Coming to Grips with Real Life Market Systems

December 1, 2014

Global enabling environment graphic

For me, one of the big attractions of the value chain framework is the boxes: crisp blue boxes neatly lined up in rows, threaded together by straight, even lines. It makes economic development look so orderly and clearly defined. Increase value chain efficiency? No problem! I’ve got all the pieces and know where they need to go… Unfortunately, of course, real life is much, much messier.

For one thing, stakeholders are not confined to the ones we have on our value chain maps. We find that multiple value chains overlap—one chain creates inputs for another chain; a second chain draws resources away from our target chain; a third creates opportunities that impact the whole sector. Value chains just won’t stay in neat and orderly isolation the way we want them to. They are part of larger market systems that are heavily influenced by interconnected systems such as the education system, ecosystem, health system, and so on. This makes it very hard to draw boundaries around our value chains and state upfront what is “in” and what is “out” of the system. I may be trying to develop the horticulture value chain but find that progress is heavily dependent on changes to seed importation policies, transport issues, customary lend tenure, and the local price of maize.

Another problem with real life is that farmers, business owners, and service providers have an annoying tendency to not act as “rational” profit maximizers within the value chain. Decisions all along the chain, and particularly at the household level, are negotiated and involve access to resources, cultural norms, individual’s risk tolerance, economic alternatives, and considerations of household well-being. This makes mapping out my interventions over a 5-year period difficult, to say the least. In such complex situations, where results cannot be predicted in advance, I may need to pilot multiple “best guess” interventions to see which proves most effective in influencing behavior change.

Without an intervention blueprint, continuous learning becomes essential. Monitoring data needs not just to be reported but also to be analyzed—scoured for hints of what’s working and what isn’t. Tacit knowledge capture and learning loops become the watchwords of the day.

None of this is new, of course. We’ve known these things for some time, but now reality is catching up with the way we articulate our frameworks and approaches. The inclusive market systems framework, developed through the LEO project, builds upon the structure of the value chain approach (which can be helpful) and overlays some of the messiness of real life market systems. 

Take a look, and let us know what you think.