NextBillion.net - Development Through Enterprise - TheNext4Billion

Guest Post: John Paul Responds to Al Hammond

Derek Newberry — Thu, 15 May 2008 15:23:36 -0500

Guest blogger John Paul is a Co-Founder and former Managing Editor of Nextbillion.net. He is currently finishing up his MBA at Cornell University, where he has focused on private-sector solutions to global poverty with the school's Center for Sustainable Global Enterprise

In this post, Paul responds to Allen Hammond's series on taking Base of the Pyramid models to scale. This week, NextBillion.net will publish responses from a number of BoP experts and practitioners, followed by a concluding post from Hammond.

By John Paul

The implementation of transformational sector strategies is a compelling idea, and has a number of comparative advantages over the traditional business-only approach. First, focusing on sectors takes a systems view of the problem, allowing for the identification and mitigation of bottlenecks and missing pieces that might have prevented other initiatives from scaling. Second, what is being created is a platform network that can be adapted as needed, as the examples cited of adding IT infrastructure or remote diagnostic equipment to an established distributed healthcare network demonstrate. This ensures the increasing utility, rather than inevitable obsolescence, of what is put in place. Most intriguingly, in some ways what are being developed are human capital networks, in many ways akin to online social networks.

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Guest Post: The Transformative Sector Approach in Latin America

Derek Newberry — Thu, 15 May 2008 11:13:39 -0500

Guest blogger Emily Fintel is Regional Representative for Strategic Initiatives at Fundación AVINA, one of the largest private foundations in Latin America. AVINA partners with civil society and business leaders to promote sustainable development through a network of twenty-one offices in eleven countries through the region, and has invested more than $350M in partners' initiatives since 1994.

In this post, Fintel responds to Allen Hammond's series on taking Base of the Pyramid models to scale. This week, NextBillion.net will publish responses from a number of BoP experts and practitioners, followed by a concluding post from Hammond.

By Emily Fintel

My immediate reaction to Al's conversation with Jacqueline Novogratz of Acumen is that I too am haunted by the numbers. Within Latin America, which is the focus of our work at AVINA, hundreds of millions of people suffer from a series of market failures that prevent them from realizing many of the benefits that are enjoyed by middle and upper class winners of globalization. I completely agree with Al that the most promising avenues in order to make a contribution of significant dimension are those strategies which have a systematic approach and integrate a diversity of complementary actors in the development of new, socially inclusive business models and the transformation of entire economic sectors.

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Guest Post: Taking the BoP Movement To The Next Level

Derek Newberry — Wed, 14 May 2008 08:34:26 -0500

Guest blogger Sagar Gubbi is a technology graduate based in Bangalore with a deep interest in social and environmental sectors in India. He maintains a popular social entrepreneurship blog on Social Edge, and he is the co-founder of 'EcoForge', an investment advisory and consulting firm for social and environmental venture funds.

In this post, Gubbi responds to Allen Hammond's series on taking Base of the Pyramid models to scale. This week, NextBillion.net will publish responses from a number of BoP experts and practitioners, followed by a concluding post from Hammond.

By Sagar Gubbi

When I first read the BoP article by C.K. Prahalad and Stuart Hart three years ago, it triggered several thoughts in my mind and I remember having endless discussions with my friends on the ideas put forth in the article. Reading through Allen Hammond's posts this week on ‘Transformative Sector Strategies', I have experienced a sense of déjà vu, with a lot of thoughts being triggered in my mind all over again. If the work carried out by people like C.K. Prahalad, Stuart Hart and others was responsible for triggering widespread interest in the BoP, WRI's model, outlined in Al's posts, has the potential to take it to the next level.

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Guest Post: Show Me the Income

Derek Newberry — Tue, 13 May 2008 08:29:16 -0500

Guest blogger Ryan Gunderson writes about sustainable, scalable solutions to end global poverty on his Riches For Good blog. A finance professional with an MBA from the University of Michigan's Ross School of Business and seven years of Fortune 500 experience, Ryan is transitioning to part-time work to allow him to pursue his goal of helping 1 million people out of $1-a-day poverty. He welcomes help in reaching his goal and can be reached at richesforgood@yahoo.com.

