Partnership Design in Social Enterprise at MIT’s D-Lab

Posted on by Bart Doorneweert

Late last summer I ran an online Partnership Design workshop with 2 agribusiness social entrepreneurs from Kenya, Peter Mumo (Founder of Expressions Global) and Dysmus Kisilu (Founder of Solar Freeze). In this post, I’ll take you through the process of how a pay-as-you-go irrigation service (Expressions Global) could collaborate with a cooled storage service provider (Solar Freeze). A collaboration which appeared ready to go, but actually wasn’t quite there yet. 

Partnership context
Peter, and Dysmus met as part of the Massachusetts Institute of Technology D-lab project on inclusive partnerships, which is a year-long learning lab on the topic of Co-Designing Inclusive Partnership Models. 

When Peter, and Dysmus were introduced to the Partnership Canvas during the first session as part of the learning lab, they were inspired to collaborate with their 2 companies, Expressions Global (EG), and Solar Freeze (SF). 

They were aiming for the same customer segments, smallholder farmers, and both companies could benefit from connecting their services. More, high-quality produce in stable supply from better irrigation, and trusty cold storage would mean more interest from well-paying (export) traders, and thus more interest from prospective smallholder farmer clients.

A few months after the initial workshop where Peter, and Dysmus met, I checked in on their progress together with Saïda Benhayoune, who is Program Director at MIT D-labs. We proposed an online workshop to apply the Partnership Design process, in order to analyse the current status of their collaboration, identify next steps, and put the Partnership Design tooling to the test at the same time. 

Approach to an online partnership design workshop
Because our aspiring partnering entrepreneurs were based in Kenya, and Saïda was in Boston, and I myself in The Netherlands, we needed to a workshop setup that could operate remotely. 

We chose to use miro.com as a virtual whiteboard, which was accessible to all. We used Skype as a means for talking.

Despite the often tricky internet connection with Kenya, the combination of both tech platforms worked wonderfully for the 3 hours of discussion we had together. Especially the miro board provided a very interactive, and immersive way for virtual collaboration.

During our call, we went through all the steps of the Partnership Design process (see visual below, which can be explored in more detail here). The results themselves are discussed in the next section of this blog.

Partnership Design Expressions Global - Solar Freeze
Output from the remote Partnership Design session between Expressions Global, and Solar Freeze in Kenya. (click here to explore the full virtual board)

The Partnership Design Process

-Understand-

We started discussing both partners’s business models, using the business model canvas. From there we looked at current priorities, and challenges to both businesses. 

For EG the main challenge is to find an well-paying market outlet for the farmers that use their irrigation technology. Without a well-paying market, like a higher-end domestic, or  export market, farmers are less inclined to invest in their crops with irrigation. 

SF is looking to expand their presence in the market, building new units, and connecting with new farmer groups who would use storage for their fresh products. 

-Intent-

Next we explored both partners’ intent to collaborate; why do they need help from a partner to to achieve their priorities?

EG is in need of cold storage capacity in the supply chain of their farmers. That is key to access high-end markets, as it keeps produce fresh during shipment. However, investing in their own cold storage would be expensive, and it would detract from their core business, which is irrigation. It would be better to work with a partner that is specialised in storage facilities.

SF is in need for new farmers to collaborate with. But building those relationships is hard. It would make more sense to collaborate with an organisation that already has those relationships in place.

So it turned out, both EG, and SF have matching priorities, and also need collaboration to achieve them. EG needs cold storage, and access to higher-end marktes, which SF can offer. And from its end, SF needs access to organised farmers, which EG can offer. This is a solid basis for delving further into the design of their partnership.

-Design & Compare-

Using the Partnership Canvas we started discussing the setup of the collaboration. For EG it was clear what value the partnership needed to create. A cold storage unit, on site, near the farmers that they work with. 

One of the key assets that SF needed to realise the construction of their cooling unit was to have land available to place the unit. Peter said that through EG’s relationship with local landowners this could easily be arranged. Also this relationship could provide for security. Operationally it seemed possible to place a functional cooling unit.

The remaining question now was how SF could tie relationships with farmers, so that they would start using the cooling storage facility. Both Dysmus and Peter explained how farmers need to improve their production practice to meet the higher production standards, and how training of farmers was key. 

For that reason they thought that it would be appropriate to design a joint training for export markets for farmers, where Peter’s standard training on Good Agricultural Practices could be combined with a Post-Harvest Management content based on Dysmus’ experience. This training could be a way for SF to acquire new farmer-customers for the storage unit.

The Created Value form the partnership is labelled with yellow on the whiteboard

-Evaluate-

Now that the design for the collaboration was made apparent with the Partnership Canvas, we looked at the big questions that needed to be answered for the collaboration’s business case; the hypotheses behind the partnership (those are labeled in red on our whiteboard). 

