More than money: mapping the landscape of advisory support for inclusive business
This blog is written by Caroline Ashley and Aline Menden
You probably know of a couple of organizations that provide acceleration or technical support services to an inclusive business. You may also know businesses that makes use of such support. But it might be safe to bet that you don't have a sense of the full landscape of such non-monetary support.
Why do we say that? Because it's a diverse landscape, with messy boundaries, and evolving quickly as organizations move out of their comfort zones. When starting our research for a forthcoming USAID report , we thought we were quite familiar with some acceleration approaches, and with technical assistance provided by investors and grantors. To our surprise, we found a whole lot more that we didn't know.
Our focus was non-monetary support provided to inclusive businesses: pretty much anything except cash or investment. The basic idea is simple: the right advice at the right point in time can make an enterprise literally leapfrog common mistakes, avoiding hard-earned experiences, and hence speed up progress. So, the value of good advisory support can be way beyond the cash value of what it costs.
In fact, over the last two decades, there has been an explosion of actors providing advisory support to scale innovative and impactful business models. We grouped them into five types of support providers: incubators, accelerators, non-commercial programs or facilities – often set up by donors, as well as impact investors, and consultancies (see below). While incubation as an approach has been around for a while, the 2016 Global Accelerator Learning Initiative (GALI) survey of 83 accelerators shows that nearly 80% of respondents launched their first accelerator program after 2010. Impact investment and donor-funded challenge funds have equally proliferated in the last 10+ years, and while most started with a focus on money, a growing number have incorporated advisory support in recent years. Hence, the sector has emerged from diverse roots and is still immature.
However, boundaries are not sharp between or around these five categories. In fact, support providers increasingly experiment outside their traditional boundaries: accelerators adopting longer-term relationships, or impact investors linking with donor-funded technical assistance. New players such as NGOs, business schools and corporates are also entering the landscape as providers of support.
Besides the wealth of players, there is a wealth of different service offerings emerging, as a blog from our colleague Christian shows. Convergence is not desirable at this stage – but rather a reflection of the diversity of different enterprise needs. A large majority focus on the “boring stuff” around core business fundamentals – which most enterprises need to get right first. Others prioritize support that helps businesses become inclusive or innovative. The stage of business, from start-up to scale, varies hugely and is an important determinant of the type and content of support.
We asked, and were asked, whether 'good practice' can be detected from the current landscape. It's clear that quality and effectiveness varies. Advisory support cannot be assumed to be effective support. But there is no single approach that works best. The closest we have to clear guidelines is five operational issues that have to be addressed for advisory support to be effective. Our colleague Carolin outlines them in this post.
But is advisory support really more effective than giving enterprises the cost equivalent in cash? The short answer is: we don’t know. In fact, measuring it is hugely difficult. The logic of providing advisory support is that the business will succeed faster than it would have done, and ultimately more businesses will survive and thrive than would have without assistance. But improvements in pace and quality cannot be measured compared to a counter-factual. So, we spoke to umpteen providers that are convinced advisory support is essential for businesses to scale, but it is conviction not evidence that drives them.
Impact is not the only open question we found when studying the landscape of support provision for inclusive business. For example, few have found out how to make the model of advisory support scalable. The entrepreneurs that might need it most in order to get going cannot afford it, and high-touch support is very valuable but very hard to scale and replicate without exploding costs. While there is a trend towards having enterprises co-invest in support, much is still donor funded.
As the landscape of advisory support continues to evolve, we can count at least seven key challenges to be addressed.
- Scalability of support provision: How to increase the scalability and replicability of high-touch engagement, given high-touch normally means high cost?
- Efficient needs assessment: Identifying needs effectively and matching support to them is critical, but how to do this without disproportionate investment in needs assessment and sourcing?
- Understanding value for money: How can providers go beyond client satisfaction to assess overall returns, in terms of additional business success or development impact that is spurred by advisory support? Ultimately, can they compare that to alternative uses of any subsidized input?
- Client perspectives: What do the thousands of recipient inclusive businesses of advisory support think of its value and how it could be improved? Where is client voice, and what would it tell us?
- Exit strategy: Clarity is needed on when and why a provider should finish providing advisory support – but at what point is it enough?
- Market sustainability: What will drive evolution of a sustainable quality market of business development services, with diminishing dependence on grant finance in the long-term and increasing incentives to drive quality of provision?
- Collaboration across diversity: Can we create increased collaboration and exchange between diverse actors providing advisory support, for joint learning, and less reinvention of the wheel?
It is obvious that our research ends with more questions than answers. By phrasing those open questions, and putting our finger on the challenges, we hope that more organizations will join and support our quest for answers.
This blog covers some of the key findings from a forthcoming USAID Report Landscape survey on acceleration and technical assistance for inclusive business.
The authors of the blog were part of the authorial team of the report, from Ashley Insight and Endeva. More blogs covering other aspects of this report include:
- The top five issues providers of advisory support need to crack
- Types and tools of non-financial advisory support
- 5 lessons learnt on providing non-financial support to inclusive businesses
This blog is a part of the June 2017 series on advisory support for inclusive businesses in partnership with USAID and the African Agricultural Fund’s Technical Assistance Facility, both of which deliver advisory support and have new analysis of it just launched (AAF’s TAF) and forthcoming (USAID).
Read the full series for more lessons from seven different providers of advisory support and stories of success from entrepreneurs.