For inclusive innovation to prosper, new policy initiatives are needed, argues the working paper “Policies to Support Inclusive Innovation”. Inclusive innovation is the means by which new goods and services are developed for and by marginal groups (the poor, women, the disabled, ethnic minorities, etc). It is central to addressing inequality in society, and thus increasingly on the agenda of global development actors. (See here for a more detailed explanation of inclusive innovation.)
But inclusive innovation suffers from a series of failures – of innovation development, design, diffusion and use – that provide a rationale for policy intervention:
- Formal innovators focus insufficiently on the poor.
- Informal actors are delinked from innovation systems.
- Those serving peripheral markets have weak adaptive capacity.
- Low-income users lack capability to use innovations effectively.
- Underlying policies and context are weak or absent.
These can then be flipped directly into five main inclusive innovation policy objectives:
- Orient Formal Innovation Systems Towards the Poor. Measures will include creating new innovation partnerships, supporting local innovative research, and reducing risk by providing market incentives for inclusive innovation.
- Promote Grassroots Innovators. Measures will include linking grassroots actors into formal innovation systems e.g. via intermediaries, and incentivising development and diffusion of grassroots innovations.
- Improve Absorptive Capacity of Low-Income Groups. Measures will include building skills to absorb and adapt innovations that meet the needs of marginalised groups, and supporting innovation hubs and clusters.
- Drive More Effective Use of Innovations among Low-Income Groups. Measures include supply-side actions to accelerate affordability of innovations, and demand-side actions to build the skills and knowledge necessary for effective use of innovations.
- Reduce Structural Barriers to Inclusive Innovation. Measures include altering government regulations that exclude or are biased against low-income actors, including altering sourcing rules.
However, such policy measures will only be enacted if there are broader policy changes. This firstly means changing the worldview of policy makers so that they understand there is an important two-way connection between innovation and social inclusion; that marginalised actors are both consumers and producers of inclusive innovation. It also means creating “Inclusive Innovation Policy Collaboratories” that bring together a wide range of stakeholders, and which adopt an experimental and iterative approach to the policy measures outlined above.
The diagram below provides an overview summary of inclusive innovation policy background and recommendations.
If you work on technology, you need to understand innovation. If you work on technology and development, you need to understand inclusive innovation.
In simple terms, inclusive innovation is the means by which new goods and services are developed for and/or by those who have been excluded from the development mainstream; particularly the billions living on lowest incomes. So new technologies for the base of the pyramid – mobile phones, mobile services, telecentres, better seed varieties, vaccines, etc – can all be included.
We can chart the rapid rise of interest in inclusive innovation in various spheres. In the past few years, the World Bank, IDRC, GIZ, OECD and other development agencies have all launched inclusive innovation actions. India, Thailand, China, South Africa, Indonesia and other national governments have added inclusive innovation elements into their policies. And – as shown in Figure 1 below – academic publications related to the topic have been growing fast.
Figure 1: Google Scholar Academic Publications for “Inclusive Innovation”
But what exactly is “inclusive innovation”?
The growth in publications means an increasing diversity of views, which now demand some overall conceptualisation. This has two key aspects: firstly who, secondly what.
Inclusive innovation means someone is being included. But who? It must be some group that is typically marginalised within or excluded from mainstream processes of development. Sometimes this may be women or youth or the disabled or the elderly. But dominant attention has been on “the poor”; those on lowest incomes which may typically be defined as some small number of US dollars – US$1, US$1.25, US$2, US$2.50, etc – per day. (There is also the issue of who, within this group, is then to be included via the innovation: will it be the whole group or just some part: perhaps the less-poor, or the men, or the adults? This raises further questions about representation and heterogeneity and inequalities within the excluded group.)
And if (some of) this group are now being included in some way, in what are they being included?
It seems most helpful to understand the different views as a “ladder of inclusive innovation” (see Figure 2 below): a set of steps, with each succeeding step representing a greater notion of inclusivity in relation to innovation. In more detail these are:
- Level 1/Intention: an innovation is inclusive if the intention of that innovation is to address the needs or wants or problems of the excluded group. This does not relate to any concrete activity but merely the abstract motivation behind the innovation.
