6 Mistakes to Avoid When Working With the Private Sector

We are the founders of Impact Ventures in North Macedonia. Together, we share our insight into systemic approach – also known as market systems development – and achieving impacts and learning from failures with a focus on the private sector.

Five years ago, we were recruited by an economic development program as private sector representatives to influence and foster private sector development. The risk for understanding the private sector would be small, but the perspectives within the staff of the program were sometimes contradictory. We quickly realized that private sector interests didn’t always align to those of the development program. Therefore, the opinions in the team were also not always aligned.

Coming from the private sector and working in development sector gave us a proper perspective on how things need to be changed. We worked in different aspects of support for the private sector, starting from demand- and supply-oriented interventions, and ending in access to markets and finance, skills, and creating an enabling environment.

We selected three sectors:

• Tourism (with three destinations)
• Green economy (subsectors: organic agriculture and sustainable building)
• Creative industry (ICT and product design) 

Market system development was new to us, and we wanted everything - now and fast. And this is what we found:

6 mistakes that development programs make + 6 learnings from failure

1. Working with a limited number of beneficiaries

The most common mistake: working with a limited number of beneficiaries only. While working with the private sector, you always start with people you know and often execute the activities only with known entities. In a small country (2 million inhabitants), segmented sectors can get you a small number of stakeholders.

For example, organic agriculture started with 344 organic operators in 2014 – these were organizations and companies that we knew. Through the process in the first two years, we reached just 25% of the target group.

We needed to change this. So, we started working with the target group, and also with the group that we could target as beneficiaries. Working with conventional farmers and supporting them with sustainable practices in the period of development led them to become organic farmers, fulfilling the need for organic produce.

The activity led to doubling the number of organic operators in 4 years. This was similar in other sectors as well. Sometimes, choosing only a group of companies led us further into more segmented target groups.

The learning that came about: Reach out to as many as you can

To reach quality, we must first reach quantity. When starting the program, connect with the more prominent players, as well as various chambers, business support organisations or communities and individuals. Make public calls, use social media. The more the reach, the larger the impact.

2. Not listening means not understanding

Being an expert in a field often means being resourceful with knowledge from the sector. That advantage sometimes creates a barrier of not listening to the private sector. This happens when you try to apply the knowledge of the work that you already know. You then end up telling your partners about your solution, but this doesn’t mean that you listen to them! And not listening always means not understanding. This leads to incorrect solutions.

The learning: Listen carefully

Real opportunities for development lie in 2 key factors

• Understanding what really caused the problem (and is there development solution?)
• Sense for demand - this naturally lies within different stakeholders coming from private sectors.

The private sector is not a unified representative. It’s a diversified group with many unrealistic, but opportunistic ideas.

In the tourism and hospitality sector, we combined Destination Management as a methodology with market system development. We learned that every participant of the group has to know the history of development, understand the development process up-to-date and then gets an inclusive chance for systemic change. Later, when the participant presented, and we as facilitators carefully listened, we were able to create a unique solution or business model to make the market work.

3. Not realizing that no one solution fits all

We appreciated the support of international experts and back-stoppers during our program. Through their mentorship, we made successful interventions. Talking about the sector experience of facilitators can be compared with the MSD experience of the back-stoppers. Their knowledge is priceless, and the provided solutions can be beneficial for partner companies. But not always. All solutions do not fit everywhere.

Solutions from another region, sometimes even from within the same country, don’t always provide answers to issues in the sectors. In the sustainable building sector, some examples were just not usable for the local market due to the already established regulations. Copy-pasting intervention from other countries didn’t work.

The learning: Tweak the solution - pivot

When somebody comes with a solution that fits the problem, don’t push the idea as a ready solution transferred from another program or region. Try to pivot the solution with the support of your partners. Sometimes those solutions, even self-evident and straightforward, can change the whole sector.

We had an example with the embedded advisory service that functioned in the single-product sector (corn) in Asia. The first intention was to cover one crop as well, but due to the size of the sector, we started to turn the model around and transferred the adapted model on a level of seed and fertiliser providers in organic farming that reached different crops. It started showing results.

4. Keeping up with the activities that don’t bring results

Sometimes for the sake of the program's reputation, we try to keep things going. Unsuccessful interventions don’t imply that you are unsuccessful as a facilitator. On the contrary, finishing and dropping interventions that don’t work and documenting lessons learned to add value to your development program.

The learning: Admit when you’re wrong, write the lessons learned

Admitting when you are wrong is the hardest part. But that exactly is the essence of market system development. Statistically, 50% of the interventions work; this implies that 50% don’t. Admitting that you are wrong, gives you the right to be right again.

5. Focusing on impressions

From the management or donors’ perspective, visibility of the program means a lot. In the developing world and regions, when there is ‘free money’ from other programs as compared to market system development programs, private sector partners often choose ‘free money’ instead of ‘systemic change’. Sometimes even donors want fast and visible results to promote their work.

In all of our selected sectors, partners wanted to fast track activities. This created an environment where we needed to show that the program is doing fast-paced activities. In those times, sometimes you lean toward more visible solutions, than on those that work on a longer run – trying to make an impression rather than impact.

The learning: Make an impact, not an impression

Rick Rigsby, American motivational speaker, in his famous speech ‘The Wisdom of a Third Grade Dropout’ makes a strong statement: “Make an impact, not just an impression”. This statement is the essence of every market system development  program. The process of market system development   programs is long, so you must aim for the impact. Wait for the impact to happen based on the proposed impact logic.

We saw changes in tourism and sustainable agriculture a few seasons after the first interventions. Sustain, and you will see systemic changes.

6. Not being able to sustain strategy

In the frame of our previous program, we had 3 sectors and 7 subsectors. Due to complexity in the second phase, the donor decided to drop two of the subsectors. This choice was reasonable due to the lack of program capacity. But changing the implementer and the strategy for the next 5 years, led the program to shift the direction. And this sometimes means starting from the beginning - all over again, not following upon the previous activities.

The learning: Endurance towards sustainability

From today’s perspective, decisions to not sustain sectors that were late with the start and the results were wrong. If we keep in line with the strategy, the results for the whole program can be at least 30% higher, counting the changes from previous work. We know that donors want fast results and in slow-growing sectors and small-scale economies, this is hard to demonstrate in the beginning. You must prove to the donors that keeping with your strategy will bring results in the long run.

Market systems development isn’t a quick fix; it is a systemic change in the market. Therefore, the results may show after 2-3 years if they are piloted and proven. Long-term results can come through the lifetime of the program.

Read more on  Impact and Learnings from Failure.

Igor Mishevski and Elena Ivanova are the founders of Impact Ventures in North Macedonia. Driven by long-term and large-scale impacts, Igor leads and manages projects in green economy sectors. A management professional with high specialisation in sustainable development, Elena focuses on project management and private sector development. She mainly deals with tourism and hospitality, destination management, destination promotion and use of Information, Communication and Technology (ICT) in a variety of economic sectors.

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