The Compass of Local Competitiveness v0.9

The Compass ofLocal Competitiveness

Manual Version 0.9

mesopartnerlocal economic delivery

Version of Thursday, 20 November 2008

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Table of Contents

1 Introduction 1

2 Why use a Balanced Scorecard-based approach to LED? 22.1 The background of the Compass 32.2 Features of the Compass 3

3 What are the key elements of a Compass? 4

4 What are the considerations and activities involved in the preparation of aCompass of Local Competitiveness? 6

5 Different types of Compass Workshops 7

6 Structure of a Compass Workshop 9

7 What happens after the Compass Workshop? 137.1 Action planning 137.2 Creation of a monitoring system 137.3 Implementation of LED activities 147.4 Follow-up Compass Workshop 15

8 Step-By-Step Explanation of Compass Workshop: Tables 17

9 Annex 1: An Example of the Application of the Compass of LocalCompetitiveness in a Subsector: An Upgrading Project with FreshVegetable Producers in Gampola, Sri Lanka 33

10 Annex 2: Documentation of a Compass workshop – Investment promotionin Baybay, Philippines 38

11 Annex 3: The Paper Computer 42

Summary

The Compass of Local Competitiveness is a tool that delivers five results in the context of lo-cal and regional development initiatives:

1. Capture the results of completed and ongoing activities

2. Create alignment among stakeholders about vision and strategy

3. Identify critical success factors for the development of a location or a specific sector orcluster therein

4. Formulate indicators to track progress

5. Define new activities and responsibilities for their implementation

Whereas an external development agency would be interested in all five results, localstakeholders tend to be particularly interested in the third and fifth result. As localstakeholders notice the usefulness of the Compass to deliver these results, they tend to bewilling to make the necessary time available to participate in a one-day Compass workshop.

The Compass is an adaptation of the Balanced Scorecard. While the BSC tends to result incomplex, costly software systems, the Compass subscribes to the intention initially underlyingthe BSC, i.e. to provide a comprehensive yet simple and straightforward performance man-agement approach.

The Compass can be applied in four different ways:

Action-oriented exercise Comprehensive exercise

Overall LEDeffort

One-day workshop that involvesstakeholders from various subsec-tors. Recommended only in loca-tions with a strong, cohesive LED /RED effort

[4]

One-week exercise, consisting ofworkshops with local stakeholdersand a separate effort to define indi-cators and set up a system to trackthem.

[1]Sector or valuechain initiative

One-day workshop that involvesstakeholders from one subsector orvalue chain. Has a strong businessfocus and helps business people tobetter understand their businessenvironment

[3]


[2]

The most straightforward and easy to facilitate format is No. 3. In a mature LED / RED proc-ess, the most adequate approach would be to combine Nos. 1 and 3.

The Compass of Local Competitiveness 1

1 Introduction

The Compass of Local Competitiveness is a tool for performance management in territorialdevelopment / Local Economic Development (LED) initiatives. It is based on the BalancedScorecard (BSC) method. Whereas BSC has been designed for the use in companies and otherorganisations, the Compass is specifically designed to cater for the needs of territorial devel-opment initiatives.

The Compass of Local Competitiveness is a tool that gives you

• a clarified perception of the vision and objectives of territorial development,

• a process of strategic alignment among the stakeholders involved in an initiative,

• the identification of the critical success factors of a territorial development programmeand of specific initiatives within this programme,

• the definition of key performance indicators and specific targets you want to match,

• the definition of specific activities to achieve these targets.

At what stages of an LED process would you consider to use the Compass? In principle, theCompass can be used at any stage, including the very outset. It is ideally suited for use in aconstellation where LED activities have been going on for some time, say six months or ayear. It can also be used at a later stage, and it is amenable to being used in a steady rhythm,such as once per year.

In our experience, a Compass can be elaborated in a participatory workshop with localstakeholders under the guidance of experienced facilitators. Elaborating a Compass of LocalCompetitiveness can be the outcome of a single workshop. In case a comprehensive perform-ance management system is needed there is the option to have a sequence of three workshops.The total duration of a single workshop is less than a day. The sequence of workshops canstill be concluded within a week.

Elaborating a Compass of Local Competitiveness involves a reasonably representative groupof stakeholders around the LED programme or initiative and a skilled facilitator with experi-ence in applying the Compass. It presupposes the buy-in of these stakeholders so that theymake the necessary time available. Getting relevant stakeholders to participate in a workshopis sometimes a challenge, and this is one of the reasons why the Compass works particularlywell in a robust LED process that enjoys the genuine support of stakeholders.


2 Why use a Balanced Scorecard-based approach to LED?

It is a widespread phenomenon both in industrialised and in developing countries that LED isconducted with little concern for monitoring and evaluation (M+E). There are a number ofreasons for this:

• It is often no easy to get LED activities going, and in particular it is a constant challengeto involve the private sector in LED. Accordingly, there often is little to monitor in thefirst place. If LED activities are going on, stakeholders are so busy managing them, orkeeping them going on at all, that little time and energy is left for proper M+E.

• LED is often conducted in a pragmatic and ad-hoc way that makes M+E difficult. It is nota constant production or service delivery process, like in a company, but rather a sequenceof targeted individual activities. Once a given problem has been fixed, the actors involvedoften don’t see the point in monitoring and evaluating this.

• M+E takes time and effort. It can become costly, it can become bureaucratic, and ulti-mately it can distract from actually doing LED. Given the fact that they always sufferfrom time and budget constraints, LED players often prefer to devote their scarce re-sources to doing things, expecting that successes will speak for themselves and assumingthat managing LED implicitly includes monitoring anyway.

Looking at these strong reasons against M+E in LED, we need very convincing arguments topersuade LED actors to do M+E nevertheless. Some such arguments are the following:

• We need convincing success stories of substantial outcomes of LED to get sustained sup-port, including funding, for LED. We only get documented success stories if we do M+E.

• LED involves a learning-by-doing process. M+E provides us with the means to make im-plicit learning explicit and thus transferable, so that over time the effectiveness and effi-ciency of LED improves and experiences becomes transferable between individuals.

• Ongoing, revolving M+E provides us with evidence that helps us to cope with the 80/20problem, i.e. the fact that we often spend 80% of our effort for activities that only deliver20% of the outcome. M+E can help us to identify and terminate those activities that havean unfavourable effort/outcome ratio and focus our energy at those activities with a fa-vourable effort/outcome ratio.

Why do we suggest a BSC-based approach for M+E in LED? The main reason is that theBSC appears superior to conventional performance management frameworks. Elaborating andmonitoring a Compass is more efficient, and it is, well, balanced. Moreover, and more im-portantly, the Compass is more than just an M+E tool.


2.1 The background of the Compass

The BSC approach was originally developed for the corporate sector. It was based on a simpleobservation: Actors in an organisation behave according to the incentives they face, and theincentives are shaped by performance indicators. If their performance is measured against fi-nancial indicators, they will optimise such indicators – even if the short-term optimisation offinancial indicators may come to the detriment of the long-term growth potential of the busi-ness. The key idea of the BSC approach was to introduce a wider, more balanced set of per-formance indicators that is not one-sidedly looking at financial indicators but also at other,more qualitative indicators that address the long-term growth perspective of the business.

