The World Bank Group recognizes the importance of institutional incentives and a culture of learning and innovation for achieving a more effective Bank Group and acknowledges risk aversion as an issue.
This evaluation found that although harnessing disruptive and transformative technologies for development often demands innovation, which by definition is without precedent and inevitably risky, there were insufficient incentives for staff to take risks and innovate.
The levers at the disposal of the Bank Group (such as leadership signaling, questions asked in operational review meetings, and the performance management system) were not yet being effectively used to facilitate informed risk taking and innovation for disruptive and transformative technologies for development.
DTT-Relevant Risks and Innovation
DTT-related operations are inherently risky and often call for innovative approaches. The riskiness of DTT-related operations results from the many complex reforms that need to be pursued—often simultaneously—and that involve multiple public and private sector stakeholders. This is illustrated by the World Bank’s 2013 Ghana eTransform project, which aimed to improve the coverage and transparency of government service delivery by digitizing several parts of government. This required the project to support significant legislation (such as a data protection act and an electronic transactions act) and regulations (such as for electronic signatures, electronic investigations and interception, electronic payments medium, and electronic waste). Furthermore, upgrading the country’s biometric ID system was essential for facilitating electronic transactions and called for sophisticated and innovative management information systems for the proper handling of citizens’ personal data. In addition, collaboration with the private sector was required to set up medical call centers to provide a first-response mechanism to citizen inquiries about medical and health care issues in remote and rural parts of the country. Finally, the success of the project also depended on procuring computer hardware and software and ensuring affordable high-speed internet access.
More recently, the COVID-19 pandemic has brought into stark relief DTT-relevant risks and the need for innovation. The Organisation for Economic Co-operation and Development–World Bank team collaborating to use DTT to aid the COVID-19 response points out that “the use of new technologies to cope with COVID-19 creates a fundamental tension between the opportunities brought by digital tools and the risks that the use of data pose to privacy rights and security” (Amaral, Vranic, and Lal Das 2020). Almost overnight, the pandemic disrupted the centuries-old model of “children going to school,” requiring it to be blended with “schools going to children,” and thereby forcing public and private sector organizations to instantly step up to deliver innovative DTT solutions for learning, including in situations of low capacity and connectivity.
Bank Group Recognition of Key Issues
- The Bank Group has acknowledged the existence of risk aversion as a constraint for innovation and the need for a culture change in favor of a new learning culture, especially in the context of the changing nature of work.
The Bank Group’s FY20–22 Human Resources Strategy states that incentivizing behaviors that create a more effective, results-oriented, innovation-driven culture are key to achieving a more effective Bank Group. Drawing on the technology-related discussion of the changing nature of work in the World Development Report 2019 (World Bank 2019m), the Bank Group’s Human Resources Strategy emphasizes learning agility and conscious on-the-job learning over mastery (World Bank 2019l). Recognizing the need for a culture change, the strategy emphasizes that the new learning culture aims to treat learning as a journey rather than an event and places increased focus on innovation and results.
A 2017 World Bank report recognizes that there are barriers to innovation and that there is risk aversion at the World Bank (World Bank 2017c). About half of the interviewees for the 2017 report opined that there would be negative professional consequences if innovative elements failed and that often management did not sufficiently recognize innovative projects due to their small size. The same report also notes that certain task team leaders argued that they were evaluated, measured, and promoted based on their outputs or disbursements rather than on results, impact, and learning. Furthermore, according to the report, although some interviewees discussed how their managers were happy to recognize their staff if they successfully used innovative methods, and others discussed how managers can provide support when navigating the World Bank’s bureaucracies, most management support to enable innovation appeared to come in the form of “not impeding” their teams (World Bank 2017c).
- There are a few instances of greater risk appetite.
The West Africa Unique Identification for Regional Integration and Inclusion Program is an example of the World Bank demonstrating greater risk appetite. This is a 10-year operation in six countries—Côte d’Ivoire, Guinea (Phase 1); Benin, Burkina Faso, Niger, and Togo (Phase 2)—and the Economic Community of West African States Commission to build foundational ID platforms that are regionally interoperable. As such, the program faces technical risks (data privacy and data security), policy risks (weak implementation that could lead to further marginalization of vulnerable populations), and organizational risks (cooperation with external organizations such as the Economic Community of West African States and coordination within the World Bank). To manage these risks, a director-level mechanism was established within the World Bank to review periodically the project’s risk management actions. The World Bank also employed an agile multiphase programmatic approach, under which countries could join when they were ready. The World Bank deemed the potential benefits of providing social assistance to vulnerable groups in West Africa to be greater than the risks.
