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A new paradigm for change

By John Elkington

6 April 2010

In an MBA world, I remain an unreconstructed, unrepentant MPhil. And that degree was in city planning in the last century, not business management in this one. Still, I have now spent 35 years helping CEOs and other leaders wake up to—and tackle—the new risks and opportunities thrown up as a series of societal pressure waves have pounded, shaped, and powered markets.

Time and again, against a seemingly chaotic backdrop, I have found myself defaulting to a standard MBA device—the 2×2 matrix—in an attempt to extract signal from noise. Another tic is to populate the matrix cells with sharks, orcas, sea lions, and dolphins (mapping stakeholder engagement in the mid-1990s) or locusts, caterpillars, butterflies, and honeybees (when exploring 21st-century economic models as the new millennium launched). There’s method to the apparent madness, however, in that the visuals can help engage a wider audience.

So here I go again—in an attempt to answer the question, “Can social entrepreneurs create the necessary large-scale change?” A simple question—and a simple answer: no.

That may strike you as unexpected, misguided, unfair, or even schizoid, given that I have spent so much of the past decade working with—and celebrating—social entrepreneurs and their intrapreneurial cousins within mainstream companies.

Don’t get me wrong; I still believe that, in the right circumstances, many of these extraordinary innovators, entrepreneurs and investors will drive potentially transformative solutions to scale. But the fact is that our current trajectory simply won’t take us to where we need to be by 2050.

And, yes, I admit it; I have followed the standard politician’s ploy of changing the question asked to one I wanted to answer. The key word that I quietly added to the McKinsey question is necessary. Necessary is a slippery word, its meaning morphing over time.

Once they have gained traction, no question, social entrepreneurs like Muhammad Yunus of the Grameen Bank, Fazle Hasan Abed of BRAC, Dr. G. Venkataswamy of Aravind Eye Care System, Wangari Maathai of the Greenbelt Movement, or Tim Smit of the Eden Project can move mountains. But generally the benefits they provide are far from ubiquitous even in their own countries, let alone globally.

The uncomfortable truth is that the nature and scale of the economic, social, environmental, and governance challenges we face are unparalleled. Humanity is headed towards 9 billion people by midcentury, with more than half of our species already concentrated in seething urban areas—and billions more destined to follow. Add to that the growing risks related to abrupt climate change; pandemics; and energy, water, and food security. Expecting social entrepreneurs to solve these problems is both unrealistic and a misreading of the real value they bring to bear.

To get a better sense of the benefits and challenges of social entrepreneurship, Volans released a report a year ago at the 2009 Skoll World Forum, largely funded by the Skoll Foundation. We offered the following simple five-stage model to map and explain the pathways social and environmental innovators, entrepreneurs, and intrapreneurs must take to replicate and scale their solutions:

Stage one spotlights the eureka moment, whether it be Archimedes in his bath, Edison in his lab, or Craig Venter advancing synthetic biology.
Stage two sees intensive experimentation, as when the Wright Brothers tested heavier-than-air flying machines on the sand dunes at Kitty Hawk.
Stage three involves the formation of new enterprises to carry forward the new technologies or solutions—many of which fail, but a small proportion of which seed the future.
Stage four sees a more urgent focus on economic ‘ecosystems,’ with growing efforts being devoted to creating clusters of activity in such areas as renewable energy, cleantech, or sustainable urbanism.
Stage five is reached by achieving truly systemic change across the entire economy.

It’s easy to identify innovators and entrepreneurs who have fought, blagged, or elbowed their way through those first four stages—but tough to think of anyone from the latest crop of entrepreneurs who has yet made it into stage five.

For that to happen, we must now raise our collective sights from technologies and business models—important though they are—to psychological, social, and even civilizational change. Social entrepreneurs perform a crucial role in stage one and stage two—and a fair few go on to develop significant enterprises, with ecosystems that, in a small but growing number of cases, include major corporations. This stage can be double edged, however. The strength of social entrepreneurs is that they connect with the community, the culture. When they form strategic partnerships with corporations, the risk is that they, too, become more corporate—and come to see those they help as customers or clients, with all that goes with that.

In recent months, as I have tried to think this through, I sensed a new 2×2 struggling to be born. This distinguishes on one axis between change that happens at the individual and collective levels, and, on the other, between change that affects thought and action.

I have been absorbing (if not always reading cover-to-cover) a trailer full of books. They include the fashionably monosyllabic Nudge by Richard Thaler and Cass Sunstein (required reading in the early days of the Obama administration), Connected by Nicholas Christakis and James Fowler, and Switch by Chip and Dan Heath. Such books tackle the deeply taxing question of how to drive transformative social change. And their very existence is a lead indicator of where this whole area is now headed.

