Last month, Aneel Karnani wrote in the Stanford Social Innovation Review an article entitled, "Romanticizing the Poor."  In it, he states, " ...romanticized views of BoP people as value-conscious consumers and resilient entrepreneurs are not only false, but also harmful." In the article, Karnani spends a lot of time debunking the view that people in dire straits are well-informed and rational economic actors. In the end, he exhorts governments and policy makers to get more involved in the fight against poverty.

Personally, I think a lot of what Karnani says in the article is true.  Particularly on the topic of entrepreneurship, (which is what I'd like to focus on in this entry). It's just wrong to assume that the majority of those living at the BoP are entrepreneurial. Recently, I spoke to a friend who is working on a BoP project that seeks to help the poor start microenterprises.  The project selects a handful of people from a poor community and puts them through an entrepreneurship training program.  I asked her what was one of the biggest challenges of the project.  She responded, "That we're trying to train a lot of people to be entrepreneurial who are simply not."

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I recently had the chance to work on a case study with Late Lawson, Director of Economic Development for CARE, and Professor Ted London at the Ross School of Business at the University of Michigan. The case study centers on CARE considering how to best incorporate an explicit market-based approach to poverty alleviation within its portfolio of poverty alleviation activities.
 
In 2005, CARE started a three-year pilot initiative in Central America to assess whether revenue-generating ventures could provide large-scale, sustainable, and scalable poverty alleviation outcomes, as well as an opportunity to generate excess revenues for the organization itself. One of the primary catalysts for CARE to move in this direction was CARE’s experience in microfinance. In 1998, CARE had founded EDYFICAR, a microfinance institution in Peru. The MFI quickly became a business leader in the country, providing thousands of low-income families with access to much needed capital.

During the three-year pilot project, CARE started or supported many social ventures, primarily co-ops in the agricultural sector. Many of the ventures, however, had become overly dependent on CARE for support and struggled to find a path towards financial and operational independence. Furthermore, the ventures did not seem to offer any prospect of generating revenues for CARE.

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It's been a while since I last posted an entry on NextBillion.  My apologies to the community.  I have been wrapped up on a number of projects at work.

 
I'd like to use this post to wrap up the discussion on talent management at the BoP with some personal reflections.  

I was at UC Berkeley a little less than a month ago, speaking on a Net Impact panel on the base of the pyramid topic.  At the conclusion, each of the panelists was given a few minutes to make a closing statement.  When the time came for me to speak, I challenged the students to bring up BoP issues in the classroom, to press their professors to incorporate more of this teaching in their syllabi, and to take untraditional jobs upon graduation. 

Afterwards, I ended up having a really interesting conversation with Mike Lee (a second year MBA student at UC Berkeley who also blogs on Social Edge.)  We started to have a conversation about what it means to be an Asian American in a typically "non-Asian" field and the challenges faced to getting there.  (The topic was of such interest that we ended up having a follow-up conversation over Skype a few days later.) For those of you who are of the Asian decent, I’m sure you know what I mean by "non-Asian" field.  For those of you who are not, a brief digression.

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On November 10th, I have the privilege to sit on a panel at the Hass School of Business at UC Berkeley to discuss base of the pyramid business models with Katie Schmitz from Water Health International and Israel Moreno from CEMEX's Patrimonio Hoy Program. Sponsored by the Berkeley Net Impact Club and Sustainable Products Solutions Program, the panel is part of a year-long series exploring whether capitalism can evolve towards genuine sustainability.  Assistant Professor Isha Ray from the Energy and Resources Group at Berkeley will moderate the panel. More details on the seminar below.  Hopefully many of you will be able to join!

 

*******************

Capitalism Next Seminar
Date: November 10, 2008
Time: 6 - 8 pm Location: Boalt Hall, Room 110 (UC Berkeley)
Note: Local, organic refreshments and drinks to follow

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One of the biggest differences between social ventures and traditional for-profit ventures is that social ventures have an explicit social mission.  This difference can be a significant reason why one person chooses to work for a social venture over a traditional for-profit venture, regardless of any difference in pay. Despite this, there are many who decide to work at a social venture for reasons other than the social mission. 

