NextBillion.net - Development Through Enterprise - Business Development

Taking BoP Strategies To Scale Pt 4: Building New Business DNA for the BoP

Al Hammond — Wed, 07 May 2008 14:49:52 -0500

This post is the fourth in a five part series on a radical new approach to scaling BoP business models, what we call a transformative sector strategy. In this segment, I discuss the common characteristics that make BoP business models in different sectors scalable solutions.

Searching for Transformational Models in New Sectors

If building the missing infrastructure could transform rural connectivity and health care, what about access to clean drinking water, especially for smaller rural and peri-urban communities? That's a proposition that WRI and Santa Clara University's Global Social Benefit Incubator are researching. There are some promising models in the field, such as Water Health International, that are beginning to scale. There are a number of additional enterprises, five of which will be mentored intensively in this year's incubator class. There are some promising new filtering technologies that use less energy than existing technologies, as well as other interesting approaches that have yet to be applied in emerging markets; we are undertaking a detailed comparison of both existing and newer technologies.

A number of community-initiated business models have produced good results, but they aren't easily replicable and don't scale. So we are analyzing both franchising and public-private partnership business models. Many of the elements that make rural connectivity and rural health care promising appear to be present in the water sector. It is too early to say what will emerge out of the research, but the scale of the unmet need is clear - a billion people without access to clean drinking water.

And after water, why not BoP energy? Our preliminary thinking is that there at least three sub-sectors of interest: Off-grid power and lighting, from mini-hydro to LED lighting; efficiency improvements in energy-using devices, such as cook stoves and motorbikes; and locally-grown, produced, and consumed biofuels that don't compete with food. We know of prototype enterprises and projects in each sub-sector, some of them already beginning to scale. We believe that the recent, rapid evolution of technology options will continue and can be adapted for the BoP. And we know that the unmet need is very large.

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GEM Report on Women and Entrepreneurship Released

Derek Newberry — Thu, 08 May 2008 10:40:56 -0500

WELLESLEY, Mass., May 2 /PRNewswire-USNewswire/ --

Women's entrepreneurship matters -- women are creating and running businesses around the world, contributing to economies that represent more than 70% of the world's population and 93% of global GDP (2007). Women's entrepreneurship is a key contributor to economic growth in low/middle income countries, particularly in Latin America and the Caribbean according to The Global Entrepreneurship Monitor (GEM) 2007 Report on Women and Entrepreneurship released today by The Center for Women's Leadership at Babson College.

View the report at: www.gemconsortium.org/about.aspx?page=special_topic_women

A gender gap persists -- both significant and systematic -- in new venture creation and business ownership. The gender difference is more obvious in high-income countries but exists throughout all regions, with Europe and Asia showing a greater gap than Latin America and the Caribbean.

GEM data suggests that women who are employed and have built a social network of entrepreneurs are more likely to become entrepreneurs. The social and economic benefits of working are driving women's entrepreneurship more than increased education or household income.

Women's level of optimism and self-confidence in starting a business is highly influenced by the culture and social norms of their native countries. Women entrepreneurs have less fear of failure than women who are not involved in entrepreneurial activity; yet they express a greater fear of business failure than men starting businesses.

"Women's entrepreneurship varies widely across the globe," says Babson Professor Elaine I. Allen, principal researcher of the study, "It's a surprise that developing countries in Eastern Europe have low rates of women's entrepreneurship, closely resembling their highly developed European neighbors, while the countries of Latin America and the Caribbean have rates of women's entrepreneurship two and three times higher."

The Global Entrepreneurship Monitor (GEM) 2007 Report on Women and Entrepreneurship, based on data collected through the Global Entrepreneurship Research Association (GERA), directed by Babson College, and is a comprehensive and up-to-date study of the role played by women in entrepreneurial activity across the world economy.

Taking BoP Strategies To Scale Pt. 3: World-Class Healthcare for the World’s Poor

Al Hammond — Thu, 08 May 2008 08:16:48 -0500

This post is the third in a five part series on a radical new approach to scaling BoP business models, what we call a transformative sector strategy. In this segment, I describe how this strategy could transform the health sector in emerging economies.

Last Mile Health Care Delivery

Talk to people in the rural communities of southern Mexico, in the new urban communities on the southern edge of Bogota, or in almost any village in rural Africa about getting decent access to healthcare, and their answer is the same: it usually costs more to get to a clinic, a doctor's office, even a pharmacy, than the cost of the service itself. In Bogota, most of the government-supported health services are in the north of the city, such that it can cost people in these new refugee communities a day's work plus bus fare across town and back to get help. Lack of access defines part of the last mile health care dilemma, and that means distributional business models, such as franchising, can be important.

