The Innovate to Save Playbook

In 2019, we published our guide to Repayable Finance for Innovation  – our goal was to share lessons learned from running Innovate to Save to help others in governments around the world do the same.

Since then, we’ve learned more that we want to add to those recommendations and so we are publishing the Innovate to Save Playbook, a how-to guide to running a programme that blends grants and loans together with tailored support to enable innovation to happen in public services. 

About this guide

Since 2017, Y Lab (a partnership of Nesta and Cardiff University) have been engaged in an experiment on funding innovation with a blend of non-repayable and repayable finance in Wales. Called Innovate to Save, the work has been delivered pragmatically and collaboratively, using our experience to improve both our offer and our delivery.

This updated guide will enable you to design and run a programme like Innovate to Save. 

Contents

1. Introduction
2. Section 1: Understanding your finance options
3. Section 2: Organisational readiness – can you run a programme?
4. Section 3: Building your programme
5. Section 4: Evidencing your programme’s impact

Introduction

In a pamphlet published ahead of the first elections to the new National Assembly for Wales in May 1999, former Secretary of State for Wales, Ron Davies wrote:

“Devolution is a process. It is not an event and neither is it a journey with a fixed end-point. The devolution process is enabling us to make our own decisions and set our own priorities, that is the important point. We test our constitution with experience and we do that in a pragmatic and not an ideologically driven way.”

The approach described here captures exactly our experience of developing and running Innovate to Save. Our programme design has been tested with experience and this publication captures our learning for others wishing to develop a similar programme.

Why is blended finance a good method for innovation?

Blended finance is an increasingly useful tool that governments can use to support innovation in public services – allowing governments to benefit from the success of innovation and, importantly, reinvest money on a regular basis in new innovations.

By incentivising the practice of innovation, governments can find and develop riskier and more novel ideas to change the way that public services are delivered, improving services and generating savings to the public purse. 

Whilst there are many brilliant innovators within the public sector, they often face considerable barriers to innovation, including: 

• Ever-increasing demands on local government, 
• Time taken to bring about change,
• Lack of commitment/challenges in developing and maintaining partnerships,
• Finding and scaling the right ideas,
• Aversion to risk.

Finding new ways to incentivise innovation through new forms of finance and non-financial support is therefore imperative. 

This guide is informed by our experience of building, delivering and developing a programme that supports public and third sector organisations to generate cashable savings and improve services through innovation, using blended finance (grants and loans) and non-financial support.

What does this guide offer?

This guide aims to be a practical and informative tool that helps public services – although most likely local and national governments and health boards –  to stimulate innovation within a challenging context. Informed by experience, it aims to guide teams through the process of planning, developing and implementing a programme of blended finance for innovation. 

It outlines why you might choose a mix of repayable and non-repayable finance to fuel innovation, especially within government bodies. It also highlights our experience using this method in Wales as a case study,  addressing some of the challenges and risks we encountered, and how we mitigated them. 

This guide, like our practice, remains a work in progress and will be revised as we complete further iterations of our programme in Wales. It is not intended to be an exhaustive guide for all public services, but is a way to share our knowledge and experiences operating in a specific location within localised conditions. 

If you feel something is missing, you have questions, or you want to talk through your own version of this work, we would love to hear from you.

Section 1: Understanding your finance options

Many different financial tools to incentivise innovation are available to governments but knowing which to use is often tricky.

Nesta has written an extensive guide on the range of financial instruments available to support innovation, Funding Innovation; a practice guide to making money work harder,  but Table 1, below,  presents some examples of mechanisms available to governments to stimulate innovation, along with some of the challenges and advantages involved with their use. Too often, funders tend to stick to just one or two methods for funding innovation (usually non-repayable grants) and so miss out on others that might be more appropriate. 

Public services in Wales and the wider UK are struggling to cope with increasing demand, creating a greater imperative to build services that are fit for the future. Innovation is acknowledged by many as essential, but there is uncertainty around how to create the systemic conditions needed to match the scale and pace of change required.

Table 1: A table from Funding for Innovation published by Nesta in 2018 shows a range of funding mechanisms for innovation, including loans. 

What is Invest to Save?

