Careful choices - how BCtA companies use partnerships

Partnerships between companies in the same value or chain, or between companies and non-traditional partners such as NGOs or government agencies, have been a feature of inclusive business for some time. What is now becoming clear is that some companies are becoming much more sophisticated about when and how to use such partnerships – and when not partner at all. This is one of the insights that I had recently when part of the team reviewing BCtA’s portfolio, and helping to write Breaking Through: Inclusive Business and the Business Call to Actio....

I was lucky enough to talk to managers from a number of companies as part of the review. They were all impressively committed, knowledgeable, and strategic in outlook, but two of the business models that I learnt about have stuck with more than some of the others. I have used them both in several different contexts to explain how Inclusive Business works. They also illustrate the point about different partnerships choices very well.

Ballarpur Industries Limited (BILT) have developed a model for supporting small farmers to grow wood as a new source of raw materials for the paper industry. This model utlises land that farmers who own it think is un-productive can be used to generate very valuable additional income for the farmers, while also building a new supply of wood in a sector where demand is always growing.

BILT found good partners and depended on them for many operating issues, realising that they have assets and resources that are beyond BILT. They have supported at least one of their partners to get FSC certification. They were wise enough to realise that it was very much in BILT’s interest that their partners also become profitable, recognising that this would lead to mutual and sustainable benefits for all concerned. This recognition of, and active support to, the achievement of each other’s goals is a feature that has been noted in many successful partnerships.

BILT noticed that this long-term partnership approach has helped to build a high level of trust between farmers and the company and between the company and the other organisations in the partnership. In a context where farmers have to wait for 3-4 years before they can sell their crop, and where contracts between BILT and the farmers are not allowed under Indian (I assume in order to protect tribal people from exploitation) this trust has been a critical element of success. Again, this level of trust is a feature of a very successful and mature partnership, because trust is not something that arises easily or quickly in a partnership.

However BILT’s partnership is in contrast to another agricultural initiative in India where a partnership approach was not used. BASF India has a set up a service to educate farmers on the benefits of safe use of agro-chemicals. BASFs agents advise and train farmers and help lead farmers to grow demonstration plots. The service also has a help line that can respond to queries. When farmers show interest in buying inputs they are directed to distributors who sell them BASF products.

Both BILT and BASF innovated in order to address a pressing business challenge. BILT recognised that land that farmers think is un-productive can help them to address long term supply shortages. BASF abandoned their European sales model that was ineffective in India, and came up with a new model that works in the context of a large number of small farmers who are unfamiliar with agro-chemicals.

Both companies were prepared to invest heavily, BASF in hiring and training a large force of extension agents, and BILT in providing multiple sources of support to farmers – including finance in the early days. They both made a very big commitment up front with a lot of uncertainty, and mention this early uncertainty as one of their biggest challenges. They then followed through on this commitment over several years such that farmers began to trust the company, and they both highlight that this trust is a central reason for the success of their Inclusive Business initiative.

However, unlike BILT, BASF did it all themselves with no partners, because they felt that control over the quality and consistency of what they could offer farmers was their highest priority. BASF opted to hire and train their own staff to interact directly with farmers instead of partnering with farmers groups, an NGO or a co-operative to play this role.

My conclusions is still that partnership is a vital mechanism for many inclusive businesses, In the BCtA report and in papers I have written for the Business Innovation Facility (BIF) I have made this case. However it’s not right for all, as the BASF example shows. Discernment in partner selection is also a critical success factor as we also demonstrate in the BCtA report. In the report, we suggest that one of five key strategies that Inclusive Businesses are learning to adopt is:

‘Securing carefully-chosen partnerships with aligned goals, walking away from the wrong partner and knowing what to take on in-house’.

I wrote a publication based on the BIF experience called ‘Take your partners…’ The message is now a little more refined: chose your partners wisely and if need be, have no fear in dancing alone!

About ‘Breaking Through’

Breaking Through: Inclusive Business and the Business Call to Action Today is authored by Caroline Ashley and Suba Sivakumaran, in conjunction with Tomohiro Nagasaki, Lara Sinha, Suzanne Krook and Tom Harrison. Joe Shamash conducted the online survey and led the data analysis. Five years on since BCtA was launched, it reviews progress made by BCtA members and the strategies they are adopting. The report covers BCtA members’ 94 initiatives and draws heavily on surveys and interviews conducted with 49 initiatives during mid-2014.