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NextBillion News vol.20 January 7, 2008
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Staff Writer Transitions, BoP Success Factors and the Codensa Case
[Contents]
1. Moving on from NextBillion - Staff Writer Julia Tran Says Goodbye
2. Featured Blog Posts:
Does BoP Success Require the Moral Imperative?
Nitin Rao
How to Succeed at the BoP: Know Your Customer
Abigail Keene-Babcock
The Codensa Case: Electricity and Related Services for the BoP in Colombia
Manuel Bueno
3. Rising Ventures: Conserve HRP - From Rags to Fashion Bags
4. Featured Event: Global Social Benefit Incubator at Santa Clara University - $20,000 Scholarship
5. Jobs/Careers: Assistant Director for Social Entrepreneurship, NYU Stern School of Business
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1. Moving on from NextBillion - Staff Writer Julia Tran Says Goodbye
I'm sad to say it's time for me to sign off as a member of the NextBillion staff [0]. I remember joining World Resources Institute [1] 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 an 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.
[1]
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2. Featured Blog Posts
Does BoP Success Require the Moral Imperative?
Nitin Rao
When I first read the seminal article "Serving the World's Poor, Profitably" [2] in HBR [3], I found the direction it pointed to elusive. Instead of tugging at sympathy, the paper pointed to an exciting and fast growing market - the immense collective entrepreneurial capabilities and buying power of the world's poor. Looking back, made easy by NextBillion, I wonder how organizations are using different approaches (read - for profit and non-profit) to social innovation.
According to Prof. Reuben Abraham at the Indian School of Business, Hyderabad, the first step [3] to understanding BOP Markets is to "Forget the Moral Imperative:"
Point number one is forget the moral imperative. Let's look at the economic imperative of why this market is important. Everybody tends to emphasise the moral imperative of why economic growth needs to spread, but I think there is a strong economic imperative why growth needs to expand beyond the 15 per cent, say, in India that actually enjoy the fruits of the current economic growth. Because ultimately, if there are a billion people and only 150 million people are participating, that is not sustainable. That is not sustainable for a bunch of reasons because there will ultimately be saturation, and there will also be all sorts of political ramifications to this as there is a disconnect between aspirations of people who live in these markets and the elite in these countries. So, there is definitely an economic reason for why we should look at these markets.
The questions are: Are we doing this? And indeed, should we? After all, some organizations might pride themselves on their non-profit approach - right?
My impressions are largely influenced by my exposure to 2 organizations in the Indian education sector: Spark and the India School Fund.
Read more [3]
How to Succeed at the BoP: Know Your Customer
Abigail Keene-Babcock
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 [4], Medicine Shoppe [5], Drishtee [6], HMX Sumaya [7], Florestas [8] and Berni Labs [9] 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 [10]). 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 [11] Fellow Catherine Casey [12] in her recent blog post [13] about rural SHEF Health Clinics [14] 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?
Read more [14]
The Codensa Case: Electricity and Related Services for the BoP in Colombia
Manuel Bueno
Codensa [15] is a very successful utility company that serves 2.2 million customers in Colombia. It is controlled by Endesa [16], the largest electric utility company in Spain, which in 1997 took control of Codensa and Emgesa [17] (this second company accounts for 21% of the generated electric capacity in Colombia).
Its return over equity (that is, the rate of return over shareholders' investments) has grown from 4% in 2003 to nearly 12% in 2006. This is a measure of the current company's profitability.
Furthermore, last July, Codensa's debt offer was oversubscribed three times, despite being in Colombian pesos rather than a more stable international currency and despite the jittery markets at the time (they still are). This was a bet the market made in favor of Codensa's future stability and profitability.
Codensa caters to the Colombian BOP. According to their 2006 Annual Report [18] (in Spanish), more than 88% of their customers were households of which more than 80% belong to the socioeconomic population strata 1, 2 and 3. In value terms, households represent nearly 60% of total sales out of which 74% belong to the above mentioned strata. In both these cases, strata 2 and 3 represent the lion's share in volume and value terms.
Customer growth has averaged around 3% since 2000 with the increase in the value of energy sales rising from 1% in 2003 to 5.77% percent in 2006.
How does Codensa do it?
Read more [18]
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3. Rising Ventures: Conserve HRP
Conserve HRP [19] exemplifies new environmental trends in India's private-sector by converting trash to treasure. At the heart of this process are the 300 rag-pickers that collect the waste plastic used for the product line. Lower-income employees collect plastic rags from neighborhood streets and press the waste into a thicker, durable material, known as Handmade-Recycled Plastic, used for stylish handbags and accessories. The material can be compared to leather in quality, but produces a wider range of colors without any artificial dyes. Each different color of plastic manufactured is named after a famous Bollywood star, an idea that has led to greater communication during the production process and is an example of the innovative spirit driving Conserve HRP. By tackling the dual problems of waste and poverty, Conserve HRP holds a captive audience among those who buy "fashion with a conscience."
Read full company profile [20]
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4. Featured Event: Global Social Benefit Incubator- $20,000 Scholarship
Santa Clara University is known in social entrepreneurial circles for its work helping to organize and judge the Tech [20] Museum [20] Awards [20] - a showcase for social entrepreneurs, mostly from developing countries. Less well-known about the school is the Global [20] Social [20] Benefit Incubator [20], run by SCU's Center for Science, Technology, and Society and a host of Silicon Valley volunteers.
The GSBI [21], under the guidance of Professor J [22]im Koch [23], selects 15-20 enterprises from developing countries and provides an 8-month mentoring process. The mentoring culminates with a two-week in residence "boot camp" program (August 19 - August 31, 2008) at Santa Clara University in California, where social entrepreneurs will work with faculty and mentors, learn key business skills for managing sustainability and scalability, and complete a strategic business plan and one-year tactical plan for their organization. Applications [24] for the fully-funded 2008 class of entrepreneurs are available now at Social Edge [25].
The application process involves completing three exercises where applicants define their target market (beneficiary), value proposition, and business model. The deadline for the first piece of the application is January 22, 2008.
Read more [25]
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5. Jobs/Careers: Assistant Director for Social Entrepreneurship, NYU Stern School of Business
Location: New York, NY
Organization: Berkley Center for Entrepreneurial Studies, 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.
The selected candidate will develop and manage high-impact events and programs that enhance the Center's standing as a social entrepreneurship innovator. S/he will oversee event marketing, publicity, budgets and logistics. S/he will also oversee the Social Entrepreneurship Business Plan competition.
Read more [25]
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NextBillion News vol. 20 January 7, 2008
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Development Through Enterprise Team
World Resources Institute