Category: Process and Change Facilitation

Industry development under conditions of complexity

Most economic development projects have a tendency to separate analysis from intervention or implementation. This follows on an engineering approach where you must first understand a problem or issue before you can design interventions which is then logically followed by implementation and later on evaluation. I will not now go off on why this logic is questionable as I have written about this before and we have dedicated the Systemic-Insight.com website to this topic.

But complexity thinking is challenging this norm of separating analysis and intervention.

Auwhere to gothors such as Snowden argues that under conditions of complexity, the best approach is to diagnose through intervention, which means that there is no real separation between diagnosis and intervention. Practically, you might have to spend some days and a little bit of effort to analyze who is interested in a particular issue so that you know where to start, but you have to recognize that even asking some simple questions is in itself already an intervention. Furthermore, the objective of working under conditions of complexity is to introduce more variety so that different approaches to overcoming constraints can be tried out simultaneously. This means that small portfolios of experiments must be developed and supported, trying many different ways to solve a problem. Many of these are guaranteed to fail, but new novelty will also arise. The health of a system depends on more options being proven viable. Strong alignment of interests, priorities and interventions are actually unhealthy for a system in the long run.

I’ve had this discussion many times with fellow practitioners in the last years and usually at some point somebody would say “but not everything is complex”. I agree. They would argue that there are definite casual relations between for instance education and economic development. Well, this may be true in some places. However, whenever a government (or a donor) decides that a particular sector or industry requires support it should assume that the issue is much more complex than it may appear, otherwise the industry actors and supporting organizations and demanding clients would have sorted things out by themselves.

The idea that diagnosis takes place during intervention has many detractors, despite the fact that many strong economic development organizations intuitively follows this process logic of working with diverse stakeholders in an ongoing process. Here is a short list of some of the detractors and their main reason for resisting such a process approach:

  • Large consulting firms: They would fight this approach as processes are much more difficult to quote and manage than a clearly defined project. Furthermore, this kind of approach depends on more expensive multidisciplinary experts that require a combination of technical, facilitation, change and business skills. The number of people that can support such a process are few and far in between.
  • The public sector: To overcome constraints created by complexity requires that dissent be nurtured and premature alignment be avoided. This is also risky for the public sector as things may not be so neat nor supportive of past policies and decisions. Furthermore, when more options are created it is not certain which firms will really take up the solutions – meaning that in a country like South Africa with strong benefit bias this is too risky, as preferred candidates might not be the beneficiaries of public support.
  • Donors and development organizations: Simple cause and effect interventions that depends on controlling certain inputs in order to benefit specific target groups still dominate the logic of donors. Therefore a process that is not specific, and that explores different alternatives may not be appealing to donors. Furthermore, donors are expected to be able to very precisely report not only in inputs, but also on impact. A process that has multiple shifting goal posts makes planning and resource management very difficult. However, many examples exist of donor supported projects that are very open to this approach, but this is mainly the prerogative of the programme managers deployed into the field – it is not systemic.
  • The private sector: Yes, even firms may resist an open ended and exploratory approach. One reason is that firms try to push the problems experienced in the private sector back onto the public sector (blame and responsibility shifting). An exploratory approach puts much more onus on the private sector to not only contribute, but to be open for alternatives and to then actively pursue opportunities that arise. Secondly, the incumbents in the private sector sometimes profits from a disorderly system. Many existing firms will resist newcomers trying different things and trying to create new markets, as this disrupts the way things are done at the moment. In a complexity sensitive approach we have to on purpose introduce novelty into the existing structures, and this means challenging some of the dominant views and agreements about what is going on, what must be done and why nothing has changed. This is very unsettling for the existing actors.
  • Top management in an organization: Management science in itself assumes many casual relations. For instance, strategy development typically starts with defining a vision and objectives, and then making sure that everyone is aligned and committed to these goals. As one of my favorite strategy David Maister argued  “strategy means saying no”. This means that resources are dedicated to a few specific areas in the belief that addressing these would have predictable and desirable effects.

Now I must state that in more ordered domains, where there is less complexity, many of the arguments outlined above are valid. In a small organization with limited resources priorities must be set. Governments cannot help everyone, so somehow a selection must be made. However, I believe that industry development is in many cases complex also because it is so hard to see how unpredictable effects will affect an industry.

