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

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

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

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

A series of national and international conferences, seminars and workshops to bring donors, NGOs and leading firms to identify the rules of the development “game” that need to change to make market development initiatives more inclusive, accountable, responsive, innovative, holistic and cost-effective.

MaFI (The Market Facilitation Initiative) started in 2008 and has more than 240 experts from all over the world working in NGOs, donor agencies, private firms and academic institutions. The aim of MaFI is to advance policies and practices based on facilitation and systems thinking to make markets work better for the poor and the environment. MaFI is a working group of The SEEP Network with the technical support of Practical Action.

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

•  To focus the attention of key stakeholders on a set of strategic changes that are urgently needed if the international development system is to effectively harness the full potential of markets to reduce poverty at scale and protect the environment

• To promote convergence and collaboration between bilateral and multilateral donors, practitioners and academic researchers working in the fields of “aid effectiveness” and inclusive markets.
• To inspire NGO leaders to promote the adoption of systems thinking and facilitation approaches in their own organizations and networks to increase their ability to interact with the private sector and leverage the full potential of inclusive market development programs.

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

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

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

What must you do?

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

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

We need you to:

Comment, vote and throw in your ideas!

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

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

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

Lazy linking

Yes, I know its been a while since I have posted. Actually my previous posts have resulted in several invitations to make presentations at different events. Thank you to my readers for making those referrals.

While I get my head around my research work I can recommend the following three articles:

1. An article on the Daily Maverick by Marelise van der Merwe on entrepreneurship, crime, the relationship between the two and a possible solution. I have argued before that many of our criminals are misguided entrepreneurs – seems there is some evidence to support my argument.

2. Jerry Schuitema’s Heroes in the workplace article posted on Moneyweb.co.za is about how business leaders should involve labour more in their companies. He argues that the involvement is essential and possible – and I agree with him!

3. Take a look on the critique by Marcus Jenal on a article that appeared in the Economist. It is called “Simplify and repeat?” Rather Simplify and Evolve.

 

 

Why is private sector development such a low priority in Sub-Saharan Africa?

I will start my post by linking to another blog from Kenya. The blogger makes reference to a report by Robert Wade, professor of political economy and development at the London School of Economics, which discusses the role of industrial policy in Asia and how donors completely neglected it in Africa. In essence, Prof Wade compared the economic development activities of donors in Asia with development efforts in Africa.

I can’t help but wonder why industrial development is such a low priority for Africa.

Although donors generally respond to the demands from their developing country counterparts, I know from experience that donors also have preferential aid packages. But why is private sector development such a low priority? Why are we not seeing the same kind of productive infrastructure and technology transfer into Africa that we saw go into Asia? Even donors with “Sustainable Economic Development” Programmes are more concerned with rural development, gender and limited agri-processing support. What about building new industries, new processing facilities, new productive capacity in Africa? Instead the focus as at a micro level, and perhaps at some regional level.

Please don’t tell me it is because the enabling environment is not right. When it suited Western countries they invested in autocratic countries with very poor human rights track records.  Billions of dollars went (and still go) into countries without an enabling business environment. Most countries in Africa today are at a better governance standing than their Asian counterparts were in the 1980s-1990s.

Just thinking out loud. What can we do to make industrial development more important in Sub-Saharan Africa?

Is there a hierarchy of the different levels of innovation?

In my daily work I often switch between working on firm level issues about innovation to working on the more systemic level of innovation systems. My focus is mainly on the institutions that are trying to get whole regions or sub-sectors to uprgrade technologically. In other words, they want modernization of a particular sub-sector or region for a specific reason.

In the last few years I have noticed some patterns that explain why these technology intermediaries are not hitting their targets:

1) they focus mainly on the micro level of the firm, and don’t move to the innovation system level. Moving from one firm to many is not necessarily systemic or holistic.

