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By Elizabeth Eckert (RTI International) with Marcus Jenal (Mesopartner)   Elizabeth Eckert & Marcus Jenal It's not every day that a group of development practitioners from around the world get together to discuss complex systems theory. In late April 2018 during the Market Systems Symposium in Cape Town, South Africa, we were offered that opportunity. On a daily basis, a group of participants met to discuss and unpack the concept of “self-organization” and how it can be of use to implementers of market systems development projects. This blog seeks to capture this robust discussion while also serving as a platform for future discussion around this topic. So, what is it? Self-organization, in systems lingo, is also referred to as “spontaneous order.” An important feature of self-organization is that the process is not controlled or driven by agents outside of the system itself, or by anybody, really[1]. Rather, self-organization arises within the system naturally. In thinking about market systems, a topical example would be the seeming black box of the informal market – traders at varying levels know how to set their prices; information about new market opportunities emerge through unexpected relationships; informal rules influence who sells products at which locations and at which prices – and all of this without a central designer or authority. The organization of the informal market is not written down or codified -- it is known through repeated patterns of behaviors and continuous interaction. Feedback loops, some that are reinforcing, and some that balance out new factors (internal or external), are essential to maintaining the coherence and nominal order of the self-organized system[2]. For some in our discussion group, self-organization is a useful conceptual framework to help understand and map the complex relationships of informal market actors; particularly information and transaction flows; spoken and unspoken norms or “rules of the game;” and the formal laws and regulations that informal market actors are navigating. This allows us to subsequently develop strategies to influence and shift these norms and rules so that the system is more equitable and inclusive. For others, self-organization speaks to spaces for engagement or convening power such as after-school committees, pick-up football matches, and community advocacy groups. Finally, some members of our discussion group emphasized that self-organization is not only important as a way of understanding change, but also as a way of framing the change we expect to see. For example, introducing new technologies is one of many possible tactics to shift how a system self-organizes so that it generates more desirable behaviors and results. What is it not? One sticking point within our group discussion was the confusion around the term itself: many kept jumping to the idea that we were talking about organizing groups. In our field, there are entire methodologies, approaches, and tools around organizational development (producer organizations, marketing cooperatives, savings and lending groups, etc.). This is not what self-organization is talking about. Rather, those existing organizational structures are part of the multitude of actors that make up the broader complex system. However, this doesn’t mean we cannot work with already formed organizations. In fact, we can use approaches discussed in the next section of this blog, to encourage new patterns of interaction and behavior of these formal organizations. In Senegal, for example, the RTI International-implemented, USAID-funded Feed the Future Senegal Nataal Mbay project employs a unique approach toward influencing producer groups to use evidence and data for their own advocacy. The project focuses on building data fluency as an entree to finance, insurance, and improved contracting. This intervention has catalyzed new relationships between these farmer groups and buyers, financial institutions and local government. How might we use this this concept in practice?
Our group discussed a number of ways in which development practitioners can harness self-organization for market systems change:
Regardless of how we influence change in a self-organizing system, our interventions should identify leverage points that can 1) trigger a ripple or multiplier effect, and 2) create changes that are lasting and self-reinforcing, rather than short-term reactions. MSD projects should identify and activate leverage points and observe the resulting ways in which market actors react in groups or individually. Which leverage points increase healthy business cooperation and competition? Which shift roles, rules, or norms towards a more inclusive system? It is also crucial here to understand that actors’ self-organizing is unpredictable if a constraint is changed or a catalytic intervention is introduced. Therefore, we need to tread carefully and be ready to remedy unintended negative consequences should they occur. Final thoughts around our role in market systems development Our last big discussion point as a group was on our role, as market systems practitioners, vis-a-vis self-organizing systems. Development projects, as we often know them, err toward tight control to achieve specific milestones and targets while adhering to a predefined logical framework. A big take-away of our group exploration on self-organization is that we may need to let go of some of that control. Rather than acting as project managers, the system we are working with is better served if we act as influencers, enhancers, space-creators, risk-reducers, and learners. In doing so, we recognize the internal logic that self-organizing market systems have – we can then build upon that logic, moving the system toward increasing inclusivity[3]. We look forward to additional feedback from the MSD industry on our exploration of self-organization, and to future discussions on this subject at the annual Market Systems Development Symposium. Erik Derks, of The Canopy Lab, also contributed to reviewing and providing input to this blog. [1] Miller, J. H., and S. E. Page, Complex Adaptive Systems: An introduction to computational models of social life. Princeton University Press, 2007. [2]Derks, E., Field, M. and Sparkmen, T. Practical Tools for Measuring System Health. Leveraging Economic Opportunities Brief. USAID. [3] Cunningham, Shawn, Ph.D. & Jenal, Marcus. Rethinking systemic change: economic evolution and institutions.” BEAM Exchange. 2016
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Growth and Value Addition, Not Profit Motive, are Key to Market Systems Becoming More Inclusive7/23/2018 By: Mike Field, Senior Technical Advisor, EcoVentures International   Mike Field When working on private sector development it is often cited without question that profit motives are good. The thinking goes that a firm that makes a profit would have to make their customers happy in order to sell to them and as a result generate that profit. While this thinking on its surface makes sense, it is founded on a set of assumptions that when seen through various systemic lenses is quite flawed. Let’s start with a definition of profit. As a banker once stated in a training, profit is an opinion based on accounting rules. It is not a universal thing, but an evolved definition related to accounting and tax requirements. So in most cases, when people say profit they really mean gross margin or what is left of revenues once you subtract out costs. Even if we leave aside the detailed accounting definitions and only frame the discussion around a very general idea of profit meaning what a business person gets to take home, then we are still left with a range of assumptions related to how markets function. Understanding how markets function is where systems lenses have proven very valuable in uncovering important misguided assumptions about profit. Going back to the original statement that profit motives are good, the assumption is that markets and market forces universally reward business that add value through customer satisfaction and that companies that cheat customers are sanctioned effectively. This assumption in how markets reward and sanction firm behavior is at the core of the concerns that good systems thinking highlights. More specifically, in most countries where there is widespread poverty, market systems are biased in favor of more extractive behaviors like rent seeking, mis-information, fake products, adulteration, etc.. – i.e., tactics and behaviors that business people can do to extract revenues without providing value in return. In many cases such biases can become rooted in social systems resulting in a process of institutionalization where norms emerge reinforcing the behavior. For example, if we take a case of an ag input provider that sees an opportunity to begin selling fake seeds, how would the market sanction that input firm if:
