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Our Staff Writers and Editors offer insights on the latest news, events, interviews and other happenings from the development through enterprise and base of the pyramid universes

The Role of Intrapreneurs in Building Base of the Pyramid Markets

To date, the track record of strategic, sustainable and successful engagement in BoP markets from corporations is extremely weak. Although companies such as SC Johnson, Dupont/Solae, and Danone have penetrated BoP markets with products and services that arguably make the poor better off, the list of successful corporate BoP projects remains quite short. In 2010, NextBillion readers will be looking for more companies with major product development and R&D budgets, proven marketing abilities, and pools of enterprise-savvy talent to lead social and economic development at the BoP.

Certainly, some successes in this area will originate in the top tiers of management, but one of the most powerful forces for progress and innovation in corporate BoP engagement may come from further down the corporate ladder. Those who will lead much of this change are "social intrapreneurs", employees who develop and implement solutions that both benefit their companies and create positive social and environmental impact. They challenge the status quo and apply the principles of social entrepreneurship inside their organizations.

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Weekly Roundup: BOP Ubiquity

One of my roles as Editor is to scan the news for articles of note to a readership interested in base of the pyramid development.  I wish I could say this involved reading a huge number of newspapers from around the world every morning but it actually takes the form of a number of Google alerts on some key phrases so that we can highlight stories that specifically reference market-oriented development approaches.  

But my job is getting harder - because "base of the pyramid" is becoming the general phrase used not only by a select number of people referring specifically to market-oriented development strategies, but as a figure of speech to refer to the poor broadly, particularly in India.  An example is midway through this article.  It's a much better descriptor than "low income" - and though it makes scanning the news for stories directly relevant to Next Billion that much harder, it is great to see this construction become popularized because of how much more powerful of a concept it is.  I am constantly reminded of the title of Ela Bhatt's book, We are Poor but So Many.

New Reports 

I wanted to highlight two reports that should be appearing soon in our Research section - Dalberg's Franchising in Frontier Markets report done with the John Templeton Foundation and the IFC, and Oxfam's new Poverty Footprint report intending to help businesses understand the full impact they are making on poverty and development in their supply chain, products, and more.

The Dalberg Report starts with analysis of well-known multinational brands that grow through franchising, and examines how such a strategy can be relevant at the base of the pyramid: 

"Franchising addresses the challenge of large distances between outlets and the need for local adaptation in frontier markets. The lack of market density makes franchising an interesting strategy for growth in frontier markets." 

The report includes case studies of SPOT City Taxis and Visionspring in addition to in-depth analysis of how both traditional and micro-franchising has emerged in select emerging markets.  

Around the Web

The recent launch of Kopernik intends to fill a crucial missing gap between technology creators and the intended customers at the base of the pyramid - or more accurately, between product distribution companies and technologies that may be deployed in one place but are relevant elsewhere.  I am curious to see how well the web format works in reaching such product distributors.  

I saw a brief but informative post with great links on the blog of the Foundation for Youth Social Enterepeneurship on innovations in transportation in South and Southeast Asia - that is, in rickshaws.

As part of our continued focus on Haiti, I also wanted to highlight a post on the World Bank's PSD Blog on private education in Haiti, which is incredibly prevalent, and examines the reasons for this.

Finally, a movie is coming out of Hollywood that is even more radical than Avatar in its subtle message - one that I think is very relevant to base of the pyramid development space.  It has also been causing a similarly intense reaction among audiences who are emotionally struck by its subject matter. You can see the trailer here.

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Does it Make Sense to Analyze BoP Firms from an Industry Lens?

This post tries to correct a missed opportunity in the BoP space: the analysis and categorization of firms in low-income markets from an industry basis. From a sociological standpoint, when we categorize firms as belonging to a specific industry we do it to make better sense of the diversity of firms in the real world. When we lump things together we carve “islands of meaning” (Zerubavel, 1996) that, in spite of not being logical, are useful to analyze and understand the reality that surrounds us.

These “islands of meaning” come at the cost of simplifying reality and can result in biased judgments of a firm working in more than one industry. For instance, it has been shown that security analysts regularly penalize in their valuations those firms which straddle industry boundaries (Zuckerman, 2000).  Such penalization is independent of the firm economic performance or its strategy. It arises because straddling or diversified firms are more difficult to analyze and understand since they do not conform to this ready-made categorization. I believe we often make the same mistake in BoP markets and that this mistake is more serious than in developed markets.

