The Role of Acceleration Services in Pay for Results Programs
This is the second blog of our series on building private sector resilience. The first blog in this series, Building Private Sector Resilience to Support Smallholders, explored the vulnerabilities many for-profit businesses face and how strengthening them also helps strengthen smallholder farmer’s resilience by sustainably providing highly demanded products and services.
Feed the Future Partnering for Innovation integrates acceleration services into our Pay for Results (PfR) model. This allows us to pay companies for results that have actually been accomplished, rather than just the effort needed to accomplish them. Acceleration services are key for our almost 60 investments because they build trust, allow companies to plan for activities that increase their ability to adapt and respond to shocks and stresses in the markets where they operate, and help achieve commercial and development outcomes.
Within a PfR program, acceleration services develop businesses’ capacity to identify challenges and co-create solutions that incentivize progress towards the achievement of milestones. In the early stages of a partnership, acceleration-based milestones (such as strategic plans or farmer surveys) provide much needed cash flow to companies to reinvest back into their business operations. These milestones also provide them with guidance, create financial incentives, and increase the likelihood of achieving more challenging smallholder impact and sales goals later during the partnership period. These incentives emphasize local ownership of activities, and increase buy-in, accountability, and the likelihood of a successful partnership.
Partnering for Innovation’s acceleration approach focuses on three key areas to businesses – trust, agility, and achievement of commercial and development results. Below are some examples of how each of these are achieved.
Acceleration services build trust
We assess our partners’ challenges of commercializing technologies in smallholder markets. This results in a mindset shift from investor/investee to a shared-value partnership. As a result of this shift, companies realize they are in the drivers’ seat of their own success, opening the door for more transparency and communication. Trust is critical to the success of partnerships within the PfR model, as companies are more inclined to share their limitations as a business if they see themselves as part of the solution. For example, we co-designed a partnership with a logistics and distribution firm in Mozambique and worked together to identify marketing and distribution as their main challenge. We were able to collaborate with the company to develop a robust distribution channel and marketing campaign that led to a more open relationship, with continued engagement beyond the life of the partnership.
Flexible partnerships build agility
The role of acceleration services in increasing a company’s agility is also integral to their success. When designing a partner agreement, Partnering for Innovation works with companies to co-create milestones that build upon the challenges identified during diagnosis. These milestones allow companies to develop a strategy for implementation, better understand their market segment, and create innovative solutions. By using a PfR model that focuses on outcomes rather than specific activities throughout the process, companies have the flexibility to adapt their business models and respond in a way to more effectively reach their targets.
After two cyclones destroyed farmers’ crops and the infrastructure needed to bring technologies and goods into rural areas in Mozambique, one of our partners proactively and strategically responded to the shocks by rethinking their marketing approach in rural areas and adapting it to accelerate smallholders’ recovery from this natural disaster. Through our flexible PfR mechanism, they were able to quickly adjust their implementation approach and are now back on track towards successfully completing their milestones and further commercial success.
Incentives help achieve commercial and development results
By building trust and agility, Partnering for Innovation’s portfolio of companies are accelerating their ability to achieve commercial and development results. Acceleration plays a key role during due diligence by vetting a company’s commercialization strategy and developing ambitious but achievable targets that can “stretch” to adapt to shocks and stresses and build sustainability into the agreement from the very beginning. Acceleration services are key to a company’s success within the PfR model, providing companies with the incentives to achieve their business-oriented outcomes in a way that will lead to their long-term profitability, while establishing smallholder farmers as a viable market segment.
Acceleration services allow Partnering for Innovation to transition a partnership from transactional to transformative, moving beyond solely providing grants to also addressing fundamental business constraints. This is an integral part of Partnering for Innovation’s differentiating factor, which has led to more than 1.4 million smallholders accessing improved technologies and services, and companies generating more than $65 million in sales.
Stay tuned for the next blog in the private sector resilience series, as we look at an example of how a more resilient company can provide critical technologies and value-added services after a natural disaster.