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2009 was a big editorial year for those of us interested in the role of business and entrepreneurship combating poverty. Jacqueline Novogratz's The Blue Sweater, Portfolios of the Poor, Microfinance for Bankers and Investors and a 5-year anniversary revisited version of Prahalad's Fortune at the Bottom of the Pyramid are just some of the titles that came out last year and you should check out.  We'll make sure to keep adding relevant  to Grace Augustine's BoP 101 NextBillion article.

Well, this year kicked off on a high note with the come-back of David Bornstein, the author of important pieces like The Price of a Dream and How to Change The World.  I'm thrilled to share this news, as Bornstein's writing was undoubtedly a huge influence as I became interested and involved in social enterprise. His new book, Social Entrepreneurship: What Everyone Needs to Know (for which he teamed up with Susan Davis, co-founder of the Grameen Foundation) looks like a practical sequel to How to Change The World. Offering concrete examples of the challenges faced by social ventures and shedding light on the issues that make social enterprises different from traditional businesses, it looks like it will be more a reference tool and less a collection of enlightening stories. I cannot wait to get my hands on it, but will have to breathe deep and wait a couple of months before it's published.

Bornstein is not the only editorial happening in the BoP space this year. I know that several thought leaders in this space have been working hard on a piece to reflect on the evolution of the Base of the Pyramid idea. The piece will be co-authored by folks like Jacqueline Novogratz, Al Hammond, Stu Hart, Ted London and many more. So keep your eyes open and please chime into the conversation offering your thoughts and critiques here at NextBillion.   

There is no shortage of evaluation frameworks/impact assessment tools out there for the BoP space - the Best Available Charitable Option (BACO), the Progress Out of Poverty Index and the Triple Bottom Line approach; and no shortage of discussion around metrics, with several posts on Nextbillion recently (here, here, here and, most recently, here). The quest to measure the social and environmental benefits of enterprises serving the base of the pyramid continues in 2010.

Last year, I asked the question 'Why should we evaluate social enterprises?' In this post, I ask the question 'What should we try to measure?'

Some of these discussions have focused on the issue of outputs vs. outcomes, with strong arguments on both sides. Before presenting my own views, I would like to clarify the distinction between these often misunderstood concepts.

Outputs are the products and services that the enterprise delivers to its customers. Outputs are the direct result of resources and activities (such as number of products sold).

Outcomes are the changes in the socio-economic conditions of the customers and the changes in the environment that are a result of activities and outputs (such as a specific, measurable, improvement in health). Outcomes may be short term, intermediate or long term.

Outputs are certainly easier to measure, and easier to attribute to activities of an enterprise. But are they good enough? Should we strive to start measuring outcomes? Can we ever sufficiently attribute a social outcome to the activities of a social enterprise?

This discussion reminds me of my first class in Research Methods, when my professor started the class by saying 'You can't prove anything with statistics', perhaps the most important thing I've learned in research. The fact is, in the social sciences, you can never really 'prove' anything. Even using the 'gold standard' of evaluation design - randomized control trials (PDF link), it is simply impossible to completely attribute an outcome to a particular set of activities or outputs.

Digging a little deeper into the question of causal inference (PDF link) or how to prove that a particular activity and/or output X causes an outcome Y, we need to confirm 3 conditions.

• 1. Temporal Order: We must confirm that X occurs before Y
• 2. Observed Covariance: As X changes, so does Y. For example, when we sell more pesticide treated bed nets in a region, and we observe a lower incidence of malaria in the same region.
• 3. No Rival Explanations: There are no other potential explanations for the change in Y, other than X. Assuming the first two conditions are met, if we can be absolutely sure that nothing else could have caused the change in Y, we can be sure that X caused Y.

Condition 3 is where most theories break down, since it is impossible to completely rule out all rival explanations for a particular outcome.

The important thing to remember is that enterprises usually have control over the outputs they produce, through their activities (such as the number of products sold, or the number of employees hired). However, outcomes are usually also affected by a number of external factors, over which the enterprise may have little or no control (such as the weather, macroeconomic conditions, usage patterns or the political situation).