The rationale for using BSC in public and public-private LED efforts follows the same line ofreasoning. Conventional performance monitoring frameworks for territorial development tendto look one-sidedly at economic indicators, such as GDP growth, business growth, start-upperformance and employment growth. The problem is that newly launched LED initiativestake some time to deliver substantial results against these indicators. The indicators may evendeteriorate despite a dynamic LED process, for instance in a region that suffers from the de-cline of old industries, or in a setting where macro-economic framework conditions are ad-verse. A BSC takes a wider perspective, including more qualitative indicators of successfulLED. From a pragmatic perspective, it is important to note that a BSC can include a numberof indicators that can be improved on a short-term time-line.

The purpose of a BSC for LED is to define the critical success factors (CSFs) of the LED ef-fort at large and of specific LED initiatives / projects and to work out the key performance in-dicators (KPIs) that permit you to assess the impact of your LED effort and specific activities.The purpose is not to come up with a complex set of statistical indicators that takes a lot of ef-fort in gathering and updating, but rather a straightforward set of indicators that permit the as-sessment of the impact of LED.

In past approaches (like in the case of development assistance donor organisations) unrealisticor not clearly defined objectives (like “The SME sector is becoming more competitive”) werematched with indicators which primarily focused at activities rather than on impact. The BSCopens new pathways to the definition of impact-oriented indicators even for intangible factors.

2.2 Features of the Compass

The Compass has often been used by development organisations in the course of their activi-ties. From the perspective a development organisation, assuring monitoring and evaluation isan important goal. Local stakeholders tend to be much less concerned about this. Fortunately,the Compass is more than an M+E tool. It is also effective in catalysing a process of align-ment among stakeholders about the overarching goal and the strategy. In fact, one can use theCompass to achieve five different goals:


1. Assess the results of completed and ongoing activities

2. Create alignment about vision and strategy

3. Identify critical success factors

4. Formulate indicators to track progress

5. Define new activities

From the angle of a development organisation, all five goals are relevant. From the angle ofstakeholders, at least two of the goals (identify critical success factors, define new activities)are relevant. As long as the Compass delivers on these two goals, local stakeholders will bereasonably satisfied.

3 What are the key elements of a Compass?

The conventional BSC, developed for use in companies, looks at four types of factors:1

1. financial indicators

To succeed financially, how should we appear toour shareholders?

2. the customer perspective

To achieve our vision, how should we appear toour customers?

4. the learning and growth perspective

To achieve our vision, how will we sustain ourability to change and improve?

3. the internal process perspective

To satisfy our customers and shareholders, whatbusiness processes must we excel at?

The BSC concept suggests to address these four factors counter-clockwise: create proper in-centives for learning and growth that will lead to constant upgrading of internal processes thatwill satisfy the customer, so that you have a convincing financial performance as the ultimateoutcome.

When translating the BSC concept from a corporate setting into the LED scenery, we intro-duce it as the Compass of Local Competitiveness with four core factors that are similar tothe corporate BSC but better adapted to the reality of LED:

1 Kaplan, Robert S., & Norton, David P. (1996): The Balanced Scorecard. Boston: Harvard Business School

Press.


Economic and financial achievements(growth, business growth, start-ups, employ-ment, ...)

What is the impact we need to deliver to keep ourvoters / our citizens happy?

Relationships with external players

How do we need to interact with otherstakeholders (other local stakeholders, investors,customers/tourists, funding agencies, ...) to makeLED a success?

The learning perspective (alignment of under-standing of LED, alignment of expectations,role definitions, ...)

How can we make sure that we constantly up-grade our understanding of our economic realityand of LED?

The local process perspective (interactionbetween core players, governance pattern, ...)

How do we have to organise our LED process andeffort internally to assure its effectiveness?

A compass can, and indeed should, not only be elaborated for the overall LED effort but alsofor the specific sectors, value chains or initiatives:

• You may want to have a top-level compass that addresses the overall LED effort in agiven location. In this case, you elaborate CSFs and KPIs that address the overall LEDprocess, rather than the performance of specific sectors. For this exercise, you would needthe involvement of political decision makers, since they are ultimately responsible for set-ting the goals that the LED effort is supposed to achieve. Note that elaborating a top-levelcompass only makes sense if you have a genuine LED process, i.e. a shared understandingamong stakeholders that there is one LED process in the location rather than parallelsectoral development activities. As long as stakeholders are only interested in their re-spective subsector, it is not advisable to elaborate a top-level compass. In cases where youhave, for instance, a municipal LED unit, it is an option to elaborate a compass for thisunit, and to invite a few stakeholders who represent different subsectors to participate inthe elaboration of this compass.

• At the next level you elaborate compasses for specific initiatives, preparing a set of spe-cific compasses. Each of them would look at a the LED activities in a given sector, clus-ter, value chain or around a key catalytic project (landmark project). Elaborating the com-pass at the sector / cluster / value chain level creates an opportunity to align the variousactivities in a given sector towards a shared goal and set of performance indicators. At thislevel you would involve business people, representatives of supporting institutions, LEDpractitioners and other relevant stakeholders, but not the top political level. It also makessense to elaborate a Compass for, say, an LED Agency or a municipal LED unit.

• It is even possible to go one level further down and prepare a compass for each activitywithin a given sector, cluster or value chain. However, you want to check whether thetime and effort involved may is in an adequate proportion to the relevance of the project.

At the level of a sector, cluster, or value chain, the Compass gets a stronger business focus. Asector focus might look as follows:


Financial results (access to credit, cash flow,...) and economic results (market share,growth, profitability, ...)

What is the result that we need to deliver to keepour shareholders, investors and creditors happy?

Relationships with external players

How do we need to interact with customers andstakeholders to succeed in the market? Whichsupport services do we need to pull in to improveour performance?

The learning perspective (upgrading of com-panies and supporting institutions, market in-telligence, ...)

What can we do to better understand our busi-ness?

The local process perspective (interactionbetween core players, governance pattern, ...)

How do we have to organise our upgrading proc-ess and effort within and between firms and or-ganisations?

In the elaboration of the compass, we suggest not to elaborate the “strategy maps” in the waysuggested by Norton and Kaplan.2 We have experienced that the simple unilinear causalitythat they suggest does not reflect the reality of interrelationships and feedback loops betweenCSFs in the different quadrants, especially for organisations or networks of actors who areprimarily involved in production. We rather suggest the use of the paper computer to analysethe interrelationships between CSFs and identify the CSFs with the strongest leverage.

4 What are the considerations and activities involved in the preparation of aCompass of Local Competitiveness?

The Compass workshop may be a useful tool in an early phase of an LED effort, since itseems to open the perspective of stakeholders to the wide scope of activities that territorialdevelopment can involve. In particular, it works at an early stage when and if some activitieshave already been going on that can be interpreted as LED.

The main application, however, will usually be in a sequence of activities after an initial diag-nosis has been conducted, practical territorial development activities are going on andstakeholders are interested in clarifying their strategy and defining performance indicators.For instance, the Compass works well as a focused exercise after an initial PACA Exercise,typically between six and 12 months after the exercise. At this stage, the Compass is useful

• to capture the learning process of local actors regarding the objectives of their territorialdevelopment process, and to align the vision,

• to gauge the progress that has been made already, and to define indicators to measure fu-ture achievements,

2 Kaplan, Robert S., & Norton, David P. (2000): Having Trouble with Your Strategy? Then Map It. Harvard

Business Review, No. 5, pp. 167-176.


