Informal innovation: It’s not a bug, it’s a feature

Written by: Eric von Hippel, MIT Sloan School of Management

Innovations in the informal sector can take many forms. Nelplast ECO Ghana Ltd turns plastic into pavement blocks. Photo: UNDP Ghana/Gaby Conrad

What the UNDP Accelerator Lab network is putting into place for the first time is a systematic process to identify and support promising innovations in the “informal sector” of national economies. Governments and other observers of Lab activities and successes must understand that individual innovations are likely to be small. However, taken as a whole, they can have major economic effects.

The situation is similar to the Industrial Revolution. As a phenomenon, it was exceedingly important. It enabled great improvements to economic wellbeing, and major shifts in social and governmental arrangements. The defining trend was moving manufacturing from small-scale handwork processes carried out in homes and small shops, to mass production in large factories using water and steam-powered machinery.

However, the innovations that collectively comprised the Industrial Revolution and were each mostly small and specific. One small innovation might be the improvement of a specific type of machinery — the “spinning mule” used by textile producers. Clearly, many such innovations and improvements to many types of machine were required to convert textile manufacturing from home-based handwork to a mass industrial process. But taken together, those minor innovations made up the major phenomenon we today call the Industrial Revolution.

Figure 1: Hundreds of improvements were made to the “spinning mule” by producers in the textile industry during the Industrial Revolution.

In the case of innovations being developed in the informal sector, the defining trend is the shifting of innovation from formal product development within firms to individual people and small informal enterprises. This shift is required because formal development processes are simply not low-cost or agile enough to respond to emerging new requirements as rapidly as in the informal sector. As in the case of the Industrial Revolution, individual innovations found by the UNDP Accelerator Labs are likely to be small. There are many very specific innovations in the informal sector that individually recycle different waste products for valuable new products, ranging from floor tiles to roads to roofing. Collectively, these small innovations have a large impact on the important social and economic problem of waste management.

Example: Many small contributions to solving the big, general problem of improved waste recycling.

As a consequence, as the UNDP Accelerator Labs introduce systematic identification of promising new innovations developed in the informal sector, and also help support their diffusion, the net effect on economic well-being will likely be very large.

The goal of the UNDP Accelerator Labs is to develop and implement a system to identify and support the many innovations, most of them predictably small, that together make up the huge phenomenon of informal sector — “bottom-up” — innovation.

To read more about MIT Sloane Review Magazine on the Accelerator Labs, click here.