The DIV Model in Detail
Innovative, Cost–Effective, Rigorously Tested and Scalable Solutions
Development Innovation Ventures aims to identify, develop, test, and scale innovative approaches to achieve cost-effective, scalable solutions to development challenges that correct market and government failures while accelerating promising solutions with a proven impact. DIV innovations can include both new applications of technology and new service delivery practices that are expected to lead to transformative (as opposed to incremental) improvements to development outcomes. DIV welcomes projects that find a new means to deliver an existing service or a new way to make an old model substantially more cost effective. Applications may be considered for ongoing projects or efforts provided they introduce a major new and innovative approach, dynamic, or element to the existing project.
DIV Stages
Drawing inspiration from other product development enterprises, Development Innovation Ventures invests in a portfolio of projects across different stages of their development. DIV breaks down its grantees into three stages:
Stage 1: the development needed to support proof of concept and feasibility
Stage 2: implementation of the project at large scale with rigorous impact testing
Stage 3: transition of innovations to widespread adoption throughout one country and/or additional adoption in other countries.
The most successful projects from the DIV portfolio are expected to be mainstreamed around the world or at least throughout a continent.
Scale through the public sector: Successful innovations will have potential for cost-effectiveness, and rigorously gather evidence thereof. This means that applications that intend to scale via the public sector must propose a rigorous evaluation methodology, such as a randomized evaluation, to obtain a legitimate measure of development impact. Cost effectiveness will also be assessed. For some projects, such as those targeting improved agricultural productivity, cost-effectiveness can be assessed through cost-benefit or net present value calculations. For projects in other sectors, the application must include some means of assessing cost effectiveness. For example, a health application might use a cost per Disability Adjusted Life Year (DALY) metric, or a project designed to reduce school drop-out rates might use an estimated cost-benefit calculation based on rigorous estimates of the returns to education. In such cases, a short-run impact evaluation funded might examine only drop-out rates, but as part of later scale-up funding, the project will be expected to validate impacts on wages or achievement that were only estimated in the initial evaluation.
Scale through the private sector: Successful innovations expected to achieve wide-spread adoption through private sector commercialization without long-run support from donors, governments, or philanthropy will provide evidence that: production costs and sales prices are such that producers make profits, beneficiaries demand and are willing to pay for the product or service, governments receive associated tax revenue, and development outcomes occur. For those innovations for which scaling by the private sector without long-run public support is planned, USAID/DIV will assess the case made by applicants for the potential of the innovation to improve the health, education, income, or empowerment, etc. of people in developing countries.
Further descriptions of the Stages are as follows:
Stage 1: Proof of Concept
The Development Innovation Ventures will provide Stage 1 funding to support projects to establish viability (i.e. technical, organization, distribution, financial, etc.), and customer adoption rates. These potential innovations will have to describe how and why they would likely be adopted within ten years or less by millions of people, including descriptions of personnel, architecture, and cost considerations. Direct impacts and viral adoption models are highly valued. This viral adoption could either be private sector driven with network effects, or through a process of spreading innovation among public sector entities. While having no strict ceiling, Stage 1 funds will typically not exceed approximately $100,000 per project. Most Stage 1 projects will last up to one year. Only the most compelling proposals of those submitted will be selected.
Stage 2: Pilot and Impact Evaluation
Note: applicants can apply for Stage 2 funding even if their project was not submitted or funded by USAID/DIV for Stage 1. Stage 1 projects that have met their criteria for success will be able to submit competitive applications for Stage 2. All Stage 2 applicants, whether or not having received a previous USAID/DIV award, will have to fully compete for Stage 2 funding.
At this stage, activities include testing the innovations at scale production, launching and rigorously testing them to assess impact and benefits for people in developing countries. Rigorous testing should be done under conditions that allow a realistic assessment of how the approach would function at scale, and thus implementation funds and personnel per user should be at a level that could, with some modifications, be replicated in large scale distribution. Innovations will need to demonstrate cost-effective development impacts. They should be implemented at a scale that allows not only for statistical significance of tests of impact vs. no impact, but at a scale that would create confidence that measured impacts are not due to a “pilot effect” in which project success is dependent on a level of management input per user that cannot be scaled. Wherever possible, projects should aim for demonstration at a scale that is at a much larger scale than the proof of concept (i.e. district-level or region).
