Santa Clara University is known in social entrepreneurial circles for its work helping to organize and judge the Tech Museum Awards – a showcase for social entrepreneurs, mostly from developing countries. Less well-known about the school is the Global Social Benefit Incubator, run by SCU’s Center for Science, Technology, and Society and a host of Silicon Valley volunteers.

The GSBI, under the guidance of Professor Jim Koch, selects 15-20 enterprises from developing countries and provides an 8-month mentoring process. The mentoring culminates with an intensive 10-day process in Santa Clara, where entrepreneurs work with their mentors, other experts, and each other to prepare themselves to succeed upon their return home. Applications for the fully-funded 2008 class of entrepreneurs are available now over at Social Edge.

This year, SCU has invited World Resources Institute to work with them on the GSBI process and accepted my suggestion that we focus a sub-group of the available slots on enterprises in the water sector.

The idea is to promote cross-learning among water entrepreneurs, and also to analyze the sector as a whole more deeply. This includes looking at geographic differences in the treatment challenge, the range of available and prospective technologies, business models, financing strategies, etc. The goal is to stimulate the sector as a whole.

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Guest blogger Grace Augustine is a Research Associate with the William Davidson Institute in Ann Arbor, Michigan. Prior to joining WDI, she worked in strategy & operations consulting for Deloitte Consulting. Grace completed her undergraduate education at the University of Michigan where she obtained a degree in Organizational Studies with a focus on Business Responsibility.

By Grace Augustine

While completing Professor Ted London’s Strategies for the Base of the Pyramid class at Michigan’s Ross School of Business, an Atlantic Monthly article highlighting a BoP-as producer venture caught my eye. The organization was the Arghand Cooperative, an Afghanistan-based business that was co-created by former NPR correspondent Sarah Chayes and members of the Kandahar community.

The article, Scents & Sensibility, was published in the December 2007 issue of Atlantic Monthly.

The cooperative uses locally-grown herbs, fruits, and spices to make soaps, then sell them at boutiques in the U.S. Chayes has gone into what some would consider to be one of the most bleak areas on the planet, overcome frustrating roadblocks in dealing with development agencies, and has still been able to focus on what is right while providing a link between BoP producers and viable markets.

Afghanistan, considered by many to be barren, hopeless, poverty-stricken, and a breeding ground for drug lords and terrorists, seems like an unlikely location for a thriving business. But to Chayes, Kandahar pushed her into action, or in her own words, "Stop talking about it already—do something."

When Chayes arrived in Afghanistan in 2001, she did not bring a product or a business model; she went in with an open mind and a commitment to help. Through her blossoming friendships there, she discovered Afghanistan’s plethora of indigenous vegetation that was unique to the area and virtually unknown to the rest of the world. Co-creating with the Kandahari villagers, she leveraged their local knowledge of rare fruits and oils, while mutually creating value for the start-up enterprise and community.

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(Via JustMeans)

Position: Assistant Director for Social Entrepreneurship, Berkley Center for Entrepreneurial Studies

Location: New York, NY

Organization: Stern School of Business - New York University

Job Description: The selected candidate will work with the Associate Director to create and manage a sustainable, world-class social entrepreneurship program that is recognized for its leadership in research, curriculum and programmatic offerings.

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Today I'd like to highlight what I see as a frequently occurring theme in BoP business models, and an element that could make it or break it for companies that look to target BoP markets. Entrepreneurship is often cited as the critical component for small and medium-scale enterprises, especially ones that employ a franchise model. Enterprises such as Scojo, Medicine Shoppe, Drishtee, HMX Sumaya, Florestas and Berni Labs are among many examples of business plans that rely on entrepreneurial individuals to take a model and make it work in their own communities.

Despite this impressive list, I think what underlies some of these entrepreneurs' success is not based on ‘entrepreneurship' per se. Rather, there is another, crucial element that explains why smaller enterprises often are the ones to find a successful BoP niche, and why larger corporations (even when they have greater economies of scale and resources available) do not always succeed in these same markets.

That element: KYC. No, not Colonel Sanders; KYC stands for know your customer. And in the BoP context, that doesn't just mean doing market research about consumer preferences and purchasing power (though that IS important). No, KYC means becoming a provider of personal attention and building an individualized connection with initial and potential customers. The importance of this for a BoP business model is

perfectly illustrated by Acumen Fund Fellow Catherine Casey in her recent blog post about rural SHEF Health Clinics in Kenya.

Casey describes the success of a for-profit rural health franchisee based on the personalized attention that customers receive and a willingness to tailor services to meet a variety of needs and comfort levels. Evidence from SHEF clinics in Kenya shows that BoP customers are willing to pay for these services, even where the alternative option of a free government clinic is available.

