Global Impact Economy Forum Series
The US State Department is working to accelerate practices and thinking around the impact economy.
The US State Department is working to accelerate practices and thinking around the impact economy—an economy in which government works with civil society and the private sector to create positive social and environmental impact while generating economic value. The following article is part of a series written by participants in Secretary of State Hillary Clinton's Global Impact Economy Forum in Washington, DC, April 26-27.
Pneumococcus vaccines, broadband Internet, and conditional cash transfers are all examples of game-changing innovations that are significantly improving the health and prosperity of people around the world. Innovations like these are not created in one way. Some are the result of methodical cross-sector collaboration; others are stumbled across in the laboratory or in the field. At the US Agency for International Development (USAID), we are focusing on how to systematically create both the serendipity for discovery and the systematic approach to produce breakthrough developments at a substantially lower price. Our aim is to pioneer a new way to support social innovation, which prioritizes evidence to maximize impact and cost-effectiveness.
In development, evaluation is often conducted at the end of a project, unlike most early stage businesses, which look for market feedback early to assess what is and is not working. We believe innovation in the development sector must be transformed; it must include evaluation at the critical early stage of a project and throughout. Development innovation should include an iterative process of piloting, testing, refining, retesting, and scaling. By gathering evidence on what is working and what is not, efforts to invest in innovation can be tempered and disciplined so that failures can be modified or abandoned and potentially transformative approaches can be refined and scaled.
In 2010, we launched Development Innovation Ventures (DIV) at USAID to do just this by marrying the venture capital world’s staged financing model with the randomized evaluation movement in development economics which prizes rigorous evaluation, often using randomized control trials (the same way the FDA tests new drugs). DIV’s staged grants aim to identify, develop, test, and scale development innovations that prove, through rigorous testing, to be cost-effective and scalable approaches to development challenges. We recognize that development breakthroughs can come from anywhere—a lab in a university, a local person who has deep contextual knowledge, or a passionate entrepreneur—and can be new products or technologies as well as novel business models and processes that have the potential to improve the lives tens of millions of people across the developing world.
These innovations can be solutions that can scale up through private sector commercialization, such as a new technology that stops post-partum hemorrhage, or though adoption by host country governments or development agencies, such as an attendance monitoring system to ensure that public health workers in India show up to work each day. The key is that DIV’s staged financing approach allocates resources in lockstep with the amount of evidence of impact demonstrated by a solution. It helps scale only the ones that are proven to work.
DIV has made awards to world-renowned economists, award-winning social enterprises, startup companies, respected NGOs, and local partners. The startup Sanergy, for example, founded by graduates of MIT’s Sloan School of Management, is trying to address an issue facing 2.5 billion people across the world: access to basic sanitation. A 2009 World Health Organization report estimates that infection from contact with human waste claims the lives of nearly 1.6 million children each year. DIV’s stage 1 investment in Sanergy is piloting its network of pay-per-use latrines in the urban slums of Nairobi. The sanitation centers are franchised to local entrepreneurs, who earn income through usage fees, membership plans, and sales of complementary products. The company collects the waste daily to process as commercial-grade fertilizer and biogas that are sold for a profit, which could create a $72 million annual market in the slums of Kenya alone.
Another DIV awardee, James Habyarimana and Billy Jack from Georgetown University, is using a technology as cheap, simple, and replicable as a bumper sticker to stem the leading cause of death for young adults: road traffic accidents, which claim the lives of more than a million people each year globally. Putting small stickers in mini-buses encouraging passengers to “Stand up! Speak up!” against reckless driving reduced insurance claims involving injury or death by two-thirds in a pilot in Kenya, conducted by the researchers. With Stage 2 DIV funding, they are partnering with a local cell phone company, an insurance company, a broadcast media company and a local NGO to expand the pilot to reach approximately 10,000 minibuses in Kenya and rigorously evaluate the program to determine how messages can be most effective in reducing accidents.
One of DIV’s first investments has already generated evidence compelling enough to continue without DIV support. Researchers from the University of California, San Diego used $100,000 of DIV funding to evaluate how candidates and polling officials in Afghanistan reacted to the knowledge that their polling station vote counts would be photographed and compared to the final vote tallies in the capital in the 2010 elections. The results found by Michael Callen and James Long showed a 25 percent reduction of votes for the candidate most likely to influence the count, and a 60 percent reduction in the theft of vote tallies and other election materials. Following the evidence of the project's success in Afghanistan and a second trial in Uganda, a private global telecommunications firm plans to expand the approach to some upcoming high-profile elections.
Evidence-based innovation offers, and DIV is designed to assist with, the iterative process of seeking and adapting to lessons learned. By supporting breakthrough innovation while prioritizing evidence, DIV has the potential to change millions of lives at a fraction of the usual cost and be an important development innovation in the field.