To see why this is a mistake, forget for a second that a firm may belong to a particular industry. Consider instead that, first, at the firm level, many of the most successful business models in low-income markets (from economic and social perspectives) are hybrids and hence straddle different industries. Therefore, by focusing on developing business models that may squarely fit on one industry we are decreasing our chances of maximizing our impact in these markets. The best-known case of hybrid business models is probably mobile phone banking, although important developments have made in health services offered through IT platforms and multi-product selling using the same commercial platform to take advantage of the platform’s capillarity and information.

Second, at the household level, potential consumers are extremely cash constrained. It is generally argued that as a result, if a customer increases her purchases in one product, she will have to decrease expenditures on other products. However, what is usually overlooked is that the purchase and consumption of a good can in fact result in additional expenditures one other types of goods which are traditionally within the scope of other industries. This positive domino effect has been shown in, for example, households buying mobile phones and as a result increasing their expenditures on other basic goods thanks to better information access (Jensen, 2007).

By approaching low-income firms using our “industry-glasses”, we become blind to a portion of the true potential of the private sector in developing countries. Indeed, it is likely that we are becoming blind to the most promising aspect of private sector solutions. Take, for instance, the case of utility retailers. Utility retailers are usually not especially exciting for BoP entrepreneurs or investors because of the high-fixed costs required to set up these firms. Instead, decentralized energy services are often favored, such as setting up solar panels or pedal-powered water pumps. Moreover, these solutions avoid dependence on the state and, if households are connected to the grid, they may even make some money by selling unused energy.

The problem with this analysis is that it fails to consider the relationship between utility relaters and other industries. At the firm level, using a “multi-industry” approach can result in important findings. Utility retailers have developed extensive platforms to cater to particular areas and generate potentially useful billing information about their customers. For instance, witness, the case of Codensa. After improving its energy losses and its infrastructure management, it used its customer information and its privileged access to customers to offer credits for the acquisition of electrical appliances (for more information go here). Codensa is the story of a firm that developed a hybrid business model and jumped from being an “also-ran” utility retailer in the BoP arena, to a pioneering organization that has become a classic case study in many MBA programs.

At the customer level, access to electricity has the potential to significantly affect expenditures on other goods. The immediate benefit of electrification comes through improved lighting. Additionally, lighting promotes extended hours of study, thus leading to better educational achievement. Furthermore, electrification increases the use of electronic devices such as radio and television, which improves the access to information. Crop productivity can be increased by the application of electric irrigation pumps and businesses can be operated longer hours. As a result, electrification may also lead to higher incomes and increased expenditures in other industries. In rural Vietnam electrification among poor households jumped from 77% in 2001 to over 90% in 2008. As a result, school enrollment increased 17% for boys and 15% for girls between 2002 and 2005. Moreover electricity use has increased household’s income by 7.4%. Such positive effects last for about 9.25 years after which they peter out (Khandker, Barnes, Samad and Minh, 2009). Similar results have been found in Bangladesh as well (Khandker, Barnes and Samad, 2009).

Therefore, the question of examining BoP firms through the lenses of industries is not a theoretical one – it has very practical implications. As the case of utility retailers exemplifies, if we fail to consider firms straddling industry boundaries we become blind to the economic and social potential of hybrid business models. This is especially important in low-income markets, as the case for mobile phone banking or IT health care has shown. In other words, it means that we may not be doing as well as we could by focusing on firms from an industry perspective.

Unfortunately, if we discard the industry categorization we require something else to substitute it and this is easier said than done. Which set of categories should we use to comprehend and analyze the BoP space? Would it be more useful to take a generalist approach and concentrate on a particular region or a population segment (women, children or disadvantaged groups)? Would it be more interesting to not abandon the industry nomenclature altogether and take the middle ground by focusing on clusters or binomies of industries? These clusters could involve industries with significant potential for hybrid solution, such as finance + mobile phones or IT services + health.

Take, for instance, the myriad of social investors or foundations in the BoP arena that focus on just one or two industries. Could their impact be increased by going beyond their industry classification and analysis of BoP firms? Would social investors or foundations specializing in one industry increase their economic and social impact if they adopted an alternative approach and, if so, which one? Would business model competitions stimulate more insightful entries if they did not restrict competitors to a particular industry? Although I suspect that there may not be any satisfactory solution to these questions, by breaking through the constraints of our current industry categorization, I am hopeful that we may be in track to at least increasing the power and applicability of private sector solutions in low-income markets.

