I like the look of this slide but (1) why do we introduce again another process flow and do not stick the one before and (2) what is the key message of this slide? Is the idea to transmit Key questions?People will get lost as this slide and the one before are not in line with each other.Suggestions: Combine 3 and 4 and call it Impact pathway (or logical path) with Indicators and Steps (what) as subsections (note: in order to be consistent we also have to mention Responsibilities (Who?))
Progress markers: A set of progress markers represents a change model for the boundary partner that illuminates the depth and complexity of change being sought. May indicate reactive par Expect to see: early response to program’s basic activities. (reactive participation) Like to see - active learning and engagementLove to see (profound change) Who? is doing what? How? Individually progress markers can be considered as sample indicators of behavorial change- but their strength rests in their utility as a set. Cumulatively- they illustrate the complexity and logic of the change process.
Source: “How to Monitor and Evaluate Impacts of Participatory Research Projects: A case study of the Forages for Smallholders Project.” Cramb, R. and Purcell, T. CIAT Working Document. Oct 2001.Source. Sartorius, Rolf, Participatory Monitoring and Evaluation Systems:Improving the Performance of Poverty Reduction Programsand Building Capacity of Local Partners
Key principleMental modlesOwning assumptions
For projects that work with private sector partners, we often work at the value chain level to promote trade between groups of producers needing new or improved trade and companies needing more or improved supplyNext is the structure of the trading relationships. It is not just about a sourcing opportunity – but an inclusive, durable, and fair one. Looking to the business model principles, are there needs and opportunities around collaboration? Market linkages? Transparency and risk sharing? What services are needed by the farmers and the intermediary?A typical weak point in inclusive business models is the “specialized intermediary” – the business that is sourcing from small scale producers and having to meet the souring requirements of modern fast moving supply chains. Understanding whether the requirements can be met, and whether the basica business model -- including he costs of services to promote and sustainable inclusive – can be carried by the value proposition is critical.Finally to increase impact and reduce risk means investment at the household level. A single value chain should be one of a number fo strategies… DB - To develop the market linkages, we critically need an effective intermediary to play the role of linking the informal world of multiple smallholders into the commercial world of modern markets. Aggregation, but critically the right services to meet quality standards, e.g. Mali women carts? Too often NGO’s or lead firms build services as part of development or sustainability project that is not publically funded or funded through the business model. Always ask the question whose role is it and if it is a service who will pay on-going for this? DS – To make this work we need to create a new business model, this is primarily between processor and farmers or their group enterprises. But also a new business model may be needed at lead firm level. We have five principles we work by etc.. Think Big Go SmallDB – Facilitate or broker the market system out of catalytic opportunity
Link methodology short presentation
THE GOAL OF THIS TOOLKITis to build inclusive and sustainableTRADINGRELATIONSHIPSlinking small-scale producers to modern marketsThe LINK methodology will help you understand the current functioning of the market chain and key businessmodels, design innovations that empower producer groups to engage more effectively and buyers to act in ways moreamenable to small holder farmers. At the end of the day, this method seeks to build bridges between the often disparateworlds of small holder farming in the developing world and emerging market opportunities both in the global south as wellas developed economies. 2
MAPPING BUSINESS MODELS AMONGST OTHER DEVELOPMENT APPROACHES PRODUCT VALUE PROPOSITION? What are the key elements of the product value proposition? Variety, quality, ethical story, etc. LIVELIHOOD STARTEGY UPGRADING STRATEGY BUSINESS MODEL INCLUSIVE AND DURABLE What is needed at the What is needed at the farm Is there a viable TRADING RELATIONSHIPS? household level and and processing level to business model for the Can we improve supply chain agriculture system level meet the product intermediary that coordination? Market to increase gains and requirements and to include supports the services linkages? Fairness reduce risks? asset poor farmers? needed for inclusive , transparency and risk? sourcing? Access to services? 3Source: Seville, Don. Sustainable Food Lab for Linking World Conference.
ELEMENTS FOR INCLUSIVE BUSINESS MODELS 4Adapted from www.regoverningmarkets.org by CIAT
Our goal is NOT to link the poorest farmers to the most demanding markets but to invest in moving farmers up and make markets more accessible 1-2% are the commercial farmers (2% of farmers account for 50% of maize sales) 3-15% are regularly selling into markets 20-30% are occasionally connected to markers and are food buyers 40-50% are subsistence farmer (e.g. maize), buy in food, and get most cash from off farm work. 5Source: Nicholas Sitko, Michigan State University. Study presented at the Agro-Enterprise Learning Alliance for Southern and Eastern Africa.
