Please cite this article as:

Altuna N, Contri AM, Dell’Era C, Frattini F and Maccarrone P (2015).

Managing Social Innovation in For-Profit Organizations: The Case of Intesa Sanpaolo.

European Journal of Innovation Management, Vol. 18, No. 2, Pp. 258-280

(http://dx.doi.org/10.1108/EJIM-06-2014-0058)

Managing Social Innovation in For-Profit Organizations: The Case of Intesa Sanpaolo

INTRODUCTION

Research on social innovation has gain momentum over the last years. Social innovations refer to

innovative products or services motivated by the goal of meeting a social need, with the opportunity

to create new social relationships or collaborations. They are a major issue for the European

Commission (Barroso, 2011), as they are seen as an opportunity not to be missed to connect with

the citizens and to promote a better quality of life. In this sense, it is not a coincidence that the

Social Innovation Europe Initiative was launched in March 2011. In the field of education, an

example of these phenomena are the Second Chance Schools, set up as a European Commission

project intended to provide training for young people who lacked the skills necessary to enter the

job market or to re-engage in education (Barroso, 2011). In the same field, a US-based example is

Teach for America: a non-profit organization created in 1989 as a little start-up with short budget

that has now become in a powerful force for education, where country’s most exemplar college

graduates teach for short to long periods in the neediest public schools in exchange of a little salary.

The concept of social innovation has entered the discourse in both academia and public in a more

prominent way in recent years and a number of institutions, non-profit organizations and

foundations have been created. Several attempts to structure the field of social innovation have been

done by academics such as Zapt (1991), Moulaert et al. (2005), Pol and Ville (2009) and Rüede and

Lurtz (2012). Besides, these initial studies have mainly referred to non-profit cases when dealing

with empirical work.

Most research has discussed social innovation in not-for-profit organizations so far. However,

beyond the role of the European Union in social innovation, other actors should also be mentioned.

Social innovation can and must come from all sectors – the public sector, the private market, the

third sector, and individuals/households – meaning that also firms have a role on it (European

commission, 2012, p.19). As outlined by the European Commission, all actors and all regions

should be involved in social innovation and there is actually a sign that social innovations can

increasingly be created and developed by firms (European Commission, 2012, p.29). However, we

do not know which are the abilities these firms need to manage these types of innovation projects

successfully. In firms social innovation causes a paradox indeed: they are not created to maximize

economic value but social value, and this might contrast traditional practices and ways of reasoning

in for-profit organizations.

To address this issue, the article presents and discusses a case study of a firm that has been involved

in social innovation for years. It is Intesa Sanpaolo (or ISP), a for-profit organization that leads the

Italian banking sector. In relation to their social innovation activities, in the last years they have

launched products and services that have acquired an increasing relevance in ISP’s strategy and

operations and have been included among the pillars of the strategic plan for the period 2011-2015.

The continuous rising and development of this kind of innovations within the bank, and the

opportunity that we had to study in detail this case study, made ISP the most suitable case for the

exploratory purpose of our investigation.

The paper enriches the field of social innovation by investigating how firms create, develop and

launch this type of innovations. By exploring the case of Intesa Sanpaolo, it points to the existence

of three managerial antecedents of a superior ability in social innovation: (i) integrating CSR in the

firm’s business strategy with a strong commitment from the top management; (ii) separating the

activities concerned with the development of social innovations from the rest of the organization,

following the structural ambidexterity model; (iii) involving in particular non-profit organizations

as a source of ideas for new social innovation projects and leveraging them to enable adoption of

the new products and services, which means applying the principles of open innovation to the

development of social innovations.

The structure of the paper is as follows. First, we will review the relevant literature regarding social

innovation and Corporate Social Responsibility (CSR), while explaining the connection among

these two concepts. Afterwards, the rationale for using a single case study and the methodological

details of the empirical analysis will be presented. The case study is presented in the results section,

whereas the discussion section summarizes and discusses the main findings of the analysis. Finally,

the last section concludes and outlines avenues for future research.

LITERATURE REVIEW

Literature on social innovation remains underdeveloped so far and little attention has been paid to

understanding its emergence and diffusion as a result of a determined sequence of actions (Cajaiba-

Santana, 2013). Research on social innovation is still mainly based on anecdotal evidence (Mulgan,

2006; Murray et al., 2010) and the different backgrounds and perspectives adopted by social

innovation scholars have led to a fragmented view, dispersed among diverse scientific fields such us

urban and regional development (Moulaert et al., 2005), public policy (Neumeier, 2012; Pot and

Vaas, 2008; Guth, 2005), management (Drucker, 1987; Clements, 2010), social psychology

(Mumford, 2002) and social entrepreneurship (Lettice and Parekh, 2010; Mulgan et al., 2007; Short

et al., 2009). The latter has gained momentum in the last years and a number of internationally

recognized works have been published, such as the book written by Light (2008) titled The Search

for Social Entrepreneurship. To date many competing definitions of social entrepreneurship exist.

One group of researchers refers to it as not-for-profit organizations in search of new funding

strategies (Boschee, 1995; Lasprogata and Cotton, 2003). A second group of researchers sees it as

the creation of businesses to serve the poor (Seelos and Mair, 2005), while a third group

understands it as a means to solve social problems and make social change (Martin and Osberg,

2007). Above all, it is worth mentioning that the term social entrepreneurship has its roots in the

non-profit sector, and as a result they tend to limit their domains to non-profit (Light, 2008).

In innovation, importance of the social dimension has become a widely accepted idea and research

on innovation has widened to accept the process of innovation itself as a social action (Hellström,

2004). Besides, in the 1995 Green Paper on Innovation (European Commission, 1995), the

European Commission highlighted the social element of innovation: “Innovation is not just an

economic mechanism or a technical process. It is above all a social phenomenon. [...] By its

purpose, its effects, or its methods, innovation is thus intimately involved in the social conditions in

which it is produced” (European Commission, 1995).

The novelty of the topic and the diversification of the disciplines involved have led to a number of

definitions of social innovation. Several attempts to structure the field of social innovation have

been done by academics such as Zapt (1991), Moulaert et al. (2005), Pol and Ville (2009) and

Rüede and Lurtz (2012). Each proposed a framework to explain different types of social

innovations. When studying social innovation the focus varies from social practices (Howaldt and

Schwartz, 2010; Zapf, 1991) to human-centred community development (Moulaert et al., 2005),

passing through human well-being in societies (Mulgan et al., 2007; Dawson and Daniel, 2010;

Phills et al. 2008; Pol and Ville, 2009), among others.