Is this specific to the BoP?

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Today, I read with interest an article from the Business Standard entitled "TutorVista Readies Indian Rollout; [Firm] To Raise $15m to Address Bottom of the Pyramid." Perfect for the NextBillion Newsroom, right?

Perhaps not. TutorVista, a leading online education firm, matches India-based tutors with students in the U.S. and U.K. For $100 per month, students have unlimited access to certified, trained tutors in subjects ranging from Calculus to Geography to GMAT test prep. Just over two years old, the company has over 10,000 registered students, 850 employees, and an estimated annual run rate of $5 million. Not bad for a start-up!

What caught my eye is the report that TutorVista is expanding back into the Indian market. According to the Business Standard,

Around 300 learning centres will be set up in B and C class towns, mostly on a franchisee basis, with TutorVista managing them and controlling quality. This will seek to address the gap in such towns for quality tutoring which cannot be accessed by those who do not have a PC and Internet connection at home...The rates have not been frozen yet but Indian students are likely to be charged Rs 25,000-40,000 per year, for eight hours of coaching a week.

As I read the article, I wondered to myself, "Is this really a 'bottom of the pyramid' business model?" Curious, I did some calculations - based on today's exchange rates, Rs 25,000-40,000 equals USD $636-$1,015. With such a high price point, can BoP households afford TutorVista?

Based on our research in The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid, the answer is easy: no, it is not. Not even close.

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In recent months, Boston Consulting Group's publications have tackled various aspects of BoP strategy, which Manuel and Julia have covered in detail.  From a high-level point of view, this is a positive trend, reflecting growing interest among BCG's clients – large private sector corporations – in better understanding and exploring BoP markets.  And from a branding perspective, I couldn’t be happier that BCG has chosen "Next Billion" as the catchphrase tying these publications together.

BCG's most recent publication, Decoding the Next Billion Customers (PDF), briefly but jauntily describes six ways that BoP consumers are different from other consumer segments, and provides a few hints about what this means for those interested in developing products for and marketing to BoP customers.  Mainly, these six points are common sense observations about circumstances that influence low-income individuals' purchasing decisions:

• They manage fluctuating incomes
• They cope with domestic [spatial] constraints
• They are unfamiliar with many products
• They are smart shoppers
• They look for trusted advice
• They demand respect

When compressed altogether, however, these facts and their implications present a challenging and exciting picture – especially for companies scouting around for new marketing opportunities.  What's helpful here is that BCG gets right to the visible and straightforward day-to-day differences that influence low-income customers' value calculations and decision-making without going into long narratives about their socioeconomic limitations.

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Organised by: Center for International Development at Harvard University

Sponsored by: The Anwarul Quadir Foundation

Key Dates:
Submission Deadline: June 30, 2008
Results: October 15, 2008

Propose an innovative and practical idea that would improve the lives of low- and middle- income people of Bangladesh (everyone except the top-third of the population in terms of annual income). Proposals will be judged by four Harvard University faculty members, in consultation with scholars familiar with Bangladesh.

This global contest is open to any individual in the world. Any compelling essay that establishes a way to improve the lives of low- and middle-income people in Bangladesh is acceptable for submission. The essays will be rated giving equal weights to a) innovative nature of the idea; b) clarity and cogency of argument and writing; c) ease and practicality of implementation; and d) the size of impact.

The author of the winning essay will be awarded the Anwarul Quadir Prize, USD $25,000.

Find competition details at:
http://www.cid.harvard.edu/quadir_prize/

 

I'm sad to say it's time for me to sign off as a member of the NextBillion staff. I remember joining World Resources Institute and the NextBillion staff in June 2005. NextBillion had just been up and running for two months. Take a look at this old screenshot and you'll notice the site had three navigation bars, 19 navigation links, and six color blocks. We agonized over the dearth of comment submissions and had regular staff meetings about how to improve site design, increase traffic, and encourage community participation.

Over the last two and a half years, NextBillion has undergone many site make-overs, but more importantly, the quality of its information and readership have improved exponentially. We now have over 250,000 unique visitors coming to NextBillion on a monthly basis, many of whom enrich the discussion through commenting on blogs and giving suggestions for site posts and improvements. Some gratifying third-party confirmations of the site's effectiveness include its nomination for a Webby Award in 2006, and "Best of the Web" mentions in BusinessWeek and New York Times.

It is exciting to think of NextBillion's steadily growing visitor count and media recognition as a reflection of growing interest in private sector solutions to poverty, and to think that NextBillion has had some role in nurturing this trend. It's been a honor to work with Rob Katz and the site's numerous blog contributors over these years. I'm eager to follow the site's continuing evolution as the "Base of the Pyramid" field matures and the ideas discussed on NextBillion become reality.