Cultural revolutions, deservedly, got a bad name because of what Mao did in China in the decade from 1966 to 1976. But what we need now is a sustained, global cultural evolution that takes us from a “Cornucopian” paradigm, in which the world is ours to pillage in pursuit of consumerist lifestyles, to a “Gaian” paradigm, in which national and regional economies may take different pathways to sustainability—but where our planetary footprints and responsibilities are internalised, becoming second nature in a critical mass of economies.

Cultural revolution in four steps

Change starts with individual beliefs and behavior, then spreads to the wider community.

Cultural revolution in four steps

So what’s the recipe for transformative change? Let’s work our way around the matrix, cell to cell. In the first, mind-sets, the emphasis is on changing our mental operating systems at the individual level. The last century taught us that brainwashing doesn’t work very well, so how do we rewire our brains? Well, happily, there is some evidence that leading social entrepreneurs are helping CEOs and other C-suite leaders –and a growing spectrum of intrapreneurs—to spot new market risks and opportunities, prototype innovative business models and test out novel leadership approaches.

Great, but even the best-intentioned leaders can hit the wall when attempting the transition from cells 1 to 2. They make the announcements, but their behavior remains unchanged: critically, they fail as models of the new behavior. Still, if you get this bit right, the process can go viral.

Those who do make it into cell 2, must then make the even tougher transition to cell 3. Here the focus is on integrating new values into corporate, urban, national, or global cultures.

Culture is the new frontier—and we’re going to have to get dramatically better at cultural engineering, or perhaps catalysis would be a better word. As we probe the margins of cell 4, the spotlight shifts to paradigms. The emerging paradigm we’re groping our way towards draws on the work of people like James Lovelock, whose thinking around what he calls geophysiology—which treats the earth as if it is a living organism—feels like a critical building block for the coming decades.

True paradigm shifts take decades, generations to work their way through—partly because those infected by old paradigms have to retire and die, clearing the way for the new order. Without wanting to sound Millennial about this, my sense is that we are at least 50 years into a shift toward a Gaian paradigm. And it is accelerating towards some sort of systemic transformation in key world regions by the late 2030s. Social and environmental entrepreneurs will be crucial facilitators in this process. Picture social innovators and entrepreneurs as scout bees returning to the economic hive to perform the waggle dance in Davos, at Clinton Global Initiative or TED events, signalling where the new opportunities are emerging. But they can’t do the heavy lifting solo: they typically achieve solutions that are local and remain vulnerable to economic and political cycles.

Going back to the stages I outlined earlier, what we need next are stage-four ecosystems and clusters designed to build towards stage-five transformations. Among other things, this means catalyzing the shift towards a Gaian paradigm built around transparency, compassion, reciprocity, intergenerational equity, accountability, evolution, resilience, and sustainability. And it means brokering fair and high-performance partnerships between innovators and those able to bring their solutions to scale.

Squint and you can already see bits of the new order forming, like a new solar system out of a dust cloud. It’s encouraging, for example, that Yunus and Grameen are partnering with Danone, producing fortified dairy products for poor children in Bangladesh.

But I’m even more interested in General Electric’s global Ecomagination and Healthymagination initiatives. Or in GlaxoSmithKline CEO Andrew Witty’s announcement of radical cuts in the pricing of critical pharmaceuticals for poorer countries—and GSK’s impending move into branded generics. Or in Nestlé’s offer to open out its new Creating Shared Value approach to other companies (full disclosure: I am on the relevant Nestlé advisory board)—and Nike’s similar offer with its GreenXchange. Such initiatives have the potential to deliver change at much greater scales than even the most energetic social enterprises.

What is needed to switch my earlier no to an unqualified yes is not increasingly vigorous assertions of how insanely great social entrepreneurs are. Instead, we urgently need not just a revamp of corporate-citizenship strategies or stock-market algorithms, but way smarter mindsets, behaviors, and cultures—all drawing on (and helping shape) that new economic paradigm.

Not a trivial task. Indeed, even if every social entrepreneur were a Yunus, a Smit, or a Maathai, we would still struggle to scale fast enough. So in trying to get a fix on the future, perhaps our motto should be a line attributed to Peter Drucker, a change agent who operated across the stage 4–5 boundary. It ran thus: “The best way to predict the future is to create it.”

What matters? Well, social entrepreneurs have been pointing the way for some time. Wangari Maathai served as a government minister in Kenya, for example, while Muhammad Yunus considered running for president in Bangladesh. It’s time to do the politics, locally and globally. Wrap in geophysiology and we potentially have a new form of geopolitics—and not before time.

Comment [11]

Agree? Disagree? Let us know what you think. Please include your full name with your comment. Comments may be edited.

