WealthWorks value chain defining characteristics
WealthWorks value chain defining characteristics
Economic and community development goals tend to drive development practice. When goals are focused primarily on creating jobs and generating income, development activities are designed to produce those results, no matter who gets income, or what kind of jobs they are. In WealthWorks, development goals are expanded to include all three elements of wealth building within a region: that is, boosting stocks of eight types of capital (while harming none), increasing the local ownership and control of that capital within the region, and improving livelihoods, including moving people, places and firms on the economic margins towards the mainstream. Working on that range of goals calls for a tool that is flexible in both its design and application—one that can broaden and deepen wealth-building impacts within a region. That tool is the WealthWorks value chain.
A WealthWorks value chain has several defining characteristics, each of which is a critical ingredient needed to achieve wealth-building results.
Partners. WealthWorks value chains rely on a “woven” network of many actors, which WealthWorks calls “partners.” Each partner plays a role in producing and delivering products and services to the market. “Transactional” partners help develop, produce and deliver the actual product or service. Other partners play important “support” roles by providing technical assistance, finance, training or other expertise that help the transactional partners function effectively. Other support partners might smooth the way for the value chain to increase the scale of results or to loop in partners who might otherwise be left out of the action.
For example, in a WealthWorks value chain that is bringing organic tomato soup to a variety of buyers, a farmer focuses on growing flavorful tomatoes, while a food processor combines the tomatoes with other ingredients to make the best tomato soup—both are transactional partners. But an agricultural extension service, as a support partner, might help farmers learn organic practices. Or a support partner coalition of farmers, processors and buyers might lobby a state agency to lower the cost of organic certification so that more subsistence farmers can grow organic tomatoes and benefit from the higher-reward organic market.
- Coordinator. WealthWorks value chains are woven together by a coordinator. A WealthWorks value chain is not self-organizing and doesn’t happen by accident. The structure and quality of relationships among partners in a WealthWorks value chain are what deliver products and services to market, allow the partners to fulfill their self-interest, and help the value chain build regional wealth. So it takes the careful work of a coordinator, working with the network of partners, to intentionally design and construct a successful WealthWorks value chain. A coordinator might be an organization, a public agency, a team or a business, but coordination must be an intentional effort, and must be considered a real part of their job and responsibilities.
Tapping into interests
WealthWorks thinks about interest in three different, but connected ways.
- Self-interest: “What’s in it for me?” is the strongest energy motivator.
- Shared interest: “What’s in it for us?” is sparked when two or more value chain partners recognize a win-win action within the value chain that will benefit each.
- Common interest: “What’s in it for everyone?” includes benefits that flow from the value chain to people or places outside the value chain, both in the region or beyond.
“Interests” as glue. WealthWorks value chains are bound together by self-interest— and strengthened by shared and common interests. Most partners in a WealthWorks value chain start working together out of selfinterest—whether that be to meet their bottom lines, advance their missions, or achieve some other goal. Relationships between core partners often begin as transactions or financial relationships. What’s unique about a WealthWorks value chain is that, over time, many of these relationships evolve and partners begin to see a shared and/or common interest in participating in the value chain.
For example, the soup processer—who has built a relationship with local farmers—might encourage the farmers to add beans and carrots to their crop rotations so that the processor can add minestrone soup to his product line. They share an interest in doing this: The soup processor expands his product line and the farmers diversify their crops and increase volume, both partners potentially boosting revenue from their activities.
Or perhaps the soup processor, farmers, and PTA all care about the health of community youth. This common interest is realized when the value chain is operating effectively and providing the school system buyers with more nutritional fare to serve in the school cafeteria.
- Demand-driven. WealthWorks value chains start with demand, not supply. Some economic development approaches simply assume what products and services buyers will want, and then try to push them to the market. When that assumption is incorrect, it leaves producers with unpurchased products. By identifying documented demand for products and services before you build a WealthWorks value chain, you ensure that there is a market for your goods. Buyers pull goods and services through the value chain.