For EG, the big question was whether the cold storage unit in combination with the training would lead farmers to dedicate more acreage to high quality (exportable) crops, and supply the (stable) volumes of that product . The needed increase in acreage, and productivity could be achieved through the EG’s irrigation service, which would mean more revenue for the business. Also, Peter expected that EG would be able to generate more revenue from commissions, as an intermediary in the trade between farmers, and exporters. 

SF had questions about how the training would influence utilisation rates of the storage units. The training would need to lead to new numbers of farmers that would use the unit, and an increase in the volume of product that they would store. This would impact revenue growth from the storage service.

These were questions about conversion from the farmer training to paying customers for storage on the one hand, and then on the other hand about productivity, and volumes of product that these customers would actually store in the cooling unit.  

Conclusion
The case for partnering turned out to be clear. The assumptions were reasonable, and if they were to be true, both business would benefit from the collaboration. 

The partnership seemed ready to move into action mode, testing the hypotheses in a pilot project. And an obvious first thing to start with would be the farmers trainings, which could even start before building the cooling units. Implementing the training would answer questions that both EG, and SF were facing. But despite this obvious first step Peter, and Dysmus hadn’t started their joint project yet. 

When digging into the issue, it turned out that Dysmus had made a wrong assumption in his numbers behind SF’s growth. Where initially he thought that SF could finance placement of new cooling units through its own profits, growth actually required external funding. So, SF’s arranging of funding turned out to be a very important missing priority in the partnership discussion, and was the cause for the hold-up. 

This piece of information also increased the importance of utilisation rates for SF’s cooling units, and whether the farmers’ training would actually lead to more farmers signing up, higher productivity of their crops, and more supply to the cooling units. This would be critical for financial viability of SF to bring return on investment of new cooling units.

This additional pressure on the numbers increased the risk to the partnership. Yet even more so, it pointed to the importance of starting of the joint training as that would provide key insights needed to confirm (or invalidate!) the business case in this early stage of the partnerhip. 

We left the conversation there, with a clear next step for Peter, and Dysmus to follow-up on. As for the result of the Partnership Design process, it pointed to the importance that a good preparation by laying out the starting situation of both businesses is critical for achieving momentum in partnering. If information is missing  in this orientation stage, the partnership will likely run into delays.

We’ll be sure to check in again with the EG-SF partnership again soon to see what insights the implementation of the training has brought. 

[PS. Upon reviewing this article, Peter explained that the partnership has run into an additional challenge, namely that exporters demand graded produce. They were assuming that cold storage was their only impediment.

So, despite having the relevant contacts with exporters in place, they still need to work out how to jointly fulfil the exporters’ product, and packaging requirements. The partnership now needs to involve sorting, and packaging facilities, which neither EG nor SF currently has.

Will it be a joint investment? Or will it be assigned as a responsibility to either of the partners individually? What are your thoughts? – Leave them in the comments below 👇]

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The Business to Business of Customer Development

Posted on by Bart Doorneweert

Selling your work in progress product or service as a startup to an incumbent company is very hard. You can find yourself offering a value proposition that competes head-on with existing products, for instance on price or efficiency benefits. In that position you have to elbow your way into an existing value network that is already servicing your designated customer at a satisfactory level. In contrast, you can also find yourself in a position that you actually have no competition, because there is no reference to the solution you have developed. That is equally difficult as muscling your way into an existing market, but a different challenge: how are you going to convince your customer to change their existing value network relations based on a solution for which they have no clear conception of a problem? In this post I’ll share some of my first-hand experiences on this issue.

Creating a new value proposition
My experience in business to business work stems from the cotton processing and marketing company I co-founded in early 2006 in India, Zameen Organic. Our idea was to set up a farmer-owned company that could supply top branding customers with a sustainability ambition like Marks & Spencer’s and H&M.

We saw that these customers were interested in Fair-Trade and Organic certified produce. At that time the market for Fair-Trade and organic was growing explosively. Cotton production was nowhere near the growth rate of demand. Our proposition in this market was thus to provide a professionally run company of farmers that would be able to grow at the rate of the market, and supply the demanded quality. This was in a time when organizing trade relations between big brands and small producers was mostly the domain of NGO’s.

In developing our proposition we also saw that enabling our customers to put a label like Fair-Trade and Organic on their products was not a unique enough proposition to capture the value we intended to create. Lots of suppliers were doing that. That wouldn’t make us unique. We thus set the bar for our marketing ambitions a bit higher than just creating access to brands. We wanted to also develop systems of co-branding, where brands could affiliate themselves with social and environmental progress of their supplying smallholder producers. In return for supplying quality produce and growing supply, we wanted to let our company and our farmers in on the value that was captured downstream in the consumer market.

