Thursday, October 27, 2005

Good practice in economic development agencies

Because I am too lazy to write original material today, and for some other days, I am going to post snippets from a less well known piece of academic work that I authored many years ago about good practice in economic development agencies. Based on 3 yrs of heid exploding work and being locked in a small room on my own. I did talk to 80 folks in Development Agencies in three countries though...

Pure gold, so it is...

A market-led operational philosophy

... there were several arguments used to promote the idea of market-led philosophies in economic development agencies:

i. A market-aware approach involves increasing client and market differentiation and segmentation - which is in response to the realisation that development aims are more effectively met if different client groups receive tailored approaches and tools.

ii. A market-led approach is about maximising the opportunities in the local economy.

iii. There are occasions where certain development activities in their current form become unsustainable. Public support for these activities is only a solution if it can change these activities to make them sustainable.

iv. The public sector has a poor track record of managing enterprises in the market-place in the long-term. Divestment should be emphasised once market failure is corrected or modes of intervention become self-sustaining.

v. Effective economic development involves working with the private sector. An understanding of the dynamics and needs of different forms of economic activity requires the insights of the businesses which are themselves the focus (GLE, 1997a).

vi. There are many examples of a mismatch between programmes and services on offer through the economic development institutional infrastructure, what is best for development, and what is actually demanded by potential and existing clients

vii. Close relations with the ‘market’ inform policy, strategy and operational design. This further enables services and programmes to be designed in such a way as to fulfil development aims whilst being attractive to potential clients or users.

Overall, it is argued in this research that many development agencies in the past have been predominantly product-led. That is, the service or programme on offer occupies too large a proportion of the agency’s efforts in management and development. The starting point should not be past practice or by claiming ‘that’s the way it’s always been done’, ‘it’s best practice at the moment’, or ‘it’s an improved version of our previous provision’. The starting point should be the ‘market’, encompassing the following stages:

1. Strategic market analysis. Both analysing the local economy and the requirements and demands of potential users, beneficiaries or clients of the development agency’s remit and role.

2. Design services and programmes that consider both the economic development aims and objectives, and what users or clients are likely to take- up and gain satisfaction from. Services and programmes designed with the best intentions and effort can perform poorly if no consideration is given to the user’s perception of value or demand for these as well as their ease of use and access.

3. Establish organisational structures so that there is a visible interface with the ‘market’ and there are feedback mechanisms into the wider organisation.

4. Acknowledge that transactions between agencies as producers of their services and clients or users as consumers is a long-term relationship. A consumer perspective implies excellent customer relations and management, that will further benefit operations by improving provision based on market feedback and enhanced market intelligence.

Using a common framework for categorising the ‘market management’ philosophy in firms further illustrates the relevance of this discussion. The ‘market’ doesn’t just refer to the business world, or the world of buying and selling services. It refers to the funder, client or beneficiary base in the case of economic development agencies. Further, applied marketing is a management philosophy and approach that is very useful in designing effective organisations. The applications of the principles of marketing to non-profit organisations are made evident by Kotler who states that,

The basic reason a non-profit organisation should be interested in formal marketing principles is that they will enable the organisation to be more effective in achieving its objectives. Organisations in a free society depend upon voluntary exchanges to accomplish their objectives. Resources must be attracted, employees must be stimulated, customers must be found. The designing of proper incentives is a key step in stimulating these exchanges. Marketing is the applied science most concerned with managing exchanges effectively and efficiently.
(Kotler, 1975)

(c) 1998

More tomorrow - can you wait that long!?


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