2) an underlying assumption in many Technology Transfer or economic development programmes with an emphasis on technology is that the problem is that firms cannot innovate (for whatever reason), therefore agencies must innovate on their behalf. It therefore takes a very narrow perspective that innovation is about products or processes, and that technology is about hardware + training. It completely miss the point that innovations emerge from within a specific framework, and that giving a firm a new product on a platter is not technology transfer nor sustainable.

3) a third pattern is the assumption that improving innovation in industry is an engineering problem (see my post on what is meant with technology). It completely ignores that fact that an innovation system is a dynamic system that is mainly about how different economic agents interact, engage, share information, learn together, and remember (learn) what works and what doesn’t work. Freeman (1987:1) defined an innovation system as “the network of institutions in the public and private sectors whose activities and interactions initiate, import and diffuse new technologies.” The emphasis is mainly on the dynamics, process and transformation of knowledge and learning into desired outputs within an adaptive and complex economic system.

4) Innovation is somehow disconnected from creativity and creative thinking. Creativity in innovation is all about getting different people to think together. Maybe they agree, most often they don’t. But somehow they need to recognize constraints, threats, opportunities and then work from there. It requires some tension and often a lot of argumentation. It isn’t serendipitous journey. It requires strong leadership and a lot of guts. And it takes time.

Let me stop here.

Earlier in a post I have written about the different levels of innovation that are commonly identified as:

1. Product or service innovation
2. Process innovation
3. Business model or organizational innovation
4. Social or societal innovation

The funny thing is that everyone is focusing on helping firms to develop new products or maybe even a better process. Yet, the biggest obstacles to product and process innovation is not a lack of effort, or funding or ideas. It is complacent or outdated management, or perhaps business models that worked in another time but that has not kept pace with change. How often do we hear that someone we know or even a whole group quit a firm to start their own enterprise because management wouldn’t listen to their ideas?

Lets get practical. For example, large parts of our South African manufacturing sector is focused on the manufacturing of components designed somewhere else in the value chain. This is most likely explained by several factors including the concentration of corporate ownership in a few industrial holdings (a left over from sanctions and import substitution) and the presence of highly organized supply chains in many sectors like Automotives or electronics. Partial success in getting larger firms to compete internationally, combined with local framework conditions that inhibit the growth of small firms (for instance inflexible labour laws, collective bargaining, Black Economic Empowerment and a preference to procure through tenders) re-inforce this pyramid structure, with many component manufacturers at the base and product integrators (OEMs) at the top of the pyramid. The product owners dominates both their supply chain, the product architecture and the performance criteria. Most component manufacturers are squeezed both on their margin but also on the processes that they may use.

Are we getting things the wrong way around? Picture: Unknown source

To help manufacturers to design new products and services is not entirely a bad idea, but this doesn’t address the systemic problem. We need business model innovation. We need new OEMs to emerge with new product combinations that draw on existing or easy to develop component competencies. Or we need some business model innovation where some traditional component manufacturers expand their business by manufacturing their own products. Perhaps we need some manufacturers to diversify horizontally, or vertically.

I have played with this idea with students in my classes, and almost all business model innovations will lead to interesting product, service and process innovations. However, we can generate long lists of product/service and process innovations that have not resulted in business model innovations. Partly because these firms cannot sell their new innovative products to their existing customers, they also need to diversify their markets which sometimes requires a completely different business approach.

To stimulate a sub-sector or a region to upgrade cannot be achieved only by helping one firm or a few firms at a time. Somehow we have to challenge management models, we have to help business people identify areas for management innovation. This will result in business model, process and product/service innovations that are self perpetuating; meaning businesses can do it again and again because their competence have increased. Actually, the best impulse into innovation is still modern management that is strategic not only about the internal dynamics of the enterprise, but that is also looking outside of the firm into the market place, at their collaborators, new technologies and their competitors. With firms that are aware of what is going on inside and outside the discussion about innovation is a fantastically creative discussion about what is possible or impossible, with the latter gives rise to very interesting discussions. But a firm that is under-managed or managed with outdated principles is very difficult to assist. Giving the latter group a new product, or taking them to a new market simply won’t do the trick.

