Tailoring business models for small-medium food enterprises in Eastern Africa can drive the commercialization and utilization of vitamin A rich orange-fleshed sweet potato puree

2.2.1 Initiation

A relationship-building activity was done between individual SMEs and the BDS provider. It involved an introductory stage between the SMEs and BDS provider, building rapport, understanding each SME’s current operations, management and leadership, growth aspirations, and the ecosystem and value chain in which they operate.

2.2.2 Business diagnostics

The diagnostics involved understanding each SME’s strengths and weaknesses and their unique business needs. In-depth exploratory discussions with each SME guided by a structured set of questions, focusing on the market, the business, the people, the product, the business case, and the venture structure were done. A SWOT analysis model was used to identify the strengths, weaknesses, opportunities, and threats for individual SMEs.

2.2.3 Tailored business development support

The six SMEs received one-on-one coaching and mentoring in key business strategies and were introduced to methods and tools needed to undertake a successful and growth-oriented business. Based on their unique needs and opportunities, each SME completed key activities, including developing a Business Model Canvas (BMC) and business profile, preparing a growth plan, and conducting OFSP value chain analysis for their respective enterprises. The BDS also included financial literacy training and simplified financial modeling. Each SME received regular guidance and intensive coaching and mentoring from the BDS provider throughout this process.

2.2.4 Wrap-up and feedback loop

At the end of the BDS exercise, the SMEs were required to submit their plans and targets based on templates provided to guide future implementation. Guided by a structured questionnaire and open-ended discussions, SMEs were encouraged to give their feedback on the relevance of the tools and exercises and the effectiveness of the different coaching and mentoring sessions included in the business development support.

3.1.1 One-page teaser/business profiles

The template featured the SME products and services, markets, current production level and future plans, financials, both current and projected, leadership and technical teams, partnership, and investment requirements. The SME profiles fell under the agriculture sector with flexible business models to integrate OFSP processing. The years in operation varied; hence, the SMEs had varied financial standings and revenue, and resource mobilization avenues. On legal status, the SMEs ranged from private limited, parastatals, sole proprietorship, and limited by liability and shares. Possibly, many other SMEs operate informally and unregistered.

3.1.2 BMC

The BMC is a strategic management tool that helps businesses to describe, design, and analyze their business models. BMC helps businesses to visualize their business focused on the eight building blocks of a business: value proposition of products or services, target market and customer segments, market strategy and customer relationship, market channels and entry strategy, key resources, key activities and partnerships, cost structure, and revenue streams [21]. The BMC beats the traditional bulky business plan that spans several pages by offering a much easier and visual way to understand the different core elements of a business.

Using this tool, the SMEs analyzed the scope of existing key partnerships, which were multi-sectoral. The partnerships ranged from OFSP research institutes, governments through the Ministry of Agriculture and Industrialization and Health, farmers and vine multipliers, aggregators, universities, technical consultants, banks, distributors, bakeries and private processors, informal vendors, and funding organizations, among others. The partners play different roles at different nodes of the OFSP value chain, and the SMEs were able to identify key partners in line with their respective business goals. The BMC also looked at the key resources required, financial and non-financial, by the SMEs at the different nodes. There were different resource needs among the SMEs, but what cut across was the need for human and financial resources, regulatory compliance, and facility establishment, including the procurement of processing equipment, transportation, packaging, and storage facilities, among others. Smallholder farmers were also identified as key value chain partners in the production of good-quality roots intended for processing and puree making. However, it would required clustering farmers into farmer groups and additionally developing effective aggregation models for bulking and collection of the raw material.

Further, the BMC helped the SMEs identify the products of interest, targeted market segments, and to lay down market penetration strategies. Their propositions did not differ significantly, as they revolved around the supply of good quality vines, puree processing, varied OFSP puree incorporated baked products, OFSP flour, animal feed, and trainings, among others. For the products to penetrate the markets and generate the much-needed consumer demand, the SMEs identified channels through which demand creation activities and advertising would be carried out. Each SME identified unique target markets, market penetration strategies, and timelines through the BDS. The BDS additionally guided the SMEs to project their revenue streams against the cost structure to give insights on the economic viability of establishing or expanding their businesses. All the SMEs projected high-profit margins from the intended activities and an assurance of the sustainability of their businesses.

3.1.3 Understanding the numbers/finances

Realizing that poor financial management is one of the key causes of SME failure, the module aimed to empower SMEs to make better decisions by utilizing financial statements. Each SME received finance training introducing key finance concepts and illustrating good accounting practices using their own financial data as a case study. Studies indicate that even reliable and timely prepared financial statements are not enough when owners do not have the ability to use and interpret them accurately. The module aimed to enhance the financial literacy of founders and/or directors to circumvent bad decisions that can leave behind widespread operational problems and ultimately threaten the enterprises’ growth.

3.1.4 OFSP value chain analysis

Value chain analysis is a useful strategic management tool. It is a process where an enterprise identifies its primary and support activities that add value to its final product and then analyze these activities to reduce costs (mitigate risks) or increase revenue (maximize opportunities). SMEs identified specific opportunities and threats at each node of the OFSP value chain and developed an appropriate partnership strategy and risk mitigation plan. In the analysis, opportunities and threats identified using the SWOT model were fitted into the value chain point they fell in; producing, sourcing, transportation and storage, processing, marketing and distribution, and end consumer, as applicable to the operations of each SME.