For our study, the latter has been considered. One of the institutions that follows this categorization

is the Young Foundation, providing a definition of social innovation that is consistent with the

notion of improving the well-being in societies: “Social innovations are innovations that are social

both in their ends and in their means. Specifically, we define social innovations as new ideas

(products, services and models) that simultaneously meet social needs (more effectively than

alternatives) and create new social relationships or collaborations.” (Murray et al., 2010, p.3). The

article from Mulgan and colleagues is another example in this stream of literature. They define

social innovation as: “Innovative activities and services that are motivated by the goal of meeting a

social need and that are predominantly developed and diffused through organisations whose

primary purposes are social.” (Mulgan et al., 2007, p.9).

Learning from the above-mentioned works, this paper focuses on human well-being in societies and

argues that social innovations are innovative products or services motivated by the goal of meeting

a social need, with the opportunity to create new social relationships or collaborations.

As mentioned by the Commission (European Commission, 2012, p.19), social innovation can and

must come from all sectors, so despite social innovation is usually promoted by non-profit

organization and/or foundations, for-profit organizations also have a role on it.

Along this line of reasoning, CSR scholars (Hanke and Stark, 2009; Harazin and Kosi, 2013;

Mulgan, 2006) emphasise the fact that firms, in the implementation of their strategic CSR, often

develop innovations that fit the definition of social innovation as they entail the creation of “new

market spaces, products and services or processes driven by social, environmental or sustainability

issues” (Keeble et al., 2005). Examples of this type of innovations are known under the labels ‘eco-

innovation’ (or ‘green-innovation’), ‘based of the pyramid’ and ‘socially responsible design’.

Literature on eco-innovation investigates the integration of environmental issues in the innovation

of products and processes (see, for example, Foster and Green, 2000; Phillimore, 2001; Berchicci

and Bodewes, 2005). According to Bansal and Roth (2000), firms may invest in eco-innovations

given their social responsibility commitment and their desire to act in a correct (ethical) way,

preserving natural resources for future generations. The base of the pyramid literature studies the

business opportunity resulting from addressing a new unexplored market area at the bottom of the

social pyramid (Prahalad and Hammond, 2002), which consists of the two billion people living with

less than USD 2.5 a day. When entering markets in developing or emerging countries, companies

innovate their products and processes and sometimes their entire business models in order to

respond to the needs of the local populations (Prahalad and Hammond, 2002). ‘Design for all’,

whereby a firm innovates its products or services to make them accessible to disabled people

(Margolin and Margolin, 2002) and, more broadly, ‘socially responsible design’, defined as the use

of design to address social, environmental, economic and political issues (Davey, Wootton,

Thomas, Cooper and Press, 2005), also fit the definition of social innovation given above. Even if

the main focus of this body of literature is on the process of design of these product or service

(Papanek, 1985; Whiteney, 1993; Dearden, Dunckley, Best, Dray, Light and Thomas, 2007), the

social and/or environmental benefits provided by this kind of innovations are evident.

Despite the interest of CSR scholars in social innovations, the extant literature does not provide

insights into how for-profit organizations can manage social innovation projects. An exception is

Harazin and Kosi (2013), who study how ISO 26000 could be an instrument to inspire and promote

social innovation within firms, due to the similarities among the principles and core subjects both

the certificate and social innovation deal with. We are left therefore with no indications as to how

social innovation projects can be initiated and developed in organizations whose primary goal is to

maximize economic value. It is clear that these organizations engage themselves in social

innovation to turn strategic CSR into practice, but how they successfully manage these projects

remains unanswered. This paper presents a case study that provides exploratory insights into the

mechanisms through which a for-profit organization can successfully initiate and develop social

innovation projects.

METHODOLOGY

Considering the exploratory nature of our research and the importance of ensuring an in-depth

analysis of the phenomenon from different perspectives, both internal and external to the firm, the

most appropriate methodology appeared to be case study research. Indeed case studies allow

studying complex phenomena, embedded in their context, collecting detailed and rich data and are

longitudinal by default (Easton, 1998; Yin, 2003). A single case study was deemed appropriate to

obtain an in-depth account of the managerial and organizational enablers of social innovation in a

for-profit organization.

The selection of the case was based on the combination of ongoing research activities and

theoretical interest (Siggelkow, 2007). The management of social innovation in Intesa Sanpaolo

(ISP) discussed hereinafter is part of a broader research project aimed at studying the management

of strategic CSR in large, incumbent firms. There are a number of facts that make ISP’s concern

and dedication towards CSR evident, among which rankings, prizes and presence in best CSR

practices reports. One of the first international recognitions for ISP arrived in 2010 when Newsweek

named ISP the third greenest bank worldwide (Panorama Economy, 2010). In 2013, ISP ranked 91

in the Global 100 Index done by the Canadian consulting firm Corporate Knights, which analyses

and evaluates the CSR of over 4.000 companies worldwide1. Again, in 2014, ISP was considered

among The 120 most advanced companies at the global level2 on the study conducted by Vigeo, the

leading European expert in the assessment of companies and organizations with regard to their

practices and performance on environmental, social and governance (“ESG”) issues. Moreover,

ISP’s CSR practices have been exemplified in a number of studies (see for example Corporate

Social Responsibility Across the European Banking Sector - 2013)3 and ISP has also promoted

volunteering activities4 and associations such as Sodalitas, which aims at making CSR a real tool

for development and social cohesion.

Building on this commitment toward CSR, the development of social innovations is one of the most

important elements of the CSR strategy of ISP. These innovations consist in new services created to

enlarge financial inclusion to disadvantaged social categories, such as non-profit organizations and

social enterprises, immigrants, unemployed people, or others who cannot provide sufficient real or

personal guarantees such as students and small and medium enterprises. Some of these products and

services have been included in the company’s commercial offer and they are gaining a major

relevance in ISP business strategy, as can be easily noticed by looking at the bank’s 2011-2015

1 Source: http://www.greenbiz.it/green-management/marketing-e-comunicazione/csr/9428-global-100-index-2014 (Accessed 5th December 2014)2 Source: http://www.vigeo.com/csr-rating-agency/en/actualites-a-presse/blog-9 (Accessed 5th December)3 Source: https://www.abi.it/DOC_Societa/Csr/Banche-e-Csr/CSR_Report_2013.pdf (Accessed 5th December)4 See website for more details: http://www.amcham.rs/education__csr/amcham_members_success_stories.124.html?nId=942 (Accessed 5th December)

industrial plan. Indeed, three of the pillars of the bank strategy for the next years are: leadership in

the third sector, creating a link with the university world and helping small and medium companies’

growth. This suggests that ISP is a particularly appropriate case to investigate the phenomenon of

our interest.

