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Enterprising leaders who tackle big problems like world hunger can learn from Alexis Mejía and Kurt Schneider, two pioneers inspired by the same vision to reduce postharvest loss with metal silos in Honduras.
Building the airtight cylinders started as a part-time business for Mejía. During the planting and harvest seasons in Nacaome, a rural town near the Pacific coast of Honduras, he managed a family farm. But as demand grew for the grain storage units, his small workshop expanded.
By 2008, he had six employees. “Nowadays, this activity is the sole source of income for my wife, seven children and me, and we are doing quite well,” Mejía says.
The success story is one of thousands across Central America since the 1980s, when local tinsmiths began manufacturing and selling the silos to protect crops from insects, rodents and fungi. Developed markets already had the technology, but it was revolutionary in Nacaome and surrounding communities.
Smallholder farmers no longer had to rush to sell their corn and beans after harvest, when heavy supply drove prices down. Perhaps more importantly, they no longer had to buy back their own produce to eat later in the year when prices were high. Skeptical customers quickly saw the value. They could wait and go to market on their own terms, while storing enough grain at home to last an entire year.
Market growth hinges on entrepreneurs like Mejía, but lack of infrastructure in places like rural Honduras can stifle enterprise. To truly make technology stick in difficult terrain, entrepreneurs need help from innovators like Schneider, a project leader with the Swiss Agency for Development and Cooperation.
He arrived in Honduras years before Mejía built his first silo. Unlike some aid agency directors, who show up in marginalized communities with ready-made answers, Schneider started by asking questions. He understood that the ultimate decision-makers had to be local farmers ready for change.
My research with Sonali K. Shah and Steven T. Sonka at the University of Illinois confirms the need for a bottom up approach when developing industries in developing economies. Viable ecosystems do not happen on their own. You can’t just set a clock and wait. But at the same time, omniscient planners cannot swoop in with prescribed solutions.
Prior to Schneider’s arrival, multiple efforts at introducing storage technologies and government regulation had failed. Farmers had little trust in nonprofit or state-sponsored interventions. Instead, Schneider adopted a market economy mindset, which requires a process of experimentation and testing.
For independent entrepreneurs like Mejía to pursue metal silos as a profitable venture, Schneider had to lay the groundwork for coordination of all parties involved, including metal-smiths, material suppliers, trainers, credit institutions and NGOs. Only then could he be assured that the social intervention would scale up, adapt and survive long-term.
My more recent research with Shah and Mahka Moeen at the University of North Carolina provides a framework for understanding how people with different aspirations and abilities can come together to resolve uncertainty in a new industry and create robust markets. The knowledge discovery process happens in three stages, each culminating with a measurable milestone.
Commercialization
The first stage is incubation, the period between a technological breakthrough or identification of unmet need and the first instance of commercialization. Among multiple available technologies that could address post-harvest loss, Swiss aid workers in Honduras needed more than 10 years just to pinpoint metal silos as a potential solution and design a business model that could work in isolated communities cut off from global supply chains.
The discovery process, which started in 1974 at a United Nations nutrition conference, moved from one challenge to the next. Who would build the silos? Where would they get their raw materials and tools? Who would finance them? Who would train them? Where would they find their first customers?
Progress was so slow in the beginning that Schneider almost lost support. “The success of the project was not certain right at the beginning,” he writes. “The continuation of the project was seriously questioned as more concrete results for the target population were desired.”
Firm Takeoff
Once a product is deemed commercially viable, a monopoly stage ensues with few competitors. This period ends when multiple entrepreneurs see enough of a potential to enter the market, resulting in a sharp takeoff in the number of firms in operation.
In Honduras these entrepreneurs came from the user community. Schneider engaged with farmers like Mejía by providing them demonstrations, training and support during this stage. As the second milestone approached, Swiss aid workers gradually withdrew their involvement as part of a planned exit strategy.
Sales Takeoff
The final stage culminates with a sharp rise in sales, signaling a transition to commercial sustainability. The milestone is achieved when a robust supply chain meets up with assured demand.
Schneider fostered alliances by helping all parties involved create business models that would work for them. Rather than things falling apart, the win-win relationships in the markets for metal silos created a surge of innovation soon after the aid ended. With relatively little support, local manufacturers continued to produce and sell metal silos directly to farmers.
By the time the aid ended in 2003, the program had produced almost 900 metal silo manufacturers, spreading from Honduras to other countries in Central America. The expansion reached Guatemala in 1990, Nicaragua in 1992 and El Salvador in 1994—20 years after the UN summit. Since then, the technology has continued to spread to 16 developing countries on three continents.
Business and nonprofit leaders often see each other as rivals in developing markets. But as the collaboration in Central America shows, Mejía and Schneider complemented each other in critical ways.
Markets don’t just emerge. But when the right individuals pull together in the right ways, they make the world a better place by harnessing the power of enterprise.