The SMEs scrutinized the opportunities and threats present in the OFSP value chain under each stage, as informed by Laurie et al. [22]. Some factors seen as threats in one SME offered opportunities for growth and development in another, depending on individual business context. The constraints and threats centered around product development innovations, inaccessibility to information, poor infrastructure, including poor roads, inadequate transportation and storage systems and the use of outdated processing technologies. Other bottlenecks were the instability of the OFSP supply systems. Some baked and fried OFSP puree products including buns and bread are currently available in the EAR market, thus offering an expansion opportunity for SMEs.

3.1.5 SWOT analysis

The SMEs articulated their company objectives for their current financial year and identified their company’s key strengths and weaknesses. They also assessed the external environment and identified emerging opportunities and threats in order to develop appropriate growth strategies and/or risk mitigation plans. Issues related to the availability and accessibility of good quality OFSP vines stood out as a strength for developing the value chain. The SMEs realized the importance of partnerships in creating an enabling environment to develop the OFSP value chain. The SMEs are currently in partnership with research organizations such as CIP, whereby they get information on the agronomic traits of different OFSP varieties and processing characteristics and good agricultural and manufacturing practices. This way, they can advise and work closely with farmers to produce desired-quality roots for puree processing. Other advantages enjoyed by the SMEs through the partnerships were linkages to farmers and the market, both local and international, the development of policies that foster the production and utilization of OFSP by governments, technical and technological backstopping, and financial assistance, among others. From the analysis, OFSP root is available, and farmers are willing to expand production, presenting a great opportunity for the SMEs to utilize the crop. Moreover, the growing demand from consumers for healthy and nutritious foods and the particular interest in nutrient enriched OFSP and OFSP puree products through demand creations activities was reported by the SMEs as both a strength and an opportunity.

3.1.6 Growth plan

A tailored roadmap to reach the business growth target is an important step in growing the business. Each SME developed a forward-looking growth plan with clear targets and related actions, resources, particularly new hires, and capital for the current financial year and future projections. Even though most SMEs were early-stage businesses, the exercise was still very useful as it inspired them to adopt a growth mindset.

The growth plans development focused on four key growth strategies: marketing strategy, market development strategy, product strategy, and diversification strategy. Under the four strategies, target activities, staffing, and capital requirements were spread out across the four quarters of the financial year. The SMEs generally identified communication and awareness creation activities as key to achieving scale. Consumers’ needs are constantly changing, and to be ahead, the SMEs need to regularly assess and be in touch with the market.

3.4.1 SME/scaling partner selection

SMEs are generally more flexible, adapt better, and are better placed to develop and implement new ideas. However, for SMEs to serve as key scaling partners of the OFSP puree, they must have the capabilities and resources required to create, market, and deliver the value and to generate profitable, sustainable revenue streams. SMEs selected as key scaling partners must also have a proven track record in their business operations or must be start-ups with market-oriented business models that have the potential for scaling. Choosing the right scaling partner can also maximize the impact of tailored BDS.

3.4.2 Access to finance/capital

Lack of finance prevents SMEs from improving their productivity and seizing opportunities to expand to new markets. Almost all OFSP SMEs suffer from a severe lack of liquidity, which can impede their productivity and ability to seize market opportunities. Difficulties in accessing finance are one of the major obstacles for early-stage businesses. Therefore, the BDS focused on making the SMEs more attractive to potential financiers. But to be more impactful, development partners should consider forging smart partnerships with targeted financiers (impact funds and commercial loans) within the agribusiness and early-stage capital providers ecosystem [23]. Access to finance coupled with tailored BDS will greatly accelerate the OFSP puree commercialization process.

3.4.3 Access to technology and innovation

Innovation does not only involve research and development activities but also the introduction of new products, services, processes, and business models. Innovation is a vital process of survival under global pressure and gaining a competitive advantage in the food processing industry [24]. To seize market opportunities and grow, SMEs must have access to technology and integrate innovation and newly acquired knowledge into their operations. Thus, continued collaboration between development partners and SMEs will be an important aspect of scaling the innovation.

3.4.4 Effective partnership

Effective partnership between research institutions, developmental organisations, governments and the private sector is critical for scaling innovation. The SMEs engaged in processing OFSP-enriched products can benefit significantly from their partnerships with different development partners and value chain actors during the scaling process through access to scientific data, knowledge, and technology. As most of the SMEs are engaged in multiple nodes of the OFSP value chain including input supply and production, they can also play a key role in market validation, a critical component of scaling innovation. However, to achieve the overall commercialization and scaling objective of the OFSP puree innovation, development partners should consider brokering smart partnerships with other key stakeholders, including financiers and market players, to address some of the binding constraints for SME growth, for example, capital, market access, among others.

3.4.5 Synergy with complementary initiatives

It is difficult for a project to address all success factors on its own. By creating well-thought-out project synergy within and outside the organization, it is possible to accelerate commercialization and scaling up as articulated by Waized et al. [25]. We strongly recommend leveraging previous and prospective projects in the OFSP value chain.

3.4.6 Coaching and mentoring

SMEs must pursue commercially viable business models to achieve financial sustainability and growth. At the same time, SMEs need continued transfer of skills, specifically business acumen as well as networking and partnership through mentorship and coaching. This approach is particularly important for social enterprises with double bottomline objectives – being profitable in the marketplace while addressing societal challenges, for instance, gender and age-specific challenges, through market solutions.