ISP was born in 2007 from the merger of Banca Intesa and Sanpaolo IMI and it is now the market

leader in Italy in every area (retail, corporate and wealth management), with a market share close to

20% in most Italian regions. ISP operates also in central-east Europe, Middle East and Northern

Africa. The bank has a divisional structure, as shown in Figure 1. The Head Office Departments

comprise both the CSR Department and the Bank and Society Laboratory (hereafter indicated as

“Laboratory”), which is the organizational structure dedicated to the development of social

innovations. Banca dei Territori (the domestic commercial banking) is responsible for retail

customers, private customers and SMEs. This division comprises all the territorial branches of the

bank, Banca Prossima (BP, the bank of the Group dedicated entirely to non-profit organizations),

Mediocredito (the bank dedicated to SMEs), and other banks focused on specific client segments.

INSERT FIGURE 1 HERE

The main data source used for the empirical analysis has been direct, face-to-face interviews, for a

total of around 50 hours of tape recorded interviews (see Appendix 1 for the interview protocol).

We involved in data collection 5 managers of ISP, the President of Consorzio Gino Mattarelli (an

Italian network of social enterprises) and a Full Professor of the Politecnico di Milano. Both

Consorzio Gino Mattarelli and Politecnico di Milano are partners in the projects developed by the

Laboratory. Table 1 provides details of the interviewed people, indicating the company or group

they belong to and the number of interviews undertaken with each of them. This primary source

information was complemented and triangulated with material from secondary sources, i.e. internal

records and documentation regarding the social innovations developed by ISP, its sustainability

balance sheets, other official documents (e.g., annual balance sheets, business plans, press releases)

and publicly available data collected through the professional database www.lexisnexis.com.

INSERT TABLE 1 HERE

Given the peculiarity of the banking industry and the intrinsic limitations of the single case study

methodology, our aim is not to statistically generalize results, since it is not possible from the

exploratory case study analysis (Yin, 2003). However, our aim is to make analytical and theoretical

generalizations to the existing body of knowledge regarding the management of social innovation

projects. It is our intent that the findings will inform future theoretical and empirical studies

regarding the management and organization of social innovation in for-profit organizations, but we

recognize that they cannot be generalized to populations of firms or markets.

EMPIRICAL RESULTS AND DISCUSSION

In this section we discuss the organizational and managerial solutions adopted by ISP that improved

its ability to create and develop social innovations. In particular, we organize our discussion around

the three main findings that represent the enablers for the development of social innovations in a

for-profit organization: (i) adopting a strategic CSR with the clear commitment of the top

management; (ii) separate the activities concerned with the development of social innovations from

the rest of the organization, according to the structural ambidexterity concept; (iii) applying the

principles of open innovation to the development of social innovations.

Strategic CSR

The paths along which ISP has been moving in its CSR strategy are mainly two: (i) the diffusion of

the CSR culture at all levels of the bank and in its foreign branches; (ii) the improvement of the

stakeholder engagement process.

Concerning the first element, the model followed by the bank is based on self-responsibility of the

departments that are committed to ensuring application of the values and principles of social

responsibility in their business activities. In this respect, a fundamental role is played by the ‘CSR

Delegates’, who are appointed by the Heads of the relative departments and collaborate with the

CSR Unit in the following tasks: identification of the social responsibility objectives for the specific

department; management of relations with major stakeholders regarding the relevant issues;

management and monitoring of projects underway; preparation of the Social Report; identification

and management of cases of non-compliance with the Code of Ethics. As of today, the Network

counts approximately 50 Delegates across all Departments and Banks of the Group in Italy, and 10

Delegates from the International Subsidiary Banks. As regards the stakeholder engagement process,

it evolved significantly in the four years after the merger, as reported in the ‘Stakeholder Relation

Report 2007-2009’. In the first phase, the focus was primarily on solving critical situations, with a

responsive approach. In the subsequent phase, the Bank went about systematically involving its

stakeholders in risk management, reaching what the bank described as ‘integral strategic integration

for sustainable competitiveness’ (Stakeholder engagement Report, 2007-2009), which refers to a

systematic dialogue with stakeholders that leads to a joint definition of group sustainability

strategies.

This ‘strategic integration’ was carried out through focus groups dedicated to the various categories

of stakeholders. In 2008 the CSR staff of ISP organized the first multi-stakeholder forum, with the

involvement of clients, collaborators and trade unions. On behalf of clients, for example, several

actors were involved: the families client of ISP, in order to evaluate the appropriateness of the

current offer to the specific needs of young people; large and medium corporate clients, to see how

the bank could help them face the sustainability challenges in their industry (such as reduction of

emissions, maintaining sustainability criteria while going international, respect of human rights);

the consumer associations, to evaluate the efficacy of the actions undertaken by ISP to face up to

the economic crisis (such as renegotiating mortgages, agreements with category associations for

helping small and medium companies and unemployed people). In addition, a select number of

NGOs were involved in order to propose strategic guidelines to the Bank on key issues such as

environment, immigration, and globalisation. Because of this positive experience, the bank

organized multi-stakeholder involvement as a systematic process, whereby different stakeholders

are met periodically with appropriate involvement mechanisms. Since 2009, the engagement

process and its results have been annually reported in a ‘Stakeholder Relation Report’, added to the

Social Report.

The strong commitment toward strategic CSR and the great support that the initiatives aimed at

diffusing the CSR culture within the organization and at continuously engaging with the

stakeholders have received from the top management are key to improve the ability of ISP to

continuously create opportunities for social innovations, in particular to enlarge financial inclusion

to those disadvantaged social categories that are usually excluded from credit provision. The

development of these innovations represents a central point of the CSR strategy of the bank, and is

managed by the Bank and Society Laboratory. As mentioned by one of the interviewees, the

commitment of the top management was clear and profound: “our CEO -of ISP- believes in this

project” (CEO of Banca Prossima). To summarize, without the strategic importance attached to

CSR by the top management of IPS, it would be impossible to raise the commitment in the

organization necessary to continuously create opportunities for social innovations, as outlined in

many of the interviews conducted with the key informants.