I am grateful that I work with organizations that are willing to embark on industry development or institutional development processes that are more complexity sensitive. I believe that such an approach is particularly important for innovation systems promotion and for industrial policy. I am surprised at how many manufacturers and universities have agreed to embrace a more complexity sensitive approach to development, strategy formation and developing new services/products. All involved have been amazed at the early results this far, as these processes typically unleash a lot of energy and creativity by different stakeholders that in the past were more than willing to just observe from a distance what was going on.

Recognizing competing hypothesis as complex

In order to improve the economic performance of an industry or a territory, it is important to recognize the current Status Quo of the economy. This is basically to understand “what is?”, but to also understand “what is possible next?”. You may think that local stakeholders, firms and public officials will know the answer to “what is going on now?”, but every time I have done such an assessment I have discovered new suppliers, new innovations, new demands and many new connections between different actors.

The benefit of being a facilitator, process consultant or development expert, is that we can move between different actors, observe certain trends, recognize gaps and form an overall picture of what we think is going on. It is very difficult for enterprises to form such a picture as they can only observe other firms from a distance.

The main challenge is about figuring out what can be done to improve certain gaps or to change the patterns that we observe. These are answers to “What is possible next?” questions . As Mesopartner, we always insist that any process to diagnose an industry or a region starts with the formulation of various hypothesis. This hypothesis formulation before we commence is not only about revealing our bias, nor only about figuring out what exactly we want to find out. It also helps us to figure out what kind of process is needed, the scope of the analysis and what different actors expect from the process.

Unlike in academic or scientific research, hypothesis formulation does not only happen in the early stages of a diagnostic or improvement process, it should be constantly reflected upon and expanded as we go on during the process of meeting stakeholders and analyzing data. This is where the importance of recognizing competing hypothesis within our team and between different stakeholders are important.This process is not about convergence, but about revealing what different actors and the investigator believes is going on.

Economic development practice is full of competing hypothesis that all seem to be very plausible. In a recent training event with Dave Snowden the consequences of not recognizing or revealing these competing hypothesis struck me. According to Dave, competing hypothesis that plausibly explains the same phenomena indicates that we are most likely dealing with a complex issue. For instance, in South Africa we have competing hypothesis about the role of small firms in the economy. One hypothesis is that small firms are engines of growth and innovation, therefore they deserve support. A competing hypothesis is that large firms invest more in innovation and growth, and that they are better drivers of economic growth. Both hypotheses are plausible – the issue is complex. Recognizing this complexity is very important, as the cause and effect relations are not easy to identify and they might even be changing – the situation is non-linear. (Marcus Jenal and I wrote a working paper on complexity in development). This simply means that to get a specific outcome, the path will most likely be indirect or oblique – cause and effect is not linear.

Why is it important to recognize competing hypothesis, or to know when some patterns in the economy or complex? The answer is that it is almost impossible to analyze a complex issue with normal diagnostic instruments. Complex patterns can only be understood by engagement, that is, through experimentation. Again, according to Dave Snowden, you have to probe a complex issue by trying several different possible fixes simultaneously, then observe (sense) what seems to work best under the current circumstances. The bottom line is that you analyze a complex issue by experimenting with it, not by observing or analyzing it.

The implication of this insight in my own work has been huge. By recognizing that many issues that I am dealing with are complex (due to competing hypothesis that are very plausible) and can only be addressed through direct engagement has saved me and my customers a lot of resources that was previously spent on seemingly circular analysis. I now use the hypothesis formation with my clients to try and see if we have competing hypothesis of “what is” and “what must be done”. Where the hypothesis seems to be straight forward, we can define a research process to reveal what is going on and what can be done to improve the situation. But when we have different competing hypothesis of what is going on, we have to immediately devise several simultaneous experiments to try and find an upgrading path. I thought my customers would not like the idea of experiments, but I was wrong.

The conditions are that you must take steps to ensure that there are many different experiments that are all very small, and that by design take different approaches to try and solve the same problem. This takes learning by doing to a new level – because now failure is as important as success as it helps us to find the paths to better performance by reducing alternatives and finding the factors in the context that makes progress possible. The biggest surprise for me is that this process of purposeful small experiments to see what is possible under current conditions (context) has unlocked my own and my customers creativity.

