Posts Tagged ‘planning’

Fundamental Elements of Informal Sector Commercial Activity

There are two key elements which underpin the dynamics of any business or commercial enterprise in the informal sector. These are Time and Money.

A generalized framework can be diagrammed, as shown above, where the dotted line denotes the degree of uncertainty and volatility of an individual’s cash flow patterns – whether from a variety of informal economic activities – such as for the farmer or trader; or from the salary received for a white collar job. The X axis – Time – denotes the increasing accuracy of estimating the Arrival date of a cash payment (from some revenue source), and the Y axis – Amount – denotes the increasing accuracy of estimating the Amount that will arrive. Their relative ability to estimate Arrival and Amount with any degree of accuracy is indicative of their ability to forecast and plan for expenditure.

Thus, at one end of the continuum, one can position an odd jobs labourer who may or may not get paid work on any given day, and is unable to predict with any degree of certainty what type of job he’ll get selected for, nor for how many days it will last. It could be as basic as loading a truck for half a day’s pay, which in turn might even be in kind, and not cash. And, at the other end of this continuum, one can position a the typical white collar salaried professional or civil servant who knows with certainty exactly on which day they will receive the salary and exactly how much will arrive.

 

Positioning and Location

Now, we can frame these two elements of the commercial operating environment in the form of a position map, as shown above, that maps the ability to plan expenditures against the stability of the cash flow. The red arrow is the continuum of certainty and stability of Timing and Amount of an income stream, anchored by the most vulnerable odd jobs labourer at one end and the relatively most secure salaried professional at the other.

Where it gets interesting is the relatively liminal space in the middle where the various economic actors in the informal economy constantly shift position as they seek to mitigate the volatility of their income streams, through a variety of mechanisms. Much of their decision making is related to their own perception of uncertainty and ability to forecast.

For the purpose of this explanatory diagram, I have selected 4 typical examples drawn from different sectors of the informal economy common in the developing country context. Each are at the more vulnerable end of their own segments i.e. a subsistence farmer, rather than one with an established cash crop; or a small roadside kiosk rather than an established general merchandise store in a market town; since they have not yet achieved the goal of their business development strategies to move their own entrepreneural ventures towards relative stability, and thus provide more insight on the relationship between cash flow patterns and investment and expenditure planning.

The hawker of goods at a traffic light or junction is in a comparatively more fragile situation than the kiosk owner with a fixed location who works to develop relationships with passing customers in order to convert them to regulars at her store. Unlike the kiosk, which might be located near a busy bus stop, or outside a densely populated gated community; the hawker cannot predict which cars will pause at the red light as he darts through traffic shouting his wares. However, compared to the odd jobs labourer, the hawker has comparatively more control over his income generation since his is not a passive function of waiting to be picked from the labour pool in a truckyard or construction site.

The smallholder farmer might actually be better off economically in many ways than his urban brethren involved in informal retail, being able to live off the land more cheaply than in the city. Experienced farmers, for the most part, are able to predict with reasonable accuracy, more or less the quantity of their crop, and the estimated timing of the harvest. However, his sense of uncertainty is often perceptually greater due to the unmitigatable impact of adverse weather conditions, or the sudden infestation of a pest or blight, any of which could at any time completely destroy his harvest, and thus, his expectations. This sense of insecurity in turn influences his decisions on expense commitments to far ahead in time, or too large a lumpsum at some point outside of his regional harvest season. The farmer’s income streams are relatively more out of his control than the disposable income in the pockets of the kiosk’s customer base.

The market woman with her display of fresh produce, at the entry level of inventory investment capacity, might only have one or two different varieties of vegetables or fruit to sell, and may not yet have established a permanent structure – a table, a kiosk – in the market. She might start off with only a tarpaulin on the ground with some tomatoes and onions for sale. Unlike the traffic intersection hawker, however, she is more likely to begin by assuming a regular placement and location as this establishes the foundation for her future business development, through the factors of discoverability and predictability among the customers in that locale.

That is, in addition to Timing and Amount of Income – the cash flow patterns and sources – we begin to see the role played by location – Place1, as a supporting element of the commercial activity in the informal economy. While farmers are least likely to have much control over the location of the land they may inherit, their risk mitigation strategies to minimize volatility of their income streams and maximize their ability to plan for the future and manage emergencies will be discussed in depth in the section2 on rural household financial management. These practices are the foundation of business development strategies commonly observed in the informal economy in developing countries which tend to be less urbanized, and as is often the case, more dependent on agriculture as a component of national GDP.

 

Appendix
1 People, Pesa, Place: A Multidisciplinary Lens on Innovating in Emerging Markets
2 Rural Household Financial Behaviour on Irregular Income Streams at the Base of the Pyramid

Improvising when work gets in the way of a laptop breaking down

Aalto Design Factory, one Monday in January 2014

Just over a fortnight ago, I nudged my coffee cup over a corner of the full size design award winning keyboard embedded in my rather obsolete but much beloved Lenovo.

