Blog Archives

Necessary Paradigm Shifts

January 18, 2010
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“The significant problems we face cannot be solved at the same level of thinking we were at when we created them.”
- Albert Einstein

In order for the markets in the developed world to connect to the developing world, a major paradigm shift must occur. According to Steven R. Covey, “Paradigms are the mental models that every person uses to perceive information, people and themselves. These are filters that help us make some sense of reality and act as a lens from which we see the world.” In laymen’s terms, a paradigm is the way our minds are trained to react to something. In the developed world, charity donations are the ‘go-to’ method for helping out those less-privileged. In times of crisis, as we have seen with Hurricane Katrina and the massive earthquake in Haiti, donations of food and money are of the utmost importance at the time. So much money will have to be reinvested into the infrastructure, buildings, medical aid, and food, that large scale donations of money are imperative. However, when we re-examine the BoP and their daily struggles, it is not the case that donating money will solve the larger issues.

There are a few shifts that I think are necessary for increased communication, collaboration, and market connection between the developed and developing worlds.

1. Improved and expanded media coverage of the developing world
2. A shift towards more innovative ways of helping the poor
3. A shift away from the negative stereotypes of market interactions with the developing world.

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Designing a Collaborative Solution

January 11, 2010
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This week I want to highlight an initiative that the Rockefeller Foundation started in 2007: Accelerating Innovation for Development. In a Business Week interview at the Aspen Design Summit, Antony Bugg-Levine, Managing Director of the Rockefeller Foundation, highlights some fascinating and exciting paths towards working with the Bottom of the Pyramid. Mr. Bugg-Levine heads the Accelerating Innovation for Development initiative at the Rockefeller Foundation, a study assessing the right approach towards a design-centered business model that applies in the developing world. What is truly inspiring to observe is the role of the locals/BoP consumers in this study. They are not viewed as end-users who will accept any product that is placed in their locale. Instead, they are integral in the success of such design business models. The Rockefeller Foundation has outlined four key outcomes that they wish to accomplish through this initiative:

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Why focus on the Bottom of the Pyramid?

January 4, 2010
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When it comes down to it – challenging an established company that primarily serves the developed world to look at shifting into serving the developing world is a difficult financial proposition. Though there are intriguing case studies emerging about the success of both multi-national corporations (MNCs) and start-ups serving the BoP, the road remains largely uncharted and without consistently proven success models. Many unanswered questions loom regarding the distribution models, unstable economies and governments, and unknown consumer bases, yet one of the largest obstacles to overcome is the lack of “sufficient” profit margin associated with products and services that target the billions of people who live on less than a few dollars a day. However, through all of these success stories, one constant remains – the boom of innovation.

Innovation at the Engineering Level
A hard-to-quantify benefit of working to solve life’s daily problems at the BoP is the innovation factor. There is innovation at the engineering level that goes into each product that is designed, because traditional products will not appeal to such a dynamic market. Your standard laundry detergent, food supplies, and energy solutions need to be altered and improved to conform to different requirements. Products may require performance at higher levels in harsher conditions, for example. They most likely will also need to survive without the standard maintenance that is readily available in developed countries. Electricity is no longer a given. These are just a few of the challenges facing engineers developing these products.

Innovation at the Business Level
While innovation is mainly seen at the product performance level, it is often overlooked how business processes change given the market and geographic considerations. The marketing strategy is much different and more dynamic; the distribution system has to overcome many more obstacles that are unheard of in the developed world; the growth strategy takes on a non-standard approach. While these may seem like another laundry list of obstacles to overcome in order to provide a low-margin product, its how the innovation is leveraged that can really shed light on the benefit of innovation.

Leveraging innovation
When a company has devised an ‘improved’ product that performs at a higher quality for a cheaper price – it would be a shame to waste the hard work that went into developing it and not share the intellectual property with the rest of the markets they serve. The methods that went into figuring a way to fit a square peg into a round hole can benefit pre-existing products (or even undeveloped products) in other locales and provide tested solutions that can help to cut costs elsewhere. While straight profit-seekers may simply see the BoP as not worth the effort (at first glance), they need not look further than the benefits of innovation to see why this market has so much potential. The key is to recognize that innovation is in fact a tremendous opportunity, rather than a cost or obstacle.

- Chris

Innovation fueled by a challenge

December 17, 2009
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BOP markets break our traditional ways of thinking and acting. This might be their biggest allure and challenge alike. Unless we are willing to discard our biases, this opportunity will remain invisible and “unattractive”.