And this is the root of the problem of establishing causality. It is easy enough to count the number of products a company produces, but how do we assess the social or environmental outcomes of the product? There are potentially dozens of rival explanations for an outcome like reduced incidence of malaria in a region, so how can we conclusively attribute it to the sale of the bed nets?

We can't definitively prove it. Development economics has been struggling with the issue of causality for decades and no one has a foolproof solution. However, there is a vast amount of literature that tries to address the issue in program evaluation through logic models, research design and statistical methods to rule out and control for rival explanations. By controlling for external variables, and carefully mapping the various factors that affect short term, intermediate term, and long term outcomes, we can begin to get a fairly good idea of how a particular activity or product contributes to an outcome. There are no certainties in this field; it's all about 'getting to maybe'. Shadish, Cook and Campbell's book 'Experimental and Quasi-Experimental Designs for Generalized Causal Inference' is probably the most comprehensive compilation of these methods, but other excellent books to learn more are 'Outcome Based Evaluation' and 'Utilization-Focused Evaluation'.

Let's remember that this is not the first time people are struggling with issues like this. Many traditional non-profit programs and social enterprises ultimately aim to deliver similar social and environmental outcomes. An enterprise selling fuel efficient cookstoves wants to achieve the same social and environmental outcomes as a non-profit program distributing them for free. Frameworks, methodologies and indicators have already been developed to evaluate these outcomes. We need to study what has been done, see what we can learn, and adapt it for our purposes. The methods are not perfect, but they do exist, and are constantly improving.

A common refrain we hear is 'what gets measured, gets done' and organizations often want to just start measuring something. However, if you measure the wrong thing, you're likely to do the wrong thing. The BoP field is still at a nascent stage, and of course many enterprises and intermediary organizations lack the capacity to track long term outcomes. But as Kevin Starr of Mulago (PDF Link) asked in this debate, "Why would you fund something that you don't think causes outcomes?". Ultimately, we're trying to achieve outcomes, so let's think about measuring them.

Around this time last year, Rob and I got on the phone to discuss the trends that would shape the Base of the Pyramid/ social enterprise space in 2009. We quickly came to consensus: "2009 will be the year of ANDE". We saw great importance in having an organization that would bring more coherence and coordination to the until-then (and still, pretty much) chaotic and uncoordinated work of the numerous organizations supporting entrepreneurship in emerging markets.

There's no doubt that ANDE was a crucial player in 2009. In fact, it's hard to believe they have only been around for a year. After building a membership base that represents the spectrum of organizations in this space (both with local and global presence) and successfully launching initiatives like the Capacity Development Fund, ANDE will continue to be a central player in the industry during 2010 as it facilitates more coordination and launches new services for its members. NextBillion will continue to report on the evolution of this organization and the industry as a whole.

What about 2010? Which will be the defining trends in the new year? Here's my bet for three themes I think we'll be hearing more and more often.

1. Impact and metrics. 2009 saw many interesting discussions around the issue of metrics for the non-financial impacts of social enterprises in the developing world. From Ted London's piece on the Harvard Business Review touched on this issue, as did numerous panels and lectures that covered the BoP in 2009. I particularly enjoyed reminding myself of why it's important to measure, reading a piece by NextBillion's Saurabh Lall.

Well, there's reason to believe that impact and metrics will continue to be a hot topic in 2010, only with a small caveat: We might actually go from discussing metrics in the abstract to seeing them at work, in the real world. I know this after several conversations on this topic with my colleague Kelly McCarthy, who has been doing important work in the realm of environmental metrics and will soon share some of her findings with the NextBillion community. What's more, the PULSE platform that Acumen Fund and Google developed will become a resource for the whole sector, and standards like IRIS will be released and piloted by many enterprises around the globe. Exciting times... I can't wait to see what comes out of all this.

