A Brief Overview of Wealth Creation and Value Chains
- 2. Wealth Creation Fundamentals The Wealth Creation approach provides a framework for creating wealth that is rooted in rural parts of larger regions, including those of persistent poverty, by using a systems approach to: intentionally connect people, resources, and markets make investments that create multiple forms of wealth develop new models of local ownership and control of investments and returns
- 3. Value Chains: Defined Networks of businesses, nonprofit organizations, and collaborating players who work together to satisfy market demand for specific products or services. Mental shift: from, “What is best for me and my firm now?” to, “What can I and my firm do to maximize the economic, environmental and community benefit to all the members of this value chain?” Because value chains are built in response to market demand and involve clear and constant communication, they can be more responsive and innovative than traditional supply chains.
- 4. What Does a Value Chain Look Like? Image by Leslie Schaller, ACEnet
- 5. What Does a Value Chain Look Like? Input Trainers/ Marketing Suppliers Extension Waste Producers Management Economic Researchers Development Consumers Processors Media Certifiers Government Wholesale Landowners Direct Sales Buyers Other Value Chains Brokers Distributors Aggregators National Organizations Financing Value Chain Intermediaries
- 6. Wealth Creation Framework 1. Move from the parts to the whole 2. Emphasize investment for long-term gain 3. Understand the difference between wealth and income 4. Collaborate for mutual benefit 5. Create wealth that “sticks” 6
- 7. 1. Move from the parts to the whole Work with entire “value chains” • Producers to consumers & everyone in between Connect small towns to regions, to urban areas and to the world – demand driven Consider all the consequences of your decisions • Short and long term • Effects on people, place and economy 7
- 8. 2. Emphasize investment for long-term gain Move beyond focus on this year’s performance Preserve assets that you will need tomorrow – and for generations to come Improve or build new assets that will boost long- term outcomes Invite investment from participants in value chains, including demand side investors 8
- 9. 3. Understand the difference between wealth and income Most projects focus on income (a flow) instead of on building wealth (a stock). INCOME WEALTH EXPENSE 9
- 10. t What do we mean by wealth? Seven Forms of Wealth Social Natural Political capital capital capital Intellectual Built Individual Financial capital capital capital capital
- 11. A wealth matrix for planning and evaluation Type of Wealth Interventions in Value Chains How will your intervention impact the stock of skills and physical and mental healthiness Individual of people in a region? How will your intervention impact the stock of trust, relationships, and networks that Social support civil society? Intellectual How will your intervention impact the stock of knowledge, innovation and creativity? How will your intervention impact the stock of unimpaired environmental assets in a region Natural Built How will your intervention impact the stock of fully functioning constructed infrastructure? Political How will your intervention impact the stock of power and goodwill held by individuals, groups, and/or organizations? How will your intervention impact the stock of unencumbered monetary assets at the Financial individual and community level?
- 12. 4. Collaborate for mutual benefit Focus on how the process builds wealth Build on values that rural areas naturally share with external markets • Clean water, healthy food, vibrant families, healthy soil, reduced energy use… Make economic connections in ways that create mutual benefit – identify the win-win Intentionally and equitably share the benefits 12
- 13. 5. Create wealth that “sticks” Explore new models for local ownership of resources, firms, etc. • Cooperatives • Land trusts • Employee ownership Create community-owned wealth through vehicles such as community foundations Align investment/grant making decisions of regional foundations, local governments, federal agencies, etc. 13
- 14. Wealth Creation in Practice Local Food Value Chains 14 © 2011 Yellowwood Associates and Aspen Institute Community Strategies Group
- 15. Utilizing the Forms of Wealth Assessment of existing value chains Planning for activities and interventions Measurement of outcomes Social Natural Political capital capital capital Intellectual Built Individual Financial capital capital capital capital
- 16. Assessment Which types of wealth currently exist in a community or value chain? Which types of wealth are lacking? Which are “limiting factors” to the growth of the value chain?
- 17. Planning Activities and interventions that address the identified priorities Using planned interventions to build multiple types of wealth simultaneously Do no harm: ensuring that no forms of wealth are negatively impacted
- 18. Value Chain Development: Interventions Training and technical assistance Small grants Planning and assessment Gatherings and educational events Regional events for peer learning, support, and education Regional and national policy work Leveraging additional investment into the region
- 19. What Does a Value Chain Look Like? Input Trainers/ Marketing Suppliers Extension Waste Producers Management Economic Researchers Development Consumers Processors Media Certifiers Government Wholesale Landowners Direct Sales Buyers Other Value Chains Brokers Distributors Aggregators National Organizations Financing Value Chain Intermediaries
- 20. Measurement Shared measurement system based on pre-determined indicators and measures for each type of wealth Baseline data collected in the first year, then annually Annual data and changes from the baseline inform planning and priorities for each year’s work
- 21. Role of the Intermediary Holding the big picture view of the value chain Assessing and planning with the whole value chain in mind Managing, implementing, and measuring the planned work Facilitating communication and relationships among value chain members Fostering investment in the value chain
- 22. The Climbing Bear In reality, progress and priorities shift back and forth Lifting up one part of the value chain allows other parts to grow a little, which in turn allows the first part to grow some more Concept taken from Bob Fedyski, Rural Action http://www.woodworkersworkshop.com/graphics12/ motherearthnews-climbing-bear.jpg
Editor's Notes
- #5: KatyThe first step in the process, ideally, is assessment. What does the value chain look like? This image here was created by Leslie Schaller of ACEnet, one of the CAN member organizations, and it shows the basic elements of a food value chain – from production through aggregation, processing, distribution, marketing, prep, and finally consumption. One of the most important lessons CAN has learned through this process, however, is that the reality of a value chain is much more complex that this. And while all value chains have some similarities, there are also very important differences between one sub-region and another.