Invest to Save is a Welsh Government initiative that offers interest-free, (mostly) unsecured loan finance to public and third sector organisations.  Projects need to demonstrate the need for upfront investment in a project that has the potential to deliver long-term cashable savings which are used to repay the initial loan. Since 2009, it has invested £174million in 181 projects. 

In 2016 the then Public Policy Institute for Wales undertook a review of Invest to Save and recommended that part of the fund be segmented to undertake a trial that might stimulate more innovative applications.  This led to the creation of Innovate to Save. The crucial distinctions between Invest to Save and Innovate to Save is the blend of finance and support package available to the cohort of innovation projects.

What is Innovate to Save?

Innovate to Save was launched in February 2017 with funding from Welsh Government and was open to all public and third sector organisations delivering public services in Wales. The programme blends grant funding to undertake a Research and Development phase, incorporating prototyping and piloting of the organisations’ ideas, followed by the opportunity to apply for an interest-free loan on negotiable terms to implement the project at scale during an Implementation phase. During both phases, tailored non-financial support is offered to project teams, that might include financial modelling, stakeholder mapping and expert help with research and data collection.The intended outcomes of the programme are to find and scale ideas that improve services and generate cashable savings for the public purse.

The Power of Blended Finance

Blending funding types can provide a powerful incentive to organisations to undertake innovation projects, off-setting their own risk by funding initial research and development, as well as providing hands-on support from experts that increases the evidence-base for whether the project is going to have the desired outcomes. 

The Innovate to Save Blend

Grant of £5k – £30k plus non-Financial support (equivalent to between £5k and £15k per project) to fund initial 6-12 month R&D phase

Loans of £500k – £2m plus non financial support for 1 year to fund 5-10 year delivery phase. 

Support provided by Innovate to Save is different to that provided by other existing loan financing programmes for innovation. Its support is given to innovation projects earlier, and is more focused and more intensive.  It takes account of the fact that taking on risk finance – in this instance interest free loans – is seen as more of a barrier to innovation than taking on grant funding, and provides small amounts of non-repayable finance backed up with non-financial support to help organisations test and prototype ideas before they implement and scale them. 

To date, we’ve found that small grants – no larger than £15,000 – were sufficient to encourage a large range of organisations to put forward ideas that needed testing and back them up with their own resources. Organisations applying to cohort one of Innovate to Save committed an additional 53p of in-kind support for every £1 of grant funding requested.

However, our experience suggested that small grants don’t necessarily encourage major ambition. In version two, we increased the grant ceiling for projects to £30,000. We were encouraged to see the quality of application and loans made increased with a small increase in additional grant funding

It’s also interesting to look at the value of loans requested off the back of relatively small scale grants.  We issued £270,000 worth of grants across 2 cohorts. Four projects were awarded loans, giving us a projected 5 year return on investment of £13.27 for every pound of grant money invested.

We would have stayed small and implemented these small changes that we were comfortable with. But because we had their backing and they’d helped us to really prove that this was doable, this could work, we had far more confidence in it. So we had confidence to think big, and that’s something we never would have done without Innovate to Save.

Jill Jones, Flintshire County Council

Section 2 – Organisational readiness: Can you run a programme?

Before starting the programme design process, we recommend trying to determine how strong the appetite and practices for effective innovation are in your organisation.

There are some key questions to discuss as part of this conversation that will help you as you move forward.

Discussion questions

• What resources do you have for a programme of blended/risk-based finance?
• Do you have partnerships and relationships in place to ensure that the programme can reach the right kinds of people? 
• What is the appetite for new and more risky ideas in your organisation – how much failure can your organisation tolerate?

What is the programme’s main priority? Generating R&D, implementing projects at scale, and making loans each require a different kind of focus – have you set clear expectations for the programme staff and project teams to follow?

Resources

Thinking about how a new programme is going to be resourced should be an ongoing activity throughout the design of your programme. Do you have the right team with an appropriate mix of skills, networks, time and appetite for the project? Can you segment enough money and set it aside for the programme?

These questions shouldn’t be the main drivers of your programme design – letting them lead can inhibit your ambition – but they should remain a constant to ensure that what you’re designing is deliverable.