Perhaps a topic for a separate blog is that to really uncover these competing hypothesis we have to make sure that we do not converge too soon about what we think is going on. Maintaining divergence and variety is key – this is another challenge for me as a facilitator that is used to helping minds meet!

Linking: Change: simple, but not easy by Tim Kastelle

I am humbled that Tim Kastelle has quoted a paragraph from a recent blog I wrote in an article he just published on Change and why it is simple but not easy.

For my students and online learners, I recommend that you also subscribe to Tim’s blog as he deals with many issues relating to innovation and especially business model innovation.

 

Moving from generic to specific and then onto systemic

When working with development organizations in the mesolevel we often find that their programmes are very generic. The same can be said of the findings of many diagnosis. The result is that firms do not really use the services of these organizations, because the value add and the impact of the services are not really clear.

For me there should always be a movement from the generic (e.g. the foundry sector is not competitive) towards the specific (e.g. the foundry industry is not competitive because it lacks capacity to do good front end engineering and design). After we have developed a sense of some specific issues that are affecting the performance of firms, there are two things we have to do.

Firstly, we want to try and figure out if there is something that we can do at a more systemic level to try and influence the specific issues. With systemic I mean that instead of addressing a particular issue repeatedly at various firms, see if there are other ways to achieve the same outcome. An example would be instead of only offering a design service to firms, make sure that the university curricula includes sufficient content dealing with design. Of course, we should always strive to have multiple interventions to address a particular issue.

Secondly, we should verify whether our specific findings are unique to the firms we have diagnosed or engaged with. For instance, and food initiative run by a university might find that the private sector is affected by a lack of a particular kind of testing lab. Then instead of designing a solution just for a limited number of producers, the university should check whether similar firms in other industries (related and not even related) are facing the same constraints. It may just be possible to design a solution that is useful to a much broader target group, making the solution more sustainable and more relevant to the private sector.

From my experience of working within many different value chains is that there are many issues that are treated as being unique (or specific) to a particular value chain that are in fact affecting many different kinds of enterprises. The South African Industrial Policy framework for instance is designed around many different sub-sectors, with many different interventions implemented by different organizations and programmes that are actually not unique to a particular sub-sector. This is expensive and also not really systemic, these interventions are not permanently changing the meso level in South Africa or the service offerings of meso organizations such as universities and other development programmes. The South African manufacturing sector is struggling with low volume, outdated designs and rapidly increasing costs across the board. I imagine that it should be possible to based on the insights from the different sub sectors to design much better programmes that are cross cutting over many different sub sectors, and that from the start are designed to improve the service offerings from meso organizations to firms.

Absorbed into the networks behind the systems we see

Its been a while since I have last posted here. The reason for my absence is two-fold.

Firstly, I am busy with a course offered by Coursera and the University of Michigan about Social Network Analysis (SNA). My business partners and one of our associates in Mesopartner are participating in this course. The course is 9 weeks long and I must admit that it is taking much more of my time than I originally anticipated.

The second reason I am hardly online is that the industrial policy in South Africa is starting to have positive effects on local industry. As I work mainly with the manufacturing sector on topics like innovation systems, industrialization, identifying and addressing market failures, and the competitiveness of regions, it means that there is suddenly an upsurge in demand. The demand is lead by state owned companies that are suddenly obliged to procure manufactured content locally, and by local industries that realize that years of underinvestment and fighting to survive against cheap and sometimes lower quality goods have left many sub-sector uncompetitive.

But these two reasons are also having an effect on each other. I have been applying many of the principles and tools of Social Network Analysis in my diagnostic work for the last 2 years, and for the last year I have been using SNA as my main diagnosis instrument. This recent course have simply forced me to read up more and more on many of the theories and the concepts behind the instruments I have been using. I am still trying to figure out how to do this kind of diagnosis fast, and how to teach these instruments and theories to the practitioners that we (Mesopartner) are working with around the world. At this moment the diagnosis that I am doing in valve, pump, tooling, automotive and industrial equipment is still slow and it takes all my attention.

What is the benefit of taking a SNA approach to sub-sector development?

