Inclusive Innovation: Part 6 of New Business Models for Sustainable Trading RelationshipsOct 6th, 2010 | By Ashley Friedman | Category: Inclusive Markets, Linking Farmers to Markets, New Business Models, New tools
Note: This post is Part 5 of a 6-part series exploring new business models for linking small farmers to global markets being analyzed through an international collaborative effort that can be read about here. Read an introductory post, see links to parts 1-4 below, or follow our series at Nextbillion.net.
Innovation and Development
Innovation is the way of the future. Or at least that seems to be the buzz word of development recently. We have finally realized that the “same old, same old” tactics of implementing top-down interventions have not eliminated poverty, hunger, diseases, or food insecurity. The search is on for new business models and technologies to help the bottom billion escape poverty, poor health, and low educational attainment. Development approaches now focus on the capabilities and originality of those at the bottom of the pyramid, instead of their deficiencies. Organizations like Ashoka and Acumen seek to break the traditional development paradigm and harness the innovative spirit of entrepreneurs with experience in their respective communities by providing mentoring and financial support. These organizations’ investment in local abilities is paying off both in terms of economic growth and social well-being. So how can other already existing companies and organizations exploit the power and experiences of those at the bottom of the pyramid to improve business performance and enhance the lives of all actors in the value chain?
The New Business Model series focuses on increasing the participation of smallholders in the decisions and processes that affect their livelihoods. Inclusive innovation by definition incorporates these smallholders in the process of transforming the market chain to increase value in one or more of the links and for the chain as a whole. In the case of agricultural supply chains, often the smallholders’ knowledge of best farming practices given the geographical, cultural, and technical context can prove vital to effectively adding more value to the product, increasing the earnings of actors in every phase of production, and generating or responding to new market opportunities. A new report by the U.N. “The MDG’s: Everyone’s Business” touts the ability of inclusive business to catalyze innovation, create new markets, and fortify supply chains in rapidly changing markets. Hence, I use an example from the Philippines to illustrate the power of local knowledge and community inclusion to drive innovation and markets:
Bo, a native Filipino, was horrified by the poverty that plagued small, Filipino coconut farmers. He recognized the possibility to eliminate waste and improve the livelihoods of the farmers by creating twines and ropes using a traditional 100-year-old weaving process, which then would be processed into nets. Bo started CocoTech, which incorporated the community into each stage and truly considered the community as a business partner. The local farmers’ organizations share the accountability for operations, hence, creating a sense of responsibility to the company and enhancing the efficiency of the supply chain. Through collaboration with other coconut processing organizations, both groups benefited from the discovery that design modification of the twiner and loom could double production. CocoTech secured market access through contracts with Mercedes-Benz and Presidential mandates to use nets in public works projects in the Philippines. The introduction of new markets reinvigorated the coconut farming industry that was failing in the Philippines and created multiplier effects in other industries as well. Through continued research and collaboration, the processes and equipment continue to improve.
How is Inclusive Innovation different?
Inclusive innovation breaks from the traditional development values of wealth redistribution instead focusing on wealth creation through creating value both for the populations at the bottom of the pyramid, other supply chain actors and final consumers. Rather than trying to redistribute a static or, or in many cases, shrinking pie, inclusive innovation seeks to grow the overall value of the product and thus provide incentives and additional wealth which can accrue to the diverse sources of innovation in the supply chain. In contrast, “normal” innovation tends to occur through research and development initiatives sponsored by actors at the end of the value chain. As a result, the majority of benefits tend to accrue to market proximate actors. A recent report by the U.K. Department for International Development (DFID) stresses the benefits of including all stakeholders in the innovation process as a means to both maintain leadership in the marketplace and to create sustainable solutions for the future of agriculture. The report outlines many benefits associated with inclusive innovation in research that increase efficiency:
- Ease of adjusting technologies to particular environmental conditions
- Faster testing, evaluation, and adoption of technologies and innovations
- More effective identification of improvements based on local knowledge
- Increased access for farmers to shape research priorities that affect their livelihoods
In addition to the points highlighted by DFID, inclusive innovation can also provide important competitive advantages for the overall supply chain. For example, as market demands shift and new market opportunities emerge, having the capacity to react in a coordinated and collaborative fashion can allow the supply chain to bring novelty to market faster as opposed to a traditional R&D approach. In this regard decentralized and smaller production units operating in a networked fashion tend to be more efficient. Examples of this can be found not only in agriculture, but also in areas like textiles and fashion in northern Italy.
In the final segment of the series, we will discuss shared measurements and outcomes as they relate to new business models for small farmer inclusion.
Past posts on this series, Exploring New Business Models for Linking Small Farmers to Global Markets include;
- Facilitating chain-wide collaboration;
- Fair and transparent chain governance;
- Exploring new market linkages;
- Providing access to services;