Perhaps this is where creative destruction of Schumpeter comes in. Sometimes the only way to upgrade a sector is to allow enterprises with new combinations of management, ideas, products and processes to outcompete older more complacent firms. Hopefully some of the incumbents will at least be able to imitate the signals from the new entrants.

I propose a toast to business model innovation.

Some recent links I enjoyed

Take a look at the article by Andrea Cornwall in The Guardian on how donor policies fail to bring real and sustained change for women.

Also take a look at the blogpage of Marcus Jenal and one of my other favorite bloggers David Green (Oxfam). I assume that most of my readers are by now also subscribed to Aid on the Edge of Chaos by Ben Ramalingham (ODI). If you feel like a good laugh take a look at Ben’s post on the Genesis of Aid (a parody).

The thematic pages on Mesopartner.com that were recently updated. Also note that we still have a few limited openings at our Annual Mesopartner Summer Academy on Systemic Economic Change that will take place this year in Berlin from the 2nd to the 6th of July 2012.

Smile: Working in development

I received the following images and text via e-mail and Facebook. A quick Google search shows that credit is due to Ahmed El Mezeny at Save the Children in Egypt. It is also published on the Global Dashboard site by Alex Evans.

This cartoon reminded me of when I first told family members about my “new” job at GTZ some years ago. They listened to my explanation of travelling to distant places to help people develop, and then asked whether I will be issued with a weapon!

Now that I work more with the private sector it is sometimes very difficult to explain to business people that our industry really exist, and that it matters!

So how do you explain to people unfamiliar with development what your “development” work is all about?

Site update – complete list of publications now available

After the two earlier posts this morning I was asked if I could make my complete list of publications available. Thank you for the reminders!

I have added a new sub page on the left (main menu) with a list of the different kinds of publications I’ve been involved in. This includes books, reports and other publications.

For those that are interested in Mesopartner note that I have also updated the RALIS page on the Mesopartner site

Book announcement: Understanding Market Failures in an Economic Development Context

This is the long awaited book on Market Failures. The cover page illustration of the hard copy is by Lina Stamer and is an image that I use when I present the popular training session on how to address market failure in a practical way.

The book is available for free as a E-book, or a paperback edition can be ordered here. More books are available on the Mesopartner online bookstore.

The official description of this publication is:

Many development practitioners are familiar with the phrase “market failure”. However, not many people relate to the topic in a practical sense. Many remember boring lectures in universities where market failures were presented as abstract theoretical concepts in economics 101. In this book, Dr. Shawn Cunningham takes a perspective that the clues to begin to address market failures are in the world around us. He argues that the characteristics attributed to each market failure by clever scholars actually provide some clues to development practitioners about ways in which to address the imperfections that hinders market based transactions. Shawn also argues that market failures cannot be addressed by business management principles, and that typical market research instruments will provide little information on how to make a market system where there is demand, supply and supporting institutions work better

Book announcement: Reducing Red Tape

This book is a collaboration between Mattia Wegmann and myself, and is based on our practical experiences gained in assisting local stakeholders to identify and address Red Tape. It consolidates our work on Reducing Red Tape in the context of Local Economic Development. The book is available as a printable e-book for free, or you can order it in a A4 Paperback format (printing and shipping costs apply) from the Mesopartner Bookstore.

The official description of the book is:

Increasingly governments and international organizations are attempting to reduce bureaucracy and red tape. While many of these reforms are aimed at national laws and reducing the costs of compliance, not much guidance is available on how local stakeholders can identify and attempt to streamline red tape at a local level.

In this publication, Shawn Cunningham and Mattia Wegmann share their practical experience in reducing red tape at a local level. The manual is aimed at local economic development facilitators that are working on improving the cooperation between public and private stakeholders.