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At the Dawn of Japanese BoP Business

I am a BoP researcher based in London, with experience as a SRI analyst in the Tokyo stock market, researching business development in emerging / developing countries. I had a good chance to post here (thanks to Duncan Duke and Rob Katz) and introduce what is happening in Japan, as most of Japanese BoP movements are written in Japanese and will never be disclosed to the world without any will of opening information.

While I spent years and years researching BoP related business, there had been a lot of small changes in Japanese business and aid society, but last year, 2009, was totally different. It was surprising that BoP related seminars and meetings have been held almost every 2 weeks in Tokyo or somewhere else, although only few knew the word of "BoP" a year ago.

2009 was the year of a "Social Business" big boom, as domestic social business individual entrepreneurs are featured in many contexts by media and also by governmental policy makers.  These include Mr. Komazaki from Florence (English URL: http://www.florence.or.jp/english/index.html ), who is helping working mothers with care of sick children; Ms. Murata from Kamonohashi project (English URL: http://www.kamonohashi-project.net/english/ ), who is tackling with child labor in sex industries in Cambodia; and Ms. Yamaguchi from Motherhouse (http://www.mother-house.jp/en/ ), who has a high end handicrafts business operating in Bangladesh. Like anywhere else in the developed world, social business had been a hot issue during last year amongst young generation, and many related conference and students' meetings (such as in Keio University) were held.

(ex. Skoll centre Keio Symposium: http://skollforum.jp/en/index.html , Social Venture Partners Tokyo: http://www.sv-tokyo.org/ , Social Innovation Japan: http://www.socialinnovationjapan.org/c000011/ )

And 2009 was the big dawn of "BoP business" for Japan. Especially soon after the Ministry of Economic, Trade and Industry (METI) invited tenders for feasibility studies in developing countries for BoP related business, the media and private enterprises began to look at this as a new kind of business, just after suffering from credit crisis and the big depression in developed countries' market. This is because the budget of METI for this project was relatively huge, 2.8 million dollars (280 mil JPY) in total.

The METI had been researching BoP related business in the contexts of PPP (Public Private Partnerships) for a few years, and in September 2009, 10 companies were selected to conduct feasibility studies. This scheme is similar to the USAID or UNDP model.

(The result of selection is here available in Japanese: http://www.nri.co.jp/opinion/r_report/meti/090911_kekka.pdf)

Some are the projects that will be undertaken include:

  • Ajinomoto (Food industry) will explore nutrition improvement business targeting BoP in Ghana, based on their strength of amino acid technology. (http://www.ajinomoto.com/csr/achievement2/index.html )
  • Sanyo (Electronics) will collaborate together with Gaia Initiative (Japanese NGO) on a solar lantern business targeting rural India, based on their strength of solar panel production. (http://www.gaiainitiative.org/en/ )
  • Sumitomo Chemical (Chemical) is already famous in BoP circles for their work with Exxon Mobil, PSI, and Acumen Fund, who have collaborated to help start a company in Tanzania that manufactures long-lasting insecticide treated bed nets. Sumitomo will pursue a new business line, tackling tropical infectious diseases in Kenya. (The press release related to their product "Olyset® net" : http://www.sumitomo-chem.co.jp/english/gnews/news_pdf/20090721_1.pdf )
  • Sony (Electronics) is researching a business in rural India for decentralized power generation based on a battery storage system. (Sony's activities in Ghana: http://www.sony.co.jp/SonyInfo/News/Press/200907/09-0717/  only in Japanese)
  • Termo (Healthcare Electronics) is working on a business in blood packaging for blood transfusion, which may be used in Zambia, Tanzania, and Mozambique. (http://www.terumo.co.jp/English/ )
  • Toyota Tsusho (Wholesale & Trading) will collaborate with Planet Finance (Microfinance NGO) to produce and sell bio-diesel energy generation systems for plants like Jatropha in Kenya and Uganda.
  • Nipro (Healthcare Electronics) is working on a diagnosis kit for tuberculosis in South East Asia.
  • Hitachi (Electronics) targets rural Indonesia with their solar power generation products.
  • Yamaha (Motors and Electronics) had received recognition for their GSB project, and they continue to work on building the business eco-system around a decentralized water purification facility. (http://www.yamaha-motor.co.jp/global/area-marketing/csr/clean-water-project/index.html  and only in Japanese, their ambitious entrepreneurship can be read here: http://www.yamaha-motor.co.jp/profile/craftsmanship/technical/publish/no41/pdf/ts_06.pdf )
  • Japan Poly-Glu is a relatively small to medium sized company in Osaka, whose strength is in purification technology. They have already spread their business selling arsenic removal purification products in Thailand, Mexico, and many developing countries, with a lot of help from volunteers and NGOs. They will scale up to more countries with this project, together with Poly-Glu Techno Japan, Yukawa Iron Casting Works Co, Ltd. (Japan Poly-Glu CEO Mr. Oda's comment here in Japanese: http://www.poly-glu.com/pdf/BoP20090915.pdf )

Most of the selected are big multinational entities, in very early stages of feasibility study, but some of them such as Japan Poly-Glu or Sumitomo Chemical are in the stage of improvement and scaling up. The feasibility study survey is now being conducted from through December 2009.

