Category: Process and Change Facilitation

The benefits of being aware of how a system works

For those that have participated in any of the training events that I have contributed to in the last years would hopefully recall my favorite energizer called the Systems Game. In this game we simulate a complex system, with all the participants moving around trying to position themselves between two targets in the group, without the targets being aware who is chasing them. Things usually start of neat and tidy, but soon chaos breaks out.  After the game we reflect on the system and how to better understand its behavior, and also how to figure out how to stimulate change of behavior in the system.

The pictures below were taken in the last Mesopartner International Summer Academy on Economic Development.

The participants secretly determine who they will follow
The participants tries to become system aware – who is following me?

One of the first insights is that our job as practitioners is not to try and fix the system, nor to solve a problem on behalf of the system. Our first job is to try and get the system to become more aware of its own behaviors, issues and dilemmas. Very often this will allow us to use some of the existing relationships, routines and networks of the system to improve the performance or to address some issues in the system.

I received the following little e-mail story recently that actually shows how actors that are aware of the system can easier manipulate the system to achieve certain outcomes. From a few google searches I could not determine the source of the story, except to see that its been featured in many fora. Therefere if you know the original source then please let me know so that I can give proper credit.

Here is the story as I received in my e-mail:

An old man wanted to plant a tomato garden, but it was difficult work, as the ground was hard.

His only son, Vincent, who used to help him, was in prison, and so the old man wrote a letter to his son:
Dear Vincent,
I am feeling sad because I won’t be able to plant my tomato garden this year. I’m too old already.
I know if you were here,  you would happily dig the plot for me, like in the old days.
Love,
Papa

A few days later, he received a letter from his son.
Dear Papa,
Don’t dig up that garden. That’s where the bodies are buried.
Love, Vinnie

At 4 am the next morning, FBI agents and police arrived and dug up the entire area without finding any bodies.
They apologised to the old man and left.

That day, he received another letter from his son:

Dear Papa,
Go ahead and plant the tomatoes now. That’s the best I could do under the circumstances.
Love, Vinnie

Now the moral of this story is that only people that are aware of how a system might behave can fully exploit the system to their advantage. I wonder how we can use this insight to promote better inclusiveness in development? From my everyday work experience I know that in value chains and production systems the poor, weak, small and marginalized are often the least aware of how the bigger system(s) around them work. The powerful, better informed and more successful entrepreneurs often have better information at their disposal. While some of this information could be formal, quite a bit of it is qualitative based on a deeper understanding of how things (might) work.

My dictionary for economic development practitioners

At any point in time I am coaching several development experts and learners around the world. I have a short list of words that when I see them in any document I see red flags. However, there are also several words that when I see them I know we are on the right track.

I share my list with you. Some refer to this as Shawn’s Dictionary for Economic Development.

Synergy NOT compromise. Synergy you focus on using the strengths of different ideas, people, organisations.

Collaboration NOT cooperation through control. Get organisations to work together yet independent. Do not try everyone to sing from the same hymn sheet. Rather allow for some jazz.

Balance NOT single minded or focus. Balance allows you to work with contradiction, conflict and seemingly opposing ideas.

Catalytic NOT incidence or isolated. I know that focus is good in an office environment. But in development focus on a specific incident can easily ignore the bigger system.

Stimulate NOT achieve. Try to find ways of getting the people to work better. Energize the system, don’t just fix the problem.

Identify patterns NOT problems. The patterns tell you about the system, the problem is a symptom.

Explore NOT prescribe. Get the people in the system to better understand what is going on.

Crowd in NOT filter out. By excluding elements in the system by creating artificial filters (like gender, wealth or social status) you weaken the system.

People and relationships NOT products and technology.  This one I have to frequently remind myself about. In the end it is about the process that we use to get people to work and thing together, not about the technology or products. The latter is always temporary.

Now I know that there may be certain contexts where my dictionary might not work, but that is why a red flag goes up when I see these “wrong” words. When I see one of the wrong words I must immediately ask some deeper questions.

Which words do you red flag?

Lets build a list and have a debate!

Identifying firms to work with to induce upgrading of industries

This post was revised in February 2018.

When working on the improvement of innovation systems in developing countries, we have to work with firms. These firms have several roles, and there are three units of analysis:

  1. The firm is an important unit of analysis of innovative practices (product, process, business model).
  2. The firm is also a unit of analysis in terms of cooperation and collaboration, thus its ability to cooperate with rivals is an important consideration when we design interventions.
  3. Working with the right firms also provides an important source of technology and knowledge spillovers. This is where the challenge comes in for development practitioners.

