To unlock innovation, procurement is key

There are few topics in global development that generate the excitement and optimism of innovation. After decades of effort and trillions of dollars in development aid, enormous challenges remain. So innovation — the idea that a new idea can go around, cut through, or hop over traditional barriers to development — is enchanting. We all want a shortcut to improving lives, and, when we can see so much innovation around us in our daily lives, we rightly begin to demand it for global development, too.

Further fueling this demand, there are many successful illustrations of innovation in global development, from whiz-bang gadgetry like cellphones that can conduct blood tests to less buzz-worthy process innovations that cut down on paperwork and make, for example, tax collection more effective.

Today nearly every development agency and international NGO has an innovation department or initiative seeking out the next exciting solution. But even with all this activity and attention, most efforts around innovation involve pilots. Small-scale funding, challenge grants and innovative partnerships are all for the good, but how to scale good ideas up? Going from thousands and millions to billions requires one very difficult thing: engaging procurement.

It is in the area of procurement that real scale resides; the nuts-and-bolts of procurement — both that of aid agencies and of national and local governments — is where the enormous opportunity for innovation remains constrained. And the challenge comes down to the basics of procurement: Is innovation required from bidders? Is it encouraged and rewarded? Is it measured and is success shared?

And this is where things get difficult. Procurement in the development context is tough. It is often conducted in fragile situations where there is limited capacity among both government and private sector actors and where the focus tends to be on avoiding the negative financial leakage or unsuccessful projects, rather than on doing something more like fostering innovation. So to request governments and implementing agencies to add an additional step to their procurement process is asking a lot.

But it can be done, particularly if the development community works together to change the mindset around innovation from novel ideas to better results achieved faster and cheaper. That’s the kind of language that procurement officials understand and it is, after all, the real goal of innovation in global development. With limited budgets, can you educate more children, reduce malaria infections, increase yields for more farmers, and the like? If you can, and particularly if you can do it with a step change rather than incrementally, your bid should be considered innovative. It shouldn’t matter if you educate those children with a tablet computer or a chalkboard — what we ought to incentivize now, as always when it comes to procurement, is results.

Doing so may require some tangible steps. One is using the procurement process to focus on broad goals rather than prescribing a specific approach to a project. This is particularly important when it comes to technology procurement where the market often moves faster than procurement officials can keep up. By not buying a specific product but rather a solution, we can create an opportunity for new ideas to be put forward successfully that aid agencies and governments may not have been aware of at all just months earlier.

And we need to be clearer about what we mean by innovation. As a buzzword, it can encourage procurement that includes exciting new technology or gadgets at the expense of proved approaches. That should not be our goal. Instead, most innovation in the development sector should be focused on process improvements that make development interventions cheaper and more efficient, such as building more modern and effective government systems. During a recent Devex initiative focused on innovation in global health, a key takeaway was that development agencies would do more good by focusing on strengthening health systems rather than trying to introduce new health technologies to the market.

That leads to another tangible step: using procurement to foster a market for the commercial introduction of new products and technologies. An approach that lets demand — particularly local demand — take precedence is much more likely to succeed in the long run than designing innovative solutions in Washington, D.C., Paris, or Tokyo, and then seeking to export them to developing countries. So, innovative procurement should entail setting high standards for cost-effectiveness and allowing the local market to respond with their own solutions, some of which may be decidedly low-tech.

Finally, for procurement to foster innovation we must consider how best to incentivize innovation. Often innovative solutions may require investment and risk, hence the many challenge grants and pilot programs that aid agencies have launched to help support innovators and entrepreneurs with early-stage ideas. Social finance can help with the other side of the coin — not just reducing risk but incentivizing innovators to be a part of the procurement process in the development sector at scale. If a project can achieve its results faster and cheaper than ever before, allowing the implementers to share financially in that success is one important way to foster a market that incentivizes innovation. There are many challenges in doing so, but that shouldn't cause us to walk away from these opportunities.

At Devex, our reporters, editors and analysts focus a lot on innovation. Much of our reporting on innovation in global development does take the form of the latest technology — after all, we are all excited by new tools to address poverty, as we should be. But we also understand that the old adage of “follow the money” applies here as elsewhere: Of the approximately $200 billion spent annually by agencies, NGOs, and corporations on global development, most is funneled through procurement systems. Pilot projects, grants, and contests are important and have their place, but it’s time for the billions of dollars that flow through procurement systems to be used to help bring innovative approaches to ending global poverty to scale.

This commentary originally appeared in The Supplement to the 2013 Annual Statistical Report on United Nations Procurement that was published this week.

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