Importantly, a key factor that limits current approaches is the enabling environment that must be created by governments. The slow impact of advocacy and the state change process in providing infrastructure, policy and enabing mechanisms for rural communities and micro-enterprises to be included is a challenge, though slowly improving.
Richard Gilbert said:
Thanks for all the great points! Let's move onto the next question:
Q2. What are some of the limitations of current approaches to supporting micro-enterprises in value chains? How can taking a more “market systems” approach deliver greater commercial and social value?
It is challenging to support microenterprises across all of the areas at once. For example, roads are expensive and are not likely to be built to reach the most poor and vulnerable people who are often in more remote and less densely populated areas. As a development Agency, USAID projects often has to draw boundaries around what is manageable (e.g. budgets, skill sets), although we do try to align projects to accomplish larger objectives requiring different skill sets. We are also trying to take more of a systems approach in our own efforts, incorporating more collaboration, learning and adapting across all that we do.
A facilitative market systems based approach can be quite effective. It can take longer to get there than simply stepping in and directly addressing the gaps in the system, but the results are more sustainable as it should result in more competitive markets with stronger relationships (trust) among the actors.
It is this trust component that is often overlooked, but it so critical. For example, a small holder farmer needs to trust that the agrodealer is selling products that will improve production. An agrodealer needs that trust to be able to sell more products, which s/he can develop by providing advice that farmers come to value.
Richard Gilbert said:
Thanks for all the great points! Let's move onto the next question:
Q2. What are some of the limitations of current approaches to supporting micro-enterprises in value chains? How can taking a more “market systems” approach deliver greater commercial and social value?
There is a number of challenges but a recurrent one is around the promise of a business case, which is either neglected or overstated. We need to be upfront that incorporating micro enterprises in the value chain requires investments and that investment needs to pay off. If this is neglected, any corporate effort will be subject to volatile budgets and will find hard time to encourage the required long term support. Conversely, we need to realize as well that not all investments will traduce in tangible immediate profits but in a more sustainable environment to operate, which might be harder to measure but not less important because of that. Last, but not least, the public good that these interventions create should be highlighted to gain the support of public institutions as well but both the business case and the public good need to be measured to be compelling.
Do people feel approaches to micro-enterprise development always need to start with a ‘market system’ approach – or is a better approach to start by addressing one or two key needs and evolving into a broader, more market system approach over time ?
Catalina, This is such human approach - I love it. With the very best of intentions, some programmes forget that they are really helping people to uplift their lives - the impact must be real and tangible to them and should be aligned to their own aspirations!
Catalina Garcia said:
n SABMiller Latam, we developed a research in 6 countries (Colombia, Peru, Ecuador, Honduras and El Salvador) to understand not only their needs but their fears and dreams. So we can approach them in more complete way. We change our relationship with the retailers, from asking them to buy our products to support them face their life challenges and family needs
Many miss the opportunity to work side-by-side with competitors as partners, in a collaborative approach to solving a challenge they are both facing – a ‘market-system’ approach is not only better for the micro-enterprise, but builds far more resilience into the entire system for the corporates and supports government and development interventions too.
Jolene Dawson said:
The limitations of current approaches are linked mainly to understanding the needs of the micro-enterprise and a siloed in-and-out approach. Some others include perceived competitiion between themselves and traditional competitors.
Richard Gilbert said:
Thanks for all the great points! Let's move onto the next question:
Q2. What are some of the limitations of current approaches to supporting micro-enterprises in value chains? How can taking a more “market systems” approach deliver greater commercial and social value?
For many small entrepreneurs, specially those labelled as survival, business and familiy are pretty much part of the same equation. Trying to invest in improving the commercial part of the business without understanding the needs of the family and psychological side is a mistake according to our research with small retailers in Latam.
Autumn Gorman said:
Excellent point. Women often face more constraints or have different priorities due to family obligations or other social dynamics. I heard of one story where the women reacted unexpected to a new water pump was installed in their village because they missed the social time they had while fetching water.
Catalina Garcia said:
In our part of Latin America (Colombia, Peru, Ecuador, Honduras and El Salvador) since the majority of mom and pop shops are owned by women, the most important need for them to also address their family needs. For them business and family are one thing. So they need to manage both correctly and lead their families properly and impact positively their communities.
