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The Role of Philanthropy in Supporting Innovation

Author: Fabian Suwanprateep, Beyond Philantropy
Published Date: 23 July 2015

Fabian Suwanprateep, Project Manager at Beyond Philantropy, attended SIE's Exploring Ecosystems for Social Innovation on 22-23 June and contributed this piece as part of our #SIEBerlin blog series. 

The German philanthropy landscape is characterized by many foundations with only a very small endowment and very few foundations with a large capital base. There are about 21,000 foundations in Germany with a combined endowment of about EUR 70 billion. About 50% of these foundations have an endowment of less than EUR 330,000 and less than 1% have an endowment in excess of EUR 100 million. 

As a consequence, foundations often state that they would like to use their relative few financial resources in a catalytic and disruptive fashion in order to spur and support innovative solutions to societal challenges. However, at the same time, foundations would like to be strategic grant makers, with highly elaborate processes to source, select, support and scale grant receiving organisations. While having such processes in place certainly helps to minimize risk and make relatively safe bets on well-known approaches that work, they might not be very conducive to actually find the most innovative approaches with transformative power for change. 

Based on this conundrum of supporting innovation and strategic philanthropy, here are three developments I would like to see in the future: 

1. Adopt and customize the 70-20-10 Rule 

Coined by Google’s chairman Eric Schmidt when it comes to innovation management, the 70-20-10 rule states that 70% of the time should be focused on core activities, 20% on activities related to the core business and 10% on unrelated but high potential business activities. While the actual division of resources and application for philanthropic activities needs to be determined, this rule could be a helpful starting point to better support innovation. 

2. Collaborate and pool resources for innovation 

During the Social Innovation Europe we called upon foundations to collaborate more closely, particularly when it comes to supporting innovation. Collaborating and pooling resources in endeavours pursuing innovation would yield the benefit of a more attractive risk-return-profile and thus could crowd in more resources to support innovation. 

3. Innovation needs more than just money 

When it comes to philanthropy and supporting innovation, foundations and other philanthropic actors must not narrow down their available resources to money alone. While funding is probably always welcome, other resources such as technical expertise, access to relevant networks or just the time to have a good sparring session to jointly deliberate on innovative solutions, could be just as helpful. 

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Beyond Philanthropy is a specialised consultancy which helps businesses, foundations and individuals to maximise the impact of their philanthropic and social investing activities. We support our clients with tailored services spanning strategy consulting, project management and research. To find out more about Beyond Philanthropy, please visit: www.beyondphilanthropy.eu 

Sources: 

Association of German Foundations, “Zahlen, Daten, Fakten zum deutschen Stiftungswesen“, 2014 

Stanford Social Innovation Review, “The Re-Emerging Art of Funding Innovation", 2014

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