• to identify and prioritise a new round of practical activities.

Given the prominence of the Pareto method (see below) in the workshop, it is important thatthe composition of participants is fairly representative:

• Both the public sector, the private sector and other relevant actors should be represented.

• The different sectors that are involved in the territorial development effort should be rep-resented.

• Participation should be balanced, since otherwise the results would be biased.

In order to successfully invite stakeholders to the workshop, proper management of expecta-tions is crucial.

• Local stakeholders need to be informed that the purpose of the workshop is to align the vi-sion on LED, to identify critical success factors and prioritise them, to define indicators tomeasure the impact of LED activities, and to identify additional LED activities.

• Local stakeholders need to be made aware that the outcome of the workshop will have astrong impact in terms of guiding future LED, so that the workshop is a good opportunityto advocate their views and interests.

• Local stakeholders must be informed that the workshop involves a logical sequence of ac-tivities. Cherry picking and hopping in and out is not an option.

It is also an option to play to the curiosity of the stakeholders and use the novelty of the for-mat as a special attraction.

5 Different types of Compass Workshops

The elaboration of a Compass is primarily based on structured workshops with local decisionmakers and stakeholders. Before planning an exercise to elaborate a local Compass, the LEDchampion has to take key decisions:

• Will the exercise only address the public sector or involve both public and private / non-governmental players? This question may appear silly – obviously, LED must involveprivate / non-governmental players, and they ought to be involved in any effort that aimsat goal alignment and the elaboration of performance indicators. At the same time, there isthe practical matter that non-governmental players are suffering from serious time con-straints anyway and often are unwilling to devote time to an exercise that ultimately aimsat M+E. It may also be the fact that non-governmental players have not really bought intoan LED effort, so that effective activities involve the public sector and beneficiaries; inthis case, representatives of the beneficiaries would have to involved.


• How far do we want to drill down? Do we want to elaborate the Compass at the top leveland the sector / cluster / value chain levels, or do we want to go deeper, also looking at in-dividual activities / projects? And to what extent do we want to formulate indicators? Lo-cal stakeholders tend to be not very excited about formulating and tracking indicators,unless they operate in an organisational culture that has already adopted the consistent useof performance indicators. In most cases, we have found that local stakeholders are neitherinterested nor experienced in indicators, so that one would consider to involve only thosestakeholders who are interested in indicators in their formulation.

The organisation of the Compass Exercise can only proceed once these questions have beenanswered, since only then it is clear who needs to be invited to the different workshops. Com-bining the different options gives us four different types of approaches which are summarisedin the following matrix.

Action-oriented exercise Comprehensive exercise

Overall LEDeffort

One-day workshop that involvesstakeholders from various subsec-tors. Recommended only in loca-tions with a strong, cohesive LED /RED effort

[4]


[1]Sector or valuechain initiative

One-day workshop that involvesstakeholders from one subsector orvalue chain. Has a strong businessfocus and helps business people tobetter understand their businessenvironment

[3]


[2]

[1] At the top-level Compass workshop, you set the stage for a process of aligning the over-all goals and expectations around LED. You would probably not assume that the differentstakeholders who are involved or interested in LED already have a common understanding ofwhat LED is all about. You need to allocate an adequate amount of time to address this issue.We advise against introducing a search for a vision, since the outcome is too often a generic“wealth & happiness for everybody” statement. We would rather ask: What do we want toachieve with our LED effort until the local government elections? And what is the medium-term goal of the LED effort, i.e. what do we want to have achieved by the subsequent elec-tions? This would take us to the formulation of one or a limited number of goals. This wouldthen be the basis for the elaboration of CSFs, and after that of KPIs. The next step would bethe definition of activities and responsibilities to meet those indicators (to the extent that theyare not yet in place or planned – which may take us back to a re-definition of KPIs and CSFsif we realise that we don’t have the resources to launch the activities needed to meet the indi-cators), as well as the definition of activities and responsibilities to actually gather the dataneeded to monitor those indicators. This workshop would go beyond the activities addressed


as part of PACA activities. A realistic time frame for this type of workshop is between lessthan 1 and up to 2.5 days, depending on the chosen format, the number of participants, andtheir degree of alignment.

[2] and [3] At the sector or project Compass workshops, you would also address the issueof goals and expectations. However, at this level the discussion would be less political / philo-sophical, more practical and more business-focused. Apart from that, the sequence of activi-ties would be the same as above. These workshops may focus at the ongoing PACA activitiesand involve the actors identified and involved during the PACA Exercises. This kind of work-shop can be conducted in one day. Initially, format No. 3 is the most adequate, since busi-nesses are keen on action, not on indicators. As they mature, you would consider to move toformat No. 2.

[4] This format is a theoretical possibility, but practically it is unlikely to happen. At an earlystage of a territorial development process, local stakeholders find it difficult to identify criticalsuccess factors except for the Southeastern quadrant of the Compass, i.e. process manage-ment. And even there, you confront the problem that actors from one subsector don’t neces-sarily see that their effort is linked in any way to what is going on in another, in their view un-related subsector. Once the LED / RED process matures and stakeholders’ perceptionschange, you would move to format No. 1 which highlights the importance of formulating andtracking indicators.

Ideally, the outcome of a Compass workshop is the definition of new and additional LED ac-tivities and the elaboration of a set of KPIs that can be used by the LED champion to monitorthe ongoing LED effort. After the initial round of workshops, we advise to have follow-upworkshops at a six- to twelve-months-rhythm to involve the stakeholders in the assessment ofprogress and in the assessment of the Compass itself, as we would expect that stakeholderswant to adjust CSFs as the LED initiative progresses.

6 Structure of a Compass Workshop

This section discusses the steps involved in a Compass workshop. It looks at Type 3 as intro-duced above, i.e. a one-day workshop at the level of a local sector or cluster. This is a highlyrobust format that can easily be applied by facilitators with some understanding of LED.

The elaboration of a Compass of Local Competitiveness essentially involves the followingsteps:

• Participants present themselves

• Explain the objective of the workshop

• Explain the structure of the workshop


• Explain the Compass

• Framing: What exactly are we talking about?

• Look back: What have we achieved so far?

• Objective: What are the overall objectives of the object of the Compass?

• Revisit framing

• Brainstorming on critical success factors

• Brainstorming on key performance indicators

• Definition of targets and accountability

• Matching

• Identifying gaps

• Brainstorming on activities

• Action planning

These steps can be conducted in a single workshop, though that is not necessarily a good idea.Practical experience has shown that the definition of KPIs is an activity that often does notwork well in a workshop, especially when participants have little or no experience with theconcept and practice of indicators.

The following table looks in more detail at the sequence of steps in a Compass workshop.Step 1 to 11 are a standard sequence in any Compass workshop. After Step 11, there are twodifferent options on how to proceed further. One includes the formulation of indicators, theother does not.

Step Objective Activity

1. Presentation ofparticipants

Participants know eachother

Simple Mesocard exercise: Name, or-ganisation, involvement in LED

2. Explain the objec-tive of the exercise

Make sure that eachparticipant understandsthree main objectives:

1. track progress

2. identify CSFs

3. define activities

Local champion or facilitator explainsobjectives: Who and what exactly is itabout?