There also seems to be some parallel surveys on 5 issues (Healthcare, Nutrition, Education, Agriculture & Timber, Energy) simultaneously held by METI with JETRO (Japan External Trade Organization) in worldwide perspectives.

We can see here that the business sector is quite keen on entering the BoP market, and most of the aid agencies have taken considerable steps. This will impact Japan BoP related issues, as many of them seek a new target of consumers with "doing good business" products.

As a starting point, this may be enough at this time, but in my opinion, these businesses must go beyond their own hands and consider giving some ownership to the community itself in longer term, or at least ensure the value created from the business will be shared among those who engaged in the projects. It is not "trading" the benefit of good product; it has to be "co-creating" the benefit locally.

And there is also an interesting case happening with Japanese SMEs. They might have potential to bring huge impact on poverty issues, but it is quite hard to find leadership.  An exception is Mr. Oda at Japan Poly-Glue, who fuses passion and business mind together.

Like other MNCs worldwide, most of the intrapreneurs working inside Japanese MNCs who are eager to get involved in "Business that matters to the poor" are now struggling a lot because they cannot be adequately recognized in their own organizations and by CEOs. In-house support is greatly needed to push forward their idea to get more involved with community development and poverty alleviation with their possible product and service, but they spend most of time explaining to CEOs and stakeholders the social business benefits and mission, and another way of thinking about profitability.

But in 2010, this should change. Some authorities, including METI, JETRO, and JICA (Japan International Corporation Agency) have plans to support BoP projects, and UNDP's Growing Inclusive Markets initiative in Tokyo will be a big influence to CEOs. Recognition from outside will be a good help for intrapreneurs.

JICA had announced in their public seminar last week that they will support MNCs or SMEs to work with local NGOs or SHGs and build up the sustainable business model within the community. They are providing 50 million yen at maximum for each projects in the early stage, with longer-term commitment for 3 years. This promotion policy will stimulate Japanese companies to apply their skills and technologies to social business in developing countries.

Apart from the side of policies, a bottom-up approach by individuals across various organizations and companies is also happening, from my own view. There will be soon some broad BoP networks among individuals, and those will connect to the rural/urban poor community to kick start their ideas and businesses.

Actually, we had launched the networking website in ning.com, at the beginning of January 2010. It's only in Japanese language but anyone can sign up.

Please visit here: http://boplabjp.ning.com

For launching, we had a casual meeting together with BoP related individual entrepreneurs, working very actively in Japan. Our guests were: Mr. Ashir Ahmed in Kyushu University with Grameen foundation for ICT technology development on banking card with healthcare information, Mr. Kanehira, working as a McKinsey consultant in his daily life, trying to connect EV car technology with Grameen foundation, Mr. Kono from Arun LLC, social investment fund for Cambodia, and so on.

2010 will be the kick-starting year for Japanese BoP related entrepreneurs, and I hope this will bring the variety of ideas and concepts understanding BoP business discussion sphere worldwide. For example, for some Japanese, education or awareness-raising means something very different when you sell a product to the community. Moreover, we feel very different about the word of "inclusive" business. I suppose those concepts originated from East Asian Chinese literature and philosophy contexts (affected by Confucianism and Buddhism) will give some hints to some point of understanding BoP community. Variety and mixtures of races and cultures who engaged in this projects will probably bring about innovative and sustainable, next generation business.

Further contact:

Shino Tsuchiya, email: tsuchiya.shino@gmail.com / JRI Europe (London)

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Photo Credit: Neil Palmer/CIAT

New Business Models for Sustainable Trading - Part 2

Editor's Note: This post is part of a recurring series exploring new business models for linking small farmers to global markets being analyzed through an international collaborative effort that can be read about here.  Read the first part here and visit CIAT's blog to learn more.