  1. Well, firstly, a network diagnostic very quickly reveals whether there is a cluster or even a value chain. We often assume that these constructs are real, but in the last few years we have learned that just because all the actors that should be in a chain are there doesn’t mean that a value chain exists. Same goes for a cluster, just because all the elements are there doesn’t mean there is a dense network of cooperation, knowledge exchange and systemic competitiveness.
  2. Secondly, a network view assists with understanding the deeper relationships, trust patterns and information flows in a small part of a real system. These relationships makes it possible to predict how information flows, who the thought leaders are and how influential institutions, leaders, officials and business people are. This is directly relevant for my work with innovation systems.
  3. Lastly, Social Network Analysis also highlights how complex even a single link in a value chain can be. When you look at the spider web of relations, ownership structures, communication channels and knowledge spillovers, then you see how traditional development interventions have completely missed the leverage points.

All I can do at this moment is to commit to blog more frequently once this course is done. I will share some of the results of the industrial diagnosis that I am currently busy with in a few weeks time. Below I will give a sneak preview of the network map of the valve manufacturing cluster in South Africa. You will immediately see that some manufacturers (in red) and some foundries (in blue) are more connected than others. The yellow dots are valve manufacturers that are not yet part of the formal valve cluster structure. Hardly any additional analysis is needed to show that the more connected firms are the ones we should work with.

 

Cluster drawing 4

However, the additional analysis that we can run on this cluster further narrows the choices of whom to work with to get both the highest impact (in terms of both ability to grow their business, increase employment and meet customers needs) and in terms of getting the highest demonstration and spill over effects. The latter is important, because when you want to upgrade an industry you should prioritize firms that are able to create positive spillovers and that others are willing to follow. To do this kind of analysis we need a combination of qualitative and quantitative information, and we use specialized software applications. But more about this in a future post!

Help – the industry I am working with is uncompetitive and many do not care

In most strategic management textbooks 4 generic factors are identified that can be used to build competitive advantage: efficiency, quality, innovation and customer responsiveness. These four factors are highly interrelated, as an improvement in customer responsiveness for instance could result in improved quality and better efficiencies. By addressing these four factors a business can reduce its costs and can create a differentiated position in a market. Let me briefly expand on the four factors.

Generic competitive advantage

  • Superior efficiency: a manufacturer converts inputs into outputs. Inputs are basic elements such as land, capital, labor,raw materials or knowledge. Firms that manage this conversion by constantly trying to find better ways to reduce costs, improve throughput and reduce wastage tend to be able to be more price competitive.
  • Superior quality: means that products are reliable and that they can do the job that they were designed for, meeting the specifications and performance requirements of customers. In most cases it is difficult to ensure consistent and reliable products without a system in place to control quality
  • Superior innovation: This is about the novelty of the products, process or services of the firm. It is not just about the great design of the product, but about the total offering and how customers can interact with the firm. Thus it includes how the company thinks about its own structures, internal systems, relations with markets and customers, use of technology and product development.
  • Superior responsiveness to customers: A firm that is highly responsive to its customer not only meets their requirements, it strives to anticipate and exceed those requirements. Although this could be about flexibility to respond to customers demand, in most cases it is not. It could simply be to find a way to respond the needs of customers in a creative way.

Enough of the strategy lesson. Back to the real world where we are all trying to use our own limited resources to promote particular industries or regions.

Here are the questions that keeps me awake about this project:

What if the industry that I am working with do not seem very eager to develop any real advantage around any of these four factors?

What must I do to improve the competitiveness of the region if the firms do not seem to even care about their own competitiveness?

For the last few weeks I have been wondering about these questions as I visit a range of manufacturers as part of a process to stimulate a regional innovation system in an industrial area. By visiting many firms in this region I noticed a big gap between those that are  are differentiated or excellent and the rest. The gap is so big that I sometimes wonder if it ever would be possible to move or support firms to cross over the empty space between those that can be described as “excellent” versus the “average”. Knowing that I only have a limited time, and the organization that I am supporting (An University) only has limited resources, I started worrying about helping all the firms. But this is not possible nor is it desirable.

All the average firms can offer many arguments for their current state. They lay the blame at policy uncertainty, high costs of borrowing, crime, political interference, expensive employees, low skills and many more. Many would say that they are component manufacturers that depend on the strategies and innovations of their customers (we just make what they want how they want it). Very few firms ever acknowledge that their current state is a reflection of past strategic choices taken deliberately or that played out to the current status because of not making decisions.