Structural ambidexterity

The CEO of Banca Intesa, who later became CEO of ISP, created the Bank and Society Laboratory

in 2002. It can be described as “the Bank R&D department for social innovation” (CEO of BP), as

its key mission is to enlarge financial inclusion: “There are about 8 million people in Italy who do

not have access to financial services: about 16% of the population, against the euro zone average

of 7%. The most vulnerable social groups are those who do not have an on-going income, for

example young people and immigrants, for whom “non-access to banks” is often paired with social

exclusion” (ISP Social Report, 2010). The innovative element of the products and services

developed by the Laboratory lies in their ability to provide credit without asking for real or personal

guarantees, which the disadvantaged social categories cannot provide. However, these innovations

are designed in order to guarantee a limited risk exposure for the bank, which makes them

economically sustainable and replicable in the long run.

The Laboratory reports directly to the CEO of the Group and operates as an independent business

unit, with its own dedicated budget. The size of the annual budget depends largely on the

Laboratory’s ability to generate new projects and ideas. Typically, the overall expenditures for each

project is below 35,000 € (not including credit disbursement), and the Laboratory has carried about

20 projects since its foundation. Given the limited financial effort and the explicit sponsorship of

the CEO, the Laboratory is quite free to decide how to allocate its budget, since no target financial

returns (in terms of ROI, profits, etcetera) are set from the corporate level.

This peculiarity allows the Laboratory to operate quite differently from the rest of the bank. It can

explore new solutions without bowing to the usual logic of profit, “We work in a department that is

totally separated from the bank, because we think in a very different way. For us the creation of

social value is the first think, not making money.” (B&S Laboratory coordinator). The peculiar

features of the Laboratory’s management systems, operational procedures and staff motivation

confirm this diversity. With respect to the usual strict rules and routines of the bank, the laboratory

staff has major freedom and flexibility: “We can work the whole night if the project needs it, but we

do not have any fixed time table. This is possible because people who work in the Laboratory

believe in its mission, they do not need strict control.” (B&S Laboratory coordinator). The

hierarchy structure is flat and the relationships between people are informal, even with respect to

the highest managerial levels. This informality represents a stimulus for creativity and ideas

exchange: “Each person in the group, at each hierarchical level, is expected to propose new ideas

to the team, to point out new critical social issues” (B&S Laboratory coordinator).

At its first beginning the Laboratory employed 5 people, who have grown up to 15. The recruitment

criteria are aligned with the laboratory’s peculiarity. Three are the main skills required to people to

work in the Laboratory: “The ability to think outside the box of business logic, their ability to

establish relationships both inside and outside the company, and the motivation and strong

commitment to the social mission promoted by the Laboratory” (B&S Laboratory coordinator).

They need to think and implement solutions having in mind first their social impact, and not the

profitability they can generate. They need to establish relations both with the bank, in order to

facilitate the transfer of the new product or service in the ‘mainstream’ (the commercial offer of

ISP), and with non-profit organizations: “Their capacity to build relations with the third sector is

important, because our way to approach to clients is not commercial, but collaborative: the clients

are involved in the creation of a product suited to their needs ” (B&S Laboratory coordinator).

Finally, a real belief in and commitment toward the Laboratory’s mission and the social value it

generates are fundamental. To ensure such commitment, human resources are chosen considering as

a discriminate criterion also their long-term experience as volunteers in the non-profit sector.

The experience of the Laboratory with non-profit organizations led to the creation in 2007 of an

independent bank within the Group, called Banca Prossima, specifically dedicated to non-profit

customer segments (foundations, social businesses, associations and the religious world): “The

decision to create a specialized bank to better serve the third sector is the result of the experience

gained by the Laboratory in four years of collaboration with the non-profit. This is a project that

affects the way we do business with a clientele usually neglected by banks, but that could soon take

charge of many services no more supplied directly by the system of public welfare” (CEO of BP).

As the CEO of Banca Prossima highlighted in the interview “all this could been done for a matter

of imagine. Instead, it was not the case, the intent is not to show off but to experiment and at the

end you understand there is research behind the outcome”. In order to respond to the particular

requirements of this sector the new bank completely revised the process of risk analysis: “We

formulated a new ad hoc rating to correctly evaluate the sustainability of clients that are radically

different from those of ‘privates’ or ‘companies’”(CEO of BP). The new evaluation model is not in

contrast with the bank’s traditional analytical methods, but it also considers qualitative elements,

such as fund raising abilities, success in projects funded by foundations or public bodies, percentage

of work from the private sector and internal governance. Moreover, BP has a special risk fund

(‘Fund for the development of the social enterprise’) drawn from the company profits. 50% of these

profits (100% for the first 10 years since its foundation in 2007) by statute have to be transferred to

the fund. The fund makes it possible to intervene in particularly risky areas, which are also very

relevant in terms of the social value generated. The fund is not part of the bank equity and it would

be given to charity in case of closing or dismissing. The results achieved by this new bank of the

group are remarkable: the sums negotiated at the end of 2010 increased by 82% from 2009, and in

the first three months of 2011 they have grown by a further 250 million. After 4 years since its

foundation, the bank reached the break even acquiring 14.000 clients, of which nearly a half were

not ISP client before. Since its foundation in 2002, the Laboratory has completed 16 projects, and

one is still in the development phase. Table 2 summarizes the main features of the most relevant

social innovations. In particular, the table points out the social aims that originated these projects,

the partners that have been involved in their development and their current phase of development.

With an exemplificative purpose, the Appendix 2 provides more detailed data for each of them.

INSERT TABLE 2 HERE

The projects realized in the Laboratory do not satisfy the needs of the mainstream customers but

grow in niche and less profitable markets, such as the one targeted to students, immigrants, or

NGOs. The projects are the result of a research that “identifies social needs by digging into

different information sources” (B&S Laboratory Coordinator). Therefore they are marginal in

comparison with the huge amount of money the bank is used to earn from its mainstream market.

Despite their marginality, the strategic relevance of the Laboratory’s projects is starting to emerge,

as shown by the five-years strategic plan of the bank. The leadership in the non-profit sector,

pursued through Banca Prossima, in one of the pillars of the 2011-2015 plan. Nova+ project created

the basis for entering the SMEs market, which now constitutes one of the main targets of the bank.