- Level 2/Consumption: an innovation is inclusive if it is adopted and used by the excluded group. This requires that innovation be developed into concrete goods or services; that these can be accessed and afforded by the excluded group; and that the group has the motivation and capabilities to absorb the innovation. All of those stages could be seen as sub-elements of this level of the inclusive innovation ladder, though all will be required for consumption so they are not hierarchical sub-steps (as appear in later levels).
- Level 3/Impact: an innovation is inclusive if it has a positive impact on the livelihoods of the excluded group. That positive impact may be understood in different ways. More quantitative, economic perspectives would define this in terms of greater productivity and/or greater welfare/utility (e.g. greater ability to consume). Other perspectives would define the impact of innovation in terms of well-being, livelihood assets, capabilities (in a Senian sense), or many other foundational understandings of what development is. For those with concerns about inequality, this could include a condition that the benefits were restricted to the excluded group, or were greater than those achieved by ‘included’ groups using the innovation. One can therefore differentiate an absolute vs. relative notion of inclusive impact of innovation, the latter being a sub-step above the former.
- Level 4/Process: an innovation is inclusive if the excluded group is involved in the development of the innovation. It is highly unlikely that the entire group could be involved so – as noted above – this immediately shrinks down to “members of the excluded group”. This level needs to be broken down according to the sub-processes of innovation: invention, design, development, production, distribution. These would create a set of sub-steps with, for example, an assumption of greater value of inclusion in the upstream elements than the downstream elements. Further complicating matters, the extent of involvement is equated with different levels of inclusion. Again, there would be sub-steps akin to those seen when discussing participation in development, with higher sub-steps representing deeper involvement. Borrowing from Arnstein’s ladder of participation, sub-steps can include: being informed, being consulted, collaborating, being empowered, controlling.
- Level 5/Structure: an innovation is inclusive if it is created within a structure that is itself inclusive. The argument here is that inclusive processes may be temporary or shallow in what they achieve. Deep inclusion requires that the underlying institutions, organisations and relations that make up an innovation system are inclusive. This might require either significant structural reform of existing innovation systems, or the creation of alternative innovation systems.
- Level 6/Post-Structure: an innovation is inclusive if it is created within a frame of knowledge and discourse that is itself inclusive. (Some) post-structuralists would argue that our underlying frames of knowledge – even our very language – are the foundations of power which determine societal outcomes. Only if the framings of key actors involved in the innovation allow for inclusion of the excluded; only then can an innovation be truly inclusive.
Figure 2: Understanding the Different Levels of Inclusive Innovation
The levels are akin to steps on a ladder because each level involves a gradual deepening and/or broadening of the extent of inclusion of the excluded group in relation to innovation. In general each level accepts the inclusion of the levels below, but pushes the extent of inclusion further. Thus, for example, those concerned with inclusion of impact accept – necessarily – the value and actuality of inclusivity of intention and consumption, but feel this is not sufficient to fully justify the label of ‘inclusive innovation’.
The corollary is that a commentator standing at any particular step of the ladder would not regard views or practice at lower levels to represent true inclusive innovation. Taking the example of those at the base-of-the-pyramid as the excluded group, commentators at Level 4 would feel innovation is only inclusive if those on low incomes somehow participate in the innovation process; perhaps typically in the development of the new good or service. A new good or service which benefited the poor without this (i.e. an innovation at Level 3 developed non-participatively by a large firm or by government) would not be regarded as an inclusive innovation.
One may also detect a move from the positive towards the normative in ascending the ladder, with a decreasing number of real-world examples as one ascends. Thus there are many examples of new goods and services which are developed and consumed by excluded groups, some of which have a beneficial impact. Involvement of excluded groups in innovation processes is not frequent but it does occur. However, one may be harder-pressed to find examples of structures let alone widely-shared knowledge frames in practice: these levels may represent aspirations more than realities at present.
Armed with the ladder model, we will find that dialogue, research, policy-making, practice, etc. are easier to achieve because all parties have the basis for framing their own understanding of inclusive innovation, and that of others.
However, this is just a first attempt. So comments or pointers to other conceptualisations of inclusive innovation are welcome.
