Measuring Business and Enabling Environment Change in Market System Development

This post was originally published on Agrilinks and was co-authored by EcoVentures International and the Feed the Future Enabling Environment for Food Security Project. 

In recent years, donors and practitioners working in value chain and market development for the benefit of the poor have made significant progress in developing a better contextual and conceptual understanding of the complex and dynamic nature of market systems and their enabling environment contexts. 

Within the U.S. Global Food Security Strategy (GFSS), market system strengthening serves to support a growing, resilient, competitive, inclusive, nutritious and sustainable agriculture and food market system to, in turn, increase producers’ income through productivity and profitability improvements. In this light, USAID's Office of Market and Partnership Innovations recently funded a rapid review of the existing tools and learning around measuring the outcomes and impacts of market systems development. Conducted under the Feed the Future Enabling Environment for Food Security project with EcoVentures International, the review is being used to inform the GFSS learning agenda moving forward.

It appears that while there is progress in understanding systemic change in market development, there remains a lack of agreement and experience with how to measure it. There are, however, a variety of applicable measurement approaches and tools researchers and implementers are testing to inform the measurement of market systems change. Before diving into the indicators, let’s quickly recap a few helpful definitions.

Defining Market System Strengthening and Enabling Environment

As with the more general concept of systems change, market system strengthening can be defined relative to three distinct change domains including outcomes/impacts, inclusion/actors, and conduct/governance. These three change domains are also related to the structure-conduct-performance (SCP) framework for analyzing firm and industry behavior.

• Outcomes/impacts: The performance of the market system, in terms of generating favorable outcomes and impacts, is the most commonly considered change domain within development programs. These are reflected in the intermediate outcomes and final impacts that are typically included in results frameworks.
• Inclusion/actors: An increase in inclusion, as reflected in the number of members of marginalized populations (smallholder farmers, women, and youth) who are included as productive actors in the market system, represents a change in the structure of the system. Another type of structural change includes new connections/relationships within the system.
• Conduct/governance: Changes in governance that affect conduct and behavior across the system represent the third, less frequently cited change domain. This would include analysis of changes in system governance, system health, market behavior and informal social and business rules.

• The enabling environment — often described as the laws, social and cultural norms, institutions, and procedures that guide behavior — is cross-cutting in relation to these domains in agricultural markets and the food systems. A facilitating enabling environment is inclusive of the informal and formal rules, codes of conduct, and the structures and institutions that support them. It also includes the important social and cultural norms and incentives that ultimately influence behavior, relationships and decision-making across transactions in a system.

Exploring Indicators for Measuring Market System Strengthening

The rapid review highlighted several approaches for identifying indicators of systems change. Key discussions included:

• There is a move towards more systems-oriented indicators that focus on actors' key behavior changes within the system, such as adoption, imitation, adaptation, and innovation. Other indicator domains focus on changes in the structure of the network, such as new entrants and greater inclusion and/or on changes in the nature of relationships between actors in the system, such as changes in information flows, financial flows, churn rates and trust.
• Two types of indicators are common across the different approaches. Buy-in indicators include adoption of new practices, initial and continued investment, and satisfaction. Imitation indicators include the copying of new practices and crowding in by competing and supporting businesses.
• A widely used framework for identifying indicators of market systems change is the Adopt-Adapt-Expand-Respond framework. Over time, the project-introduced change (innovation) is adopted by the actors in the system. Once established, there is “player-level institutionalization,” and the project no longer needs to provide support to system actors in the same way. Actors’ supportive behavior changes are adapted and sustained over time. Impact is expanded as more benefits accrue to more people, such as through new actors, imitation, rollout and further innovations. As a result, market actors’ responses indicate additional changes in supporting functions, or rules in the enabling environment support increased adaptability.
• Another framework for identifying indicators of systemic changes defines two indicator domains, reflecting the depth and strength of changes. Greater depth relates to changes in the structure (network) and conduct (norms) of the market system.
• Another framework provides indicators of market systems health, including churn rates in business relationships, financial flows, information flows and rates of innovation in business models.

Deepening Discussions on Findings at the Global Market Systems Symposium

A group of more than 130 leading practitioners and donors engaged in the market systems development space convened at the global Market Systems Symposium in South Africa in April 2018. Their discussions highlighted a number of emerging principles to better support the strengthening of market systems and their enabling environment contexts, which were further affirmed in the rapid review. These included:

• Facilitating change through the local private sector as primary change agents.
• Elevating donor coordination to capitalize on mutually beneficial programs.
• Increasing and improving human capital and institutional capacity to develop and implement laws and regulations, including productive mediation roles within markets.
• Addressing impact measurement challenges, including issues of attribution and contribution.
• Thinking more in terms of attractors, boundaries, feedback loops, local equilibria, disruption and interlinked systems.
• Avoiding the limitation of defining sustainability in terms of a stabilized market system while shifting greater emphasis toward resilience of market systems and their enabling environment contexts.

To learn more about tools and learning from the review, see the M&E for Market Systems Literature Review. Check out the principles described in the related blog Five Market Systems Enabling Environment Recommendations and access Market Systems Symposium 2019 to pre-register your interest in attending next year.