Innovation Edge: Impact, scale and systems change in ECD in South Africa
In Feb 2018 Early Insights spoke to Sonja Giese, Founding Director and Erika Wiese, Head of Portfolio Management, at Innovation Edge (IE). IE is an investment fund focused on ECD initiatives in South Africa. Innovation Edge was founded through a partnership between Omidyar Network, the UBS Optimus Foundation, the DG Murray Trust, First Rand Foundation and the Elma Foundation.
Three years into operations, IE is entering a growth and consolidation phase. This was a great time to speak to Sonja and Erika to take a snapshot of where IE stands today as it looks at 2018. What stood out
- The ability to scale an innovation is guiding the intake of the portfolio at IE. The fund has become more selective as it has evolved. It takes in fewer ideas to incubate balanced by the increase in the quality of applications thinking about scale
- IE sees its role as a ’scaling funder’. It sits at the intersection of business, non-profit and government, helps organizations identify pathways to scale. Reaching scale sustainably is the defining ‘exit’ for IE.
- The most crucial pathway to scale remains being able to work with the government on systems change
You can listen to the audio version of the interview or scroll through an edited transcript that follows
Early Insights: Hi, Sonja, and Erika. It’s good to be speaking to you. Thank you for making the time. I’d love to kick this off by knowing a little bit about Innovation Edge and what you do.
Sonja: Thanks, Tarun. Innovation Edge is a grant and investment platform that supports innovation in the early years. We focus on the period from conception to the age of six. We look for people, individuals, organizations, NGOs, businesses that have ideas that we believe can transform the lives of young children living in poverty. We specifically focus on three key levers for change.
The first is parent-child interactions. We look at ideas that could enhance the quality of parent-child interactions to support early-age developments. We’ve got a bunch of investments in our portfolio that are designed to enhance caregiver-child interaction.
The second is looking at the quality of the workforce and the quality of services for children such as pre-school services, creches, ECD centers.
The third, which is the one we’re most excited about, are systemic levers. We look at the systems changes that are needed to create more efficient and effective ways of scaling quality services. So there we look at examples of innovation in data, in financing, administration, regulation, monitoring, evaluation support.
We have 34 investments in our portfolio and they’re split across those three levers for change; enhancing parent-child interactions, building a quality workforce and programs or enhancing systems.
Early Insights: Sonja, why are these three levers important and how did you get to this conclusion?
Sonja: The three levers actually emerged out of the last four years of practice. Originally, we started off with a theory of change that was a lot broader in terms of the kinds of interventions that we would support. What we realized over the last three-and-a-half years of investing and building a portfolio is that they are clustered around these levers and that we also started to develop expertise in these areas.
There are many things one can do when it comes to the early childhood development space, everything from de-worming and sanitation to improving road infrastructure. We had to figure out what is going to be our niche and where could we really bring about meaningful change. What we’ve seen is that it is these three areas where we feel we can actually have an impact and where we have a combination of the right level of resources and the right kinds of experience and skill.
Early Insights: Could you share a little bit about your journey in research before you got to Innovation Edge. Has that informed practice?
Sonja: Yes, absolutely. I come from a background where I’ve done years of research into government systems, policy, and a lot of work in terms of understanding where the barriers are to the implementation of good policy in South Africa. That systems understanding influences a large part of the direction that Innovation Edge ended up taking.
A lot of our systems work revolves around a deep understanding of the challenges in the ecosystem in South Africa. This is a key ingredient in the magic formula. The two elements, one being a deep understanding of where the challenges are at societal and a systemic level in South Africa when it comes to young children. And two purposefully building very broad inter-sectoral networks. The combination of broad networks bringing new people into the space together with a very deep understanding of the challenges enables us to create innovation.
Early Insights: Erika, I know you manage the portfolio at Innovation Edge and bring this research to life, what attracted you to IE?
Erika: The opportunity that opened up for me at Innovation Edge was unique. What excited me was the chance to work with people and different ways of thinking. I come from a background where my education was focused on psychology and finance. This opportunity merged those two worlds perfectly. Innovation Edge’s focus on finding and co-creating a sustainable business models excited me.
In the beginning when we had a few investments, a large part of our time was spent on sourcing and thinking of creative ways to find ideas and to attract entrepreneurs from outside the early childhood development space to apply themselves to innovate for children. It wasn’t just about finding ideas, but rather finding ideas that have reach and impact at scale. It was really working with entrepreneurs to say, “Let’s innovate in a space which is generally known to be predominantly occupied by NGOs and let’s challenge the traditional charity mindset.” What excited me given my business background was to really think how do we create models for scale and sustainability.
Early Insights: Could either of you give me a snapshot of where you stand now and also paint the picture of what’s going to follow in the next 18 months that is key for Innovation Edge?
Erika: I can start by answering the question in terms of where we are now. Our portfolio has grown in number and to date, we’ve made approximately 34 investments ranging in maturity. We’ve got a couple of investments that are in the feasibility phase. That’s where we do a lot of research and initial testing before moving on to proof of concept. Here a lot of iteration happens and more traditional incubation and acceleration support is offered.