THE PATH TO INCLUSIVE INNOVATION uncertainty/patters/insights clarity/focus Solicit input Analyze Focus Plan Design & testThis toolkit will walk you through an innovation process based on a set of participatory tools adapted fromvalue chain analysis, business model assessment, prototyping and related fields. The methodology isgrounded in a set of emergent principles that have shown to be effective in supporting long-term sustainabletrading relationships between small-holder farmers and formal markets. At the end of the process you willhave succeeded in understanding the relationships between specific business models and the overall valuechain; identified critical areas for improvement; designed, implemented, evaluated and improved innovationprototypes; built an improved business model; and, evaluated the effects of these changes on smallholderfarm families and the business itself. 6
3 PERSPECTIVES “I have a mission “I am seeking to to support small- expand my supply farmers through chain to include service provision small-holder and coordination “I am looking farmers” with buyers” to sell my product better to buyers”NGO BUYER FARMER 7
Sources of inclusive innovation PARTNER NETWORK CHAIN ACTORS Market Value Chain SystemUPGRADING STRATEGY Farmers Aggregation/ Markets Processing External Environment Feedback/Adjustment TRADING LEAD FIRM MODEL MODEL
WHAT TOOLS CAN WE USETO DETERMINE AREAS OF INNOVATION WITHIN MARKET CHAINS? Business ModelValue Chain 2 Map 1 Canvas New Business 3 Model Prototype Principles 4 Cycle 9
Roadmap “I am just looking for a baseline to business is happening Understand the basic (2) Framework for a snapshot of today’s identify bottlenecks and opportunities’’ context in which the (1) Analyze functioning of a specific ‘’I am looking for a participatory situation and tomorrow’s vision. toolkit to enhance inclusiveness for KEY TOOL # 1: organization including up and Purpose: small holder farmers.’’ Value Chain “I want to zoom in and downstream connections Map focus on one important business link” Key questions: KEY TOOL # 2: Who are key actors and what are their roles? Purpose: How do products, services and information Business flow through the chain? Who are (potential) partners? Model Canvas ADD-ON # 1: Key questions: How can I understand the functioning of a Drivers, trends and key implications specific link in the value chain? “I need help in identifying critical points and opportunities’’ ‘’I don’t know where to focus the BM Analysis’’ “I have got an inclusive innovation idea and just need help with the implementation’’ ADD-ON # 2: the inclusiveness of “I want to measure NBM Typologies my business’’ ‘’ I want to understand typicalthrough rotative up-scalingImprove inclusiveness and performance Purpose: KEY TOOL # 4: characteristics of inclusive businesses’’ Prototype “I want to improve Cycle inclusiveness through innovation ” Key questions: a wider social context Enhance efficiency within Purpose: KEY TOOL # 3: How can I move from theory to action? How can I incorporate innovation ideas in a NBM work plan? PRINCIPLES “I want to design a new business under inclusivity aspects’’ Key questions: How inclusive is the business? How to identify areas for change?
THREE LEVELS OF VALUE CHAIN MAPPING Understand how the different business links function together as a system Identify and assess the relationship, leverage points, capacities and resources of partners including Understand the context in which the system operates support services and stakeholders 12
Or like this... STRAWBERRY CHAIN, MEXICOAdapted from “Chain-Wide learning for Inclusive Agrifood Market Development: A guide to multi-stakeholder processes for linking small-scale producers to 14modern markets.” Sonja Vermeulen, Jim Woodhill, Felicity Proctor, Rik Delnoye. IIED, Wageningen International and Regoverning Markets, 2008