BRIDGE gave ISP the role of first mover, and leader, in the field of students’ loan in Italy: indeed,

the strategic plan underlines the willingness of the bank “to play the role of a bridge with the

university” (ISP Business plan 2011-2015).

The characteristics of these innovation projects resemble those of radical and disruptive innovations

(McDermott and Colarelli O’Connor, 2002; Bower and Christensen, 1995). They address a new

market, initially marginal, and they are not based on an incremental improvement but on radical

changes of traditional products and require specific competences. Indeed, given the peculiarities of

the social categories they address, as regards the lack of real or personal guarantees, the products

and services developed by the Laboratory to fit their specific needs do not simply derive from

incremental changes in the process of credit provision, but they are based on a radically new rating

model and credit disbursement process, as described in the previous section. More precisely, these

innovations features resemble those of Christensen, Baumann, Ruggles and Sadtler (2006)’s

catalytic innovations: “Like disruptive innovations, which challenge industry incumbents by

offering simpler, good-enough alternatives to an underserved group of customers, catalytic

innovations can surpass the status quo by providing good-enough solutions to inadequately

addressed social problems” (Christensen, Baumann, Ruggles and Sadtler, 2006, p.100).

Radical innovations have been extensively studied by innovation scholars (Leifer et al., 2001), as

their development is fundamental for the long-term survival of the firm (Chandy and Tellis, 1998;

Geroski et al., 1993), but their management also have particular requirements (Colarelli O’Connor

and DeMartino, 2006; Colarelli O’Connor and Ayers, 2005). A structurally ambidextrous

organization, according to O'Reilly and Tushman (2004), is a solution that enables a firm to oversee

the development of radical innovation projects, without detriment to its current business, through

the creation of “structurally independent units, each having its own processes, structures, and

cultures but integrated into the existing senior management hierarchy” (O'Reilly and Tushman,

2004, p.76).

This ambidextrous structure resembles very closely the way in which ISP organizes the

development of its social innovations, through the establishment of the Laboratory. The Laboratory

works indeed independently from the rest of the organisation, with a specific social mission that

influences its overall culture. It has developed its own procedures that are devoted to find out

innovation opportunities and to develop them not focusing on profits, but mainly on long-term

sustainability and social impact. People are recruited also according to their social sensitiveness and

they are not evaluated on traditional financial indicators. These ‘isolation’ typical of structurally

ambidextrous organizations facilitates the generation and development of radically innovative ideas,

but it also enables the generation of social benefit through these innovations. The social value of the

projects is a priority with respect to their profitability: therefore, innovative ideas with high social

potential are taken into account even if they do not ensure high marginality, and they are developed

in order to maximize the social impact they can generate. They find a rich soil to grow up whereas,

in the mainstream organization of the bank, they would have been put aside for their scarce business

value.

Usually, in structurally ambidextrous organizations it is senior executives who have the key role of

ensuring integration, which can be achieved by articulating a clear, emotionally engaging and

consistent vision, building a senior team with diverse and heterogeneous competencies and

introducing specific processes and integration mechanisms (O’Reilly and Tushman, 2004). The

CEO of ISP plays this critical integration role and creates strong ties between the Laboratory’s

projects and the bank’s strategy. He has personally encouraged the creation of the Laboratory and

he is its main sponsor both inside and outside the organization:: “The perspective of our visionary

CEO is that it deserves to sacrifice an immediate profit for the creation of social value and, above

all, for the testing of new products for unknown customer segments” (CEO of BP). A further

integration mechanism is represented by the CSR Delegates within the organizational departments.

This structure helps spread the CSR culture and sensitiveness all over the company, enables the

collection of innovative ideas from different sources, and creates the basis for the integration of the

Laboratory’s projects in the commercial offer of the bank, improving the commitment of front-

office employees to the social responsibility of the company: “We feel proud to offer our customers

real solutions to their problems, and to show the image of a company that is worried about the

problems of the society” (Front office employee dedicated to private customers).

Openness of the innovation process through stakeholders’ engagement

Each of the Laboratory’s projects follows a similar process. They start with an explorative phase

that leads to the identification of the social need to be addressed. The main feedbacks come from

media, customers and non-profit organizations, and are collected by the CSR Unit, the CSR

Delegates and the territorial branches who are in direct contact with clients. As described before,

clients (such as families and SMEs) are explicitly involved in order to understand how the bank is

answering to their specific needs (BRIDGE and Nova+ are examples of the bank response to such

needs). Medias are systematically screened in order to find out the major social problems at national

level: for example the idea of PAN raised from the Laboratory awareness of the scarcity of quality

nursery schools on the Italian territory. Moreover, non-profit organizations are an important

window on social problems and needs, with whom ISP has a preferential connection particularly

after the creation of BP and its ‘Stakeholder relation Unit’.

This first phase is followed by the so-called strategic design activities, during which the

intervention model is defined: “Once defined our objective we need to understand where and how

we need to change and innovate the process of credit provision” (B&S Laboratory coordinator).

The identification of the project partners is fundamental in this phase, as all the projects of the

Laboratory are developed in collaboration with on average 2 or 3 partners, for the majority (around

80% of them) coming from the third sector. "A key point is that we never do things by ourselves ...

we have a range of partners who provide us the skills that we do not own and with whom we

develop the product from the generation of the idea to its implementation." (B&S Laboratory

Coordinator). The partners are chosen on the basis of the specific competences they can contribute

to the project, that is their knowledge of the ‘client’ and his conditions (e.g., universities for

BRIDGE, immigrants foundations for PRIMI, sporting bodies for SPIN). Their function is usually

to provide specialised consultancy on the validity of the projects to be funded, thus contributing to

risk reduction. In the majority of the cases, the bank requires its partners to join in a consortium or

network (e.g. PAN or SPIN), in order to constitute a nationally extended body that enables the

social impact of the project to be widely diffused. The lack of serious partners to dialogue with and

the unavailability of partners to practically work with have been since now the major reasons of

failure of the Laboratory’s projects (this has been the main criticality in PAN and the main reason

of failure of the PRIMI project for immigrants). If the partners are found, the project leader within

the Laboratory is chosen and the project enters the operative design phase. This phase consists in

the implementation of the intervention model. In this stage of the project the contracts with partners

are concluded and the consortium, if existing, is created. Also the specific features of the new

service, such as the interest rate and the disbursement schedule, are defined and the eventual IT

system is developed.