This is a nice application of Ken Wilber and Integral Theory’s four quadrants to social change. What many people fail to grasp, but you have implied, is that each of the stages you outline actually have correlates in each of the quadrants, and so there is a tetra-emergence in all four quadrants at the same time. The psychological prerequisities of the “way of being” that you call for in leaders near the end are found emerging in what developmentalists call integral and it characterizes about 5% of the senior leadership population of the U.S and Europe at this point. The key, therefore, is to create developmental programs that move this needle, because integral leaders do not find the alternatives meaningful. And meaning drives all behavior.

Posted 19 April 2010, 20:54 by Robb Smith
Master piece! Unless we change from consummerist society to need based consumption society, we will face huge problems in future. We are killing tons of fish, animals, birds just for taste which lasts few seconds in our tongue. Less meat will lead to less heat for the earth.

Posted 17 April 2010, 02:55 by venkata krishnan
I think the model is very imaginative but also seems to propose continuing to rely ever more heavily on ever less reliable outcomes. Haven’t we all been watching that happen for years now? That’s not actually a responsible plan.

First Keynes then Boulding and then I and various others noticed a complete natural certainty that for a physical economy to remain stable, the information system that manages it can’t keep multiplying, particularly not after the physical economy stops multiplying. The rub, of course, is that most financial people think of money AS the physical economy, and like having it defined to multiply. In the physical world the role of money is just the book keeping function for the energy economy, however. For manageability we need peak money to accompany peak resources, not just multiplying complications till all fails.

It’s a question of whether we can acknowledge our dual reality, that the information realities we live by need to respect the physical realities we live on. Insisting on “stabilizing” the growth of ownership in a world of scarcity only intensifies competition over shrinking resources. It had the opposite effect, of course, back when we lived in a world that appeared to be one of limitless resources. The way out is to notice how natural growth systems display a wider variety of choices for the end of growth.

The high confidence solutions available allow the economy to stabilize, within our means, taking one of the several paths to maturing the system as a whole. Keynes suggested that the more fortunate path would be for investors to see their interest in preserving a steady scale of capital by not trying to pump ever more, and spending enough to stabilize the system instead.

He called the solution “the widow’s cruse”, after a Biblical story of a widow receiving an inexhaustible cup. The more apt term for how natural systems do it might be called “the young buck’s cruse”, though. The “cup” given to a maturing youth is to reach their growth climax at a peak of vitality and spirit. That is what our objective should be. We’d only need to yield to obvious necessity, and learn a little about how natural physical systems so simply take care of themselves by changing form at the end of growth. Nature has a great many examples for meeting this same circumstance.

If we could consider the physical world as our first culture, then potentially we could learn to read from it some of its remaining tricks. phil

Posted 16 April 2010, 20:18 by Phil Henshaw
Well-thought and insightful post!

You do however adapt a descriptive mode of how it is and how it should be. The big questions is from a prescriptive mode:

1) how to induce the mindset->behaviour->collective->culture change in a sustainable scale?
2) how to synthesize disconnected initiatives, pockets of potentially explosive paradigm shifts into an interconnected and self-renforcing system?

Also, social entreèreneurship is only there because the corporates initially did not include society/community/culture in the equation of their business. Ideally, the social and corporate has to merge into one.

Posted 16 April 2010, 07:33 by Hayk
Synthetic way, I think personally that the couple of change agents (thinking a different/subversive way) and real informal networks is key for potential change within organizations.
During a (often long) time, this new culture has nearly no power, but this minority culture can, by chance, become one day a kind of majority. That’s my acquired feeling about innovation and anarcho-democracy within organizations and life.

Posted 11 April 2010, 04:52 by Jean-François David
Mr. Elkington should be commended for at writing the article whose aim, I assume, is to challenge the current view on the role of social entrepreneurs in “change”. I am of the opinion that social entrepreneurs need not change their mode of activities specifically in moving to a new field or venture like politics for them to be effective. In their own domains, they can influence change and such changes may be introduced in the policy arena. What is needed is adherence to the values of openness, transparency, sincerity, etc. which these entrepreneurs should practice. The 2×2 matrix was a simple but very meaningful tool in how change evolves and role played by the various factors (individuals, group, thoughts, and actions) in influencing the state of change attained. I believe that this piece of work of Mr. Elkington would positively challenge, if not guide, the thinking and behavior of social entrepreneurs in their work.

Posted 9 April 2010, 20:45 by Leodegardo M. Pruna
Great article. As someone who has been fortunate to work in the sector for 30 and serve as CEO of two large nonprofits, I have been in those boxes, with and without company.
The comment by Puthi is spot on. Creative capitalism must be the basis for sustainability.

Posted 9 April 2010, 10:44 by Marty Sinnott
A delight to read what has been said.

The key I think is the ability of the change agents (I am not calling them social entrepreneurs or CSR leaders or green initiatives) to “infect” others with a “Gaia mindset”. The examples quoted earlier, be it Yunus or Mathaai, have had this “gift” to capture people’s imagination and ignite the flame of passion that helped them move through the series of squares described by John.