- #6: “enabling ecosystems” – the supportive network that enables a value chain to thrive. Every square on this picture is a person, business or oganization. CAN’s work is to identify these folks behind each piece of the value chain and then help to strengthen, build and connect these pieces to form the entire value chain. The trick is to construct the value chain in a way that not only generates jobs and incomes but that also help to build multiple forms of wealth within the region. So, what do we mean by Wealth?
- #16: KatyCAN uses the wealth creation framework in three major ways. They are: (read list). We’ll provide a short overview of each way of utilizing the framework.
- #17: After we have a beginning concept of what the value chain looks like, we use the wealth creation framework to help answer some important questions about its current state. First, what types of wealth currently exist in the value chain, or the community surrounding the value chain? We work from an asset-based perspective, so we always want to start with what’s there, and what’s working. Next, we identify the types of wealth that are lacking or less present than we’d like them to be. And finally, we set priorities by asking which of these types of wealth are the “limiting factors” that are preventing the value chain from growing or developing. Let me give you an example –let’s think about the value chain we just looked at, in the WesMonTy region of West Virginia. Maybe we’ve identified that social and natural capital are real strengths of this value chain – the links in the chain are well-connected and there is a lot of local support for local foods, and the region has a lot of natural resources that are well managed and contribute to the value chain, like good farmland, well-managed forests, and clean water. But the gaps are around financial capital and built capital – it’s a very low-wealth area, with a lot of persistent poverty, and many of the producers in the region are not making a living wage from their farm businesses. As for built capital, there are some farmers markets and a consignment-based garden market, but the aggregation and distribution infrastructure to bring their products together to sell in volume doesn’t exist.
- #18: After the assessment process, the next step is obviously planning. What interventions should we use to build or strengthen the value chain in a way that creates multiple forms of wealth for the community and region? We want to design interventions that address the identified priorities, both in terms of types of wealth and specific places in the value chain that need attention. We want to be efficient, planning our interventions so that they create multiple forms of wealth simultaneously. And we want to always keep in the mind the principle of doing no harm – making sure that we don’t build one form of wealth at the cost of others.
- #19: So what does CAN do? CAN intervenes directly and indirectly to build and strengthen value chains. We use four interventions directly, within specific value chains. Training and technical assistance – CAN provides training and technical assistance to individuals and organizations who are or want to become involved in local food value chains. (Examples – food safety standards trainings for producers, assistance with business plans for entrepreneurs.) This intervention focuses primarily on intellectual and individual capital, although social capital is also an important product of many of these training events. Small grants – CAN provides small pass-through grants to organizations working to connect or fill in identified gaps in the value chains. These grants often support built capital in the form of infrastructure, or pay for staff time to work on building intellectual, social, or other types of capital. (If there’s time, give examples – Appalachian Staple Foods Collaborative, WesMonTy, GVEDC)Planning and assessment – CAN provides support for planning and assessment activities that bring together diverse partners within a sub-region to work on understanding and developing value chains. This process is critical for value chain development, and often results in increased intellectual, social, and political capital, as well as identifying needs and priorities in other types of capital. Gatherings and educational events – CAN sponsors sub-regional and regional gatherings annually to develop intellectual, social, and political capital throughout the region.
- #20: “enabling ecosystems” – the supportive network that enables a value chain to thrive. Every square on this picture is a person, business or oganization. CAN’s work is to identify these folks behind each piece of the value chain and then help to strengthen, build and connect these pieces to form the entire value chain. The trick is to construct the value chain in a way that not only generates jobs and incomes but that also help to build multiple forms of wealth within the region. So, what do we mean by Wealth?
- #21: Finally, using the wealth creation framework has provided the basis for CAN to adopt a shared, region-wide measurement system based on agreed-upon indicators and measures of each form of wealth. For example, we measure the natural capital of a value chain by calculating the number of acres of farmland which are contributing to the value chain, and we track how many of those acres are certified organic, uncertified organic, and conventional. Because we provide support and training to farmers who want to use organic methods or become certified, we hope that over time we will see that 1. there are more acres contributing to the value chain, and 2. a larger percentage of those acres will be farmed using organic methods.Adopting this shared measurement system has been a significant challenge for CAN, since each of the member organizations works with a different value chain and has different strategies and areas of expertise. However, at this point we have collected both baseline and Year 1 data, and the combined data has provided us with extremely interesting and useful information about the state of local food systems in Central Appalachia, and informed and guided CAN’s planning process for continued work in the region.