The Innovate to Save team

Innovate to Save is run by Y Lab (a partnership between Nesta and Cardiff University).  The programme employs a full-time programme manager and assistant programme manager. This equates to: 

• 0.5 FTE Research Associates x 2
• 0.5 FTE Research Fellow
• 0.5 FTE Senior Research Fellow
• 1 Programme Manager
• 1 Assistant Programme Manager
• 0.25 FTE Communications Manager 

The programme is a collaboration with Welsh Government and the Head of Invest to Save plays an active and engaged role in the programme, supporting all aspects of the work.  We are also working in collaboration with Wales Council for Voluntary Action – a representative body for the third sector in Wales.

Relationships

As you begin the process of designing your programme, you should spend time thinking about your key stakeholders, both internal and external to the process. Who can help you reach people with new ideas? How can you broaden your pool of applicants beyond the usual suspects? What kind of people and places are you trying to support, and what conscious steps can you take to ensure that it’s truly accessible for them to apply? What kinds of support will people need when applying (for example, in writing an application, or in finding partners)? Who is likely to slow your process down, be sceptical or block the programme and how are you bringing them on board early on?

If you are hoping to reach a defined community, try to understand what your programme might look like from their perspective to ensure it doesn’t place unnecessary barriers in their way (e.g. overnight events may exclude people with fixed caring responsibilities outside of work).

It’s also worth taking the time to understand how your programme can complement (or be constrained by) wider government or public service strategic plans, finance plans, governance, legislation and policy direction. While you don’t want these to dictate your programme design, it is worth ensuring that what you do complements and builds on existing policy and practice.

Contracting Innovate to Save

It took a year for us to design and contract the Innovate to Save programme. We hope that this guide might shorten the timescale for you!

In particular, the contracting process was overly (and necessarily) arduous. Multiple rounds of amendments and sign-off from three legal teams were needed to ensure that the objectives of the programme, delivery mechanisms and assurances against the expenditure of public money were suitable – without taking away from the ambition of the programme. Having strong relationships, both internally and externally meant that we were able. to keep focused on the vision for Innovate to Save over a significant length of time

Risk

Thinking about the level of risk that your organisation can take informs whether you are in a strong position to build a programme and make clear decisions about:

• The level of grant funding you might offer
• Types of organisations you might fund and their readiness to undertake an innovation project
• How rigorous you will want existing evidence to be for a project’s outcomes
• How much novelty you might be comfortable with.

It is likely that not everything you fund will work – that is certainly the case with Innovate to Save. 

How we talk about ‘failure’

A key objective of Innovate to Save is to generate useful knowledge about what works and what doesn’t. To that end, an R&D project that fails to show cashable savings or improvements for the people who use the service is only deemed to have failed if those running the project can’t tell us why that’s the case.  

In capturing information about what works and what doesn’t we ensure that every investment (grant or loan) has a level of value for others, alongside the financial value that it might generate back to Welsh Government.

Failure, and fear of perceived failure, is a significant issue in public service culture. Communicating clear programme priorities and expectations help supported projects shift their mind-set from reporting success at all costs, to experimentation. Some research undertaken around the Innovate to Save and Invest to Save cohorts makes a distinction between two contexts where failure can occur – in the innovation or change space, and in the operational space. Implications of ‘failure’ in each space have very different consequences. Emphasising that R&D is about carving out a controlled and ‘safe space’ to fail through testing and experimentation will help your cohort adjust to a different way of working.

Section 3 – Building your programme

Once you have decided what is important for your programme, it is time to start the design and build.

All blended finance programmes for innovation will look different as they are determined on many factors that are unique to the organisation. 

When developing a staged programme of support, it is vital to plan each stage fully – taking time to identify objectives and outcomes, the kind of support that can be offered, and the amount of time available to complete each stage. As well as ensuring that you are able to deliver your programme, this level of planning will help you communicate your offer effectively to potential applicants – a vital step in making sure people are able to fully engage with your programme and undertake the best work possible.

The following section is intended to help organisations develop the component stages of a loan-based financial tool to help stimulate innovation in public services.

Discussion questions

• How much time do you have to run the programme? And how much time do you have to get it set up? 
• What skills mix do you need as part of your programme team? Do you have a dedicated team or will you need to identify one?
• What are the key outcomes you are looking for from your programme?
• What kind of evaluation plan do you need to have in place and what feedback will you look for during the programme?
• Have you identified your key external relationships? Who is funding the programme? Who will provide vital support for the projects (e.g. financial modelling)? 

