Your Questions About Facilitating Systemic Change in Feed the Future Countries Answered! (Part 1 of 2)

December 1, 2016

On September 8, the Leveraging Economic Opportunities (LEO) activity, in cooperation with Marketlinks, hosted a webinar on systemic change in markets across four Feed the Future countries. Practitioners from ACDI/VOCA, Impact LLC and MarketShare Associates discussed findings around diffusion of innovations within market systems in the Rwanda Dairy Competitiveness Program, the Senegal Nataal Mbay program, the Zambia PROFIT PLUS program and the Ghana ADVANCE II program. 

Webinar presenters Elizabeth Dunn, Ben Fowler and Olaf Kula had the opportunity to answer live questions fielded from participants and have responded below to more points and ideas raised from the webinar audience.

Did the researchers define what they meant by a "market system"?

We have been building on the market system definition and concepts in the LEO Brief “Framework for Inclusive Market System Development.” 

“A market system is a dynamic space—incorporating resources, roles, relationships, rules and results—in which private and public actors collaborate, coordinate and compete for the production, distribution and consumption of goods and services. The behavior and performance of these actors are influenced by other actors’ decisions, and by rules, incentives and the physical environment. Market systems are composed of vertically and horizontally linked firms and the relationships embedded in these linkages; end markets, input and support service markets; and the environment in which they operate, which may include socio-cultural, geographic and political factors, infrastructure and institutions.” (Campbell 2014, p.2)

In my experience, a key driver of innovation in family farms is generational transition where traditional practices are adjusted to accommodate knowledge contributed by new generations. Did your research look at this?

Good observation. No, I do not think any of the cases addressed this. With the aging of the farm population in many countries and the exodus of youth from farms, your observed paradigm suggests that future innovation may become more difficult.

Are businesses in Rwanda registered in their respective locales and adhering to regulatory compliance? 

The Rwanda case was interesting because it drove improvements in milk quality through market-based mechanisms. So rather than having adherence to new quality standards driven by fear of sanctions, it was rather initially led by dairy companies seeking to supply quality-conscious urban consumers not wanting to boil their own milk. Only after a franchise-based milk retailer model had been established and proven successful did the government feel confident enough in the viability of the model to begin working on enforcement in the informal sector. That process is relatively recent, and so at present there is certainly higher compliance in the formal market. The companies that the project partners with were locally registered. 

When investigating commercial relationship churn, to what degree are you looking at ways in which businesses market themselves, especially when attempting to connect with larger businesses? 

I assume by commercial relationship churn, you are referring to actors who opt out or exit a particular relationship. None of the three cases looked at internal churn rates, though exit was observed in the Ghana case. While churn rates were not part of the TOR for this, I can see the value of a project to try to better understand attrition or exit and the reasons for it.

Are there any data on how mobile technology is being used to facilitate growth, development and better management of financial resources for small and mid-sized businesses?

There is an emerging academic literature on the use of mobile telephony and money to facilitate growth and better management of financial resources. The Groups Speciale Mobile Association (GSMA) website can link you to interesting sources of information.

With regard to underlying norms and use of resources: Do you have any thoughts on how businesses are changing/have changed the manner in which financial resources are allocated and inventory maintained when considering climate or weather variables? 

Certainly the way that businesses respond to technological change, especially in the information management space, affects the way in which financial resources are managed. Where reliable climate/weather data is available and accessible, businesses are using it to better asses risk whether that business is a lender or a trader of a commodity whose supply will be affected by weather/rainfall. 

To what degree do small businesses influence market practices? 

Although this is a broad question, historically small businesses dominate functions in market systems that are labor- rather than capital-intensive. This occurs where production processes cannot be standardized, e.g., custom tailored clothes, or mechanized hand harvesting of easily perishable agricultural commodities, or where regulatory environments drive up the costs of employing labor versus contracting with them, or where labor requirements are seasonal and therefore less costly to hire contract labor. In each of these examples, it could be argued that market forces drive the small business versus larger business decisions.

Because small businesses are labor-intensive and have less invested in sustaining costly practices in order to amortize machinery and equipment costs, small business can be more innovative and more rapidly so. This is evident in the IT sector in which large numbers of innovative start-ups introduce practices or technologies that influence the practices of large numbers of market actors. It is also common for larger companies to acquire these small business start-ups rather than maintaining a large innovation and design staff internally.