Supply chain discussions, counting sheep and drinking warm milk have been sleep aids for insomniacs everywhere for quite some time.  But before your eyes glaze over and your head hits the keyboard, consider a bigger picture:  Supply chains connect us with every person, through every product, in every corner of the globe.   How can we encourage collaboration, information sharing, resource and technology transfer to create supply chains that allow small farmers to be successful and critical participants in global food chains?

Principle 1: Chain-wide collaboration

Businesses that are shifting procurement and buying practices to include small farmers tend to recognize their participation in a comprehensive business ecosystem.  In this ecosystem, chain-wide collaboration is a key business strategy.   In agriculture, adaptation to market fluctuations in terms of quality and quantity are two broad categories perpetuating inefficiencies and profit losses.  Small farmers are least likely to cope with these shifts, often dropping out of markets completely.  Chain-wide collaboration ensures that actors can reach a common goal of both supply and price stabilization, in conjunction with greater profitability by:

-Sharing critical information:

-Maintaining transparent standards and creating greater value

-Identifying and pro-actively collaborating to solve problems

Sharing Critical Information:

Gauging accurate market demand and distributing market information is key to supply and price stability along agricultural supply chains.  Committed distributors and retailers with a pulse on supply trends can be critical to cooperatives and entities assisting small farmers to reduce risk and plan accordingly.

Cuatro Pinos is a 30 year old farming cooperative in Guatemala, established to bring jobs and economic development to seven principally indigenous communities near Saquetepequez.  Today the operation employs over 5,000 small farmers, 562 of whom are as co-owners.  Through supply chain coordination, success is directly linked to the clear communication and knowledge sharing between Cuatro Pinos and its value chain partners.

Using sales projections from its wholesaler, LA Salad , market data flows directly from US retailers to buyers in Los Angeles to the cooperative.  This information helps the cooperative create more accurate planning schedules, estimate future gaps and anticipate changes in demand.  The result is greater supply chain agility and a greater chance at supply chain and price stability.

Maintaining Transparent Standards and Creating Greater Value:

Chain-wide collaboration is essential for creating increased value and maintaining product standards.   Today, food trade companies are responding to a growing demand for greater food safety, traceability, and sustainable sourcing standards.   These standards require strict adherence all along the supply chain, which means that every actor in the chain has a vested interest in ensuring that other members follow procedure.

Certifying agencies as well, might step into a "champion" role, helping companies establish metrics and outlining best practices around which companies can rally around.   Rainforest AllianceOrganic Certification, Fair Trade and sustainability reporting (like GRI and ISEAL), are a few examples of organizations assisting companies with a long term visioning for meeting chain-wide standards for value creation through certification.  As companies use small farmer inclusion in supply chains to convey increased value to both customers and investors for social and environmental sustainability, compliance with standards and transparency will only strengthen investor and consumer perceived value.

Unilever, a global corporation with over 10,000 suppliers of raw materials and packaging, is one of the world's largest buyers of palm oil.  The extraction is notorious for perpetuating rainforest deforestation and Unilever has committed to sourcing 100% sustainably cultivated palm oil by 2015.   As founder of the Roundtable on Sustainable Palm Oil (RSPO), Unilever is collaborating with a number of NGO's, 50 private companies, international banks, and hundreds of its supplies towards the integration of these new, sustainable cultivation standards.  Coordinated chain shifts like this, offers new opportunities to better serve existing markets, the chance to enter new markets, add value, and implement innovative, sustainable processes.

Identifying and Resolving Issues:

Unforeseen environmental, social, and political events can distort production yields, complicate transport and delivery, and result in dramatic price fluctuations and volume gaps.

Mechanisms of support with a long term objective of system-wide stability can assist with managing risk effectively.  In agriculture, risk management is an inherent part of the process of food production.  Unpredictable weather, shifts in consumer demands, less than transparent application of regulations, and logistical challenges challenge leave certain actors assuming unequal levels of risk.  Often, vulnerability to these risks is most extreme at the farm level. Companies engaging in chain-wide collaboration are preserving business relationships and reducing single player exposure to risk in favor of system-wide stability.

Del Cabo, a US company specializing in organic vegetables and herbs works with multiple, independent grower groups in parts of rural Baja California.  Among other things, Del Cabo is working to reduce price shocks and supply gaps due to unexpected economic and environmental crisis experienced by farmers.  Towards this end, Del Cabo established a "rainy day fund", based on a percentage of farmer and company profits to assist growers with unforeseen issues that affect crop production.  This savings fund is extended to any member of the network experiencing an unexpected crisis.  This collaborative effort ensures that all actors on the chain continue to function, recoup losses, and maintain their place in the chain.

