This far, IPs mostly concentrate on initiating the multi-stakeholder process, agreeing upon entry points for innovation and Natural Resource Management (NRM) experiments. Much less attention has been given to market analysis, and experimentation with business modelling and market access. Furthermore, engagement with the private sector shows to be a challenge.
To enhance scaling and market access, Humidtropics researchers from the International Institute of Tropical Agriculture (IITA) and Wageningen University and Research Centre (WUR) conducted a study to gain a better understanding about potential strategies for successful IP activities to scale and link to markets, and to test methodologies that can be used for business modelling.
A multi-method approach was used, which includes 1) Value Chain Analysis, 2) CANVAS Business Model Development (Osterwalder & Pigneur, 2010), and 3) Prototype Cycle (Lundy et al., 2012), to conduct a rapid assessment of two commodity-focused IP activities with promising outlook for market uptake. The CANVAS methodology is known as a simple tool developed for companies to assess the What, Who, How and How Much of a product, respectively 1) The value proposition of the product on offer, 2) The key actors needed to produce, market and consume the product, 3) The channels involved from production to consumptions, and 4) The costs and revenues.
Two case studies were developed for which we selected soybean production in the Kiboga-Kyankwanzi IP (Uganda) and, Irish potato production in the Kadahenda IP (Rwanda). Each case shows the current status of the commodity’s value chain, and IP-led business and market developments. Six potential business models were developed for both cases, including opportunities, challenges, level of maturity and, way forward for each model.
Uganda’s models focused on examples of ongoing market activities, of which the business models were worked out by IP members and support partners in a multi-stakeholder workshop. Since ongoing market activities are absent in Rwanda, potential models were developed by us, based on the value chain analysis and interviews with key informants and farmers. Identified models were discussed in a multi-stakeholder meeting involving participants from IP and R4D. In addition, and based on our experiences with the CANVAS methodology, we introduced an alternated approach for business modelling adjusted to the unique setting of IPs and agricultural R4D. The new approach can be used within IPs to identify business model scenarios that support up- and out-scaling of IP activities, contribute to successfully market commodities targeted by IPs, and assists in platform sustainability. This modified approach can be found in chapter 12 of the full report.
This Ugandan IP selected soybean as key commodity for it has the potential to impact both nutrition and soil fertility at household level. Additionally, there is strong global and national market demand for soybean too. Approximately 200 IP farmers are currently involved in soybean activities, including seed multiplication, field experiments and farmer trainings. The Kiboga-Kyankwanzi platform is actively working on business development, exploring multiple models simultaneously. One model that stands out, the so-called community private sector business model, is developed in collaboration with ARUWE, a social venture providing farmers with seed loans and offering a fixed price for soybean and profit sharing. Our study results show good prospects for what we called the trader channel, a model that has much in common with that experimented with by the IP and ARUWE.
The entry theme for the Rwandan IP is potato-tree-livestock system integration, with dominant focus on Irish potato. Potato is not a new crop in the region, and our findings showed a growing demand for potatoes and potato products (e.g. chips), but also scarcity of (seeds from) appropriate varieties, low productivity and a near absence of Rwandan processors. The IP aims to improve productivity, for instance with training in agronomic practices, and by addressing system constraints such as lack of access to high quality seeds and agricultural inputs.
This far, the IP mostly focused on participatory field experiments. In contrast to Kiboga-Kyankwanzi, the Kadahenda IP has not started to scale to markets. However, recently introduced government policies prescribing producers without contracts with buyers to supply consumption potatoes to collection centres, aim to formalize the Rwandan potato sector, and will affect potential business models. This means that IP farmers could either decide to supply to collection centres at a fixed price that cannot be influenced, or surpass the centres via a business model that allows for contracts with buyers. Alternatively, the IP could introduce a seed-multiplication model since it fits with existing IP activities and interests. Although policies and regulations currently hardly affect seed production, this is likely to change in the near future. Moreover, seed production does not offer a suitable business model for every IP farmer, and requires a more detailed cost-benefit analysis.
With the case study findings and our experiences with the CANVAS business modelling approach, we came to a number of recommendations that we believe can facilitate scaling through market mechanisms:
- To prepare and plan for market entrance early in the platform process. As such the IP can take its long-term ambitions into account in field trials and experimentation as well as, develop targeted training and capacity development activities. It is recommended to consider the following guidance criteria for feasible business model selection:
- Focus on few but high-potential models that are realistically achievable;
- Match the current capacity of the IP (in terms of production volumes, quality requirements, access to finance and ability to track cost-benefit), with the potential business model, while offering room for future scaling;
- Provide a good outlook in terms of short- and long-term sustainability (e.g. market demand, funding, environmental impact);
- Initial investment to implement the model has to be affordable, preferably through funds available within the IP or through IP partners.
- To introduce business modelling tools that provide: (1) Room for inclusion of non-for-profit sustainability aspects, (2) focus on financial profit of individual actors, and (3) space to capture the different roles, needs and interests of the various stakeholders involved.
We recommend the use of the modified business model CANVAS:
- To apply a more systemic M&E and documentation approach that will enhance feedback on the activity’s progress, based on which the IP can steer its implementation and enhance for example linkages between producers and market actors;
- To work towards less donor dependency of the IP, as resource limitations currently hinder implementation of large scale initiatives. Simultaneously Program design should include a fund and credit system that supports farmer-initiated activities.
Please refer to the Scaling Successful Innovation Platform Activities report as: McCampbell, M. and Bos, S (2016). Scaling successful innovation platform activities: Introducing business model methodologies that contribute to the out-scaling of Innovation Platform activities in East and Central Africa. CGIAR Research Program on Integrated Systems for the Humid Tropics (Humidtropics). Wageningen University, The Netherlands. pp 116.
Lundy, M., Becx, G., Zamierowski, N., Amrein, A., Hurtado, J. J., Mosquere, E. E., & Rodríquez, F. (2012). LINK methodology: A participatory guide to business models that link smallholders to markets (Vol. 1). Cali: CIAT. doi:10.1017/CBO9781107415324.004
Osterwalder, A., & Pigneur, Y. (2010). Business model generation: A handbook for visionaries, game changers, and challengers. (T. Clark, Ed.). Hoboken: John Wiley & Sons, Inc.
In addition to the full report, we have also produced an Innovation Platform Brief on this topic. For more information contact Mariëtte McCampbell: M.McCampbell@cgiar.org or Sandra Bos: Sandrafirstname.lastname@example.org
Blog written by Mariette McCampbell, Social Scientist, IITA/WUR, and edited by Valerie Poire, Communication Officer, Humidtropics. Photos by Mariette McCampbell/IITA/WUR and by Sandra Bos.