Objectives are written on a flipchartwhich remains visible for the rest of theworkshop

3. Explain the struc-ture of the work-shop

Participants know thesequence of activities inthe workshop

Quickly go through the steps, don’t getlost in details

4. Explain the Com-pass

Participants understandthe method used in theworkshop

Brief oral explanation, complementedwith visual representation of Compass


5. Framing: Clarifythe object of theexercise. Whatprecisely are wetalking about in thisworkshop?

Define two points:

1. What exactly is X?Clarify the bordersof X (system / envi-ronment)

2. Who is involved inX? Clarify the actorstructure (we /them)

Put information on the object onto flip-chart. Keep flipchart visible through theentire workshop.

Note actors on mesocards, organisethem as insiders / outsiders

6. Look at activitiesand achievementssince PACA Exer-cise or start of ac-tivity

1. What have we doneso far?

2. What have weachieved so far (=outcome and impactof activities)?(If possible, try tocapture data)

Option 1: Participants call out, facilita-tors note on flipchart (may be quicker)

Option 2: Participants write on cards

7. Clarify the “vision” Clarify the overall ob-jectives of the object ofthe Compass

Mesocard brainstorming: What is theimpact / outcome / benefit we aspirewith X?

8. Revisit the framing Verify framing Check that the object of the exercisewas defined properly. If necessary, ad-just.

9. Critical successfactors

Identify the factors thatmake or brake X

Mesocard brainstorming: What are thecritical success factors that determinewhether X achieves its mission? Whatare the factors that shape the success ofX?

10. Organise the cardsinto four quadrants

Assure that there isbalance between theidentified CSFs

• Economic and financial factors• Relationships with customers and

external players• Internal process, internal relation-

ships• Knowledge and learning

11. Prioritise the CSFs Pareto

The following steps can be conducted and sequenced in different ways:


Brainstorming onkey performanceindicators (KPIs)

Measure the progressin terms of addressingeach CSF

Mesocard brainstorming, CSF by CSF

(option: split into working groups)

(note: doing this in a workshop is onlyadvisable if the participants are familiarand comfortable with the definition of in-dicators – otherwise, you may want todelegate this step to a core group, i.e. asmall working group of experiencedpractitioners who meet separately to de-fine KPIs, while in the workshop youmove directly to the brainstorming onactivities)

Definition of targetsand accountability

Put numbers to the in-dicators, define respon-siblity for monitoring

Option 1: Working groups in the work-shop

Option 2: Delegated to core group, donein separate workshop

12. Matching Match CSFs or KPIsand ongoing or plannedLED activities

Identify “orphan KPIs”, i.e. indicatorswithout a corresponding LED activity

13. Identifying gaps Identify which CSFs arenot adequately ad-dressed

Discussion

14. Brainstorming onactivities

Define activities relatedto each CSF

Option 1: Mesocard brainstorming

Option 2: Match ongoing activities withCSFs, identify gaps / mismatch

Option 3: Paper computer

15. Action planning Pfeiffer’s six questionson each activity

Continuation of Option 1 of step before

As mentioned before, our experience has shown that it will often not be practical to includethe definition of KPIs into the participatory workshop, and this for several reasons. First,many stakeholders tend not to be familiar with the concept of indicators. Second, manystakeholders tend not to be particularly interested in indicators. Third, at that stage, the Com-pass workshop has already gone on for some hours, and participants tend to be tired. In orderto keep the flow going, it is often preferable to move directly to matching, in this case by cre-ating a matrix that has CSFs on one axis and ongoing activities on the other axis..


7 What happens after the Compass Workshop?

A Compass Workshop must be more that a once-off event. The workshop itself can be a veryinsightful and to some extent even exciting event, and participants will take important learn-ing out of it. This applies in particular to sector workshops, which often give the participants amuch better understanding of their business environment. Yet it would be unsatisfactory if theCompass workshop was not followed by concrete action planning, the creation of a monitor-ing system and the implementation of LED activities.

7.1 Action planning

We have often observed that towards the end of a Compass workshop the energy level amongparticipants is too low to engage in detailed action planning. It is possible to have a brain-storming to generate ideas on how to address those CSFs that are not yet sufficiently ad-dressed. Yet refining those ideas, looking at the connections between them, and planning theirimplementation in a detailed way is better left to a separate meeting.

In this subsequent meeting, there are two options regarding the format. One option is to refineideas for action, prioritise them, and then plan their implementation, asking the six questions:How exactly are we going to do this? Who will take responsibility? Who will collaborate?Which resources do we need? When do we start? How will we know that we have started?

The other option is to use the Paper Computer in order to identify those activities which havethe strongest leverage effect. The Paper Computer is a tool that looks at the interrelationshipbetween activities in a systemic way and allows to identify those activities that promise thebiggest impact, in particular in a somewhat complex setting where cause-effect relationshipsare not obvious. The Paper Computer is explained in detail in Annex 3.

7.2 Creation of a monitoring system

During the Compass workshop, or during a meeting of a smaller group of LED stakeholderswho are familiar and comfortable with the concept of indicators, a set of KPIs is formulated.These criteria need to fit with the SMART criteria (see below). As there must be no more thanfour CSFs per quadrant and no more than three KPIs per CSF, the maximum possible numberof KPIs is 64. However, it would be preferable to end up with a lower number of KPIs sincetracking 64 of them might involve a very significant effort.


Table 1: The SMART CriteriaS Specific &

Sensitivespecific to the issues which are intended to be changed, and sensitiveto the changes induced

M Measurable measurable, objective and unambiguous - not easily blown off courseby unrelated developments, and not easily manipulated

A Attainable &Applicable

attainable by the policy measures, and applicable to measure prog-ress towards achieving objectives

R Relevant measuring factors which are related to the policy and reflect the objec-tives

T Time-bound &Trackable

Varying over time, reflecting at what point in time changes can be ex-pected and do happen. Indicators can be easily tracked, preferably therequired data are already and frequently available, or are not toocostly to track

Source: Metz / Groetschel, Training Manual on Monitoring Policy Impacts, prepared for FAO and GTZ, 2002

A practical way of testing the robustness of a proposed indicator against each of the SMARTcriteria is by scoring it: 1 means “no”, 2 means “to some extent”, 3 means “definitely”, andthen the five scores are multiplied. Only scores higher than 50 indicate a robust indicator.

Apart from the formulation of the indicators, it must be defined who tracks each one of them,and with what frequency. Some indicators can easily be tracked on a monthly basis (for in-stance, number of registered and liquidated businesses). Other indicators may be capturedevery quarter.

When designing your system to capture and process indicators, stick to the KISS principle –“Keep it simple, stupid!” Do not try to come up with a highly sophisticated, scientific ap-proach since this would maximise the risk that the whole effort collapses after a brief period.

7.3 Implementation of LED activities

The planning of activities at the end of the Compass Workshop (and possibly in a follow-upworkshop, since you may run out of time at the Compass Workshop) should be guided by sixquestions:

1. How exactly are we going to implement this?

2. Who will be responsible?

3. Who needs to collaborate?

4. What are the resources that we need?

5. When do we start?


6. How do we know that we started?

It is useful to agree on a certain reporting rhythm, for instance by posting monthly or quarterlyreports on each activity at a website.