Building momentum towards collaboration

By sharing risk, disclosing information, and finding collaborative solutions to potential problems, companies can come together and small farmers can be successfully integrated.   Chain-wide collaboration can create product and corporate value, stabilize price and supply, and offer significant returns for social impact.   Our upcoming five posts will discuss the remaining 5 principles for smallholder inclusion, including:

  • New market linkages;
  • Fair and transparent chain governance;
  • Equitable access to services;
  • Inclusive innovation in the chain; and
  • Shared measurements and outcomes

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Rice paddies and culture

If you haven't read Outliers, or Malcom Gladwell's previous books The Tipping Point and Blink, you are missing out on some of the most insightful, entertaining and mind opening dissection of human behavior. In Outliers, Gladwell explains what makes someone extraordinary successful. The Cliff Notes version of why Bill Gates is Bill Gates is:

  • You need a minimum level of smarts, but it does not have to be an "off-the-chart" IQ.
  • You have to put at least 10,000 hours of practice into your area of talent or expertise.
  • You have to be lucky, meaning born at the right place and the right time.

The last point is what I found most fascinating. It is made of up several dynamics. When you are born is crucial. Bill Gates and Steve Jobs were born in the mid-50's, allowing them to be at the right age when information technology was in its nascent stage of development. But the "where were you born" dynamic that was most interesting was Gladwell's findings on the impact of culture.

Culture is something that most of us take for granted, unless you are in a field like sociology or anthropology.

Culture is like breathing: we have no idea how it impacts what we do. When we were developing the Classmate PC at Intel, we had folks that did ethnographic research in developing countries to understand how people living at the Bottom of the Pyramid (BoP) used or could use technology in their lives. Culture was obviously one thing that was key to understanding these behaviors. VitalWave Consulting recently posted a short article called Lost in Translation: Emerging Markets Success Hinges on Understanding Culture talking about the importance of "localized management investment."

When I did an expat assignment for Intel in China, they gave you "cultural" training in order to help us adjust to a new culture. It helped give us a deeper understand of cultural differences. What may seem weird, offensive or different on the surface often has an underlying meaning. If you understand that meaning, you can accept that difference more readily.

They used the analogy of an iceberg, with what you perceive on the surface as the tip of the iceberg. For example, my wife used to find it offensive that the Chinese would spit publicly. Growing up in America, that can come across as very impolite on the surface. But the underlying reason for the spitting is their a long-held belief that it is healthy habit to clear the respiratory passages (to put it politely) frequently.

Why are Asians so good at math?

According to Gladwell, there are two main reasons: their number-naming system, and rice paddies.

Having learned how to count in Chinese, I can tell you how much easier it is to count to a 100 in Chinese then in English. It is as logical as the decimal system. You just need to be able to memorize 1-9, 10, and 100. 11 is ten-one, 12 is ten-two, and so on. 20 is two-ten, 21 is two-ten-one, 30 is three-ten, and so on. 1-9 are also short, single syllable words, compared to their English counterparts (for example, 7 is "si" in Chinese and "seven" in English. "Si" can be pronounced in 1/3rd of a second. This system allows Chinese children to recall numbers much more quickly than American children.)

But the impact of a cultural legacy of working on rice paddies is really the underlying factor. The chapter starts with the Chinese proverb:

No one who can rise before dawn 360 days a year fails to make his family rich.

Simply put, the harder and smarter you work on a rice paddy, the greater the output. In Western agriculture, you increase output by purchasing more land, or replacing labor with technology. Growing/harvesting seasons are short, whereas rice paddies are grown/harvested for most of the year.

A peasant farmer in eighteenth-century Europe worked about twelve hundred hours per year. A peasant in Southern China worked an average of three thousand hours a year.

Gladwell summarizes the benefits of rice farming this way: the work was meaningful, complex, autonomous and exacting. He shared proverbs from peasants in Europe and China.

A Russian proverb:

If God does not bring it, the earth will not give it.

Chinese proverb:

Don't depend on heaven for food, but on your own two hands carrying the load.

You can see the connection between the cultural legacy of working on rice paddies and today's much-talked about work ethic of Asian students and workers.

But what does that have to do with math? Math is hard work, especially for those that don't have a natural talent for it. My son is currently learning 7th grade algebra. A typical problem can take many minutes to solve, sometimes with a lot of trial and error which is normal. He often gets frustrated and would give up after a few minutes if not pressed. As such, I'd argue that American students probably give up quicker than their Asian counterparts.

What about "family" culture?