The multiple important mechanisms required in a market to sanction poor behavior relative to value addition are not present so sanctioning is not effective. In this scenario, it is likely that the farmers would not be able to recognize that the seed seller is cheating them, and since competitors or third party organizations like media or consumer protection NGOs are not organized to advocate on behalf of the farmer and against the seed seller, it is unlikely for the seed seller to be sanctioned. More likely, the seed seller would be rewarded for cheating the farmers by gaining more revenues with lower costs. Further it would be rational for the seed seller in such market conditioned to think that maximizing profits would mean cheating more. In this case above, the profitability of the shop is not an indicator of adding value as the shop is specifically reducing value in the system – it is extracting value from the system not only in real financial terms in that it is taking financial capital in exchange of something that has no productivity value, but also because it is reducing the efficacy of social capital by further eroding trust. The systemic feedback via the lack of sanctions and rewards from having immediate higher margins would also reinforce that kind of behavior to be normalized, which is exactly what is observed in many developing country contexts. The result is that firms that are profit driven in systems that reward extractive business practices would, as a normal course of business, engage in behaviors (i.e., selling/buying tactics) that capture value at the expense of their customers/suppliers. Given that in international development where many if not most market systems are biased in favor of extractive business practices, profit is especially a poor indicator of positive change at firm or market system level. Even further, the greater the profit orientation of firms within such a system often suggests that the underlying incentives pushing extractive behaviors is deeply rooted in the system and will be difficult to change. If most firms are aggressively applying tactics to extract value from their suppliers, staff, and customers then that would be an indication of a system’s strong bias in favor of markets that have self-organized to capture resources (i.e., and not add value). It is important to understand that such biases are mostly likely related to a risk management strategy that accumulates resources as a means to deal with shocks/stresses. The table below provides specific firm and systemic patterns that indicate an extractive or a value addition orientation of a market system. A good market systems project will focus its efforts on catalyzing firms to see the value in behaving in ways that align with a value addition orientation. They would also try to catalyze systemic changes that also align with a value addition orientation. Simply assuming profit motive is good further a myth in how market work and why they are not providing appropriate benefits to a wide enough set of citizens. Systems thinking is critical to understanding the orientation of market systems and how to shift that orientation to being more value added.  A good market systems project will focus its efforts on catalyzing firms to see the value in behaving in ways that align with a value addition orientation. They would also try to catalyze systemic changes that also align with a value addition orientation. Simply assuming profit motive is good further a myth in how market work and why they are not providing appropriate benefits to a wide enough set of citizens. Systems thinking is critical to understanding the orientation of market systems and how to shift that orientation to being more value added.
Written by Piers Bocock, Chief of Party, USAID LEARN, Dexis Consulting Group  There are strong signals across the international development sector that intentional, systematic, and resourced efforts to improve strategic collaboration, organizational learning, and adaptive management are being mainstreamed into the work of development projects with the goal of improving development outcomes, increasing stakeholder self-reliance, and reducing donor dependence. The May 2018 Market Systems Symposium in Cape Town, South Africa event not only highlighted the benefits of these approaches, but also embodied them.  Poll conducted during the Symposium in response to "What is the organizational enabling environment that would improve your market systems practice the most? 58% of responses indicated "More flexible/adaptive programming tools/processes" The Symposium was the inaugural edition of a (hopefully) annual gathering of some of the leading champions for inclusive Market Systems development It was a true learning event, focused on creating a dynamic and cross-cutting environment for development professionals from dozens of countries, multiple funders, and scores of projects from across the globe to share successes, challenges, and visions for a path forward in this discipline. Originally envisioned as a group of 40 or so thought-leaders, the event clearly offered so much potential that the guest list ballooned to more than 130 practitioners. As Chief of Party of the USAID LEARN contract, which is charged with supporting strategic learning and knowledge management at USAID to development results, I was asked to share how adaptive management processes are being embraced and integrated by USAID Bureaus and Missions around the world, along with resources that could be applicable for those working in Market Systems development. There was broad acknowledgement that adaptive management and more intentional learning efforts are essential to improved market systems effectiveness. I also learned about a number of programs that are integrating adaptive management practices in their work (all of which I strongly encouraged to submit to our annual CLA Case Competition!).  This particular gathering of development experts work in some of the most complex development contexts in the world, under constantly changing conditions, with numerous market actors. As an intentional approach to making decisions and adjustments in response to new information and changes in context, adaptive management is a promising approach to working under these conditions. So it was gratifying to learn about so many practical applications of this approach in action at the 2018 Market Systems Symposium. It is exciting to see the convergence of two of today’s most promising approaches for sustainable international development impact; I’m already looking forward to #MSS2019.
For more information on this event, go to https://www.marketsystemssymposium.org/. |
AuthorsThe MSDHub Blog Series is authored by respected implementers and donors of market systems projects globally. 
Core Contributor Mike Field
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