Synthesis documents

Systems Change in the Business Enabling Environment. Investment Climate Practice Note, Miguel Laric, DFID, 2012

    Programmes which take a systems approach to business enabling environment reform face challenges of measurement, results communication, pace and risk appetite that need to be managed. But if permanent improvement in the BEE is the objective, a systems approach can be a more effective way to deliver durable solutions.

    This guidance note is both for implementers and donor managers of legal and regulatory investment climate programmes. It is designed to help either manage or oversee programmes using a comprehensive conceptual and implementation framework that maximizes probability of sustainability and transformational impact of business environment reforms. The guidance is divided into three parts: a Theoretical Framework, some Operational Guidance and Key Challenges and Risks.

    Summary of results
    Theoretical Framework:

    1. The Business Enabling Environment (BEE) is a complex set of interconnected and overlapping systems that define the policies, rules and regulations administered by government that affect business. Programmes have to address these to promote sustainable BEE improvements.

    2. BEE programmes must overcome many challenges that make systemic reform slow and difficult: different systems and actors demand and supply different elements of the BEE and benefit differently; supply and demand both depend on the capacity and incentives of actors in the systems who must therefore own and take charge of reforms at the pace that internal capacity constraints allow.

    3. But these challenges are why a systems approach should lead to more sustainable, more flexible, more politically savvy and ultimately more effective BEE interventions at scale. There already exist viable frameworks for analysing and implementing systems change.A systems approach operationalises the key BEE reform principles of the Donor Committee for Enterprise Development.

    Operational Guidance:

    1. Taking a systems approach is about prioritising the change in systems (ie processes, exchanges, incentives and relationships) that an intervention leaves behind rather than the outputs it delivers directly. Success in a systems framework is measured by how much the elements of systems have improved and how much more capable stakeholders are at sustaining existing change and articulating, demanding, executing or managing further change.

    2. There are a wide range of key characteristics of a systems approach that should be integral to a BEE programme: These include multidisciplinary diagnostics at both programme and intervention levels, a very strong and thorough monitoring and results measurement system for both reporting and wide communication, focus on both technical and practical constraints to reform, facilitating change rather than delivering it directly, making use of influencing techniques to win hearts and minds, piloting and experimenting diverse activities and applying lessons learnt to evolve the programme organically by either scaling up, reformulating or trying something else, and prioritising local solutions and local adaptation of international practice.

    3. Simple inertia can be a powerful force against change. Programmes need clarity on where the incentives or nudges for change will come from. The programme should be designed to take advantage of likely change pathways such as: emerging political champions, investigative media, benevolent business interests, public administration reform momentum or jurisdictional competition.

    Key Challenges and Risks :

    1. Taking a systems approach produces a challenging trade off: greater chance of sustained impact in exchange for less speed, control and more difficulty reporting attributable results. These drawbacks do not align well with short donor timescales for delivering results. Direct delivery may be justified if risks or constraints are substantial but programmes should always proceed within a systems framework.

    2. Programmes must make a substantial resource investment in measuring, reporting and communicating progress. Evidence for transmission mechanisms needs to be proactively managed to show that programmes are delivering, using process indicators of progress to show the programme is on track and to ensure a clear mutual understanding by all stakeholders.

    3. Different development objectives will likely compete with one another for prioritisation. Success in sustaining change will depend heavily on interpersonal relationships, facilitation and influencing skills.

    4. Stimulating local markets for research, media and capacity building deepens the likelihood of sustainability but will be easier in some contexts than others. Flexibility and a pluralistic private/public model of change can ensure the best actors are supported.

    Associated Activities and Documents
    Synthesis documents
    »Supporting Business Environment Reform. Practical Guidance for Donor and Development Agencies, DCED, 2008
    »The Political Economy of Business Environment Reform: An Introduction for Practitioners, Peter Davis/ DCED, 2011
    »Top ten entries, in terms of page views in September 2012