3.4.3. Program Design Process
Value chain program design should address systemic constraints to sustaining competitiveness. Underlying systemic constraints are incentives that limit the quality and types of inter-firm relationships, reduce the value placed on innovation and learning, and maintain inequitable benefit distributions. It is often helpful to look at the key components of a system separately and identify systemic constraints and opportunities at each level.
- Business Enabling Environment: For an industry or a government agency, a set of formal and informal rules will guide behavior. Project facilitators should understand how these rules drive behavior and where key changes may be required to improve performance on an ongoing basis.
- End Markets: For value chains, end markets determine the product and operational characteristics and branding tactics that result in competitive advantage. Project facilitators should understand end market dynamics and the systemic constraints and opportunities in end markets, and design facilitation activities to overcome those constraints and exploit these opportunities.
- Horizontal and Vertical Linkages (Relationships): The relationships that form throughout an industry will be assessed based on relationships between functional levels (vertically) or within a functional level (horizontally). Project facilitators should design interventions to address the limitations or underlying drivers resulting in poor relationship structures or conduct.
- Supporting Markets: Supporting industries or government agencies tend to either be directly tied to the target industry or service, or are cross-cutting--such as finance or information communication technology. Project facilitators should assess which types of supporting markets and networks are critical to foster ongoing upgrading.
- Upgrading: Process, product or functional upgrading of MSEs is often the desired outcome as well as the process through which value chain competitiveness is sustained. Project facilitators should understand the incentive systems that will drive the upgrading decisions of MSEs and design programs to help facilitate upgrading decisions.
To prioritize constraints and opportunities the following questions should be asked:
- Among the constraints, which limit the industry's ability to better serve its end markets (in light of the end market characteristics)?
- Which opportunities add to an industry's ability to compete in end markets?
- Will solving the constraint impact the overall industry or affect only an individual firm?
Accordingly, a subset of systemic constraints should be selected and a program designed to overcome those systemic constraints.
Program designers should place emphasis on identifying commercial solutions to value chain constraints since sustainable solutions are mostly provided commercially by value chain actors. Some of these market-based solutions are offered on a fee-for-service basis while others could be embedded (and offered for free) as part of a commercial relationship between the provider and the firm. Program designers should identify both types of solutions within a value chain and the appropriate means to promote them. Commercial solutions--existing and potential--should be prioritized that 1) contribute to both firm and industry level competitiveness, 2) have the potential to achieve impact and scale, and 3) avoid distorting private-sector markets.
For more information, check out LEO's Designing a Value Chain Project here >