The Currency of Good Data

Measurement was a hot topic at the Council on Foundations' annual conference last week in Washington D.C. As data and evidence-based decision making continue to wend their way to the center of today's philanthropy conversation, funders and grantees increasingly look to monitoring and evaluation (M&E) for proof of a solution's value and to make programmatic improvements. Rigorous approaches such as Randomized Control Trials are considered the gold standard of impact measurement, and systems like the Impact Reporting and Investment Standards (IRIS) have been developed to standardize social, financial, and environmental performance metrics. Now, networks such as ANDE are encouraging grantees and funders to move beyond standardization and to integrate impact metrics with financial and operational processes, while broadening the collection and distribution of data to benefit an entire ecosystem or society.

Despite these positive trends, M&E is still hard to do well in developing countries. Good information is difficult to obtain, and its collection costs time, effort, and money that many feel would be better spent on direct beneficiaries. Furthermore, many grantees on the ground still struggle with basic evaluations, much less the rigorous M&E systems preferred by many funders. Grantees also frequently need help integrating this data into feedback loops and decision processes in order to make operational improvements.

Practical M&E programs in the developing world means measuring the right indicators with the right approach and the right amount of rigor. For corporate funders and CSR groups, measuring the business value alongside social impact is critical to conveying the full value of programs and ensuring continued financial support. There is an excellent opportunity to share the cost of collecting and analyzing program data with other donors and private sector players. Solid data - particularly on the opaque small-business sector - could help partners improve programs, design products or services, develop strategies, and create effective marketing campaigns. The collaborative approach to development is not new, but the currency of good data has the potential to bring a lot more collaborators into the tent. 

Small and Medium-sized Businesses Gain New Attention as Pillars of Emerging Market Economies

China's state-owned banks are showing unprecedented increases in their lending to small and medium-sized businesses (SMBs). This expansion is part of a trend in which emerging-market governments are increasingly active in supporting the SMBs within their economy. Jamaica and Russia are also making a concerted effort to recognize and support SMBs and to help them grow, especially as millions of laid-off workers look for ways to rejoin the formal economy.

Giant multinational corporations (MNCs) such as Huawei in China and Wipro in India often get the lion's share of attention in discussions about emerging-market business. Yet, SMBs form the backbone of most of these countries' economies. Data from the World Bank indicates that SMBs employ about three quarters of all workers in countries as diverse as Turkey, Mexico, Egypt, China and Bangladesh. During economic downturns, the role of SMBs comes into sharper focus. They are often particularly hard hit due to their precarious financial position and reduced access to sources of credit.

SMBs in emerging markets are often underserved and overlooked by MNCs because it can be difficult to identify, size and characterize this target market. Additionally, MNCs are often unsure of how to reach developing-country SMBs or provide purchase financing, especially in nations with weak or non-existent credit systems (Google.org notes the "missing middle" between microfinance and traditional commercial finance). MNCs would do well to investigate local partners who could provide SMBs with innovative payment methods. Industry associations or specialized businesses can also be an effective avenue for targeting these often diffuse businesses. Such focused efforts may provide both MNCs and their SMB customers with the edge they need during these challenging economic times.

Cracking the SME Nut

For multinational corporations (MNCs) examining emerging markets, the small- and medium-sized enterprise (SME) segment remains one of the most profitable opportunities. Increasingly recognized for their contribution to gross domestic product, SMEs have garnered the attention of global philanthropies like Soros, Omidyar and Google.org. Those organizations joined together last week to create a $17 million venture capital fund in India to support socially-responsible, early-stage companies. A recent article in the Latin Business Chronicle points out that certain developing-country governments are also trying to promote the development of the SME segment by reducing barriers to growth, facilitating exports, and improving access to financing. The author suggests that while deregulation puts competitive pressure on SMEs, they retain the advantages of greater flexibility, latitude, and speed in responding to threats and opportunities.

For many multinational corporations, the SME segment are becoming the “holy grail” of emerging markets. However, there is a troubling lack of information about the segment, for example many SMEs are part of the informal economy, lacking the capacity or incentive to implement transparent accounting or reporting practices. But even companies that are part of the informal economy need technology to grow and compete. Recent field research by Vital Wave Consulting in Central America on SMEs suggests that tourism and youth-focused companies present solid growth opportunities for technology companies. Small businesses with multiple locations also require more coordination and control and have a greater need for technology infrastructure.

To effectively target the fastest growing SMEs with growing technology needs, the segment must be broken down. Just as the term “emerging markets” lumps extremely diverse countries and economies into one category, so does the SME label. The diverse nature of the SME market means a broad-brush approach is not appropriate. A SME is most commonly described as a company with 10 to 250 employees, but this does not differentiate by industry or growth potential. There is a clear opportunity for MNCs that invest in a comprehensive SME segmentation and sizing analysis by sub-segment and by country or region. MNCs that understand the true size and nuances of the SME market opportunity will be best equipped to capitalize on this growing segment.

Also in the news:

• Intel to release low-cost platform
• Quanta says partnering with academia is challenging
• Tata bent on seeing wealth flow into emerging markets

Think Global, Partner Local

March 14, 2007

Think Global, Partner Local

Professor Pankaj Ghemawat of Harvard Business School poked a hole in the world-is-flat version of globalization in the current edition of Foreign Policy magazine. Ghemawat points out that “more than 90 percent of all phone calls, Web traffic, and investment is local,” and that most Web users chat with local friends or e-mail family rather than connect with someone overseas. “We’re more wired, but no more global.”

The preference for local, relevant content may account for the struggles US-based companies like Google, Yahoo, and eBay have faced in transplanting their success to emerging markets like Russia and China.

To win these markets, multinational tech companies are wisely experimenting with different business models – partnering with local competitors, surrendering overseas operations to local players, or signing up proven consumer champs like Pepsi and Procter and Gamble to find new advertising revenues.

There is a clear opportunity for SMB’s in developing countries to partner with multinational search and e-commerce companies to collect and deliver locally relevant content. Soon, it will be possible to identify a user’s location as soon as she logs on. The company with the strongest roster of local content providers will achieve the most business growth in that environment.

Also in the news this week

• MobiTV sees demand for service in developing countries
• Apple developing flash-memory notebooks – more rugged, less expensive could give Apple an emerging-market play
• Microsoft moves into enterprise VoIP – enabling more cost-effective operations in MNCs with overseas offices