Or even like this one! INPUT STRAWBERRY MARKET CONSUMER SUPPLIERS STRAWBERRY GROWERS PROCESSORS US external market High Technology Export • Driscoll mainly PLANTAS Large Producers 23-28% • Between 12 to 50 acres of land • Window of 80 to 90 days Importation MADRES • 150 to 225 MT acres 4,760 a 5,950 MT Nov to Feb. • Production technology:: • Imported from • $ 5 a 7.5 k • 44 to 5,000 k/daily - Traditional 2% U.S. • 67% export. - Medium13% • Royalties paid in • 33% Industry - High 85% National distributors cash from parent Fresh Formal National • Large landowners • Gaitan, Gutiérrez plants. 28-42% • Do not depend on each harvest for their 30% • 65,000 to 97,500 k/day • Formal Importers- 5,850 a 8,775 MT Informal Eurosemillas, S.A. living. 20% 21,037 MT • They hire a lot of workers 35% , la Unión Agrícola • The majority applies BPA 14,024 MT 7,312 a MT Regional de • 5% of the total population are large Industry leader Productores de producers Flow • Agrana, Frexport y Wholesale markets Fresas y • Informal Market Profusa. • CEDA México Hortalizas del • Undifferentialted • Products: IQF, bases for • Other states across Valle de Medium Technology product, not yogurt y jams. the country Zamora, processin Medium-scale Producers • 85 to 100 MT acres. sanitized(water). • Process between 10 and g companies. • Between 5 to 10 acres of land • $ 3.75 a 4.29 k • Cash 12,000 MT/ ano for each. • Applied production technology: • 10% export. • 130,000 kilo/day -Traditional 80% • 90% Industry - Medium 20% Processors in Production of strawberry (70,122 ton, 2005) Purchase Price US$ 220 / box of 1.000 - Farmers and their families are involved Irapuato Leaders plants (royalty US$ in the work, plus additional external • Congelador El Niño 53-61% Large-scale fruit 150/box) labor force is contracted. • Congelador del Río 26 a 30 MT processors Needs: 1 box per acre of - Important income source to sustain 50% • Duarte strawberry. • 5 companies • Agriamericana livelihood but farmer have other income 35,061 MT Including freight and • Work closely with industry • Mexfruit. nursery, cost. US$ sources. leader 1.000/Ha. - Few application of BPA, for those who do not have problems with water quality Industry Supermercados - 60% of the total population are medium 70% Costs scale producers . • 0.69 p/kilo Other inputs - There numbers are stable. 49,085 MT • 1 p/k admin. Group GYC • Agrochemical • 0.15 a 0.30 earned/k stores National industrial • Inputs include: Traditional Technology customers Medium industry - Fertilizers • 50 to 60 MT acres • Yogurt dynamic • Cookies - Pesticides • $ 5.6 a 7 k • 9 companies Small-Scale Producers Dynamic • Jam - Foliar • 10% export. • Mainly family capital • Between 0.8 to 5 acres of land 19-21% • Jugos • Technology • 90% Industry • Frozen strawberries in • 100% of traditional production 9.5 a 10 MT • Paleterias - Drip irrigation various forms technology systems, fertigat • Develop new products and • Family work, but hire labor for harvest. ion, plastic markets International clients • Highly dependent on each harvest for mulch sustaining their livelihood. • Fruit bases greehouses • Very few apply BPA, b/c of rolling water • Frozen fruit 30% Costs hole or river water quality problems. • Represent 35 % of total population 21,036 MT • 4.47 /k processing • Final costs 11.01/k Other clients US Medium industry Brokers US traditional • Interamerican • 11 empresas Tradicional • Capital principally from 80% Quality Foods 18-28% • JSO Associates ejidal 9 a 14 MT • Rigby Foods • Frozen strawberries inAdapted from Lundy, M. “Análisis del Sistema Producto Fresa en el Valle de various presentationsZamora, Michoacán, México”, in Berdegué, J.A., Sanclemente, X. (eds). 2008. La Fresa en • Traditional products and markets 100% 15Michoacan: Los Retos del Mercado. SAGARPA, Michoacán, Mexico.
THE BUSINESS MODEL CANVAS 4 AREAS 9 BLOCKS HOW? WHAT? WHO? HOW MUCH? 18Osterwalder, 2010 Adapted from: www.businessmodelgeneracion.com
THE BUSINESS MODEL CANVAS 4 AREAS Key activities Customer 9 BLOCKS relationship Value Partners proposition Customers Key Resources Channels Cost structure Revenue Streams 19Osterwalder, 2010 Adapted from: www.businessmodelgeneracion.com
ADAPTING BUSINESS MODELSTHE PRODUCTION THE MARKETING SIDE: SIDE: comprises the set of comprises the set ofactivities, mechanism activities, mechanism s and relationships s and relationships for providing a good for selling that good or service, in other or service, or in other words for creating words for capturing value. The partner value. Broadlynetwork -- the supply speaking, the chain and its production side is coordination – is a associated with costs vitally important while the marketingsource of competitive side generates advantage. revenues, though marketing also entails costs. 20
DOUBLE-FACING VALUE PROPOSITION FOR INCLUSIVE BUSINESS MODELSCLIENT-FACING FARMER-FACINGIs there assurance of supply, safety Whatand quality? Do the products tell a products, strategies, activities orstory? Support the brand? purchasing practices can promoteDifferentiate your client in the smallholder inclusion? Are we amarketplace? preferred buyer?