Impact and measurement talk has also been hot among development economists. MIT's Esther Duflo, a strong proponent of randomized evaluation trials, was named a McArthur genius in 2009; she presented at Pop!Tech and her work was featured at outlets like Fast Company, to name just one. Some of her findings touched on issues relevant to the BoP space, which were highlighted by Paul Hudnut and later again here in NextBillion. The debate is still alive and I was lucky to receive a copy of What Works on Development? Thinking Big vs. Thinking Small, published by the Brookings institution and edited by Bill Easterly and Sarah Cohen. It is a must-read to anyone interested in the grey areas that exist between growth-based development economics (the macro view) and the micro view that is represented by randomized control trials.

I may write a lengthier piece about the book later this month, but while I read it over the holiday I couldn't help thinking where, if at all, metrics and evaluations discussions like those in IRIS, etc. fit in this debate raised by the book. Granted, our industry and the discussion of a forum like NextBillion focuses on the role of enterprise; however, the end goal of these enterprises is the same as that of the programs evaluated and discussed by development economists in the Brookings publication.

2. Base of the Pyramid from within large corporations? A recent conversation that I had makes me think that we'll be seeing more and more corporate leaders embracing the idea of social enterprise and building initiatives inside large corporations, the way Justin DeKoszmovszky has done at SC Johnson, for example.

My conversation took place in late December at the Headquarters of MetLife, which look on to Bryant Park in New York City. It was with one of the organization's Vicepresidents, Felipe Botero, who is leading an initiative inside MetLife to develop insurance products for the base of the pyramid. Felipe is also one of the participants of the recently-created First Movers Fellowship, of the Aspen Institute. Recipients of the First Movers Fellowships are all promising leaders that work for organization with scale and reach large enough to enact significant change through their decisions. NextBillion ally Jocelyn Wyatt, a BoP champion inside a remarkably influential organization like IDEO, is also part of the First Movers cohort.

I'm fascinated by leadership development programs of this kind. In fact, it is another topic in my list to explore early in 2010, motivated by an excellent series on "cohorts" produced by Acumen Fund in 2009, as well as by the numerous fellowships available in this space, including the Global Social Benefit Incubator, the Unreasonable Institute and the Rainer Arnhold Fellows program.

Expect more on the topic of leadership development and its link to the BoP idea. For now, Kudos to Aspen Institute for targeting the seeds that can help this movement grow from within larger organizations.

3. Replication: Exporting social enterprise. Community scale water treatment has scaled and become a profitable industry in India. Can the model be exported to other countries with similarly acute needs? This question can be applied to many social enterprise models that work in some places and are not yet in many others where their services are badly needed.

The whys-and-hows of social enterprise replication is one issue I suspect we'll be hearing about more in the year to come. Luckily, the Ayllu Initiative will be working hard on the same question throughout 2010 and we'll be following their work closely as they make progress testing the concept in Brazil. Maria Blair said it loud and clear last Summer during the Future Trends Forum of the Bankinter Foundation: "We're not funding yet another water filter. Rather, we're interested in ideas and models that help existing and working filters scale globally".            

What do you think? Would you add any missing trend to the psospects of the BoP industry in 2010? We'd love to hear from them

New Ventures (NV), an initiative of the World Resources Institute and a sponsor to NextBillion.net, is looking for help from a dynamic team of MBA students interested in exploring the connection between corporate supply chains and SMEs in emerging markets.

NV has realized that not all the companies it works with are looking for investment or are at the right stage to receive investment from venture funds. In stead, a fair portion of companies are looking to expand into new markets and obtain contracts from international buyers. In the past, NV has provided support to these companies in an ad hoc manner, which has translated into high transaction costs and limited impact. New Ventures would like to develop and implement a south-north linkage strategy (NV companies becoming green suppliers for international or US-based buyers) that will lower transaction costs while serving a greater number of companies.

New Ventures is looking for an MBA team in the winter/spring semester to develop an implementation strategy that helps NV companies in the green consumers products industry engage with international buyers.

If you're interested in this opportunity to take action, read more about the project and respond before the deadline in late January.

