Jamal, you raise a good point which is market information. Oftentimes smallholder farmers do not receive the kinds of quality, quantity, and avoiding post-harvest lost (such as using crating) information they need to meet market demands. The traders that come to their gate--which can be a different person every time--may not either, so it can be incredibly challenging to find ways to connect those dots to get the markets working more efficiently, which would ultimately benefit everyone.
I nearly forgot to mention the importance of trust in all of this, which is a critical component in market systems approaches. If the farmers could work with the same traders over time and there would be sufficient numbers of them to be competitive ...or have a more direction connection with buyers, that would help to build the trust necessary.
Jamal Uddin said:
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
The allure of market systems approaches to development practitioners like Practical Action is the potential to achieve scale - most agencies can see small islands of 'success' in a straight delivery model. A systemic approach opens things up to potentially impact on many more MSEs who rely on those systems. But success (commercial and social) depends on many factors that are outside of our direct control. So that means we have to focus much more on the processes that will build the capacity of system actors to deliver the changes that need to happen. This is not (always) so much of a challenge for bigger players, but if MSEs are to benefit we need to specifically support their engagement.
Investing in trust building has been mentioned elsewhere in this discussion and certainly that's something we've found to be crucial in a range of different contexts. And agree with others about the importance of understanding incentives
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 could not agree more with you Jane. But why large companies do not collaborate more with them when it comes to small business development? My hypothesis is that this tends to happen when the program is driven too much by the reputation angle. A large company in terms of reputation competes with virtually all other large companies. When the program is run primarily by a commercial driver, your list of competitors is smaller and it becomes easier to develop partnerships.
Jane Nelson said:
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.
Alison - could you describe some of the ways you build trust between system actors?
Alison Griffith said:
The allure of market systems approaches to development practitioners like Practical Action is the potential to achieve scale - most agencies can see small islands of 'success' in a straight delivery model. A systemic approach opens things up to potentially impact on many more MSEs who rely on those systems. But success (commercial and social) depends on many factors that are outside of our direct control. So that means we have to focus much more on the processes that will build the capacity of system actors to deliver the changes that need to happen. This is not (always) so much of a challenge for bigger players, but if MSEs are to benefit we need to specifically support their engagement.
Investing in trust building has been mentioned elsewhere in this discussion and certainly that's something we've found to be crucial in a range of different contexts. And agree with others about the importance of understanding incentives
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 would recommend to address all needs working in collaboration with all society actors (governments, companies, ngos, etc) but starting with a pilot to test, adjust and implement.
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 ?
Andres makes a key point about the challenge of small businesses being so fragmented and therefore costly to reach and work with on a one-to-one basis for many large companies. This is where intermediary organizations like Technoserve, FUNDES and others can play a vital role - similar to microfinance intermediaries in the financing area, we need "market-making" intermediaries in the area of value chain linkages that can help to aggregate micro-enterprise needs, services and opportunities.
Andres Peñate said:
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?
A little late into the discussion - @moladi we see our value chain as the primary benefit to the micro-enterprise - the micro-enterprise is not a tool to assist us in moving product. The value is basic needs product - Food and Shelter, By supplying more micro-enterprise of the same product does not help the micro-enterprise nor does it create more sales of the same product....
Thanks for the great discussion. Let's move on to our final question:
Q3. What are the key challenges that limit collaboration across companies, governments, civil society organisations and donors? What are examples of effective collaboration and what has made them successful?
I absolutely agree with you Jolene. By psychological needs I mean more than self esteem. What we have learnt in our part of Latam working with small businesses in our value chain both as retailers and suppliers is that we often need to invest in what we call the leadership potential of the owners of these business. The neuro science tools are very useful for this. The point I am trying to make is that we need to understand not only the commercial needs of these businesses but the fears and dreams of their owners first.
Jolene Dawson said:
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.
Totally agree Andres. This is where we need to focus much more intentionally and strategically on opportunities for pre-competitive engagement among the large companies. It seems to be that this is most likely to happen in specific countries and commodity value chains, rather than trying to do it generically - but it would be interesting to hear the views of Technoserve, FUNDES, CARE and others on how we can get larger companies to work more collaborative with each other.