Phase development

To effectively deliver a multi-phase programme, it is vital that you plan enough time and funding for each part. Each phase will yield different results and can be thought of as a stage-gate process, bringing the most viable projects through to the Implementation phase.

Phasing Innovate to Save

We took the decision to run Innovate to Save across three phases, giving us the chance to focus intensively on:

• Building a high-quality pipeline of applications
• Supporting rigorous and iterative R&D
• Effectively implementing ideas that work.

Working in this way also allows us to build cohorts and networks. Potential applicants and partners come together in phase 1, the R&D teams build a peer-support group in phase 2, and implementation projects are able to benefit from ongoing support in phase 3.

Phase 1: Pre-application support

What are your objectives and outcomes?

This phase gives you an opportunity to ensure that the widest range of potential applicants know about your programme and feel confident and able to apply. It is a good time to leverage support from key partners and identify people who might act as ‘Innovation Champions’ in specific thematic areas or locations. Your primary objective is to develop a pipeline of high-quality applications that meet the aims and ambitions of your call.  

How can you maximise high-quality applications?

Your support offer should be based on a clear understanding of the breadth of your target audience. Without this it’s easy to accidentally restrict the pool of talent through an unattractive, unwelcoming or inaccessible support package.

Make it useful

Remember that this is the phase that’s the most risky for people wanting to take part in your programme – they are investing their time and often money in your process with no guarantees about the outcome. To that end, think about how everything you do and everything you ask them to do might be useful to the participant regardless of their success in applying for your programme:

• Design application forms in a way that allows information to be reused in other business cases
• Design workshops so that new tools and methods can be used in scenarios outside of an application to your programme
• Design the content of the workshops to directly help the development of an application
• Provide participants with the opportunity for learning and networking with others
• Sense-check your programme vocabulary with your target cohort. Getting your language and tone right is of huge importance in ensuring that the people you want to support understand what’s on offer and how it works.

What might your support offer involve?

• Workshops and skill sessions that help to develop high-quality applications. 
• Networking events to attract potential applicants and provide information about the programme in an informal way. This can also aid collaboration and the formation of teams of applicants.
• Informal meetings and an ‘open door’ for potential applicants to talk through ideas.
• Use social media to reach out to potential applicants outside your networks about the programme, as well as any personal contacts. Target press coverage in appropriate publications.

How long should it take?

Dedicating as much time as possible to this phase is imperative, as long as momentum isn’t lost with potential applicants. Due to the experimental nature of the programme, we invested heavily in this stage in order to find good applicants. 

Setting up and delivering a series of workshops or networking events, especially if you are covering a large geographic area, can take at least a few months and there is likely to be follow-up contact with projects to develop their idea to application phase. This time is also vital in setting up the R&D phase and a good time to plan ahead for things like cohort events, and project set-up workshops. It is recommended to spend between three and six months delivering this phase. The industry standard, by comparison, spends on average six weeks running pre-application support. 

Cohort selection 

As you design your programme, be clear about your selection criteria priorities. Beyond the programme’s main objective, what are you looking to achieve through building your cohort? Are you looking for a cohort that is geographically representative, diverse, collaborative or from a particular sector? 

An offer of support alone is often not enough. Ensure that definitive steps are taken to reach marginalised communities with your offer. Check that the language you use is understood by the people you want to support. Test your processes to ensure they are clear and easy to understand, and take conscious steps to ensure that public-facing processes (the application process and interviews) don’t disadvantage or favour specific types of people. We find cohorts benefit from including a diversity of perspectives and life experiences.

Good relationships are vital throughout the delivery of a programme of blended finance. 

Where two or more organisations are working on a project under the programme, it is important that partnership agreements are in place and submitted as part of any bid. These partnership agreements should clearly define the roles each party will take, data sharing agreements, and financial relationships. Setting that expectation at a programme level from the outset will help ensure that participating projects are well-placed to succeed. 

Similarly, relationships with project sponsors are vital to the success of the innovation projects supported by the programme. This is an area that merits thorough investigation at the initial bidding stage, by asking for specific details on how senior leadership will support the innovation project. 

