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How Do We Encourage Innovation in Markets? What Can Systems Thinking Add?

Authored by

Duncan Green
Strategic Advisor

Duncan Green is a strategic advisor for Oxfam GB and author of From Poverty to Power.

This post originally appeared on Oxfam's blog, From Poverty to Power.

Earlier this month, I spent a fun three days at a seminar discussing market systems innovation. No really. I discovered a Market Systems community of very smart people working on markets who seem to be on a similar journey to the people working on governance and institutions, who I have spent most of my time with in recent years. Chatham House Rule, so the speakers must remain shrouded in mystery, but I will say it was at the Rockefeller Foundation’s Bellagio Centre, just to make you jealous. FSG convened the event (I nicked their slides on the India dairy story).

The market systems crowd have been on a familiar journey. They started with a focus on individual entrepreneurs and firms — how to encourage them to innovate, grow, etc. Then they became aware of the surrounding economic systems as barriers. What if you can’t get your products to market or the banks won’t lend to you? So they learned to identify bottlenecks and obstacles and try to overcome them. But that is a static picture of the system, a series of snapshots. It misses the pockets of momentum, how the system is constantly changing and throwing up potential opportunities.

Now the MSI folk are ready to "dance with the system." That means thinking more about how to boost the system as an "enabling environment" rather than just see it as a series of problems that need fixing. It also means studying the history of any given market system, essential to dig into the path that has brought it to its current state and the influence that is likely to have on any attempt to change it. There was some really impressive use of timelines to delve into the history of particular markets like India’s iconic Amul dairy project.

I realize that probably sounds like a load of meaningless management babble, but I think there is some substance here. Bear with me.

The bit I got excited (and pushed remorselessly) about was the importance of social/gender norms that block off and open up areas of market activity without firms even realizing. There’s a great example from Bangladesh in one of the background papers for the conference.

"Katalyst, a market development project, supported large private seed companies to expand their input distribution channels in the northern remote areas of Bangladesh to become more gender inclusive. Katalyst assisted with market research, developing a business model and showing that women took leading roles in vegetable production and were an important clientele. Ultimately, the input companies were able to design and sell, via female door-to-door sales agents, small affordable packages of quality seeds to customers, 90 percent of whom were women. One leading company, Lalteer seeds, experienced a 50 percent hike in sales of mini-packet seeds to homestead producers in the chars. As a result, women are growing more vegetables more efficiently, with positive implications on the household consumption of vegetables as well as increased disposable income for women from selling excess vegetables. Katalyst will build on this success by designing interventions to attract buyers to purchase from the farm gate so that women have access to output markets without compromising their mobility. Such activities ensure that women are able to access markets without compromising their ability to meet household responsibilities or challenge norms around mobility." Read more here.

I was in a small group that was tasked with coming up with some guidance for market systems people on how to work with and on social norms. We identified three areas: diagnosis, working within constraints (like the Bangladesh example of finding markets solutions compatible with restrictions on women’s mobility), and deliberately trying to tackle norms head on. Few market systems organizations are going to go all the way to start campaigning for norm change (e.g. funding feminist activism), but all are capable of doing better on the first two categories: making norms visible (for example, using a gendered market analysis) and finding work-arounds when norms are excluding people from markets. Another background paper looked at the care economy.

Finally, as with the governance debate, talk of systems thinking seems to generate two contradictory responses in market-system people. One lot cry, "Whoopee, we need some new, and preferably really complicated, toolkits" and start messing around with social network analysis and the like. The others say "Let’s embrace ambiguity and doubt. Forget data. It all comes down to judgement." They cite investors looking for promising companies who often say they ignore the business models and project proposals, which they assume will change massively during the course of a project. What they are interested in is the quality of the management team and its ability to sense and respond to change and new information. The second camp also loves broad enabling environment issues like transparency and access to information.

I fall somewhere between the two camps. We need some general tools (e.g. power analysis, systems mapping) but also need to keep it simple by not pursuing some big new machine. But then it’s time to go and find the firms and individuals who are doing interesting things and see what you can learn (positive deviance). And add to that lots of advocacy on everything from access to finance to women’s rights.

Views?

Final plug. Oxfam has a rather good and non-geeky intro to market systems and an accompanying five-minute video.