It is Time to Break Out of the Innovation Silo

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As we know all too well, the pace of progress is falling far short of both the desperate needs in the world and the ambitions of the Sustainable Development Goals. Today, it’s hard to find anyone who disputes the need for innovation for global development.
So, why does innovation still seem to be largely relegated to scrappy social enterprises and special labs at larger NGOs and funders while the bulk of the development industry churns on with business as usual?
We need to move more quickly to bring best practices such as the G7 Principles to Accelerate Innovation and Impact and the Principles for Digital Development into the mainstream. We know we can drive greater impact at scale by taking measured risks, designing with users, building for scale and sustainability, and using data to drive faster feedback loops.
In Lean Impact: How to Innovate for Radically Greater Social Good, I detail practical tips for how to put innovation principles into practice. Lean Impact is the latest book in the Lean Startup series, and will be released on Oct 30th.  You can pre-order your copy here.
Crossing the Innovation Chasm
Those of us in the ICTworks community are among the early adopters who have drunk the Kool-Aid. We’ve carved out pockets within our respective organizations where innovation can thrive. But, what about the other 90%?
If we are to move the needle, these principles will need to permeate into the largest programs and most established teams. No doubt this will be hard. The existing processes, pressures, and incentives push towards conservative solutions that are rigidly defined and deliver short-term wins. But, we have to get started.
iNGOs Can Create Room for Innovation
While funders do indeed hold most of the cards, they don’t hold all of them. Indeed, there are concrete steps that international NGOs can take to create the mindset and space needed to innovate. Here are a few:
Innovation windows.
Carve out a small percentage (5-10%, or even 1%) of a large grant to seek incremental improvements or disruptive alternatives. If you can improve your cost-effectiveness by 20% as a result, you’ll come out ahead. This could be included as part of your initial proposal or negotiated in the workplan after a grant is awarded.
Build in adaptation.
With the update of the ADS 201 policy in 2016, USAID recognized quality programming requires us to “manage adaptively through continuous learning.” Rather than treating this as another check box, embrace it as an opening to move away from a rigid plan to one that incorporates data and feedback loops.
Metrics that matter.
Program metrics tend to revolve around reporting requirements – typically aggregate measures of activities and outputs. Even if a donor doesn’t require them, define and track your key “innovation metrics” – such as the adoption rate, success rate, and cost per intervention. By optimizing the underlying drivers of success at the unit level, you can accelerate your impact and scale over time.
Invest in the future.
Unrestricted funding is more precious than gold, but we still manage to invest in proposal development. By going beyond research on paper and running small experiments to validate new approaches, iNGOs can be in a better position to make the case to donors that the benefits outweigh the risks.
Of course, when you push back on donors, take an untrodden path, or put precious funds on the line you will face the possibility of failure. But, remember that your mission is not to win grants or perpetuate our organization, but rather to make the biggest difference possible. If you believe you can deliver better results, some risk is well worth that reward.
Donors Can Focus on the End Game
At the end of the day, it’s funders who set the playing field and create the incentives. While iNGOs can do more, innovation will not become the norm unless donors not only allow for intelligent risk taking, but also encourage it.
Where we don’t have existing solutions that are sufficient for the needs, donors should allocate a significant chunk of their investment to incentivize innovation and catalyze paths to scale. This means allowing those closest to the problem the flexibility to take risks, rapidly iterate, and seek new business models that will grow sustainably beyond the duration of a grant. Among the tools we should deploy far more frequently are:
Tiered Funding.
For earlier stage or disruptive innovation, tiered funding similar to venture capital casts a wider net for potential solutions, then rewards those that demonstrate traction with larger follow-on tranches. USAID’s Development Innovation Ventures (DIV) and family of Grand Challenges are built on such a model. In contrast to micro-managing activities, allowing for risk and rewarding success can unleash innovation.
Pay for Outcomes.
For more mature interventions, paying for outcomes encourages continuous innovation to achieve lower costs and greater impact. Development Impact Bonds (DIBs) have drawn much attention with the potential to leverage private financing, but can be overly complex. Smaller steps such as bonus payments (particularly of precious unrestricted funds) for improved outcomes can also provide a meaningful incentive.
Blended Financing.
If we recognize that foreign aid and philanthropy will never be sufficient for the problems we aim to tackle, we need to shift the focus from what we can deliver to what we can catalyze. By de-risking new solutions and proving out novel business models, we can draw in far larger pools of private financing.
The constraints of the global development ecosystem as it exists today can be so discouraging that it is tempting to work along the edges where there is more room to experiment. However, if we are committed to achieving the SDGs, we will need to find ways to integrate the best practices for innovation into everything we do.
Written by Ann Mei Chang, the author of Lean Impact: How to Innovate for Radically Greater Social Good and previously the Chief Innovation Officer at both USAID and Mercy Corps.
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