The Re-Emerging Art of Funding Innovation

(Gabriel Kasper and Justin Marcoux are part of the Monitor Institute, a consultancy and think tank focused on philanthropy and social change that operates as part of Deloitte Consulting LLP.*)

As philanthropy has gotten more strategic over the last decade, many foundations have begun to lose their appetite for risk and experimentation. But a small number of funders have begun to intentionally seek out and support high-risk, high-reward innovations with the potential to truly transform our most intractable social challenges.

In our recent article, "The Re-Emerging Art of Funding Innovation," we explore the processes and practices used by these “innovation funders” and look at how funding breakthrough innovation differs from more traditional grantmaking approaches. The article is the cover story for the just-released Spring issue of the Stanford Social Innovation Review and can be found here on their site.

In the article, we share a process for intentionally injecting two interrelated innovation principles — transformation and experimentation — into philanthropic processes and systems in order to bring a greater degree of risk-taking, openness, and flexibility into funders’ work.

Although these approaches often take a different shape within each institution, innovation can typically be introduced at five different stages of the funding process: sourcing, selecting, supporting, measuring, and scaling. The article shares a series of stories illustrating what these activities look like in practice.

While a formal innovation strategy requires thoughtful choices around structures, processes, networks, culture, and many other considerations, there are some simple ways that funders can begin to embed innovation principles in their work. Here are a few steps that a foundation could take to get started:

1. Make deliberate out-of-strategy grants. Dedicate 10 percent of your grantmaking budget to support projects that seem promising but don’t fit neatly into your strategy. Each quarter, hold a meeting to discuss what has been learned from this "out-of-strategy" grantmaking and how it could influence the rest of your work.

2. Ask your grantees. Grant recipients bring a perspective on the field very different from foundation staff's. Solicit ideas from your grantees about emerging ideas and who is doing work that is pushing the envelope.

3. Assess your portfolio. Review your grantmaking portfolio, giving each grant a subjective score for its level of risk and its potential for reward. Plot the results on a graph and have a conversation with your board or other stakeholders to discuss whether you are taking enough risks and what type of balance between risk and reward feels appropriate.

4. Tap into your network. Select a small, informal group of advisors and every six months ask them to tell you about the most interesting new ideas that they're seeing and whether the ideas are a fit for your grantmaking or not.

5. Use your special opportunity fund. Many foundations have a fund that is used to support pet projects from board members and other ad hoc requests. Use a portion of that fund to explore a new area that is tangential to your primary strategies but shows potential. Think of it as a "sensing" or "search" mechanism for finding new issues you may address in the future.

6. Host an innovation contest. Hold a conversation with staff about how they define innovation and then run a contest to identify one or two grantees that the staff feels are most innovative. Provide the winner(s) with a small flexible grant to encourage the behavior.

7. Bring in a futurist. There are many experts who look ahead and try to see and understand trends and patterns as they emerge. Invite one of these forward thinkers in to talk with your board or staff to see if they prompt new thinking.

8. Follow provocative thinkers. Find ten people who are exploring new concepts and approaches and follow them via Twitter or blog posts, cataloging the ideas they mention. Then host a discussion among staff or board members to see what new thinking the ideas might prompt.

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We hope that these activities are helpful starting points as you seek potentially transformative solutions in your work. We welcome your thoughts and reactions and would encourage you to share this message with others who are working to fund more innovative ideas.

-- Gabriel Kasper and Justin Marcoux

* Monitor Institute is a part of Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.