Yet, almost each of the excellent firms that we come across in our fieldwork focused on getting some basic principles. Many started monitoring their costs and wastage to try and improve their efficiencies. They focused on equipping their staff to understand the business, the products and the process, resulting in lower failures and higher quality. They spoke to their customers to find out how they can offer better services and products, even when they were just manufacturers of components used in someone else product. They focused on the quality of their products by looking at the quality of their process, their equipment, their systems and their management.

Those that are excellent are not necessarily better educated, better off financially, or better engineers. They just took charge despite being in the same economy, the same reason and even the same sector, with all the same environmental factors that the average firms use as a reason to do nothing. Sometimes the firms that are now excellent where started by disgruntled employees quitting the average firms. Or in other cases, the excellent firms were started by people from outside the sector moving in with a different perspective and approach.

What bothers me is the way the public sector responds to the manufacturing sector with their funding, support interventions and incentives. The strange thing is that most public sector interventions are aimed at the average or below average performers. It is almost as if the logic is that they are weaker and therefore they need protection and special care. Well, if economics is the study of how humans allocate scarce resources, then we should be very worried about directing too much of our scarce resources to firms that cannot use the resources the society endow them with (capital, labour, land and knowledge). Of course there are exceptions, but the problem is finding a fair way of deciding when it is justified to protect a firm and when it is best to let a struggling firm fold in so that the resources can be redeployed to other people that are able to use these same resources in a better way.

So what can we do when we are faced with this situation? Here are some of the ideas that we are working on now.

Lets say, of the 50 manufacturers we want to work with, 5 stand out as trying harder than the others. Perhaps another 5 or so are ambitious but they just don’t seem to know where to start, who to work with or where to go. We argued that we start with the first 5 (already good) and the 2nd five (the almost there). Then we invited any of the willing from the rest of the group (3 more stepped to the front). Now we have a core group to work with. Now we are trying to find ways to better connect them with each other, trying to get them to identify their own and their common competencies and opportunities. We have arranged a few pilots to support some of these firms to try and improve their own performance, and we have arranged some events with experts to discuss common issues.

But we have to remind ourselves that we cannot create competitive firms if they do not at least work on the four generic advantages outlined earlier. We cannot improve the competitiveness of the region without being able to show firms that are excellent. Trying to get these generic factors under their control is a minimum requirement. We should never use public resources to support firms that are not serious about improving their overall performance. Furthermore, everything that we do should become public knowledge in this industry and perhaps in the downstream customers, perhaps one of the other firms or even a customer decides to step up and form part of our initiative.

  • Have you also had an experience like this? The firms you are expected to work with just don’t seem bothered by their current status or improving their game?
  • Hey, what else should I do?
  • How do we use the principles of innovation systems and good development practice to get firms in a region to work together to improve their competitive performance in order to improve the economics of the region?

My activities in the last months

So what have I been up to in the last few months?

At the moment I am working with several industry organizations and development institutions in South Africa on topics that are all interrelated around the topic of upgrading of our manufacturing sector. This involves working both on the softer issues such as facilitation of processes, building trust, identifying patterns, mobilizing stakeholders and lobbying for change to both government and the private sector. Another dimension of this work is to assist meso level organizations created to stimulate upgrading and competitiveness of industries to design better and more relevant programmes, developed organizational plans, and diagnosing industries to find systemic intervention points. I am involved in several cluster development programmes, and I am also working quite a bit with universities to better respond to the (often unarticulated) needs of industries. Lastly, I am assisting several large international and national buyers to develop their South African supply chains. This work is partly fueled by the public sectors increased emphasis on localisation.

For me all of this can be summarized under the heading of upgrading innovation systems, and building new industrial competencies. Sometimes I describe it as modernizing industries, or to stimulate technological upgrading of industries and regions. My customers do not often use these words.I thought it would be interesting to perhaps share with you how some of my current customers describe the work I am doing. I will not share their details due to the sensitivity of the work I am sometimes involved in.