7.4 Follow-up Compass Workshop

If the Compass is properly implemented, there need to be repeat Compass Workshops. At thelevel of LED at large, an annual rhythm would be adequate. At a sector level, stakeholdersmay decide to have more frequent Compass Workshops.

8 Step-By-Step Explanation of Compass Workshop: TablesTime Activity Description Tool Basic rules / mesocard questions to be

askedObservations

Step 1

15‘

Presentation All participantspresent them-selves

Mesocard 3 cards per person: name, organisation,involvement in LED

Good opportunity to introducethe basic Mesocard rules: 1statement per card, write legi-bly, 3 lines per card

Step 2

10’

Objective Explain that theobjective of theworkshop is tolook back and tolook ahead

Oral, supportedwith cards orflipchart (pref-erably not mul-timedia projec-tor)

Explain the objective of the workshop:

1. Track progress on developmentalactivities in a location, or a subsectorin a location, or a value chain

2. Define additional activities

Explain that a Compass is a device thattells you where to go.

Can be done by local championor by facilitator

Don’t use technical language

Refer back to event that initi-ated local activities (e.g. PACAExercise, launch of LED Forum,etc.)

Step 3

5’

Schedule Explain thestructure of theworkshop

Flipchart ormesocards

Point out the different steps in the work-shop.

Quickly go through the steps,don’t get lost in details

Step 4

5’

Compass Explanation ofthe Compass

Oral and flip-chart

Briefly explain the background of theCompass in the balanced scorecardmethod.

Keep a flipchart with an expla-nation of the 4 Quadrants visi-ble throughout the workshop

Step 5

15‘

Framing Clarify the objectof the exercise:What preciselyare we talkingabout in thisworkshop?

Statement bychampion ofthe activity, al-ternatively byfacilitators

Define two points:

1. What exactly is X? Clarify the bor-ders of X (system / environment)

2. Who is involved in X? Clarify theactor structure (insiders / outsiders)

Put information on the objectonto flipchart. Keep flipchartvisible through the entire work-shop.

Note actors on mesocards, or-ganise them as insiders / out-siders

X = the object of the Compass, i.e. the LED initiative, or the cluster initiative, or sector initiative, or project

Time Step Description Tool Basic rules / mesocard questions to beasked

Observations

Step 6

30’

Look back Look at activitiesand achieve-ments since startof LED or activity

Flipchart ormesocards

1. What have we done so far?

2. What have we achieved so far (=outcome and impact of activities)?(If possible, try to capture data)

Option 1: Participants call out,facilitators note on flipchart

Option 2: Participants write oncards (does not give you sto-ries!)

Consider to capture partici-pants’ statements as audio /video recording

Step 7

30‘

Overall objec-tive

Clarify the overallobjectives anddeliverables of X

1. Mesocard

2. Organisecards hier-archically

1 – 2 cards per person

Question:Why do we spend time and effort on thisinitiative? What do we want to achieve?

Alternative: If in two years‘ time some-body enquires about X, what will wepoint at to indicate its success?

Don’t use the term Vision. Thisleads to cloudy, fuzzy discus-sions.

Organise the outcome. Try todefine a hierarchy, i.e. highlightthe ultimate outcome and belowit the factors that will contribute

Many cards will come that actu-ally are CSFs or KPIs, and theyshould be put up again at theappropriate step

Assure that the Vision is visibleduring the subsequent activities

Step 8

5’

Revisit fram-ing

Verify the fram-ing for the work-shop

Open discus-sion

During the look back and thevision steps, it may have ap-peared that the frame was notdefined or worded properly


Observations

Step 9

30'

Critical suc-cess factors

Brainstorm onthe factors thatmake or break X

Mesocard No limit to number of cards per person

Questions (put them all up!):

• What are the factors that determinethe success of X?

• What are the factors that decide thesuccess of our effort to build a com-petitive location / sector / valuechain?

• Which elements need to be in placeso that we can build a competitivelocation / sector / value chain?

Check whether all four quad-rants are adequately ad-dressed. Often one of the topquadrants gets only few cards.In that case, explain the rele-vance of the quadrant and askparticipants for additional cards.

Step10

30'

CSF intoquadrants

Organise theCSFs into fourquadrants

Facilitators, as-sisted by par-ticipants, or-ganise cardsinto 4 quad-rants

1. Economic / financial factors

2. External relationships (with non-LED-stakeholders / external actors /customers / ...)

3. Internal process and organisation ofLED inside and among the organisa-tions involved

4. Knowledge and learning (includingresearch, training, ...)

Make sure that each CSF isclearly understood by all par-ticipants, possibly insert a stepin the process to verify and re-phrase each CSF. A CSF like“diversification” is useless be-cause it is too unspecific.

One way of looking at the CSFsis by introducing Quadrants 1and 2 as external factors andQuadrants 3 and 4 as internalfactors.

Step11

10'

Prioritise Identify two tofour decisiveCSFs per quad-rant

Pareto Quadrant by quadrant


Observations

The next step in the standard Compass process relates to the elaboration of Key Performance Indicators and the definition of activities.It may, though, not be useful to do this in a workshop setting, especially with participants with little experience in the formulation ofobjectively verifiable indicators. Below, you will find three different options (Plan A and Plan B, where Plan B again involves two dif-ferent options).

Plan A Plan B

What to do Inverse sequence:

• Match CSFs with ongoing activities

• Define activities related to CSFs that remain un-matched

Standard sequence:

• Define Key Performance Indicators

• Define responsibility to track KPIs

• Match KPIs with ongoing activities

• Define additional activities

When to apply Participants have little or no experience in formulating in-dicators.

Participants have some experience with indicator formu-lation.

Variations Have an additional meeting of a core group where youdefine KPIs and determine who is responsible for trackingthem.

1. Use the Paper Computer to prioritise possible action.

2. Have only a first brainstorming on KPIs, then form ateam to elaborate them, then have another workshop to

• present and discuss the elaborated KPIs

• define responsibility for tracking them

• match KPIs with ongoing activities

• define additional activities


Observations

Plan A

This sequence applies in workshops with participants with little experience in the elaboration of indicators.

Step12

30’

Matching Do we haveactivities goingon that contrib-ute to allCSFs?

Matrix Create a matrix with the ongoing activitieson the vertical axis and the CSFs on thehorizontal axis. Verify, together with theparticipants, whether any given activitycontributes to the CSFs. The assumption isthat many activities will contribute to morethan one CSF.

Proceed as follows: Every par-ticipant receives a card with thenumbers 0 to 3 – 0 = no influ-ence, 1 = weak influence, 2 =some influence, 3 = strong in-fluence. You ask “Does Activity1 address CSF A?” Each par-ticipant then indicates his/herscore by holding up a number.The facilitator forms an averageof the scores. Encourage dis-cussion when participants comeup with three or four differentscores.

This system assures that allparticipants actively participate,rather than a few dominatingthe scoringnd the others givingin to the temptation to have alittle nap.

Step13

10’

Identify gaps Which CSFsare notmatched withactivities?

Oral discussion Verify: Which CSFs are not matched withactivities? Add up the scores in each col-umn. Probably all CSFs are at least some-what addressed. Focus the discussion atthose CSFs that come out with a low scoresum, and in particular those that did not re-ceive a single score of 3 (which means thatno activity is really focussing at this CSF).


