Tool 5 - Analyzing Options for Demand-Driven Upgrading: Knowledge, Skills, Technology and Support Services

 

Introduction Objectives Key Questions Steps Step 1     Analyse (mapping and diagnosis) the variation/differences in knowledge, skills and technology in the separate processes in the value chain Step 2     Determine and describe standards along the chain (both in terms of market demand and supply) Step 3     Identify distinct market chains based on applied knowledge, skills and technology and product grade levels achieved Step 4     Identify opportunities for upgrading in knowledge, skills and technology for improving  market chains Step 5     Analyse which options are within reach of the poor (in terms of knowledge level, investment, use) Step 6     Analyse which services should be provided to assist the upgrading and who are the potential service providers What Should be Known after Analysis is Complete

Introduction

 

With this tool the gap between the quality demanded by the market (as expressed in formal or informal standards and grades), perception of quality by different actors along the chain and the current quality provided to the market by different segments of producers will be analysed. Following the analysis of the gaps, opportunities for upgrading knowledge and skills as well as technology will be identified and potential providers of services to make the necessary upgrading available and possible will be mapped. 

 

Important pro-poor aspects in the analysis of upgrading opportunities will be:

• Who are the local innovators in the community that can serve as showcase to others within the community?
• What are the mechanisms present within the community to share, maintain and collectively develop skills and knowledge? Is the social capital present to be willing to share?
• Can the poor do it? Do they have the required knowledge and skills to understand the technology and to implement or operate it?
• Can the poor afford it? Is the investment requirement for the upgrading within reach of the poor?
• Can the poor copy it? When the technology is introduced to a select audience is it easy to copy? For example, do local construction workers have the capacity to build it or are seeds available?
• Can the poor access it? Are the necessary services in place and accessible to the poor?
• Is  there enough level of organisation/collective action to disseminate experiences and guarantee quick absorption of upgrading? 

 

Take Note

The term ‘skills and technology’ includes all types of skills and technology ranging from so called traditional (indigenous / local) skills and technology (often self-developed by the users based on experiences) to high-tech skills and technology (developed through extensive R&D) without making a judgement on its value. In a pro-poor skills and technology analysis special attention should be paid to the existing levels of traditional technology and its effectiveness and previously tried upgrading interventions and its impact (both acceptation and failure).

 

Objectives

 

The objectives of this tool are:

 

1. To analyse the efficiency & effectiveness of technology in use within the value chain
2. To categorise current and required technology in the value chain
3. To analyse the appropriateness of technology (affordability, suitability, accessibility, replicability and exchangeability) matched with skills of technology at different levels of the value chain
4. To analyse upgrading options within the value chain that provide the required quality of output
5. To analyse the impact of external investments in knowledge and technology (innovation and R&D)
6. To understand what the causes of the existing gaps / constraints are through the analysis of:

·         Existing and applied skills, knowledge and technologies, and

·         Past attempts to improve skills, knowledge and technologies and its impact

7. To identify the needs and opportunities for upgrading of skills, knowledge and technologies
8. To analyse the possibilities to make upgrading opportunities available through embedded services, external services and collective action and learning

Key Questions

 

Key questions to answer in the analysis will be:

 

• What are standards and grades existing in the market (formal as well as informal)?  

• Which technologies are in use and which grades are currently produced by different groups of producers at different stages along the value chain (poor versus non-poor, ethnic division)? What is the efficiency and effectiveness of the technologies in use? Where are problems located?  

• What are the current levels of understanding, skills, and knowledge about quality standards and grades along the chain actors? Is there a unified definition of quality? 
• Who determines orientation and investment in knowledge and technology in the value chain?
• Who organises, provides and pays for quality control?  

• Does the current level of skills, knowledge and technology produce the required output?  

• What indigenous and other knowledge is being used in the value chain?  
• What upgrading interventions have been tried in the past and what has been their impact? 
• What are the upgrading options already available in the market?  

• Where are good examples of upgrading inside or outside the geographic analysis area? 

• Who are the change leaders and do they have the willingness to share?  

• What are the costs/margins of technology (refer also to Tool 6 – Analysing Costs and Margins)?  

• Is investment in upgrading woethwhile? Does it bring enough added value to the poor?
• Are there social mechanisms to make investments in services or technology affordable?  

• Who can provide and produce the upgrading solutions? For example, advisory services, R&D, extension, local producers of technologies. 