The last phase consists in the launch of the new service and in its operating management. Usually,

the Laboratory, the projects partners and BP are involved in the management of the new banking

product or service, with different roles. BP is usually responsible for the credit disbursement. The

partners are responsible for the qualitative evaluation of the projects or the entities to be funded.

The Laboratory contributes to the evaluation phase from a financial point of view, and keeps the

project control till the main problems and criticalities are solved. Once the service has reached a

sufficient standardization, it is transferred to ISP. In some cases, such as the BRIDGE project, the

new product becomes part of the commercial offer of ISP and it is managed and sold by the

territorial branches of the bank. In other cases the Laboratory’s projects lead to additional services

that the bank can offer to its traditional customers, such as families looking for a nursery,

immigrants, elder people, or customers looking for a sporting infrastructure. It is the case of Nova+

(IntesaNova), which has become part of the service offer to SMEs and administered by a dedicated

branch of the bank, Mediocredito.

The description of the projects development highlights the several linkages that the Laboratory

creates and nurtures inside and outside the bank to carry on its projects. Figure 2 summarizes this

network of relationships with respect to the different phases of project development.

INSERT FIGURE 2 HERE

As previously explained, in the last years the bank has embarked on a path of stakeholder

engagement improvement. Currently, the process is organized as a systematic and structured set of

engagement mechanisms, periodically documented in the ‘Stakeholder Relation Plan’. According to

the stakeholder theory of the firm (Freeman, 1984), which is one of the main pillars of the scholarly

debated on strategic CSR, the firm is responsible for dialoguing and involving in business decisions

many stakeholders such as clients, suppliers, employees, NGOs, the environment (Maon et al.,

2008; Porter, 2008). The ISP case confirms the results of previous research (Vandekerckhove and

Dentchev, 2005; Ayuso et al., 2006) and shows that the involvement of stakeholders also represents

an important source of innovation. Indeed, the process of stakeholders’ engagement is key in the

explorative phase of the Laboratory’s projects development process and it represents a strong

differentiating element, as it allows ISP to systematically seize business opportunities that

companies less committed to strategic CSR would miss.

As regards non-profit organizations in particular, their involvement in ISP often takes the form of a

real partnership, where the two parties collaborate in an open perspective, consistently to the

principles underlying the open innovation paradigm: “in a world of widely distributed knowledge,

companies cannot afford to rely entirely on their own research, but should use external ideas as

well as internal ideas, and internal and external paths to market” (Chesbrough et al., 2006: 1).

Consistently with this paradigm, non-profit organizations represent an external source of new ideas:

“Thanks to the freedom of initiative and the close ties with the territory, it helps understand the

demand for social services which often remains unmet” (ISP Social Report, 2010). Leveraging the

CSR Unit, the network of ‘CSR delegates’ and, most of all, Banca Prossima and the ‘Stakeholder

Relation Unit’, the bank has the receptors that enable it to scout and catch these ideas. Therefore, as

showed in Figure 2, non-profit organizations act as an input of the explorative phase, and play the

role of an essential partner in the strategic design phase. Our case study shows indeed that their

absence is a major cause of project failure. They also represent a fundamental connection with the

target market (e.g., universities with students) and a necessary partner for the commercialization of

the service. Indeed, in all the projects developed by the Laboratory, the partnerships remained in

place (e.g., with social enterprises for PAN, with universities for BRIDGE and NOVA+) for

enabling the assessment process and thus the credit disbursement.

As a result, the non-profit organizations become both one of the stakeholders whose needs are

addressed by the social innovation projects activated by ISP and a partner in the process that

enables the development and launch of social innovations. Indeed they represent the main source of

the innovative ideas, the instrument through which innovation can take place and, in many cases,

also the final beneficiaries of the innovation itself, or the representatives of these beneficiaries.

This finding is consistent with the studies conducted by those authors who have recently recognized

that third sector organizations play an important role as potential partners in the innovation process

(Kourula and Halme, 2008; Holmes and Smart, 2009; Murphy and Arenas, 2011), as sources of new

ideas (Ayuso et al., 2006) and providers of competences (Loza, 2004).

The main findings of our analysis are summarized in Table 3. Figure 3 provides a synoptic view of

the elements emerged from the case study analysis, which should be conceived as the managerial

levers ISP acts upon to improve its ability to successfully generate and develop social innovations.

INSERT TABLE 3 HERE

INSERT FIGURE 3 HERE

CONCLUSIONS

The paper adds to scholarly research on social innovation by investigating how for-profit

organizations create, develop and launch this type of innovations. By looking into the case of Intesa

Sanpaolo, the largest Italian bank which has engaged in successful social innovation projects for

years, it points to the existence of three managerial antecedents of a superior ability in social

innovation: (i) integrating CSR in its business strategy with a strong commitment from the top

management; (ii) separating the activities concerned with the development of social innovations

from the rest of the organization, following to the structural ambidexterity model; (iii) applying the

principles of open innovation to the development of social innovations, by involving in particular

non-profit organizations as a source of ideas for new social innovation projects and leveraging them

to enable adoption of the new products and services.

The study presented in the paper has important implications for research. Indeed it provides new

insights into a relevant although underdeveloped topic, namely the development of social

innovations in firms. In particular, it explores the managerial antecedents of a firm’s superior ability

in creating, developing, and launching social innovations, which represents a relevant gap in our

current understanding. In doing so, the paper indicates several opportunities of cross-fertilization

between mainstream innovation management research and the more recent scholarly debate around

social innovation. It suggests indeed that social innovations in for-profit organizations should be

conceived as radical disruptive innovations as it regards their impact on established practices and

routines. Accordingly, one way to successfully deal with this type of innovation projects seems to

require embedding them into a separate organizational structure, according to the structural

ambidexterity model. Moreover, the case study indicates that firms lack a series of competencies to

successfully develop social innovation projects, such as knowledge of societal needs of particular

disadvantaged categories. To fill this knowledge gap, the paper points to the validity of the open

innovation model, whereby firms wiling to develop a superior ability in social innovation

systematically engage with external stakeholders and, in particular, with non-profit organizations.

By doing so, the paper strengthens some recent findings in the open innovation literature and

improves the external generalizability of the open innovation paradigm.