New_Ventures_Supply_Chain_Project_Proposal.pdf

The NextBillion team will be taking a break in observance of the holiday weekend that starts today. We'll be back next week with a round up and some retrospective thoughts of what 2009 meant for the Base of the Pyramid movement and what could be expected in 2010.

On a separate note, regular readers may have noticed a strange behaviour in our blog comments field, which has been hit unusually often by savvy spammers the last few weeks. We regret this circumstance and are working on a solution. Our committment is to make NextBillion a dynamic, thoughtful and spam free discussion forum.

With gratitude,

The NextBillion.net team

This question gets asked a lot. For the Indian social enterprise LabourNet, the answer is both. While the necessary development efforts implied by this answer are dynamic, organizations often focus on only the entrepreneurial or wage earning aspect. This is fine, so long as they work in balance with other complimentary programs, but this isn't always what we see. The overwhelming prevalence of microfinance in Bangladesh is probably one of the best examples.

I had the chance to sit down with the management at LabourNet in their Bangalore headquarters to learn about their perspective and model. Rajesh Joseph, LabourNet's Manager of Strategy and Research, explained that from LabourNet's point of view, the poor are much like you and me: "Starting a business is an entrepreneurial skill. Not everybody [has] it. If somebody gives me money and tells me, 'Start your own LabourNet', I won't do it because I don't have it. I will work for somebody first. And I might do it after a period of time, but the condition has to create it for me, or I simply don't have it in myself." Instead, Rajesh says that if you want to be a wage earner, LabourNet can equip you with the tools you need. If you want to be an entrepreneur, that's great - LabourNet wants to train you up.

LabourNet is applying this idea to try to legitimize and empower the 40+ million informal urban workers who comprise India's economy. Urban informal workers - who are only becoming more common in India's cities as rural-urban migration intensifies - generally struggle to find consistent work, lack any type of insurance, and are unable to save, which precludes the crucial process of wealth accumulation. LabourNet has positioned itself as an orchestrator between labor and clients. Using a computer database and an SMS platform, LabourNet is able to match appropriate laborers to its clients. It offers a simplified and reliable labor solution to clients like a construction company building a supermarket or a family in need of a maid, while at the same time providing job security to the workers. And it's not just a middleman. It provides social services such as a bank account, health insurance, ongoing training, and even childcare for the many women using LabourNet's services. Any profits are plowed back into worker welfare and scaling up the organization.

Where does the entrepreneur dynamic factor in? As workers move up the ladder from unskilled to skilled labor, LabourNet allows them to stay in their roles as wage earners or try their luck at entrepreneurship (they can even leave LabourNet if they want). Says LabourNet founder and Ashoka Fellow J.P. Solomon, "We want to move into an area where entrepreneurs can come and build businesses on top of LabourNet, so [that if] they have a business that requires a lot of labor...they can build their virtual labor source from here and we can also specialize training according to what the customer needs." Their move out of the system allows LabourNet to focus on the next batch of unskilled workers. Herein lies their biggest problem, which refreshingly, they were quick to admit. They want to market their workers as the ones who can do the best job, but LabourNet's best workers aren't the ones who need the help the most - it's the newbies in the system.

Thus, for LabourNet, the distinction of the poor as entrepreneurs or wage earners is more a chicken-and-egg question than an either-or question. Effective development on the one hand means creating a support network for those who are more risk averse, unwilling, or just want to earn enough money so they can go back to their villages. On the other hand it means adding the capacity building that microfinance organizations are often accused of overlooking for those ready and willing to make the plunge as an entrepreneur. This generally implies some sort of training and working as a wage earner before becoming an entrepreneur.

Why is all this important? Because if we don't try to identify those with the right guts and then arm them with the necessary training and education, we should have reasonable expectations for what they will create: probably one-person businesses. But if we can create this entrepreneurial environment, then those entrepreneurs may be on the way to generating not only employment for themselves, but also for scores of those wage earners.

