About 3 or 4 years ago EWB found itself amidst a swirling movement of new thinking on development issues, disillusionment with traditional economic strategies, and the rise of the middle class in Africa, amongst other trends and developments. To understand a little better how a group of dyed in the wool, pocket-protecting, calculator mashing engineers became involved with business development work in Africa, it helps to know some of the recent history of EWB and the amplifying and colluding trends of business, finance and development of the past couple years.
In the last post I covered a few thoughts on the development world in general and the current state of affairs with regards to social finance and impact investing. This time I’ll drop down to the meza-level and explore a few of the main theories and concepts that have affected EWB’s current thinking and direction and provide an overview of our activities in these areas. This should help explain why Small and Growing Social Businesses (SGSBs) are a large part of EWB’s “systemic innovation” theory of change and how this connects upstream to the impact investing world and downstream to what we are doing on the ground in Ghana and Zambia.
If, after reading, you are interested in supporting this work, then head on over to our “We are” page which is part of EWB’s year end fundraising campaign.
Concepts in EWB
EWB has always prided itself as being on the cutting edge of the latest thinking in the world of international development and, often, one of the few organizations small and versatile enough to immediately begin putting these theories to the test. Another strength of EWB has been its ability to gather and synthesize ideas and concepts from different fields (engineering, management consulting, finance, business, social science etc.) to create something unique. Here are a few of the main concepts that have had a significant influence on EWB over the past few years:
Systems Thinking – Something every engineer is intimately familiar with is the world of systems and how the interactions between individual parts work together to create a greater whole. Be it in control theory, system-on-a-chip design, assembly line optimization, or chemical processes, engineering more often than not is about combining increasingly smaller components into increasingly larger and more complex systems. This thinking began entering the world of business and management consulting beginning with the “Fifth Discipline” by Peter Senge in the early 90’s and has since been adopted by many other disciplines. The aim is take a highly complex ever-changing system of players and interactions and approach it from a holistic perspective instead of piece-by-piece. The ability to better understand the system as a whole allows one to better find and exploit leverage points, synergies, and loopholes and nudge the system towards a new paradigm instead of just patching up symptoms.
Social Enterprise – This fairly ambiguous term has been used to describe everything from a purely non-profit organization delivering only social good all the way to a purely for-profit, traditional business which just happens to be generating some social good (i.e. jobs, health, education) as a by-product of its primary profit incentive. While no one can really decide where to draw the line, the basic concept is that a social enterprise is an operation that generates highly scalable, wide-reaching, positive social or environment impact to its community, stakeholders, or customers. These are typically headed by social entrepreneurs who are very much like regular entrepreneurs, except instead of starting a business they aim to start a movement. You can read a lot more about the concept in the excellent book “How to Change the World” by David Bornstein.
Blended Value – This is another slippery concept which, like social enterprise, is open to broad interpretation. At its core, however, blended value is about businesses or non-profits delivering a blend of economic, social and environmental value as part of it mandate. This takes the concept of “triple-bottom line” a bit further by arguing that these aims should be part of a holistic approach instead of just separate categories. (Unfortunately, due to the nature of some businesses the blending is more like oil and water than milk and coffee). Read more about it here.
SGSB/SME – Small and Growing Social Businesses or Small and Medium Enterprises are two terms used to describe up and coming businesses that have the potential to scale up and deliver far-reaching impact across many communities.
Base of Pyramid – This concept holds that there are an awful lot of people who do not make or spend much money in the world and are hence largely ignored by most mainstream businesses. The theory goes that if a company can reach BoP consumers with their products or services, this will have a profound impact on the overall economy (for better or worse). By serving the needs and demands of the base of the pyramid effectively, companies can make large returns from relatively small margins due to the economies of scale. Read more here.
Participatory Approaches – Based on the work of Robert Chambers in “Whose Reality Counts?” participatory approaches and methods are about reversing the typical top-down, expert-driven power dynamic of traditional development. Instead of designing (usually poorly) the project from a far, implementing something using experts from overseas and leaving. P.A. is about leaving the conception and control squarely in to the hands of the people who are living with the project and giving them discretion about how and where to use outside “expert” help. EWB attempts to do this (though not perfectly) through being a value add partner that local businesses and governments can bring in as they choose. We are aiming to be “on tap”, not “on top”, but there are many systemic issues in the nature of development that prevent this from truly being the case.
EWB and Systemic Innovation
Through its earlier work (2005-2011) in water and sanitation in Malawi, food system in Ghana and Burkina Faso, and governance and rural infrastructure also in Ghana, EWB was exposed to many levels of interactions from high level aid decisions, to local government program implementation, to the effect of these programs on the citizens of these countries. Through this perspective a trend started to emerge that was starkly different from much previous technology-based development thinking. The realization was that instead of focusing on broken water pumps, low harvests, ineffective government programs and other inputs, outputs or technologies, a better way to achieve lasting, resilient, locally directed, and scalable change, was to take a much broader approach. Instead of focusing on implementing “solutions”, EWB decided it was better to first understand the “systems” from which these symptoms manifest and design ways to create change from within. This systemic approach has since become EWB’s specialty and has allowed it to use its limited resources and people on the ground much more effectively. This approach was codified after much internal debate and dialog into EWB’s current vision as a leader in “systemic innovation” in January 2012.