Andres Peñate said:
I could not agree more with you Jane. But why large companies do not collaborate more with them when it comes to small business development? My hypothesis is that this tends to happen when the program is driven too much by the reputation angle. A large company in terms of reputation competes with virtually all other large companies. When the program is run primarily by a commercial driver, your list of competitors is smaller and it becomes easier to develop partnerships.
Jane Nelson said:
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.
With regard to examples of what works, I’m really proud of the great work Andres, Cata and others in our SABMiller Latin America business have achieved through the 4e Camino al progreso programme, working collaboratively with the Inter-American Bank, FUNDES and other partners. I had the pleasure of seeing this programme in action and the impact that it is having on the ground in Colombia. It was here that I realised how much these entrepreneurs are really local heroes.
I can also see in Peru, the work they have undertaken to support small retailers is really moving towards the ‘market system’ approach highlighted in the report.
They are developing skills for smaller retailers, increasing retailer access to mobile financial services, and helping strengthen the broader financial infrastructure – all in collaboration with other sectors and companies. This has generated both commercial and social impact.
The approach taken in Latin America has really helped inform and inspire other parts of our business, including Europe, on how we can drive more collaborative approaches to retailer development. I’ve been very happy to borrow with pride the approach!
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Richard Gilbert said:
Thanks for the great discussion. Let’s move on to our final question:
Q3. What are the key challenges that limit collaboration across companies, governments, civil society organisations and donors? What are examples of effective collaboration and what has made them successful?
Lack of incentives and high transactions costs are major challenges. Taking a systemic and collaborative approach has obvious upfront costs in terms of time, money and other resources, for the companies taking a lead – even when there is a promise of long-term benefits. This is where catalytic funding from governments, donors or foundations can play a key role and where the on-the-ground capability, local market knowledge and outreach of market-oriented NGOs and consultants can be invaluable. Having a coordinator or backbone organization often makes a difference in bringing disparate actors together – country-level initiatives of the Better Than Cash Alliance, Global Alliance for Improved Nutrition, and New Vision for Agriculture illustrate the value of this role.
Richard Gilbert said:
Thanks for the great discussion. Let's move on to our final question:
Q3. What are the key challenges that limit collaboration across companies, governments, civil society organisations and donors? What are examples of effective collaboration and what has made them successful?
Andres this is an interesting point. We have found that getting commercial actors together is challenging where they are direct competitors, but not impossible where there are issues that are affecting them all. So they can come together to look at for example, quality issues, and see benefit in getting things addressed for mutual benefit. Building the capacity of MSEs to engage in these kinds of processes is critical, so that they have the information and confidence they need in order not to be passive 'price takers'.
Andres Peñate said:
I could not agree more with you Jane. But why large companies do not collaborate more with them when it comes to small business development? My hypothesis is that this tends to happen when the program is driven too much by the reputation angle. A large company in terms of reputation competes with virtually all other large companies. When the program is run primarily by a commercial driver, your list of competitors is smaller and it becomes easier to develop partnerships.
Jane Nelson said:
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.
Some of main challenges I have seen coming from corporations is misalignment between what is good for the company in the long term versus short term incentives, among governments are dramatic policy changes that accompany changes in administrations and among civil society is around rigorous measurement that proves both the business and development case.
One particular successful case we are very proud of is our global collaboration with Anglo American, a multinational mining company that has understood that becoming an effective partner in the development of their communities is key for the long term success of its business.
Joint efforts have provided a clear example of what mining can make in terms of supporting the economic development of a community by fostering micro and small entrepreneurs in very different settings such as Chile, Brazil and Botswana and has gained recognition and support from peers, governments and more recently IADB.
Success, in my opinion, has been based on 1) creating impact by addressing key microentrepreneurs´gaps in a cost effective manner , 2) measuring and demonstrating impact and 3) long term commitment thanks to a clear business case
Richard Gilbert said:
Thanks for the great discussion. Let's move on to our final question:
Q3. What are the key challenges that limit collaboration across companies, governments, civil society organisations and donors? What are examples of effective collaboration and what has made them successful?
I am Darian Stibbe from the Partnering Initiative and delighted to join the discussion.
Some of the challenges that we see include:
A lack of trust, a lack of existing relationship, between the different sectors;
A lack of sufficient understanding of alignment of interest;
People not having sufficient skills or capabilities to build effective partnerships;
Organisations not giving their staff sufficient time and leeway to take the more difficult, but ultimately more transformative, collaborative approach;
Risk aversion particularly with governments and UN agencies
Different timescales between different actors.
