Scaling Innovation

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Existing Technology Solutions

The development community is filled with hundreds of new innovations that have the potential to change millions of lives and help address global poverty in new ways and using more efficient methods.

“Examples include clean-energy, portable fuel cells powered by sodium silicide to bring power to off-grid homes; a cell phone fingerprint recognition app to improve health worker attendance; a special pen to self- test for pre-eclampsia to prevent maternal mortality; a low-cost psychometric-based test to screen credit applications from small business owners; and cyanobacterial fertilizer to improve soil fertility. These particular examples are among several currently being sponsored by the U.S. government as part of its renewed focus on supporting transformative technologies for development.”

Good technology isn’t enough

While these technologies might be amazingly innovative and probably could solve a lot of the world’s problems, they have to take into account other realities. These include getting the technology to those it was actually intended for in a way that is cheap, effective and sustainable. Achieving this is no easy task.

“Whether these or any other technologies succeed in having a transformative impact depends not just on their individual brilliance and creativity but also on whether they can be brought to a scale where they can reach millions of poor people. Participants in the Brookings Blum Roundtable examined what it takes to propagate technological solutions for development so that their reach can be maximized.”

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Brookings Blum Roundtable 2012

On August 1-3, Brookings Global Economy and Development hosted the ninth annual Brookings Blum Roundtable on Global Poverty in Aspen, Colorado. The theme of discussion was “Innovation and Technology for Development” and the event gathered global leaders, entrepreneurs and practioners in talks on technology and innovation and how they can be used to  solve some of the world’s most pressing global development challenges.

“A keystone of the roundtable discussion was recognizing the importance of the business model—the specific combination and design of product, distribution, supply chain, financing, pricing, payment and sales—through which a solution is propagated. This is equally applicable whether the solution is delivered commercially or as a public good or service. Most business models employed in administering development interventions are not viable at scale, which explains their limited reach and impact. Identifying the appropriate business model to use for a given product or intervention is therefore a critical challenge.”

Two challenges

As mentioned above, actually figuring out how to scale any innovation involves understanding what is most appropriate for that particular situation. Particularly for poverty or development innovations, these challenges are extremely relevant.

“First, there is the issue of finance. Poor people can rarely afford to pay the full cost for a good or service, and these costs can be especially high when new markets or products, like solar power, are being introduced. The second issue is managing delivery to large numbers of beneficiaries. Marketing and distributing goods and services efficiently to poor people spread out throughout a country or the world hinges on effective logistics, systems, staffing and training.

Devising and implementing a scalable business model is hard for any single organization to do alone. Roundtable participants noted the potential for partnerships to expand the scope for achieving scale both by pooling the resources and expertise of different parties to enable larger and more ambitious interventions, and by dividing up tasks according to an appropriate division of labor.”

Two main challenges for scale. [Photo credit – Brookings Blum Roundtable 2012 Report]

Two Cases

In order to help understand and learn more about scaling the right way, two cases are discussed below in detail and their ability to overcome these challenges. These are both technology-infused development solutions and took unique steps to organize and create impact at scale

“In each case, a unique partnership of actors is formed to tackle the twin challenges of finance and delivery. Moreover, these partnerships employ hybrid models combining public and private actors and thus do not conform to a traditional division of subsidized versus for-profit approaches. These examples demonstrate that the role of innovation in development does not stop with the design and harnessing of new technologies but extends to the business models and partnerships through which they are propagated.”

Case 1: M-Pesa

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“The mobile money service M-Pesa enables cell phone users to transfer money and utilize other simple financial services at a minimal cost and without requiring a formal bank account. M-Pesa has reached scale in Kenya and has been rolled out in other countries alongside other mobile money systems from rival operators, many of which employ a similar business model.

While M-Pesa is profitable in Kenya—it is currently responsible for 18 percent of the revenue of the mobile operator Safaricom—it benefited from some “soft money” in its early development to help pilot the initiative. A total of £1 million was made available through a challenge fund from the U.K. Department for International Development. This was matched by approximately £9 million in investment between Safaricom and its parent company, Vodafone, with the latter being responsible for developing and hosting the technology.