Shocking revelation, right?

During a discussion on talent management with the recently returned Acumen Fund fellows, one person made the comment to me which I found quite interesting:

One of the mistakes that management makes at a social venture is to think that all workers are drawn to the venture because of the social mission alone.  For some workers, this may be the case.  For others, the social mission is only a small reason why they join the social venture.

So what are these other reasons?  

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The traditional talent support approach for base of the pyramid (BoP) projects has been a sending model: workers/professionals from the developed world are sent by an organization to a developing country to manage a local project.

The American Peace Corps was established with the intent of sending American volunteers in "helping the people of interested countries in meeting their need for trained men and women." Large multinational corporations have for decades sent their professionals from the developed world to start/manage local offices in developing countries.

However, the sending model can be very costly and be met with significant challenges. Studies have shown that international assignments can cost three to five times an assignee's host country salary per year. This is primarily due to cost of travel, relocation, and cost of living allowances. Outside of cost, there are also a number of other challenges for expatriates working at the BoP.

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Talent management is arguably the greatest challenge today for social ventures trying to scale-up in their overall impact.  I recently spoke with Deepti Doshi, Talent Manager at Acumen Fund on the subject and she commented, "We have realized that recruiting and retaining quality local talent is one of the greatest hindrances to growth and scale for enterprises serving the poor."

In the next few posts, I'm going to write about talent challenges at the BoP in the effort to spur discussion and brainstorm solutions.  In this post, I'd like to open up a discussion on recruiting.  The following scenario sets up one of the main issues:

There's an open position within your social venture and it has been very hard to fill.  One of the primary reasons for this is that there is such as small pool of qualified local people - people with the right skill and will - from which to pull from.  The country's educational system is not strong and the most qualified people end up migrating to greener pastures.  You eventually stumble across two potential hires: one has the right skill for the position, but doesn't have the will - the value and drive to build a social venture.  The other person has the will, but not the skill.  The position is considered key within the organization.  What do you do?  

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This post is the second in a two part series on how to get involved in the base of the pyramid movement. Part 1 was a personal story of involvement, and Part 2 focuses on the role of students in bringing social transformation.

I recently attended the Social Enterprise Knowledge Network (SEKN) colloquium at Harvard Business School and had a conversation with a professor about the role of students in BoP ventures. He left me with this parting insight: "Don't forget - students change the world. Many social movements throughout history have been started and led by students."

It wasn't a surprise for me to hear this at the SEKN colloquium. One of the main objectives of SEKN is to empower business school professors with knowledge, research, and insights on social enterprises in order to influence students -- who will ultimately drive social transformation. "SEKN seeks to advance the frontiers of knowledge and practice in social enterprise through collaborative research, shared learning, case based teaching, and the strengthening of institutional capacities in management education."

During my time at the colloquium, I was able to rub shoulders with a number of HBS professors who had a lot to share about students and BoP ventures. Michael Chu, who teaches a base of the pyramid class at HBS, said his class is always oversubscribed. Another indicator of this enthusiasm on campus is the fact that HBS's base of the pyramid club has the highest membership of all student clubs.

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I visited the slums of Nairobi in the summer of 2002. I remember being completely overwhelmed by the poor living conditions: large families cramped into little rooms, putrid refuse scattered throughout the neighborhood, young children left seemingly hopeless. I remember thinking to myself, what can possibly be done?

That summer, upon graduating from the BBA program at the University of Michigan's Business School, I was in Kenya on a service project with a small group from my local church.  For six weeks, a dozen of us taught English, science, and math in schools throughout Kenya.  But it was while visiting the slums that something in my heart and mind shifted.   It was an epiphany of sorts – similar to another epiphany I'd had the summer before, which led me to Nairobi in the first place.

