Working with the Private Sector for Systemic Change: How Do We Do Partnerships in Practice?

This is the second post in a series by Dan Langfitt discussing partnership principles and partnership implementation. This series explores how a partnership facility can work as an interface between donor-funded programs and their private-sector partners, and how the partnerships that emerge can be an engine driving systemic change. Check out the first, third and fourth posts on Marketlinks. 

Guiding principles for co-creation and collaboration are all well and good. But the devil is in the details. A business may be able to agree on shared objectives and a set of activities with a donor-funded project, but we all carry professional biases and institutional incentives into the day-to-day part of our work. An activity manager held to workplan deadlines tends to seek the shortest distance from point A to point B. An M&E officer is inclined to critique private-sector data quality control.  An audit-conscious operations manager is likely to over-scrutinize illustrative budgets prepared by partner businesses. And a program director may be tempted to continue supporting the same initiative until it is successful. These habits lead to the pitfalls of many private-sector partnerships.

In the first post in this series, we talked about why FTF Inova* created a partnership facility to systematically put its principles into practice. This post discusses how our tools and processes create a space for more effective collaboration with the private sector.

Translating facilitation principles into partnership mechanisms

First of all, FTF Inova’s partnership mechanisms are all good-faith agreements. Removing them from the domain of contracts or grants helps the DAI and partner legal teams come on board more quickly, but our partnership mechanisms are no less rigorous for being non-binding. We follow a defined process to set them up, and we decide whether to continue the partnership based on how it performs. Our process is rooted in past generations of MSD projects, and it combines strategy documents (MOUs) with implementation documents (deal notes and grants).

We use both active and passive approaches to finding our partners, because even though we map the agricultural system the best we can, partners and ideas sometimes come from unexpected places. Of the 127 partnership applications we have received to date, even those that didn’t lead to partnerships helped us learn more about the market system.

We co-create and sign MOUs with all partners to signify collaboration towards market system change. Inova’s interests (pro-poor change in the market system) and the partner’s interests (growing and creating value for their business) will always be distinct, but the MOU seeks to identify and build on where they overlap. It sets a strategic vision with the partner, structures technical assistance from our team or external consultants or firms, and guides our learning process. MOUs on their own are sometimes enough to give us leverage with a partner to start creating the change we want to see.

For more intensive partnerships, however, we also sign modules called deal notes within each MOU. To be eligible for a deal note, a partner must co-invest ideas and resources and share long-term strategic objectives with us. Since we are an innovation project, we only sign deal notes to formalize unique, bilateral partnerships. (For example, we wouldn’t sign deal notes with a group of five agro-dealers to provide them with management coaching; nor would we “copy” a successful deal note from one processing company to another processing company—there are better ways to bring a successful innovation to scale.) We also expend more monitoring resources on our deal notes, since they typically test innovations that are a priority for us and involve more of our resources. The figure below shows how deal notes nest within MOUs:

We write MOUs for one year at first—that way, we can let partnerships expire “naturally” without ruffling any feathers if they don’t bear fruit—and then extend them as needed. Deal notes tend to be four- to nine-month tests of specific innovations that require us and our partners to do carefully planned operational and monitoring work. MOUs and deal notes cannot transfer funds or contractual obligations to partners, but in cases when we need to directly fund a partner to implement an activity, we can issue a grant. If the first deal note goes well, we follow it with new deal notes in an ongoing learning process:

Because deal notes usually represent our most intensive level of involvement, we make them an anchor for our internal operational planning, monitoring and evaluation, learning, and technical compliance and reporting. The design process yields a budget, a week-by-week implementation timeline, management milestones, and a measurement plan (you can find a graphic of the deal note process in the materials linked in the resources at the bottom of this post).  We drop unsuccessful partnerships, recruit new partners, and develop new deal notes based on what we have learned.

MOUs and deal notes as engines of collaboration: an example

Here is a synopsis of one partnership with a company that processes and sells maize and soy flour and porridge and approached Inova for support to strengthen its supply chain:

The MOU in this example begins with some background on the company, explains that the partnership will address the need for a reliable supply system, and articulates the purpose of the partnership: “to use preferred supplier mechanisms to enable more effective farmer participation in the supply chain, build a robust supplier base, and invest in transparent and performance-based supply chain management practices.” It mentions two strategies—establishing performance clubs** of maize and soya farmers and designing a supply chain management system—and then outlines the overall roles of each partner.  For example, FTF Inova provides technical support for designing performance clubs and facilitates engagement with other output buyers, while the private-sector partner coordinates the creation of the performance clubs, leads implementation of all field activities under the partnership, and finances the upgrades needed for the supply chain management system. Both parties agree to “monitor, report, document, and invite donor/peer projects to observe and learn from activities conducted under this partnership.” Then there are some clauses about social inclusion and environmental stewardship, points of contact, review schedules, and that is about it. The whole document is four pages long.

