Participatory Appraisal of Competitive Advantage (PACA ®) - Principles and General Procedures

Background

In the recent years, a paradigm shift in economic development strategies can be observed:

• from long-term planning to short-term action,
• from top-down to bottom-up,
• from government-driven to public-private partnership.

Therefore, Local Economic Development strategies have been adopted and comprise the following  aspects:

• Driven by opportunity,
• Based on local resources,
• Business-driven,
• Not primarily addressing the main sector, but the motivated sector,
• Little emphasis on strategy as plan,
• Iterative process,
• Open and open-ended process (“perspectivic incrementalism”),
• Action learning,
• Main Role of LED Agents: Facilitation .

Figure 2:    Where is PACA feasible

The sequence of activities using PACA

The Participatory Appraisal of Competitive Advantage comprises eight steps of implementation, which can be devided into three  overlapping time spans, the PACA project, the PACA  exercise and the PACA field work (compare Fig. 3).

The PACA Project:

An entire project applying the PACA approach, from the preparation initiation of the PACA,  to the joint implementation of activities by  concerned stakeholders.

Step 1: Preparation and organisation of the PACA project

This requires the identification of involved stakeholders, such as:

• Government institution(s)
• Private sector institution(s) (e.g. Chamber)
• NGO’s
• stakeholder forum

It is required to identify one stakeholder as  a PACA  Host, which

• mobilizes funds
• motivates other stakeholders
• creates a PACA team, consisting of  
  • 1 - 2  external consultants
  • 3 - 5 local people

Figure 3:    The sequenct of activities during a PACA project

The PACA Exercise

The  PACA  team

• advances information to the stakeholders,
• identifies invitees for kick-off workshop, mini-workshops and  interviews,
• organizes the kick-off workshop,
• coordinates the schedule for interviews and mini-workshops,
• organizes the presentation of results.

Organising a PACA Exercise:

In order to get organised,  8 - 9 weeks in advance the following activities have to be  carried out:

• identify PACA Champion,
• define territory / focus,
• contract PACA Consultants.

5 - 6 weeks in advance:

• select PACA Team,
• plan details of organisation with LOCA Champion.

3 weeks in advance:

• book venues,
• invite people for kick-off, mini-workshops,
• make appointments for interviews.

Plan your resources:  

• Making 90 contacts with an average of  2 phone calls and a length of 10 minutes per call results in 30 hours on the phone! Additionally, you have to spend time for marketing,  correspondence!

• Check available publications (research, articles in papers and journals):
• Check statistics
• Main sectors in the local economy:
• What are their main competitors nationally and internationally?
• What is international good practice in promoting competitiveness in these sectors?

Step 2:    The Hypotheses Workshop

Purpose:

• Get a shared understanding of the expectations in the PACA Team:

• on PACA
• on the location
• on possible proposals
• Make implicit opinions and prejudice explicit
• Create a base of reference for the next steps of work

Structure:

• Presentation on PACA
• Mesocard exercise 1:
  • Clarification of open questions on PACA
  • LOCA Consultants respond
• Mesocard exercise 2:
  • What do we expect to be our findings?
  • What may come out as proposals?
  • Which LED activities are already going on?

Figure 4:    Action plans can be developed using PACA from two perspectives

Step 3:    The Kick-off Workshop

• Representatives of business associations
• Representatives of local government
• Representatives of leading firms
• Representatives of support institutions
• Local media

• Inform locall stakeholders about the PACA
• Raise information about the local economy
  • hard information
  • participants’ perception / interpretation of local reality
• Motivate participants to support the PACA exercise
  • arrange appointments for interviews
  • persuade colleagues to be available for interviews

• Presentation of key concepts
  • Michael Porter’s diamond
  • optional: Systemic Competitiveness
  • optional: LED
• Participants write Mesocard cards
• four diamond corners -- strong & weak points
• competitive  advantage of the  region
• vocation in ten year’s time
• Discussion of cards / observations / questions
• Explanation of subsequent steps

Photo 1:  The PACA sequence as an open process is not limited to the single event of diagnosis of competitive advantage

Step 4: The Field Work:

A. Interviews

• Identification of firms, institutions and individuals to be met
• during kick-off workshop, discussion with Chamber, local government, key informers
• structured interviews (“conversations”), usually with director/CEO/executive secretary, based on open questionnaire and qualitative methodology
• conducted by external and local members of PACA Team (2 - 4 persons)
• notes about observations, minutes, formulation of more hypotheses / reformulation of hypotheses

Questionnaire vs. Interview Guidelines

Questionnaire:

• Closed questions (yes/no,  scoring)
• Precise wording  of questions is paramount
• Fixed sequence of question

Interview Guideline:

• Open questions
• Wording of question not defined ex-ante - depends on situation
• Interview dramaturgy depends on interviewee

Purpose:

• To understand the internal structure of the company / institution
• To understand how it fits into the local economy
• To gather its perception of the local economy
• To assess its willingness to participate in a LED initiative
• To motivate it to participate in a LED initiative

Structure:

• Intra-firm effort to improve competitive advantage
• Interaction with suppliers and subcontractors
• Interaction with customers
• Interaction with competitors
• Interaction with supporting institutions: training, R+D, information, finance, etc.
• Interaction with business association and Chamber
• Relationship with and percep-tion of local government

A good way to organize the interview is  Michael Porter’s Five Forces Analysis Plus as shown in Figure  5.