The universities I work with describe my work as :

  • stimulating industry- academia relations around upgrading and regional innovation,
  • facilitating the improvement of technology transfer,
  • developing industry partnerships, research strategies and applied research programmes. This involves improving innovation within the academia
  • improving innovation systems that the university forms part of by designing appropriate support programmes

The industry development organizations I work with describe my work as:

  • facilitating the improved competitiveness of industries,
  • facilitating change processes in industry in order to unlock new markets and improve competitiveness,
  • developing public sector programmes that are responsive to the needs of industries.
  • High level policy advocacy and industry partnerships

For the government officials that I work with my work is:

  • developing industry – government partnerships,
  • supporting the development of local industries,
  • brokering partnerships,
  • shaping policy based on industry insight and
  • developing practical development programmes.

Why do I share this with you? The insight for me is that I am using a limited number of tools (mainly facilitation skills, some insight into manufacturing and technology transfer, insights into innovation systems, organizational development and a fearless approach to engaging with industry leaders) to work with a largely overlapping set of stakeholders.

Although I think that I am basically doing the same kind of work, my customers describes my work in completely different ways, even if ALL my current customers have the same objectives (they all want to improve manufacturing competitiveness and grow the local industries).

This work is all based on process consulting and I am very happy that I have a complementary set of customers that are all eager to work together to achieve our common goals. The work is very intensive and I am also grateful that I have contracts that have sufficient time and sufficient flexibility in so that my work can be supportive and responsive to the people I work with.

 

Note 1: Right at the moment I hardly work for any donors agencies in South Africa, mainly because private sector development and especially innovation system promotion in South Africa is not very high on their agendas. I do however assist with capacity building, coaching and programme design work occasionally.

Note 2: One important contract is with GFA on behalf of GIZ where I am supporting several technology stations at universities to improve their technological services to the industries they work with. This work is included in the descriptions above about the work I do for universities.

Note 3: The work I am currently doing is all possible due to the experience I have gained by working for organizations such as the GIZ (then GTZ) on issues such as innovation systems, university industry relations and local/regional economic development.

There is more value to the value chain than adding value to products

I am supporting value chain practitioners in various programmes where I am coaching, teaching, supporting, pushing and pulling experts. This is one of the perks of my job as I get to look over the shoulders of practitioners working all around the world on commodity, agricultural, manufacturing and service value chains.

While marking some assignments for a course I am tutoring for the ILO I realized that many practitioners are trapped in a particular chain, just like the actors that they are trying to empower. With trapped, I mean that they are working with the actors and the chain for the benefit of the chain. They completely miss the broader impact of their work. (I know that this is often more the fault of the people who design programmes, more about this elsewhere in my blogs).

Let me explain.

For me a value chain is something we construct so that we can understand a part of a sub-system. If you are diagnosing a tomato value chain then it is true that you are getting a deeper understanding of the tomato system. But you are also gaining an insight into an agricultural system, a regional system of stakeholders and communities, but also an insight into the national or maybe even global economy. While some value chains exists in a very formal way, with contracts linking the different actors, most value chains can rather be described as temporary social phenomena. Temporary because they tend to change over time.

Back to my main argument. While it is true that value chains are known by their end products or markets, there is more to a value chain than just the conversion stages of a product/service. Value chains show us how an economic system works. It show us how responsive institutions and supporting organizations and indeed a whole society is towards economic activities of a certain kind. Value chains also tell us some fluffy yet important things about the society it is framed by. It tell us something about the social relations, the search costs (finding people to do business with), the social capital (how well we trust each other, how easily we collaborate), the enabling environment, and the returns on investment and effort in different parts of the system.

So if we find that tomato farmers are not very sophisticated, that they have poor market relations, that entry barriers are very low hence nobody has an incentive to invest, that suppliers are dishonest, that there are some new market niches developing but that nobody knows, that intermediaries have disproportionate power; I am not surprised at all. In fact, your findings are rather typical, even predictable in some sectors. What I am surprised by is if you treat this like it is a unique finding contained only to the tomato farming sector. The chance that these characteristics are contained only to those involved in the tomato chain is rather slim. This is the real risk of having a too narrow product focus.

