In this guest blog post, Chris Mitchell of Bain & Company discusses a new paper, Growing Prosperity, compiled in collaboration with Acumen, that focuses on optimizing interaction between farmers and pioneer firms—entrepreneurial companies that develop and offer market-based innovations to serve the poor.
Pioneer firms are bringing innovative solutions to resource-poor farmers in places where governments and traditional aid have fallen short. But what needs to happen to spur sustained adoption of the innovations on offer that will allow these firms to serve hundreds of thousands, or even millions, of smallholder farmers? The work of these pioneer firms is simply too important to remain small scale, and there is potential for a real breakthrough in the next 5 to 10 years. With this study, we hope to shift the odds more in favor of pioneer firms and the smallholder farmers they serve.
Three key findings from our research point to what these firms and other actors must do.
The Four A’s of Adoption
First, pioneer firms must systematically ensure that the “Four A’s” (awareness, advantage, affordability and access) are continuously in place for their farmer customers. Adoption starts with an unrelenting focus on the farmer: how to raise his or her awareness of new products and services, how to communicate and reliably deliver on the advantage the farmer will gain by adopting innovations, how to ensure the affordability of these innovations and how to provide easy and timely access to them. While these Four A’s are not revolutionary, we learned from our research that few firms are able to systematically address each of these elements in a sustained way as they grow. This is not surprising, given the structural challenges of serving the base of the economic pyramid and the inherent complexity firms encounter as they try to adapt to rural developing markets with often low levels of infrastructure and value chain development.
The Importance of Repeatable Models®
Second, pioneer firms must develop Repeatable Models® to achieve adoption at scale across villages, regions and countries. This means having the right strategies, processes, teams and supporting systems to drive adoption of their innovation in an adaptive and increasingly efficient and effective manner, while ensuring their own sustained, profitable growth. In short, Repeatable Models help pioneer firms promote “good scale” that endures while avoiding “bad scale” that is unprofitable and unsustainable. In our research, firms pursuing bad scale had introduced costly complexity by prematurely expanding to adjacencies (new customers, products, geographies or capabilities), while those on the path to good scale were implementing aspects of Repeatable Models. Building Repeatable Models entails, among other things: defining the company’s core market and distinctive competencies; establishing clear operating processes and market entry routines; appropriately hiring, training and managing the performance of employees; and developing and institutionalizing the customer feedback and learning systems that inform management as to whether and how the Four A’s are in place and that guide ongoing efforts for improvement and innovation.
Collaborating for Success
Third, other actors across the agricultural system should tailor their actions to enhance the Four A’s and help pioneer firms develop and scale their Repeatable Models to bring their products and services to more farmers. Though an understanding of the key factors of adoption and scale are paramount, firms and farmers do not exist in isolation—they operate within a wider market system. This system can either promote the Four A’s and enable the firm to develop its Repeatable Model or hinder the firm’s success and slow down adoption. There are clearly examples of pioneer firms that, by virtue of their innovation and first-mover nature, disrupt and change part of a failing system; nonetheless, no single firm can rewire an entire system. Further, as the firm begins to reach scale of any significance, its interactions with this system (rules and regulations, infrastructure, access to finance and supporting inputs) and other key players (including competitors) will become more central to its success. Therefore, corporations, foundations and development agencies, impact investors, NGOs and the government should design investments, interventions and policies that promote the lasting success of pioneer firms and the smallholder farmer customers they serve.
The agriculture sector requires considerable investment by all sector actors to build a robust and supportive ecosystem, and it needs more capital from investors who take the long view and value social returns. We are encouraged by the ingenuity and perseverance of the many pioneer firms we have studied for this paper, but more must be done to support their work. As many management teams at pioneer firms have told us, the work is consistently challenging and takes a very long time to “get right,” and the rewards, in terms of impact and financial returns, are often uncertain at this early juncture.
We hope that current and aspiring entrepreneurs, as well as other system actors, will find in this study a clear roadmap for motivating those farmers to adopt innovative, value-creating products and services. If successful, this study will help accelerate results for all involved and, in so doing, contribute to our collective efforts to create growing prosperity.
To download the full report, visit: http://www.bain.com/publications/business-insights/growing-prosperity.aspx