Fourth Sector Innovation

Posted by Flux on 

20 March 2012

What’s Trending Now?

Fourth Sector Innovation.

In the post-recession world where one sells solutions and not just products , social entrepreneurs find themselves fitting into a “Fourth Sector” of the economy.  This ties in with new research showing that innovation is as likely to be done for pleasure as for profit in our new economic climate.

Why It’s Important?

Do away with the old idea of the economy’s segregation of entities into profit, non-profit and government enterprises.  This no longer adequately classifies initiatives correctly, or helpfully, for that matter!

An article by Heerad Sabeti recently published in the November Harvard Business Review, states that in our new amalgamated world, “For-profit businesses are tackling social and environmental issues, non-profits are developing sustainable business models, and governments are forging market-based approaches to service delivery.”  This makes for a real zeitgeist change, and Sabeti goes on to explain the necessity of a new Fourth Sector classification, made up of businesses operated “For-Benefit”. These For-Benefit organisations are already thoroughly integrated into society.  Consider freemium services available online, and how already there is a blur between shareholder and stakeholder benefit maximisation in for-profits and non-profits alike.

Not only have we witnessed this emergence, but there is strong evidence to suggest that the economy’s Fourth Sector has truly become so necessary in today’s world that equipping companies and countries with the appropriate legislation to participate in this sector is vital.  Congress has been in a battle over this for almost two years. 

What’s the Butterfly Effect?

The ramifications of this Fourth Sector are significant.  Firstly, there is and will be a significant increase in the level of innovation.  This is because changing and improving products will no longer be seen as a company’s job, done to extort the highest payoff.   Consumers are more willing to become Prosumers and get further involved with the process of innovation; understanding more fully that social benefit may be had by all. In fact, according to research done by Eric Von Hippel in the UK , the average consumer innovates more than two times as much as an average firm.  And this not due simply to the abundance of information and access to materials, but also because of the motivation derived from the social consequences he sees in his design.  (Only 2% of consumer innovations were patented.)

Secondly, there is most likely to be better integration of networks, responsibilities, business objectives and employee-switches between the sectors.  This is consistent with global trends; such as sector-overlapping tech-development (Mercedes’ Invisible Car) the greater emphasis on the triple bottom line (For-profits can be seen as even leading the charge), and broader education for millenials – aptly known as the slashies.

The Pioneers 
There are companies wising up to the paradigm shift.  Twitter is a superb example of how easy and beneficial it is to harness users’ energy, and allow them to leverage a platform for their own functionality.  A recent example, as found by Von Hippel, was Microsoft’s experiences with the Kinect accessory.  So many users modified the product that Microsoft had to revoke its stance against the “hacking” and rather commend the laudable innovation.  The mutual advantages were easy to see.

Global Hotspots

Consumers everywhere are increasingly growing in confidence with regard to their problem-solving abilities, especially in the economic downturn.  The emergence of a Fourth Sector will see many new social entrepreneurs begin their adventures in developing markets, and I believe that once legislation better supports the For-Benefit enterprise, therewill be a very quick adoption rate, worldwide.

By: Benjamin Shaw

About Benjamin

Benjamin is a broad-thinker, fast learner and passionate trend spotter.
He particularly loves reading about the integration of technology into society, and the role that entrepreneurs have to play in new South Africa.


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