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  • Karen Smith

Technology Disruption in MSD Programs – From Startups to Multinationals

Updated: Feb 12

MSD Hub editor's note (Michael Field, Senior Systems Specialist, Vikāra Institute):


This blog provides some important insights on how to apply systems thinking lenses to support innovative technologies.  Of particular importance is the idea that MSD approaches should not focus on a specific technological solution to push, but on the ability of the system to continually search and filter potential solutions and performance improvements.  Central to this thinking is that it is critical to think about change over time (i.e., not about the perfect solution) that needs to emerge from context-specific disruptions that are attractive to market actors.  As the blog points out, what might be attractive in a given context is often not the most advanced or even the ‘best’ option according to an expert.  An additional and important point the blog highlights is the importance of focusing on the competitive landscape or the various forces and factors that influence how technology emerges, gets adopted and changes over time.  A typical challenge with donors and technology is the tendency to pick a specific winner and then provide unfair support to that one company or type of technology, which often skews the competitive landscape in ways that actually reduces the likelihood of the next technological innovation to emerge and take hold.  Applying systems thinking approaches to technology is not about a specific technology, but about the systems’ ability to align market forces around finding solutions in response to threats and opportunities that the society signals are important.  It is through this process that market actors can develop technologies that add value on an ongoing basis. 


 


The Market Systems Symposium 2023 held a small, fascinating ‘Deep Dive’ discussion on market systems development and disruptive technology. The group agreed that our primary discussion question should be: how to make the most of technological innovations in MSD programmes? And then - not surprisingly given the topic - we put it to ChatGPT.  The advice it offered was very generic: “build capacity among disruptors and market players to understand and embrace new technologies; provide relevant regulatory support; facilitate access to finance, partnerships and market linkages; and conduct monitoring and evaluation to assess impact and adjust approaches”. Uninspired by this I decided to offer some more thoughts based on our group discussion and my own experience….


A common trap into which MSD projects can fall, looking for novel ways to achieve system change and simultaneously catching a donor’s imagination, is to be tempted by shiny new things. Agricultural programmes, for instance, might well plan to support the development of novel mobile apps for farmers, e.g. to diagnose pests and diseases or to help them plan their farming calendar. But these solutions might well not suit the wider smallholder population – many (and certainly the poorest) farmers cannot afford a smartphone or pay for data or phone charging. And female farmers are less likely than male counterparts to have mobile phones so care is needed not to perpetuate gender disparities while popularising tech solutions. Simpler text or USSD-based mobile information systems that don’t require a smartphone - and might be considered ‘old fashioned’ - are much more accessible to farming communities. 


Further up the value chain, digitalisation is an increasingly important technological factor for the growth of small and medium enterprises (MSMEs). The BEAM Exchange guide on how to use the market systems approach for digital transformation explores how MSD can be used to facilitate change in the digital ecosystem leading to adoption of new technologies for MSMEs to unblock value chain barriers and facilitate market access. Better data management, for instance, can improve firm decision-making and digital financial management can hugely reduce transaction costs. But one key learning from the guide is that ‘Not solely the most cutting-edge technologies, like artificial intelligence and the internet of things (IoT), offer promising prospects. For most MSMEs, the adoption of “basic” technologies, like emails, websites and office software packages, can already bring far-reaching and transformative changes’. Similar learning is reflected in a recent paper from the NIRAS-managed CASA programme on reducing food loss in agricultural production which suggests that it can be better to ‘reduce the cost and improve the reliability of nascent … technologies’ rather than piloting entirely new products.


Supporting innovation is often, nevertheless, a core part of MSD programming and implementers are understandably keen to support startups with potentially transformational technologies. But supporting nascent tech companies is a tricky undertaking and all of our Deep Dive group shared highly frustrating examples of poorly thought out investments (not exclusively in MSD programmes) where donor funding had been lavished on certain well marketed startups which then went on to collapse when the lack of a business model finally caught up with them. One of our group had extensive experience in tech company funds and incubators and his advice was to consider systemic support to tech startups. His point was that MSD programmes very commonly identify tech SMEs to work with to fulfil market gaps or strengthen value chains in other ways - but are development programmes best placed to identify and support these companies? Increasingly in developing countries where ICT is booming (such as Kenya and Ghana) there are burgeoning entrepreneur support organisations (ESOs) that incubate and invest in the most promising startups. Could MSD programmes be shrewder by engaging with these ESOs to cultivate a broader range of tech companies rather than working in parallel?  This both reduces the risks involved in picking individual startups to support and leverages ESO expertise and if done smartly can strengthen the startup support ecosystem for more sustainable development of new technology companies. 


Another less risky option than working with startups to stimulate technology innovations might be to work with large companies. Several years ago I worked on the UKAid Business Innovation Facility programme which engaged with the private sector in a number of experimental ways. One pilot window sought to leverage the innovation and scaling capacity of multinational corporations (MNCs) in a systemic way, responding to the UK government’s agenda of harnessing the private sector in delivering international development objectives. MNCs were invited to put forward original commercial concepts which could also have pro-poor and/or environmental impacts. We were looking for ideas that were sitting on the shelves of company R&D departments – ones that weren’t prioritised for investment but could be brought to life by some additional funding and support. In several cases the entry point to such projects was through MNC corporate social responsibility departments, but ultimately the concepts had to have profit-making at their core. 


A rapid market assessment was used to test concepts and if this yielded a positive outcome, an MSD intervention was designed for implementation, strengthened by the commitment of the partner MNC whose involvement meant a much greater chance of success and subsequent scaling. The whole programme was technologically and geographically agnostic so the projects were hugely varied, but examples included working with a large bank to improve agricultural lending and the introduction of ‘tea swaps’ as a financial instrument to mitigate the impact of fluctuating tea prices in Kenya. As with any private sector initiative, care was taken to avoid market distortions – this was particularly important when working with such large powerful players, for instance ensuring that innovations could be readily accessed or replicated by others. Donors may be wary of potential market distortion, but the DCED guidance on the topic provides useful advice on how it can be avoided.


MSD programmes may look anywhere from large companies to startups to find disruptive technologies – each type of business will require different engagement strategies and present different risks to navigate. Although the excitement of trying something new and pioneering can be hard to resist, programme teams should also weigh up the costs and benefits of alternative options such as to adapt or scale existing technologies. Finally, whether scaling the old or incubating the new, working with existing actors to facilitate change is always the route to sustainability, including in technology ecosystems.



Author: Karen Smith


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