Observations

Step14

30’

Brainstorm-ing on activi-ties

What are theactivities thatwe need to im-plement tomake progresswith respect tothe CSFs?

Depends onoption

Option 1: Mesocards. Various rounds ofbrainstorming / cluster / Pareto / brain-storming on highest priority

Option 2: Paper computer (see annex)

If you choose Option 1, youneed to make sure that partici-pants prioritise activities thatare actually doable. For in-stance, you can distribute reddots so that participants canmark those proposals theydeem unrealistic before doingthe Pareto.

Step15

60’

Determineresponsibilityfor imple-mentation ofactivities

Pfeiffer’s sixquestions oneach activity

Mesocards Six questions:1. How exactly will we do this? (unpack

activies)2. Who takes responsiblity?3. Who has to collaborate?4. Which resources do we need?5. When do we start?6. How do we know that the activity

started?

It may be useful to createworking groups for this step.

Step16

End of work-shop

Thank the participants for their time and in-puts. Explain what will happen next.

Make sure that you have a clearcommunication structure, sothat every participant can easilytrack the progress of imple-mentation.


Observations

Plan B

This format applies in workshops where participants are familiar and comfortable with the elaboration of indicators

60 –180‘

Key perform-ance indica-tors

Brainstorm onthe indicatorsthat measure thedegree of prog-ress towardseach CSF

Mesocard

Pareto

Pick the highest scoring CSFs (two tofour per quadrant)

Go through the CSFs one by one

Pareto the KPIs, CSF by CSF; a satis-factory outcome is one where no morethan four KPIs are prioritised (in workinggroup scenario, the Pareto is done by allparticipants after they have visited theresult of each working group)

Consider to divide the partici-pants into working groups:

- Go through the first quad-rant CSFs in the plenary

- then go into working groups

Introduce participants toSMART principle: Indicatorsshould be Specific, Measurable,Achievable, Relevant, Timed

At this stage, the initial participatory workshop may or may not terminate. There are different options in terms of how to proceed. Thefollowing steps are based on the assumption that the Compass Exercise is concluded in the same workshop, and in a very comprehen-sive manner:

60 –180‘

Targets Definition of anumber anddeadline for eachindicator

Mesocard

Discussion

Indicator by indicator, each participantwrites his/her estimate of a realistic indi-cator onto a small circular card

Results are discussed, result is deter-mined by consensus

Consider to divide the partici-pants into working groups, eachworking on one or two quad-rants


Observations

45 –90‘

Accountability Definition of aperson or or-ganisation who isaccountable fortracking the Indi-cator

Open discus-sion

Indicator by indicator, call for individualsto resume responsibility for tracking theindicator

Define one actor who is in charge ofconsolidating the data on indicators on abi-annual basis

Definition of accountability isdone in plenary

30’ Matching Do we have ac-tivities going onthat contribute toall KPIs?

Matrix Create a matrix with the ongoing activi-ties on one axis and the KPIs on theother axis. Verify, together with the par-ticipants, which activity contributes towhich KPI.

The assumption is that manyactivities will contribute to morethan one KPI.

90 –240’

Activities Brainstorming onactivities tomatch each CSFand achieve theKPIs

Mesocard Proceed CSF by CSF

Keep CSFs and KPIs visible at all times

Refer participants back to the visionstatement, to make sure everybody isstill on track

Consider to divide the partici-pants into working groups, eachworking on one or two quad-rants


Observations

120 –240’

Determine re-sponsibility

Discussion inplenary


Make sure that each question is an-swered properly

Six questions:1. How exactly will we do this?

(Possibly unpack activityinto complementary ac-tivies)

2. Who takes responsiblity?3. Who has to collaborate?4. Which resources do we

need?5. When do we start?6. How do we know that the

activity started?

The complete duration of this workshop is between 9 and 18 hours or 1.5 to 2.5 days. In other words, applying this format with realstakeholders will only work under exceptional circumstances.


Observations

There is also another option, which would be more focused and less time-consuming. It would employ the papercomputer to identifythe CSFs with the highest leverage factor and focus the brainstorming on activities on those CSFs. This would proceed as follows:90’ Papercom-

puterLook at the in-terrelationshipbetween CSFs

Papercomputer see annex Strong recommendation: Beforeapplying the Papercomputer,make sure that each CSF isclearly understood, e.g. by de-termining what two opposingincarnations of each factormight look like1

45’ Activities Brainstormingon activities toaddress thecritical / lever-age CSFs

Mesocard

Pareto

Identify the CSFs in south-eastern quad-rant.

Keep the KPIs linked to each CSF visible.

Brainstorming, CSF by CSF: What are ac-tivities to match each CSF and achieve theKPIs?

It is rare that more than two orthree CSFs end up in the south-eastern quadrant

90’ Determineresponsibility

Discussion inplenary


Make sure that each question is answeredproperly

Six questions: see above

45‘ Targets Definition of anumber anddeadline foreach indicator

Mesocard

Discussion

Indicator by indicator, each participantwrites his/her estimate of a realistic indica-tor onto a small circular card

Results are discussed, result is determinedby consensus

1 Example: Diversification might come up as a critical success factor. First. clarify what kind diversification is meant – diversification of products, of distribu-

tion channels, of final customers? Second, determine two opposing expressions: highly diversified distribution channels (e.g. more than 5), little diversificationof distribution channels (three or less).


Observations

In a situation where a substantial number of stakeholders is involved in the workshop, and in particular in a situation where several ofthose stakeholders suffer from time constraints, so that even a 1.5 day workshop may border the impossible, there is the option to go fora sequence of three workshops:

Workshop Objective Participants

1. Brainstorming Workshop: All steps un-til the definition of KPIs

Define CSFs and KPIs of LED programme orspecific initiative within an LED programme

Representative group of stakeholders in-volved in the programme or initiative

2. Technical Workshop: Core group re-visits and defines KPIs and targets

Match CSFs and KPIs with ongoing activities

Identify gaps in programme / initiative

Define targets

Small group of stakeholders with a par-ticularly keen interest; LED officer, Cham-ber official and similarl

3. Way-forward Workshop: Core grouppresents results to wider group. KPIsare validated. Activities are defined.

Agreement on targets and accountability

Agreement on next steps regarding identifiedgaps

Representative group of stakeholders in-volved in the programme or initiative


Observations

Things to prepareModeration materialsMinimum: brown paper, cards, maskingtape, markers

Optimum: moderation panels, brown paper,cards in at least four different colours, pins,masking tape, markers

Cards and flipcharts• Cards with the questions for each step

• Cards with the titles for the four quad-rants

• Flipchart with sequence of workshop

• Flipchart that indicates the four quad-rants of the Compass

• Flipchart with SMART criteria


Step-By-Step Explanation of Compass Workshop: Additional Explanations[This section is work in progress – please share your insights and comments with Jorg Meyer-Stamer, [email protected]]

Step 1 -- 15‘ -- Presentation

Step 2 -- 10’ -- Objective

Step 3-- 5’ -- Schedule

Step 4 -- 5’ -- Compass

Briefly explain the background of the Compass in the balanced scorecard method forcorporate strategising:

1. financial indicators

To succeed financially, how should we ap-pear to our shareholders?