Of course the findings of the paper, which are based on an exploratory, single case study, cannot be

generalized to populations of firms or markets. Our aim was indeed to make analytical

generalisations to the existing body of knowledge concerned with development of social

innovations in for-profit organizations and, accordingly, the findings can be used to further develop

current theoretical ideas concerning this topic. That said, the case study of Intesa Sanpaolo provides

some interesting suggestions to Chief Executive Officers and CSR managers working in firms that

are willing to put strategic CSR into practice through innovating their products, services and

business models. They are given indeed a framework, grounded in the radical innovation and open

innovation concepts, which should help them think about the most appropriate approaches to

administer their social innovation projects, in a way that enables overcoming organizational inertia

and acquiring the critical competencies for social innovation that usually for-profit organizations

lack. These practical implications have important potential societal impacts. Although social

innovations represent the main area of intervention of non-profit organizations, encouraging a

superior engagement of for-profit organizations in this type of innovation activities is a key lever

for generating important benefits for the society, as acknowledged also by the last report on social

innovation published by the Commission (European Commission, 2012, p.17). This aspect has

important policy implications as well.

Of course the paper leaves some gaps that future research could fill. First, although social

innovation refers to innovative products or services motivated by the goal of meeting a social need,

they can produce some profits, especially after they have been institutionalized in the firm’s

mainstream business, as the ISP case suggests. This points to a critical issue for social innovation

scholars, i.e. the need to identify the real motivation for engaging in these types of project, as they

can be seen, especially in a period of economic recession and shrinking business, as a profit

generation opportunity, surrounded by a social flavour. In the ISP case the motivation to engage in

this project to address social needs and realize their strategic CSR is clear when speaking with the

top managers who championed the initiative, and considering the position of ISP in the main CSR

rankings. However, disentangling these aspects is not straightforward, especially in large scale

multiple case studies and quantitative research methods. It requires developing a robust approach to

investigate the motivation for engaging in social innovation projects, which represents an

interesting avenue for future research. As a second future research topic, it would be interesting to

investigate whether, and to what extent, the managerial antecedents of a superior ability in social

innovation unearthed in our case study hold true in other industries besides the banking sector, to

which Intesa Sanpaolo belongs. Third, the impact that social innovations have on the ‘mainstream’

business of the firm developing them should be researched in more details. Do social innovations

enable the deployment of new competencies that can be useful to improve the traditional products,

services and processes of the firm? The case of Intesa Sanpaolo points to the existence of this

interesting relationship, but further empirical evidence is needed to develop a deeper understanding

on this specific aspect of the social innovation phenomenon. Finally, future research should explore

the existence of contextual factors, e.g., the size of the for-profit organization engaged in social

innovation, its degree of product diversification, the previous experience with social innovation,

that might affect the role and nature of the managerial antecedents identified in this paper.

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LIST OF TABLES

Company Role of people interviewed Number of interviews

Intesa Sanpaolo (Head Office

Departments)

Coordinator of Bank&Society

Laboratory

7

Banca Prossima (Banca dei

Territori Division)

CEO of Banca Prossima 3

Intesa Sanpaolo (Head Office

Departments)

Corporate CSR manager 2

Banca Prossima (Banca dei

Territori Division)

Responsible of stakeholder

relations

2

Mediocredito (Banca dei Territori

Division)

CEO of Mediocredito 2

Banca dei Territori Division Front-office employee 2

Consorzio Gino Mattarelli President 3

Politecnico di Milano Full Professor 2

Table 1. The interviews

Project Starting

date

Social aim Partners Current situation

BRIDGE 2002 Provide credit to

students, not asking

for real or personal

guarantees

At the beginning:

Politecnico di

Milano, Torino and

Bari and Università

delle Marche. It was

later extended to 16

Universities

It is part of the

commercial offer of

the bank sold by

local branches.

PAN 2004 Fund high quality

social enterprise

nurseries

Three main social

enterprise networks

in Italy (Compagnia

delle Opere, Lega

Coop, Consorzio

Gino Mattarelli).

Recently also FISM

– Federazione

Italiana Scuole

Materne, joined the

Consortium.

The service is

managed by the

Consortium and the

credit to social

enterprises is

provided by BP. The

service is proposed

as additional service

to ISP clients by

territorial branches.

NOVA+ 2004 Foster innovation in

SMEs

Technical

Universities

(Politecnico di

The service is now

totally managed by

Mediocredito, the

Milano, Politecnico

di Torino and

Università degli

Studi di Trento).

bank of the Group

dedicate to SMEs.

PRIMI

(Project for

Immigrant

Entrepreneurs

)

2006 Assist new Italian

citizens in

developing

entrepreneurial

activities

Provincia di Milano

and Fondazione

Antiusura

The service is now

under revision as it

did not obtained the

expected results

ALFA

(ALtra

FAmiglia,

other family)

2007 Set up new ‘family

homes’ for people

with disabilities

ANFFAS

Foundation (the

main Italian

association of

disable people’s

relatives) and the

network of social

enterprises

Consorzio Gino

Mattarelli.

The service is

proposed as

additional service to

ISP clients by

territorial branches.

SPIN (Sport

Insieme)

2010 Fund the

restructuring of sport

infrastructures

managed by

nonprofit

7 sports promotion

bodies (recognized

by CONI, Italian

National Olympic

The partners have

been identified and

the project is in the

operating design

associations Committee) stage.

Table 2. The social innovation projects

Theory Rationale

CSR strategy

(Burke and Lagsdon,

1996)

The CSR strategy represent the fundamental prerequisite for the

development of social innovations: the diffusion of the CSR culture

at all levels of the bank and in its foreign branches allow the

development of social innovations.

Structural ambidexterity

(O’Reilly III and

Tushman, 2004)

Structural ambidexterity ensures the independence of the

Laboratory, that can operate without being subject to a profit-

maximisation logic and focusing on the social mission of the

projects. The CEO visionary leadership and the diffused CSR

commitment enable the integration of the Laboratory’s projects in

the bank’s strategy.

Open Innovation

(Chesbrough, 2006)

Openness in the innovation process, which very often entails

frequent and constant collaborations with third sector and no-profit

organizations, is a fundamental prerequisite for improving the

firm’s ability to scout, analyze and explore the external environment

with the aim to identify unsolved social needs.

Stakeholder engagement

(Freeman, 1984)

The process of consultation and involvement of the firm’s

stakeholders enables the company to identify innovation

opportunities to which firms less committed in CSR would be blind.

