3 Models That Ensure Private Sector Engagement
In the following post on private sector engagement, the authors provide three examples of working with private sector actors. In the first intervention, a project works with a segment of the tourism industry in Jordan to help them connect to international marketing platforms. In the second, a project works with a specific business on how to commercialize a new product related to reducing aflatoxins in crops, and in the third, a project facilitates public-private partnerships related to entrepreneurial support services. While all the examples give some good ideas on ways to work with private sector, from a systems perspective there are important questions that practitioners should be asking and testing when applying any of these tactics.
The first question is, “why haven’t the actors come up with these solutions before, and will this intervention catalyze increased capacity to solve the next problem without donor leadership?” Often projects take a problem-solution mindset of development, as opposed to seeing their role as catalyzing a shift in the direction the system is headed over the longer-term. By asking how market actors innovate their own solutions, projects can start thinking about shifting the path the system is evolving.
The second key question is, “what are the market signals that will emerge in the market system coming out of the intervention?” For example, will private sector actors read the intervention as a special event primarily related to the project, or will they see other actors doing something innovative and copy and adapt that behavior? Thinking about competitive landscapes and how they need to change, and how interventions can catalyze changes such that firms compete to add value via innovations, is central to good systems thinking.
The third question is, “what are critically important feedback loops that have to guide/influence how the market evolves/how firms compete over time?” In most cases in developing countries, market actors are not responding to demand from mass-market segments (i.e., the middle, lower, and low-income customer segments). They typically respond to some combination of feedback that comes from political and economic power nodes. Whether in the form of political patronage or oligarchy/monopoly power, to the extent possible, interventions should catalyze a shift in which feedback loops have more influence as feedback acts like a kind of compass for a system guiding/steering how it evolves. It is not possible to make every intervention do everything systemically, but asking these questions can help project teams think about how to adapt existing/design new interventions that build off of initial successes to catalyze that changes in the path market systems are evolving.
Donor agencies, such as the U.S. Agency for International Development and the U.K. Department for International Development, have made private sector engagement, or PSE, a key element of their development strategies. Being more intentional about including the private sector in development is good news. Over the years, we in the development community have come to recognize that the success of the private sector depends on strong development outcomes. Both parties succeed when there is a healthy, well-educated, and skilled workforce, efficient and productive supply chains, better business environments, and stronger economies that drive more domestic commerce and international trade.
At Chemonics, we have learned there is value and opportunity for PSE in any other sector and at any stage of development. In the past, PSE often occurred once activities had been fully designed. Now, the private sector is active from the design and establishment of shared objectives to implementation and evaluation of outcomes to ensure we’re achieving sustainable results for all.
So what is the implementers’ role today? We believe our role is to bring partners together find ideas based on shared risk and shared reward, create sustainable and long-term impact, and test and scale up solutions. There is no one-size-fits-all approach to do this, but these are three PSE models that we have tried and tested in different parts of the world and with which we have seen some success.
The traditional model: Finding the sweet spot
Worldwide, travel and tourism is one of the largest economic sectors, supporting 1 in 10 jobs and generating more than 10% of global GDP. In the last five years, 1 in 5 new jobs were created in the tourism sector. For lower-income countries, this represents a significant opportunity for job creation and export growth, particularly among local businesses that provide services where large multinationals have little presence.
In Jordan, local small- and medium-sized hospitality companies outside of the capital of Amman struggled to attract tourists and grow their businesses. Traditional marketing techniques such as word-of-mouth, printed brochures, and basic websites were not generating enough growth. As the implementer of a tourism development program, we worked with the Jordan Tourism Board to increase sales and jobs in the industry. We recognized the untapped potential of local businesses and knew it could be realized if the tourism industry could successfully reach an international audience. We engaged the world’s largest travel technology companies, TripAdvisor and Expedia, to help identify solutions that would give the websites with more global tourism offerings, provide small Jordanian hospitality businesses with access to global tourists, and contribute to our development goals.
As the implementing partner, we facilitated collaboration between the travel technology companies and the Jordan Tourism Board. Through these partnerships, the Jordan Tourism Board was able to take steps to reach a new, broader audience of international travelers, showcasing what Jordan has to offer as a travel destination. Activities included Expedia holding a half-day workshop in Amman to teach local hospitality businesses how to create effective accounts. Additionally, TripAdvisor signed on to an agreement with the Jordan Tourism Board to provide support valued at $250,000.
The private sector direct model: Scaling innovations developed through research institutions
Aflatoxins — toxins produced by soil fungi that can infect commodity crops — threaten food security, health, and trade in many low- and middle-income countries, particularly in Africa. They contaminate food supply chains, and aflatoxin management has cost an estimated $1 billion per year in just the Philippines, Thailand, and Indonesia. They can also cause stunting in children and lead to liver cancer. After more than a decade of research, the International Institute of Tropical Agriculture developed Aflasafe, a natural product that combats aflatoxins. However, getting this product to the market was another challenge.
