How we can stimulate collaboration in supply chains
Typical stories emerge whenever enterprise development in supply chains is discussed. One is of a small business trying desperately but never winning an order, and struggling to find finance.
The second is of a frustrated big company wanting to encourage small businesses but not finding suitable suppliers, or suppliers failing to perform. A third is of investors looking in vain for businesses to fund.
Supply chain development is huge, not just in SA but in most of Africa as well as Asia, Latin America and Eastern Europe.
The government encourages it through legislation, enforceable codes, tax benefits and agencies to facilitate it. Big businesses are committed to it and create units to increase the proportion of small black businesses in their supply chain.
Entrepreneurs throw themselves and their limited resources into offering products and services; banks have special divisions committed to financing and supporting them with advice. Investors attend endless pitch days; nonprofit agencies line up to match suppliers and purchasers and funders, as well as to train suppliers and represent purchasers in managing the process. The field should be exploding.
Yet frustration seems bigger than celebration when these various parties get together to talk about enterprise development. Why? Lack of coordination is one factor, though the solution is not as simple as setting up an online matching service. People are reluctant to share competitive advantages.
While competition is healthy among businesses, it can be frustrating among nonprofit agencies that need to collaborate. They compete for funding, which means painting as positive a picture of their impact as possible, perhaps hiding key data. They protect their intellectual property and methodologies, thereby preventing helpful discussion about best practices.
Moral urging to collaborate is unlikely to be enough in the face of incentives that support going it alone. It might help to reward outcomes (such as growth in employment) rather than outputs (such as numbers trained). We have found that investors and banks are well placed to connect players by offering training to groups of investees and by drawing on their network to introduce suppliers and prospective purchasers to each other.
Window-dressing and boxticking are common complaints, with cynical abuse of the system to earn points or tax credits without really helping businesses thrive. Top management commitment to supplier development is important to avoid this.
Corruption inevitably enters as tenderpreneurs get rich at the expense of genuine businesses. Suppliers often have technical ability but lack information and business expertise.
This includes general business practices to give purchasers confidence in their capacity to deliver consistently, and specific skills such as preparing documents for tenders or registering on a supplier database.
The psychology of success probably plays a bigger role than we imagine. A study in Ivory Coast found that a course boosting entrepreneurs’ psychological fitness had more effect than a course on basic business skills. This may be an even bigger factor in SA. So small business owners need confidence, competence and opportunity. In Linda Human’s words, they need to be willing, able and allowed to perform.
Each of these individual solutions helps, but the biggest effect will come from working together to create a supportive ecosystem with incentives that encourage collaboration towards a shared outcome. We all know this.
We do not need more big interventions focusing on one or other silver bullet. We do need an intervention that resists becoming yet another player competing for attention and funding, and builds instead on the amazing effort and strengths already in the field by taking an evidence-based systemic perspective, with influence over government, business and nonprofit agencies. It has to be led in a way that puts their success above personal glory.
I believe the mood in the country is becoming receptive to that humble approach.
● Cook, a former director of the Gordon Institute of Business Science, is chair and co-founder of the African Management Institute.