The Solution Economy: A New Way to Solve Social Problems

In recent years an entire economy of societal problem solvers have emerged to tackle old problems in new ways. Below, William D. Eggers and Paul Macmillan discuss a rapidly growing and evolving solution economy in which social impact has become a form of currency with real value to millions.

Can social problems be solved by “solution markets” instead of government?

Consider the toilet: an elevated cistern filled part-way with water, a lever, and a ceramic bowl—the catchment that funnels those tiny cyclones of waste into a hole where stuff just disappears.

It’s so simple and yet…pure magic.

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Our long-held reverence for the flush toilet—its convenience, its elegance, and its tried-and-true efficacy (plungers be damned)—can blind us from seeing its true costs and prevent us from seeking more sensible alternatives. Look closer and you’ll find that it’s not such a modern marvel after all and is more of an anachronistic dinosaur, requiring billions of gallons of water each year and elaborate (and costly) off-site treatment facilities.

The fact that developing economies, many with spotty access to clean water, are trying to duplicate our plumbing follies makes the situation all the more serious, if not down right crappy. Consequently, more than 2.5 billion people around the world rely on unsafe toilets or conduct their “business” out in the open, contributing to more than 3.4 million deaths each year from water, sanitation, and hygiene-related causes. Nearly all of these deaths occur in the developing world, where the esteemed 18th century solution has proved simply too expensive and unsustainable.

It was against this sobering backdrop that the Bill and Melinda Gates Foundation launched the Re-invent the Toilet Challenge in 2011—the Manhattan Project of waste management for the developing world.

A year later, crowds of lab coat-clad grantees from around the world gathered at the Foundation’s headquarters in Seattle. Starry eyed, the academics-turned-inventors chomped at the bit, ready to showcase their innovations to Mr. Gates and a bevy of investors, who were just as ready to take the best loos from the lab to the distant water closets of the world.

Some used solar power to disinfect waste for fertilizer, others recycled urine for flushing. Many were ingenious and inspiring. Most were highly cost effective (operating at a cost of five cents or less a day). First prize went to California Institute of Technology for their solar-powered toilet that generates hydrogen and electricity.

Notions of the possible were blown out of the water that day, along with our illogical reverence for flush toilets.  More remarkable, however, was that a foundation–not a government agency or Kimberly Clark or American Standard–funded such groundbreaking research and development for solutions to such an enormous problem—sparking a new market of next-gen toilets in the process.


Societal Problem Solvers

Sometimes it takes a different set of lenses to realize the limits of a given situation and see the opportunities that blind spots previously masked. Sometimes the lens is a magnifying glass, enabling slight tweaks to make a legacy product better. Other times, it may require looking through a kaleidoscope to embrace a whole new way of seeing and solving problems.

Fortunately, an entire economy of societal problem solvers—social entrepreneurs, double and triple bottom line companies, investors, and citizen changemakers alike—have emerged in recent years to tackle old problems in new ways. These wavemakers are harnessing the entrepreneurial spirit of our time to trample hardened beliefs, break through barriers, and find new approaches for some of society’s stickiest problems—issues that were once almost the exclusive domain of government.

Now consider one of the most perennial (and personally vexing) of problems: traffic congestion. Commute times to work continue to drain productivity and waste resources. In the U.S., the average commuter loses 34 hours a year to congestion delays; that’s 4.76 billion hours wasted among all American commuters. That’s a staggering opportunity cost: $429 million daily or about $160 billion every year according to the Texas Transportation Institute.

For decades, governments worldwide have tried to come up with solutions by adding high- occupancy vehicle (HOV) lanes to roads and spending billions on elaborate public transportation networks. Yet, traffic congestion and the cost of commuting continue to grow.

But if we change our lens and think of traffic congestion as less an infrastructure problem and more an information issue, other less costly and more efficient solutions emerge.

New technology enables Car2Go and Zipcar to rent cars by the hour, enhancing the viability of a car-ownership free life, while bikesharing services provide alternatives to driving altogether. And then there’s that abundant and underutilized resource that (if tapped appropriately) could bust the gridlock problem in an instant: the empty seats in a car.

Rideshare wavemakers teem with ideas to transform lone commuters into a secondary public transit system. Ridesharing apps like Zimride, Lyft, Carma, RelayRides, and herald the coming of a commuter revolution. Smaller, community ridesharing programs, too humble to make national news, similarly carve out a piece of the solution.

Ridesharing innovations represent just one of the many ways new solutions beyond traditional government spending are being fueled.

Innovation in ridesharing is growing rapidly. Entrepreneurs and nonprofits are using clever business models and technology to respond to the market and backfill public services. Reward Ride awards points to riders and drivers who can trade points for rides, creating a micro-economy in the process. Meanwhile, Carma’s mobile app displays drivers’ routes to passengers, who can search for rides headed in their direction. The app alerts drivers, pulling up a profile of the prospective rider. Drivers can then survey the profile at a red light or another stopping point. The trips are logged via GPS. When the ride ends, Carma transfers a fee ($1.00, plus $0.20 per mile) from the passenger’s Carma account to the driver’s, with Carma taking a cut. Users then rate each other to ensure a quality experience.

“We are making the private car part of the public transit network,” says Carma founder Sean O’Sullivan, echoing an increasingly common refrain of people pushing this new model of a grassroots public transportation system. “The consumer is making [his or her] asset, empty seats, usable.”


Socially Transformative Solutions

Ridesharing innovations represent just one of the many ways new solutions beyond traditional government spending are being fueled. They may come in the form of a loan to a promising social entrepreneur, a scientific formula for an immunization, or sharing one’s car with strangers. Such impact currencies are a means of paying for socially transformative results. They determine how resources are allocated across a rapidly growing and evolving solution economy.