- C.K. Prahalad
The Fortune at the Bottom of the Pyramid

As we close off 2009 and begin a new decade, its a time to reflect back on what has been accomplished in the last ten years, but also to look at what trends and innovations have come to fruition. A new concept has emerged by engaging the Bottom of the Pyramid in a market-based system of innovative and socially-minded companies. The combination of a flatter world, improved technology, and hungry entrepreneurs has played a role in growth in this phenomenon, but they are not the focal point. Once just a belief or hypothesis, the concept of social entrepreneurship has blossomed at a greater rate recently and is increasingly highlighted in successful case studies of organizations that are providing socially-focused goods and services while not surviving solely on donations. Publications such as The Wall Street Journal (here, here, and here) and The Economist (here and here) have devoted space not to just to the good work people are doing, but to turning the discussion towards the largest untapped market currently available.

Prahalad points out that working with the BoP goes against the grain and the homegrown method of business we learn from the consulting firms, the investment banks, and business schools needs to be rethought. It’s a challenge again. No longer are innovators looking to fit their product into the proverbial ‘box’ of today’s society. By going into a third world country without adequate infrastructure or resources and providing access to a product, entrepreneurs must tackle other issues that have been solved in developed countries. Can a traditional distribution model work here? What if there are no roads to access the towns? How does our product/service fit into the culture and traditions of the local villagers? These are all new puzzling questions that social entrepreneurs work to address alongside providing a social or environmentally focused product or service. The steep challenge posed by social ventures combined with a change in the mindset of entrepreneurs has boosted the “allure” of working in the social enterprise space.

As we work our way out of one of the worst global economic situations that the world has seen in some time, the momentum behind this movement/business model/market must not just be sustained but fueled. Innovation is what drives people to change their paradigms and beliefs as to what is possible. The past year alone has brought amazing business concepts and fascinating products to the social enterprise market – and its appropriate to take a moment to acknowledge that. The work is far from complete and the journey has just begun, but it is picking up steam, and the exciting parts are yet to come.

- Chris

Global Team for Local Initiatives

December 9, 2009
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I have written thus far about socially focused organizations that look to create innovative solutions and work to eliminate poverty through market-based products and services. Yet while much of the effort is focused on the actual innovation behind the products and the strategy surrounding how to create and market a cost-effective product, many times the focus on the local people is forgotten. Last week I wrote about how I believe it is possible and almost quite necessary for the community to be involved to ensure the acceptance, growth and success of the program or service. At the same time, it is crucial to provide a sense of comfort to the community that their traditions that have been passed down over the years will not be wiped away with the introduction of a product or service.

Global Team for Local Initiatives (GTLI) is an organization that strives to improve the welfare of the Bottom of the Pyramid while maintaining tribal traditions and culture. They are showing that it is possible to provide a valuable service to the BoP without infusing a Western mindset. Their four-phase model “ensures that [their] work with tribes is culturally appropriate, effective, and long-lasting.” From their website:

Phase 1: Ground Time: Before working with a tribe, GTLI representatives spend several months living with the people, learning the culture, forming relationships, assessing the tribe’s needs and desires, and building trust. We work only with communities that are committed to working with us to improve their situation.

Phase 2: Concept Testing: After assessing the tribe’s needs, we work with the elders to develop ideas for programs that can meet tribal needs. With the elders’ support and participation, we test those ideas with small groups of people.

Phase 3: Pilot Programs: After conducting our concept tests, we adjust the programs as necessary and then conduct the programs again, this time with larger groups of people. The pilot programs are monitored, assessed for effectiveness and fine-tuned.

Phase 4: Implementation: Once the pilot programs have been proven effective, we implement those programs on a large-scale basis, across entire communities or groups of communities.

The key takeaway from this is the involvement of the community not only in the development of the program initiatives but in the understanding of the problems and needs. All too often, organizations may try to develop a product out of the perceived needs of the community they aim to serve, but do not involve local communities in the development. Establishing trust between the tribe/community is essential to the success and wide-spread adoption of programs, and as GTLI is proving, an effective way to establish trust is to involve the community in the discussion, development, and piloting of different programs.

- Chris

Providing zero-waste assistance

December 1, 2009
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As socially conscious businesses and organizations begin to develop and increase in popularity, the number of people that are affected or helped grows as well. Its no doubt that companies like D.Light, Connect Africa or Driptech have a major impact on the quality of life for the people that they seek to help. Their work is innovative, and eases the daily tasks of local people who are able to increase their income, welfare, or standard of living. The question, however, is ‘are there times where a Western influence is not wanted, or potentially harmful to the people we think we aim to serve?”

The spectrum at the BoP tends to vary quite a lot in terms of the level of Western influence or available technology. There are plenty of people who live on less than $2 a day yet utilize cell phones to be able to find the most optimal price for their crops that they produce. Others live in mud huts, but use solar panels to fuel their lights and cook stoves. As Westerners, we tend to assume that technology is the answer to assisting in the rise out of poverty, or that our ‘innovative’ ideas are what is necessary to help. Taking a step back from all of the progress that has been made in numerous countries – could we be overtly influencing people that wish to simply maintain or sustain their culture that has been generationally passed down through tradition?