Excellent Gerry . Our 4e retailers program is supported but IDB-Fomin and one component of the training plan is related to gender and how we can we improve this approach. Focused on phsycological needs of all family members, not only women.
Gerry Boyle said:
Catalina - CARE's focus is on women and undoubtedly the overlap between "business" life and family life is a huge issue for women. We therefore work much more widely across communities and especially with men and boys to develop changes in gender attitudes and norms so that women's economic contribution is better recognised and the care burden is shared. The report spends a bit of time highlighting the importance of looking at the value chain with a gender lens to better understand these issues
Catalina Garcia said:
In our part of Latin America (Colombia, Peru, Ecuador, Honduras and El Salvador) since the majority of mom and pop shops are owned by women, the most important need for them to also address their family needs. For them business and family are one thing. So they need to manage both correctly and lead their families properly and impact positively their communities.
I really agree with the points that Jolene has made about the need for competitors to work together as well as the opportunity for other B-2-B collaboration. A major limitation is the “silo effect” - the fact that different service providers, in both the public and private sector, are responsible for delivering different solutions to address micro-enterprise needs, and their activities are very rarely coordinated and sometimes undermine each other. When micro-enterprises are operating in corporate value chains – or have the potential to link into these value chains – large companies can play a vital coordinating or orchestrating role. Agribusiness, consumer goods, healthcare and extractives companies, for example, can bring their bankers, insurance companies and ICT partners to the table – and vice versa. They can work collectively on a pre-competitive basis in a particular country or commodity value chain to share risks and costs of micro-enterprise support programs, to advocate for more targeted and effective government policies and incentives, and to encourage donors, foundations and NGOs to provide more resources and targeted sector-specific support for microenterprise development.
Gerry, You raise an important point here - working in communities with disparate gender roles and issues requires not only upliftment of women and girls through education and opportunities, but also education of boys and men to accept the changes afoot
Gerry Boyle said:
Catalina - CARE's focus is on women and undoubtedly the overlap between "business" life and family life is a huge issue for women. We therefore work much more widely across communities and especially with men and boys to develop changes in gender attitudes and norms so that women's economic contribution is better recognised and the care burden is shared. The report spends a bit of time highlighting the importance of looking at the value chain with a gender lens to better understand these issues
Catalina Garcia said:
In our part of Latin America (Colombia, Peru, Ecuador, Honduras and El Salvador) since the majority of mom and pop shops are owned by women, the most important need for them to also address their family needs. For them business and family are one thing. So they need to manage both correctly and lead their families properly and impact positively their communities.
Juan Carlos - Absolutely. The report talks about the importance of the "value proposition" - this goes beyond the company's own business case to a series of overlapping "business cases" - for other players in the value chain, for government, for donors, for NGOs. Each of these may be different and its the challenge of coordinating and delivering this varied set of business cases that really requires a high level of collaboration
Juan Carlos Thomas Soto said:
There is a number of challenges but a recurrent one is around the promise of a business case, which is either neglected or overstated. We need to be upfront that incorporating micro enterprises in the value chain requires investments and that investment needs to pay off. If this is neglected, any corporate effort will be subject to volatile budgets and will find hard time to encourage the required long term support. Conversely, we need to realize as well that not all investments will traduce in tangible immediate profits but in a more sustainable environment to operate, which might be harder to measure but not less important because of that. Last, but not least, the public good that these interventions create should be highlighted to gain the support of public institutions as well but both the business case and the public good need to be measured to be compelling.
