The Business Development Center (BDC), along with the International Training Center of the International Labor Organization (ITC-ILO), hosted the 1st Regional Conference on Developing Service Markets and Value Chains last month on the role of business development services, value chain analysis, and service market development techniques in supporting the development of small and medium enterprises. Mosaab Mustafa reports from the event.

The BDC is a Jordanian non-profit organization established in 2005 as the successor to the Jordan-United States Business Partnership (JUSBP) funded by USAID.  In an effort to help businesses enhance their ability to compete in both regional and international markets, the BDC and ITC-ILO assembled an impressive repertoire of speakers to share their own experiences with such development services and set guidelines for effective service provision. Proven to be a major trigger of economic development, small and medium enterprise (SME) support is becoming one of the most pressing issues of developing economies.

The three-day conference consisted of sessions that provided both general information on the nature of business development services (BDS) and selected case studies from across the Middle East and North Africa region that illustrate how service providers’ tools and techniques were used to help SMEs succeed. Several discussion groups were conducted at the end of each day to encourage the exchange of ideas and perspectives.

Peter Tomlinson, seminar director and enterprise development program manager, kicked off the conference by describing the ITC-ILO’s efforts and priorities in supporting SMEs as “enabling effective business environments, upgrading the value chain, triggering local economic development, and raising the level of workplace practices.” By doing so, SMEs would become “fully sustainable and self-sufficient.”

BDS cover several areas that are essential to the development of SMEs. These include training, consultancy and advisory services, marketing assistance, information, technology development and transfer, and business linkage promotion. It has become clear that the difficulties SMEs face go beyond financing issues, and that BDS expertise is necessary to build the capacity required to run SMEs successfully.

Money troubles and more
The small and medium enterprises sector is estimated to include 90% of all businesses in Jordan. However, Nayef Stetieh, co-founder and CEO of the BDC, said many of these SMEs are “facing a problem with middle management, as they are not well trained and capable.”

Mr. Tomlinson said that SME owners are taking shortcuts to becoming more competitive that are detrimental to the Jordanian people’s overall well-being. “Developing skills and knowledge,” he said, “is a better route to competitiveness than cutting wages.”

Building successful SMEs requires several elements. These include access to affordable finance, the ability to acquire business services, and access to regional and global markets through better positioning in the value chains of regional and global companies.

One of the main difficulties that SME owners have is covering the costs of acquiring BDS. Mr. Stetieh said, “We need to embed [SMEs] with business development services throughout the value chain, provide them with the capacity to build different types of services, and introduce fee-based business services” to make them affordable. Donors have suggested that flexible and innovative approaches to delivery and payment mechanisms are needed to boost demand for development services.  The BDC is taking many steps to support SMEs in Jordan. One of its projects, Tatweer, focuses on improving the business capabilities of client enterprises by working at the “firm level.” This involves direct support for improvements in management, marketing, technology, production methods, quality assurance, exports, financial management, and human resources, among other priorities, to ensure sustainable growth of Jordanian enterprises. Tatweer’s services cover a wide range, including business process improvement, branding and PR consulting, Web development and design, HR management, financial analysis and planning, inventory control, environmental impact assessment, and Jordan-U.S. Free Trade Agreement advice.

Another of BDC’s projects aims to fuel growth and competitiveness by bridging the gap between banks and SMEs, an ongoing problem that was highlighted at the event. “They don’t know how to approach banks, get financing from them, even speak to them,” said Mr. Stetieh of SME owners.

FOR-Jordan, the Financial Operations Results project, will encourage more loans from banks by creating a common financial language that makes it easier for SMEs to tap into available resources. It will use technical software and training to build the effective relationships necessary for building capacity.

The right tools
Value chain development was another topic emphasized at the conference.  Nikolai Rogovsky, senior specialist at the Enterprise Development Department of the ITC-ILO, recommended “bringing together existing ITC-ILO projects as tools that have proven to be successful, and focusing them on the upgrading of whole economic sectors by using a value chain approach.” Competition’s effects tend to be sector- and value-chain specific, and thus, the ITC-ILO is increasingly shifting its efforts to job creation and enterprise developmental services that are specific to industries, sectors, and value chains.

Measuring the impact of the provided services was a recurring topic at the conference. Impact measurement of enterprise development projects and programs is important in demonstrating their effectiveness and justifying funding from donor agencies. It also serves as a tool that helps BDS design marketing strategies, monitor customer satisfaction, respond to changes in demand, develop new and better products, manage costs, and establish staff incentives. However, assessing the impact has proven to be a difficult task. Donors have supported work to examine the possibility of creating a Performance Measurement Framework for BDS, which uses a small number of core indicators across the many types of BDS programs.

Jim Tanburn, seminar director and enterprise development consultant, spoke of some of the important responsibilities and tough decisions that development services would face upon providing assistance to SMEs. These included how to research and reach distant markets, how to measure and report on the impact and outcomes of services provided, when and how to develop an exit strategy while ensuring sustainability, and whether to provide service directly to a business or build capacity and improve the industry as a whole. It was reiterated that the more targeted the assistance into a specific sector, sub sector, industry, product, or service, the faster and larger the benefit.

At the same time, Mr. Tanburn said that, while it may take a longer time to achieve, using public money to build the entire industry is “potentially more durable – rather than targeting the lucky few businesses. It will keep them going long after the public money has run out.”

Building on success
Mr. Stetieh emphasized that success stories were the best way of keeping business owners motivated to continue with the gradual but effective growth process. He said that business owners often give up on the idea of upgrading their systems when results are not immediate, but that reminding them of the success of other SMEs under a development program helps keep them focused on their goals.

To underscore the value of using success stories as motivators, the conference included several case studies that highlighted the benefits BDS. Jordan Tile and Stone Exporters Association (JOSTONE), established in 1993, was described by its Executive Director and CEO Mohammad Shami as previously being “an inactive association representing only four members, but 2001 marked the beginning of a strong coordination between JOSTONE and JUSBP.”  

The business development program provided assistance in the form of office space, leadership appointments, technical assessments of all the factories in the sector, and U.S. market research and funding to cover participation in the Coverings Show in Orlando, Florida. As JOSTONE developed, it started to utilize, among other tactics, new marketing techniques, strategic planning workshops, focused management and technical training, financial and taxation advice, and bi-monthly seminars to keep stakeholders apprised of the most recent developments. Between 2003 and 2005, JOSTONE showed an annual growth of imports and exports of 25%. Mr. Tomlinson said, “If we can make a model that works, we want people to copy it. The more the merrier.” Hopefully, this will serve as a model for other Jordanian SMEs.    

Looking towards future trends in development programs, Jim Tanburn spoke of the importance of “learning by doing.” He said that while preparation, research, and planning are important parts of the business development process, so is risk-taking. He went on to say that we are in need of people who venture to find the “touch of genius necessary to truly take advantage of local opportunities,” and used Napoleon’s innovative and audacious war techniques as an example. Mr. Tanburn said that value chain development is also a focus of the future of BDS and promises more immediate gains than developing service markets across the board because it takes a long time to build up infrastructure and measure the results with general service market development, but it is easier with value chain development to measure the number of jobs created, the ultimate goal of business development.