In SABMiller, we usually try to engage different actors in our programmes. We believe that every partner has its competitive advantages and strenghts and that is key to guaranteeing the best outcome possible. For example, in Peru, our local operation Backus, has partnered up with NGOs and financial institutions in order to set up Progresando Juntos, a programme which aims at improving the capabilities and providing access to markets and finance opportunities for maize smallholders and for retailers.
Before answering this question (how can we incentivize players to participate) it is important to really understand what players are being incentivized to do. In our experience, most actors act rationally based on the incentives being placed in front of them, however these incentives are not always transparent or obvious and can take some work to uncover.
As examples
A local bank may have strong incentives via government programs to not lend money at risk
A local leader in a rural community may have incentives to not close an unviable business because the stipends from the leadership position are an important part of his income
having a very clear understanding of these opaque incentives are the first step to designing strategies that can get an intervention to where it wants to go
This has been a fascinating discussion - thanks to everyone, including our panel, for sharing your insights. We'll do a note and post it up in the Enterprise Zone, created with SABMiller here: http://enterprise.businessfightspoverty.org/
We'll keep this discussion open, but to round off this live segment, any final thoughts from the panel?
Opportunity entrepreneurs face the increadible hard task of quickly growing a business (organizing a team, developing managerial skills, achieving sales, managing technological risks, developing human resources policies, tight cash constraints, accessing to growth capital, etc.; while for survival entrepreneurs is usually more about how to get security and stability (in income and living standards) for them and their families.
Many thanks to all for participating and as Zahid says, please keep posting and helping us improve our programmes!
David's comment on incentives leaves me with great food for thought on how we need to be clear on the outcomes we expect and how we should define those outcomes to come up with the right set of incentives!
Thanks everyone for participating, particularly SAB Miller and Business Fights Poverty.
Real solutions are out there, and good work is being done, we are entering a very exciting phase where large multinationals can start to bring their leverage to bear on age old intractable problems, in a way that creates win win solutions for the business and also SME entrepreneurs in emerging markets. Its an exciting time to be engaging on these questions
Thanks David. Yes Technoserve help in Honduras has been most useful and we will be loking into it for drawing experience for our larger 4E program to support survival tenderos across the region.
Thanks for the invitation to participate. It was a pleasure. And I hope to see more of these dynamic discussions on how different players (companies, governments, multilateral development institutions, etc.) can join to make the task of entrepreneurs, both survival and opportunity, a liible bit easier and more prosperous.
Thanks for this forum and for the great moderation. Maybe next time we should organize two separate conversations, one for opportunity entreprenreurs and another for the survival...they belong to different planets. We will review the conversation and extract ideas for our programs. Don´t be surprised if we are contacting you shortly to expand your ideas. Thanks to all.
One final thought on why the IDB works in partnership with such large companies as SABMiller in developing entrepreneurship across Latin America and the Caribbean: large companies have the resources and motivation to scale and make sustainable interventions that generate value for them. In this way systemic impact can be achieved. For that to happen, we need to find the common ground where our developmental mandate meets with SABMiller business objectives and generate a win-win program for all the involved parties. The IDB is seeing more and more cases of large companies realizing there is an opportunity in pursuing public-private partnerships and we welcome this enthusiasm.
Beth and Miguel have both hit on some really crucial points that are particularly relevant in the discussion around how investments in retailing and entrepreneurship can contribute to overall poverty reduction at scale in a community or region. Understanding the underlying socio-cultural and gender dynamics that will influence a female entrepreneur’s (or potential entrepreneur’s) behavior is key - especially combined with much of the data that shows that women are more likely than men to re-invest income back into long-term poverty-reducing investments at the household-level – education, nutrition, etc.
Taking it one step further back, in many communities or cultural contexts women are disproportionately less likely to have many of the building blocks that are essential to even start a business (be it survival or opportunity) – much less grow it. These building blocks include things like basic literacy and numeracy skills, freedom of mobility, self-confidence, an ability (both in terms of skills and cultural norms) to negotiate with others (a la suppliers and customers), etc. This is certainly our experience in India, for example.
I know for my own organization (ACDI/VOCA), one area of learning we’ve really been internalizing and growing in recently is in better understanding – and designing around - this interaction between economic behavior and social/gender-based norms or influences. Many of these social/gender-based norms and constraints have traditionally fallen outside of an economic empowerment or growth framework, but we are increasingly seeing just how integrated they are – you cannot divorce one from the other. This echoes much of the other discussions around a systems approach and the need to take an expanded view of the entire eco-system that surrounds an entrepreneur.
Interesting point. I found this true in the Middle East as well. In addition, opportunity entrepreneurs can face financial and even social ruin should the business fail due to the way the system is set up. In addition to losing personal assets, young aspiring entrepreneurs may find it more challenging to find a spouse. That is quite an opportunity cost. Fortunately, both the social stigma as well as policies are starting to change.
Great insight. Thanks for the link.
Great, Thanks Zahid, I look forward to it.
Generally social entrepreneurs have a special role o play which modern economics is silence about, globally people are blessed with different talents lock in their brains and if nothing is done they will go to their graves with their potentials. It is therefore, the duty of the social entrepreneur to unlock the potentials for Banks and other NGOs to develop them.