Phase 2: Research and development

What are your objectives and outcomes?

This phase allows projects to develop, test, iterate and trial their idea. There are two primary research questions that each project will look to answer, which cover the programme aims:

• Will the new idea improve the service for the people who use it?
• Will the new idea generate cashable savings for the organisation(s) involved?

Projects will also need to have a set of research questions which are specific to their goals and it is a good idea to set these together at the very start. This ensures that any data that needs to be collected to help write a business case is considered from the beginning. Supporting projects to understand the R&D process, and by extension what makes a good set of research questions, is a key feature of Innovate to Save. It is crucial that your programme team is also able to support projects in this way. 

I think one of the things for me is having the research team asking us questions and challenging us. I think they picked up our business really, really well and really quickly and with some of the things they are asking us we have kind of looked at each other and gone, ‘we didn’t think of that’. So rather than it just being us two, and bumbling along and doing it, having those challenges is really helpful.

Innovate to Save project

At the end of the process, projects should be in a position to deliver a research report, and hopefully develop and submit a business case that shows their project is likely to improve services and generate cashable savings.

What support should you offer?

• A non-repayable grant to enable the organisation to undertake their R&D to test if their idea is financially viable and effective in the long run.
• A package of support for conducting research and development, including expertise on research methods (such as focus groups and routine data analysis), user-centred design, piloting and prototyping. Support given includes both advising some projects on work they are conducting, as well as conducting the work on behalf of some of the projects. Consideration needs to be given to the need for ethical approvals and consent procedures when conducting research with service users, including analysis of their personal data. We recommend starting with a set-up workshop to set research questions, identify key stakeholders and begin drafting a project plan.
• Other non-financial support that responds to gaps in the organisations’ capacity, knowledge or expertise. Examples include:

-Research methods and data collection and analysis

-Modelling savings and preparing business cases

-Organisational change and preparing for change with new ideas

-Leadership development

-Marketing and communications support – developing a narrative for the project

-Governance and business development – particularly where new relationships have been formed.

This type of support may not be possible to deliver in-house, so having a budget for non-financial support to commission experts when needed is essential.

A programme of events that brings together groups of projects to develop a cohort, enabling peer-support networks and identifying areas where collaboration could be useful. These events also ensure that regular face-to-face contact occurs between projects and the programme team, developing relationships and knowledge, and ultimately providing a better level of support. These events can also be a good opportunity for the cohort to learn new skills surrounding innovation which may help push their projects forward. This could include topics like developing pitching skills or learning about user-centred design methods.

How long should it take?

Make it as quick as you can in order to generate and sustain momentum, but keep in mind that it can take longer than anticipated to set up an R&D project and that some ideas may be affected by things like seasonality (especially in health-related projects). It is best to be as flexible as you can within your established timelines. A period of 9-12 months should be adequate.

The process of doing the R&D meant that we had to really look at the idea. We previously would have just done it within the fostering service within a very small team of opinions and ideas of what we thought would be the right way forward. They really encouraged us to talk to every single stakeholder. They allowed us to access experts really, who could put our words into a spreadsheet and helped us to really fine-tune where could we see cost savings. So that was really useful, especially when you’re trying to get a local authority to invest.

Jill Jones, Flintshire County Council

Phase 3: Implementation

In this phase, projects are offered risk-based (loan) finance to implement their idea and, where appropriate scale it internally or by offering the idea to other similar organisations.

What support should you offer?

• Loan funding. In this phase, projects are offered interest-free, unsecured loans. There is no upper or lower limit to the amount that can be requested and no fixed timeframe for repayment. Both are judged on the following criteria:

-The amount required to fund the implementation

-The rate at which savings can be achieved – at what level and over what time period.

• Support to scale the project. By offering a period of non-financial support alongside loan funding, you are helping to ensure that organisations have the necessary skills to implement their project effectively. As with the R&D phase, this could include help with financial modelling, stakeholder engagement, and developing an evaluation plan, but may also now focus on organisational change to equip projects in overcoming potential barriers when scaling their idea.