This grand sounding idea, while flashy, modern and, yes, a little presumptuous, has definitely left many a head scratching both inside and outside the organization. How exactly does one plan to create systemic change a priori? Can these efforts be measured, evaluated, attributed, correlated to outcomes? How big of a system are we talking about? The past two years we have been grappling with these questions and experimenting with a new model as an incubator of systemic innovations and social enterprises. Instead of operating like a traditional NGO with projects and programs, EWB works more like a venture capital firm for social entrepreneurs to pitch their ideas and get “investments” of people, connections and some funding.
Business Development Services Africa
While EWB has maintained its work in water and sanitation, governance, and agriculture; through its iterative progression, it has come to focus more on the business sector as the vehicle with the most potential to deliver large-scale impact. Business Development Services Africa was spun off of EWB’s successful work in agriculture value chains, (itself an iteration of working with farmers and noticing major barriers and inefficiencies in the way inputs and outputs flow along a value chain). The BDS venture was pitched with the idea that expanding the number and impact of SGSB’s (especially in the agriprocessing sector) could leverage massive higher order effects upstream for farmers and suppliers of raw foods and downstream by creating jobs and locally sourced food products for BoP consumers.
This leverage point at small businesses within the system of a local economy has been repeatedly cited by politicians, economists and NGO’s around the world as a primary source of jobs and economic growth (both major issues and topics other posts for sure). The question is how to rapidly and effectively accelerate these companies while not creating even more problems down the line. The answer may be in combing ecosystems of socially and environmentally driven companies together along a value chain to produce the most efficient outputs while doing the least amount of collective harm. No one has quite figured out how to do this yet and the North American model surely isn’t the most inspiring, but BDS hopes to push forward the thinking around this and help find new ways of operating.
BDS is a relatively new venture within EWB and is still very much in a start-up, exploratory stage as we tighten our business model, experiment in different roles and develop our theory of change. Within the next several years, it is hoped that BDS will become its own separate entity; based directly in the countries it has operations and employing mostly, if not all local staff. As of right now, we are only operating in Ghana and Zambia with a handful of client organization, but aim to grow and diversify as we iterate. Our current numbers on the ground as of the end of this month will be four in Ghana and five in Zambia.
Our model of assistance is meant to harness the power of small business to develop a self-reliant and sustainable form of poverty reduction and social betterment. BDS only works with clients that request our services and are able to demonstrate strong entrepreneurial drive and business models with tangible social and environmental impact. In essence, we are helping entrepreneurs build better business systems, and we are connecting those entrepreneurs with the right investors to scale up. Our solutions are co-developed, co-owned and co-executed with the entrepreneur and, therefore, have their buy-in from the beginning.
There are a variety of systemic failures in markets, institutions, and rules and norms that contribute to the demise of many small enterprises. This makes it harder for entrepreneurs to access “growth capital” to expand their businesses. But, there is more to it than that: businesses also need to be able to utilize that capital efficiently and sustainably in order to effectively benefit from it. This is why BDS is primarily focused on capacity development of entrepreneurs. From our perspective, both investors and entrepreneurs are losing out because often the underlying issues that make businesses “unbankable” are surmountable with the right approach. As David Packard (the P in HP) said, “More organizations die of indigestion than starvation”.
BDS is piloting and testing its operation in three main categories:
– Pre and post investment technical assistance through embedded consultants: Here we partner with pre-investment (start-up to growth stage) businesses and work with them to streamline their business and technical systems, and prepare business plans and record keeping for investor due diligence. We also partner with impact investors and work with them and the client organization to ensure a smooth transition post-investment. That is, direct, client-based consulting to understand, diagnose and remove the barriers that stand in the way of the client’s objectives.
– Business incubators: In this role we work with existing NGO or government lead business incubation programs to develop the tools, training, selection processes and monitoring and evaluation frameworks for the incubated businesses.
– Mobile business training clinics and coaching: This stream, currently based in Ghana, brings together cohorts of small business leaders in groups from each geographical area for a three-month training and coaching program delivered by local Ghanaian business leaders. Training modules include management and leadership development, finances and accounting practises, and project management techniques. The training sessions are accompanied by regular coaching sessions to help the small business owners to immediately begin implementing what they’ve learned.
We are still very much working on the overall direction to take to increase our reach and effectiveness and continuously learning and discussing with local partners about what needs are not being met. In particular a lot of work needs to be done around understanding how these intangible and unpredictable things like “business success” or “positive social and environmental impact” can be influenced, quantified, qualified, compared, measured and/or evaluated. As we increase our understanding this system, we will be narrowing in our specific leverage points and value adds.
In the final installment, I’ll address the day-to-day operations here in Tamale including my work with Taimako Enterprises, Mobile Business Clinics, and some of BDS’s other projects and clients in Ghana and Zambia.
Thanks for reading!