From Value Chains to the Business Models “The value chain map is the high level view on the system and the business model canvas the close-up on one organization with a 360 view.” 23
BUSINESS MODEL CHAINSCustomer or supplier? - A question of perspective. 24
TWO STAGE BUSINESS MODELA two stages business model can representdirect trade from producer to retailer Business Model B Key Customer Key Customer activities R/ships activities R/ships Value Suppliers Value Partners Proposition Proposition Customers Customers Key Channels Key Channels resources resources Cost Revenue Cost Revenue structure stream c structure stream Business Model A 25
MUTLI STAGE BUSINESS MODEL Business Model B KA CR C KA CR C KA CR C P VP VP VP KR CH P KR CH P KR CH P c CS RS c CS RS c CS RS c Business Model CBusiness Model A 26
Business Model Canvas of Chiyangua, Colombia 29
Evaluation of Business Model Canvas of Chiyangua, Colombia 30
Business Model of APROCA, Ecuador Key activities Value Relations Clients Partners proposition Clients pay an appropriate price for Technical assistance for the product producers APROCA support Without contracts associated farmers in Payments do not always happen Project management with improving their on the due date Pacari partner of international livelihood Cacaoyere cooperation Cofina Intense customer care APROCA= Registered brand Marketing With contracts Unique characteristics in Key resources terms of Cocoa quality and Channels Transmar environmental conditions Process transparency and International and national What do clients product traceabilityPartners provide Technical equipment and Chocolate fairs demand?support for: infrastructure High Quality Constant quantityProduction Existing clients visit Know-how CertificationsInfrastructure APROCA “headquarter” Fixed pricesOrganizationMarketing Communication via mobileFinancial phone and internet pageCost for humanresources is partlyassumed by partners Cost structure Raw material Transport Fermentation Drying process > Break even point: 2500 cwt/year Revenue structure Sales margin on Cocoa Grants by partners 31
THE NBM PRINCIPLES - AN OVERVIEW 3. FAIR AND 4. EQUITABLE1. CHAIN WIDE 2. NEW MARKET TRANSPARENT ACCESS TO 5. INCLUSIVE 6. MEASUREMENTCOLLABORATION LINKAGES GOVERNANCE SERVICES INNOVATION OF OUTCOMES______________ _______________ ______________ ______________ ______________ _______________The resolution of For farmers and their Fair and transparent One of the special New business The business axiomproblems, in both organizations, market governance refers to challenges faced by models PROMOTE states that you cannotthe commercial and linkages should the establishment and small-scale INNOVATION by manage what you dosocial performance provide a STABLE enforcement of CLEAR producers is access multiple actors along not measure. Our sixthof new business MARKET with clear AND CONSISTENT to services such as the chain in principle is tomodels requires all quality, volume and GRADES AND finance, market PRODUCTS and incorporate TAILOREDor most chain actors price signals as well as STANDARDS, CLEAR information, and SERVICES as well as INDICATORS ANDSET SHARED GOALS access to key services COMMITMENTS to best agronomic the PROCESSES that MONITORING PLANSFOR (Principle 4). These buy and sell certain practices that could underpin both. to assess the health ofCOLLABORATION. linkages must volumes of certain improve quality, Innovations should the on-going tradingThe development of contribution to grade products at yields, food safety, be done ‘WITH’ relationship as a for-a systemic view of improved livelihoods. certain times, and and environment SMALLHOLDER profit business andthe chain recognizes For buyers, solutions equitable processes of performance. FARMERS, rather also its effectivenessand values the must provide A RISK MANAGEMENT. Successful solutions than ‘for’ them. as a vehicle forinterdependence of CONSISTENT SUPPLY Mutually enable smallholders Inclusive access to communitythe actors. Reaching of safe, quality RECOGNIZED to ACCESS CREDIT, innovation provides a development.and implementing products at a INTERDEPENDENCY KNOWLEDGE, means to remain Constant monitoringagreement often competitive price. between chain actors TECHNOLOGY, and competitive in of the health of theinvolves is a key criteria. develop incentives dynamic markets; trading relationship The achievement ofIDENTIFYING one or Shared commercial that encourage build the commercial reduces the risk the both producer andmore CHAMPIONS risk and insurance producers to invest value of goods and minor problems will buyer goals inalong the chain to against failure are in their own services; and, share destroy the business. practice requires thelead the process. frequently cited as the production based on innovation gains delivering social and commercial value up cement of successful market needs. among partners all of and down the chain. relationships. which builds business durability.
THE NBM PRINCIPLES - KEY QUESTIONS 3. FAIR AND 4. EQUITABLE1. CHAIN WIDE 2. NEW MARKET TRANSPARENT ACCESS TO 5. INCLUSIVE 6. MEASUREMENTCOLLABORATION LINKAGES GOVERNANCE SERVICES INNOVATION OF OUTCOMES______________ _______________ ______________ ______________ ______________ _______________Are the goals to clear How easy or difficult is Are Do all actors have Is there evidence of Are economic andto all actors in the it to buy (find product) standards, processes, timely access to product or process developmental goalschain? and sell (find buyer) in prices clear and market information? innovation? and indicators known this chain? consistent across the and shared along theIs there opportunity chain? Do all actors have If so, who chain?for co-investment or How are sellers linked access to financial participates andshared decision to buyers? Are Are risks and technical why? What systems are inmaking in the chain? linkages stable or (production, commer support services? place to effectively constantly changing? cial, financial) If innovation is measure or analyzeAre there structures understood and evident, who gains indicators?in place for Do buyers know shared Are there examples from the results? Arecollaboration or where their product proportionately of service provision there profit-sharing How does the chainshared problem comes from? along the chain? that goes beyond mechanisms in deal with difficultiessolving? basic production place? and crisis Do farmers know Do all actors have services? management?Are there one or where their product is access to information Is innovationmore champions consumed? on quality standards? encouraged among Are there feedbackwho will lead the all actors in the loops in place toprocess of co- Is there evidence of chain? guarantee effectiveinnovation? formal or informal chain-wide contract adherence? What are the management and If so, why? If incentives? decision-making? not, under what conditions do contracts break down?
