Editor’s Note: This guest blog was authored by Trupthi Basavaraj and Rachel Findlay of the charity think tank and consultancy NPC, which provides strategic support to the Stone Family Foundation and has coordinated the Stone Prize for Innovation and Entrepreneurship in Water. Here they share some of the key lessons that NPC has learnt from running the Prize. A version of this story also appeared in Alliance magazine.

Chlorine dispensers used by communities in Kenya. Credit: Dispensers for Safe Water

Prizes have long been successful at inspiring technological innovation, from determining a ship’s longitude to creating a toilet that costs less than five cents per user per day to operate. What is less common is using a prize as a tool to stimulate innovation in service delivery. So when the Stone Family Foundation set up the Prize for Innovation and Entrepreneurship in Water, it was all about doing just that.

As a part of our wider strategy to support entrepreneurial initiatives in the water, sanitation, and hygiene (WASH) sector, we launched the £100,000 Stone Prize earlier this year. After an extensive eight-month process of identifying and short-listing candidates, we finally found our Prize winner — Dispensers for Safe Water (DSW) in Kenya — and four other organisations that we hope to support outside of the Prize.     

The Prize came about as a way to identify early stage water initiatives that the Foundation could support, and eventually help scale up. The search was for innovative approaches to delivering safe water in a sustainable and cost-effective manner to those without access in sub-Saharan Africa, and South and Southeast Asia. For the Foundation, running the Prize has been an exciting process, and one that has taught us several key lessons, three of which we have highlighted here.

Firstly, to attract the right type of initiatives and ultimately short-list candidates, it was important to set clear criteria — without being overly prescriptive. We identified six criteria for the Prize, but with a particular emphasis on two areas: a) innovation in technology or service delivery, typically in response to a specific need, and b) innovation in financial model, looking to harness the power of the private sector.

Dispenser’s valve releases metered dose of chlorine into jerricans. Credit: Dispensers for Safe Water

DSW meets both of these requirements. It addresses a clear need in rural Kenya: its water purification technology, a simple dispenser, is filled with chlorine and placed near a communal water source, allowing individuals to treat their water free of cost with the correct dose of chlorine. (To learn more about DSW's work, read this post.) But what makes this initiative truly exciting are two innovative financial models. First, the dispensers generate carbon credits by reducing the demand for boiling water using firewood, which DSW will eventually be able to sell. Second, DSW is able to bundle the dispenser as part of a wider package of agricultural goods sold by its partner, One Acre Fund. If successful, both models offer new ways of making water purification accessible and sustainable for low-income communities. It will also allow DSW to expand the Kenya Chlorine Dispenser System program into other countries.

Secondly, running a prize scheme is not just about funding. It’s also about generating publicity in a way that reactive grants programmes cannot. Getting publicity right is important not only for attracting applicants, but also for promoting the winning candidate and its approach. Our strategy was to identify the right partners and to leverage their extensive networks, reaching out to organisations both within the WASH sector and outside it. At the end of the first round, the Foundation received 179 applications from 39 different countries. We hope the Prize will not only help DSW gain recognition and attract further support from other funders, but also stimulate wider discussion on what innovation means for the water sector.

Finally, we also learnt that it was important to have the right reward in place. The promise of £100,000 for scaling up the winning initiative attracted a pool of strong applications, but as we narrowed down the candidates, it became clear that the level and type of funding offered through the Prize was not necessarily appropriate for all. As a result, the Foundation is now looking at the best way to support four highly commended candidates outside the Prize framework — this could be through providing investment or smaller grants to further test an aspect of the approach, or simply by helping to identify partners to move an initiative from pilot to scale.

For the Stone Family Foundation, the Prize has been a successful endeavour. It has enabled us to find some exceptionally strong grantees for the Foundation that we might not otherwise have discovered. It has also given us a sense of the wide range of innovations within the WASH sector, especially in countries such as Kenya, India, and Cambodia where the local environment has led to a growth in entrepreneurial initiatives. Much depends on what a funder is looking for and how a prize is structured, but we feel prizes can be an incredibly powerful tool for identifying and driving innovation.

Editor’s Note: Our new Spotlight On... series shines a light on funders and NGOs working to bring critical solutions to water, sanitation, and hygiene issues. This guest blog is the first in the series. It is authored by Adrian Fradd, senior consultant at New Philanthropy Capital, who is in charge of the day-to-day management of the Stone Family Foundation and provides strategic support to its trustees.

Credit: Photo courtesy of SNV Cambodia

Being a new funder in the WASH sector has sometimes felt like being the new kid in high school. It can be hard to know where you fit in — particularly when you’re not that big, or experienced, or well-connected. You have to decipher a whole new language and get up to speed on all the unspoken power dynamics and history. And there’s the danger you’ll fall in with the wrong crowd, try and be something you’re not, or get frustrated, drop out, and go it alone.

Of course the analogy only goes so far, and also has the effect of making people think I had a very unhappy time at high school. But I guess in a way it highlights some of challenges that a new, mid-sized funder faces when trying to work out its strategy, and the importance of initiatives like WASHfunders.org.

For us at the Stone Family Foundation, we still feel very much like the new kids, but we’re getting a clearer idea of the direction we’re heading in and the way we want to spend our annual WASH budget of £4m ($6.25m).

Our current approach is based on three main hypotheses. First, that market-based solutions, have the potential to provide sustainable, scalable, and efficient water and sanitation services to low-income households. Second, that more grant funding is needed to help these initiatives to transition from a successful pilot to operating at scale. And third, that the Stone Family Foundation is well-placed to fill this funding gap. We can provide grants of a meaningful scale, we have an appetite for risk, and we can take advantage of the business skills and experience of our trustee board and their contacts.

Since the end of 2010, we’ve started to put in place specific funding programs to refine, develop, and test these hypotheses. And as we seem to like to do things in threes, this has coalesced around three main initiatives.

The first, the major grants program, is focused on three countries, Cambodia, Zambia and Tanzania, where the foundation is making a small number of grants, with an average size of £1m ($1.6m). In Cambodia, it is funding a cluster of work in sanitation marketing — two programs are scaling up their work with local entrepreneurs, and then a third is exploring how to integrate sanitation marketing into a portfolio of approaches (such as targeted subsidies, CTLS, and government regulation) in order to achieve 100% sanitation coverage in a specific area.

The second, an innovation grants program, is looking to reach further down the food chain, identifying projects that are at an earlier stage of their development. In sanitation we are continuing with a proactive model — as promising ideas have been relatively straightforward to source — but with water, we’ve taken a different approach and have set up the Stone Prize for Innovation and Entrepreneurship in Water. (First round applications close on 22^nd March.)

And then the third, more nascent initiative, is a strategic grants program looking at how the foundation can help strengthen the resources and the support available to organisations looking to develop and scale their work. So for example, the foundation is funding Monitor Inclusive Markets to support a group of Indian organisations to test and strengthen the business model of their urban water purification. And it is exploring potential ways to open up sources of finance, by partnering with social impact investors and microfinance providers, as well as potentially supporting organisations to access carbon financing.

This is where we are at the moment. It’s all quite early stage, but also quite exciting, and we feel we’ve already learnt a lot, and are starting to refine and challenge some of our working hypotheses — for example, the specific role and potential of market-based solutions, and also the extra capacity the SFF will need to fund in this space.

As we learn more and our partners start to report back on the progress of their projects, we’ll post and blog the lessons on this site, and we’re happy to talk with others off-line and share our experiences in more detail — like why we chose Cambodia, Zambia and Tanzania as a focus for our major grants program. We’re also currently writing up a short report on what we’ve done to date, which should be out at the beginning of April.