We continue to provide support on R&D in the first year of the Implementation phase, to continue generating evidence during the initial scale-up. A key lesson from both versions of Innovate to Save run by Y Lab is that loan contracting, for various reasons, can take up a considerable amount of time, and you should be clear in your planning and timescales on whether your implementation support runs from contract issue or after contract approvals. 

The COVID-19 crisis meant that service re-designs had to occur, and it was essential that we were able to support our projects in this way. Once the shock of lockdown subsided, projects needed help to adapt to remote ways of working or to be given space to reconsider timescales and any financial implications on their work. Additional non-financial support was lined up, and close contact ensured the projects felt supported as they worked out new ways of working.

Case study: COVID-19 support to Flintshire County Council

When the coronavirus struck the UK in early 2020, Flintshire County Council were early in their implementation of a £1.15 million roll-out of the Mockingbird approach to foster care across the county borough. 

The Mockingbird programme creates an ‘extended family’, called a constellation, of six to ten fostering families who are supported by an experienced foster carer. The programme is shown to improve the stability of fostering placements and strengthen relationships between carers, children and young people, fostering services and birth families. The extended family model enables sleepovers and short breaks, peer support, regular joint planning and training, and social activities between the families. The first constellation was set up in February 2020 with another to follow by the end of the year.

Lockdown meant that all activity paused initially while both the local authority and families involved took time to understand their new circumstances. The local authority’s fostering team had to find ways to continue to deliver their services, and work on the Mockingbird project refocused on finding new ways to deliver remotely. Primarily this focused on finding ways to enable standard and informal contact between the participating families, and between the local authority and families, and digital solutions to delivering their recruitment work for the next constellation. 

Innovate to Save provided non-financial support to Flintshire County Council to help them identify and develop new ways to deliver their work, and gain approval to transition to digital delivery. This included service mapping, research, testing and briefings. At the same time, Flintshire County Council was successful in securing specific support, delivered by Catalyst to qualifying Nesta grantees, to transition to digital ways of working in response to the COVID-19 crisis. They are now working as part of a ‘Digital Team’ – a cohort of children and youth organisations that share a specific need to deliver online training and engagement for professionals working directly with young people.

How long should it take?

When you issue loans, they will likely be on a tailored repayment plan, which may be years apart for different projects. The R&D phase could involve a pay-back exercise to understand the period over which savings are likely to be realised so that loan offers can be structured accordingly. Commissioning an external organisation to help projects with their financial modelling has been key to the success of the programme.

Innovate to Save Loans

How much should be set aside for a loan fund? 

Innovate to Save has attracted 70 applications for R&D funding over two rounds of the programme, but a high attrition rate saw just 15 projects being selected for this phase. Four projects in total have been approved for loan finance amounting to £2.8 million investment over differing repayment periods.   

The smallest request approved for funding was for £400,000 and the largest was for £1 million.

Improving services

For the purposes of Innovate to Save, we use the following definition of the term innovation:

“Put simply, public sector innovation involves creating, developing and implementing practical ideas that achieve a public benefit. These ideas have to be at least in part new (rather than improvements); they have to be taken up and used (rather than simply remaining ideas); and they have to be useful. By this definition innovation overlaps with, but is different from, creativity and entrepreneurship.” (Nesta, Innovation in the Public Sector, 2014)

The ‘public benefit’ requirement of the programme is as important a feature of Innovate to Save as the cashable saving. A project’s product or service innovation must have the potential to achieve public benefit in Wales. 

Although no specific definition of ‘public benefit’ is attached to the programme, the tools and resources used by Innovate to Save encourage projects to take a service-user-focused approach to the design, development, delivery and evaluation of their work.

Taking methods from a user-centred/service design approach is helpful to ensure that the users are at the forefront of the innovation. During one of the initial cohort events, we facilitated a skills share introducing the participants to tools to help increase user engagement throughout the R&D process. User journeys, persona development and stakeholder mapping all encourage projects to put the needs and priorities of the public above their own needs. 

At the very least, we expect that projects should not make the service worse for the people who use it, whether they are staff of the organisation implementing a new idea, or members of the general public. This can be measured through regularly conducting user feedback during the R&D phase, gaining feedback on ideas, and collecting user satisfaction data through surveys and interviews during implementation.

The impact of cashable and non-cashable savings on repayment

We considered a number of scenarios when thinking about how best to structure risk finance to projects, based on the types of savings they are likely to make.

