Rodney W. Nichols, past President and CEO Emeritus of the NY Academy of Sciences, is Senior Advisor to the Alliance. Rod.email@example.com
A national competition is one of the best ways to discover the best ideas. That’s how the US Federal government conducts its health research, for example. Scientists across the country submit proposals, rigorous standards are imposed by independent reviewers, and only about 5% of the most highly qualified applicants receive awards.
That’s also the motivating idea in the Alliance For Global Good’s (AFGG) new Innovation Fund (IF). It is a national competition to discover groups, among the best in class of the 501 c (3) domain, that work in the developing world and that have well-developed plans to start a new line of earned revenue. Advertised widely, the competition is open to all comers, and refereed independently by experienced experts.
Why do this? The central reason is that new sources of funding will not only support core missions but also buffer groups against the vagaries of governmental and philanthropic fashions. Today, with cutbacks looming, AFGG believes its initiative in non-profit finance will become a powerful new theme throughout American philanthropy. There is also some evidence that engaging the market supports effective scaling up of successful programs, but that’s the subject of a a subsequent blog.
“Innovation” is never easy. The AFGG’s first four winners in 2012 have had to adapt their plans as their programs unfolded. This should not be a surprise: the best teams, in sports and in life, are resilient. As Christiansen points out in his classic book on The Innovator’s Dilemma: “….. the vast majority of successful ventures abandoned their original business strategies when they began implementing their initial plans and learned what would and would not work in the market.”
Recognizing this reality test, AFGG asks applicants to present their understanding of the market. To assure that the reviews are penetrating, the AFGG also assembles a “pitch panel” of private sector experts to cross-examine the finalists. The panel will meet in October to gauge the merits of the top six 2013 contenders. Just as venture capitalists use pitch panels to decide on investments, AFGG uses them to help decide on grants. The panelists this year are: Walter (Skip) Auch, founder of Auch Partners; Amy Bell, Head of Principal Investments at JP Morgan’s Social Finance unit; and Michael Park, Partner at McKinsey and leader of Corporate Finance and Strategy.
AFGG also insists that the leaders of each applicant participate personally in the one hour “pitch.” This includes the CEO, CFO, and Chairman of the non-profit. These officers must endorse the goals of the proposed project and, even more, be ready to adapt initial plans to changing circumstances ranging from the staff’s skills to the culture of the organization.
On a conceptual level, the Innovation Fund’s strategy emerges from due diligence by the Founding Director, Susan Raymond, PhD, about the strengths and weaknesses of non-profit work in international development. Two key conclusions emerged.
First, non-profits in the mid-range of annual budgets – say $5-20 million – simply do not have a margin of capital to “experiment” with new revenue-raising ideas, no matter how desperately new funds may be needed. Few foundations think in terms of such grants, and governments rarely even consider such ideas. The AFGG is, therefore, pioneering the investments “social finance.”.
Second, the AFGG strategy builds upon extensive experience demonstrating that the “Third World” must emphasize increasingly a “bottom up” style for starting and growing successful programs. Only through independent initiatives will developing countries advance.
Dambisa Moyo, the Zambian analyst of aid to Africa, and a severe critic of “top down” foreign assistance, points out: “China has 1.3 billion people, only 300 million of whom (experience) Western living standards. There are a billion Chinese who are living in substandard conditions. Do you know anybody who feels sorry for China? Nobody.” The Chinese are taking responsibility, taking risks, and taking whatever turns in the road they need to thrive.
Even if you think Moyo’s verdict a bit harsh, it exposes a hard truth: only energy and imagination, with quick adaptations as needed, can deliver the desired progress on the ground toward self-sufficient economic development. This path enables genuine sustainability. Humanitarian assistance is, of course, still crucial in emergencies and admirable in every case. But AFGG will support no more quick fixes that usually are transient. Instead, AFGG’s mission is to back solutions that stick.
For those who question this unconventional mixing of “business” with humanitarian activities, dig more deeply. The moral character of the projects is this: the IF encourages the freedom of individuals to chart a path that ensures independent funding for indispensable social missions which otherwise would be slashed or set aside. Creating this opportunity for people is the goal of the AFGG’s Innovation Fund