Constellations to Guide Us from the Dark - From Value Chains to Locally Led and Owned Value Networks

Several terms have gained prominence in recent times. The SARS-CoV-2, Covid-19, pandemic caused much thinking on localisation and heightened questions surrounding shifting the power. As we moved forward from the worst of the pandemic, lessons have been drawn in different ways by those seeking to make changes happen. Regularly, this is within the specific organisational agenda noting one of the rules of a bureaucracy is to perpetuate itself. Shifting the power is great – as long as my job is ok?

Localisation is also being reinterpreted by people where ‘local’ is regularly perceived as shifting power to capital cities in countries receiving European and Anglo-North American largesse. Local means something more when looking at socioeconomics in any market system.

• Where is neighbourhood in terms of education and health?
• How do I get my daily and weekly staples?
• Grow them? Walk to an open market?
• Go to the shops or a supermarket?
• Have them delivered?
• Can I order in new shoes or sandals?
• Am I fortunate enough to have a local cobbler able to mend or make shoes?
• Local changes in interpretation across cultures and, definitely, in terms of how the aid and development industry perceived value.

Value chain analysis came about through Michael Porter’s work in the mid-1980s with the publication of his book ‘Competitive Advantage: Creating and Sustaining Superior Performance’(1985) being seen as the critical point. As with all of Porter’s thinking and resulting work, it is a practical tool focusing in on the capability for decision-makers in a company to learn, postulate, create dialogue around information, make decisions and act to improve the company’s performance.

Value chain as an approach in the development industry draws from wider market systems perspectives, placing people and products into the geographies of markets. Regularly, conditionalities are brought forward within a specific (product) value chain analysis. Elements such as the ease of doing business pointing to implementation of related policies and public sector enablers for trading as a private company in the formal sector where development protagonists feel they can leverage greater impact. This last point is a key since so much of supply work is undertaken either in the informal sector or with micro and small business where application of policy remains a challenge and the benefit from much development and politically incentive infrastructure investment is minimal.   

The USAID’s https://www.marketlinks.org/good-practice-value-chain has an excellent overview and lead in to how value chains are used in the development industry. The claim for the development practitioners to ‘transform relationships’ may be a step beyond the realities of market dynamics. Moderated, the approach can define and allow targeting of leverage points and empower the private sector. The riders should be considered in terms of formal / informal, deliberations on power and influence within a supply chain and how any policy initiative is to transcend the written word to practical implementation.

In Porter’s original work, acknowledging inputs / suppliers and considerations of customer engagement, investigations are within an organisation where management means control of individual elements and the interrelations between elements.

• See the diagram below and reflect on how different relations are regarding your own organisation, its suppliers and those for whom you work.

Source: TechTarget - What is a value chain and why is it important

Japanese thinking is highly influential on how value chain within an organisation fits to wider supply chain development. The term Keiretsu refers to a network, supply chain with partnerships and possibly including all from the financiers through to the end users / consumers of a product or service. The win-win of working together and building collaboration (as opposed to win-lose or even lose-lose seen with competition elements fitting to another of Porter’s seminal tools – Porter’s 5-Forces). Keiretsu infers mutuality and inter-connectedness, and, within the Japanese context, organisations will regularly have stakes in each other to reinforce the mutuality. This, whilst knowing each organisation is a sovereign entity where decision-making sits within its own management. We have management of what is measured as per the value chain set out in the diagram above but, then, collaboration built on the realities in how we are mutually supportive because we have reciprocity.

• What is good for my organisation is good for others in our Keiretsu.
• Is this the case in other settings where societal breakdown is apparent, mutuality has given way to survival and there is widespread exploitation of people as beneficiaries or workers without bargaining power rather than active participants in value addition?

Value constellation is terminology Richard Normann brought forward and developed with people, notably Rafael Ramirez, to look at added value, the exchange of value in building to mutual advantage between different actors in a supply chain. The classic model is thus taken forward drawing in thinking, and the practicality, of Keiretsu style.

In the development industry, this approach is the basis of linear thinking resulting from value chain becoming synonymous with a single product (and very rarely the analysis of a service delivery). The thinking can move us beyond key informants in a commodity production and supply chain into the mutuality of community. Community is rarely used in the commercial setting and the manner the development industry took to value chain as an analysis tool regularly means it is undertaken by a technical consultant more often than a facilitator in participatory (rural) appraisal (PRA) style engagements.

• Why?

Because of lines of accountability? This being the separation of the industry and how it generates information for its own continued wellbeing. Think further how value and supply chain, market analysis would work if undertaken by a company or could Porter’s work be handed over to an informal artisan group?

Market systems development has us moving beyond specific product (rarely services are being ‘done’ under value chains by development industry actors) and into the market system dynamics.

• What are the similarities and differences between market system dynamics and M4P, making markets work for the poor approach (M4P)?

Few apart from their antecedents.  