Generally, firms that are able to lead the way, or could be good role models, are difficult to involve in development programmes for a variety of reasons. I won’t discuss that right now. What is important to remember is that most firms not only absorb or use technology and knowledge, they are also the main sources of knowledge and technology. This is both from a supply perspective (equipment suppliers, technical or specialist sources of knowledge, etc.) and from a demand perspective (demanding customers, sophisticated demand). Whether firms are aware of their role as disseminators of knowledge of technology is another story!

I will rather focus on how to identify the firms that we can work with to improve innovation and competence in all three units of analysis discussed above. Remember, our objective is to find ways to improve the dynamic in innovation systems that will result in the modernisation and technological upgrading of industries and regions.

More than 25 years ago Bo Carlsson and Gunnar Eliasson described a concept called “economic competence”. At the time they defined economic competence as “the ability to identify, expand and exploit business opportunities” (Carlsson and Eliasson, 1991). This is a useful definition as we have to remember that we cannot innovate on behalf of a broader industry. Somehow we must work with those firms that are able to innovate, imitate, adapt and integrate new knowledge and ideas.

According to Carlsson and Eliasson, economic or business competence has four main components:

  1. Selective (strategic) capability: the ability to make innovative choices of markets, products, technologies and overall organisational structure; to engage in entrepreneurial activity; and especially to select key personnel and acquire key resources, including new competence. This aspect has been amply illustrated in recent years as many companies have struggled to define their corporate identities and strategies as distinct from their competitive strategies in each individual business unit (Porter, 1991).
  2. Organisational (integrative, coordinating) capability: the ability to organise the business units in such a way that there is greater value in the corporate entity as a whole than in the sum of the individual parts.
  3. Technical (functional) ability: this relates to the various functions within the firm, such as production, marketing, engineering, research and development, as well as product-specific capabilities. These are the areas of activity in which firms can compare themselves to their peers or leading competitors.
  4. Learning ability, or the shaping of a corporate culture which encourages continual change in response to changes in the environment.

Economic competence must be present in sufficient quantity and quality on the part of all relevant economic agents, users as well as suppliers, government agents, etc. in order for the technological system to function well. This is both true at a local or regional level, our a national or sectoral level.

If the buyers are not competent to demand or use new technology – or alternatively, if the suppliers are not able or willing to supply it – even a major technical breakthrough has no practical value or may even have negative value if competitors are quicker to take advantage of it.

I think that this business approach of choosing the entrepreneurs that we work with is very relevant to finding the people who can absorb new ideas and make them work in a developing country context. I would also go so far as to state that I do not believe that it is feasible to select “change agents” according to social criteria such as gender, age, etc. – but that we recognise that change within economic systems happens because of the economic competencies of the people who are recognised in the system (regardless of their demographic data). The reality is that you cannot be competent on behalf of other people!

I challenge you to review the firms that you are working with to see if they are economically competent!

Sources:

Carlsson, B. and Eliasson, G. (1991). The nature and importance of economic competence. Working Paper No. 294, The Industrial Institute for Economic and Social Research (IUI).

Porter, M.E. (1991). “Towards a dynamic theory of strategy“, Strategic Management Journal, 12 (Winter Special Issue), pp. 95-117.

Hypothesis, questions and the underlying knowledge bases

I will assume that all my readers do actually formulate hypothesis very early on in every project, assignment or investigation that they undertake. We all know that hypothesis is important for us to capture our own bias, beliefs and assumptions. But the formulation of a hypothesis also allows us to involve our colleagues, counterparts and fellow-explorers. Practically you can do this by using little coloured cards. Use one colour for your own hypothesis, and another colour for your colleagues.

The hypothesis is then useful as it gives you clue of where to start your search. In other words, it helps you to formulate some search and research questions. As a hypothesis can only be true or false, your findings will often help you to refine your hypothesis. Sometimes in a 1 or 2 week assignment I even have a Hypothesis reflection session where we can reflect on our new hypothesis.

It is important to remember that although the original hypothesis and the research answers are important, the process of verifying or disproving the hypothesis is even more important. For instance, from an hypothesis “not much manufacturing is happening here” a story can be told about how the research team went about to eventually conclude that “some limited manufacturing is going on here, but it is mainly in food processing”. The story of discovery is also an important finding, as it explains why the hypothesis was not just a fact from the start!

 

But here is my real question. Where do you get your questions from? 