- In general, however, Bank Group staff interviewees perceived a lack of sufficient institutional incentives for risk taking and innovation.
IEG interviews of Bank Group staff cited the institutional culture and incentives for risk taking and innovation as challenges for DTT support. NVivo analysis of staff interviews conducted by IEG showed that of the 41 interviewees who talked about incentives for DTT support, 37 interviewees (or 90 percent) reported these to be insufficient. Of the 19 interviewees who talked about incentives for risk taking, 18 interviewees (95 percent) reported these to be insufficient. Furthermore, of the 23 interviewees who talked about incentives for innovation, 18 interviewees (78 percent) reported these to be insufficient. The NVivo analysis is described in appendix A.
A past IEG evaluation found that staff experience pressure to avoid risks. An IEG survey and interviews conducted for IEG’s first Learning and Results evaluation found that staff experienced pressure to avoid risks and not to admit failure and that in the view of many, there was limited learning from mistakes (World Bank 2014a). That evaluation also found that staff perceived the lack of institutional incentives to be among the biggest obstacles to learning and knowledge sharing in the World Bank. Moreover, the World Bank’s internal organizational structure has been subject to many reforms, but serious reforms of internal incentives have not been undertaken.
Interviewees noted that the willingness to attempt innovative solutions for the twin goals depends on an institutional culture that supports risk taking and acknowledges that failure is part of this. Failing is essential, because if one is not “prepared to be wrong,” one will never produce “anything original” (Robinson 2009). Interviewees noted that incentives to learn from mistakes would require that the Bank Group convey clearly and explicitly how failure would be treated. Every project document in the Bank Group is required to discuss potential risks and mitigation measures, but interviewees reported that the “real” risks are sometimes downplayed so as not to hold up the operational review process. The implicit assumption staff make is that the institution has a low tolerance for risk and failure. Ensuring a more realistic up-front assessment of risks would require staff to feel psychological safety in speaking up about potential risk and failure and for operational review meetings to also promote speaking candidly about them. Google X holds meetings termed “premortems,” where teams are encouraged to speak their mind from the start about all the things that could go wrong. This enables decision makers to be fully aware of risks and make calculated bets. Furthermore, projects that are expected to fail are not viewed negatively: “We see killing projects as a normal part of doing business because it means we can go faster and take on ideas that are more promising” (Teller 2016).
- Interviewees reported that the Bank Group’s institutional incentives do not yet sufficiently encourage staff to keep up with DTT trends, despite the fluid and fast-moving nature of DTT.
Interviewees reported a lack of institutional incentives for staff to keep up with DTT trends. An institutional barrier cited in the interviews was that Bank Group staff were not encouraged to keep up with technological advances to enable them to deploy frontier DTT for development. Interviewees reported a lack of active support and enthusiasm for DTT-related external training, secondment of staff to and from organizations leading in DTT, encouragement of participation in relevant conferences, and partnership with external organizations that are pioneers in specific DTT areas.
Interviewees saw the Bank Group treating DTT in the same way as other sectors and themes, with little awareness that DTT are fluid and fast moving. World Bank interviewees in the Digital Development and the Finance, Competitiveness, and Innovation Global Practices and in IFC said that leadership did not provide sufficient incentives for innovation and smart risk taking. Such incentives are especially needed in DTT-related operations since the Bank Group needs to move with greater agility (by reducing processing complexity) compared with traditional infrastructure sectors. Interviewees noted that IFC is often the last to sign deals, which can be a particular issue in a fast-moving area such as DTT.
Although IFC and the World Bank tend to take more risks in venture capital investments in DTT and fintech projects than in more traditional projects, their risk tolerance is still below that of other players in the area. Risk aversion is apparent in broad managerial comfort with what has been tried before rather than something that breaks new ground. In DTT, and fintech and digital entrepreneurship specifically, there are often no past examples, but interviewees confirmed managerial preference for precedents even in these areas. Nevertheless, interviewees noted that there is a marked increase in risk appetite for venture capital investments in DTT and fintech projects compared with a couple of years ago.