Talk to Health Stores in Kenya, an enterprise trying to staff small pharmacies with nurses, and another part of the problem becomes clear: the sheer lack of doctors, nurses, and pharmacists in emerging markets. There are not anywhere close to the number of skilled professionals needed to cover rural areas, and these health workers overwhelmingly refuse to live either in rural areas or in urban slums. So technologies, organizational models, and legal changes that enable local diagnosis and remote practice by doctors and pharmacists could play a critical role.

Still a third factor leaps out from the data in The Next 4 Billion report that shows clearly that low-income households spend between a third and a half of their out-of-pocket health care expenditures on drugs. They typically don't go to doctors or clinics or hospitals, but rather to pharmacies or some other source of medicines and seek to self-medicate. That means they often get a guess as to what's wrong with them instead of a diagnosis.

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Announcement: New Ventures Call for SME Business Plans

Ella Delio — Wed, 07 May 2008 12:34:51 -0500

Do you run a small-to-medium size enterprise operating in India, Indonesia, China, Brazil or Mexico? Does your company have an innovative business model that delivers strong environmental and social benefits? Are you seeking debt or equity capital in order to grow your business?

If so, apply for the New Ventures program in these countries. The New Ventures program of the World Resources Institute supports the growth of businesses that deliver social and environmental benefits by providing business advisory services and access to capital. Enterprises that have been supported by New Ventures have raised $120M in capital. Moreover, 98% of New Ventures enterprises are still in operation.

The application deadlines for each country are:

India: May 15th
Indonesia: May 16th
Mexico: June 30th
China: TBD
Brazil: TBD

For more information and access to the application form, please visit the specific country websites. For an English language version of the Indonesia application form, please contact slall@wri.org.

Marketing Insight at the Base of the Pyramid

Francisco Noguera — Wed, 07 May 2008 09:28:50 -0500

By Anisha Motwani

Rural India seems to be the latest flavour in town. From finance ministers to corporate India across industries, everyone seems to be shifting focus to the bottom of the pyramid. All boardroom discussions are getting centred on finding ways and means to grab a share of this lucrative pie. Numbers look seductive with statistics and data giving enough evidence of volume potential... smaller ticket sizes but more buyers, making it eminent for most industries to ignore this segment at their own peril.

With near saturation and cut-throat competition in urban markets, there is almost no debate left on the potential of the rural population whose incomes are rising and mindsets are changing. While certain industries like FMCG have made an early entry, others are learning the ropes with each passing day. Most industries are trying to test the waters through various forms of pilots and test launches, with no clear indicators of gains in the short run. But there is no denying that the long term potential is vast, but so are the challenges.

Till recently, a large part of marketing was done targeting the urban consumer, and with most marketers having no prior exposure to the rural audience, they are applying the same rules to connect with this completely different segment. The mistake that most companies make while chalking their rural strategies is to treat the rural consumer as an extension of their urban counterpart.

Taking BoP Strategies To Scale Pt. 2: Connecting Rural Communities

Al Hammond — Wed, 07 May 2008 08:31:17 -0500

This post is the second in a five part series on a radical new approach to scaling BoP business models, what we call a transformative sector strategy. In this segment, I tell the story of a rural connectivity pilot project; an example of this new model for development in action.

A Last Mile Model for Rural Connectivity

Son Tay commune, Quang Ngai Province. I was sitting across a table in a remote rural outpost of Vietnam, negotiating (via a translator) with the manager of a local radio station about access to his tower. He asked a series of technical questions and seemed satisfied with the answers, but then he wondered aloud: "Can we get Internet access here?" He didn't just want it for the radio station, it emerged, but for the surrounding small community - even though nobody there yet owned a computer. The manager understood that internet access could help transform their opportunities. And when we agreed to mount a small antenna to serve the community, the tower was ours.

The negotiation was part of a two year long process to pilot a novel approach to rural connectivity. It involved building an advanced, broadband network in three communes (groups of villages) in a very poor province in central Vietnam to provide Internet-based phone service and Internet access. Quang Ngai Province has no Internet access for its million-plus population outside of the provincial capital, and phone ownership is about 3 percent.

But the province does have an AUSAID-funded rural development project (RUDEP) that had built trust by doubling farmer's incomes in many communes, and optical fiber to every district capital (owned by the national electric utility, EVN, which also owns a mobile phone company, EVN Telecom). Ultimately all of these became partners in the effort, as did USAID's Last Mile Initiative, Intel and other equipment providers.

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Companies Unveil New Business Initiatives in the Fight to Decrease Global Poverty

Manuel Bueno — Wed, 07 May 2008 03:53:01 -0500

London, 6 May 2008—Joining the Business Call to Action, a dozen companies today announced concrete initiatives that apply core business expertise, utilizing their technology and innovative spirit to tackle the multiple challenges of poverty.