Selling ‘new’ in an existing market
Filled with ambition, I set up several meetings with potential big brand customers to discuss our idea. I started off with just the guy from procurement at the table. Unfortunately he didn’t want to take the discussion further than product price, quality, and quantity specs. My conclusion was that this guy apparently was not authorized to set any kind of innovation into motion. So I conjured my way into follow-up meetings with procurement, CSR, and marketing around the table, hoping to make each part of our proposition understandable to each relevant silo within the company. Hopefully they would come to an ‘aha!’ moment together, and that would get the ball rolling…

…But no such luck! There was no emotive response from any of the parties at the table. No recognition that our story could latch on to the problem they were facing. Why? Well, purchasing was only told to procure certified produce at the lowest possible price and secure the supply that the company required, regardless of working against odds of tight supply in the market. CSR’s job was focussed on making up the reports that showed the company was seriously picking up its responsibility. This department wasn’t involved in actual company decision making. And marketing, well marketing was not much into the business of understanding how the supply chain operated. Rather they preferred to put creative thinking into how to put the brand into a positive limelight with the end consumer. So, none of the people at the table could properly assess the value of the proposition we were trying to sell.

Selling ‘new’ in a new market
Our proposition didn’t connect with our larger customers. But on the other hand, we also serviced a segment of smaller apparel branding companies who were dedicated solely to ethically produced garments. One of our more successful branding customers was Pants to Poverty, a non-profit awareness raising company on equitable trade, under leadership of Ben Ramsden. Pants to Poverty had released a line of undergarments, conveniently lifting on Nelson Mandela’s campaigning to Make Poverty History which made the Pants brand go viral.

Ben understood the proposition of co-branding, and securing the supply for their operations. With him, we were able to set up a branding initiative advertising the link between Zameen farmers, and the underwear made from their fibers. Pants’ website till date still uses images of the Zameen Organic farmers holding up their product, demanding riddance of poverty.

Zameen farmer Pants to Poverty

Zameen Farmer Pants to Poverty Man

Zameen farmer showing ‘their’ pants

Pants to Poverty was able to create a unique value proposition to the consumer market by showing their direct contact and collaboration with farmers. Our collaboration gave PtP a more secure position in the supplying market, amidst bigger competing buyers. Farmers in return were able to negotiate better terms of trade, also including farmer training on cultivation practices in pricing, as well pre payments, on top of the regular investment of the Fair-Trade premium in meaningful projects for community development.

Existing vs. New
So what made the difference? For one it’s the fact that PtP was looking for our proposition. There was no other supplier out there that could provide the same kind of consumer marketing opportunity. Zameen enabled them to do it. But the more interesting distinction is that we succeeded to form the collaboration because Ben embodied the function of purchasing, CSR, and marketing all in one. Ben was a fully integrated customer, better able to critically assess the performance contribution that our proposition might bring. This made life much easier in pitching the idea for making Zameen part of the PtP value network.

What we saw in our other discussion with the larger companies was the symptom of dealing with a new proposition and a dispersed customer. Even though the reality of the market of short supply begged for a change in assessment of relations in their supply chain, there was no way that our large customers could recognize the value we intended to provide. They did not have the joint understanding and feedback mechanisms in their own internal cooperation that would allow them to properly assess the proposition. Nor did they feel in any way inclined to discuss the opportunity with their superiors. The proposition was too new. Hence they preferred the possibility of leaving value lying on the table and sending us home over taking a chance with us and assessing the actual potential of Zameen as a supplier on its merit.

Conclusion
The story above describes a challenge that entrepreneurs often face (social entrepreneurs almost by definition). It happens when you’re so very early to market with a solution, that people generally would dismiss it as a market opportunity. This is what Bright B Simons refers to as the struggle of creating “a new value class”.

In our Zameen case, things got rolling when we shifted focus to working with smaller companies. With these companies it was easier to come to an integrated assessment of our proposition with the people who fulfill the critical roles of user, purchaser, and beneficiary. They were organized informally enough to have a validly critical discussion about our proposition in relation to their performance priorities. At the least it ensured us that our product wouldn’t be dismissed based on false-negative arguments.

My key learning from this experience is that the more a product or service relates to the norms within an existing value network, the better you can deal with the dispersed customer. The further a product or service is removed from that network, the more you’ll need to look for your integrated customer to get a substantial discussion going. As a rule of thumb, I would say that your chances of finding integrated customers is highest with companies with up to a billion euro in revenue. Over a billion in revenue, things get layered and segmented, and you’re likely not to get a proper early assessment of your product’s market potential. Start your proof of principle with smaller companies. They might provide you with the insights and reputation that allow you to enter the big league after.