Safaricom reaches its customers through its network of agents. Agents are the most visible element of the service, and were responsible in the early years for gaining the trust of customers to encourage the adoption of a new product. Rather than creating an agent network from scratch, M-Pesa identified existing networks of competent intermediaries in the Kenyan economy which they could readily employ. These included their own airtime dealers, the fuel retailer Caltex, Group 4 Securicor courier services, supermarket chains and other retailers, dry-cleaners and the Pesa Point ATM network. At present, Safaricom has over 45,000 agents, or nearly 1 for every 500 adult Kenyans. Regular interactions between M-Pesa and its agents provide an opportunity for training (to ensure a high quality of service), information gathering (to inform improvements to the service) and instilling loyalty (to retain agents and avoid rehiring costs).”

How M-Pesa addressed the two challenges. [Photo credit – Brookings Blum Roundtable 2012 Report]

Case 2: Husk Power

“Husk Power Systems (HPS) has developed a profitable approach to biomass energy generation and distribution that is loaded with innovation across the value chain. This includes the generation of gas from rice husks, distribution of power to homes via low-cost bamboo poles, a sophisticated system to prevent power theft, specially designed smart meters and a tariff model tailored to the low-income customer segment. Starting in 2007, HPS has developed 75 mini–power plants serving 25,000 Bihari households and is now planning to replicate its business model in Tanzania and Uganda.

As with M-Pesa, HPS benefited initially from grant fund- ing to test and refine its business model. This included an award from the Dell Social Innovation Challenge and, more significantly, a $2.3 million multiyear commitment from the Shell Foundation. The latter helped to finance a range of sunk costs including research and development, capital expenditures, human resources, training, and health and safety and was complemented with extensive on-the-ground technical assistance from the Shell Foundation team. Once HPS was ready to scale, it was able to draw in impact investors, including the Acumen Fund, Draper Fisher Jurvetson, LGT Venture Philanthropy, Bamboo Finance and the International Finance Corporation.

Operating in poor, rural and remote locations presents obvious challenges in hiring qualified personnel. To overcome this challenge, HPS has established a dedicated training center called Husk Power University, which is being run as a separate philanthropic project through the owners’ foundation, Samta Samriddhi, with support from the Shell Foundation and the business training group Optima. A partner organization, the Rural Power University, is sponsored by HSBC and the Indian philanthropic foundation, Dasra.”

How Husk Power addressed the two challenges. [Photo credit – Brookings Blum Roundtable 2012 Report]

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Conclusion

As we can see from the above two examples, it is extremely important to look at activities that can have a profound impact on whether your innovation is able to scale throughout the project. Just focusing on the technology alone will not be sufficient. Good technology will not be able to overcome bad execution and bad ideas will not succeed despite good implementation.

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Sources

1. Pauline Vaughan, Wolfgang Fengler and Michael Joseph, “Scaling-up Through Disruptive Business Models: The Inside Story of Mobile Money in Kenya.” in Getting to Scale: How to Bring Development Solutions to Millions of Poor People, ed. Laurence Chandy, Akio Hosono, Homi Kharas and Johannes Linn (Washington: Brookings, forthcoming).
2. Harvey Koh, Ashish Karamchandani and Robert Katz, “From Blueprint to Scale: The Case for Philanthropy in Impact Investing,” Monitor Group, April 2012
3. Peter Vanham, “Mobile Money: Kenya good, India bad” beyondbrics blog of the Financial Times, May 28, 2012
4. Elio Vitucci, “Is there a demand for mobile loans?,” Mobile Money for the Unbanked, August 7, 2012
5. Blum Roundtable 2012 Event Page
6. Brookings Blum Roundtable 2012 – Report

Photo Credits for Prezi:

1.  WORLD’S FIRST DUAL-CORE SMARTPHONE COMES TO EUROPE – by user LGEPR on Flickr
2. U.S. Department of Agriculture, Natural Resources Conservation Service  – on Wikimedia Commons
3. Crowded busy street of Little India – on Wikimedia Commons
4. Icon Free Check List – by user Nemo on Pixabay
5. Money! – by user Tracey O. on Flickr
6. Husk Power Systems – by user RobKatz on Flickr