The announcements were made at the Business Call to Action event, hosted by UK Prime Minister Gordon Brown and Kemal Derviş, Administrator of the United Nations Development Programme (UNDP), and with the participation of more than 80 global business leaders who came to London to showcase innovative and creative initiatives to reduce poverty in the developing world.

Taking Base of the Pyramid Strategies To Scale Pt.1: An Introduction to Transformative Sector Strategies

Al Hammond — Tue, 06 May 2008 08:03:26 -0500

This post is the first of a five part series on a radical new approach to scaling BoP business models, what we call a transformative sector strategy. In this segment, I introduce the conceptual framework for this innovative poverty-alleviation model.

"It doesn't exactly keep me up at night, but I do think about it a lot." Jacqueline Novogratz, head of Acumen Fund, and I were talking about getting to scale - about expanding private sector business development and investment aimed at empowering and providing basic services to the poor to the point of making a real impact.

I felt exactly the same, and I've had similar conversations with colleagues at Santa Clara University, at Ashoka, at private investment funds, and elsewhere. Ever since we finished our report on The Next 4 Billion, the numbers haunt me. How do you meet the unmet needs of four billion people?

Convincing a dozen multinational companies to take this market seriously isn't enough. Doubling or quadrupling the capacity of the organizations that mentor social enterprises and BoP-serving small and medium businesses won't do it either. Even investing hundreds of millions of dollars in individual enterprises in this sector doesn't guarantee success. I think the goal has to be to transform whole sectors in ways that catalyze mainstream investment in BoP economic activity and unleash market forces. To get there, I think we need a more systematic approach.

A Next-Generation BoP Approach: Transformative Sector Models

In this and subsequent posts, I'm going to suggest one such approach that I and my colleagues at WRI and elsewhere have been developing for several years, and that we are now starting to take into the field. I'm proposing this scaling model tentatively, and asking for feedback and for comparisons to other scaling models.

The approach builds on the perception that there is a growing amount of public and private capital available to fund BoP strategies - almost every month now I hear about a new BoP private equity fund - and the conviction that the bottleneck is a shortage of solutions in the form of investable enterprises. In venture capital jargon, what's missing is the "deal flow." And I'm suggesting that the way to create that deal flow and unleash a rising tide of investment is to focus not on individual entrepreneurs, not on individual companies, but on economic sectors.

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Video: Making the Case for Inclusive Business in Latin America

Francisco Noguera — Fri, 02 May 2008 09:32:24 -0500

The WBCSD-SNV Alliance recently released a fantastic video introducing their work in the promotion of inclusive business models across Latin America.

Besides profiling interesting models that bridge the interests of MNCs and the base of the pyramid, the video highlights the role Governments are playing in promoting market-based approaches to poverty alleviation. It is indeed a sign of promising trends to hear about Ecuador's transition from a "Ministry of Welfare" to a "Ministry of Social and Economic Inclusion".

Kudos to the alliance and the work being done in Latin America!
I hope you enjoy watching this, as I very much did.

What Keeps Indian SMEs from Growing

Derek Newberry — Fri, 02 May 2008 08:37:43 -0500

In the last one week, I have had the privilege of interacting with over 300 entrepreneurs from the small and medium enterprises segment. 70% of them have been in business for at least a decade; 40% have completed two decades. Yet they are still "small" - in revenues, profits, employees. 15% have global aspirations but do not know how to achieve that goal.

Small and medium enterprises account for 80% of Indian businesses (3 million small and medium enterprises and counting), produce over 8000 products, contribute 35% to industrial output, 40% to direct exports, and employ nearly 30 million people. And yet, they continue to remain small even after 20 or 30 years. Given a choice, they still want some form of protection. The forces of competition, rapid technological change and globalization mean very little to these otherwise successful enterprises.

What are the challenges faced by entrepreneurs in scaling up and making it to the big league? How much of this can be attributed to the external environment and how much to the entrepreneur's mindset itself? Based on the responses I have, here are the major constraints:

Treating the business like a family - almost literally: this might come as a surprise to those in the developed countries, but promoters of small businesses develop an emotional attachment to everything about the business, including the people. The leadership style is patriarchal. A significant majority have not fired anyone in their business. Performance orientation is lacking and a comfort with the status-quo is palpable.

Inability to prioritize: entrepreneurs engaged in small businesses are in a perennial "fire-fighting" mode. Everything appears to be a crisis. Considerable time and effort is expended on trivial matters often at the expense of growth, creativity and innovation. Strategy is conspicuous by its absence. Not surprisingly, the business remains small.