 

An important pro-poor aspect in the upgrading of technology and knowledge will be the impact on the poor in terms of: 

• Producers: Will the recommended upgraded technology and knowledge be in reach of poor producers? Will they be asked to take unnecessary high risks?  
• Labourers: Will the upgraded technology be labour saving (and thus less poor will have access) or will the upgraded technology be labour intensive, meaning more poor can be absorbed?  
• Consumers: Will the upgrading of technology and knowledge in the value chain lead to an increased access for the poor to products at a more affordable price? Will production inputs needed for the upgrading (often seeds and breeds) be available to the poor so they can also benefit from the technology upgrading?

 

Steps

 

Step 1     Analyse (mapping and diagnosis) the variation/differences in knowledge, skills and technology in the separate processes in the value chain

 

In  this first step the different uses and users of the current technologies in the value chain will be mapped. For each process in the value chain the levels of knowledge and technology being used is mapped for the different users, focusing especially on poor and non-poor users.

 

For each process that is identified in the mapping exercise, a matrix should be made that shows the position of the process in terms of poor and non-poor users. Table 1 below gives an example of the type of matrix that could be constructed.

 

Tool 5 - Table 1: Example of knowledge and technology matrix - cassava production and processing 

Production				Processing
	Knowledge	Technology			Knowledge	Technology
Poor	Indigenous knowledge on upland growing conditions	Local varieties		Poor	Indigenous knowledge on chip making and drying	Open air drying and home storage in bags
Non-poor	Upgraded knowledge from extension training	Hybrid varieties from China		Non-poor	Knowledge from formal studies	High tech starch processing

  Source:^[1]

 

To determine the types of knowledge, technologies and skills used by actors at different levels of the value chain, it is important to both observe the types of technology, and to ask questions that are designed to gather useful information about knowledge levels and the appropriateness of technology being used. Table 2 gives examples of questions that could be asked to value chain actors, and the types of information that could be determined from asking those questions. The questionnaire will have to be adapted to the local context and/or research question. The (non-) homogeneous application of knowledge, skills and technology should be taken into account especially when dealing with smallholder producers and systems of collective action.

 

Tool 5 - Table 2: Examples of questions that can be asked to the different actors in the value chain 

Question	Details to look for
What is the technology you are using to produce your output?	Get a clear description of the technology used. Primary production: ·          Varieties in use ·          Inputs ·          Tools / machinery ·          Post harvest treatment / storage Processing: ·          Home based drying ·          Small scale factory ·          Large enterprises Transport: ·          Foot / horseback ·          Motorbikes / bicycles ·          Cars / trucks Packaging / labelling: ·          Bulk (more than 10 kg) ·          Bags ·          Packs ·          Other
Where did you learn about this technology?	Is the knowledge on the technology passed ·          From generation to generation ·          From other people in the neighbourhood ·          By extension (or other) services ·          Through the media (radio / TV) ·          Through formal education (yourself or family members)
When did you start using this technology?	Date that the technology was first introduced and the modifications that have taken place
Who paid for the initial cost of the technology?	·          Paid by the user ·          Introduced with outside subsidy (for instance an extension model) ·         Introduced as part of a business deal (free training with a seed purchase)
What investments (capital, labour, land) have you made in the technology and knowledge?	Capital Investments: Initial amounts Maintenance / modifications Cost to operate the technology Labour Amount of time needed to operate the technology Land  Amount of space required for the technology
For what purpose can the technology be used?	Can the technology be used for other purposes? Examples: Cassava can be used to feed the own animals or sell to the starch factory. A longan drying oven can also be used in other seasons to dry mushrooms.

   

Step 2     Determine and describe standards along the chain (both in terms of market demand and supply)

 

In this step the different commercial standards (qualities and grades), as described and used by actors along the chain, will be identified and described. The example provided in Table 3 can be adapted for number of grades, as well as key features, according to the official description of standards (official standards as described in laws and regulations, or in commercial standards as an accepted standard among chain actors); see Box 1 to Box 4.

 

Tool 5 - Table 3: Product standards table with specified visible key features and grades 

Key Features	Grade A	Grade B	Grade C	Grade ……
Shape
Colour
Smell / Taste
Freshness
% Impurities

  

Take Note

If there are no formal, clear standards with specified grades these need to be developed with relevant actors. Key features should be as specific as possible so they can be understood by all and are not open to multiple interpretations.