Scenario 1: Cashable savings are equal to, or greater than, the value of the loan in a single organisation

The standard loan model is still applicable, providing there is reasonable evidence that the loan can and will be repaid in a timely manner.  

Scenario 2: Cashable savings are equal to, or greater than, the value of the loan but spread across a number of different service delivery organisations in a single project

The standard loan model is still applicable, however, we might encourage the use of a Special Purpose Vehicle to deliver the savings, with each member contributing to the repayments proportionally to the cashable savings that are made in each of their organisations. This scenario has not arisen with Innovate to Save’s cohort. 

Scenario 3: Cashable savings are less than the value of the loan, but non-cashable savings are significant and will deliver significant additional value, either in a single organisation or spread across a number of organisations

This is more complicated, and also remains somewhat untested by Innovate to Save. In this scenario, there won’t be significant savings that can be used to repay the loan, but the value that a project generates might mean that it makes little sense not to support it. In this instance we will need to take a decision as to the amount that is repaid and by whom.  

In this instance, we need to consider how and if these projects pay back loan finance via the Innovate to Save programme as repayments can’t be made from cashable savings. We also need to consider the fact that innovative projects may be more likely to generate non-cashable savings (or a mix of the two), rather than cashable savings, at least in the short term. Potential financial structures for projects like this might include:

• Seeking additional third party support that’s non-repayable, such as a grant
• Writing off the loan on a ‘payment by results’ basis – as the project delivers non-cashable savings that directly benefit the funding organisation at a policy level, the amount of the loan reduces.
• Requiring that the project repays the loan from other sources, either its reserves or by moving funds from another area.

Managing and modelling risk

In each of the scenarios outlined above, a degree of risk is attached. In the first instance risks can be mitigated using a supported R&D phase, ensuring testing and evaluation prior to taking on risk finance. However, we should acknowledge that there will still be some risk attached and you should consider these risks as fully as possible as it has an impact on the projects you choose to take forward.  

An unanticipated risk that was a realistic scenario at one stage in Innovate to Save, was the prospect of a significant loan request, with a repayment flow that could have destabilised the fund (i.e. it didn’t start to repay for a number of years, leaving the available pot for new investments depleted). In this scenario a staggering of the draw-down amount was proposed to ensure that the implementation would have been gradual and measured and avoided depleting the main loan fund. However this was unnecessary in the end. 

Key lessons

Small grants (£15k-£30k) coupled with tailored non-financial support can catalyse organisations to develop and run an R&D project to test a new idea, when paired with prospective loan funding later down the line. We have found that the model works well for implementation projects up to the value of around £1 million. 

Having genuine partnerships in place is a key element of success of this programme. Those that overstated their key relationships or who entered R&D without the right relationships in place (e.g. with local authorities) were not able to do as much R&D as planned.

Funding for non-financial support, capacity to assist, and the time to be there for projects is crucial. This starts during the awareness-raising phase to establish the fund as a dynamic approach to innovating in public services. This element of support helped projects understand that Y Lab is not looking for a traditional funder/grantee relationship, but rather a partnership to experiment with and support ideas to see if they work. The style of support offered is crucial to the success of this side of the programme. We found that coaching-based support styles align well, and help meet the emotional support needs of projects.

Section 4 – Evidencing your programme’s impact

Good quality evidence and its value in informing policy decisions is gaining increasing traction in governments across the world.

Organisations such as the Alliance for Useful Evidence promote the use of rigorous evidence in order to achieve several outcomes, listed in Figure 1:

At Y Lab we ask applicants to our fund to assess where they sit on Nesta’s Standards of Evidence (see Figure 2) and commit that, if they secure grant funding or repayable finance, they will work to improve the level of their evidence of impact over time. 

Standards of evidence

Standards of evidence are valuable in a blended finance-based innovation programme. They can help guide the objectives and activities of an R&D project – setting clear boundaries and assumptions about what will and will not be undertaken.

They can also be helpful in understanding stakeholder appetite for risk-taking when it comes to investment. For example, we set our benchmark for risk at a level 2 standard of evidence for making most investments. We believe that in most cases this should be sufficient for us to make some form of risk-based investment in a project. 