New Business Model Principles SCORECARDPrinciple 1: Chain Principle 2: Effectivewide collaboration market linkages # Scoring criteria Does not Fully # Scoring criteria Does not Fully apply at all applies apply at all applies 1 Formal or informal flow processes between 1 Trading relations are stable actors are defined 2 The trading relationships are profitable for all 2 Actors along the chain have the same vision actors and follow the corresponding goals 3 Each link adds (social or commercial) value to 3 Commercial goals are aligned among the the product actors 4 Producers generate a stable income from their 4 Social goals are aligned among the actors products 5 Actors have the capacity to identify new market 5 The chain can be described as a collaborative opportunities partner network 6 Actors rapidly react to changing market 6 Problems along the chain are easily identified conditions 7 Chain actors are able to react rapidly to 7 Intermediaries respond to needs of both, upcoming problems suppliers and buyers, through a tailored double value proposition 8 Interdependencies of actors along the chain are recognized and valued 8 Up-stream actors are familiar with the product delivered to the final customer 9 Processes are set chain-wide and are not restricted on one individual actors 9 Down-stream actors are familiar with the production system 10 Chain wide incentives are created to enhance collaborative behavior 10 Intermediaries deliver social and commercial value to suppliers and buyers 11 Champions, leading the collaboration process are identified in different parts of the chain or 11 Farmers are formally or informally organized business model are identified 12 The procurement system is stable 12 It is possible for the actors in the chain to participate in decision making processes 13 Complementary markets are reached for 2nd and other products Average Score P. # 1: Chain wide collaboration Average Score P. # 2: Effective market linkages
New Business Model Principles SCORECARDPrinciple 3: Fair and Principle 4: Equitabletransparent governance access to services # Scoring criteria Does not Fully # Scoring criteria Does not Fully apply at all applies apply at all applies 1 Grades and production standards are 1 Technical assistance for production is consistent and known by all actors available 2 The price formation in each link of the chain 2 Production and post-harvest technology is is known by all actors available 3 Producers know the quality requirements to 3 Transportation services are accessible receive top prices 4 Small holders have access to financial 4 Incentives are transparent and aligned with services outcomes 5 Financial services are used by small holder 5 There are clear commitments to buy and farmers sell certain volumes, of certain grade, at certain times 6 Financial services are affordable for small holders 6 Risk sharing models include formal and informal insurance schemes 7 Input supply and dealer models are established 7 Equitable processes of production risk sharing are established 8 Services are provided by double specialized intermediaries 8 Equitable processes of commercial risk sharing are established 9 Production related credit providers take into account soft collateral (contract, 9 Risks do not fall disproportionately on one organization, potential) actor or group of actors 10 All producers have timely access to market 10 Trading terms are clear to all actors information 11 Buying conditions are clear to all actors 11 All producers have access to information on quality standards 12 Formal or informal contracts are concluded Average Score with producers P. # 4: Equitable access to services 13 Mechanisms are in place to ensure that fair prices are established Average Score P. # 3: Fair & transparent governance
New Business Model Principles SCORECARDPrinciple 5 : Principle 6:Inclusive Innovation Measurements of outcomes # Scoring criteria Does not Fully # Scoring criteria Does not Fully apply at all applies apply at all applies 1 Innovation is promoted by multiple actors 1 Formal and informal feedback mechanisms including producers are established within and in-between (groups of) actors 2 Innovations are clearly aligned with market opportunities 2 Decisions are based on assessment 3 Continued product and process 3 Measurements are as simple and cost-neutral improvement takes place as possible 4 The value chain actors are able to responds 4 Measurements are designed and tested jointly to market tendencies 5 The perspective and needs of smallholder 5 The end user and the purpose of the measured farmers is incorporated in the innovation information is clear to all process 6 Participants have a role in guiding what 6 Farmers led innovation processes are information is collected encouraged 7 The generated information is shared and 7 Innovation happens regularly and in a discussed along the chain systemic approach 8 Key economic and performance indicators are 8 Plans to upgrade product quality and known and shared along the chain quantity are developed jointly 9 Measurements lead to rapid action 9 Returns from innovation are shared fairly 10 Regular and consistent evaluation and among actors feedback processes are set in place 10 Development interventions are rather done 11 Tailored indicators and monitoring plans are with smallholder farmers, than for them established to assess the trading 11 The value chain is characterized by the relationships development of a differentiated value 12 Market trends and market position are jointly proposition reviewed on a regular base Average Score 13 Social and environmental factors are included P. # 5: Inclusive innovation in the evaluation Average Score P. # 6: Measurement of outcomes
GRAPH SCORE ON RADAR DIAGRAMIDENTIFY AND PRIORITIZE AREAS FOR INNOVATION Chain-wide Collaboration Measurement of Outcomes Effective Market Linkages Inclusive Innovation Access to Transparent Services Governance