When I saw this picture on the right in one of those e-mails you get from friends it

What are you basing your questions on?

made me wonder.

How often are people basing their hypothesis on issues that they do not understand at all? Is this possible, and what would the consequence be? The consequence would be that they formulate the wrong questions, or they try to prove something that is not worth proving.

Now you would immediately say that this is not good, and that it should not be tolerated in economic development at all. Yet, often development programmes adopt names with nice titles without understanding the underlying body of knowledge (or the problem), nor do they understand how this specific body of theory relates to other bodies of knowledge. The result is that the law of unintended consequences immediately applies. When you do not understand a specific theory, you are not able to formulate proper questions that will help you diagnose or intervene in a specific field.

Therefore in our training programmes where we develop experts and practitioners we should make sure that practitioners understand the theories underneath our methods. Teaching practitioners how to run a method will not lead to insights that can form a firm bases for diagnosis or intervention design. These underlying theories helps practitioners to formulate better hypothesis. In most cases an hypothesis formulated by a practitioner will be informed by practical experience (things seen elsewhere) and underlying knowledge (knowledge bases) as well as a certain amount of preference.

 

 

 

The irony of bottom-up development

From the participants of our trainings on local and regional economic development it seems evident that many national governments are paying lip service to bottom-up development. Often Local Economic Development (LED) is related to attempts to decentralise certain decision-making to lower tiers of governments. However, this is done in an uneven way where powers to make decisions about financial allocations, education, health investments are centralised. Even is places where local economic development decisions are decentralised to the local level, other national policies counteracts the power of local stakeholders. For instance, LED is decentralised by law in many Southern African countries, however, skills development, university programmes and even small enterprise development programmes are all designed and run from a national level. I do not count a local office of a national or provincial programme as “localisation”, as local representatives have no power over funding allocation and programme development. Other national programmes such as tender regulations, public procurement rules, and public finance legislation were all implemented to contain corrupt or incompetent public officials (thanks for that), but it also inadvertently reduces the ability of local government to drive their own development agenda. My late business partner liked to refer to that as “unintended consequences”.

Despite these obstacles to local development there are several brave souls that are trying to do local economic development from the bottom-up. They may be constrained in many ways, but they continue to try and mobilise local stakeholders.

Often bottom-up development activities in countries and specifically at the local level are driven by external development organizations (ranging from donors to charities). From my experience in Africa I can say that international development cooperation is often more serious about bottom-up development than most governments. While I know from my previous experience (I worked for GTZ on LED) that many national government officials think this is western ideology of democracy that is being forced down the throats of developing countries, I also know from experience that imperfect solutions that are developed by locals often have critical momentum that simply outperforms even smart initiative coming from the national level. But these development organisations are Macro level actors from outside of the country, so on a hierarchy they would be above the top!

Ok, I understand. For many national governments in Africa, their biggest obstacle to programme implementation is often the lower ranking officials in local governments. But this is not the cause of their problems, it is simply a symptom of other problems. A symptom that is further re-enforced by a lack of an ability to respond to the local context. Perhaps this is why local governments accross Africa are struggling more and more, despite evidence that national governments in Africa are improving their performance. But more about that in another post.

So the irony of bottom-up development is this: bottom-up development is often still happening in parts of Africa not because of top-down (national) support, but because of international (above-the-top down) support.

Until this situation changes, bottom-up development will always be limited to making local stakeholders feeling better about addressing some of their own issues without a guarantee that the framework conditions will re-enforce their goodwill. Sometimes this will yield excellent results if the right champions drive the activities, thus making it dependent on individuals and not systems. But for local initiative to become systemic, in other words, leveraged with multiplier effects, governments across Africa would have to sincerely embrace bottom-up development by addressing the constraints that limits local action.

Rediscovering things I once knew: 4 types of innovation

I am in the process of preparing for an intensive appraisal of several sectoral innovation systems around a University of Technology in South Africa. While reading up on my old notes I discovered something written a long time ago by the late Christopher Freeman in 1987. I thought it a good idea to share this with my readers.

According to Freeman, four types of innovation can be distinguished:

  • everyday, “incremental” technological change in small steps – an improvement in a production process, an improved product, a new service. It is this type of innovation that ensures that the productivity of firms will grow. Yet it does have inherent limits: even continuous improvements were, for instance, unable to prevent the replacement of sailing ships by steam ships;
  • technological breaks due to radical innovations, which alter the course of development of an entire industry – the introduction of the zipper, nuclear technology, or electronic word-processing systems are examples;
  • changes in a technical system that affect more than one industry; one example is the success of plastics;
  • changes in a techno-economic paradigm – new technologies prevail throughout entire societies, new industries emerge, old industries lose significance, conventional organizational patterns are invalidated. This type proceeds from the long-wave theory.