Just twelve months beforehand, I was in a posh tower in Manhattan, working as an investment banker for the largest financial services company in the world.  A brief snapshot of what my life looked like:

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This is part 2 of our series reviewing Michael Edwards' Just Another Emperor and the concept of 'philanthrocapitalism'.  Read part 1 here.

Michael Edwards' recent book on "philanthrocapitalism" reminds me of a recent conversation I had with my sister, a social worker. Over dinner one day, she started going off on business types:

Why is it that business people think they are the answer to all the world's problems? You guys come off so arrogant! Somehow, we, who have been working in the civil sector for centuries, struggling to solve social issues, are completely inept, and you guys, who have all the money, are going to solve all the problems.

I think many people have a similar perspective. And perhaps rightly so.

Maybe we business folks didn't enter into the public/non-profit sector scene in the smoothest way. We in the BoP world know that when entering into a developing country, we can't just tell locals what to do and what they need. But perhaps we didn't follow our own advice when we entered into the world of foundations and NGOs. Instead of partnering with and listening to those who have gone before us, we just set up shop and announced to the world, "times are changing -- a new and better way has arrived!" Therefore, I can understand the push back and why Edwards wrote his book, Just Another Emperor?

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In my previous post, I suggested that BoP enterprises should consider partnering with faith based organizations (FBOs) on the ground, particularly in countries where religion plays a large role. In this post, I’d like to put forth another distinct, but similar idea: FBOs in the West can play a large part in the overall BoP Movement. Crazy, right? Maybe not.

A recent article in the Stanford Social Innovation Review highlighted the results of a survey on charitable giving in the United States. The survey showed that there is a gap between donor intent and actual giving. 47% of the respondents to the survey stated that they gave money in order to assist the needy. However, in actual giving, only 6% of donor dollars was given to organizations that primarily seek to meet the basic needs of people in the United States. Internationally, only 2% of donor dollars was allocated to assisting of those in need. So where is all the money going? Answer: FBOs.

Time to sound the alarm, right? “Wake up, donors! Smell the coffee. Start channeling your money elsewhere.” This is probably the reaction most on this blog would have.

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A key concept when operating a business at the base of the pyramid, or in any place for that matter, is contextualization. And by contextualization I mean a deep understanding and embrace of local culture. A simple example of contextualization in business can be observed by comparing the McDonald's menus in Asia and the United States. For instance, it would be impossible to find any McDonald's in the state of Michigan serving a curry burger. Why? Because people in the state of Michigan don't have a taste for curry burgers and wouldn't buy the product. Indeed, it is critical that businesses be aware of local patterns of human behavior – such as lifestyles, tastes, and social involvement – and develop products and services that suit these behaviors.

What I have mentioned thus far is nothing new and probably very elementary to the NextBillion community. However, I would like to suggest that we have left out of the conversation a very important component of culture: religion. It is a subject that is very polarizing and often taboo to discuss in business. But it is important to bring up because religion is very important to people in the communities that we in the NextBillion community are trying to serve.

Recently, this dawned upon me as I listened to a presentation by some MBA students from the Ross School of Business on improving the penetration of insecticide treated nets in Ghana. One recommendation that particularly jumped out at me was the following: leverage the church's influence. The presenters noted that in Ghana, Christianity is widely practiced, and as a result, the church is a very powerful and influential social institution.

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In my last post, I put forth a definition on scaling a BoP venture: increasing business transactions that positively affect the lives of the poor. In this post I'd like to address the importance of scaling a BoP venture.

Apoovra Shah recently brought up the issue of BoP ventures partnering with governments as a means of scaling. I'd like to take a different spin on this. I'd like to suggest that scaling BoP ventures is critical in order to influence the way governments spend their money on aid. Why is this important? Because according to William Easterly's book, The White Man's Burden, governments have spent $2.3 trillion over the past five decades on foreign aid -- and with little to show for it.

Last month, I was able to spend a week in Indonesia working with a local business owner on a BoP scale-up strategy. Over dinner one night, our conversation drifted to the subject of government aid money. My friend said to me, "Do you think we'd ever get funding from a government agency? No. We don't fit the profile."