Collaboration between countries and cultures is a beautiful concept that must be embraced and has lead to technological and sociological developments benefiting millions of people. However, it must be acted upon in such a way that does not threaten the diversity that has defined cultures. Many environmental solutions these days focus on the concept of zero-waste or close to zero-waste. I believe there are methods to raise the standard of living, prevent diseases, improve fragile economies in ways that are to ‘close to zero-waste’ in the social sense as well. By implementing solutions that not only solve a problem within a culture but that are also agreeable to tribal or town elders by not encroaching on cultural traditions, a trusting relationship is built and serves as a foundation for future growth. The loss of a sense of ownership or traditions within a culture (with or without the success of the implemented product or solution) can leave a devastating effect and hamper any future efforts to provide assistance later down the road.

An inverted approach to the Bottom of the Pyramid

November 17, 2009
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Much of the discussion surrounding business plans of Social Enterprises (and as outlined in a previous post, How to Structure the Social Business Space) involves using the constituents at the Bottom of the Pyramid as consumers. For example, a popular business model that has arisen is reliant on developed world people micro-loaning to others in developing nations. The borrower receives the loan, uses it appropriately and then repays, closing the loop. Other examples of business ideas use BoP individuals to purchase products. Yet, a truly underdeveloped idea that has yet to gain as much traction – one that may hold even more promise – is using the BoP as suppliers.

Why it hasn’t happened as much
Inadequate infrastructure is a major reason that basic businesses dominate the economies in the developing world. Some countries are struggling to even provide utilities and adequate housing, and thus haven’t been able to turn their attention to providing the infrastructure necessary for developing a service-based economy. Agriculture and mining currently dominate the output of developing nations, and history shows that as developing countries progress, they will move on to manufacturing and services. Samasource is showing why they don’t have to wait until the manufacturing revolution occcurs to allow the BoP population to provide services to the rest of the world.

To quote Samasource’s website:

Samasource enables marginalized people, from refugees in Kenya to women in rural Pakistan, to receive life-changing work opportunities via the Internet. The core of this concept is microwork – little bits of labor that can be performed anytime and anywhere that add up to a real livelihood for our partners. In parallel, we enable socially responsible companies, small businesses, nonprofits, and entrepreneurs in the US to contribute to economic development by buying services from our workforce at fair prices.

This model shows that there are other ways to involve those at the Bottom of the Pyramid in business. Samasource is paving the way by showing the viability of treating the BoP as suppliers. This sort of creative business model should serve as an indicator that there is great potential in this area.

What needs to happen
The innovation that is so prevalent in the the business models that use the BoP as consumers needs to be applied towards developing business models that use the BoP as suppliers. Not only should they be seen as potential consumers or individuals that need assistance, but they should also be viewed as a viable workforce that has much to offer.

Given that, what needs to happen for this to occur? The growth of education and training facilities that can train the BoP is essential to developing a workforce that will be able to compete with the developed world. Countries in Africa, Latin America, and Asia have many benefits (cheaper wages, cost of living, and facilities) that provide a competitive advantage over the developed nations. As Samasource has come to discover, these competitive advantages provide a foundation for a viable business model. Innovative solutions should not only apply to products and distribution models, but to the way we see folks at the Bottom of the Pyramid.

- Chris

BoP Marketing and Growth Strategy

November 5, 2009
By

Dr. Erik Simanis, a senior researcher at the Center for Sustainable Global Enterprise at Cornell University’s Johnson School of Management wrote an insightful case study on marketing to the Bottom of the Pyramid. One of his points is that the BoP is not a market, and one has to be created in order for products to catch on as a success.

Education as a Foundation
To build up the BoP, its not enough to provide cheap, necessary, innovative products, but to help develop their future which will provide sustainability. Vittana, for example enables more students to attend secondary school and obtain a degree that will help increase their income. Slowly but surely with more and more educated individuals coming out of developing nations, the potential for growth and prosperity from within increases dramatically.

Loans as a Resource
Kiva and Grameen Bank are examples of other organizations that provide aspiring individuals from the BoP the financing and thus the opportunity to begin their journey towards achieving their dream. The money provided is not a handout, but quite the contrary. This low cost loan encourages strong fiscal habits and ideally leads to a step up the pyramid. Allowing someone to increase the size of their taxi company, or to help provide funding for another employee, these loans water the entrepreneurial seeds that will help to accelerate an economy’s growth.

What Next?
Education and funding are necessary building blocks to a stronger marketplace and economy. This is widely accepted and serves as one of the reasons why the previously mentioned companies are becoming a rapid success. Yet the goal being to improve the economy and provide opportunities for those at the BoP to rise, what happens when those educated and financed individuals begin to start their businesses? Enter TechnoServe. TechnoServe is an organization that has been around since 1968 and now serves to develop entrepreneurs, their businesses, and their economic environment. This is the next step in the process of growing economies and raising consumers from poverty to increased purchasing power.

