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Innovation

To foster innovation, let a hundred flowers bloom?

Jean-Louis Racine's picture


Helen Mwangi and her solar-powered water pump in Kenya © infoDev/World Bank

Managers of initiatives that support innovative entrepreneurs have a choice to spread their resources (and luck) among many opportunities or focus them on the most promising few. In developing countries, public and donor programs can learn a lot from how private investors pick and back innovative ventures.

In the early days of infoDev’s Climate Technology Program, our thinking was very much about letting a hundred flowers bloom: supporting a large number of firms with the hope that a few would emerge as blockbusters. Firms were selected on the basis of objective metrics tied to the innovative nature of their ideas and their economic, social and climate-change impacts. For example, while infoDev’s partner the Kenya Climate Innovation Center has more than 130 companies in its portfolio, a $50 million venture-capital fund in California would have at most six. Inspired by private investors, we have since rethought our program objectives for these centers, as well as the way we select and support businesses. The Kenya center is going through a rationalization of the firms it supports.

Like many public programs, infoDev and its network of Climate Innovation Centers had good reasons to support large numbers of companies. The main reason is the need to spread the entrepreneurship risk through a diversified portfolio. A recent infoDev literature review found that up to a third of all new firms do not survive beyond two years, let alone grow. Out of those that survive, data from high-income countries suggest that fewer than 10 percent become high-growth firms. So casting a wide net increases the chances of hitting the jackpot. The opposite approach, picking winners, is seen as destined to fail and distort the market. 

Six tips to balance the gender scale in start-up programs

Charlotte Ntim's picture

Sinah Legong and her team meet at Raeketsetsa, a program that encourages young women in South Africa to get involved in information and communications technologies. © Mutoni Karasanyi/World Bank

Olou Koucoi founded Focus Energy, a company that brings light, news and entertainment to people living off-grid in his country, Benin. Its spinoff program ElleAllume hopes to train more than 1,000 women to bring power to 100,000 Beninois homes this year. “At the end of the day, [inclusive hiring] is not a gender decision, it’s a business decision,” he says.
 
Over the past few months, I interviewed a number of incubator and accelerator programs to compile best practices for the World Bank Group’s Climate Technology Program. The research spanned 150 programs in 39 countries, ranging from relatively new to seasoned veterans of the clean tech incubation space. The consensus regarding gender diversity and inclusion was almost unanimous; all but one program echoed Koucoi’s sentiments – in principle.
 
In practice, however, encouraging more women into the clean energy sector and related programs has proved challenging. Below are some of the most popular explanations for the low levels of female representation:
 
“We can’t find them.”
Many clean energy incubation programs said they had difficulty recruiting due to a lack of women in the industry and strong women’s networks to tap into. While there is no shortage of women in clean energy (with industry-specific examples such as clean cookstoves serving as a good example) there are few women-led businesses. This lack of visible leadership translates into lower rates of participation.
 
“We would love to focus on bringing more women into the program, but we have limited resources.”
Incubation programs are often lean, with little time and few resources to expand on offerings and create targeted programs for women. Instead, to create quick wins and draw in additional funds, programs often take a “low-hanging fruit” approach, seeking out the most visible companies to recruit and invest in, which tend to have male co-founders.
 
“Does it really matter at the end of the day?”
Many programs are pro-gender-diversity in principle, but gender-agnostic in practice. This stems from a disconnect between the “gendered-lens” approach discussed when fundraising for incubation programs and the results frameworks which judge their success. Such factors as the number of companies exited are still weighed much more heavily than gender balance.

Below are some of the best ways I have found to create more gender-diverse and inclusive programs:

Scaling up inclusive innovations: 10 lessons for donors

Johannes Linn's picture
Women in Jharkhand, India
Women in Jharkhand, India. © Natalia Agapitova/World Bank

Only a small fraction of women in rural India have a bank account, reinforcing existing gender inequity. Without access to financial services, women miss out on government benefits, like cash transfers. Alternative for India Development (AID) delivers financial products to women and other underprivileged populations through a unique business model. In partnership with the government and commercial banks, AID established more than 600 Common Service Centers that serve as one-stop delivery points to financial and government services. In just three years of operation, AID opened 200,000 deposit accounts, one-third of which belong to women. Thanks to these accounts, underprivileged populations was able to receive pensions, government subsidies and access free savings accounts.

AID is just one of a large and growing number of businesses that combine profits with impressive development results. These businesses are known as social enterprises, and the innovations they develop play a critical role in providing life-improving goods, services, and employment to hundreds of millions of poor people. Social enterprises can be distinguished from other public and private organizations by the fact that they pursue social objectives through commercially viable business models and are independent from the government.
In his recent blog, World Bank Group President Jim Kim urged the development community to partner with social enterprises to achieve the Sustainable Development Goals. This will require a different approach to scaling results of successful social enterprises, their inclusive innovations, and business models. In a recent Brookings Working Paper we reviewed the literature and experience with scaling up social enterprise innovations and summarized lessons for how scaling up can be best managed. Here we briefly explore the main implications for external donors.