(This model and related text are extracted from “Inclusive Innovation: Definition, Conceptualisation and Future Research Priorities” by Richard Heeks, Mirta Amalia, Robert Kintu & Nishant Shah; a conference paper for AIE 2013 which can be found at: http://bit.ly/IncInnov)Follow @CDIManchester
 Arnstein, S.R. (1969) A ladder of citizen participation, Journal of the American Institute of Planners, 35(4), 216-224
 For further details on the relation between innovation systems and inclusive innovation, see: Foster, C. & Heeks, R. (2013) Conceptualising inclusive innovation: modifying systems of innovation frameworks to understand diffusion of new technology to low-income consumers, European Journal of Development Research, 25(3), 333-355 [see also: https://www.escholar.manchester.ac.uk/uk-ac-man-scw:198318]
Why has M-Pesa been so successful in Kenya, yet mobile money initiatives in other developing countries much less so? Recent Centre for Development Informatics research can help provide a systematic response.
M-money services have two core functionalities. Registered customers can convert between e-cash and real cash (typically at the physical premises of an m-money agent), and can transfer e-cash from their account to that of another account holder via SMS. They might use this to send money to family members or friends, or to pay a provider – anyone from a taxi driver to a local school – for goods and services.
M-Pesa was launched in Kenya in 2007. It has grown spectacularly: in mid-2012, there were 19.5 million m-money users in Kenya (83% of the adult population), transferring nearly US$8 billion per year (equivalent to 24% of GDP) – M-Pesa is responsible for more than 90% of these transfers. Transfers are growing at nearly 40% per year.
It’s not that m-money initiatives in other developing countries have failed: there are an estimated 250m users of m-money services in emerging markets. Just that they have not – yet – succeeded on anything like the scale of M-Pesa, with Kenya accounting for 30% of all emerging market m-money transactions in 2011. For example, a recent survey in South Africa found only 16% of respondents with a mobile money account. In Nigeria, only 3% of adults use mobile money. And Africa is the lead continent: outside the Phillipines, m-money has been very slow to catch on in Asia. In India, for example, Nokia quit the m-money business in 2012 after two years of failing to build a critical mass.
How do we explain the differences? University of Manchester research, based on six months of primary fieldwork conducted by Chris Foster, analysed the reasons M-Pesa has grown so fast in Kenya; reasons summarised in the model shown below:
Ongoing support from government – liberalisation of the mobile market; investment in infrastructure; light-touch regulation; facilitation of the initial pilot, etc – combined with strong consumer demand across all strata of society (itself partly fed by the instability and disruption following the disputed 2007 elections). These drove a virtuous circle:
- Competition between mobile sector firms pushed them to seek profits beyond the traditional middle-of-the-pyramid; answering the demand from the majority market of the country’s poor.
- The service was delivered via atomised distribution networks that reached right down into poor urban and rural communities; a network of nearly 50,000 agents by 2012.
- Those embedded intermediaries – essential in scaling any innovation to reach the base-of-the-pyramid – were given the flexibility to adapt business models, retailing patterns and service offerings so they met the specific and heterogeneous needs of their local customers. Effective knowledge channels allowed these innovations to filter back up to the lead firms, which then scaled those they found most useful; fuelling yet further growth.
Armed with this model, we can analyse the m-money weaknesses in other emerging markets. For example:
- Much lower levels of customer demand (put down to both culturo-institutional factors and more effective functioning of and access to existing financial services) combined with a more stringent regulatory regime are behind the slow growth rates in India.
- A much smaller number of intermediaries (agents) and a lack of innovation (e.g. to address cash float problems) is restricting growth of m-money in Uganda and Tanzania.
- Tighter regulation and the much small number of intermediaries has held back expansion of mobile money services in South Africa.
We are not the first to try to understand the different performance of M-Pesa vs. other countries (see e.g. Wolfgang Fengler, Amaka Okechukwu who both also note the value of Safaricom’s market domination). However, we hope that our model provides a clear and transferable framework for comparison, that can be used alongside more in-depth evidence from other countries to help understand their relative success or failure in mobile money.
If you see ways in which you think the model should be modified – based either on experiences in Kenya or elsewhere; then let us know . . .Follow @CDIManchester