Different key donors, notably the USA’s USAID with market systems development and the UK’s FCDO (DfID when M4P developed) and the Swiss SDC, have taken forward the M4P approach with quality results in different settings as the thinking allows identification of specifics within a holistic approach. Whether all the elements are resourced remains a major element noting points regarding infrastructure and the practical application of all the lower semi-circle enabling environment factors.

M4P The Market System

Duncan Green’s Oxfam treatise, Why rethinking how we work on market systems and the private sector is really hard, on M4P points to the need for further use of a toolkit within an overall approach. As the Eric Beinhocker quote exemplifies:

‘Institutional change cannot be put in place by solving problems and scaling them up. Institutional change can only occur if the local actors who are part of the system become aware of their role in the system and have options to purposefully influence institutional evolution. A group that is targeted by an intervention is likely to become more marginalised, not less – a boundary is drawn around the people, and the group is given an often highly simplistic and idiosyncratic label, such as ‘the poor’. Instead of labelling groups of people, the aim of market systems development should be to create opportunities for all people to engage in a functioning market economy.’

Here, we are entering the realms of people talking systems thinking, adaptive systems and the discrepancies in how terms such as transformational are used more as marketing than to highlight if there is change to the systems being studied or change within the systems without, fundamentally, changing the competition and collaboration factors epitomising capitalism. Changes allowing greater inclusion and addressing issues of equality of opportunity thence impacting inequity and how this links to ingrained, structural, poverty.

Value constellations via market systems, encompassing supply and value chains, making markets work for the poor?

Constellations is the key word – groupings, assemblages, gatherings, alliances, patterns, combinations and arrangements people develop to get things done. Adding to Normann’s and Ramirez’s inspirations, the value constellation thinking moves us toward the local economic development approaches, area/asset-based community development (ABCD), and reinforces the stakeholder analysis, power and influence (noting Porter’s original value chain and the Keiretsu thinking).

Asking questions as to how we are looking at change within the existing system(s) and whether, noting Cunningham and Jenal’s points from Green’s Oxfam piece, systematic change is happening within the market system or there is the opening for systemic change where economic power is shifted.

Value constellations offer opportunity to look at the different pulls within a constellation keeping its shape and form or, possibly,

• being pulled apart for elements to join other constellations or become something else?
• The precursor for migration so how to counter and reinforce localisation at durable levels reinforced by accountable structures and systems?
• Whether there are empowering pushes to create positive change?

Noting all the other factors in terms of generating systemic change rather than systematic developments not addressing the fundamental issues in a system with inequality of opportunity.

The other elements of value constellation come into form here. No one constellation works in isolation, there are wider pulls as different value networks impact and create torque and tensions. Market systems are rarely closed and self-contained as multiple external, exogenous, factors impact. Climate change and the (increasing) extremes of weather is impacting primary production. Internal, endogenous, elements continue to cause action and reaction as socio-economic factors continue to influence politics and politics is used by those seeking socio-economic influence and power. Or, as witnessed with the Russian invasion of Ukraine, the disruption within a (geographical) production system has tremendous knock-on effects through multiple value constellations due to the interlinkages moving well beyond the (linearity) of a value chain.  

Value constellation can be a way of thinking, slotting in tools and approaches, to define and grant perspectives on facets in taking forward socio-economic development.

A big issue is the changing nature of work and expectations of generations entering the world of work having achieved levels of education their parents commonly could only aspired to achieve. Virtually all approaches and tools speak to skills. Critical is how these skills fit to values and people’s own ambitions.

A value chain, even a market assessment not drawing in influences beyond a geography, miss the desires being implanted with (young) people. Pulls being placed on people’s desires are influenced by constellations far away but acting locally when offering opportunity. Whether the opportunity is realistic must be tested in the market context noting the different elements in defining the context. This brings forward the need to have a broad framework recognising the different influences in defining contexts, be these identification of market opportunities, problems to be addressed (through specific approaches) or a political economy analysis seeking “to find out what is really ‘going on’ in a situation”. The Beginner’s Guide to Political Economy Analysis (PEA)

In all cases of analysis, assessments, frameworks and tools to follow or guide, the questions arise of involvement and ownership. External analysis can become stultified and set in a moment in time. Internal diagnosis will tend to systematic change reinforcing the present powers and influences. Being able to show the broader stimuli and, have stakeholders engage in a process looking at this breadth, building agreement and moving into the detail may be time consuming. But it will be the basis for sustainable development addressing the realities of adapting to the multitude of influences on people, their society, livelihoods and, ultimately, the wellbeing of the majority.    

Value constellations open the mind to how the different elements come together and how we perceive those groupings, assemblages, gatherings, and arrangements people develop to get things done. From chain to constellation opens possibilities, as Normann and Ramirez note in Harvard Business Review 1993, for interactive strategy in the dynamism of systems interlinked and, seemingly, with greater variety and variations creating extra turbulence. Turbulence is fantastic when we find the patterns to be guided by, navigate by, the stars and can develop the understanding with all stakeholders to look to the stars to see beyond the immediate chain building interlinkages knowing gravity will work on all of us but some can use it to best effect in shaping our particular part of the value addition in particular chains, markets, communities and broader society.