As our portfolio has grown, we’ve started focusing a lot of our support on transitioning to scale. That’s where Innovation Edge finds itself to be a unique player. We’re not going to exit until we’ve graduated our investees to partner with a scaling funder or where a definite pathway to scale has been identified. This could be through the private sector, the public sector or a combination of both of them.
We have 16 investments that are in proof of concepts stage. We have had to make definitive decisions in terms of where we’re going to continue allocating our energy. We’ve pruned nine of the investments that we absorbed into the portfolio in the beginning.
We screen a lot of applications. We’ve been able to take fewer applications into the portfolio. Over the last three years the quality of our applications has increased. An increase in quality was a result of the fact that we’ve refined our filtering mechanisms. We’ve been more clear on what our criteria for funding is and how to best allocate our energy to support the entrepreneurs that come into our pipeline.
Sonja: I think I’ll just add to that. In terms of the types of support that we provide, originally when we set up, the funders created parameters for financing and they said, “Okay. We’ll fund between this amount and this amount for each new investment.” What we realized over time was that there actually needed to be a lot more flexibility in the kind of support we’re providing to each startup team.
Now, the support is very customized and the financial support is only one element of the process of pilot and scale. The deep understanding of the ECD sector, systems, the relationships that we have, the networks of people, the connections that we make, and the strategic business, planning and facilitation support that we provide is as, if not more important, as the funding that we provide. Which is why when we talk about ourselves as a grant-making and investment platform, it doesn’t quite capture the richness and the depth of the investments that we’re making. It really is a full-wraparound support that we’re providing.
Looking at the future; I think that the iterative approach we use to support our investments is in our own DNA too! We’re constantly iterating and are open to a complete change of direction as necessary. We are learning, reflecting, and shifting. That is informing our strategy. We’re moving towards less focus on the quantity of applications and are more concerned about the quality of applications.
We’re are a lot stricter about the allocation of resources that we put into each before we make a call about whether we continue or prune. This is critical. Our goal is to have seven successfully scaled innovations by 2020. For us, that means that those innovations have not just impacted a small number of children’s lives, we’re aiming for 700,000 children by 2020, but that we would have capitalized and created sustainable and scalable innovations that will continue to thrive without our support moving forward. I think that’s really important for us as a platform. Our success is not just measured in terms of the number of children whose lives we impact, but in terms of the number of innovations that we take to scale and that are sustainably scaled after we exit.
Early Insights: It seems to me that Innovation Edge is a market leader in the way you think and in the way you’re investing. How do you set the benchmark for your work?
Sonja: We draw inspiration from different spaces for that, because we don’t fit into a neat box where we sit comfortably within one particular space. I’d say there hasn’t to date really been a benchmark, we go out and ask, for example, what level of risk do you accept, and they might say, “Well, if one in ten succeed that’s fantastic.” We can’t set that benchmark for ourselves because we’re sitting at the interface between profit and purpose, and between what the business sector does and what the nonprofit sector does.
We can’t benchmark ourselves in any one place. That is part of our challenge as an organization — to develop our own metrics and measurements in what we consider to be successful. This process will involve inspiration from different places.
I think the other thing is that in certain ways we are innovating ourselves and how we do things. There’s a lot of great work happening globally now within early childhood. What we’re trying to do is kind of seed into and draw from this global innovation agenda for early childhood development.
Erika: To add to that, part of our investment strategy is to develop a theory of change, and a theory for scale. From the outset we have tried to build a reflective approach to support our investees and then apply the same to ourselves. We constantly check “How could we have done this better? How can we pivot quickly?” Although this is often uncomfortable because we might just get accustomed and familiar with a certain process that leads to a successful outcome. At the same time it doesn’t mean it’s going to work in the next situation.
I think it’s about being comfortable with constant change. We know now that it is about being grounded in terms of how we make our investments, and at the same time tapping into what is happening on global. We are constantly looking at things from different angles.
Early Insights: Sonja, you touched on systems impact and change in the beginning. Are there are any reflections you have on the work you’re doing, and the systems change you see in South Africa beyond in the next five years.
Sonja: (Thinking…) It is extremely challenging, bringing about systems change particularly where the system is a government system. In this sector, at least for the foreseeable future, scale is going to rely largely on government. In South Africa, we’re looking at four million children living below the poverty line. The only way in which to reach four million children at this point, in most instances, is going to be through enhancements to government systems.
I think that it takes time and it takes excellent relationships. You have to have relationships with the people who are in that system and you have to have relationships at multiple levels within the system. I think that that is going to continue to be an area of focus for us.
Where we started to get traction and see results, it is incredibly inspiring. The numbers extrapolate tremendously! In one area, we managed to reduce the time taken for ECD centers to become registered, an extra thousand ECD centers are now able to access funding. Those thousand ECD centers work with between 50 to 100 children. That is 50,000 to 100,000 children reached! The effort that we have put into systems change has started to pay off, but that’s taken three or four years.
Systems change is a marathon, rather than a sprint. It takes a real emphasis on building relationships and on ensuring that you have really excellent data.
Early Insights: Thank you for speaking to me and all the insights. I look forward to keeping up with Innovation Edge’s work
Erika and Sonja: Thank you
Disclosure: Innovation Edge is a former client of Education Futures. Early Insights is owned by Education Futures.