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. An emerging program at SCU is getting more and more press every year: the Global Social Benefit Incubator or GSBI. Next year, 20 organizations will be selected for a full scholarship, valued at US $25,000, to participate in 4-months of online preparation and then to attend the intensive two week in-residence program (to be held August 15-28, 2010).

The GSBI, under the guidance of Professor James L. Koch, selects 15-20 enterprises from developing countries and provides a 4-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 2010 class of entrepreneurs will open over at Social Edge on January 4 and are due by Friday, January 15.

GSBI alumnae include Matt Flannery, Graham Macmillan, Amit Jain, Rajendra Joshi and many more. NextBillion's Francisco Noguera and Allen Hammond have both been GSBI mentors in past years, and Francisco has reported extensively here on NextBillion about the mentoring sessions and the entrepreneurs themselves.

This year, GSBI will bring a cohort of entrepreneurs focusing on demonstrated solutions for solving the problem of lack of access to clean, reliable, low-cost energy sources, including: off-grid power and light; locally-produced and distributed second-generation bio-fuels; affordable energy-saving devices, such as efficient cook-stoves and more efficient, less-polluting transport vehicles.

Good luck and don't forget - applications are due January 15!

There is big excitement and delight in studying businesses targeting the "Base of the Pyramid". Still, while thousands of researchers spend their time in dusty academic offices thinking how traditional business can be best run, the number of researchers probing their skills of inquiry, analysis and theory building in this field is rather small. Does the lack of acceptance for new topics in mainstream academia, or the challenging conditions for gathering data in developing economies hold the field back?

To explore these issues, fifteen PhD students and recent PhD graduates that target the "next billion" as a research challenge gathered for the one-week oikos UNDP Young Scholars Development Academy 2009 in Kaubad, Switzerland from the 6^th to the 11^th of December, 2009. They were brought together by the oikos Foundation and UNDP's Growing Inclusive Markets initiative to discuss the state of their research and avenues to move forward. The Mercator Foundation Switzerland also sponsored the event.

As they key part of the academy, participants presented study proposals and first research results that were extensively discussed. Examples include

• Kevin McKague, from the Schulich School of Business in Canada, who explores the "dominant logics" in developing and developed markets, by taking a look at interactions in value chains. Similarly, Myrtille Danse, from the Rotterdam School of Management, explores how business can become "locally embedded" to link up with entrepreneurs in poor environments.
• Markus Taussig from the Harvard Business School, asks how equity investors in developing countries shall specialise in industries and countries - or build a broad portfolio
• Sourav Mukherji, from the IIM Bangalore, explores how health care can best be delivered to the poor - making it not only available, but also accessible and affordable.

Other participants focused on corporate strategies to reach the BoP (François Perrot, Misagh Tasavori, Paula Linna and Martin Herrndorf), entrepreneurship (Sulaman Hafeez Siddiqui, Ulf Richter, Sacha Lawrence, Tobias Lorenz), cross-sectoral partnerships (Jacob Ravn) or evaluation (Saurabh Lall).

Four faculty members attended the event to provide feedback and engage in discussions. Both anthropologist and business school professor, Ana Maria Peredo provided insights based on her extensive work with local cooperatives and community-based enterprises across developing countries. Jonathan Doh, a professor in international business, provided input on how to anchor new and innovative research in classic theory and research. Ashok Som, teaching international business at the ESSEC in Paris, provided his insights into cross-cultural international business research. And Murdith McLean, a philosophy professor with broad interest in development theorising and research, helped the participants dive deeper into the assumptions underlying their research.

Notable was the broad range of experiences of the participants. Some have spent years living and working in developing countries. Even today, few are "pure academics" - but involved in BoP through working with leading players like New Ventures, being employed by large private companies or by starting up their own initiatives. While being heavily involved with your research topic can lead to hands-on experience, participants also critically discussed conflicting roles and expectations, and how to deal with them.

Academics like CK Prahalad or Stuart Hart have played leading roles in stimulating the "BoP Movement" - which role can the next academic generation play to push the sector forward? oikos and UNDP are looking forward to run a joint young scholars academy in 2010. A Call for Paper will be revealed on NextBillion, so stay tuned!

