A Return on Investment and Value for Money Assessment Methodology for the Humanitarian Innovation Ecosystem

With rising needs and stretched resources, there is an increasing demand to demonstrate that innovation investments are bringing about high returns. However, the practicalities of the humanitarian system make calculations of the return on investment (ROI) and judgements on value for money (VFM) complex.  

‘A Return on Investment and Value for Money Assessment Methodology for the Humanitarian Innovation Ecosystem’ outlines a set of indicators to assess ROI and VFM for innovation-focused investments to help increase alignment of methods that could be adopted by actors currently investing in humanitarian innovation. This report is a part of Elrha’s Global Prioritisation Exercise (GPE) for Humanitarian Research and Innovation. 

During the desk review and key informant interviews, a few key issues were highlighted in the sector: 

1. A lack of alignment in how key terms are used by different actors. Whilst the definitions and calculations of different ROI and VFM measures are not controversial, there is frequent misuse of terms.  
2. A range of different interests exists in the area of ROI and VFM across the various institutions, going from project-level interests to portfolio-level and even higher-level considerations of the ROI of humanitarian innovation as a whole.  
3. A review of documentation from recent funding opportunities particularly identified: 

• Information on costs is the biggest gap. 
• Cost and cost-effectiveness metrics are often not explicitly defined. 
• A lack of explicit detail on what quantitative detail or indicators are needed, reducing the comparability of data that is reported. 
• Guidance is often lacking on what evidence should be generated within each phase of the innovation pipeline. 

To try and support alignment and contribute towards solving some of these challenges, the report: 

1. Sets out the key terms, in terms of both the innovation pipeline and for ROI and VFM terminology, with reference to similar efforts at increasing alignment from related contexts. 
2. Focuses on portfolio-level considerations, as the area of broadest interest and highest potential for alignment. A ‘portfolio view’ is particularly important to innovation funds, where it is unlikely that every individual project will be a success, but where not every individual investment needs a positive return for the overall portfolio to be a success. 
3. Presents a recommended set of ‘ROI indicators’ – measures which can be feasibly assessed at each of the relevant phases of the innovation cycle, and which are sufficiently aligned with the eventual portfolio ROI to provide the basis for decision-making about investments.