Dr. Simanis states that in order for a product to become a success in a BOP region, “companies should start by getting the community involved in creating, implementing and shaping the business itself. The sense of ownership this brings will help ensure that interest in the company’s product will be widespread and sustained.” I would take that a step further and argue that a sense of ownership across the spectrum of education, business, and the environment is the key to consistent upward growth of an economy. Too often have we seen aid been delivered to countries in need just to see it either improperly spent or spent on the wrong things. The seed of economic growth – which I believe is one of the most crucial tactics towards alleviating poverty – must be sown from within.

- Chris

Find support in the most unlikely of places

October 26, 2009
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As interest in social enterprise begins to grow and stories of the successes become more well known, it is important to make sure the audience we reach out to is not limited by prior misconceptions. Social enterprise organizations are extremely popular with a ‘younger’, more innovative generation of people, and use tools (such as social media) to reach out to others for support and publicity. I use the term ‘generation’ loosely to partially represent an age group, but also to represent like-minded people who have a natural propensity or drive towards socially motivated work. That being said, we run the risk of (un)intentionally ignoring an entire sub-section of society simply by associating ourselves with other individuals who think like us.

The older ‘generation’ – baby boomers and older – who either simply have not heard of social enterprise or are skeptical of its benefits/validity, have a wealth of resources that could provide the type of support that can move social enterprise organizations from smaller scale to large scale. The breadth of industry knowledge, connections, and product development experience – if applied to certain organizations, say, for example, in the role of an advisor or board member – can help younger companies clear hurdles that would normally take twice as long.

Reaching out to folks from different walks of life and different experiences brings the type of healthy diversity to an organization that can bring it to the next level. The mission and goal of the organization must be the basis for which everyone comes together to support. After that, having different viewpoints and suggestions on how to tackle business issues (for example, distribution models, financing, innovation, etc) will provide for a more mature and developed approach. From a startup perspective, it is always a benefit to have some ‘grey hair’ on an advisory board that can help to open some doors (especially to funders).

In addition to reaching out to other generations for business-advisory support, it would be prudent to seek to publicize social organizations through other mediums than social media. As we have seen with Twitter, blogs, and websites that provide a simple way to donate or loan money, the potential for growth with social media is huge. The Wall Street Journal, major city newspapers, The Economist, Time, Business Week, etc…these are traditional forms of media that are still essentially quiet on the accomplishments that have been made over the past 10 years. While it is ‘easy’ or something we are familiar with, we cannot simply rely on social media to provide the publicity for our causes. We cannot fall into the trap that traditional media has fallen into by simply only focusing on their constituents and pigeon hole their approach. Use any and all sources of media to raise awareness, and we just may get support in the most unlikely of places.

- Chris

Don't strive for "good enough"

October 20, 2009
By

The benefits that non-profit organizations provide are well documented. When provided with proper funding (and sometimes even without), they aim for socially conscious or environmental improvements through their work. A difficulty attached with their model is the fact that a chunk of bandwidth is spent applying for and locating sources of funding, not only to provide their desired impact, but to afford to keep their own lights on. When the funding is then delivered, it’s time to deliver results. For every few success stories we see, there is an unsuccessful project that either ran out of funding, didn’t plan properly, or encountered roadblocks that prevented them from fulfilling their goal. So what? What are the consequences of a failed project? Anything? Potentially a loss of future funding, but then again – their work may be classified as “good enough” to continue to receive additional funding. Can they be held to the same standards as a for-profit organization, or should they be judged differently? I think for the sake of the people they serve (the bottom of the pyramid), both should be held to the same high standards.

A for-profit organization, on the other hand, is held responsible by its financiers – seeking a return of some sort – and in some cases, tax payers or share holders. If the project cannot be finished and they underdeliver, there will be ramifications throughout the organization: a loss of fuding, a loss of more jobs, a loss of opportunities, etc.

This is where I believe for-profit social companies can provide a compelling business case. Using the L3C Business Structure as a building block, organizations can combine the rigor of standards typically reserved for for-profit organizations with the focus and resources of a non-profit. I do not mean this to say that non-profits do not hold themselves (or are held) to standards, or even high standards. Part of their goal is to create a lasting impact with the available resources – said another way: producing a project or product that has met its goals and can stand the test of time. Yet adding in the ability to utilize profits to invest back into the development of the organization and their products can help to drive more efficient and lasting results.

A great article by Evan Thomas entitled The Business of changing the World touches on this topic. Producing results that are sometimes “good enough” is a step in the right direction, but we need to continue to strive for reliable and consistently positive results. In a nutshell, non-profit and for-profit organizations need to be held to equally high standards with regards to their output and sustainability.

- Chris
Note: Updated a few sentences for clarity

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