There are more, but that's a start!
Richard Gilbert said:
Thanks for the great discussion. Let's move on to our final question:
Q3. What are the key challenges that limit collaboration across companies, governments, civil society organisations and donors? What are examples of effective collaboration and what has made them successful?
An example of effective collaboration we had the privilege of working with is the Barclays GSK Partnership in Zambia, where they used new routes to market and used community health workers to deliver health (pharmaceutical, consumer, livelihoods and financial) door to door in peri-urban Lusaka and Eastern Province. They have employed over 200 health workers, in partnership with CARE Zambia and Living Goods. Their success was determined by a few things, starting with corporate appetite to invest with a long-term outlook, aligned priorities, both bringing their strengths to the fore (Barclays brought over 100 years of Zambian context and GSK innovation in selling products). This together with a real willingness to be entrepreneurial, perhaps fail, but fail fast and correct and learn were all factors that made the 3-year partnership one that has really improved micro-enterprises in Zambia and bred innovation into the way they work in country. They have intentions to take these learnings more broadly across Africa.
Richard Gilbert said:
Thanks for the great discussion. Let's move on to our final question:
Q3. What are the key challenges that limit collaboration across companies, governments, civil society organisations and donors? What are examples of effective collaboration and what has made them successful?
Effective collaboration happens most frequently when interests and strategies align. Unfortunately, this is not easy or quick. There are also parties which benefit from the status quo so there will be resistance at times. It takes time to fully understand the other actors to recognize where the interests align and build the trust necessary. This is equally as true among donors, companies, governments and civil society as it is for the actors in market systems, but the individuals involved can rotate, and they may have different incentiver or priorties, which can set back any progress made.
The pros definitely outweigh the cons—especially if we want to make sustainable and more significant improvements, which is why USAID and other donors are working and partnering with the private sector more frequently in many ways. My office, the Office of Private Capital and Microenterprise is even exploring the many areas in which commercial investments and development objectives align
I also think some of the key challenges that limit extensive collaboration are identifying who to partner with, effectively managing and aligning the potentially differing incentives and agendas of all parties, and ensuring a common goal.
Jane Nelson said:
Lack of incentives and high transactions costs are major challenges. Taking a systemic and collaborative approach has obvious upfront costs in terms of time, money and other resources, for the companies taking a lead – even when there is a promise of long-term benefits. This is where catalytic funding from governments, donors or foundations can play a key role and where the on-the-ground capability, local market knowledge and outreach of market-oriented NGOs and consultants can be invaluable. Having a coordinator or backbone organization often makes a difference in bringing disparate actors together – country-level initiatives of the Better Than Cash Alliance, Global Alliance for Improved Nutrition, and New Vision for Agriculture illustrate the value of this role.
Richard Gilbert said:
Thanks for the great discussion. Let’s move on to our final question:
Q3. What are the key challenges that limit collaboration across companies, governments, civil society organisations and donors? What are examples of effective collaboration and what has made them successful?
The key challenge that limits collaboration across companies is an undue emphasis on reputation as the key driver behind these programs. A company compete with all pother for reputation and therefore prefer programs where it is the lone force. This limits the reach and eventually the duration and traction of the program.
Two key issues I would say get in the way of collaboration:
1. Businesses don;t think sufficiently strategically about micro-enterprises - indeed they are very often ignorant of which micro-enterprises are in their value chains. But this is slowly changing both because of risk management (UN Guiding Principles, for instance) AND companies starting to see the advantage they can build by managing their relationships with, and investment in, micro-enterprises
2. Governments and donors do not see informal micro-enterprises as a path to future economic development - they too easily jump to the other end of the value chain of ODI and export markets. However, as increasing numbers of companies will acknowledge, having an effective micro-enterprise supplier base or distribution network is really important to business success. Governments and donors therefore need to think a lot harder and more positively about improving the environment for micro-enterprises.
Richard Gilbert said:
Thanks for the great discussion. Let's move on to our final question:
Q3. What are the key challenges that limit collaboration across companies, governments, civil society organisations and donors? What are examples of effective collaboration and what has made them successful?