This is an important reminder that I have to design my process to be sensitive to these different kinds of change within technological systems!

 

User-led innovation

Here is another short article that I wrote on the topic of user-led innovation. Many of my clients are asking about this topic. Because we are so far away from the industrialised countries, and because we have such huge geographical spaces to cover, we are faced by sophisticated and sometimes unreasonable demands. Therefore lead firms, lead customers, government and problems solvers are all asking for some very demanding solutions. Many of them are not waiting for new innovations to come from the markets, they are simply innovating to solve their own problems.

In recent years the focus in value chain promotion has increasingly emphasised the importance of systematic and market-based interventions. Within innovation system promotion, markets are important not only as selectors or buyers of successful innovations. Specialised users or unmet local needs could also be used as an impulse to stimulate innovation in a specific part of a value chain. The challenge here is not to ‘import’ technology or ‘solve’ a problem, but to get industry and its supporting structures to respond to this opportunity. This can often be achieved by better articulating unmet needs, or facilitating interaction between innovative producers and user groups.

Authors such as Von Hippel (2005, 1988) have over the years made a strong case for recognition of the innovations introduced by users, especially lead users. For instance, Von Hippel argues that customers (markets) often know what design criteria they have, and if a producer can capture this knowledge then new products could be created. Other authors, most notably Michael Porter, has in several publications indicated that the force of market demand not only shapes the design of products and technologies or strategies of firms (i.e. 5 Forces analysis), but that it could affect industry structure (i.e. the Diamond of Competitiveness). In his work Porter also emphasises the role of sophisticated or demanding customers in the innovativeness of firms.

Lead users may also provide unique opportunities for firms to innovate by customising or combining existing elements of technologies to respond to the needs of a potential customer group. For instance, many medical devices originate from the US or Europe. But surgeons and operating theatre staff working in distant locations may have unique functional requirements for these instruments, and if approached or observed in their working environments may provide important clues or insights on how instruments can be customised to improve their functionality. While firms in developing countries may be far from large markets, they are often close to specialised or niche users that may then create opportunities for innovators.

The risk of an emphasis on user-led innovation is that path dependence may occur and that blindness to rival technologies may result in a marketplace being disrupted by a rival technology. Path dependence occurs when producers respond to the demands of a certain kind of customer through investment choices that do not allow the producer to switch to a different technology or market. These customers may in turn be exposed to other market forces or technological change processes that may affect their continued demand for a given technology. The risk of the strong governance of strong buyers in the chain may then lead to a tunnel view that does not consider the upgrading potentials and requirements of the whole innovation system in the sector or region, but a too-narrow perspective on companies and their need to upgrade according to the demands of the main buyers and final customers[1]. The insights as well as interventions may be too narrow and may not lead to more proactive knowledge loops but to a reactive orientation that does not encourage new ways of doing things in the system.

Experienced value chain practitioners will be able to identify the opportunities and the risks of working with lead users as sources of innovation, as in value chains lead customers often emerge who can be used to better position certain actors in a chain. Although this usually works to the benefit of certain kinds of chain actors, it could also be argued that it deepens the dependence on specific kinds of customers (resulting in path dependence).

Sources:

VON HIPPEL, E. (1988) The sources of innovation, New York, NY, Oxford University Press.

VON HIPPEL, E. (2005) Democratizing innovation, Cambridge, MA, MIT Press.

[1] For instance, the IDS has published several papers on this and related topics which can be found at http://www.ids.ac.uk/go/idsproject/clusters-in-the-global-economy

A journey to change change

Holger Nauheimer and a small group of people are changing the way we see change in organizations! I am participating in the change journey, and so should you. Head over to the Change Journey now and share your experiences (or just learn from others)!

Take a look at the text below for an announcement about important training events on change.

Global Change Journey training courses: Join us for a fresh view on change in organizations

We all know that 60-80% of all change projects fail. It is time to change how we see change.

Holger Nauheimer, worldwide known as one of the key innovators in the change management field, has recently announced a new approach to change in organizations: The Change Journey. The concept radically departs from the blueprint approach of traditional change management models and is based on the fact that no two change processes are alike. Each organization that decides to embark on a change initiative has to reinvent itself and find its own path while mastering the uncertainty of the process. Holger and his colleague Vesa Purokuru have designed a tool that serves as a guide through such a journey – the Change Journey Map. With the Change Journey Map, individuals, teams and entire organizations are enabled to

  • initiate an open dialogue about the required change,
  • find common ground on the principles of the transformative process,
  • identify priority areas for intervention,
  • select the appropriate tools for driving that change, and
  • create a list of required actions in order to make change successful and sustainable.