- Interviewees reported that the Bank Group was not making the best use of its levers to create incentives for risk taking and innovation and that pilots were insufficiently monitored, precluding the expansion of successful initiatives or the scaling back of unsuccessful ones.
The levers at the disposal of the Bank Group (such as leadership signaling, questions asked in operational review meetings, and the performance management system) were not yet being effectively used to facilitate informed risk taking and innovation for DTT for development. The organizational effectiveness literature suggests that leading on an overarching agenda typically requires a strong mandate and signaling delivered from the top. The housing of Singapore’s Smart Nation program in the prime minister’s office is a case in point (Lin 2016). Interviewees saw the operational review process as constraining innovation and creative solutions, given the general support for continuing on a familiar path rather than for breaking new ground. Interviewees reported that legal, procurement, and external relations departments often asked for precedents and could not always be counted on to support first-time initiatives. Furthermore, interviewees reported that the operational review meetings did not consistently ask questions focused on informed risk taking, learning from successes and failures, and innovation for DTT for development. Interviewees also noted pressure to lend, saying that it took a lot to be at the cutting edge and that it was easier to just keep things simple. Interviewees noted that some innovation occurs despite the system. As one interviewee put it: “There are fearless innovators. . . . It takes a lot of self-motivation.” Other interviewees noted that a lot of innovation is being driven by intrapreneurs, but they are not being fully supported. There is tremendous pressure for them to conform to more traditional paths and ways of operating. Economist Gary Pisano identifies a number of behaviors necessary for creating a culture of risk taking and innovation (appendix F).
The Bank Group has supported pilots for innovation, but the systematic monitoring of pilots, which can allow subsequent upward or downward scaling, is not sufficiently undertaken in the Bank Group. Pilots for innovation are supported through three initiatives: (i) the Disruptive Technologies for Development Fund, which finances pilots that are proposed by Bank Group staff and connects them to experts within and outside the Bank Group; (ii) the ID4D Mission Billion innovation challenge to source innovation for providing digital ID for vulnerable groups; and (iii) the Development Marketplace (gender-based violence). However, interviewees noted that there has been insufficient monitoring of the pilots supported through these three mechanisms and, consequently, insufficient follow-up. The Bank Group’s stated goal of “thought leadership on what is changing, why it matters, and where the new opportunities lie” (World Bank 2019h, iii) would suggest greater emphasis on research and development, piloting, incubation, evaluation, and the scaling of new ideas. In this regard, the Bank Group could explore “sandboxing” and “real-life” piloting in addition to the initiatives noted above. Sandboxes can allow Bank Group teams to temporarily waive procedures in particular areas to freely experiment, affording staff the psychological safety to innovate, take calculated risks, and fail without fear of repercussion. Real-life piloting can allow new approaches to be implemented in different country contexts where there are willing clients, enabling innovation to be scaled quickly, taking it from the “lab to the last mile” (Watkins 2018). Even when pilots are well monitored and suggest potential for scaling, challenges may arise. Disruptive technologies in the energy sector, such as the Bank Group’s experience with Lighting Global (which includes Lighting Africa and Lighting Asia) and Scaling Solar, were covered in a recent IEG evaluation and are discussed in appendix K.
- For example, the United Kingdom’s Department for International Development notes that a well-networked central hub “will ensure coordinated implementation of the digital strategy. It will set strategic direction for digital policy and programming; build digital capability and capacity; inspire transformation through visible digital demonstration; and ensure impact is maximised through partnerships and collaborative working with those who share our digital vision” (DFID 2018). Similarly, the 2018 United Nations survey on frontier technologies for sustainable development found that having a central hub group was important to success (United Nations Department of Economic and Social Affairs 2018). The United States Agency for International Development has its Global Development Lab Public Service Division, a central human resources agency under the prime minister’s office. These technological innovation hubs inside of organizations provide links among actors within their innovation systems. and Singapore has the Government Technology Agency and the Smart Nation Programme Office, which is charged with building innovation capabilities and mindsets across the entire public service. It is housed in the