The development initiative is to support the SMEs for their business model designing, business planning, grant or co-investment and mentoring the business operation. We exploring partnership opportunity after formation the SMEs or just after the operation started. Then the following problems arise:
- the SMEs facing challenges to allign with the large business enterprise
- location is important issue, right partners absent in the right place
- Already large enterprise reached the solution which is offering the SMEs
-Fail to meet the actual demand of large enterprise
-Increased supply than demand/service gap
And the solution is:
- Large enterprise should the thematic area or development organization find out thematic area where new SMEs can add value to the supply chain
- Large enterprise forecast market demand or development organization find out market demand with proper study
- Large organization share their standard service/product specification so that the product or service would be up to mark and easy to allign
I think, the above steps might be useful for better collaboration
ElAne you are spot on - many companies don't realise the embedded cost of getting the needs assessment wrong - having the guidance of this report to ensure companies start at the beginning (to quote Steven Covey)is so important. Setting things up right is the first solid set toward success
Elaine McCrimmon said:
Prioritising is key but it is not easy. What we found is that while there are similar needs 'what works' is context specific and the priority should be local. Aligning closely elements of support for micro enterprises with either a regulatory change or business activity helped to gather momentum and pace.
Richard Gilbert said:
Hi Elaine - That's interesting. Once you have identified the needs - how do you prioritise which ones to address?
Elaine McCrimmon said:
Exploring the real needs of micro-enterprises upfront is hugely insightful and can be a much more impactful and resource efficient way to develop effective interventions in support of micro-enterprises.
In SABMiller Europe, we undertook research in 4 of our key markets (Italy, Poland, Romania and Czech Republic) to understand the challenges faced by small retailers in our distribution chain. While the terminology used to describe the challenges differs slightly from what is used in the report, our findings reflected many of the five needs identified.
For example, retailers said they lacked understanding of store and stock management, lacked funding to invest in their business and, had concerns about bureacracy and red tape.
So I think the five needs identified in the report offer a useful structure that can act as a starting point for an organisation to then drill deeper into understanding how these needs manifest themselves for specific micro-enterprises.
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Jolene Dawson said:
Richard Gilbert said:
Thanks everyone - Let’s kick off with the first question:
Q1. Our new report highlights five key interconnected needs of micro-enterprises that would enable them to thrive – how do these needs exist for the micro-enterprises you engage with and support? Are some more important to address than others?
Understanding Micro-Enterprise Needs :
Many of the micro-enterprises we have worked with feel misunderstood. There seem to be largely due to misunderstandings of deep cultural norms (e.g. some farmers feel spoken at, and cultural norms prevent them from interrupting or correcting the person speaking).
In this context, both the corporates or donor organisations as well as the beneficiaries or micro-enterprises make faux-pas – and things get lost in translation.
By focussing on human-centred design, Accenture Development Partnership have made huge in-roads into setting up healthy partnerships between corporates, donors and micro-enterprises in health, agriculture and finance. This concept ensures that the very human beneficiary is front and centre to the design of all elements of the programme or products in question.
The key challenge to address is that small businesses in the value chain of large companies by definition are fragmented and therefore they do not have the economies of scale that would allow them to improve productivity and reduce costs while maintaining or augmenting their profits. So, when large companies feel the pressure of costs, small companies in their value chain are in a vulnerable position.
Jolene Dawson said:
Many miss the opportunity to work side-by-side with competitors as partners, in a collaborative approach to solving a challenge they are both facing – a ‘market-system’ approach is not only better for the micro-enterprise, but builds far more resilience into the entire system for the corporates and supports government and development interventions too.
Jolene Dawson said:
The limitations of current approaches are linked mainly to understanding the needs of the micro-enterprise and a siloed in-and-out approach. Some others include perceived competitiion between themselves and traditional competitors.
Richard Gilbert said:
Thanks for all the great points! Let's move onto the next question:
Q2. What are some of the limitations of current approaches to supporting micro-enterprises in value chains? How can taking a more “market systems” approach deliver greater commercial and social value?
To me, this depends a bit on the microenterprises themselves and what the overall objective is. Some are what we call more "market ready" and need some assistance to link to other markets. Others need much more assistance, such as after a natural disaster or conflict.
Elaine McCrimmon said:
I have a question
Do people feel approaches to micro-enterprise development always need to start with a ‘market system’ approach – or is a better approach to start by addressing one or two key needs and evolving into a broader, more market system approach over time ?
Andres your point here is interesting - part of the divide between the "haves" and the "have-nots" is not necessarily completely psychological in terms of self esteem, but also related to role models and having an example of what good looks like to aspire to. If you don't have that to frame yourself on, you may not know there are other ways.