  

Tool 5 - Box 1:     Norm table developed for dried longan in North Vietnam

 

 

Source:^[2] 

 

Tool 5 - Box 2: Official grading tables for certain Indian cashew types 

Grade Designation Trade Name Colour Characteristics Count 454 gms size description Maximum Moisture % Broken Max % NLSG NLG Max % SWP   Small white pieces White/pale ivory or light ash Broken kernels smaller than those described on LWP but not passing through 6 mesh 20 SWG sieve/2.80mm I.S Sieve 5 Nil 5 (BB & SSP Together) BB   Baby Bits Do Plemules & broken kernels smaller than those described as SWP but not passing through a 10 mesh 24 SWG Sieve/1.70 mm I.S.Sieve 5 Nil 1% (Cashew Powder) SPS   Scorched Pieces Second Kernels may be over scorched, immature, shriveled (Pirival), speckled (Karaniram), discoloured and light blue Kernels broken Into pieces but Not passing through a 4 mesh 16 SWG sieve/4.75 mm I.S. Sieve. 5 Nil 7.5 (DP & DSP together) DP   Dessert Pieces Kernels may be deep scorched, deep brown, deep blue, speckled, discolou- red & black spotted. Kernels broken into piecesbut not passing through a 4 mesh 16 SWG sieve/4.75 mm I.S.Sieve 5 Nil 7.5 (DSP) Remarks: Kernels shall be completely free from infestation, insert damage, mould, rancidity, adhering testa and objectionable extraneous matter. NLSG denotes: Next Lower Size Grade,   NLG denotes :Next Lower Grade

Source: http://www.cashewcorporation.com/spec.htm

   

Tool 5 - Box  3: Quality criteria for green leaf vegetables along a value chain in North Vietnam

 

 

Source: ^[3]

 

Tool 5 - Box 4: Quality criteria along a pig value chain in North Vietnam

  

Source: ^[4]

  

Step 3     Identify distinct market chains based on applied knowledge, skills and technology and product grade levels achieved

 

In this step the analysis continues by analysing the different results and outputs from different technologies and knowledge levels.

 

In many value chains there are distinct market channels, often with regard to value and end-consumers using the products. By analysing these different channels and the technology and knowledge used in these channels it is possible to get a clear picture of the activities the poor are involved in, and an assessment can be made what their best options are if they would like to upgrade technology.

 

Take Note 

During the analysis, it is helpful to support investigations with photo materials, especially to show different technologies that are being used.

  

For  each market channel that is identified in the mapping exercise, a matrix should be made that shows the position of the process in terms of poor and non-poor users, the type of technology used and the type of output. Table 4 gives an example of the type of matrix that could be constructed.

 

Tool 5 – Table 4: Matrix for market channel analysis of poultry 

	Market Channel	Technology Used	Type of Output
Poor	Local market / Self consumption	Home yard growing	Eggs Live chickens
Medium	District / Provincial markets	Open shed farming for 50-150 animals	Eggs Live chickens
Non-poor	Supermarkets	Industrial chicken production and processing	Eggs Pre-processed frozen chicken

 

It is important to analyse which technology is used in each market channel but also to analyse from the consumer towards the producers to understand customer demand and to translate that into the correct use of technology. In Box 5 on Longan processing an example is given of how technology was developed to be able to go from low quality processing to medium quality processing for a different market channel in which different margins can be earned.

 

Tool 5 – Box 5: An example of technology development – longan drying technology development

In Son La province, North-West Vietnam, farmers are growing Longan (a tropical fresh fruit). Most of the fruit is processed into dried Longan. This is partly due to the fact that there is an oversupply of fresh fruit in the season combined with infrastructure constraints to transport the fresh fruit directly to the end consumers. Present technology was deemed to produce an inappropriate quality of output in the eyes of end consumers. An analysis of technology in use demonstrated that there were a number of weaknesses that caused the poor quality. These were related to temperature control, hygiene and energy inefficiency. The department of agriculture had introduced new technology which was not adopted by small scale processors in the value chain because of high cost for the technology, complexity of the technology and the high running cost (energy input) of the technology. Development of new technology, suitable to the investment levels of local processors and technologically appropriate, was facilitated by an outside development organisation. An analysis was done with potential investors (processors) to determine the financial limitations. Based on this information a new design was constructed and tested with a local training institute for demonstration and dissemination purposes.

Source:^[5]

 

Step 4     Identify opportunities for upgrading in knowledge, skills and technology for improving  market chains

 

In the fourth step of the analysis the possible upgrading solutions - and why they are not being applied - will be analysed. In other words, what are the limitations of these options, especially for the poor, to be put into practice.