Yes. Value chains are known by their end markets or products. But no, we are not locked into a product. We want to understand the system better so that we can support the emergence of institutions, market systems and interventions that make the whole system work better. Those issues that I outlined before in my tomato example can be verified in the sectors or crops around it. In my experience, many crops or business sectors sometimes have similar challenges. Therefore instead of trying to work at a low scale with some tomato farmers, you could possible be working with 10 crop types in a region, involving 1000s of farmers, and maybe a dozen supporting institutions. Few extension services for instance focus on one crop, they often handle a variety of crops, animals and markets. So you have to try and understand what each kind of economy activity (like farming with tomatoes) have in common with other business types or farms, and then what is unique. When you do this you often find that the actors in the chain have far more in common than the product or crop. They could all be equally unskilled, equally under-capitalised, equally vulnerable to market fluctuations, equally exposed to poor contract enforcement, or monopolies. This is how we get to real systemic interventions.

But the idea should never be to promote some products. This is the job of business people and entrepreneurs, not development practitioners. No, development practitioners should try to understand and strengthen the system. We make the features of the system that is overlooked or not visible to stakeholders more apparent. I also dislike it when practitioners start with an hypothesis that profit is unfairly distributed, or many of the other typical biases that exists in this field. The simple truth is that investments in economies flows to where there are (visible) returns. If it becomes more profitable to invest in retail than in manufacturing or farming, then this tells us something about the system. It is an important finding in itself which then allows us to ask the next question “how to make farming more profitable for investors (farmers and the poor are also investors)?”.

Your value chain has more value in it than the value added at each stage of the chain. What is valuable is the insight you are gaining about how a part of the economy works. Don’t become a product promoter. Be a system builder.

The MaFI-festo: changing the rules of the international development “game” to unleash the power of markets to end poverty

I am supporting great initiative of the Market Facilitation Initiative. Lucho submitted the online debate we’ve been having since 2008 into the annual Harvard Business Review/McKinsey M-Prize for Management Innovation (called MIX). I am a member of the MaFI discussions.

Lucho provides the following short summary “Bilateral and multilateral donors and NGOs re-write the rules of the International Development Cooperation System to unleash the real potential of markets and the private sector to end poverty at a large scale… easier, faster and cheaper. How? Through trust-based partnerships, complexity science, effective organisational learning, systemic M&E and co-evolutionary experimentation.”

The solution offered by Lucho (based on the MaFI dialogue) is:

A series of national and international conferences, seminars and workshops to bring donors, NGOs and leading firms to identify the rules of the development “game” that need to change to make market development initiatives more inclusive, accountable, responsive, innovative, holistic and cost-effective.
MaFI (The Market Facilitation Initiative) started in 2008 and has more than 240 experts from all over the world working in NGOs, donor agencies, private firms and academic institutions. The aim of MaFI is to advance policies and practices based on facilitation and systems thinking to make markets work better for the poor and the environment. MaFI is a working group of The SEEP Network with the technical support of Practical Action.

After almost two years of of discussions, MaFI members produced a manifesto (The MaFI-festo) which has three main objectives:

  •  To focus the attention of key stakeholders on a set of strategic changes that are urgently needed if the international development system is to effectively harness the full potential of markets to reduce poverty at scale and protect the environment
  • To promote convergence and collaboration between bilateral and multilateral donors, practitioners and academic researchers working in the fields of “aid effectiveness” and inclusive markets.
  • To inspire NGO leaders to promote the adoption of systems thinking and facilitation approaches in their own organizations and networks to increase their ability to interact with the private sector and leverage the full potential of inclusive market development programs.

The MaFI-festo focuses on four areas (in no particular order of importance):

  1. Changing how we work in the field
  2. Balancing flexibility and accountability
  3. Building the capacity of facilitators
  4. Changing what and how we measure change

The MaFI-festo will give content and focus to the series of conferences, seminars and workshops mentioned above. These are called the MaFI-festo Dialogues.

What must you do?

To see the application go to http://www.managementexchange.com/node/62551

Find out more about the M-Prize go to: http://www.managementexchange.com/m-prize/long-term-capitalism-challenge

We need you to:

Comment, vote and throw in your ideas!

With each comment, like, or Tweet our submission goes up in the rankings!

Link: Why dont they want what we know they need by Charles Kenny

Take a look at this post by Charles Kenny at the Centre for Global Development about why people don’t absorb technologies that we know they need!