The first deal note under this partnership is more detailed and operational. It states its objective to design performance clubs and lay the groundwork for a supply-chain management system, discusses the roles that FTF Inova and the partner will play in this set of activities, and lists the following seven activities:

• Establish foundations for supplier clubs (building the capacity of 2,000 farmers);
• Design appropriate incentives to foster loyalty, transparency, and quality standards;
• Build clusters’ and farmers’ awareness about the performance clubs;
• Implement an ICT-based management system for the performance clubs;
• Develop a trial of the performance clubs;
• Facilitate a partnership between [a local university] and [the partner] to implement a process for aflatoxin control; and
• Conduct monitoring, evaluation, and learning activities.

We broke each activity in this deal note into sub-activities and plotted them out on a nine-month calendar, with eleven management milestones to help us stay on track (for example, “At least 1,500 farmers with production plans in implementation by 31 January”; “Training on performance clubs completed by 30 April”; “At least 10 performance clubs established by 31 May”; and so on).  Each of the activities also has a budget associated with it, so that we both can estimate how much the intervention will cost us (our team also uses the illustrative budget as one way of assessing how committed the partner is).

Finally, the deal note contains a measurement plan with common-sense dimensions like “number of farmers participating in performance clubs” and “quantity of maize and soya sales”. We usually keep the detailed monitoring plan that feeds into FTF Inova’s MEL framework—along with the detailed budget, week-by-week operational plan, and gender and environmental screenings—separate from the agreement we share with the partner. They certainly aren’t a secret, but usually, we prefer to translate MEL, gender, and environmental aspects into regular business language, not the "donor-speak" of our internal documentation.  The deal note concludes with points of contact for each party and a schedule of formal reviews every two months. It is just six pages long, including figures and tables.

Keeping these documents and processes focused on the partner—not our compliance or donor-accountability concerns—helps us mainstream the co-creation and self-selection principles we rely on to make sure we are doing the right things with the right partners and not succumbing to the sunk-cost fallacy or other biases, and keeping them short makes it compatible with our probe–sense–respond approach.

But does it work?

This approach (which we’ve been using systematically for about a year so far) has helped us avoid some biases and pitfalls and get a greater commitment from the private sector.  But it also led us to some challenges we did not think we would face and brought some benefits we did not anticipate.  In August and September, the FTF Inova team is examining how our portfolio of partnerships can lead to change at scale across the whole market system.  Once we have reflected on how our partnership facility fits into that vision, we plan to share what we’ve learned in the next post in this series.

Please contact Dan_Langfitt@DAI.com and Luca_Crudeli@DAI.com for more information about FTF Inova and its partnership approach or to share your feedback.
________________________________________________

We want to share some of FTF Inova’s partnership resources with the community!  The tools in the resources bar below may not be the right fit for your team or the work it is doing—the skill sets of each team and its working environment vary—but if you do find them helpful, and especially if you adopt and adapt them, we hope you will share your experiences with us.
________________________________________________

*The Feed the Future Agricultural Innovations activity (FTF Inova) is a five-year, $21M market systems development activity funded by USAID and implemented in Mozambique since 2017 by DAI with support from Technoserve, MarketShare Associates, and EcoVentures International.  For more information, see the following page on DAI’s website.

**Performance clubs with agricultural commodity suppliers typically focus on assembling farmers in groups to sell their products together.  The clubs can form a nexus for technical assistance, but more importantly, they can provide a helping hand (and social pressure) to their members to discourage side-selling and ensure members are using the right techniques to get a high-quality product.

***Aflatoxins are a family of carcinogenic toxins produced by Aspergillus fungi that grow on maize, peanuts, and several other crops in warm and humid climates.  An FTF Inova study found that demand for aflatoxin-free products is relatively low in Mozambique, though this is partly due to the lack of product differentiation on supermarket shelves and the low confidence of consumers in the reliability of traceability systems.  Some of FTF Inova’s partners are willing to test whether marketing their products as aflatoxin-free can boost sales, but the first step in the process is a strong supply-chain management system that can ensure that products are in fact aflatoxin-free.