Supporting inclusive business: what have we learnt so far?
The Business Innovation Facility is piloting a new approach to supporting inclusive business. A ‘pilot’ is only useful if it generates lessons. So, after one and a half years of operation in five countries, we are starting to share some preliminary lessons about this approach.
Lessons about how companies implement inclusive business are elsewhere on the Hub. These lessons are about how business and development programmes can facilitate inclusive business by working with companies.
How is the Business Innovation Facility approach different?
The aim of the Business Innovation Facility is to support the up-take and roll-out of inclusive business, by providing technical support that helps companies to unblock bottlenecks and take their inclusive business venture to market and scale.
The focus on technical support makes the Facility quite different from many other donor programmes which engage with business by providing financial input. Many programme provide finance, perhaps with an add-on of technical support. The Business Innovation Facility offers only technical support, sourced from an experienced, international network.
Other private sector development programmes may focus on a single sector or type of company. They may operate across regions and continents, while centralising management in one country. The Facility works only in five pilot countries: Nigeria, Malawi, Zambia, India and Bangladesh. It works across sectors – from agro-processing and health, to retail and IT. There are no limitations on the kind of company, so start-ups and multinationals are included. While the international management team is based in London, country management teams in each of the five countries are fundamental to the Facility approach.
1. Added value to companies
Early feedback indicates the high added value to companies from the Facility’s ‘hands-on’, technical assistance approach. Additionality is clear, and in some cases feedback is that it made the difference between the venture stalling and thriving. Or, as one provider of technical assistance commented after intensive input to a project over a few months,
"In the absence of BIF support the project would, in my view, have continued to stagnate and eventually would have died. It now has been given a real chance to succeed.”
When focused on a key constraint, with the right team of experts, a three or four month input from the Business Innovation Facility can make the difference between an inclusive business venture floundering or moving ahead. Business plans are written or re-written. Partnerships and investment agreements are kicked-off, revamped or completed. Willingness to pay or consumer habit is assessed. All these can make a small but critical difference to business development.
2. High transaction costs of the approach
Per pound spent, this approach costs more to manage compared to a ‘hands-off’ challenge fund or funding mechanism because there is intensive and extensive engagement between companies and the Facility, before and after the application.
3. Importance of country management
The hands-on approach works because it is based on country management teams in five countries, backed up by an international team. Coming from business networks and associations, the Country Managers find inclusive business entrepreneurs, help them apply, coordinate providers of technical assistance, and see projects through the entire BIF process to final report. Companies report that the overall engagement, not just the specific input from TA providers (who may be entirely external to the BIF team), is useful.
4. A mix of start-ups, family firms and multinationals works well
We cannot make assumptions about which type or size of company is most likely to succeed commercially and meet the Facility’s objectives for development impact, innovation and scale. Medium and large domestic firms, often family-run, combine substantial size with the leadership and vision needed for inclusive business success (see AACE project). Start-ups are high on innovation and may reach scale through attracting investment or business to business partnerships (see Malawi Mangos project) - but, by nature, they are small and risky at first. Multinationals can reach hundreds of thousands or millions of consumers (see mKRISHI and Oando projects) - but by their nature have hierarchies and legal teams to deal with, so take longer to work with at first.
5. Expected results are diverse, tracking results is critical but difficult
Anticipated results range from direct gains for hundreds of thousands at the Base of the Pyramid, through systemic impacts on sectors and business practice and multiplier effects vs knowledge exchange.
Ultimately, the bottom line for business is the bottom line for development too: results depend on the businesses thriving and going to scale. The Business Innovation Facility has an appetite for risk, so some business failures are expected, as are some outstanding success stories.
The framework for monitoring programme results is subject to conflicting pressures and carefully designed to balance multiple needs. On the one hand, it needs to be robust and ambitious, so as to better understand inclusive business and programme results and capture the many types of results that are catalysed. On the other it needs to be light, to avoid a burden (transaction tax) on companies and keep monitoring in proportion of small spend per project. Our approach, the challenges faced and some lessons learned are explored further here.
6. Additionality: would it have happened anyway?
Just because technical assistance proves useful to a business, it doesn’t necessarily mean that without the Facility it would never have happened. Indeed, if the business plan is so important, wouldn’t the business get it done anyway? This might sometimes be the case, but there are at least three ways that the Business Innovation Facility differs from expertise that a company could buy:
- It is available at a time when the business model needs to be proven, so may precede sufficient allocation of corporate resources.
- Often, the immediate need for input is not well defined. Defining the bottlenecks and scope of work is a key area of collaboration with the country team.
- Input is sourced from networks of experts internationally, and provides business acumen in a context that fully understands the interface of social and commercial goals.
- Facility input comes from an independent, authoritative and external source. Team members and TA providers can act as a ‘critical friend’ and ‘intelligent provocateur’. Or as one client in Malawi said in September 2011:
“The BIF staff were never invasive during the discussions nor critical of the project but had a very subtle way of posing questions and seeking clarifications. This provoked us, at times to have a re-look at certain aspects within the project itself and we did identify previously unknown gaps which needed to be addressed”
The Business Innovation Facility is now half way through its three years of operation. In only a few projects have the Facility inputs and company feedback been completed. Lessons are therefore preliminary, and there is much more to learn and share. A longer report on lessons learnt by the Facility will be available later in 2012.