Guest blogger Bill Kramer is principal of The Global Challenge Network, LLC, an executive education and training company. From 2001 through mid-2007, he worked on pro-poor business strategies with WRI. Previously, Bill founded a non-profit focusing on the relationship of knowledge to economic development and enjoyed a long career in the private sector, founding a dozen companies, most of which were in the book business.

By Bill Kramer

Intel and the OLPC project have parted ways. The proximate cause, according to the report in The New York Times on Saturday, January 5, was the effort by an Intel salesperson in Peru to get the Education Ministry to switch from the XO to Intel's Classmate PC for primary schools. This was interference with an existing contract for the XO and contravening prior Intel agreements not to compete directly, nor to disparage the XO through one-on-one comparison of the machines. David Kirkpatrick from Fortune has an in-depth interview with OLPC head Nick Negroponte that goes into even more detail.

The failure of this partnership is not surprising to most observers, however disappointing it may be. First, Intel, as readers of Next Billion will know, was resistant to joining the OLPC effort, but yielded last year, and agreed to cooperate in developing a new chipset and machine, the Intel XO, which was to be unveiled at the Consumer Electronics Show which opened this past weekend (also see this story on the CES’ greening initiative). It was going to be a rough ride for the partners. OLPC and Intel already had a history, strong personalities at their respective centers, and, on OLPC's side, a powerful vision driven by education, not commerce, as Nick Negoponte said loud and often.

These divergent visions are the second reason for this breakup. In Intel's statement on its departure from OLPC, Chuck Mulloy of Intel said, in part, "that at the core of this is a philosophical impasse about how the market gets served." Spot on, in my view. And my sympathies frankly lie with Intel on this particular issue (while, at the same time, the press report suggests that Intel behaved badly in other respects here).

My earlier posts on the OLPC suggested that the philanthropic/education orientation of the venture would prove shaky in the competitive environment of computer hardware, and that reliance on governments as the primary market could prove a flawed approach to commercial success. Prof. Negroponte has remarked ruefully that politician's headline-seeking public "contracts" with OLPC have, in a number of cases, not been followed by checks being written. More experienced (and perhaps cynical) businesspeople could have (and may well have) foretold this outcome.

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What's in a name, a brand, a catchphrase? In some sense, everything. But a brand/name/phrase is only as good as the content behind it. So when U.N. Secretary General Ban Ki-Moon recently declared 2008 to be "the year of the 'bottom billion'," I paid attention - after all, Ban's declaration has the force of the U.N. behind it.

Upon hearing this statement, my first thought was actually a question: if 2008 is the year of the 'bottom billion', does that preclude 2008 from being the year of the 'next billion' as well?

I thought a lot about this, and came to believe that 'bottom billion' and 'next billion' need not be mutually exclusive. My conclusion is based partly on data: if there are 4 billion in the base of the pyramid, then there's room for both a bottom AND a next billion. (I cringed when thinking about this - these data are quite daunting when thought about in this way.)

Beyond numbers, however, there is a case to be made that 2008 should be the year of both the bottom and the next billion. In fact, as we argued in The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid, these two elements of the BoP couldn't be more different - and they merit different approaches.

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Yesterday, as I rode the metro home from work, I browsed through the obituaries section, as is my daily habit.  While reading the newspaper, however, I came across a news obituary relevant to my work, and to NextBillion.net.  I had not heard, but P.K. Sethi - an Indian surgeon and the mind behind Jaipur Foot - died January 6 of a heart attack.  To Sethi's family go our condolences.

Some may be wondering why Sethi's obituary is newsworthy on NextBillion.  For long-time BoP watchers, the answer is easy: Jaipur Foot.  The project, Sethi's brainchild, was the subject of a 2003 case study by C.K. Prahalad and a team of University of Michigan MBA students.  In it, they described how Jaipur Foot

created a low-cost prosthesis that it fits on sixteen thousand patients annually, allowing their return to their chosen professions in the fields and cities without loss of income or productivity.

You can find the full case study at the old XMAP site, or read about it in the context of other world-class BoP healthcare models.

If anything, we should celebrate Sethi as a pioneer - one who saw the BoP as a market worthy of high-quality innovation, service and attention.  He may belong in the same class as Dr. Govindappa Venkataswamy - founder of Aravind Eye Hospital - whom we remembered similarly on this site back in August of 2006.

William Easterly, respected for his contributions to the development debate and widely know for his opposition to the Jeff Sachs camp, recently published an interesting piece entitled How the Millennium Development Goals are Unfair to Africa. The article reveals specific statistical misrepresentations and non-standard methods of calculating progress toward the MDGs, ultimately concluding that such methods "paint an unfairly bleak portrait of Africa."