CASE EXAMPLE: Cuatro Pinos, Guatemala Two Producer Cuatro Pinos LA SALAD Wholesaler organizations Cooperative Exporter of fresh vegetable Product flow Product flow • Founded in 1979 • Co-owned by 562 families • Sales volume in 2008: 14 Agronomist support mio. US$ Investment • 1200 women in packing and sorting Cooperative c members Technical assistance 562 families Technical assistance Business Mission: • Increase family incomes • Organize small producers Fixed price contracts into cooperative model Product development • Provide programs of social service to rural families Non- Cooperative members Health and education Risk sharing fund > 5000 services families 39
Principle # 1: Chain-wide collaboration Supply chain coordination, based principally on sales projections and actual sales data, flows from buyers back to the Cooperative and from there to diverse farmer organizations. In the US, the wholesaler LA Salad also plays a role. Based on projected sales, Cuatro Pinos develops production plans with partner organizations. This system functions in a relatively informal manner with market information relayed to Cuatro Pinos either via e-mail or fax but often via phone calls (with LA Salad for example). From there Cuatro Pinos formalizes the process with the0 1 2 3 development of production plans and contracts with associated producers and producer associations.Principle # 2: Effective market linkages Cuatro pinos is the aggregating and contracting agent with the international buyers. It provides key systemic services both to buyers (i.e. quality and consistency guarantees) as well as to farmer organizations. Effective mechanism to recruit additional growers (clear value proposition) combined with willingness to work with broad range of farmer organizations has enabled them to provide market access for a large number of farmers.0 1 2 3Principle # 3: Fair and transparent governance Chain governance from Cuatro Pinos back to producer organizations and individual producers is clear, based on production plans and backed with formal contracts. Recently these contracts have included weather-insurance coverage subsidized partially by the Guatemalan State. Discussions regarding product quality are still relatively common (suggesting clarity is still an issue) Full transition to GlobalGAP is driven through the provision of price incentives to farmers who gain and maintain certification Shared risk fund (between Cuatro Pinos and LA Salad) that allows the Cooperative to guarantee payment to farmers even0 1 2 3 when product is not sold due to problems at the port of entry or logistics.Principle # 4: Equitable access to services Access to inputs on credit. The cooperative secures loans from commercial banks. Once the loan is received, the Cooperative provides credit to producers based on the production schedule (planting and harvest times) and projected volumes. The credit is discounted from the product received and the producer receives the balance. Provision offer technical assistance through training and support of local extension agents and/or lead farmers linked to producer associations0 1 2 3 40
Agricultural insurance to cover the weather risks that farmers face (purchased as a block, invisible to the farmer) Partner in development: During the 2005-2006 production season, the Cooperative successfully accessed 1.5m US in public sector funds for investment in supplier organizations including packing sheds, irrigation facilities and rural housing Currently the coop is developing a food security and nutrition program Extensive social services for members (health, education, etc) New foundation to support social services to non-members funded by a small percentage of the profits of each member of the French bean supply chain which during its first full year of operation (2008) generated US $ 60,000Principle # 5: Inclusive innovation The central point of innovation in this case is the nexus between Cuatro Pinos, LA Salad and Wegman’s in the US. Wegman’s and LA Salad identify potential niches for new products and/or new presentations of existing products and transmit this information to Cuatro Pinos. Cuatro Pinos then employs field staff to engage with smallholder farmers to test and adapt production systems to the market needs. Once the production systems are capable of meeting market needs in terms of quality, the systems are rolled out to a wider number of farmers based on the sales projections received from the final client.0 1 2 3 chain wide collaborationPrinciple # 6: Measurement of outcomes Measurement of outcomes occurs within Cuatro Pinos following the cooperative model measurement new market (yearly meetings, internal accounting and of outcomes linkages collective decision-making). The system works well for cooperative members and is complemented with informal feedback0 1 2 3 activities – basically on-going visits and phone calls – with non-cooperative member Fair and organizations. inclusive transparent innovation Recent household nutrition surveys show goverance troubling rates of malnourishment in 20% of coop member families who are relatively better off than non-member suppliers so equitable clearly market linkages (including credit) are access to not enough to solve poverty on their own. services 41
CASE EXAMPLE: Intelligentsia Coffee, US “A direct trade Intelligentsia Coffee Two Supplier model“ Coffee roasting company Groups with own coffee shops in 40% are small scale three cities farmers Green coffee • Started in 1995 • 30 m US$ sales/year Coops with processing Transparency contract and quality pricing premium Buying philosophy is driven capacity by intrinsic quality. They believes that to get such coffees they need to work On farm quality assessment closely with Farms with producers, Farmers that individual don’t get paid well for their processing work don’t change capacity management, and those who don’t respect their land and the people who work on the farm face a constant uphill battle to produce quality. 42
