“STEERING NEW SECTOR DEVELOPMENT”
INTRODUCTION
Most developing countries depend on a limited number of sectors to grow their economies, and Zambia is not an exception. Zambia’s economy remains significantly dependent on the mining and export of copper, The agricultural sector which accounts for about 50% of national jobs is dependent on smallholder farmers characterized by low levels of productivity and limited accesses to local value-added sectors. There has been much talk about diversifying the economic activities from the traditional mining and agriculture sector, but much is yet to be achieved
This can be partly attributed to lack of demand for certain products and services in an economy where there are lots of needs that go unmet, such as infrastructure needs, health needs, energy needs etc. Creating the much-needed diversification call for a mental shift, it calls for a people to demand much more from themselves in order to foster an economy-wide productive capacity and structural economic transformation. Doing nothing means accepting the status quo. To procurement practitioners, this point to the need for deliberate procurement interventions aimed at fostering new economic sector growth.
The question for procurement practitioner, here could be “how is it possible for us to develop new economic sectors?” The answer is in producing knowledge to create new products, services, industries and jobs; as some proponents of education systems changes would argue, “what use is an education to the nation if it cannot produce knowledge to create its own industries, machines or provide solutions to problems to social economic ills? This opportunity to create new knowledge and diversify the economy lies in the UNMET NEEDS OR DEMANDS; the STRATEGIES TO ENGAGE THE PRIVATE SECTORS and/or SMEs to create products and services that meets these needs; and the FLOW OF INFORMATION. The annual procurement plan does not capture unmet needs. However, procurement practitioners have to create a mechanism that encourages extended need identification beyond the current needs and the documentation of all unmet needs and/or creation of a basket of potential projects based on the said needs. For lack of better a term, the author would like to refers to this as “creating an unlimited organizational vision”.
The objective should be to develop frameworks that pulls investments in desired new sectors and create new products and services that meets global standards. This calls for procurement practitioners to challenging the dominant logics or conventional wisdom as it were. move from an inward-looking culture, to taking a proactive process that encourages innovation and creative that pulls investments in desired new sectors.
THE UNMET NEED OR DEMAND
The usual first step of the procurement cycle involves identifying need that an organization believe can be met based on available resources or capacities. The need to be met is usually either a product or a service to be acquired to support an organization’s operation. The aim at this stage is usually to identify the need, frame it, and define it in terms of specifications of how it will impact the organization. These needs are then aggregated and documented in an organizational annual procurement plan. However, as already stated above, this traditional approach to need identification does not document or keep a record of needs that the organization’s stakeholder believe cannot be fulfilled for various reasons. It is in these undocumented or unmet demands where opportunities for driving innovation, leading to new products, services and jobs lies. Identifying unmet needs and supporting innovation is the only way we will move from business as usual to rapid economic and new sector growth.
Unmet needs represent powerful opportunities for the private sector or indeed SMEs to build their current market share, disrupt the business-as-usual mentality, and creating new products/services and investment opportunities. Supplying more money through mechanism such as Constituency Development Fund (CDF), CEEC is a brilliant strategy, however, supplying it without a matching production of new products and services may just lead to inflation. More money plus new products and services will mean strong currency.
Identifying Unmet Demand or Need
There are various means by which unmet demand can be identified, but an effective way involves a multidiscipline approach and discussions with both internal and external stakeholders. Generally, an unmet need or demand is a need that a public entity has now, or will have in the future, that current products or services cannot meet for various reasons, such as;
- lack of confidence and belief that an existing need can be resolved through innovation,
- lack of awareness of an existing need by procuring entities, in a case where a solution may be readily available,
- unwillingness to meet the need due to excessive cost, capacity deficiencies, unacceptable risk exposure etc
- a need driven by policy, legislative, fiscal such as preferential schemes or budgetary changes and trends or new operational requirements such as those brought about by drought,
- Pressing societal problem needing solutions such as shortages of affordable housing etc.
Unmet demand can also easily be identified by simply challenging our assumptions about the way things are and can be, at the organization or indeed at the national level, to determine what needs to be met in order to move to higher levels.
