Monday, September 10, 2007

Defining how to define success

(Moussa, manager of Zirasun cutting aluminum for a solar installation)

I would like to apologize for the delay between postings but I recently moved to Paris to do a semester of my studies abroad. As it turns out finding a place here and getting set up was more difficult than I anticipated so internet usage has been limited and reserved for letting family members know I am alive and well. That being said, this installation of the blog lays out the criteria I feel is a starting point for identifying potentially successful enterprises, given a lack of empirical data. I have also added some thoughts on other considerations that may help define "successful" investment in Mali. The next blog will include an example of how these criteria can be applied; I hope to have it up in about a week.


The evaluation of companies will be based on four criteria:
1) Is there an opportunity for management/human resource training to increase profitability?
2) Is there a sufficient market, both current and in terms of growth potential, for the goods and/or services the organization provides.
3) How susceptible is the organization to the primary risk factors and impediments to success in their country?
4) Does the organization operate in a manner consistent with C.K. Prahalad’s Twelve Principles of Innovation for BOP Markets? If not, can the organization be changed to do so?

The first criterion draws on Adapted Consulting’s expertise in working in Western Africa. Being able to identify management and leadership skills in entrepreneurs in the proper cultural framework is one of the largest value adds that an investor would receive when following our model.

The second criterion merely identifies whether there is a customer base willing and able to pay for what a company is selling. There is some overlap with criterion 4.

The third criterion examines the company’s positioning and correlation to the success or failure of the national economy.

The fourth criterion allows us to evaluate how well a company is responding to the needs and wants of their market. It is important to know that not every potential investment will satisfy each of these criteria. Areas where potential investment sites do not meet the criterion are potential areas for improvement that can be used to market the benefit of outside investment to the site.

After identifying the criteria for evaluation it is important to describe how success will be measured so that failing ventures can be improved. As stated earlier, one of the most substantial problems facing Groupe Zirasun is their access to highly skilled workers. However there is a wealth of potential employees who could complete jobs requiring less skill. These workers may still be university graduates from within Mali who have little professional experience. A problem facing North American investors is the difficulty in trying to benchmark companies in Mali, or other African countries, against domestic companies who use standardized reporting methodologies. Unskilled workers could be used to overcome these barriers to capital investment if they could be given relatively simple tasks (i.e., data gathering) that could be used in the preparation of financial results that are meaningful to North Americans. Adapted Consulting again plays a role in this process by screening employees to be deployed to companies such as Moussa’s. Furthermore, Adapted will develop a framework, which can be implemented within company to allow the unskilled workers to succeed. This framework could then be repeatedly updated and exported to new companies.

Ideally, unskilled workers could be used to collect data locally that could then be transformed to satisfy International Accounting Standards. While these statements would not be audited by professional accounts under the same scrutiny as is the case in North America, they would give north American investors an idea of profit contribution of each company in which Adapted is/was invested. It is important to note that the lack of stringent accounting disclosures may be beneficial, although this may seem counterintuitive. If adherence to strict accounting regulations is demanded of companies whose employees cannot comply, the company will be forced to comply with forgeries or through the employment of creative accounting practices. If less rigid requirements are in place there is less pressure on any given company to conspire to meet the requirement. The other benefit of these practices is that the true driver of investment will be the major offering to investor’s: the ability of Adapted Consulting to leverage local market knowledge to select good investment sites.