Principle # 1: Chain-wide collaboration The principal mechanism is direct travel by Intelligentsia staff for face to face strategy meetings two or three months before the harvest to outline the business goals with all partners. Besides the pre-harvest strategy meeting, Intelligentsia staff attempts to also visit source during the harvest to monitor quality, and post-harvest to review, evaluate and celebrate success A new mechanism that is being implemented is the annual "Extraordinary Coffee Workshop” in which Intelligentsia brings0 1 2 3 together farmers from different coffee origins to discuss issues related to quality, market trends and other relevant issues. Principle # 2: Effective market linkages Intelligentsia provides direct links to the final customer and directly identifies high quality producers. The quality based business model requires Intelligentsia to make considerable up front investment to identify marketable products Intelligentsias quality based business model requires consumer integration for its success. Consumer education about coffee production and sourcing processes and about coffee quality has a high priority for the firm.0 1 2 3Principle # 3: Fair and transparent governance Transparency contract that defines and documents pricing, responsibilities, costs and profit across the chain of custody. All the trade participants must agree to transparent disclosure of financial deliveries back to the individual farmers Long term contracts: Contracts in the first and second year of the business relationship are for one year. In the third year, given measurable success and tangible confidence, multiple year contracts (up to 3 years) are designed. Pricing premium and clear pricing structure: The verifiable price in the Direct Trade Model to the grower or the local coop, not simply the exporter, must be at least 25% above the Fairtrade price. The Intelligentsia Tiered Pricing System0 1 2 3 establishes a sustainable base price and ensures there is a clear, tangible link between cup quality and coffee value. The entire payments are made at the time of export. Quality is measured through cupping. Cupping results are communicated to and discussed with farmers during the post harvest field visits. Producers are often able to double their income within a few harvests. A number of actual examples show base prices that have grown threefold. Information management: Intelligentsia has created a system that allows producers access to the same information as the millers and exporters (see www.cropster.org) 43
Principle # 4: Equitable access to services chain wide Access to expert taste collaboration testing and access to results database . Support on obtaining pre- measurement of new market harvest financing (through outcomes linkages root capital).0 1 2 3 Fair andPrinciple # 5: Inclusive innovation inclusive transparent innovation Interestingly, Intelligentsia observes that goverance the incentive structures of the Tiered Pricing System triggers innovations, mainly based on the understanding by growers equitable access that they can influence quality. Most to services innovations tend to come out of medium sized farms.0 1 2 3 Intelligentsia actively engages farmers in discussions about how they might improve cup quality. In some cases experiments in fermentation or drying are conducted with growers to assess their effects on cup quality. When successful, Intelligentsia may offer the coffee as a micro-lot and share the additional profits with the farmer or cooperative involved.Principle # 6: Measurement of outcomes Intelligentsia has implemented an interesting way to ensure that the premiums paid are actually reaching producers. Individual growers are deploying a peer control system: during the pre-harvest meetings it is clarified what individual farmers will receive. Then, communication channels between Intelligentsia and individual farmers are set up. Producers use these channels in case that their cooperative or the intermediary is not disbursing premiums as agreed upon I the contract. In some cases where coops are much larger, Intelligentsia also makes use of certification schemes such as Rainforest0 1 2 3 Alliance and UTZ to track payments. Interestingly these certifications are not communicated to the final clients. 44
CASE EXAMPLE: Hariyali Kisaan Bazaar – India “specialized SMALL intermediary hub” HOLDER FARMERS DSCL HARIYALI KISAAN Fertilizer and inputHKB procuresfrom 10,000 Grains delivered direct to hub BAZAAR companyfarmers and 2000dairy farms “ prosperity in(2009). HKB Technical assistance agriculture andselects thefarmers it wants farmers market” Commodityto work with.Farmers also Inputs Chain of 75 stores set up in markets, specialtapproach HKB 2007, now 300 stores. y buyers, etcdirectlythemselves. Produce & Dairy pick up service Mission: affordable inputs and links to market with buyback scheme LARGE Seed purchases FARMERS 45