In this economy, social impact has become a form of currency with real value to millions—from foundations to governments to venture philanthropists to individual citizens. The buyers in these markets purchase impacts or outcomes, such as healthier communities, improved literacy rates, and reduced recidivism; while sellers provide the outcomes for the buyer by designing and selling cheap, solar-powered lights or writing the code that tracks salmonella outbreaks using government data, or building the cross-sector networks to fight scourges like human trafficking.

Focusing on the desired outcome rather than clinging to bygone processes opens up a whole universe of potential problem solvers.

Consider the fight against obesity. If you sat down and made a list of the stakeholders key to addressing this epidemic, the tally might include doctors and snack food companies. But not the National Football League in the United States. Yet it turns out that the NFL is an impact player in the fight against obesity, using its mighty brand to encourage youth health and fitness through its Play 60 initiative. The NFL has donated more than $250 million in airtime and money to youth wellness since the 2007 inception of Play 60, recognizing that children who ignore presidential directives will nevertheless listen to NFL running backs.

Another key player that probably didn’t make your anti-obesity roster is Walmart. As the largest grocery retailer in the world, the company has enormous influence on the food-access part of this problem. Walmart credits Michelle Obama’s Let’s Move! campaign with inspiring its own Healthier Food initiative, which commits to opening between 275 and 300 additional stores by 2016 in USDA-designated food deserts—places where access to healthy food is severely limited. (On top of the 218 stores the company has already opened since 2011). The stores will offer produce to more than eight hundred thousand people who today live in low access areas.

Walmart has also committed to reduced prices on fresh produce and reformulating thousands of its private Great Value brand products to reduce their fat, sugar, and salt content. It’s good business, of course.  The double bottom line for Walmart: penetrating urban markets in the United States could enable the retailer to boost its sales by $80 billion a year.

Focusing on the desired outcome rather than clinging to bygone processes opens up a whole universe of potential problem solvers.

New Opportunities

Viewing companies like Walmart and organizations like the NFL as a big part of the solution to larger public problems requires a very different frame of thinking than most policymakers have today. So how exactly do you change your lens in order to see new opportunities? Luke Williams, the author of Disrupt, defines a disruptive hypothesis as “an intentionally unreasonable statement that gets your thinking flowing in a different direction.”

To develop such a hypothesis, Williams suggests exploring the dominant clichés in the area in question and then inverting or denying them. Take education. Public schooling evokes in-person teachers, classrooms, textbooks, school facilities, cafeterias, and yellow buses. A disruptive hypothesis might ask, “What would happen if we tried to educate children without any of these elements?” The answer might be something like the massive open online courses (MOOCs) sprouting up across the globe.

When we think of really big and hard problems, we also tend to immediately gravitate to big, heavyweight, and expensive solutions to solve them. Think new infrastructure and light rail for traffic congestion, more prisons for spikes in crime, or more fighter jets and aircraft carriers for security threats.

One hallmark of the information age, however, is that today’s solutions to even the most intractable problems often don’t require the massive spending and heavy infrastructure so associated with the industrial age. Truly innovative solutions deliver results at a fraction of the cost.


The Solution Economy

Let’s return to ridesharing. While traffic gridlock chokes some of the world’s largest cities, our analysis suggests that shifting about 15 percent of drive-alones to car sharing or ridesharing could save 757 million commuter-hours and about $21 billion in congestion costs annually. To achieve this savings through traditional means would require billions of dollars of infrastructure investment. Ridesharing apps, a tiny fraction of that cost, could engage the millions of commuters needed to generate a sizable impact.

The same goes for peer-to-peer education and job training.  Both have the potential to hugely reduce the strain on governments. Meanwhile, in the health arena, DIY tools can improve health outcomes and lower costs. Self-monitoring, cheap remote consultations, and widely available preventative care information all help cut health-care costs for both consumers and governments. Health-care apps now do everything from monitoring glucose levels in people with diabetes to managing chemotherapy schedules for people with cancer. Just as the case with ridesharing, citizens themselves, empowered by technology, become the key source of the solution.

In short, we’re seeing oil and water converge. Usually at odds with each other and their different agendas, ordinary citizens, companies, non-profits, social entrepreneurs, and governments are today teaming up to tackle the greatest challenges of our time. If we can start viewing problems with these new lenses—apart from the tinted lens of politics and obstructivism, apart from the dated belief that government is anathema to business and business is anathema to social progress—we can grow this solution economy, for the benefit of all.

Consider the toilet. Now flush it.  And imagine something better.

This article is adapted from The Solution Revolution: How Business, Government, and Social Enterprises Are Teaming Up to Solve Society’s Toughest Problems by William Eggers and Paul Macmillan, published by Harvard Business Review Press. Copyright 2013. All rights reserved


About the Authors

William D. Eggers leads Deloitte’s public sector research and is the author of 8 books on government reform. His books have won numerous awards including the Louis Brownlow award for best book on public management, the Sir Antony Fisher award for best book promoting an understanding of the free economy, and the Roe Award for leadership and innovation in public policy research. A former manager of the Texas Performance Review, he has advised governments around the world. His commentary has appeared in dozens of major media outlets including the New York Times, Wall Street Journal, The Washington Post, The Guardian and the Chicago Tribune.

Paul Macmillan has been a management consultant and strategic advisor to government leaders for over 25 years. As the Global Public Sector Leader for Deloitte Touche Tohmatsu Limited, Paul is responsible for the firm’s client service innovation to support public purpose organisations around the world.  He is a frequent writer and speaker on topics of government innovation, public accountability,and advanced analytics. Paul was recently invited to contribute his expertise to the OECD Observatory of Public Sector Innovation as a member of its Associates Group.




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