Designing for Risk in Innovation
Lessons from IDEO.org’s Amplify program
By: Selam Kebrom and Sandy Guberti-Ng
Innovation is inherently risky. So how do organizations, specifically selected to test innovative (and therefore risky) ideas, navigate uncertainty? What works well? What are common barriers?
We reviewed five years’ worth of data from 31 Amplify grantees — a mix of qualitative and quantitative information drawn from reports, surveys, and internal interviews. We pinpointed two factors that were critical to making their solutions successful:
- Market risk: a limited understanding of prospective users and the context in which they live
- Operational risk: a limited certainty or awareness of an organization’s own internal capacity to implement a solution
A Framework for Understanding Risk
We set about trying to understand the influence of these risks on our grantees’ solutions by adapting a framework developed by Lynn and Akgun in 1998. Lynn and Akgun’s research identified technology and market uncertainties as key factor to consider when launching products in “risky, dynamic” markets. Their ensuing framework was designed to help companies “innovate more effectively with a greater probability of succeeding.”
Much of this framework resonated with us. Our Amplify grantees also sought to introduce innovations in uncertain environments. However, we adjusted it to fit our needs. We kept “market” as a factor but redefined the term to reflect relevant external influences such as a grantee’s familiarity with, and access to, their intended users. We replaced “technological uncertainty” with “operational risk” to reflect relevant internal influences such as the grantees’ willingness and ability to make organizational changes to implement their innovative solutions.
We called this our Amplify Risk Matrix and used it to understand how each of our grantees navigated the external and internal barriers they faced in developing their solutions; we also used it to identify the impact of design on their efforts.
This framework is best understood in action. Take Build Change, an Amplify grantee we supported to enhance climate resilience for low-income residents in Manila. Like many of our grantees, Build Change’s solution was bold — to incentivize people to invest in retrofits for their homes before a natural disaster struck. Though Build Change was well-established in the Philippines, with a deep expertise in post-disaster reconstruction, what they sought to accomplish carried both operational and market risks. For their solution to succeed, they needed to drive behavior change among customers and provide financing — both of which fell outside of their existing capacity and pitted them against a new market.
To mitigate the operational risk, Build Change enhanced their internal expertise so they could test out different financing products. These experiments allowed them to issue real loans for home upgrades and test if these were desirable to their users, a critical step in overcoming the market risk inherent in their innovative proposal. At the end of this prototype, 99% of the lenders had repaid their loans. This repayment rate was much better than what financing institutions typically saw — there was clearly a demand. The results of this prototype gave Build Change the data they needed to convince financing partners to offer these products to more clients.
“We launched our home retrofitting project based on insights Build Change gained time and again after disasters, and the hunch they could be leveraged before disasters occurred to prevent catastrophic loss. The Amplify team helped us frame the problem differently so we looked not only at the engineering solution, but the design process that could help change the system, helping vulnerable families shift from being at risk to being resilient.” Kate Landry, Build Change Country Director in the Philippines
Today, the number of loans being taken by users to make their homes resilient is steadily increasing, and Build Change has released a market study that maps the market and financing options for retrofitting in the hopes of scaling this offering further.
Helping Grantees Overcome Risk
As we started building out this risk framework, we hypothesized that organizations attempting to create more radical change would not be as successful as those that strove to foment more incremental change . But we were wrong. In fact, we found that grantees that wanted to create big change weren’t necessarily less successful than their counterparts that sought to create more incremental change. As long as grantees were willing to invest in reducing their market and/or operational risks, they could create the changes they sought.
So how did the application of human-centered design reduce the inherent risks of these innovations? When it came to market risk, user research reduced their market risk by increasing their familiarity with the systems in which their users lived. Likewise, prototyping and adjusting solutions based on user feedback lead to products and services that were actually desirable and viable, further reducing their market risk.
When we looked at operational risk, successful organizations invested time and resources in internal capacity. While a solution might be desirable to end users, some solutions stretched grantees too thin. By prototyping ideas on a smaller scale internally, grantees were often able to identify what operational changes they needed to adopt to feasibly execute their solutions.
Designing for all
Innovative solutions — wherever they are — exist in complex systems. So, we need to design for all the users in those systems, including those implementing the solution. In development, we call these people stakeholders. If we want solutions with sustainable impact, we need to understand how to influence their behaviors. There are three types of research that help us do just that.
- User research: knowing the people at the center of a solution — their behaviors, challenges, and aspirations.
- Looking out: mapping stakeholders, knowing what’s been done in the sector to address a particular issue, being inspired by other contexts, and looking at analogous examples — which helps fuel truly innovative solutions.
- Looking in: understanding how organizations function, what their risk tolerance is, and what kind of resources they have at their disposal to try new things.
The relatively short duration of Amplify grants constrained many of our grantees from delving into these three types of research and effectively iterating on their prototypes to reduce their market and operational risks.
But, what would happen if those time constraints were removed? As part of our Smart Start project under the Adolescents 360 program, IDEO.org worked with PSI to research and prototype ways to increase demand for contraception among rural women in the face of limited access to providers. We had three years to figure this out. The IDEO.org team experimented with different messaging. The solution was both simple and pragmatic: by linking financial stability to family planning, we successfully posited contraception as a leeway to save up for a home. Framing contraception in terms of prosperity reduced market risk by making the solution desirable to all our users: women, their husbands, and others in their community.
IDEO.org and PSI knew that, to increase the use of contraception, we needed to make it easier for families to access it. But rural health posts, the most decentralized units of the Ethiopian health system, are often located hours away from users. To reduce the operational risk, the solution would have to fit within the Ministry of Health’s operational structure. The Health Extension Workers (HEW) who were responsible to reaching rural families were already overburdened so, rather than asking them to assume this additional task, a new position was created as a prototype. These navigators (as they were called) were young female mentors who would be responsible for identifying young couples and introducing them to Smart Start, as well as training HEWs to slowly adopt this solution. PSI is also currently in the process of optimizing Smart Start so it can fit within the operational constraints of the Ministry of Health and scale organically across Ethiopia.
These are just two examples of how design can mitigate risk in innovation and there are many, many more. Yes, pursuing innovative solutions is inherently risky, but there are ways to get around such barriers. The many long-standing and burgeoning issues that disproportionately affect marginalized communities require us to take chances on bold ideas. Human-centered design can help us navigate the potential pitfalls of pursuing these difficult — albeit necessary — solutions.