 

Terminology: Upgrading

Process upgrading. Process upgrading refers to the efficiency of production. Can costs be reduced? Can speed of delivery be increased? For example, can a farmer reduce the use of fertilisers while maintaining the same production levels? Or can a transporter use stronger boxes to reduce losses? Product upgrading. Product upgrading refers to the introduction of new products or improving old products. For instance can a processor use a better drying oven to produce higher quality dried longan? Or can a tea processor introduce small tea bags instead of 1 kg loose tea boxes? Functional upgrading. Functional upgrading refers to the basic question of which activities the actor in the chain should concentrate on. Should a farmer be both producer, processor and transporter or can concentration on one or two steps add more value? Can outsourcing of other activities improve added value? For example, can a group of small farmers bring their pigs together to the market in one small truck or should they all travel individually with the pigs on the back of their motorbikes?

  

In the search for upgrading possibilities it is important to look at the effect of the upgrade on the whole value chain. For example, the introduction of a new variety for the producer can mean that the processor also has to change technology or that different requirements have to be placed on transport.

 

In In order to improve the performance of the whole value chain it is important to determine the most effective level in the value chain to upgrade. If upgrading should take place at more than one place in the value chain it is important to look where this will have best impact for the poor.

 

Construct a matrix as shown in Table 5. For each level of the value chain identify potential product, process and functional upgrading possibilities. It may not be possible to identify all three types of upgrading strategy for each level of the chain. If no possibility can be identified, leave that cell blank.

 

The choice for upgrading possibilities can also be influenced by external factors such as availability of labour (permanent of seasonal). In the analysis these elements should be well looked at.

 

Tool 5 – Table 5: Example – upgrading possibilities matrix

	Producer	Processor	Trader	Wholesaler	Retailer
Product		Better drying oven			Display shelving
Process	Increased fertilizer use		Use crates for transportation	Maintain low humidity in storage sheds
Functional	Small scale drying facilities	Integrate processing and trading	Integrate trading and wholesaling

 

Tool 5 – Box 6: An example of factors influencing upgrading possibilities in the cassava value chain 

The production of dry chip rather than fresh cassava can be considered a form of upgrading. Dry chips have four major advantages: (i) creates more employment and adds value for cassava producers; (ii) farmers can keep dry chip as savings and speculate for higher prices; (iii) dry chip can be used as animal feed, giving more choices to farmers against market risk; (iv) the dry chip is lighter, which reduces transportation cost. The production of dry chips does not require a big capital investment (a basic dry-chip processing technology costs about 400,000-500,000 VND). This is an affordable investment also for poor farmers. The opportunities that are there depend largely on the characteristics of cassava buyers. North and Central Vietnam are characterised by a scarcely diversified cassava processing sector, with buyers engaged in starch processing enterprises. This type of processing requires the utilisation of fresh cassava roots, and thus the potential for utilisation of dry chips is limited.     In contrast dry chips are favoured by buyers engaged in animal feed processing. In the South of Vietnam where important animal feed processing factories operate, market opportunities for dry chips are therefore much higher.     However, farmers are willing to participate in dry chip production only if the volume of cassava output is high enough to have a surplus beyond their own needs, as dry chips are produced for the purpose of animal feed, and cannot be eaten. Furthermore, the production of dry chips is associated with a high labour requirement. For these reasons the poorest or small holding farmers, which have limited land and cassava output and overall cash shortage, prefer to sell fresh cassava roots.

Source:^[6]

    

Step 5     Analyse which options are within reach of the poor (in terms of knowledge level, investment, use)

  

In this step of the analysis the focus changes to which of the upgrading options are within reach of the poor. There are many aspects to consider when deciding if an upgrading option is within reach of the poor. These should be considered when making an analysis of these options. 

 

Tool 5 - Table 6: Example of different technology options available in relation to investment levels.

	Tomato on raised beds	Covered beds with simple irrigation	Green-house
Short description	Open cultivation system on raised beds for water management	Beds covered with simple plastic tunnels and continuous water availability	Permanent green-house system with water and climate control
Advantages	Easy to construct     Cheap	Better climate control inside the tunnel  Easier to keep insects out Lower maintenance	Good climate control possible for all year production Good hygiene Low maintenance
Disadvantages	High maintenance (labour) Not easy to keep insects out	Relatively high investment costs	High investment costs
Costs	Only labour days	Medium cash cost	High cash cost

  

Some of the important aspects to consider in this step of the analysis are summarized in the table below.

