In our previous blog, we explained that crises help to create windows of opportunity for systemic change, and that the interplay of innovations across both business models and practices, and market rules, have helped to push open those windows in the past, leading to lasting change. We also argued that those of us wishing to ‘build back better’ through the COVID-19 pandemic crisis should seek opportunities to act now, and not wait until the dust settles.
In this blog, we will share some thoughts on how that could be done, drawing on our work in recent years with philanthropic partners around the world trying to shape more inclusive markets. While this work has been intricate and deep, and continually evolving, here are four key lessons that we would highlight:
1. Don’t start from today.
‘It’s easy to fall into the trap of believing that the first day of our program is the first day of change for everyone else in the market system,’ said Ashvin Dayal, Senior Vice President at the Rockefeller Foundation and our lead collaborator on this work. Market systems are not inert and static, waiting for us to act on them; they are always evolving. In order to effectively formulate and calibrate our actions, we need to understand how change has happened in the past, and then retrace our steps to the present day to get a sense for what might be changing now.
Each time we do this with participants with deep experience, allowing us to look back across several decades of the market, the results have been incredibly illuminating. On this time horizon, we can see both where significant shifts have happened and where they have not happened (or even attempted and failed), and which actors, interests and processes have been involved. This is not about trying to copy what was done in the past – history does not repeat itself – but about discerning underlying dynamics in the market that we can then work with.
2. Look at both market players and market rules.
When examining the market system’s journey, we naturally pay more attention to the parts of the system that we know best. Many will focus on the players in the market, especially the major businesses that operate in it. Typically, fewer will look closely at the rules of the market, i.e., laws, regulations, tariffs, subsidies. Fewer still will consider societal norms – such as moves against the exclusion of particular groups or changing consumer preferences – that might not be explicit but can nonetheless exert a powerful influence on behaviour.
In reality, all of these aspects are important in determining how a market operates, and how it changes. In Latin America, for instance, one group of partners found that the issue of access to eyeglasses had been shaped over time by diverse factors such as changing regulatory frameworks for optometrists, consolidation in the industry value chain, the advance of digital technologies, and even trends in fashion.
This perspective is relevant not only to understanding the past, but to shaping the future. Our research shows that successful shifts toward inclusion come from both changes in business models and practices, and changes in market rules and norms, often ‘ratcheting up’ towards a deep and lasting change. Importantly, we found that the rules changes that drove success were not ones that ‘levelled the playing field’, but those that tipped the playing field firmly in favour of inclusive practices; it is interesting to note, given the present moment, that these changes were often achieved in the wake of major crises.
3. Anchor on potentialities, not on barriers.
In working towards a goal, it is not uncommon for us to first identify the major barriers in our way, and then act to try to remove or neutralise them. While this is logical, it is very difficult to do in the context of systems change, because the biggest barriers could also be the hardest to surmount. Without god-like powers to ‘change the system’ at will, we instead need to find the seeds of change within the system itself. In our work, we call such a seed a potentiality, which Merriam-Webster defines as ‘a quality that can be developed to make someone or something better.’
Most of us are attuned to the idea of potentialities, but tend to only see the ones that we are most familiar with. Those whose inclination is to find and back promising new businesses might revert to an interventionist mode when it comes to changing laws and regulations. Meanwhile, those who are adept at gathering public policy ideas and nurturing them to fruition, might fall into the trap of imposing unsound business ideas on the market. Doing this well requires us to bring together people working in different domains and with different perspectives, so that we can minimise blind spots.
This is particularly important at the present time because major crises and other powerful external events can generate new or different forces (such as greater public discontent, or general interest in a specific issue) that can be tapped to advance potentialities.
4. Consider the ‘unusual suspects’ when backing innovators.
Just as we have blind spots with potentialities, we tend to recognise some innovators and innovations more readily than others. For instance, those who are quick to spot the need to provide early-stage risk capital to entrepreneurs pioneering new business models may less readily see the potential for investigative journalism to drum up public support for a market rule change.
In Southeast Asia, we worked with a partner organisation that had a strategy mainly focused on supporting pioneer enterprises and facilitating investment. While they were deeply interested in changes to market rules, their focus was largely on the key decision-makers at the top of the political hierarchy. As they widened their scope of potential change agents, they realised that they had overlooked the innovators working quietly within government in ways that aligned with the partner’s mission, and extended their strategy to include better identifying and engaging with these new change agents.
Together with other leaders, our teams at FSG will be working over the coming weeks and months to seize opportunities to help shape a better world. You should too.
Harvey Koh is a Managing Director at FSG, and Laura Amaya is an Associate Director at FSG based in London. Thanks to the Rockefeller Foundation for their support of the work described in this article. Thanks as well to Ahmed Irfan, Marc Pfitzer, Rishi Agarwal, Samantha King and Sujata Rathi for their contributions to this work.