The biggest constraint is knowing what we want and where to find it.
SABMiller can invite plans and lastly sale or share the plans with Banks and other institutions or investors for actualization of the plan.
This is a good reminder from Anna. The way market systems function and how the actors within them behave are often affected deeply by informal regulation i.e. cultural and social norms.
SEEP conference had a learning track on this a couple of years back and Practical Action presented some work where we were seeing different actors in a livestock value chain taking different 'world views', and how that significantly affected their behaviour (incentives) and decision making. It was complex but manifested itself as sellers and buyers valuing different things. As facilitators we needed to help them unpack all that before they could move forward towards joint solutions. If we don't find ways to help actors understand and address the issues they can undermine trust and ultimately hamper progress.
This question has two dimensions:
1- the value chain as a system
2- entrepreneurship segment by segment
The theoretical classification of opportunity entrepreneurs and survival entrepreneurs might not essentially depend on "internal factors" but essentially in "external factors". Entrepreneurship is a result of skill & competence but most of all of a conducive "business context" (including availability, accessibility, affordability and adequacy of all services and information required). A very good entrepreneur can still be stuck into a "survival business" if the context is not conducive for the growth of her or his business. Better-off entrepreneurs have more chance to development their enterprise. The challenge is for lead firms is not to identify qualified business associates but how to invest in services that will make more entrepreneurs or MSMEs qualified: investing in the service market, or make the service market works for the "poor"! And please don't encourage NGOs to do what a commercial service should do.
back to the first dimension: a value chain as a system. A value chain is NOT a series of linear or branched commercial relationships related to a product and a market: this is a too limited theoretical definition. As a system, an eco-system, it has to include all the "living functions" such as:
1- the brain function: intelligence service for ALL stakeholders: equity is key here. Intelligence services is not just about information on prices, GAP and technology, is about who is who, smart identification of business associates, quantified & qualified opportunities and constraints along the system, is about a flow of information and about timing... but most of all is about processing data & information into decision taking processes, individual and collective processes.
2- the respiratory function: the inclusive finance service for ALL, including pioneer gap (financing the emergence of innovative services and MSMEs) and missing middle (between micro and macro finance)... oxygenating businesses and their interactions. Too often finance is very poor in "oxygen" and it fact finance can suffocate MSMEs and smallholder farmers or BoP consumers.
3- the nutrition or "bodybuilding" function: innovative and inclusive business development services for ALL, where strengthening the "muscles" for one segment helps the others to grow in a synchronized manner (pulling and pushing effects). Here we should explore the principle of "who benefits and who should pay": building the capacities of farmers should NOT only be paid by the farmers themselves. The spirit here between direct economic actors of the value chain and service providers should be "If you grow I grow, we are partners". This why subsidized NGO activities cannot do it. Strengthening value chain actors SHOULD NOT be a donor's project but a real commercial, sustainable, inclusive service. NGOs can channel public and private investments to the emergence of this "service market" with a strong inclusive and equity agenda.
4- the communication function: inter professional dialogues for more coordination, better cooperation, investing in social capital that will reduce the transaction costs, collective actions... result-oriented platforms or associations... advocacy and lobby for a better enabling environment since any system is embedded in a broader system.
Thinking "system" and not only "chain" and investing in the right "function", for me is key... intervening directly in direct economic actors of a chain (strengthening their capacities) or in their relationships (connecting them or "access to market" intervention) is probably NOT a good idea or it means that these businesses are operating in a VERY POOR context. If we invest in the "service markets" we will probably boost more businesses and create more employment in a sustainable manner.
As a lead firm, as a business, you can certainly invest time and money in building up a conducive business context in your "value chain system": sharing more intelligence, encouraging commercial service providers to make their services affordable, accessible, available and adequate to your business associates, especially the more vulnerable or excluded using this principle: a stronger business associate will facilitate your business (less transaction cost, more supply, better quality) so I should co-invest in such service for local MSMEs. You can also encourage financial institutions to adapt and offer smart services considering business agreements as collaterals: discuss with them how you manage your risks and how this do positively impact on your suppliers' risks: encourage systemic financing.
Just some ideas...
Great topic! Here's my take:
1. For survival entrepreneurs, the main constraint is daily cash flow. Each day, there must be enough to take care of survival and inventory for the next day. For opportunity entrepreneurs, the constraints could be a variety of things depending on their business situation. How and why they choose to include survival entrepreneurs in their value chain will depend on their strategy and what they're trying to accomplish (differentiation, cost reduction, etc.) Whatever their strategy, the daily cash flow needs of the survival entrepreneur is a condition that the opportunity entrepreneur can address through extending credit, reducing minimum purchases, and other creative means.
2. Take a look at what Unilever has done in places like India to turn survival entrepreneurs into a dynamic distribution network.
3. This is a big question...People like @OttoScharmer are doing very interesting work in this area. See some examples at Presencing Institute
I think most can learn to be successful entrepreneurs. If one can teach and encourage entrepreneurs to think entrepreneurial many people can come far.
Read the article about the 5 principles used by successful entrepreneurs: Start business from nothing