On September 18, 2024 the White House launched their strategy for global development, and although there are just a couple of months left for the Biden-Harris administration to follow through this strategy, it is very much still worth discussing the plans of the largest foreign aid donor in the world.
The goals and plans
To summarize the 20 page document, the administration’s approach to global development is broken down into five objectives:
- Reduce poverty through inclusive and sustainable economic growth and quality infrastructure development
- Invest in health, food security, and human capital
- Decarbonize the economy and increase climate resilience
- Promote democracy, human rights, and governance and address fragility and conflict
- Respond to humanitarian needs
To reach these objectives the administration plans to leverage inclusive partnerships, the private sector, innovative financing, and locally led solutions. The administration also admits that although providing humanitarian assistance to those in crisis is crucial to avoid worsening situations, the ultimate goal is to reduce the need for humanitarian assistance over time and promote systemic reforms.
This sounds great…and not entirely new or surprising. Afterall, the objectives outlined in the document align with the UN’s 2030 Agenda for Sustainable Development, and the plan to implement these objectives actually aligns with multiple characteristics of one of our core theories at the Institute.
In this piece I would like to focus on the plan, the how of the strategy, because I believe that one way to ensure the US actually achieves their five objectives, and more generally achieves the goal of sustainably driving global development forward, will be to take a disruptive theory approach.
How to execute the plan and meet the goals
To promote systemic reforms to global development, you need to build and invest in systemic solutions and market-creating innovations are system solutions.
Market-creating innovations (MCIs) transform complicated and expensive products and services into cheap and accessible ones to target a whole new segment of customers – nonconsumers – who previously didn’t have access. To be able to do this, innovators need to create not only an accessible product or service that solves someone’s unsolved struggle, but do so through a new value network.
A value network is the collection of upstream suppliers, downstream channels to market, and ancillary providers that support a shared business model within an industry. In simpler terms a value network consists of all the stakeholders and activities needed to get a product or service to the customer. Now, because a market-creating innovation is a new innovation (not necessarily a new invention!) innovators often need to build a brand new value network that will allow them to profitably sell this cheaper, simpler, more accessible innovation. Existing value networks won’t work because you can’t sell a tshirt for $10 if the cost structure of the current value network adds up to $15.
To create a market-creating innovation innovators need to target nonconsumption. To spot nonconsumption – the inability of an entity (person or organization) to purchase and use (consume) a product or service – innovators need to tap into people’s struggles. In development, there is a lot of struggle. But please remember that problems and struggles are not the same. For example, although climate change is a problem (climate resilience happens to be the third pillar in the US’ strategy), the struggle will be more granular like increasing tomato prices due to crop failure because of climate change.
Once an innovator has identified a struggle that their MCI will solve, they will set about creating their value network and this is where the magic happens.
In the building of an MCI, not only are people’s struggles solved and a product or service sold, but the new value network enables the creation of jobs, infrastructure, and a new exciting culture of innovation. An MCI is never just about the product or service, it’s an entire system. A system that pulls in resources and promotes a society’s economic development which will ultimately help them on their trajectory to becoming trade partners rather than foreign aid recipients.
Don’t take my word for it, there is an entire book with success stories. What past students have charmingly called my bible, The Prosperity Paradox: How Innovation Can Lift Nations Out of Poverty, expands on the US’ own history of innovation and development, and also guides readers through South Korea’s and Singapore’s development journey. Countries aren’t spontaneously prosperous, development is a part of their trajectory at some point or another, but market-creating innovations are one way to ensure the creation of prosperity.
MCIs check every box of how the US plans to reach their global development goals. Because MCIs are new they may require multilateral partnerships, will thrive through locally developed and led solutions, and will require innovative financing. One last note, the new global development strategy commits the US to catalytic financing which makes me think of a spark, and while a spark is appreciated, MCIs require long term support, not just a spark. MCIs are not simple solutions, but they are system solutions to development.
So, dear Biden-Harris administration, you’ve only got a couple of months left, if you really want to achieve your goals, let’s chat.
