Private sector development is about building capacity and making use of resources and the motivation of individuals, private companies, cooperatives and public companies to generate growth, improved income and higher living standards. Reduced poverty is typically the outcome when the private sector is looked after. That’s because the private sector accounts for a large share of all economies and employment, even in the most extreme command economies. In addition, poverty pockets are typically in the private sector, not in the public sector. Inclusive development comes from the private sector. Finally, the motivation that comes from an effective incentive system and diverse private sector provides the basic features that drive high levels of innovation, growth and poverty reduction.
Empirically the evidence on private sector performance, across countries and over time, shows it to enable most efficiently the long-term direction and deployment of resources for the purpose of gaining a sustainable competitive advantage. The ‘Competitive Advantage’ concept persuades private sector (and astute public sector) decision makers to think about the attractiveness of their firms, industry and country to investors and how to compete on the basis of cost and product differentiation. One indicator of how attractive a country is to private sector development is the Cost of Doing Business.
Efficient markets and a high quality regulatory framework underpin effective private sector performance.
What can we do for your organization to build private sector development?
• Help prepare National Development Plans that build capacity for a vibrant and inclusive private sector.
• Design strategic plans that are integrated with effective risk management and elevated innovation.
• Help mobilize the enormous potential of small-medium size businesses.
• Prepare e-commerce strategies for a fast moving digital economy.
• Help to be a top 10% economic growth performer, with a top 10% business environment and competitiveness ranking.
Our approach to private sector development
In our private sector development projects there is typically attention to an overall corporate or binding strategy (focus, execution, culture, structure) and then strategies for six major functions – information and knowledge, marketing, innovation, operations, finance and human resources (including leadership and skills). In strategic planning we tend to start with a Porter type generic framework (industry attractiveness, cost and differentiation advantage etc.) and then start to break this down into the basic elements of strategy:
1. What industry and business;
2. How to get there and how to be cost competitive;
3. How to differentiate products and services and achieve quality requirements for market access;
4. What speed to travel at; and the Economic Return (EVA) needed to create value. Strategy is not a one-off event.
To assess private sector performance we need measurements of key indicators including the business environment (e.g. Cost of Doing Business) including rankings and changes in rankings; international competitiveness rankings (e.g. World Economic Forum country indicators); value chain maps and linkages with global markets; industrial and manufacturing assessment of industry drivers and scenario analysis; public private partnership infrastructure; and a picture of how well markets are working. Strategic and development plans need monitoring and revision and should be approached in a manner similar to financial audits. Our strategic planning software helps maintain consistency in the methodology and execution of the strategy. The strategic audit evaluates just how well the current strategy fits in with the current environment (e.g. is it able to cope with another GFC); the industry situation and outlook; costs and product differentiation; whether resources are being exploited fully or over-extended; whether there is sustainability and consistency; and whether implementation has been effective.
Private sector development management examples
● More than 20 years of private sector development with government, industry and private companies and cooperatives
● International Competitiveness Advisor World Bank – project to improve competitiveness through improving capacity of the Ministry of Finance’s Directorate of Economic Affairs to facilitate private sector development
Interesting links for private sector development