The gap between a scientific discovery and its commercialization is known as the innovation “valley of death,” a nod to common hurdles that stand between innovative solutions and practical scalability. The problem facing Aflasafe’s commercialization is that the product does not have a direct impact on agricultural yields. And, the negative effects of aflatoxins in the body can take years to manifest, resulting in very low awareness among farmers because they are often invisible to the naked eye. We knew commercialization of Aflasafe depended on a market-driven approach and leveraging private sector assets, so IITA set up the Aflasafe Technology Transfer and Commercialization Project and implemented it in partnership with Chemonics and Dalberg Advisors.
To reach the necessary number of farmers and ensure Aflasafe would be viable, ATTC developed a five-phase commercialization methodology for taking science to scale, focused on analyzing and presenting market analysis to private investors and business opportunities to manufacturers. Since November 2015, ATTC has seen six market assessment strategies, four technology transfer agreement licenses, two distribution licenses, and three actively operational manufacturing plants. This commercialization methodology can be adapted by research institutions or donors seeking to leverage the resources of private business to get new innovations on store shelves and in the hands of users who will benefit.
The multiple partner/complex model
Private sector growth in LMICs is often stymied by a workforce with insufficient skills and technical training, resulting in youths and entrepreneurs unprepared for today’s tech-driven economy. Local companies are challenged to use modern technology solutions that would help them compete in lucrative markets, and global technology companies’ products are not utilized to their full potential in these markets.
To tackle these challenges in Moldova, we applied a collaboration model known in Europe as the “golden triangle,” bringing together industry, government, and academia to develop innovation centers based on the needs of the private sector. Multinational technology company Microsoft approached the development community with an interest in building an information technology training center in Moldova. We took the initial concept and evolved it through co-creation with Microsoft, IBM, the Technical University of Moldova, and the Moldovan Association of Information and Communications Technology Companies into an ICT Center of Excellence.
Using a similar co-creation process, we have since transformed business ideas from numerous companies into six other university-based excellence centers, which include shared learning spaces, coworking and startup zones, globally recognized training programs for cutting-edge and in-demand technologies, and collaborative production facilities with equipment, tools, and software for rapid prototyping.
As the development implementer, we identified the shared business and development interests among all the partners. We convened private sector companies with similar business needs and ideas as well as academic institutions with shared technical interests and long-term commitments to training and education. Global and local companies contributed technical know-how, software, hardware, training programs, and trainers to ensure the global relevance and quality of services. Universities provided physical spaces and long-term management, while local private sector associations provided business planning, management systems and support, and continual input on private sector business needs to ensure sustainability.
Meanwhile, donor, university, and industry association representatives serve on the centers’ boards of directors for balanced oversight. Having strong, credible partners and using proven global approaches convinced the Moldovan government that these centers would be well-funded and managed and would achieve both business and development objectives, ensuring long-term critical government support.
Through the centers, 180 teams and startups have benefited from acceleration programs in technology, fashion, and digital business. Some 34,000 youths and professionals have developed in-demand technical skills in coding, cybersecurity, the “internet of things,” electronics, fashion pattern-making, design, and robotics. We project that, by the end of 2020, the centers will have improved the skills of 40,000 youths.
We know that doing good and doing well are not mutually exclusive. If we are to make achieving the Sustainable Development Goals profitable for the private sector, we must understand the needs and strengths of all partners and design projects on this foundation of shared value to transform development outcomes. Whether the role of the development community is to identify opportunities, convene stakeholders, facilitate partnerships, provide technical guidance, or measure impact, development practitioners should adapt their involvement according to unique circumstances and opportunities. Only then can we facilitate the right partnerships that will bridge private sector interests and development goals.
About The Authors:
Melissa Scudo Gasmi
Melissa Scudo Gasmi is currently the senior vice president of Chemonics’ Middle East and North Africa region. She joined Chemonics in 2007 and brings 20 years of experience managing complex international development programs both overseas and in Chemonics’ home office. Gasmi served as team leader and chief of party for Chemonics’ Tunisia Tax and Customs Reform Activity in Tunisia, chief of party for Chemonics’ Asia and the Middle East Economic Growth Best Practices project, and program manager and deputy program manager of the global financial sector knowledge sharing project.
Eileen Hoffman is the director of the economic growth and trade practice at Chemonics where she leads industry engagement, enhances project performance, supports the development of competitive proposals, and fosters knowledge sharing and innovation in the areas of entrepreneurship and enterprise development, trade and regulatory reform, financial services, public financial management, and business enabling environment
Tracy Shanks is a subject matter expert and leader in private sector engagement, trade and investment, market analysis, investment promotion, business reforms and efficiencies, public financial management, and business enabling environment. She brings more than 20 years of experience in international development and portfolio management at Chemonics, including executive roles as senior vice president for Afghanistan/Pakistan and South America.