My friend Joanna Harries recently wrapped up a yearlong stint as an Acumen Fund Fellow.  Prior to Acumen Fund, Joanna was a Brand Manager at Unilever in Toronto, where she also led community-focused projects.  She has a MBA and is frankly one of those people who makes you wonder how one person can be knowledgable in so many arenas.

I think I may be starting to figure it out: Joanna is a great listener.  She seeks out interesting people and asks them probing questions, listening and capturing fantastic insights.  Having seen Joanna in action while working for Dial 1298 for Ambulance - where she conducted surveys of low-income customers, among other things - this is no surprise.

Her expertise is not limited to low-income customers, however.  While at Dial 1298 for Ambulance, Joanna managed to author a three-part series on "Women in Social Enterprise" while on assignment for Beyond Profit Magazine.  As I reviewed the series, I realized that I would be remiss if I didn't post the blog pieces up on NextBillion as well.

• Part One is an interview with Chetna Gala Sinha, Founder of Mann Deshi Bank.  Mann Deshi was the first in India to lend to rural women; it now boasts more than 120,000 clients.
• Part Two is an interview with Pooja Warier, Co-Founder of UnLtd India, which provides seed funding, along with start-up services, to individuals with an idea or early stage social venture.  Pooja is also a founder of the Hub Mumbai.
• Part Three is an interview with Sweta Mangal, CEO of Dial 1298 for Ambulance (and Joanna's former boss).

Joanna has left Mumbai and is preparing to return to New York, where she will take a job as a Director of International Expansion at Endeavor.  But thanks to her appetite for information - and her sublime listening skills - her experiences in Mumbai will live on long after she's left India.

Much of the action covered by this blog take place in places that are far from the spotlight, both globally and in their own nations - in rural communities, the invisible poor in megacities, and more.  I wanted to highlight a few places where this work at the ground level is directly interacting with global politics and international relations:

This week the Acumen Fund blog covered their work building a community of local patient capital investors in Pakistan.  And I have heard murmurs from friends in D.C. about ideas for incorporating social innovation into the broader U.S.-Pakistan relationship.  This would be a welcome addition to Predator drones.

Meanwhile, in Afghanistan, microfinance funded by Britain is enabling individuals to leave their current employment - the Taliban.

And finally, Dubai is getting bailed out and depending on what you read, European and American expats are either ditching their cars at the airport as they leave, or getting their kids on the waitlist for the right elementary school next year.  Its migrant laborers are mostly staying put. 

As we get close the end of the year, year-in-review articles are starting to proliferate.  We just posted a Business Week article on innovation in 2009, which highlighted "trickle up" innovation - product design starting at the base of the pyramid and then being adapted to more wealthy market segments. 

The phrase "trickle up" would seem to be preferable to "reverse innovation," which showed up in another news item on Next Billion recently and provoked the ire of Gunjan Bagla on his blog.   However in terms of accurately describing geographic reality as well as illuminating how multinationals can conceive of the challenge of catering to consumers with broadly different income levels, I have to go with polycentric innovation. 

And that is the year in innovation semantics.   

Some events and opportunities this week:

The lineup for the Social Venture Capital/Social Enterprise Conference focused on Latin America, March 17-19 in Miami, Florida is now online.  This is your chance to see NextBillion's own Francisco Noguera in person, along with many others.

If you're in New York next month, on January 27 Endeavor will be hosting an informal event at their office highlighting some of its high-impact entrepreneurs from around the world.  RSVP's are required. I know Endeavor to be a great organization for helping people with business skills put them to use in this sector through its placements with its entrepreneurs' companies, so if you're looking to break into this kind of work this might be a great opportunity.

And in case you missed them, on our Take Action and Jobs pages, we've added links to LeapFrog Investments' Global Fellowship and to the Deshpande Foundation's Sandbox Fellowship. You have until January 4 for the latter and January 15 for the former.