Gladwell shows that the main culprit in the gap between grades and test scores of students from wealthier families versus poorer families is summer vacation. Students from low-income and high-income families have comparable scores on the California Achievement test at the beginning and end of the school year. But after summer vacation, the score gap increases significantly.

This implies that if you keep kids in schools longer, and out of the family home, you can minimize the achievement gap. They reference a charter system called the KIPP academy. Students are in school from 7:30am to 7:00pm every weekday. Saturdays they are in school 9am to 1pm. In the summer, they come in from 8am to 2pm. Any kid's nightmare, right? But the improved results are significant. For example, in 7th grade, KIPP students are doing high school algebra.

Fixing education

I have participated in many discussions on the role of technology in improving education standards in emerging markets. Gladwell has helped me realize that it may be a few other changes completely unrelated to technology that could make the biggest difference.

Closer to home, there has been much talk about reforming education in America. Thomas Friedman talks about how we are falling behind our Asian counterparts by not investing and putting a bigger focus on education. But based on Gladwell's findings, a solution to improving education and America's long-term competitivenes could be addressed by simply getting rid of summer vacations and implementing a rice paddy-like KIPP system. Unfortunately, we in the West are culturally conditioned to shorter school days and summer vacations.

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Announcing TechnoServe as a New Partner in NextBillion

We are pleased to announce that TechnoServe has agreed to join the NextBillion community as an Associate Partner.  TechnoServe joins World Resources Institute, Acumen Fund and William Davidson Institute as the site's Partners.  As an Associate Partner, TechnoServe will not be responsible for managing or funding the site, but will play a major role in developing content, editing and marketing.

TechnoServe is one of the longest-tenured members of the "base of the pyramid" community.  Founded in 1968, TechnoServe has been helping entrepreneurial men and women in poor areas of the developing world to build businesses that create income, opportunity and economic growth for their families, their communities and their countries.  Frankly, TechnoServe was part of the BoP movement before there was a named BoP movement.

With a focus on developing entrepreneurs, building businesses and industries, and improving the business environment, TechnoServe will add tremendous value to the NextBillion community through its orignal content contributions and editorial oversight.. Over the course of four decades, TechnoServe has learned what does and doesn't work.

For example, TechnoServe recently partnered with the Coca-Cola Company and the Gates Foundation to work with 50,000 fruit farmers in Uganda and Tanzania, helping them double their incomes over the next 4 years.  They are also one of the most accomplished facilitators of business plan competitions, which we have covered on NextBillion in the past.

Representing TechnoServe on NextBillion are new Staff Writers Kevin Keepper and Matt Cohen.

Please join me in welcoming TechnoServe to the NextBillion community!

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Staff Transitions: Moses Lee, Tayo Akinyemi and Phil LaRocco

I often call January the "gearing-up period", the perfect time to get your pieces in place and the toolkit prepared for the projects to come in the next 11 months. It has certainly been a gearing-up (and still is, stay tuned for more announcements that are on the way) period for NextBillion. We're excited about what seems will be a fruitful year for our site and the community around it, particularly because of the remarkable people that continue to join and contribute to this effort.  

Today I'm happy to welcome Moses Lee into NextBillion's Editorial team. Moses will join Rob, Nathan and myself in keeping the site running smoothly and moderating the conversation in it. A NextBillion veteran, Moses has contributed to the site over the last two years and is an expert with a unique perspective on the challenges around social ventures an market-based approaches to poverty. We're grateful for the support of our new Managing Partner, the William Davidson Institute and look forward to working with Moses in the months to come.

This is also an opportunity to publicly thank two members of our team who will transition out of their roles as NextBillion Staff Writers: Tayo Akinyemi and Phil LaRocco. I'm a big fan and will greatly miss their writing style, but hopefully we'll keep hearing from them in the future with a Guest Post or two about their endeavors, which will surely remain closely linked to the topics discussed here in NextBillion.

Thank you, Tayo and Phil. All our best wishes for your future projects. NextBillion is possible thanks to your ideas and contributions.       

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Weekly Roundup: Not Venture Capital - Village Capital

Better late than never for, ahem, last week's roundup.  Putting this up Monday has allowed me to include a few new items, including the release of Bill Gates' 2010 "Annual Letter".