The Change Journey Map is a tool for change leaders. It helps to refocus on the essential skill of facilitators: to ask questions which matter and which open up new perspectives. The Change Journey concept is compatible with any other organizational development philosophy and can be enriched by all other existing change management toolkits.

Learn more about on how change can happen in the 21st century and participate in one of the global workshops in Brussels, Amersfoort (NL), Los Angeles, Seattle, Washington D.C. and New York: http://www.changejourney.org/page/global-workshops.

The Change Journey supports 1WE (www.1we.com): For each workshop, course organizers will sponsor a rickshaw for a family in Bangladesh (http://www.1we.com/web/show/id=59754/langid=42).

Best wishes,

Shawn

Local economic development as an evolutionary process

Modern evolutionary economics is about 20 years old now, and many research programmes continue to add to the content of the subject. I think that development practitioners have a lot to learn from this subject. When we work at the local level, with local stakeholders and local resources, we are often confronted by the failures of traditional economic models (for instance the obsession with supply and demand). For instance, traditional economics often focus on distribution or allocation of wealth, while in evolutionary economics the focus is more on wealth creation. Traditional economic models assume that you can use the data of the past to make reliable predictions about the future. Just this simple insight will already change many LED approaches that emphasize working with the youth and the marginalised (solving an allocation problem) towards understanding the systemic interaction of economic technologies, social technologies and physical technologies that co-evolve to create wealth.

To be more precise, an economy should be recognised as a complex adaptive system (Beinhocker, 2007; Ramalingham, Jones, Reba and Young, 2008). This means that the economy is a system of interacting agents that adapt to each other and their environment in a complex way. Complex adaptive systems are sub-systems of open systems. It recognises that change and advancement are forces within the system created by the agents, and that it takes energy to create and process information, and to create order.

Dosi and Nelson (1994) explains that “evolutionary” implies a class of theories that tries to explain the movement or change of something over time. It furthermore involves both random elements which generate or renew some variables, as well as mechanisms that systematically create variation. Central to these theories are the concepts of deductive and experimental learning and discovery.

Beinhocker explains a simple formula that is common to all evolutionary systems. Firstly, a system needs to create variety (for instance through many innovators trying new things), and then there must be some selection or fitness criteria (often this is provided by markets). Next there is a selection process, where the ‘best’ or rather most-suitable designs are selected, and thereafter these choices are amplified or repeated (also known as imitated).

So if you think of your local economy, then consider how certain businesses came about. The variety of businesses is a direct result of novelty or variety creation, and how they ‘fit’ to the criteria of local consumers,resulting in these business models being ‘chosen’. Every now and then, a business person with a new or different idea comes along, and this in many cases may even result in local consumers changing their fitness criteria. This describes a process where economic resources (as well as labour and technology) are continuously being allocated to those who are able to combine or create new ideas, new products, and new business models.

In the next few posts I will try to delve deeper into this topic, as I believe that it holds many important insights to why local economies grow in such an unpredictable and dynamic way, and why so few local governments or organised business in Southern Africa struggle to have any real positive and leveraged effect on local economies.

References and additional reading:

BEINHOCKER, E.D. 2007.  The origin of wealth. Evolution, complexity, and radical remaking of economics`. London: Random House.

DOSI, G. & NELSON, R.R. 1994.  An Introduction to Evolutionary Theories in Economics. Journal of Evolutionary Economics, Vol. 4(3).

NELSON, R.R. 1995.  Co-evolution of industry structure, technology and supporting Institutions, and the making of comparitive advantage. International Journal of the Economics of Busienss, Vol. 2(2) pp:171-184.

RAMALINGHAM, B., JONES, H., REBA, T. & YOUNG, J. 2008. Exploring the science of complexity. Ideas and implications for development and humanitarian efforts.  Working Paper 285, London: Overseas Development Institute.

Moderating large events

I have just created a new sub-page on my experiences of moderating large(ish) events. With large I mean events with more than 50 people in, but still not 1000s of participants that Natasha Walker enjoys to facilitate!

There are some pictures on the page of the technology configuration and the role of the moderator in a large event.

Please take a look and contribute your experience of moderating or even participating in larger events.