However, the appetite for risk within the organisation that’s doing the work may be significantly lower, requiring that a higher standard of evidence be reached before an investment is made. Using the standards of evidence, we can map and understand these disparities, and work on methods to overcome them – either through advocacy work, new investment models or finding additional research funding to enhance the evidence base before risk finance is taken on.

Monitoring and evaluation methods

I’ve learned a lesson that data is really key and if you’ve got data and you’ve got hard evidence to support this new innovation, it can help to actually challenge the resisters to change, the barriers to change.

Innovate to Save Project

The opportunity to better understand the types of publicly-funded innovation that programmes support (and don’t support) is an important area of research to pursue.

Currently, the bulk of research in this area is from the USA, where the public, private and voluntary sectors (and relations between them) are very different. The long-term research opportunity available here provides a space to explore the impact of your programme in its own context. For example, does a country with more closely integrated public services enable certain types of projects to emerge and facilitate more effective dissemination into practice? Or are independent bodies more likely to look outside their direct delivery sector to gain knowledge and experience that transfers into their service?

The connection of, and potential impact on, the people that use public services are a central part of this programme and this also informs all the research undertaken to evaluate it.

How are we evaluating Innovate to Save?

A key aim of the Y Lab partnership delivering Innovate to Save is to understand how and why innovation happens in public services.

Evaluating Innovate to Save presents us with a unique opportunity to follow the development of some of the best new ideas emerging from public services in Wales, and explore how innovation funds function and support new ideas, for whom, and how.

Programme evaluation spans all three phases of Innovate to Save. First, as the programme is publicised and engagement begins, second as teams are supported to research and develop their ideas, and finally as successful projects are implemented and evaluated. 

Different types of evaluation are required at different moments in the programme, and should be used in combination. Innovate to Save has mainly used a combination of ‘monitoring’ and ‘process’ evaluation. 

Monitoring evaluation gives you feedback on your events and other inputs, allowing adjustments to be made if necessary, and giving snapshots of the process that can be useful in mapping progress. 

Process evaluation on the other hand tracks across the entire programme, determining whether plans were implemented, any mechanisms of impact, and the influence of the broader contexts. There are objectives in terms of what the programme is aimed at achieving, and these can be measured using the various instruments available. 

Planning and collecting data on the effectiveness of your programme can provide valuable evidence for impact, and determine whether you need to make any changes to bring your desired outcomes to fruition.

Methods that can be used to do this include:

• Surveys
• Focus groups
• Interviews
• Journals.

It is a good idea to think of your programme as containing different types of activity (e.g. inputs, dialogues, projects, planning) with different time-scales (depending on your programme’s Theory of Change). Forms of evaluation must be tailored to maximise your information and evidence-gathering capability.

Evaluating Innovate to Save

As the programme is also a form of innovation – and to some extent also experimental – the evaluation of Innovate to Save has in itself been a learning process. Challenges that have arisen as part of the programme evaluation mainly concern: 

• The iterative nature of the Innovate to Save programme design and delivery – this created a need for a flexible and responsive evaluation strategy.
• Difficulties tracking the longer-term ‘impact’ of the Innovate to Save programme beyond the period for which the evaluation of the programme is funded. 

Key evaluation issues to consider by anyone developing a similar programme include: 

• A clear evaluation strategy that is responsive to programme iterations. This strategy should include clear indicators of:  

• The type(s) of evaluation being undertaken (i.e. monitoring, process, or impact evaluation) 
• Who will do the evaluation (internal or external team)
• What you are trying to evaluate (e.g. impacts on participants, teams, organisations, ideas)
• Why, when and how data will be collected and used to inform the evaluation (develop a rationale and schedule for data collection and analysis)
• How to respond to additional iterations.
• How might you ensure comparability of the data collected across the various iterations of the programme?
• Are there any ‘validated’ instruments/tools you can use to assess the innovation ‘readiness’ or innovativeness of projects and organisations participating in the programme?
• How important is understanding longer-term impacts of projects once the programme’s relationship with projects has ended?

I think it’s given me confidence to kind of say, actually we can do something big and we have got the potential to be the first people to do this and we can be the leaders and the innovators. We might be just a little [name of place] but we can do this and we can be the best.