Easterly identifies a number of decisions regarding data selection and representation, all of which seem to downplay Africa's progress and throw its development shortcomings into even sharper relief against improvements made by other regions. These statistics involve the selected benchmark year, absolute vs. percentage changes, change targets vs. level targets, and the use of positive vs. negative indicators to compare improvements.

Even for someone - such as myself - with limited exposure to advanced statistics, (most) of Easterly's arguments immediately register as common sense, and raise some important questions. These are questions not just for development agencies pursuing the MDG grail, but also for investors, markets, and governments who make use of development data (and overall conclusions).

They are also some of the same questions that crossed my mind when I read an editorial last month arguing that, due to the "large statistical glitch" of using outdated calculations of purchasing power parity in China, the number of Chinese living below the World Bank's poverty line ($1 a day) may in fact be 3 times more than previously thought - 300 million, not 100 million.

Now, if you were a sizeable MNC and suddenly found that your market had shrunk or expanded by two thirds, what would you do?

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On Wednesday, I attended a presentation by Jessica Cohen on her doctoral research experiment (co-authored with Pascaline Dupas) about distribution schemes for anti-malarial long-lasting bednets. The randomized experiment, conducted in rural, western Kenya, aimed to test the difference between free distribution and cost-sharing schemes in terms of their direct impact on malaria prevention in pregnant women and their infants. A draft of their paper is available through the Brookings Institution.

In the past, I have been an advocate for the continued use of social marketing (cost-sharing) and for profit-based BoP business models to produce and distribute insecticide treated nets (ITNs). Because of this history, I was a little apprehensive about what Cohen's presentation would reveal. After all, the report's summary stated clearly that the experiment produced "no evidence that cost-sharing reduces wastage on those that will not use the product: women who received free ITNs [insecticide-treated nets] are not less likely to use them than those who paid subsidized positive prices."

It turns out, though, that the real conclusion of the experiment in no way supports any blanket claims, such as those made to the New York Times by Dr. Arata Kochi, Director of the WHO's malaria program: "Virtually the only way to get the nets to poor people is to hand out millions free." Instead, the study arrives at this cautious and tempered conclusion: free distribution of bednets is not the way but also a way, in some cases, for lowering malaria rates in a cost-effective manner.

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Guest blogger Bill Kramer is principal of The Global Challenge Network, LLC, an executive education and training company. From 2001 through mid-2007, he worked on pro-poor business strategies with WRI. Previously, Bill founded a non-profit focusing on the relationship of knowledge to economic development and enjoyed a long career in the private sector, founding a dozen companies, most of which were in the book business.

By Bill Kramer

Last week’s Wall Street Journal story about ICICI Bank's micro-finance loan collection tactics and the Business Week article last month about Mexico's Banco Azteca (and the interesting follow-on posts) raise a series of complex issues around doing business at the BoP. These questions have been present from the movement's early days, but are taking on new currency as BoP markets mature. Finance and information technology, in particular, are recognized as lucrative opportunities, and BoP-targeted enterprises grow up, rapidly. The debates around microfinance interest rates (cap or not) and business practices (Are banks conning borrowers? Are borrowers getting in over their heads?) have raged since the inception of the modern microfinance industry by NGOs more than 20 years ago.

Nobody will, or should, condone thuggish tactics in debt collection. It's a problem across the income spectrum (banks do play hardball with the non-BoP, too; I speak from 30 years of entrepreneurial business experience). The current flaps will, I hope, serve to establish higher standards for business at the BOP, something WRI called for back in 2004, and which Cornell's BoP protocol effort continues to push.

Debtors at all levels can get in over their heads; the impacts on the BoP of such mistakes are, of course, perhaps more profound and damaging. The appropriate responses are not to limit access, but to provide much more financial education, incentives for good business practices, and swift and sure punishment for illegal or unethical practices.

These stories help me clarify my own thinking on ethics at the BoP. (For another examination of BoP business ethics, do read Nitin Rao’s excellent post, Does BoP Success Require the Moral Imperative?) Looking at multiple cases from different industries, I have identified four major aspects of BoP business ethics:

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Position: Managing Director, Sustainable Supply Chain Management Center

Location: Eugene, Oregon

Organization: Lundquist College of Business, University of Oregon

Job Description: The Sustainable Supply Chain Management (SSCM) Center will be a cornerstone of the Lundquist College of Business’s strategic objective of becoming internationally renowned in selected focus areas. The Center can achieve this mission by promoting goals that reflect our values: excellence in programmatic research focused teaching, and high-value outreach at the intersection of supply chain management and environmental stewardship.

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