Giving Thoughts

The Re-Emerging Art of Funding Innovation

By Gabriel Kasper, Senior Manager, and Justin Marcoux, Senior Consultant, Monitor Institute

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.

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.

This post was originally published by PhilanTopic.

About the authors:

Gabriel Kasper is a senior manager at the Monitor Institute, a consultancy and think tank focused on philanthropy and social change that operates as part of Deloitte Consulting LLP. He has spent nearly two decades thinking about the future of philanthropy and helping funders develop new approaches to increase their effectiveness in a rapidly changing global context. He has led numerous national initiatives focused on innovation and emerging philanthropic practices, and has co-authored the Monitor Institute publications What’s Next for Philanthropy, On the Brink of New Promise, Intentional Innovation, and Working Wikily. Prior to joining the Monitor Institute, Gabriel served as a program officer at the David and Lucile Packard Foundation and as a manager of neighborhood programs at the Berkeley Community Fund.

Justin Marcoux is a senior consultant at the Monitor Institute. Justin focuses broadly on innovation in philanthropy, exploring ways to find and fund new ideas across a diverse array of issues with forward-thinking foundation leaders. In addition, he is leading several initiatives related to What’s Next for Community Philanthropy, a year-long Monitor Institute project focused on the future of place-based change. Justin was previously at Cambridge Associates, where he worked with foundations, nonprofits, and universities on investing their endowments. He holds an MBA from the Stanford Graduate School of Business, and a BA in Economics and Mathematics from Boston College (Phi Beta Kappa, Summa Cum Laude), where he wrote a prize-winning thesis on socially responsible mutual funds. You can find him on Twitter @jmcoux.

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