Today was a very important deadline that my team and I had to meet. And my work involved writing over 5000 original words in response to a wicked problem, one of those that would wring your heartstrings if you knew.

Simultaneously, I had an entire market entry strategy to complete and submit for a client project that had been ongoing since earlier in the spring. My intent had been to get that done and dusted before the 1st of June leaving me the balance of time available to focus on the complex analysis and synthesis of a narrative by today’s deadline.

A few drops of coffee was all it took to disrupt my intended plan of action.

I’m sharing this anecdote here, now, because I learnt something about myself that I’d not have noticed had this not happened.

Improvisation is the key to success in challenging situations where the infrastructure we take for granted, or the tools we come to rely on, refuse to perform the way we expect or they should.

Slow down during a crisis, and you will have that unique center of calm grounding you instead. It may seem counter-intuitive at first glance, but if you step back and consider the whole, this singular moment in time – infinity – can allow you an unprecedented opportunity to envision the whole, recognize the landmarks, and the obstacles, and then, plan your navigation all the way through to your goal. That is, instead of diving in deep into the urgency, take a step back off the edge of the cliff instead.

Then, and only then, when you have your roadmap in mind, take that critical first step forward to begin.

We submitted over 10 megabytes of materials last night, well in advance of our deadline. And, after a day or so of letting my poor old tired eyes rest from switching back and forth between two screens and flipping the trifocals on and off, I’ll sit back down to complete the interrupted strategy for my patiently waiting client.

An Interdisciplinary Approach to “Best Fit” for International Development: Process and Tools

This post follows on from the previous one which introduced the concept of a ‘best fit’ approach to the ‘wicked problems’ in development. There I posited that consumer facing private enterprises looking at the African market would benefit from considering Development’s thought-leadership in this regard, given their experience in the challenging operating environments of the developing world.

I also noted that while the ‘best fit’ concept was a welcome paradigm shift for addressing complexity, the siloed thinking common to academia left far too many gaps in their approach and process.

In this post, I will begin to explore the seminal thinking (1) at the intersection of business and design  – also known as innovation planning – for methods and tools to address complexity in a holistic way, all the while keeping in mind that we need to ensure the end users (the rural poor, the people, or the beneficiaries) are at the center of the strategy (Chambers 1988).

Where is the gap?

A careful review of the working paper provides evidence that the challenge faced by international development practitioners when considering a ‘best fit’ approach to programme design is the lack of a robust methodology proven to take one from A to B. Here, we can think of point A as their original ‘best practice’ paradigm, and the attendant methods learnt through study and experience. Point B would be a validated process, with an accompanying toolkit, for applying the ‘best fit’ approach. One can confidently say a How To Handbook is missing, and the siloed thinking creates the barrier to developing one within the field.

What is the challenge?

While Ramalingam et al (2014) recognize the need for tools and processes from other disciplines more familiar with complex systems, one can gather a sense that they don’t know where to start. One cannot simply throw various methods and tools at problems, like spaghetti on the wall, to see which sticks. Even in mathematics, formulae are carefully selected based on the variables available, and the answer to be calculated. One doesn’t blindly throw data at all the available equations hoping to discover the one that fits the problem statement.

This challenge is better articulated in Matt Andrew’s blogpost which posits that the ‘best fit’ approach to policy and programme design is akin to choosing a new suit of clothes. The implication is one must try many different suits in order to discover the ‘best fit’. This is wasteful and time consuming.

What can people centred innovation planning offer?

First, the fundamental premise of human centered design firmly focuses the outcome of the processes on the context and needs of the end users. This orientation offers design a headstart in considering Robert Chambers’ emphasis on putting people first. The entire discipline is eminently suited to take on this challenge for international development, in an empathetic and holistic manner.

Second, addressing complex systems designed for human interaction is another key facet of the field of design, particularly the specializations that deal with computer human interaction of all types. This means there is a vast body of work created over decades meant to consider exactly this point.

Third, rather than wasting time and money on “trying on different suits” for ‘best fit’, there are proven approaches developed to minimize the failure rate of innovations introduced in the consumer market, and maximize the adoption rate by the end users. In particular, the areas of design thinking, design planning and design innovation have years of expertise in considering exactly this.

Finally, for development policies, and programmes to provide value for money, and sustainable, beneficial outcomes for their target audience, they must be designed such that they are viable, feasible, and desirable. This requires a holistic approach to solution development integrating elements from more than just one discipline, whether its design or development.

The philosophy of the methodology required to leap from “We must pivot to ‘best fit'” to bridging the gap of knowledge of “How to map the wicked problem and assess the context for programming” will be covered in the next article.

 

(1)

Strategy as a Wicked Problem by John Camillus (HBR 2008)
Living with Complexity by Don Norman (MIT Press 2010) Chapter 1 PDF
A Short Grandiose Theory of Design by Jay Doblin (STA Design Journal 1987)
Wicked Problems in Design Thinking by Richard Buchanan (Design Issues, 1992)