2. the customer perspective

To achieve our vision, how should we ap-pear to our customers?

4. the learning and growth perspective

To achieve our vision, how will we sustainour ability to change and improve?

3. the internal process perspective

To satisfy our customers and shareholders,what business processes must we excel at?


Step 5 -- 15‘ -- Framing

Step 6 -- 30’ -- Look back

Step 7 -- 30‘ – Overall objective

Phrase the question in such a way that it neither generates to vague and fluffy a result (a “vi-sion” in the negative sense of the term) nor responses that are too focused at “here and now”.The participants should not get the impression that you are asking for the next activities thatneed to be formulated.

It can be helpful to limit the number of cards to 1 per person.

Organise the outcome. Try to define a hierarchy, i.e. highlight the ultimate outcome and be-low it the factors that will contribute. Example:


Step 8 -- 5’ -- Revisit framing

Based on the conversation you had regarding the overall objective, you may find that theframing is not entirely adequate and that you want to word it differently. Make sure that thereworded framing is visible for all participants.

Also, in Step 7 you asked a question that included the term “we”. While revisiting the fram-ing, you may want to ask: Do we all agree on who is “we”? And also, who is “them”?

Step 9 -- 30' -- Critical success factors

Step 10 -- 30' -- CSF into quadrants

At this step, your Compass may looklike this:

This is, quite obviously, a very unbal-anced Compass. The majority of cardsended up in the “process” quadrant,which reflects the current state of mindof local stakeholders: they are very con-cerned about the challenges involved ingetting their collaboration effectivelyorganised. As a facilitator, you wouldnot accept this result but rather ask toconsider the other quadrants as well:Are there more CSFs regarding knowl-edge and learning, such as conductingmarket research and upgrading localskills? Are there more CSFs regardingcustomer satisfaction and relationships,and relationships to other external ac-tors? Are there more CSFs regarding fi-nancial and economic issues?

You would hope that participants come up with more CSFs for the other quadrants. If theydon’t, this may imply a serious lack of understanding of the issues involved in their businessfield and in the successful development of their sector or location.

Step 11 -- 10' – Prioritise


Step 12 -- 30’ -- Matching

The rationale for the Matching step is that local stakeholders are already implementing someactivities and have more or less specific ideas about activities they would like to launch. It iscrucial to match the ongoing and planned activities with the CSFs and to verify that all CSFsare properly addressed.

The picture below illustrates how the matching may look like. The horizontal row indicatesthe CSFs, the column the ongoing activities.

Step 13 -- 10’ -- Identify gaps

Step 14 -- 30’ -- Brainstorming on activities

Step 15 -- 60’ -- Determine responsibility for implementation of activities

Step 16 -- End of workshop


9 Annex 1: An Example of the Application of the Compass ofLocal Competitiveness in a Subsector: An Upgrading Project withFresh Vegetable Producers in Gampola, Sri Lanka

This section summarises a workshop conducted in 2006 as part of the Sri Lankan - GermanEconomic Strategy Support Programme (ESSP). ESSP has used the PACA methodologysince 2002. In 2004, it conducted a PACA Exercise (or as it is called in Sri Lanka, a LOCAExercise) in Gampola division, a municipality in the Central Province. The PACA had astrong focus on agriculture. One of the sectors with particularly strong activities after thePACA was the production of fresh vegetables, where local stakeholders were especially moti-vated and dedicated.

The Compass workshop documented below involved a group of stakeholders from the freshvegetable sector as well as representatives of supporting institutions.

Structure of the workshop

The planned format was supposed to involve the following steps

1. Clarify the objective and the object of the exercise: Who and what exactly is it about?

2. Look back: What have we done and achieved so far?

3. Clarify the vision, i e the overall objectives of the object of the Compass

4. Brainstorming on critical success factors (CSFs)

5. Brainstorming on key performance indicators (KPIs)

6. Definition of targets and accountability

7. Brainstorming on activities related to each CSF.

In this workshop, the brainstorming on activities had to be cut short as we had run out of time.A number of first ideas on activities were ventilated. The ESSP facilitators and thestakeholders agreed to have a follow up meeting to define the details of those activities.

Documentation of the steps in the workshop1

1 Vision

Contribute to improve the local economy through increasing productivity of the vegetablecultivation

1 This section has been captured by Jayalal Chandrasiri, a consultant under contract with ESSP to conduct an

impact assessment on ESSP’s LOCA activities.


2 Objective

Achieving higher income through market aimed, organized vegetable production

3 Critical Success Factors

Economic and Financial

• external financial facilities available

• stable market

• satisfactory price for the produce

External Relationships

• better institutional and personal re-lationships

• good quality seeds available in themarket

Knowledge and Learnings

• acquire technical knowledge

• developed new varieties

Internal Processes

• minimised cost of production

• minimised post harvest losses

• planned cropping cycles

4 Key Performance indicators

Economic and Financial

1. Number of credit facilities to farmers from agrarian services centers with a grace pe-riod

2. Financial support extended to farmers by ESSP

3. Prices for produce

4. Percentage increase of income of producers after a given period of time

5. Continued growing market

6. Percentage increase of the business of vegetable buyers

External Relationships


1. Training programmes increased due to linkages with government and other organisa-tions

2. Input costs reduced

3. Wider use of quality seeds

4. Number of shops selling quality seeds in the market

Internal Processes

1. Percentage decrease in cost of production within a given period of time

2. Percentage increase in production within a given period of time

3. Percentage increase in higher quality, higher shelf life, fresh vegetable products

4. Percentage increase of producers engaged in planned cultivation

5. Percentage decrease in excess stocks in the production process

6. Percentage increase in maximum utilisation of limited croplands

7. Percentage increase in the use of good agriculture practices in production

8. Percentage decrease in wastage at the market

Knowledge and Lessons Learned

1. Percentage decrease in rejected quantity of produce in a given period of time

2. Percentage increase in production of producers after a given period of time

3. Percentage increase in producers who have released their produce as a finished prod-uct to the market

4. Percentage increase in producers who are using new varieties

5. Percentage increase in quality and quantity of produce after a given period of time

Photos taken during the workshop


The stakeholder groupinvolved in the project

Deciding which quadranta critical success factorbelongs

The completed Compass


Working groups ofstakeholders elaboratethe Key Performance In-dicators (KPIs)

One of the stakeholderspresents the KPIs hisgroup has elaborated

At this point, it was mid-afternoon and participants indicated that they had had enough work-shopping for that day. Thus, no time was left to progress to the formulation of activities. Afterthis workshop, we actually decided that we needed the Plan B outlined above, i.e. movingfrom the CSFs directly to activities and leaving the formulation of indicators to the ESSP spe-cialists.


10 Annex 2: Documentation of a Compass workshop – Investment promotion inBaybay, Philippines

As usual, some of the participants ar-rived early, some on time, and somewere late. Facilitators engaged thosestakeholders who had arrived early inconversations, which is a practical wayof both creating a nice atmosphere andgenerating some relevant information.

The workshop then starts with a self in-troduction by all participants. The fa-cilitators explain the purpose of theworkshop, and they explain the Com-pass.

Participants then agree on the framingof this Compass workshop, meaningthey define what exactly is the focus ofthe workshop.


