Case studies in funding innovation

76 Pages·2015·2 MB·English

Case studies
in funding
innovation

About the authors
Gabriel Kasper is a senior manager with Deloitte Consulting LLP at the Monitor Institute. For two
decades, he has helped philanthropic funders understand the changing context for their work and
clarify what those shifts mean for what they do and how they do it. His work is grounded in experi-
ence, as a program officer at the David and Lucile Packard Foundation and a program manager
for the Berkeley Community Fund. A prolific writer in the social sector, he has co-authored “The
re-emerging art of funding innovation,” What’s Next for Philanthropy, On the Brink of New Promise,
Intentional Innovation, and Working Wikily.
Justin Marcoux is a manager with Deloitte Consulting LLP at the Monitor Institute. He focuses on
innovative practices in philanthropy and has helped private, corporate, and community founda-
tions challenge old assumptions and creatively imagine new possibilities. He also writes and speaks
regularly about philanthropy and social innovation. His work has appeared in publications such as
Stanford Social Innovation Review, Alliance Magazine, and The Chronicle of Philanthropy. Prior to
joining Monitor Institute, he was with Cambridge Associates advising US and European founda-
tions, nonprofits, and universities on investing their endowments.
Deloitte Consulting’s new Social Impact practice helps clients harness a market-driven
perspective to identify and co-create socially minded solutions that enhance value.
The practice combines deep consulting expertise in the business, government, and
nonprofit sectors with experience bridging domains and working at the forefront of
social progress. Read more about our Social Impact practice on www.deloitte.com.
Contents
Introduction | 2
Endnotes | 5
Reverberating impact
Introduction | 8
The origins of ECHO | 9
Supporting pioneers in health | 11
Lessons for funders | 14
Epilogue: The evolution of the Pioneer Portfolio | 17
Endnotes | 19
Can’t do it a-loan
Introduction | 22
The beginnings of Kiva | 23
The first injection of innovation funding | 25
Taking Kiva to the next level | 26
Lessons for funders | 28
Endnotes | 31
A few wild and crazy ideas
Introduction | 34
The Grand Challenges model | 35
Applying the GCE model outside of the Gates | 40
Lessons for funders | 41
Endnotes | 43
Keeping cool
Introduction | 46
The importance of ecosystems | 47
VentureWell and Promethean’s early days | 49
Lessons for funders | 53
Endnotes | 55
Diffusing innovation
Introduction | 58
The British invasion | 59
Avoiding the high price of doing it wrong | 61
Elements of an ecosystem | 62
What’s next for SIBs | 66
Lessons for funders | 67
Endnotes | 69
Contacts | 70
Case studies in funding innovation
Introduction
INNOVATION has long been an essential part • Can’t do it a-loan: How innovation fund-
of philanthropy. But the process of search- ing helped Kiva launch and develop looks at
ing for and supporting new approaches can be the innovation process from the other side,
messy. The reality is that the path from idea to starting with a high-profile innovation and
impact is often long, winding, and unpredict- looking back at how it was found and sup-
able, and there is no simple, step-by-step meth- ported by philanthropy.
odology for finding and funding new ideas.
That doesn’t mean, however, that phil- • A few wild and crazy ideas: How the Gates
anthropic funders can’t be intentional about Foundation’s Grand Challenges Explorations
the approaches they use to seed and scale program finds and funds radical new
social innovation. In our 2014 Stanford Social approaches from across the globe looks at
Innovation Review (SSIR) article “The re- the deliberate processes that one innova-
emerging art of funding innovation,”1 we high- tion funder has developed to find and select
light the ways that the processes, strategies, ideas with transformative potential.
and structures required to deliberately seek out
and support early-stage, breakthrough ideas • Keeping cool: How a coordinated ecosys-
can be quite different from those used in more tem for innovation supported the growth of
traditional grantmaking. Promethean Power Systems explores how
To further illustrate what it really takes to The Lemelson Foundation has created the
fund innovation in practice, we have developed infrastructure and support to help many
five case studies that aim to capture the reali- new innovations develop over time.
ties of the innovation funding process. Each
looks at the process of supporting innovation • Diffusing innovation: How an ecosystem-
from a different angle: based approach is helping social impact
bonds to spread examines a different sort
• Reverberating impact: How the Robert Wood
of ecosystem—one designed to help dif-
Johnson Foundation’s Pioneer Portfolio
fuse a potentially powerful innovation
helped seed and scale Project ECHO dives
more rapidly.
into how a foundation can help an early-
None of these cases alone tells the whole
stage idea blossom into something that may
story of what funding innovation looks
grow to be transformative.
like; they explore a range of approaches that
2
Introduction
emphasize very different aspects of the process. the first question is not ‘Is this going to
But we believe that the collective set of case work?’ but rather, ‘If it works, would it
studies begin to paint a well-rounded picture matter?’”3
of many of the processes and approaches that
innovation funders can use to nurture and • Provide risk capital. Many nonprofits
scale new ideas with transformative potential. and social activists operate with lim-
It’s important to recognize that these stories ited resources and are so focused on
are not about the innovations themselves. They accomplishing their goals that they have
don’t explore whether Kiva should actually be little time and money available to experi-
considered a truly game-changing financial ment with new ideas. Providing flexible,
innovation, or whether the Gates Foundation’s unrestricted financing that can be used
Grand Challenges program should have hit a to try new approaches can be critical to
“home run” already after 10 years of operation. promoting innovation.