Figure 5: Michael Porter’s Five Forces Plus

B: Mini workshops

• 5 - 15 persons with similar characteristics, e.g.
  • particpants should come from the same industry and company-size (e.g. small garment firms, small food processing firms),
  • participants should have  a similar background (e.g. CEFE entrepreneurs, woman entrepreneurs, innovative firms),
• objective of the mini workshop is to evaluate the performance of the sector,
• Application of Moderation Method (Mesocards),
• Structuring tools like Porter’s diamond, Five Forces Analysis, Interaction Matrix and SWOT can be applied accoding to the demand of analysis.
• Which tools suit the Mini-workshop format?

An adaptation of Michael Porter’s Diamond  is used
 (compare  table 1, figure 1 on page 2  and figure  6 next page),

• when a heterogeneous group is coming together,
• when the focuslies on locational factors,
• whendiversified landscape of supporting institutions.

Table 1:    Issues regarding the explanation of the four corners of Michael Porter’s Diamond

Figure  6:    An adaptation of Michael Porter‘s “Diamond“

Michael Porter’s Five Forces Analysis (compare Figure 6) is helpful,
when the miniworkshop group is a homogeneous groop of businesses,
when only few supporting institutions are involved.

A Interaction Matrix is used, to  identify benefits and advantages in relation to  costs and risks for a possible cooperation (e.g. between IT firms and universities or supporting institutions / public sector). Figure 7 depicts a transaction matrix.

Figure 7:     Interaction Matrix

Step 5: Results Workshop

• Internal exercise of the PACA Team,
• verification / falsification of hypotheses,
• preparation of diagnostic (Mesocard),
• strong and weak points by industry / economic branch,
• strong and weak points of supporting institutions, associations, local government,
• prioritisation of observations (Pareto),
• verify: what were the proposals which came up during the field work, i.e. in interviews and mini-workshops?
• what are further proposals the team can come up with?
• verify: which proposals meet the following  criteria:

The PACA team defines a score between 1 (=no) and 3 (=yes) for each criterion. Multiply the three scores.

Figure 8:    Typical constellations regarding business sectors in the local economy: Where to start?

Step 6: The Presentation Event

The format of the presentaion event is different from a normal presentation. Admittedly, there is  a Powerpoint presentation
the  Mesocard exercise breaks through the usual rituals.

Consider to give the presentation at an unusual location
to make sure that participants don’t forget the event.

Structure  of the Presentation Event:

• Presentation of concepts, findings and proposals,
• Mesocard exercise with audience,
• optional: additional activities with interested participants.

Presentation of concepts, findings and proposals:

• explain the concepts and the methodology used (Powerpoint) ,
• present the diagnostic (Powerpoint),
• present the proposals (Powerpoint).

Discussion of findings and proposals:

• distribute cards and markers among the participants, explain the Mesocard rules (1 idea per card, write legibly),
• ask the participants to write down their observations, questions, criticism and proposals,
• stick the cards to the wall, discuss them with the participants.

Management of expectations
Do not create unrealistic expecations:

• do not formulate proposals which are unlikely to be implemented!
• don‘t promise activities which will overwhelm your capacity!
• don‘t promise that you will solve the local stakeholders‘ problems!
• don‘t give the impression that you come with a big bag of money!
• limit the number of proposals, and mention who will be in charge of them!

Step 7: The Way-forward Workshops

Purpose:

• Define priorities, activities and responsibilities for implementation and monitoring
• Separate workshops around each proposal / sector

Format:

• Explanation and clarification of the meaning, context and background of monitoring
• Mesocard: How can we implement monitoring?
• Transforming the Mesocard result into a mindmap
• Mesocard: What are the obstacles and risks in the implementation of monitoring?
• Planning exercise (Mesocard): How will we implement monitoring?

Step 8:    Implementation

• creation of working groups for given sectors (e.g. software, tourism) around project ideas (e.g. paleontology center),
• working groups initially operate  independently,
• coordination between activities, initially informally, later, as complexity increases, via a Stakeholder Forum or similar fora.

How to know that you do PACA in the right way?

PACA is currently implemented in:

• Armenia
• Bolivia
• Bosnia-Herzegovina
• Brazil
• Chile
• Colombia
• Dom. Republic
• Ecuador
• Ghana
• Honduras
• Indonesia
• Macedonia
• Montenegro
• Namibia
• Nepal*
• Nicaragua
• Peru
• Serbia
• South Africa
• Sri Lanka*
• Thailand
• Vietnam