Think of it this way: if you start with what producers (tomato growers) and processers can produce instead of what buyers (schools) want, you might try to sell the schools diced tomatoes for salads. But when you do that, schools tell you kids much prefer tomato soup or pizza to salad, and they will only buy small quantities of diced tomatoes. If you had built a relationship with the school first, you would have known to produce and sell soup and pizza sauce instead of diced tomatoes.
- Nimble and responsive. WealthWorks value chains learn about and respond to changes in consumer preferences. WealthWorks value chain partners, because they are connected and coordinated, more easily stay on top of and communicate changing buyer preferences to others in the chain. As one partner notices price signals or changes in buyer preferences, she can alert others in the chain.
For example, the tomato grower can ask her partners in the WealthWorks value chain which tomato varieties are preferred by buyers before choosing new seeds—rather than relying on a year of poor sales to give her that information. Or the local university that is providing marketing assistance to a group of growers might share research about varieties that are trending elsewhere and likely to be in greater demand by their own buyers soon—which might trigger new conversations with buyers or investments by value chain partners.
- Resourceful and inclusive. WealthWorks value chains stimulate productive investments in underutilized resources. Value chain coordinators, working with the value chain partners, look for underutilized resources within the region that, with some investment, can be woven into the value chain, increasing their productive use. Moreover, WealthWorks value chains intentionally target market opportunities that can include and directly benefit lowincome people, places and firms in the region.
In our example, the agricultural extension service might intentionally target helping local subsistence farmers learn organic practices so that they can start supplying the organic tomatoes that buyers are demanding for soup. Or network partners might uncover a local trucking firm not working at full capacity that could add a new run to pick up those farmers’ tomatoes, reducing cost for the farmers while making the trucking firm more viable.
Designed for scale. WealthWorks value chains are not meant to be “one and done.” Once a value chain has successfully delivered a set of products or services to buyers, it can serve as a platform for doing more, better or different. So, from the get-go, WealthWorks value chains seek investments in partners and activities that will establish greater capacity within the region to produce at higher quantity, at a wider range of quality, or to diversify and add products and services. These are all steps towards different aspects of scale. The point of achieving scale is to maximize wealth building and the flow of benefits from it within the region.
Through the value chain, our tomato growers may be able to band together to produce enough tomatoes to satisfy the demand for soup from local schools. But if the same farmers want to supply an interested buyer from a multi-state distributor, they might need product liability insurance. That costs thousands of dollars, and no farmer could afford it alone. Thinking ahead, through intentional value chain design, these farmers could organize to secure insurance affordably through a cooperative—setting them up to establish relationships with higher-volume buyers. That’s just one example of designing for scale.
- Regionally rooted. WealthWorks value chains are rooted in place. WealthWorks value chains are coordinated within a region, utilizing locally rooted resources to create a rich enabling environment that supports people, organizations, and businesses as they engage in value chain action. It’s true that a few value chain partners might be outside the region, like a state university, a financial investor, or perhaps a distant buyer of your chain’s products. But because most WealthWorks partners live, work, and play in the region, they have both self-interest and shared interest in helping more people, places and firms in the region do better.
- Designed for wealth building. WealthWorks value chains are intentionally designed to achieve wealth-building ends. Clearly, there are other ways to bring players together to meet demand for products and services. And other processes can have a positive impact on a region. But often that impact is short term, or limits who it benefits. In order to build wealth that sticks and lasts in a region, WealthWorks value chains are intentionally designed to grow local stocks of capitals while harming none, strengthen local ownership and control of that capital, and improve livelihoods for those on the economic margins.
With these defining—and designing—characteristics in mind, let’s turn to an overview of the basics of building a WealthWorks value chain. Economic and community development practitioners engage in four essential activities to construct a WealthWorks value chain. The exact steps taken depend on the market opportunity selected and the partners and coordinator in any one value chain. Here we offer a broad-brush overview of the four activities.