In this post, Gunderson responds to Allen Hammond's series on taking Base of the Pyramid models to scale. This week, NextBillion.net will publish responses from a number of BoP experts and practitioners, followed by a concluding post from Hammond.

By Ryan Gunderson

"The biggest reason most poor people are poor is because they don't have enough money." Why did Paul Polak find the need to write that embarrassingly obvious statement in a book? Because the development community has a long history of overlooking the concept. My initial reaction to Allen Hammond's series on transformative sector strategies is that he is perpetuating the common mistake of ignoring income generation. One of his sentences particularly strikes a wrong chord with me: "How do you meet the unmet needs of four billion people?" To me, the appropriate question is "How do you help people raise their incomes so they can afford to meet their unmet needs?"

Consider his phone example for a minute. Hammond shares a reasonable level of detail about how WiFi networks can be built relatively affordably in rural areas, theoretically at a profit to companies. (I will ignore for a moment that in his example he implies a regional government may be more interested than its for-profit partners in expanding its WiFi network). But Hammond does not talk convincingly, in my opinion, about how phone and Internet access will help raise individuals' incomes. He mentions that a phone user could solicit information about how to raise pigs, and he mentions that quality of life would improve from less walking.

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Guest Post: Brian Trelstad Responds to Al Hammond

Derek Newberry — Mon, 12 May 2008 08:50:05 -0500

Guest blogger Brian Trelstad is the Chief Investment Officer of Acumen Fund. Before joining Acumen Fund, Brian spent four years at McKinsey as a consultant in the healthcare and non-profit practices and as an editor of the McKinsey Quarterly. Prior to McKinsey, he worked as a case writer at Stanford University's Center for Entrepreneurial Studies and was the lead environmental staffer for President Clinton's AmeriCorps program.

In this post, Trelstad responds to Allen Hammond's series on taking Base of the Pyramid models to scale. This week, NextBillion.net will publish responses from a number of BoP experts and practitioners, followed by a concluding post from Hammond.

By Brian Trelstad

Al Hammond's enthusiasm for the bigger picture is refreshing. His transformative sector strategies are a bit of a departure from the norm for someone like me, who spends most of his time evaluating individual investments and, as a result, often loses the forest for the trees. I am surprised, however, to hear that this topic doesn't keep Jacqueline up at night, as the entire Acumen Fund team is constantly thinking about how to take businesses - even those serving upwards of a million people - to the next level of scale.

Our strategy is to find great models like Medicine Shoppe or Water Health International and build them into profitable companies that are providing critical goods and services to the poor at scale (defined as 1 million plus customers). It's also critical for us to share the lessons and insights gleaned from the investing/management experience with the private capital markets and public sector to help shape the next generation of investment strategy and public policy.

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

Al Hammond — Fri, 09 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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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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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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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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NYT Magazine Asks: Can Cellphones Alleviate Poverty?

Derek Newberry — Mon, 14 Apr 2008 12:41:15 -0500

All of us at NextBillion.net were both humbled and thrilled to see the New York Times Sunday Magazine draw on our work - and the work of many colleagues - to write an extended piece on the impact of cell phone usage in emerging economies.

Sara Corbett's article follows Nokia researcher Jan Chipchase as he navigates the human terrain of countries like Ghana, Brazil and Uzbekistan, trying to figure out why a farmer in Kenya or a prostitute in Brazil is finding unique value in their cell phone. The article uses Jan's experience as a device for sparking a broader discussion on the potential for the booming cell phone market to increase incomes and quality of life among the BoP.

What was most interesting about the piece is that the author poses her central theme as a question, not an assertion: "Can the Cellphone Help End Global Poverty?" In her narrative, while laying out the case that cell phones increase productivity, she does not present this technology as a silver bullet development solution.

Rather, we get a very rich, on-the-ground account of how technology is changing people's lives in BoP markets everywhere.

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