What SMEs Really Need (and Why They’re Still Not Getting It)

SMEs | Chinese Bakery

For the past 15 years, we’ve worked to help build the capacity of SMEs around the globe—from beekeepers in St. Lucia to digital animation firms in Nigeria, from agribusiness providers in Rwanda to Web developers in Ukraine. One thing that’s become clear from our work in more than 40 countries on 5 continents is that micro, small, and medium enterprises worldwide face a core set of challenges.

Whenever we engage in a workshop or focus group with micro, small, and medium enterprises (MSMEs) in emerging markets, the participants try to make the case that their businesses face unique challenges: it’s harder to register a new business in their city, their business-enabling environment is more challenging than in other countries, women entrepreneurs may face specific cultural hurdles, local corruption may be more intractable, the infrastructure (electricity, roads, etc.) may pose greater challenges.

These types of obstacles are very real, and it’s true that they vary substantially from market to market.

But despite these sorts of market-specific differences, our team at Emerging360 still believes that at a foundational level, SMEs everywhere face a common set of challenges.

And by the end of every training we’ve ever done for MSMEs or MSME service providers worldwide, the participants have come to appreciate these commonalities as well.

So What Are SMEs’ Shared Challenges?

We call the diagram below an SME “needs wheel,” because the needs are structurally interdependent, and the challenges and potential solutions mutually reinforcing.

Needs Wheel for MSMEs

Professionals in the SME development field are intimately familiar with these challenges. And the good news is that various development institutions have been tackling some of them successfully in specific markets. So the question is: why hasn’t the international development community been better at implementing successful solutions more broadly?

The Obsession with Innovation: Is It Part of the Problem?

What this raises for us is a fundamental methodological question: whether there is currently too much emphasis in the development world on program replicability and too little emphasis on program replication itself.

In other words, it’s common practice for major donors and development organizations to announce that their innovations (whether for SMEs, health, education, climate change, you name it) will serve as proofs of concept potentially replicable in other markets. But in our experience it’s much less common for a development organization to take one of these “replicable” models developed by a different organization and implement it themselves.

Imagine, for example, if the World Bank, rather than investing primarily in designing new solutions to SME challenges were to replicate proven, successful “replicable” programs developed by the Asian Development Bank (ADB). Or if the U.S. Agency for International Development (USAID) were to replicate successful climate mitigation solutions developed by the African Development Bank.

In a world where innovation is prized above reproduction, experimentation above mere cloning, at a practical level it sometimes seems a shame that more stress isn’t placed on inter-organizational collaboration, co-investment, and program replication.

Let’s be clear: we’re not Luddites. There’s no doubt that smart, strategic innovation can change the world. Innovating–both technologically and strategically–is at the very heart of what we do at Emerging360.

But with dwindling development budgets, what we should definitely not be doing is innovating for innovation’s sake.

Of course, inter-organizational replication and co-investment are happening in the development field. But are they happening enough? What do you think?

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