Introduction: The age of the solution economy

As the recent recession and the resulting damage made clear, creeping social problems, such as crumbling roads, safe and affordable housing for lower-income families, and crowding schools, do not yield when markets slow and government budgets tighten. Fortunately, as Paul Macmillan and I argue in our new book, The Solution Revolution: How Business, Government, and Social Enterprises are Solving Society's Toughest Problems,¹ government is no longer the only game in town when it comes to societal problem solving.

This collection of articles explores how, in today’s new “solution economy,” solving social problems is becoming a multidisciplinary exercise that challenges businesses, governments, philanthropists, and social enterprises to think holistically about their role and their relation to others—not as competitors fighting over an ever-shrinking pie, but as potential collaborators looking to bake something fresh that serves as many stakeholders as possible.

Even while so many have struggled during the historic economic downturn, we’ve also seen a massive growth of economic activity targeted at solving larger social problems. A burgeoning new solution economy has emerged where players from across the spectrum of business, government, philanthropy, and social enterprise converge to solve big problems and create public value. Over the last decade or so, a dizzying variety of new players have entered the societal problem-solving arena. Lyft and Relay Rides, Acumen and Ashoka, Kiva and Kaggle, SpaceX and M-Pesa, Branson and Bloomberg, Buffet and Gates—the list is long and growing briskly. Where tough societal problems persist, these new problem solvers are crowd-funding, ridesharing, app-developing, and impact-investing to design innovative new solutions for seemingly intractable issues.

This phenomenon points to a crucial lesson: namely, that thorny, complex problems can become immense opportunities when industry, philanthropy, and government start thinking entrepreneurially, leveraging their respective strengths to take on pesky challenges. This occurs when leaders in all economic spheres change their lens to see opportunities that others don’t see; look for ways to create new value by trading in different currencies (e.g., data for work or carbon credits to reduce emissions); or develop new business models that help solve problems and can be rapidly scaled.

Among the many forces that are coalescing to advance the solution economy:

• Seismic shifts in technology are helping companies, social enterprises, and government agencies break old trade-offs and network to create solutions faster and cheaper than ever before. By unleashing the creative capacity of citizens, open platforms increase the number of potential solutions.
• Big data is becoming a currency and transforming the science of impact evaluation. We are beginning to harness the huge troves of information collected in government databases and putting that data to work solving problems. Governments can choose to be a producer, consumer, or facilitator of this ballooning marketplace, while new actors like Kaggle—a data science competition platform—can help reveal the secrets in the data to point toward solutions and monitor and measure social impact.
• Business’ growing belief that caring solely about profits is simply not rational anymore and in the long run is actually a liability. The concept of pursuing a double bottom line, in which companies seek to maximize financial and social impacts, or even a triple bottom line, with environmental benefits added to the equation, has gained traction among large, established firms and fledging enterprises alike. It’s a false trade-off that companies must compromise financial success for social progress: If you’re smart, you can have both, and will ultimately be better off for it.
• Public-private partnerships for purpose are rapidly multiplying. Private-public partnerships are no longer restricted to financing and building roads and bridges. Innovative new financial tools such as social impact bonds (SIBs) are engaging new service providers in activities like reducing criminal recidivism and taking considerable risk off the backs of governments. This new wave of partnership options offers a diverse set of players new opportunities to work together towards shared goals. One consequence for governments: the need to cultivate, as a core competency, the ability to determine how to amplify value by engaging others in problem-solving needs.

Driven by these and other forces, “wavemakers” like the organizations and individuals named above—and the solutions they’re developing—are increasingly aligning around common objectives such as reducing congestion, providing safe drinking water, and promoting healthy living. By erasing boundaries between the public and private sectors, the solution economy has the potential to unlock trillions of dollars in social benefit and commercial value.

View  Social innovation: The solution revolution video and The Solution Economy collection.