 

Tool 5 – Table 7: Important aspects to look at when selecting the best potential upgrading options for the poor

Issue	Details to look for
Capacity to react to changes in demand (fashion)	Consumer demand is often changing. The success of a value chain is mostly determined by the capacity to react as quickly as possible to these changes. Upgraded technology should ideally have the capacity to deal with this without making a lot of extra changes or investments.
Bottleneck analysis to determine at what level to invest	In order to improve the performance of the whole value chain it is important to analyse the most efficient and effective level in the chain to upgrade. Especially if more than one place in the value chain is being upgraded, it is important to look where this will have best impact on the poor.
Prioritise options	Based on the bottleneck analysis a prioritisation should be made for which level in the chain the first interventions should take place to upgrade the whole chain and to have a direct impact on the poor.
Incentives that stimulate investments in knowledge technology / lack of incentives and barriers that limit the poor from upgrading	In poverty situations there is often a lack of technology and knowledge development and thus also in subsequent upgrading of the value chain. It is important to analyse what the incentives or lack of incentives for investment are. Why do people invest in new technology? Or Why do people not invest in new technology? ·    Why do people gather new knowledge? Or ·    Why do people not look for new knowledge? Are there factors that hinder the poor from investing in technology of knowledge?
Role of local institutes / organisations in R&D and innovation	An often seen, limitation to technology upgrading is the “distance of the researchers to the local situation.” Technologies developed in location A do not suit to the circumstances in location B. In the analysis it is necessary to look at: What local institutions / organisations are there which are involved in R&D and innovation? What have been their past contributions to technology development? Can they play a role in the current value chain upgrading?
Policy environment for pro-poor technology development	What are the policies for technology development and value chain upgrading in place? (R&D, dissemination, credit & investment). Do these policies favour pro-poor technology development? Are people aware of these policies?
Information flows	Trickle down of R&D information & bottom up flows of indigenous knowledge
Dissemination	Low-tech feasible technology can disseminate itself based on reputation - expensive promotion campaigns are often not necessary.

  

Take Note

Innovations in knowledge and technology often come from external service providers (public or private). In many agricultural value chains the lack of these service providers causes a large bottleneck to the possibility of upgrading the chain. If present, these service providers (e.g. extension, vocational training, knowledge providers) need to be carefully analysed as their presence alone is not enough. It is also necessary to analyse whether the poor have equal access to these service providers to improve their knowledge and technology and if the services offered are suitable to the capacity level of the poor.

 

Step 6     Analyse which services should be provided to assist the upgrading and who are the potential service providers

 

The following table provides an overview of services that might be needed to upgrade skills, knowledge or technology. In describing the services make sure to be as specific as possible about these services.

 

Take Note 

Describe the type of the service first, without thinking about who can or should provide the service. This will come in the next phase of the analysis, working towards intervention strategies.

  

Tool 5 - Table 8: Overview of potential services for upgrading

Skills	Knowledge	Technology
Technical skills upgrading training	Market information	Research & Development
Demonstrations	Group management	Improved technology practitioners
Exchange visits	Technical knowledge / specialisation	Visits to proven / failed technology improvements
Unified skills application	Standards and control	Contacts / networks to sellers
Entrepreneurial skills improvement	Chain actor networks	Access to investment financing

 

To identify who could be potential providers of the services, the following lead questions can be used:

     

Tool 5 -Box 7: Possibilities for upgrading Thieu Thanh Ha Litchi value chains by combining local and scientific knowledge

Situation and Constraints: ·         Lack of capital investment for production ·         Limited scope of intensive production techniques and lax husbandry of litchi production ·         Immature harvesting of fruit at harvest for quick cash flow reduces income ·         Unstable and reducing market price for litchi ·         Difficulties in drying, preservation and processing technologies ·         Lack of market, technological and scientific information ·         Small scale of production, processing and marketing leading to higher transaction costs Opportunities for Upgrading: ·         Develop extension mechanisms to expand Good Agricultural Practice (GAP) procedures for production and processing ·         Support for new technology development in preservation equipment, long season varieties and extended ripening times ·         Establishment of internal quality management systems and Protected Geographical Indicators ·         Improve market information, identify stable market outlets ·         Strengthening Producer Associations

 Source:^[7]

  

What Should be Known after Analysis is Complete

 

After having followed all the steps related to skills, knowledge and technology, the position of actors involved in the chain with regard to upgrading should be clear, and a set of upgrading strategies with positive impacts on the poor can be designed. The role of embedded or external service providers in this process is often very important and should not be overlooked.

 

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