Some innovations may require testing at various levels (local, regional, and across several regions); funds may be allocated to reflect the scope of testing as well as to build to scale. The initial scaling attempt should also include the architecture and other systems development that would allow it to scale further in Stage 3 and beyond. For innovations that would require on-going public support, rigorous impact measurement is a vital part of this stage as it ensures innovations are not promoted simply for their novelty but rather based on empirical evidence on their impact and cost effectiveness.
For those innovations for which the long-run planned scaling strategy is based on the private sector, without government support, there must be evidence for demand by low income clients in developing countries at a price sufficient to allow the innovation to be scaled without ongoing public support. Such projects should also make a prima facie case for the potential of the innovation to create social value, improve the health, education, income, or empowerment, etc. of people in developing countries. Successful business cases must also provide compelling rationale for the creation of social value.
There are some innovations that would be scaled by the public sector and display great potential but are impossible to subject to the most rigorous impact evaluations with a random assignment to treatment and comparison groups. Such projects will still be expected to include a monitoring and evaluation plan. USAID/DIV leadership will have limited flexibility to fund a limited number of projects that fall into this latter category each year. Exceptions will be granted by the selection committee on a case-by-case basis. Stage 2 funds projects will likely average around $1 million per project but requests can be made at levels substantially below that. For most innovations, these funds will be spent over 2 - 3 years.
Stage 3: Transitioning Projects to Wide-Scale.
Note: applicants can apply for Stage 3 funding even if their project was not submitted or funded by USAID/DIV for Stage 1 or 2. All Stage 3 applicants, whether or not having received a Stage 1 or Stage 2 award, will have to fully compete for Stage 3 funding.
Proposals for Stage 3 must have credible and rigorous evidence of effectiveness from past implementation of projects at a smaller scale. Stage 2 projects that have met their criteria for success will be able to submit competitive applications for Stage 3 which is expected to be at a countrywide scale and beyond (i.e. reaching millions of beneficiaries). Innovation proposals that start at the Stage 3 level as well as proposals transitioning from Stage 2 will compete in the same selection process.
To receive Stage 3 funds, innovations will have to demonstrate scalability and sustainability at multi-country level via either the private or public sector. Scaling plans may vary across proposals, as some innovations may need to be introduced more gradually to several regions (especially in large countries with large populations) before being scaled-up nationally and internationally. In this stage, proposals should identify and address approaches and operational challenges for scaling—including the policy environment. This stage will involve in-depth and ongoing consultation with those who will ultimately scale up the project, including USAID bureaus, counterparts in country governments, other development agencies, and the private sector, to understand what would be needed for their organizations to achieve widespread adoption within a decade.
A typical Stage 3 project might initially aim to reach five million people across three countries. Stage 3 funds from USAID/DIV may range from $1 million to $15 million. It is anticipated that most competitive Stage 3 applications will leverage additional funding from other donors, investors, or other bureaus and missions in USAID. For most innovations, this phase will last three years. It should operate throughout at least one country along with planning or start-up development in at least two other countries.
Beyond Stage 3: Mainstreaming:
The final step for successful projects will be graduation: as USAID bureaus, host countries, the private sector, bilateral or multilateral development agencies, or others adopt interventions at scale, they will no longer require support from USAID/DIV. Mainstreaming will be a key metric of both innovation and USAID/DIV success.
Projects can come into the USAID/DIV portfolio at all stages described above. Projects that successfully complete in a prior USAID/DIV stage will be able to submit competitive applications for the following stage. USAID/DIV staff will work with grantees at all stages to develop and refine plans for achieving rapid, wide adoption. However, simply meeting the milestones will not automatically lead to funding at the next stage, due to the competitive nature of the process. About 10-20% of projects are anticipated to move from each stage to the next, though this may vary with the quality of the portfolio of projects. (Again, to be clear all applicants, whether not having received a previous USAID/DIV award, will have to fully compete for next-stage funding.)
Stages are determined by the content of the project, not by the funding required. For example, some Stage 2 impact evaluations may only require $100,000 worth of funding. Furthermore, individual applicant projects may apply for multiple tranches of funding within any given stage, so long as total funding does not materially exceed the normative limit for that stage. Thus, for example, an applicant could initially apply for $2 million in Stage 3 funding, and later apply and compete for an additional $3 million in Stage 3 funding under a subsequent application.