It is important to state that the objective at this stage, should be to achieve a need specification that makes it possible to describe to the private sector which functions and/or properties the new product or service must have and possibly how big the market will be – THE BIGGER MARKET OF CASHFLOWS THE BIGGER THE PULL. However, it is also important to note that unmet needs- (unrecognized need)-may be difficult to identify because people don’t know what they don’t know and may find it difficult to specify what they don’t know. This should not stop one from seeking for the unmet need, those who seek find. Further, it is important to note here that, the identification of unmet needs should not be taken lightly, because it determines the level to which we are willing to rise as individuals and, as a nation. IF YOU CAN DREAM IT, YOU CAN BECOME IT”
STRATEGIES TO ENGAGE THE PRIVATE SECTORS
The procurement strategies to engage the private sectors and/or SMEs to create new products and services can take different shapes and forms, however, the primary features of such a strategy are to generate demand around which actual businesses can be obtained. Strategies to generate demand around which actual businesses can be obtained through leveraging the unmet need for economic growth include the following.
Supply chain gap analysis
Generally, effective procurement relies on good supply chain management practices that focuses beyond organisational walls of internal operations into the supply/value chain that link organisations together in their participation to fulfill a social or customer need; from the sourcing of raw materials or services through the production of goods to distribution and sale or consumption.
Crucial achievement can be made, by analyzing the current situation in several critical areas of the supply chain, compare with the desired performance levels in order to identify gaps (unmet needs) and reasons for the gaps and then creating action plans to close or eliminate those gaps. This will include, gathering the enablers, barriers to achieving the desired supply chain performance and their effects on the economy.
By managing and understanding the supply chain and how products, information and money flows through it, procurement will be in a better position to find unmet needs and figure out how to assemble the different supply flows or element to innovatively address the identified unmet need.
Supply chain fragmentation strategy
This is one of the strategies to improve supply chain performance and increase SMEs access to business opportunities. A startup company seeking to manufacture industrial equipment components might not be able to get off the ground, if it has to go through Research and Development, but can easily find read demand for its product or services through supply chain fragmentation. Supply chain fragmentation strategy involves breaking each part of what would be one big business into smaller value additional activities that can be undertaken by new SMEs entrants, each exploiting a component of the supply chain.
For example, manufacturing of industrial equipment components can be localized or undertaken in a different geographic region or by different SMEs, from product design to customer support.
Each part of a business will effectively be a subcontracted SME and produces a different item which ultimately makeup the final product or service. Procurement practitioners can facilitate the identification an unmet demand and fragment its development and delivery from design to customer support.
Part of this approach can be seen in the manufacture and supply of locally made school desk at the instigation by the Head of State. Putting such strategies to bear without the instigation of the Head of State should be the norm, if we are to achieve economic growth through the support and development of new SMEs sectors.
This is critical as building the local value chains is essential to the nation’s economic transformation and the nation’s subsequent participation in regional, continental and eventually global value chains
Public Private Partnership (PPP)
Compared to traditional procurement approach, PPPs involve a significantly increased level of private-sector participation. PPP is a collaborative arrangement between the public and private sector that aims to leverage the strengths of both sectors to deliver effective, cost-efficient projects and associated services.
PPP provide a good opportunity to generate demand around which actual businesses can be obtained through leveraging of the unmet need. PPP frameworks have to pull investments in desired new sectors and create new products and services that meets global standards. If well structured, the value of committed private investments can significantly contribute to the creation of new sectors. The resulting new developed infrastructure can also further serve to make our country a competitive investment destination, spiraling even much more economic growth prospects.
However, someone has to identify these PPP opportunities before mobilizing the private sector in support of investment in unmet infrastructure and service needs.
Using information of documented unmet demand or project banks, procurement practitioner can then mobilize the Private Sector to Drive Zambia’ economic development.
Forward Commitment Procurement’ (FCP),
This is a specialised outcome-based procurement strategy aimed at demand creation in which public procurement entities commit to purchase unmet needs solutions, should they be developed by the private sector. The objective is to create an innovation environment in which private companies and SMEs are encouraged to invest in new products and service they would otherwise be reluctant to invest in the absence of clear market demand.