Principle # 1: Chain-wide collaboration Problems are voiced mainly through farmers’ visits to the outlets and their communications with agronomists. The IT system logs farmers’ enquiries, so that problems are stored and can be fed back to centre. Rajesh Gupta, president of Hariyali Kisaan Bazaar explains that “we always try and understand problems from the farmer’s side – through our agronomists and the questions farmers ask in our retail stores”0 1 2 3 Principle # 2: Effective market linkages HKB has a ‘buy-back’ scheme that serves as a link between small-scale farmers and markets. HKB also procures grains and basic crops from small-scale farmers in order to “move them up the value chain”. Farmers produce seeds for HKB, which HKB then sells at its outlet. HKB processes the seeds and sell them under its own label. HKB aggregate the produce for the farmers. It is collected from the farm level or from approximately 500 metres away from farmers’ fields at the village level.0 1 2 3Principle # 3: Fair and transparent governance Pricing, information about pricing and timely payment are all vital for establishing trust. If farmers are offered lower buy-back they will go elsewhere. Information is provided to farmers at a number of outlets. Mobile phones are also used to announce bonuses and premiums to farmers for good quality seed, for example, pre- season. Farmers are also made aware of the support price, which allows them to plan ahead and make decisions more effectively. Written agreements are in place for farmers but “contracts are not enforceable”. A mutual understanding or agreement is far more powerful0 1 2 3 46
Principle # 4: Equitable access to services Inputs/retailing/household goods Technical advisory available at hub and through targeted group seminars (not one on one at field) Credit or facilitation of credit (through partner bank) Insurance – crop insurance and life insurance (need to probe more about crop insurance). Market linkages – seed production (which has now expanded significantly), dairy, grain.0 1 2 3 Fuelling stations with transparent pricing (cooking gas) are also at the outlets, as are demonstration plots for training purposes.Principle # 5: Inclusive innovation HKB prides itself on high quality seed production. There is a degree of collaboration in order to ensure this high quality is met. Farmers, for example, are given foundation seed to maximise quality and HKB has control of the input material they give to farmers to ensure that genetic purity is maintained. Because of this, rejection rates of seeds sold to HKB by farmers are very low. Gupta approximates that 90-95% of seeds are bought back from the farmers. For seed HKB offers tech services to farmers to help them meet quality standards and have a continuous engagement and dialogue with farmers.0 1 2 3 Collaboration Market Measurement LinkagesPrinciple # 6: Measurement of outcomes In general, Gupta and Chhabra (head of retail operations) , evaluated an outlet’s success based on the percentage of total agri-input market that HKB was able to capture in each Innovation Governance outlet’s catchment area. Services0 1 2 3 47
CASE EXAMPLE: Sustainable Harvest, US Sustainable Harvest is a specialty coffee importer that uses the Relationship Coffee model to bring partners together in a sustainable supply chain that serves everyone involved — from the farmer to the final consumer. This approach builds direct, transparent market linkages for coffee growers while investing in training and management systems to improve their ability to produce high quality coffee. Sustainable Harvest’sLet’s Talk Coffee is an annual event hold bySustainable harvest and its partners along the value chain annually organizedthat brings together hundreds of coffee roasters and growers gathering of valuefor direct conversations in an innovative and transparent chain actors is anforum. example on how aIn an industry where it is often difficult for partners to meet lead-firm fostersface-to-face, Let’s Talk Coffee provides a unique platform for directbusiness partners to create and maintain open lines of communication, facilitcommunication, humanizing their business relationships and ates negotiationbringing the Relationship Coffee model to life. between distant chainParticipants gather to gain an understanding of actors, providescollective, practical actions that can be taken to ensure a access to criticalfuture of specialty coffee. This years program focused onprice risk management, quality calibration, and farmer information thatincome diversification. matters especially toIn 2012 the event counted 379 participants including small coffee growersproducer organizations, coffee roasters, non-profit and encourages chainorganizations and financial institutions from 22 countries. actors to take mutual action.A direct result and benefit of the Let’s talk coffee forum are http://www.sustainableharves11 million pounds of coffee sales that were t.com/relationship-coffee/let/negotiated during meetings at the event. 48
NOW WHAT?HOW DO WE NAVIGATE THROUGHUNCLEAR TERRITORY AND OBSTACLES? 50
THE RAPID PROTOTYPE CYCLETHE PROTOTYPE CYCLE METHODOLOGYADDRESSES THESE CHALLENGES:MISSION AND VALUE PROPOSITION 3-6 monthWhy we are here? cyclesWhat do we offer and do well?STRATEGY AND GOALWhere we are going?What are we aiming for?MEANSWhat do we need to get the work done?MEASUREMENTHow do we tell we are doing well?CORRECTIONHow do we remediate, repair and improve? 51
BUILD A VISUAL CHANGE MODELMACRO-LEVEL STRATEGY Where will we start? What do we want to What existing factors do we wish achieve? to change/ improve? How will we know we’ve What actions do we need to achieved our goals? take to reach our desired What key elements will change? outcome? Who is involved? What are the expected results? What obstacles need to first be removed?
PRIORITIZE PROTOTYPE CYCLESFOR EACH INNOVATION AREA IN THE BUSINESS MODEL What action is required? Where to innovate What are the desired process within existing Business characteristics and metrics? Model? How will the proposed innovations effect our business model? How do these elements connect? Which are How will key elements change? How prerequisites for others? Which function in will we know we’ve achieved our parallel? goals?
PM&E PLANNING WORKSHEETSources: Cramb, R. and Purcell, T. “How to Monitor and Evaluate Impacts of Participatory Research Projects: A case study of the Forages forSmallholders Project.”. CIAT Working Document. Oct 2001. And Sartorius, Rolf. “Participatory Monitoring and Evaluation Systems.”