Making innovation benefit all: Policies for inclusive growth

Caroline Paunov's picture

“Inclusive growth” has been at the forefront of policy discussions in OECD and non-OECD economies. These discussions reflect a concern that economic growth does not necessarily improve the welfare of all citizens as income inequalities have risen to unprecedented levels over the past decades. The richest 10% of the population in the OECD area earn almost ten times more than the poorest 10%.
 
Throughout history, innovation has been the main engine of improved living standards and the current period of digital innovation offers similar opportunities. At the same time, periods of substantial technological change are known to be highly disruptive as new technologies render old technologies obsolete. This process creates winners but also losers within and across countries.

Beyond building products – changing hearts and minds to actually use them

Marta Milkowska's picture
They were everywhere — blown-up condoms flying around as balloons in a small village in southern Kenya. A day earlier volunteers from an international NGO came to the village to promote family planning. They held a daylong workshop for women and thoroughly described the risks of lack of sexual protection. The next day, the volunteers left, and the village was covered with flying condom-balloons. It was 2007 and I was just about to learn how typical that story was. In the months that followed, I saw cookstoves being used as shelves and mosquito nets as football goals. So what went wrong?

Demystifying start-ups, or why Snapchat is an outlier

Ganesh Rasagam's picture



A market in Ramallah, West Bank. © Arne Hoel/The World Bank

Snapchat made its historic initial public offering this month with a market valuation of $33 billion, which qualifies it as a decacorn (a firm valued at least $10 billion, compared to a unicorn, which is valued at a mere $1 billion). Snapchat, once the bane of parents as a teenage distraction, overtook Alibaba’s record of raising $22 billion in 2014 and has spawned two 26-year-old multi-billionaires.
 
It is tempting to be dazzled by the likes of Snapchat, Uber, Facebook and Airbnb and to conclude that the start-up scene is dynamic and thriving. However, the reality is rather different, and perhaps even somewhat grim: U.S. Census data released in 2016 show that new business creation is near a 40-year low. According to a number of researchers, the rate of business start-ups and the pace of employment dynamism in the U.S. economy have fallen over the past decades.

A critical factor in accounting for the decline in business dynamics is a lower rate of business start-ups and the related decreasing role of dynamic young firms in the economy. For example, the share of U.S. employment accounted for by young firms has declined by almost 30 percent over the past 30 years. This statistic has significant implications given that the churning effect of new firms is an important means of reallocating capital and labor from low-productivity to high-productivity activities, which in turn is required for long-term productivity-led growth.
 
If this were not worryisome enough, the data also shows that since around the year 2000, there are far fewer high-growth young firms being created in the United States. Most start-ups fail, but a very small percentage (between 1 percent and 5 percent, based primarily on data from OECD countries) are innovative and dynamic, grow rapidly and create the most jobs and value, thus making a disproportionate contribution to overall productivity growth.
 
The likelihood of a start-up in the United States becoming a high-growth firm is now lower than before the year 2000, which is counterfactual in the age of digital disruption. No one is quite certain of the economic, social, and demographic factors behind these trends of declining start-up activity and the dearth of high-growth firms in the United States, but there are a number of theories, including the effects of the Great Recession, generational cultural changes and changing risk appetite of young people, a burdensome regulatory environment, and the increasing importance of large, innovative firms that have adapted many of the appealing features of startups.
 
A World Bank Group team is exploring the topic of high-growth entrepreneurship in developing countries to examine whether there are similar patterns and trends as in the United States and OECD countries. This study looks at the prevalence and characteristics of high-growth firms in various economies, the attributes of the firm and the entrepreneur, the business environment, and other factors such as the role of foreign direct investment and spillovers/linkages and agglomeration effects. The focus of the study will be also to assess the policy instruments being deployed and how effective are these in providing targeted support to high growth firms.
 
The Global Entrepreneurship Congress (GEC) this week in Johannesburg, South Africa provides an excellent opportunity to exchange ideas and deepen insights on the challenges of identifying and nurturing high-growth firms. This year’s GEC theme is “Digital Disruption.” More than 4,000 disruptors — entrepreneurs, investors, policymakers and ecosystem builders from more than 160 countries — are coming together to exchange market-specific insights on how to identify and nurture the most innovative high-growth entrepreneurs from across the world to create high-quality jobs, drive productivity-led sustainable growth and find solutions to global challenges.

 

Announcing funding for 10 Development Data Innovation projects

Haishan Fu's picture

In July of 2016, the Global Partnership for Sustainable Development Data (GPSDD), announced a new multi-million dollar funding initiative to support collaborative data innovations for sustainable development.  Today, the Partnership, working in close collaboration with the World Bank’s Development Data Group, is delighted to announce the recipients of the pilot round of this initiative.

