; if every multi-billion- dollar company became a double- or triple-bottom-line business and directed resources to solving society’s problems.

Imagine if the number of social enterprises tripled and thousands of them had the size and scale to spread their innovations across continents.

We’ve started down the road to such a world. The solution revolution is a reality—and it’s growing. This growth, however, is uneven. It’s flourishing in the United States, the United Kingdom, India, Australia, parts of Africa, and in pockets of Europe. In whole regions of the world, however, the developments described in this book are still quite immature.

Cultivating A Solution Economy

The reason is simple: the solution economy grows to fill the space it’s given, and certain regions offer habitats more hospitable for a robust solution economy than others. Their governments provide room for creativity, their businesses embrace new measures of value, and their investors trust alternative currencies of return.

What accelerates the solution economy? What constrains it? Consider two European neighbors: France and the United Kingdom. In the United Kingdom, both Conservative and Labor governments have actively nurtured the social sector for more than a decade. The result is a large and rapidly growing economy of problem solvers and a changing role for government. Instead of shouldering almost sole responsibility for delivery, government increasingly catalyzes solutions. The United Kingdom has fewer civil servants today than at any time in the past seventy years, despite a population increase of 300 percent over the same period. Moreover, the country has experienced a rapid growth in civil society—a 40 percent increase in new charities and a doubling of large charities between 1995 and 2005.

In contrast to the fertile UK landscape of nongovernmental problem solvers, France is pretty barren. Compared with the rest of Europe, France has the fewest philanthropic and charitable foundations per capita. The nonprofit sector is also smaller than most of Europe’s and less than half that of the United States (4.2 percent of GDP, compared with 8.5 percent in the United States). And the social enterprise sector is still a new and undeveloped concept.

Red Tape Vs. Helping Hands

Some of the differences between France and the United Kingdom can be attributed to long-standing cultural differences. French citizens have long supported the state’s large role in the economy and in daily life. But there is more to it than this. In contrast to France, the UK government has devoted significant time and resources to creating conditions for the solution economy to thrive. "You have to get the landscape right," explains Gareth Davies, a key architect of the government’s effort. "We spent a lot of time on structural reform, building the institutions necessary to grow the social economy." Steps along the way included opening up services to citizen choice, devolving service delivery to local governments, shifting procurement to payment-for-results models, and creating the £600 million Big Society Capital fund to help finance new entrants into the solution economy.

Some jurisdictions are designed to offer habitats more hospitable to the solution economy. Their governments provide room for creativity, their businesses step up to build social outcomes into business practices, and their investors innovate how social value is measured and exchanged. Some regions uproot thickets of red tape; elsewhere the opposite is happening. Waste Ventures in India struggles against laws that limit small-scale contractors. With an act as free and simple as changing restrictions, Indian municipalities could gain comprehensive waste cleanup, reduce carbon emissions, and boost a homegrown fertilizer and recycling industry.

On the other side of the planet, Revolution Foods, in Oakland, California, would be vulnerable to shareholder activism if it registered as a regular corporation—the board would face a legal obligation to turn $50 million in revenue into shareholder profit, rather than reinvesting it to serve 120,000 healthy meals per day to schoolkids.5 Fortunately, recent U.S. laws allowed Revolution Foods to form a B corp, a benefit corporation in which the number of meals served is a valid bottom line.

Think of the ripples emanating from the work of Revolution Foods. The company helps disadvantaged children and the farmers and others who produce healthy food. Children perform better in school, so the education system benefits as well. Private employers later enjoy (and employ) a smarter workforce—and a healthier one. Health-care savings pass both to the students’ families and to their communities.

As this example shows, the effects of one benefit corporation spread widely to the greater community. Imagine what the larger solution economy already produces and how much more can be unleashed. It makes a country stronger, for far fewer tax dollars.

Government’s willingness to forge partnerships (and vet those partners with accurate metrics), to make data more open, to contract for outcomes, to reduce regulatory minefields, and to convene diverse groups of contributors will hold tremendous sway over the scale of the solution economy within its borders. For instance, legal designations for nonprofits and foundations, along with the accompanying tax exemptions, encourage the proliferation of these organizations.

Collaboration Is Key

Some factors important to the solution revolution are more cultural and resist change. These range from citizen expectations of the role of government to societal attitudes on business failure and risk.

Yet across these various cultural contexts, one observation remains the same: today’s biggest societal problems are beyond the reach of any individual entity or sector. Collaboration is not just helpful, but essential, for true progress. In many ways, the technologies, business models, and currencies featured in this book offer a more level playing field, enabling the collective strength of all contributors to drive improved public services, wider choices, and better outcomes.

Ignoring the changing ways that solutions are now rapidly developed and deployed presents its own risks. Countries that cultivate connected ecosystems gain the advantage of accelerated growth in the scope and scale of potential solutions, while others that rely wholly on government will increasingly struggle to keep up. As citizens, we know which side we’d prefer. The question is how, as a society, to get there.

William D. Eggers leads Deloitte’s public sector research and is the author of seven books on government reform. Paul Macmillan is the global Public Sector leader for Deloitte Touche Tomatsu.

Reprinted by permission of Harvard Business Review Press. Excerpted from The Solution Revolution: How Business, Government, and Social Enterprises are Teaming up to Solve Society’s Toughest Problems. Copyright 2013 Deloitte Global Services Limited. All rights reserved.