  • Time will tell if Gates and his letters (this is the second) will become for philanthropy (philanthrocapitalism?) what Buffet and his annual letters to Berkshire Hathaway shareholders are for investors.  This is an opportunity to understand in a narrative form the thinking that goes into the work of this mega-foundation.  In Gates' words:

    "Melinda and I see our foundation's key role as investing in innovations that would not otherwise be funded.  The ones with low risk are where the innovation has been proven at a small scale and the challenge is to scale up the delivery. High-risk innovations require the invention of new tools. Some are at the frontiers of science, such as finding a new drug and running a large trial to see how well it works. Other high-risk efforts involve changing social practices, such as persuading men at risk of getting HIV to get circumcised."

    This chart gives greater insight into the Gates Foundation's thinking.

    From his emergence on Twitter to the creation of his Gates Notes blog, Gates seems to be picking up for his philanthropic work some of the things that would've helped Microsoft out a lot - being a little more open, and understanding that lasting influence that is accepted willingly comes from people understanding the intelligence of the approach that you're employing.   The conversation that results will hopefully improve the effectiveness of his foundation, as well as those of the people who are already following in his footsteps as new-style philanthropists.  
  • Two exciting incubator slates have been announced in the past weeks, both with an innovative, entrepreneur-driven investment process and backed by First Light Ventures, a sister fund to Gray Ghost Ventures.  West Coast Village Capital at The Hub in Berkeley and the Unreasonable Institute will both invest a pot of seed money among a set of ventures as chosen by their peers in their respective incubator programs, the idea being that entrepreneurs themselves are well-positioned to make these decisions. The 24 startups at West Coast Village Capital span a range of sectors but include some development-oriented companies, including a pay-as-you-go computing company for East Africa and a rainwater collection system developer. A third village capital project is in Mumbai and a fourth is in New Orleans
  • Further democratizing the process, you yourself can help choose the startups for the Unreasonable Institute in Boulder, Colorado with the Unreasonable Finalist Marketplace - 284 applicants have been narrowed to 42 phenomenally diverse, creative, unproven and certainly unreasonable finalists including startups focused on sanitation and energy in Africa, organizing informal sector workers in India, renewable energy development on Native land in the U.S., and housing in Peru, to name just a few.  25 will attend the Institute. If you think you've got good VC instincts, this is your chance to back a winner.  
  • For the second annual Opportunity Collaboration, the Cordes Foundation is offering fellowships on a global basis for organizations and individuals who could benefit from this cross-organizational "strategic off-site" in Ixtapa, Mexico, October 15-20, 2010 that fosters new collaboration across the anti-poverty sector and new relationships between funders and funded.  Crucially, the website notes that it will not include: "death by powerpoint, plenary speechifying, or theater-style seating." Apply here.
  • If you want to get further out of theater-style seating, you can also apply for the Grassroutes fellowship which sends youth on road trips to rural India, where they are mapped to various organizations, work alongside change-makers, and do their bit to drive social change.  This will be its third year.  
  • However, for some world class plenary speechifying, made even more speechified via webcast, the World Economic Forum is this week in Davos.  The agenda has been switched around to give Haiti top billing, but most of the agenda is focused on a "sustainable" recovery for the financial system.  On that note, from Microcapital.org

    "According to a recent article in Indian daily The Economic Times, Dubai's financial crisis has caused a ripple around the Arab world, "eating away at the money many Middle East families depend on, sent home from relatives who work in Persian Gulf countries." Worker wages from the Gulf account for 15 to 20 percent of the economy in countries such as Jordan, Lebanon and Egypt. Remittances to Egypt have already fallen by 25 percent over the last year, according to the article. The World Bank estimates that remittances are expected to decrease by over seven percent this year across the Middle East and North Africa. The International Monetary Fund (IMF) reported that a decline in remittances combined with a drop in trade could leave many of the poorer Arab countries slower to recover from the global financial crisis than other parts of the world."

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Tech Awards 2010: Call for Nominations

The following announcement reached our Inbox by way of our allies at Santa Clara University's Center for Science, Technology and Society:

Tech Awards 2010 Nominations

The Tech Awards, a signature program of The Tech Museum, honors innovators from around the world who are applying technology to address humanity's most urgent challenges.

In partnership with Santa Clara University's Center for Science, Technology, and Society, 15 Laureates are selected annually and $50,000 is awarded to one Laureate in each category: Environment, Economic Development, Education, Equality, and Health.

Individuals as well as nonprofit and commercial organizations are eligible. Anyone may submit a nomination. Self-nominations are accepted and encouraged.

Deadline for nominations is March 31.

Deadline for final applications is May 5.

This year's Laureates will be honored during a week of activities in Silicon Valley leading up to The Tech Awards Tenth Annual Gala on Saturday, November 6, 2010.

Nominate today.

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