As part of the Collaborative Data Innovations for Sustainable Development Pilot Funding, which is supported by the World Bank’s Trust Fund for Statistical Capacity Building (TFSCB), GPSDD will support 10 projects in data production, dissemination and use, primarily in low­-income and lower­-middle-­income countries.

From improving vital registration of Syrian refugees in Lebanon to helping health workers predict patient behavior in Africa, from using low-orbit satellites to detect illegal fishing in Southeast Asia to using signal attenuation between mobile phone towers to estimate rainfall, the selected projects include a rich mix of innovations in development data being carried out in 20 countries across Africa, the Middle East and Asia. 

“What’s particularly exciting about the funding provided by the Global Partnership for Sustainable Development Data is that it is focused on solving real problems facing real people in the world.”- 
Nathaniel Heller, Managing Director, Results for Development Institute, Innovation Fund Recipient
 

While these projects cover a variety of sectors and SDGs, their unifying goal is to encourage collaboration, experimentation, learning and capacity development in the field of sustainable development data, especially where needs are continuous or recurrent, and where innovations can be readily adapted to other regions and sectors.

We’re committed to learning from the projects’ successes and failures as they’re implemented over the next 18 months. This is vital for any innovation work. The results and lessons learned from these projects will be openly available to all, and will help to shape the themes and priority for future rounds of funding.

The process has been a joint effort between the World Bank and GPSDD. Innovation financing was one of the World Bank’s commitments when it joined GPSDD, and GPSDD provided a network of ideas, individuals and institutions that resulted in the submission of over 400 proposals for this pilot round of financing.

The secret sauce of a ‘start-up nation’

Anabel Gonzalez's picture

Israel has one of the most admired innovation systems in the world. With the highest Research & Development (R&D) spending and venture capital investment as a percentage of GDP, the country has positioned itself as a global leader in research and innovation, earning the title of “start-up nation.”
 
Avi Hasson, Chief Scientist of the Ministry of Economy and Industry and Chairman of the Israel Innovation Agency, was at the World Bank Group last week to share some of the “secret sauce” behind Israel’s success in the innovation and entrepreneurship space.
 
Hasson highlighted the key role played by public-private partnerships over the last 40 years. Those partnerships have resulted in the establishment of an innovation infrastructure — including educational and technical institutions, incubators and business accelerators —anchored within a dynamic national innovation ecosystem built around shared social goals.
 
Specifically, to reduce the risk for investors, the government has focused on funding technologies at various stages of innovation — from emerging entrepreneurs and start-ups to medium and large companies. Strengthened by that approach, the Israeli ecosystem is maturing: according to Hasson, mergers and acquisitions have increased and exit profits have almost tripled over the last three years, with more and more new projects being started by returning entrepreneurs.

How urban start-up ecosystems help cities adapt to economic transformations

Victor Mulas's picture

Entrepreneurs at mLab East Africa, Nairobi, Kenya. Supported by the World Bank’s infoDev program, this business incubation center provides knowledge and networking opportunities to local digital start-ups. © infoDev / World Bank 



Start-up ecosystems are emerging in urban areas across the world. Today, a technology-based start-up develops a functioning prototype with as little as $3,000, six weeks of work, and a working Internet connection.
 
Entrepreneurs are not seeking large investments in hardware or office space. Rather, they look for access to professional networks, mentors, interdisciplinary learning, and diverse talent. Cities are best suited to meet their needs, as they provide diversity and allow for constant interaction and collaboration. Thus, the shift caused by the so-called “fourth industrial revolution” makes cities the new ground for organic innovation.
 
The urban innovation model can be applied in cities in both developed and developing countries. The same trends are driving the urbanization of organic innovation ecosystems in New York City, London, Stockholm, Mumbai, Buenos Aires and Nairobi. This presents a great opportunity for developing countries to build innovation ecosystems in cities and create communities of entrepreneurs to support the creation of new sectors and businesses.
 
But while some cities have organically developed urban innovation ecosystems, nurturing a sustainable and scalable ecosystem usually requires determined action. Moreover, not all cities are building their innovation ecosystems at the same pace.
 
To support a local innovation ecosystem and accelerate its growth cities can promote collaboration through creative spaces and support networks, while also hosting competitions to solve local problems. 

Four cautionary lessons about education technology

David Evans's picture
 Charlotte Kesl / World Bank
Technology in education is often seen as a solution. It holds promise, but caution is warranted.
Photo: Charlotte Kesl / World Bank


There is no denying that governments around the world are expanding investments in education technology, from inputs that students use directly (like Kenya’s project to put tablets in schools) to digital resources to improve the education system (like Rio de Janeiro’s school management system). As public and private school systems continue to integrate technology into their classrooms, remember that education technology comes with risks. 
 


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