Those are questions for another time and place.
But each of the examples described in the • Support innovations with more than money.
cases is showing important signs of promise, Virtually all funders try to support the work
and because creative funders were willing to of their grantees, but early-stage innova-
embrace a different way of working, the inno- tions often require an especially hands-on
vations have been able to grow from the seeds approach to help mold emergent strategies,
of ideas to full-fledged experiments. It’s still too prototype new concepts, and build neces-
early to answer whether they will ultimately sary systems and networks.
prove to be transformative—but it’s clear that if
the funders involved had been wedded to more • Build ecosystems for innovation. Because
traditional grantmaking approaches, we might foundations are rarely positioned or staffed
not even be able to ask the question. to provide all of the different supports
The innovation processes described in the required to help an innovation grow and
cases here are inherently complex, full of stops spread, it is often important to put infra-
and starts, iterations, and failures. And one of structure in place that can provide the
the clearest takeaways looking across the sto- necessary assistance required to move
ries is that there is simply no straightforward innovations ahead.
recipe for funding breakthrough ideas. But the
cases do help to illustrate an emerging set of • Allow for iteration and failure. As Van Jones,
“innovation funding principles” that can allow a senior fellow at the Center for American
funders to better identify and support early- Progress, has explained, funders need to
stage, high-risk, high-reward projects: “stop giving grants and instead start to
fund experiments.”4 This means building
• Seek out ideas from new places. Finding
an appreciation for iteration, failure, and
ideas with the potential to create lasting
learning—it’s not necessary to know all
transformation means reaching beyond
of the answers and outcomes right from
the usual suspects to find promising
the outset.
new solutions.2
• Focus on learning and improving. Funders
• Select ideas to support based on their poten-
need to be careful not to mistake wrong
tial for transformation. As Eric Toone, vice-
turns for roadblocks. Innovations often fol-
provost and director of the Duke University
low a long and circuitous path, and funders
Innovation and Entrepreneurship Initiative,
need to balance the tension between “failing
explains, “When you’re doing innovation,
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Case studies in funding innovation
fast” and allowing enough time for ideas to opportunities with the potential to produce
iterate and develop. outsized rewards—funders, too, should con-
sider using a portion of their resources to sup-
• Think about scale and spread of innovation port innovation alongside their investments in
from the start. Innovation funders need more consistent and proven approaches.
to start thinking about scale and diffusion Eric Schmidt, the former CEO of Google,
early by recruiting other funders to support used to describe what he referred to as his
later-stage innovation, exploring how to 70/20/10 rule: 70 percent of management’s
connect innovations to markets, soliciting effort should be dedicated to core business
support from government, and dissemi- tasks, 20 percent should be focused on proj-
nating information and building capacity ects related to or adjacent to that core, and 10
to help promote widespread adoption of percent should be dedicated to unrelated but
new ideas. high-potential new businesses.5 Using this type
of portfolio approach allowed Google to focus
Perhaps unsurprisingly, these principles
the majority of its resources on proven strate-
mirror many of the key elements that were dis-
gies that formed the heart of its business while
cussed in our 2014 SSIR article related to the
ensuring that it wasn’t missing out on impor-
sourcing, selecting, supporting, measuring, and
tant new opportunities and impact.
scaling of innovation. As we explained in that
For funders, 70/20/10 may not be the right
piece, innovation funding shouldn’t be seen as
ratio. Each foundation and donor will need to
an alternative to, or replacement for, strategic
think about its own unique risk-reward profile.
philanthropy; funding innovation is actually
But imagine the potential impact if all funders
an integral part of good, strategic philanthropy.
dedicated 10 percent of their giving to experi-
And we believe that embracing these innova-
ments that may have a high likelihood of fail-
tion funding principles can help with virtually
ure but that, if they succeed, could transform
all aspects of a funder’s grantmaking.
a critical system. With so many more ideas
For many funders though, taking risks on
being supported, if 1 in 10, or even 1 in 100, of
high-potential projects won’t be necessary
the innovations could succeed, it could change
or appropriate for all of their work. Instead,
the world.
the principles are better applied to just a
We hope you enjoy the stories of innova-
subset of their giving activities. And much as
tion funding that follow, and we hope that they
financial investors try to build a diversified
illuminate some of the ways that your orga-
portfolio—placing the majority of their assets
nization might embrace supporting break-
in investments with safe and steady returns,
through ideas as part of your funding portfolio
but using a smaller percentage for higher-risk
in the future.
4
Introduction
Endnotes
1. Gabriel Kasper and Justin Marcoux, “The 3. Kasper and Marcoux, “The re-emerging
re-emerging art of funding innovation,” art of funding innovation.”
Stanford Social Innovation Review, spring
4. Ibid.
2014, http://www.ssireview.org/articles/entry/
the_re_emerging_art_of_funding_innovation. 5. CNN Money, “The 70 percent solu-
tion,” December 1, 2005, http://
2. For more information on this topic, see
money.cnn.com/magazines/business2/
Gabriel Kasper and Justin Marcoux, “How to
business2_archive/2005/12/01/8364616.
find breakthrough ideas,” forthcoming as a blog
post in Stanford Social Innovation Review.
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