They also clarify who is us and who isthem, which stakeholders are relevantand which are actively involved in theinitiative that is addressed in this Com-pass workshop.

Participants then look back: What havewe done, and what have we achievedso far? The next question is: Why arewe doing this anyway, what is the ulti-mate purpose of our initiative? Partici-pants respond on cards, which are or-ganised in a hierarchical way, with theoverarching purpose on top and thefactors contributing to it organised be-low.

The next question: If we want toachieve what we just declared to be ourintention, what are the critical successfactors that we need to address? Thecritical success factors are first pinnedup and then organised into the fourquadrants of the Compass.


The participants then apply the Paretomethod, theyvote quadrant for quadrantfor the most important critical successfactors.

In the next step, the participants matchthe critical success factors with the on-going or planned activities. A matrix isput up. For each activity, the facilitatorsask: Does this activity address criticalsuccess factor A, B etc.? Participantsgive scores between 0 (not at all) and 3(strongly).

In this case, at first glance it would ap-pear that all critical success factors areaddressed. However, a closer look re-veals that three critical success factorsreceive no or just one “3”, which meansthat they are mostly addressed in anindirect way (and probably not all thatmuch, since stakeholders tend to besomewhat optimistic in their scoring).Thus, the critical success factors on topof the first three columns should be ad-dressed more consistently.

It is really striking that in spite of the 0to 3 vote, all scores are very close toeach other. Is this a pattern?


The next task is to identify activities.However, at this stage, participantstend to be tired and low on energy andcreativity. Thus, the following brain-storming exercise on activities thatwould address the under-matched criti-cal success factors is only a first at-tempt, to be followed by a further work-shop with a more systematic brain-storming and action planning.

The last step in the workshop is either adetailed action planning or an agree-ment on the next meeting to be con-ducted for action planning.


11 Annex 3: The Paper Computer

The Paper Computer is a tool which may be useful in a Mini-workshop setting. It is particu-larly practical when it comes to identifying priority action, like in the Results Workshop or aWay-forward Workshop. It is very powerful in persuading local actors to ignore, at that stage,some issues that figure high on their list of priorities but that are very difficult to address, orto make a difference.

The elaboration of a Paper Computer involves the following sequence:

1. Conduct a card-writing-based brainstorming on a question like: What are the factorswhich influence the success of our organisation?

2. Organise the cards. Eliminate duplicates. Prioritise them (Pareto: no. of cards : 5 = num-ber of points per participant)

3. Take the top seven to ten highest scoring cards. Pin them underneath each other. On eachcard, ask: “What are opposing expressions for this factor?” For example: The initial question was “What are the critical success factors of a Genesisexercise?” One high scoring response was “Facilitators have an understanding of the location beforestarting the exercise”. Opposing expressions would be: “Facilitators locate information (reports, studies etc.) on location and read it” and“Facilitators stumble into the Genesis exercise without digesting any information on thelocation”.The purpose of this step is to make sure that everybody understands the factors in thesame way.

4. Take six to ten cards with highest priority. Write each item onto a second card. Create amatrix like this, A being the first high priority card, B the next, etc.:

A B C D E F G Activesume

A X Howdoes AinfluenceB?

Howdoes AincluenceC?

etc.

B Howdoes BinfluenceA?

X Howdoes BinfluenceC?

etc. XPassivesume

X

Note: The values can be between 0 and 3. Negative values are not allowed (i.e. we don’t dis-tinguish between a constructive and a destructive influence).


Participants often find it difficult to distinguish the directions of influence, especially whenfactors are mutually influential. However, if A influences B strongly (=3), this does not nec-essarily mean that B influences A also strongly. It rather depends. The depth of the river youwade through influences how wet you get, while the wetness you can personally generate willhave next to no influence on the depth of the river. The facilitator will have to emphasise thispoint repeatedly.

Perhaps you want to give an example, for instance: What is the relationship between theweather and the wetness of my feet? There clearly is a relationship. It is strong. What is theinfluence of the wetness of my feet on the weather? It is zero.

5. Add the numbers horizontally (active sum) and vertically (passive sum). The result maylook as follows:

A B C D E F G Activesume

A X 3 1 0 2 2 1 9B 1 X 2 3 0 0 1 7C 2 3 X 3 2 1 0 11D 3 3 2 X 3 3 2 16E 2 2 1 1 X 3 1 10F 2 3 2 2 1 X 1 11G 3 3 2 3 3 3 X 17Passivesume

13 17 10 12 11 12 6 X

6. Prepare a scatter diagram. The horizontal axis takes the active values, the vertical axis thepassive values. Each factor has an active value (on the right of the matrix) and a passivevalue (at the bottom of the matrix). Locate each factor according to its active and passivevalue in the matrix. The result may look like this:

PassiveB

15

A12 F D

EC

9

6 G7 10 13 15 17 Active

7.


8. Calculate the mean for the active and the passive sums (in this case, it is 11.5). Draw anaccording vertical and horizontal line in the scatter diagram. For example:

PassiveB

15

A12 F D

EC

9

6 G7 10 13 15 17 Active

9. The resulting matrix is labeled as follows:

Impact:Factors which are receiving a lot of in-fluence, but who are exerting little influ-ence. You can ignore them for the timebeing.

Complex:Factors which receive a lot of influence and which are ex-erting a lot of influence. Many stakeholders may want toattack those, but this is actually very difficult since eachfactor is so heavily interconnected with other factors.

Posteriority:Factors which receive little influence andexert little influence.

Leverage:Factors which receive little but exert a lot of influence.These are the factors which you want to attack initially,since they offer you the best leverage point.

In our example, factor “G” would be the one with the strongest leverage factor.

10. Option: Conduct card-writing brainstorming exercise about the factor(s) which are locatedin the leverage square, asking: What can we do to strengthen / leverage this point?


PreparationMaterials you need Cards, flipchart-paper or brown paper, markers

Things you can prepareTypical problems and errorsProblem / error Solution

Confusion between activeand passive side

Convince participants that, at one stage, they are exclusively tolook at the influence of factor A on factor B, and that they willlook at the inverse relationship later. At no stage we ask spe-cifically for interaction / mutual influence / reinforcement be-tween two factors.

Participants insist that theinfluence is a negative one.

Convince participants that positive or negative influence is notthe issue here. It is all about the strength of the influence.

Examples


The evolution of the Compass is based on the collective effort of a Community of Practicethat includes, but is not limited to, the following individuals:

Name Country Email

Desiderio Belas Philippines [email protected]

Shawn Cunningham South Africa [email protected]

Wolfgang Demenus Ecuador [email protected]

Anura Ekanayake Sri Lanka [email protected]

Sonja Ende Germany [email protected]

Aruna Gunasinghe Sri Lanka [email protected]

Ulrich Harmes-Liedtke Argentina [email protected]

Kgomotso Matthews South Africa [email protected]

Jörg Meyer-Stamer Germany [email protected]

Deepabandhu Ratnayake Sri Lanka [email protected]

Christian Schoen Vietnam [email protected]

Volker Steigerwald Sri Lanka [email protected]

Gabriele Trah South Africa [email protected]

Frank Wältring Germany [email protected]

This document was written by Jörg Meyer-Stamer.

The Compass of Local Competitiveness v0.9

Technology

Transcript of The Compass of Local Competitiveness v0.9