Forward commitment procurement derives much of its features from forward commitment arrangement commonly used in the sale of commodities or good under a contractual agreement to carry out a transaction in the future. As in any other forward commitment arrangement, the objectives should be to reduce uncertainty and risk around the transaction.
Forward commitment arrangements act as better strategy for products for which there is a time lag between creation and sale, and similarly, FCP can be used as a strategy aimed at procuring innovative goods and services in the future and the management of associated risk.
Pre-Commercial Procurement’ (PCP)
Pre-Commercial Procurement (PCP) is another specialized outcome-based procurement strategy aimed at procurement of Research and Development services. PCP challenges markets to develop innovative solutions to meet public sector demand, while providing a first customer reference that enables companies to obtain competitive advantage on the market.
The PCP approach will also enable procurement practitioners to compare alternative potential solutions and narrow down on the best possible solutions that the market can deliver to address the public need. The procurement is managed through phased competitive stages that culminate in the development of a commercially viable product/service.
INFORMATION FLOWS
In an any health environment, effective information flow is important as it provides the basis on which decisions are made. In addition, without effective information flows, all the efforts to identify unmet needs and develop frameworks for engaging private sector participation will be wasted time and resources. Effective information flow will be the lifeblood to get buy-in and ensure that all stakeholders have the right information, at the right time, at every stage in the development of new products and services, or indeed new economic sectors. It is also important to ensure that all stakeholders are on the same page.
Instead of SMEs incurring cost in researches for answers, procurement practitioners, using appropriate procurement communication platforms and dedicated resource centers, can provide such information, triggering private sector full participation in the economic activities involved from design, sourcing raw materials to consumption. This information flow will help overcome barriers to the market that SMEs and producers of innovative goods or services face, manage the risks involved, and unlock investment that brings new products and services into the market.
Without such information no new goods and services will be developed or brought to commercial production, because of the high market risk and lack of demand pull leading to market failure.
The two broad categories necessary to ensure that information flows are effective are the Internal and External information flows.
Internal information flow
Information flow within the organization has to be effective to ensure that there are no misinformation or misunderstanding of what the goal or objective is. The aim here should be to ensure that:
- that everyone is on the same page.
- decisions or new products/services delivery models are not based on false information leading to disastrous consequences,
- collaboration and alignment of all involved staffs are based on shared understanding and goals.
External information flow
The objective here should be to amplify unmet demand or unmet project visibility. Without information, the private sectors will not know what unmet needs or demands of the procuring entities are, what innovative solution or new product and services development opportunities exist, etc.
A well-established information flow mechanism will elicit appropriate private sector reaction to innovative opportunities and risks associated with new products and services development. However, because of the nature and complexity in meeting some of the unmet needs, information flows here may not only be limited to the targeted private sectors, but also other public entities such as regulatory authorities, local authorities, government ministries etc
In order to achieve this, the procurement practitioners will use various forms of communication to build awareness. These will include direct engagement, exchange forum among stakeholders, project marketing, publishing of request for proposals and other user-centric procurement platforms and dedicated resource centers etc. The objective should be to foster private sector engagement, better decision making and the creation of an environment where creativity flourish arising from quality and effective information.
Conclusion
Procurement practitioners should drive innovation from the demand side by committing to buy new products, services and solution that meet identified unmet needs. Doing nothing means accepting the status quo, it is time to aim high, even if it means failing. As Micheal Angelo put it “I will have no problem with you aiming high and miss, but I will have a real issue if you aim low and hit”
It is time to break functional silos that are out of synch with the higher government agendas, inward-looking culture and remove complex bureaucracies that stifle creativity. The solution for the future calls for discussion of teams across disciplinary and practice lines.
This understanding is critical as it help overcome many reasons that make procurement fails to harness the economic growth opportunities arising from their privileged position.
However, before starting any intervention, it is important to ensure that procurement professionals involved in delivery are knowledgeable, well trained and are clear about conceptual frameworks and expectations, while still retaining overall day to day responsibility.