Increasingly larger number of people are becoming “susceptible” to a wiser influence and many are ready to change but somehow we all seem to need something more to drop off our past baggage and adopt the change for good. This “something more” comes in various forms at individual or collective levels. I am still grappling to understand what this might be in given contexts, but increasingly being convinced that shared beliefs & empowerment play a huge part in standing for what is right.

In many ways celebrating heroes and messiahs strengthens an icon of inspiration, but on the other hand it actually becomes a detriment because “someone else” becomes responsible for change “not me”! It is worthwhile to consider for the person in square 1 to stand back from personal ego while driving change and create frontiers of like minded people to take ownership who can pass on the torch of inspiration and empowerment (be it personal, social or financial) to others. That would be an ideal model where journey to paradigm shift can be fruitfully pursued in face of million challenges.

The history bears testimony to that in examples of Marx, Gandhi and many more.

Posted 8 April 2010, 23:32 by Priyesh
I am so proud of McKinsey for joining this discussion, which I consider among the most important in society today. John, thank you for your eloquent and as always, visually delightful exposition. Your punchline comes around to where we’ve been working for the past five years, too, in a word: integration. Integrating human values into the core of business purpose, strategy and behaviors. Imagine starting the design process with the unmet, human needs of ‘customers’ then matching the company’s core competences to them in a high performance model. It’s doable, as our early-adopter clients have demonstrated. Sure it takes some guts, but fewer today, when a punishing economic climate boosts C-suite courage to innovate away from the dysfunctional familiar. Still such change is no small feat when the chain that binds you sits deep in the DNA of industrial society: compartmentalization. And (with apologies to the progenitor of these excellent goals) ‘sustainability’ (and CSR/greening/citizenship) initiatives today have become arm’s length distractions from the authentic, holistic role that business must play to reverse the damage done by us cannibals with forks. Thanks, John, for turning a vivid light once again on the critical role, and opportunity, for business leaders today. XOXO E.

Posted 8 April 2010, 18:42 by Elsie Maio
My compliments on an excellently argued post: passionate and forceful yet rational, objective and balanced. Your 2×2 matrix reflects deep insight and I hope you don’t mind my quoting it, with due attribution to you and the McKinsey blog.

I would just like to add one dimension that your argument either misses out or treads too lightly on.

There’s this niggling thought at the back of our minds as we throw ourselves into any activity – a thought (actually a question) that is simple to articulate and obvious enough to be self-evident: “What’s in it for me?” … this is something that is hard-wired into all of us, including the most earnestly and sincerely selfless among us.

One of the factors inhibiting scalability of social change is the fact that it has till date been driven by selflessness in some shape or form – call it charity or philanthropy or altruism or whatever. ‘Social Enterprise’, in most cases, is just the new avatar of the familiar 20th century non-profit / NGO type of activity. In exceptional situations (and there have been many more of these in recent times), social enterprise is actually more business-like in its approach and practices, in terms of ascribing legitimacy to the self-interest of the entrepreneur.

The tipping point will come when the question “What’s in it for me?” gets a meaningful answer when it comes to activities that drive social change. In other words, when the motive to act towards social change is clearly visible as delivering benefit to self, more people will act, and act on a larger scale. Till that happens, we will only have sporadic exemplars whose efforts everyone will laud, a few will follow and try to replicate, but not all will embrace en masse.

There are two pre-requisites to reach that tipping point, and they both need to go hand-in-hand. One is the recognition of ‘sustainability’ as a design goal for a healthy and prosperous society – the recognition that the common good is a higher goal than short-term narrowly defined self-interest, not from an emotional / moral / religious perspective, but from a very practical point of view. And the other is of course, technology. Technology must be quick to provide cost-effective solutions, but that can only happen when someone invests in R&D effort in that direction. For example, only passionate ‘believers’ will use alternative energy that is more expensive than conventional energy. This is out of commitment to a cause, and such things can never be scalable. For widespread proliferation of clean energy, the cost has to be at least comparable, if not lower. But that will happen only if someone has the vision and the risk appetite to throw money at R&D. That’s where the first pre-requisite comes in.

CSR and green initiatives will continue to remain discretionary activities (some might even call it indulgence) outside the domain of mainstream economic activity of corporates, till even hard-headed business people see what’s in it for them. When they start integrating such activities into their mainstream business, and when that achieves critical mass, we will have scale. And that is the cultural revolution we need to bring about. Your matrix describes very accurately the evolutionary pattern of such change, but the trigger will be the viral spread of the sensibility that sustainable activities are good for me because they’re good for us, coupled with the fact that they’re no longer prohibitively more expensive.

Posted 8 April 2010, 12:22 by Hemant Puthli