Table 3. Concepts that help interpret the empirical evidence

LIST OF FIGURES

Figure 1. The bank structure

Figure 2. Social innovation development process

Figure 3. Managerial antecedents of a social innovation capability in for-profit organizations

Appendix 1: Interview Protocol

1. Description of the innovation:

Product / Service

Addressed market

Quality / Performance

Price of the product /service

Strengths and Weaknesses

2. Idea generation and funding sources:

Why did the company develop the innovation? (Culture / corporate values;

Commitment of top management; Search for new profits; Enter a new market /

response to unsatisfied needs; Pressure of one or more stakeholder groups;

Improvement of its image; Need to be compliant with laws and standards;

Adaptation to competitors; etc.)

How did the company identify the unsatisfied need or social problem?

What are the funding sources that the company used to finance the project?

3. Stakeholder engagement:

Did the company develop partnerships / agreements with public institutions, research

organizations, NGOs or others for the development of the innovation?

Did the company involve other stakeholders in the development of the innovation

(e.g. consumers, suppliers, employees)?

What were the main suppliers involved in the innovation process?

Did the company control the social responsibility adopted by the involved suppliers?

4. Innovation management:

How did the company manage the innovation process? In which phases was the

process organized?

What were the main challenges faced during the development of the innovation?

How were they overcome?

How did the company build the innovation team? Who were the components of the

team?

5. Commercialization of the product / service:

What distribution strategy did the company adopt?

What marketing strategy did the company use?

What were the key messages used to communicate the characteristics of the

innovation?

6. Performance measurement:

Did the company define indicators to measure the social and economic performance

of the innovation?

How do you evaluate the profitability of the product / service? Was it satisfactory for

ISP?

7. Learning:

What competencies / skills did the innovation require?

What competencies / skills did the company acquire?

How will the innovation affect the future business of the firm?

What are the strategic benefits from developing this product / service?

Appendix 2: Project examples

BRIDGE project

BRIDGE was the first project developed by the Laboratory in 2002 and consists in a bank loan

specifically designed for university students granted on the basis of their academic performance,

without asking for any real or personal guarantees. In the start up phase the project was developed

in partnership with four Universities: three Polytechnig Universities (Politecnico di Milano, Torino

and Bari) and Università delle Marche, and it was later extended to 16 Universities. The universities

have the responsibility to evaluate the students’ academic performance and they provide a small

financial guarantee (between 3 and 10% of the loan) through a dedicated fund. The main innovation

in BRIDGE regards the process of credit disbursement. The loan is supplied in multiple tranches,

one every six months and it is disbursed only if the university confirms the student’s good

performance. The loan repayment starts an year after the student’s graduation, in order to leave the

student the possibility to start his working career; after this year BRIDGE, if not totally refunded,

can be converted into a standard loan. The interest rate for all the duration of the loan, both during

its disbursement and during the repayment phase, is lower than the one applied for traditional loans

and remains fixed for 12 years. An IT software has been developed to enable the shared

management of the loans between ISP and the Universities; this tool enables the bank to allow the

loan provision at every tranche based on the university’s evaluation. This has been the major

investment made for the project development: “The high level of investment in the IT infrastructure

and the low interest rates applied make it still not profitable. However, it is clear that profit is not

the primary mission of this project” (B&S Laboratory Coordinator). BRIDGE has reached a

noticeable diffusion, even if it has not been explicitly promoted, thanks to the word of mouth among

students. Currently it is sold by more than 6,000 bank windows of the Group; more than 7,000 loans

has been provided for a total amount of around €49 million. Around 1,000 students have already

began to repay the loan: to date there have been only 9 defaults.

PAN project

PAN, (Progetto Asili Nido, i.e. nurseries project), has been built upon the BRIDGE experience. It is

a Consortium born in 2004 from the partnership between ISP and the three major social enterprise

networks operating in Italy in the childcare sector: Consorzio Gino Mattarelli (CGM, the largest

Italian network of social enterprises), ‘Compagnia delle Opere’ (another catholic Federation of

Social Enterprises) and DROM (National Consortium of Social Cooperation of LegaCoop, the

oldest social cooperative in Italy). Recently also FISM (Federazione Italiana Scuole Materne, i.e.

Italian Federation of nursery schools) joined the Consortium. The aim of the project is to create

new nurseries on the whole national territory, assuring families a high service level. The bank has

the role to fund the start-up phase of the nurseries. The role of the social enterprise networks is to

support the new social enterprises in defining their business plan, to provide training for the

employees and to promote the nursery service in the territory. The professional knowledge that the

project partners (i.e. the social enterprise networks) have of the childcare business, and their direct

participation in the evaluation and improvement of business plans, increases the solidity and

sustainability of the managerial aspects of social enterprises thus reducing the bank’s risk: therefore

it can grant credit without asking for any personal or real guarantee. As further risk covering, the

Consortium provides a guarantee for the 5% of the sum funded by the bank for each nursery. The

new nurseries are given the quality brand PAN, that guarantees the quality of the infrastructures, the

educational program, food, medical assistance and the fairness of their fees. The Consortium

inspectors periodically verify the compliance with the quality requirements for maintaining the

PAN brand. Thanks to this project, 416 new nurseries were born in Italy. They have more than

12,000 family clients and the total amount of funding is around 15 million euro. Moreover, they

employee around 3.000 teachers, all women, around 30 years old, all of them graduated, thus

contributing to improve the female employment rate in the country.

IntesaNova project

The IntesaNova project, developed with the aim to improve product and process innovation in small

and medium enterprises through dedicated credit lines, works similarly to the other Laboratory

projects. The disbursement of funds is subject to a positive assessment of the innovation project,

which is carried out by three technical universities (Politecnico di Milano, Politecnico di Torino and

Università degli Studi di Trento). The assessment is based not only on objective parameters (e.g.,

annual reports, assets), but also by taking into account other, qualitative aspects which are

considered as ‘leading indicators’ (good predictors) of the long term value that can be generated by

the projects. They examine the technical characteristics of the innovation, the quality of the

technical solution relative to the state of the art and the ability of the company to manage the

technology throughout the project. This evaluation enables the bank to reduce or eliminate the

necessity of personal or real guarantees. After the merger, IntesaNova, with the new name of Nova+

has been incorporated into the bank of the Group specifically dedicated to small and medium

business clients, called Mediocredito. Since 2003 the project has provided more than 1 million euro

of funds for innovation projects in SMEs.