Elaine McCrimmon said:
This is a great point Andres, we found low levels of confidence when we conducted the needs assessment in Europe. This insight helps frame the response and how to interact, engage, motivate and learn together.
Andres Peñate said:
I would say the most important is probably not in the list. The most important need in my opinion is not economic, financial or technical, although all of them are critical. In my opinion the most important need is psychological. Small businesses owners need first of all more self esteem to be able to cope with the challenges they confront.
Our approach in the report is to think that teh companies at whom the report is aimed are likely to find themselves in the situation of already attempting to address one or two key needs, and that they need to grow out from there to a more systemic approach by finding the right partners and other stakeholders. Companies are unlikley to be in the position of setting up the system from scratch - donors and NGOs much more frequently find themselves in that role
Autumn Gorman said:
To me, this depends a bit on the microenterprises themselves and what the overall objective is. Some are what we call more "market ready" and need some assistance to link to other markets. Others need much more assistance, such as after a natural disaster or conflict.
Elaine McCrimmon said:
I have a question
Do people feel approaches to micro-enterprise development always need to start with a ‘market system’ approach – or is a better approach to start by addressing one or two key needs and evolving into a broader, more market system approach over time ?
One limitation to support micro-entreprises in value chains is that each company runs different programs, disconnected, uncoordinated with small impact and limited outreach. In order to connect this programs and improve collaboration, all companies should add the value of each of the programs under one same platform of business and social intervention, addressing common needs and goals.
Richard Gilbert said:
Thanks for all the great points! Let's move onto the next question:
Q2. What are some of the limitations of current approaches to supporting micro-enterprises in value chains? How can taking a more “market systems” approach deliver greater commercial and social value?
I think there is a need to work together and find solutions. There is more that we can do in working with businesses that would have been considered competitors. Supporting micro enterprises benefits all. We have started looking in Europe to expand our approach through working with our suppliers. There is certainly a greater opportunity, which this report highlights through the market system approach.
Autumn Gorman said:
Excellent points. Could not agree more.
Jolene Dawson said:
Many miss the opportunity to work side-by-side with competitors as partners, in a collaborative approach to solving a challenge they are both facing – a ‘market-system’ approach is not only better for the micro-enterprise, but builds far more resilience into the entire system for the corporates and supports government and development interventions too.
Jolene Dawson said:
The limitations of current approaches are linked mainly to understanding the needs of the micro-enterprise and a siloed in-and-out approach. Some others include perceived competitiion between themselves and traditional competitors.
Richard Gilbert said:
Thanks for all the great points! Let's move onto the next question:
Q2. What are some of the limitations of current approaches to supporting micro-enterprises in value chains? How can taking a more “market systems” approach deliver greater commercial and social value?
I agree with the proposed market system approach, however, we need to realize that this is a marathon rather than a sprint and it takes an alignment of a variety of public and private players to move a whole ecosystem to the next level.
So where do we start? how can we build momentum by demonstrating a valid approach that will convince public and private players to do what it is required
We start by addressing the most critical ones, which doesn’t mean neglecting the rest. Our experience suggest that in many underdeveloped markets, although base conditions are far from ideal, they are "good enough" at least for a sizable segment of microentrepreneurs, so we have starter to work with them in the most critical ones. This usually start with a subset of managerial skills as we have found that no matter how good is regulation, infrastructure, A2F and A2Mkts, if some core managerial skills are not present, they will not benefit from that. Conversely a few key managerial skills have demonstrated to largely help entrepreneurs overcome or at least maneuver in suboptimal ecosystems and growth at a great pace. Among these core skills are included the ability to identify both market and funding opportunities, which would address other two key gaps identified in the guide.
TechnoServe and its partners have tested this approach at scale (thousands of entrepreneurs) with great results in a number of very diverse markets, from Nicaragua to Burkina Faso, which is creating evidence and momentum to help us influence governments, corporates and financial institutions to join forces.
Elaine McCrimmon said:
I have a question
Do people feel approaches to micro-enterprise development always need to start with a ‘market system’ approach – or is a better approach to start by addressing one or two key needs and evolving into a broader, more market system approach over time ?