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"How are we going to scale this enterprise?" "What is our scaling strategy?" "What are the building blocks needed to take our concept to scale?"

If you have ever sat in on a board meeting of an organization, either for a for-profit or non-profit, I am sure you would have heard the above questions or some derivative of them.

Scale is a word that is often thrown around, but what is scale? In the business world, scaling an enterprise basically means optimizing resources to sells more goods or services in order to grow top-line revenues and finding ways to improve cost effectiveness to drive profitability. Simple, right? Or not. Not all businesses are created equal. Some business models are inherently more scalable than others. For example, an online retailer is much easier to scale than a brick-and-mortar store.

Defining scale in the for-profit world is relatively straightforward. And its importance is also clear: shareholder maximization. But what about in the BoP world, where measurement is not necessarily in dollars and cents and the goal is not wealth maximization? Can we simply take scaling strategies from the for-profit world and apply them to BoP ventures? I think most of us would say no. Therefore, it is important for us to look at scaling a BoP venture through a different lens.

In this post and the next, I'd like to open up the discussion on scaling a BoP enterprise. In this entry, I am going to attempt to bring some definition to the idea of scaling a BoP venture. In my next post, I will try to tackle the importance of scaling BoP ventures from a macro level.

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"We must imagine a world which combines in equal measure economic development and eradication of poverty, ecological stewardship and social justice. We must harness the forces of globalization to create this outcome. We have to imagine this future. If we cannot imagine it, we cannot create it. We cannot create this world if we cannot imagine it. I do hope that we can bring to this task our collective imagination, passion, courage, humanity, humility and intellect. We cannot expect less of ourselves." - CK Prahalad

Last year, I had the chance to listen to CK Prahalad give his lecture entitled, "Democratizing Commerce" at the University of Michigan. He urged the audience to push for a globalization that benefits all, particularly the poor. I listened with great intent and thought that his final comments of the talk were quite profound, particularly related to BoP strategies.
A few thoughts on what Prahalad suggests as the building blocks for business leaders seeking to create a more inclusive global economy:

• Imagination: Creating BoP ventures that serve the poor entails having the eyes to see what could be in an environment often neglected and left for dead.
  
• Passion: This is the fuel that keeps BoP entrepreneurs up late at night, fighting against all odds, and refusing to bow down to the complexities and challenges of creating enterprises that serve and employ the poor.
  
• Courage: When entering communities of the poor, a BoP entrepreneur must be willing to accept the inherent risk that comes with serving the poor, seeing the failure that may come as a step in the right direction rather than a signal to give up and go home.
• Humanity: Whether you are the privileged elite at the ToP or the poorest of the poor at the BoP, we all share one thing in common: our humanity. Since the beginning of time, we humans have lived in the pursuit of purpose, significant and meaningful relationships, fulfillment, happiness, and longevity. The fact that some of us have been given unbelievable opportunities and privilege is grace. By grace I mean that which we do not deserve but we receive anyway. It is critical in our pursuit of poverty alleviation that we from the ToP develop what Jacqueline Novogratz from Acumen Fund calls "moral imagination," or the ability to empathize with the poor and to place ourselves in their shoes so that we can "make tough decisions in the name of the greater good."
• Intellect: Bill Gates, in his Harvard commencement speech in 2007, reflected, "The crucial thing is to never stop thinking and working – and never do what we did with malaria and tuberculosis in the 20th century – which is to surrender to complexity and quit." The issue of poverty is highly complex and needs our collective thinking and brainpower in order to bring forth true transformation.

Now, I'd like to expound more on the subject of humility because I think this is the one characteristic that is the most elusive, as it cannot be obtained through effort, work, or education. The reason it is so difficult to obtain is because the mere desire for it precludes one from having it. Have you ever heard a person state, "I have finally become a humble person!" The statement alone is a signal that humility has not been gained.

 

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