Inclusive policy and strategy making tends to be associated with policy matters affecting developing countries. This is mainly because of the gap between the rich and poor in relatively poor environments, and the relatively low income levels caused by significant levels of poverty. An excessive share of riches being concentrated in the hands of the few is not a developing economy prerogative. Income and wealth inequalities have attracted much attention in the developed economies in particular since the last economic recession began in 2008, generating the iconic ratio of 99:1, although there are wide variations between countries. The richest 1% of Swiss manage to survive with half the income of their UK counterparts, and in Denmark the ratio of one-tenth of the highest income earners and the poorest tenth is 5:1. (http://www.oecd.org/social/in-it-together-why-less-inequality-benefits-all-9789264235120-en.htm
Consequences for businesses
Why does this matter for entrepreneurship development or business strategy? Can inclusive government policy influence entrepreneurial thinking in the design of strategy? It matters because inequality, in the words of Tony Judt, “is corrosive; it rots societies from within” (‘Ill Fares the Land’ Penguin Books). While corporates lobby governments on a range of fiscal, monetary, industrial and environmental issues to try and map their own strategies around government policies, very rarely do they reflect or act on socially inclusive agendas. This is despite overtures to ideas such as the sharing economy and shared values.
Innovation and policies promoting innovation cannot necessarily address the big inequality question which has been entrenched by rates of return on capital exceeding the rate of growth of output and income. This trend reversed what they did in the 19th century as Piketty and Saez,2014, write in ‘Inequality in the Long Run’ ;https://eml.berkeley.edu/~saez/piketty- However, policies focus on market failures that exclude certain groups of people from participation in the economy, then it simply replaces social failure with market failure. If market adjustments incorporate social change, to address the needs of the poor, then the poor and others can both engage as consumers and producers. This approach necessitates a key role for both the state as an innovator working with existing businesses as entrepreneurial organisations to foster the creation of new producers.
Barriers to innovation
The OCED Innovation Strategy 2015 An Agenda for Policy Action , refers to two types of inclusive innovation, pro-inclusive and grassroots innovation. The two variations attempt to address a range of market and systemic failures. These include typically a lack of or barriers to information about markets, difficulties in accessing basic infrastructure utilities, and the unavailability of credit, generally by the poor and the excluded, part of what Robert Mendoza, (Why do the poor pay more? Exploring the poverty penalty concept (2011) refers to as the “poverty penalty”.
Government as actors
Governments are not just market gatekeepers, they are also effective as market creators This means dedicating imagination, resources, commitment and ecosystem development in that region. It also means mobilising resources for creating new firms with citizen governance structures.
At the business organizational level this takes the form of developing multiple channels of products and services or platforms, but not all governed by the same commercial goals. Applying ambiguous dexterity in strategy, using AI and machine learning technologies coupled with design thinking, firms could work with big public data to seek joint solutions for the future, marrying civic good with economic surplus generation. This necessitates an understanding and application of appropriate ecosystems instead of rigid or standardized models extrapolated from the past and developed in very different socio-economic environments.
We can identify 4 5 distinctive rationales for adopting these policies and using their purpose to sharpen entrepreneurial thinking in boardrooms:
- Analysing historic market, system and capacity failures but identifying predictive factors using both economic and social data;;
- Augmenting innovation in the design and delivery of public and private services and the public and the private goods creation activities, matching public policy initiatives with specific corporate innovation strategies; ;
- Empowering low-income groups to be active producers and consumers of innovative products and services that are consumed by varied communities of interest; and
- The extension of the idea of long-term growth to address both economic growth and social development at the level of the wider economy/society and also at the level of the firm;
- Incorporation of ex-ante and ex post evaluation metrics using , for example, natural language processing, that capture social innovation outcomes alongside those for economic ones for general innovation policies.
While individual firms may be able to achieve such outcomes with specific products (the Amul Dairy cooperative in India and the rural women suppliers of milk, just one example of integrated strategy) it is not easy To coordinate design, production and delivery with the involvement of excluded communities, firms have to wade through bureaucratic currents at governmental, institutional and spatial divides. The creation of an active ecosystem becomes a major requirement often involving government departments, NGOs, universities, research institutions, private sector partners, and the financial sector working in tandem with grassroots innovators, low income groups and consumers.
The complexity of the inclusive innovation policy agenda suggests that it is far removed from standard innovation strategy development, especially those found in advanced economies with their focus on science and technology and short-term outcomes. Yet, we can see that in any scenario organisational innovations involving people as producers and consumers, are necessary concomitants of technological innovations. A longer-term strategy process supports both larger and smaller firms. The mix enables strategies to leverage both complexity and uncertainty of economic environments.
Ecosystem of key players
Grassroots innovation and inclusive innovation policy development only has purchase when an ecosystem of key players and institutions is established and supported. This leads to a democratisation of the innovation process, now apparent in networked based, open innovation architectures for modern product development projects (von Hippel and Krogh, Free revealing and the private-collective model for innovation incentives’. A distinctive factor in the inclusive innovation process is this producer-user-institutional nexus coupled with the conjoined technological-economic-social imperatives. Crucially, it is about non-proprietary and collective models of innovation. We need inclusive government policies on innovation dovetailing with micro-level organization strategies for inclusive wealth creation.
About the author:
Jay Mitra is Professor of Business Enterprise and Innovation, Director of The Venture Academy and at Essex Business School, University of Essex, UK. He also leads the International Entrepreneurship Forum (IEF) a unique network and forum for researchers, policy makers and business practitioners.