This post is the second in a two part series on how to get involved in the base of the pyramid movement. Part 1 was a personal story of involvement, and Part 2 focuses on the role of students in bringing social transformation.

I recently attended the Social Enterprise Knowledge Network (SEKN) colloquium at Harvard Business School and had a conversation with a professor about the role of students in BoP ventures. He left me with this parting insight: "Don't forget - students change the world. Many social movements throughout history have been started and led by students."

It wasn't a surprise for me to hear this at the SEKN colloquium. One of the main objectives of SEKN is to empower business school professors with knowledge, research, and insights on social enterprises in order to influence students -- who will ultimately drive social transformation. "SEKN seeks to advance the frontiers of knowledge and practice in social enterprise through collaborative research, shared learning, case based teaching, and the strengthening of institutional capacities in management education."

During my time at the colloquium, I was able to rub shoulders with a number of HBS professors who had a lot to share about students and BoP ventures. Michael Chu, who teaches a base of the pyramid class at HBS, said his class is always oversubscribed. Another indicator of this enthusiasm on campus is the fact that HBS's base of the pyramid club has the highest membership of all student clubs.

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I visited the slums of Nairobi in the summer of 2002. I remember being completely overwhelmed by the poor living conditions: large families cramped into little rooms, putrid refuse scattered throughout the neighborhood, young children left seemingly hopeless. I remember thinking to myself, what can possibly be done?

That summer, upon graduating from the BBA program at the University of Michigan's Business School, I was in Kenya on a service project with a small group from my local church.  For six weeks, a dozen of us taught English, science, and math in schools throughout Kenya.  But it was while visiting the slums that something in my heart and mind shifted.   It was an epiphany of sorts – similar to another epiphany I'd had the summer before, which led me to Nairobi in the first place.

Just twelve months beforehand, I was in a posh tower in Manhattan, working as an investment banker for the largest financial services company in the world.  A brief snapshot of what my life looked like:

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This is part 2 of our series reviewing Michael Edwards' Just Another Emperor and the concept of 'philanthrocapitalism'.  Read part 1 here.

Michael Edwards' recent book on "philanthrocapitalism" reminds me of a recent conversation I had with my sister, a social worker. Over dinner one day, she started going off on business types:

Why is it that business people think they are the answer to all the world's problems? You guys come off so arrogant! Somehow, we, who have been working in the civil sector for centuries, struggling to solve social issues, are completely inept, and you guys, who have all the money, are going to solve all the problems.

I think many people have a similar perspective. And perhaps rightly so.

Maybe we business folks didn't enter into the public/non-profit sector scene in the smoothest way. We in the BoP world know that when entering into a developing country, we can't just tell locals what to do and what they need. But perhaps we didn't follow our own advice when we entered into the world of foundations and NGOs. Instead of partnering with and listening to those who have gone before us, we just set up shop and announced to the world, "times are changing -- a new and better way has arrived!" Therefore, I can understand the push back and why Edwards wrote his book, Just Another Emperor?

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In my previous post, I suggested that BoP enterprises should consider partnering with faith based organizations (FBOs) on the ground, particularly in countries where religion plays a large role. In this post, I’d like to put forth another distinct, but similar idea: FBOs in the West can play a large part in the overall BoP Movement. Crazy, right? Maybe not.

A recent article in the Stanford Social Innovation Review highlighted the results of a survey on charitable giving in the United States. The survey showed that there is a gap between donor intent and actual giving. 47% of the respondents to the survey stated that they gave money in order to assist the needy. However, in actual giving, only 6% of donor dollars was given to organizations that primarily seek to meet the basic needs of people in the United States. Internationally, only 2% of donor dollars was allocated to assisting of those in need. So where is all the money going? Answer: FBOs.

Time to sound the alarm, right? “Wake up, donors! Smell the coffee. Start channeling your money elsewhere.” This is probably the reaction most on this blog would have.

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A key concept when operating a business at the base of the pyramid, or in any place for that matter, is contextualization. And by contextualization I mean a deep understanding and embrace of local culture. A simple example of contextualization in business can be observed by comparing the McDonald's menus in Asia and the United States. For instance, it would be impossible to find any McDonald's in the state of Michigan serving a curry burger. Why? Because people in the state of Michigan don't have a taste for curry burgers and wouldn't buy the product. Indeed, it is critical that businesses be aware of local patterns of human behavior – such as lifestyles, tastes, and social involvement – and develop products and services that suit these behaviors.

What I have mentioned thus far is nothing new and probably very elementary to the NextBillion community. However, I would like to suggest that we have left out of the conversation a very important component of culture: religion. It is a subject that is very polarizing and often taboo to discuss in business. But it is important to bring up because religion is very important to people in the communities that we in the NextBillion community are trying to serve.

Recently, this dawned upon me as I listened to a presentation by some MBA students from the Ross School of Business on improving the penetration of insecticide treated nets in Ghana. One recommendation that particularly jumped out at me was the following: leverage the church's influence. The presenters noted that in Ghana, Christianity is widely practiced, and as a result, the church is a very powerful and influential social institution.

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In my last post, I put forth a definition on scaling a BoP venture: increasing business transactions that positively affect the lives of the poor. In this post I'd like to address the importance of scaling a BoP venture.

Apoovra Shah recently brought up the issue of BoP ventures partnering with governments as a means of scaling. I'd like to take a different spin on this. I'd like to suggest that scaling BoP ventures is critical in order to influence the way governments spend their money on aid. Why is this important? Because according to William Easterly's book, The White Man's Burden, governments have spent $2.3 trillion over the past five decades on foreign aid -- and with little to show for it.

Last month, I was able to spend a week in Indonesia working with a local business owner on a BoP scale-up strategy. Over dinner one night, our conversation drifted to the subject of government aid money. My friend said to me, "Do you think we'd ever get funding from a government agency? No. We don't fit the profile."

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"How are we going to scale this enterprise?" "What is our scaling strategy?" "What are the building blocks needed to take our concept to scale?"

If you have ever sat in on a board meeting of an organization, either for a for-profit or non-profit, I am sure you would have heard the above questions or some derivative of them.

Scale is a word that is often thrown around, but what is scale? In the business world, scaling an enterprise basically means optimizing resources to sells more goods or services in order to grow top-line revenues and finding ways to improve cost effectiveness to drive profitability. Simple, right? Or not. Not all businesses are created equal. Some business models are inherently more scalable than others. For example, an online retailer is much easier to scale than a brick-and-mortar store.

Defining scale in the for-profit world is relatively straightforward. And its importance is also clear: shareholder maximization. But what about in the BoP world, where measurement is not necessarily in dollars and cents and the goal is not wealth maximization? Can we simply take scaling strategies from the for-profit world and apply them to BoP ventures? I think most of us would say no. Therefore, it is important for us to look at scaling a BoP venture through a different lens.

In this post and the next, I'd like to open up the discussion on scaling a BoP enterprise. In this entry, I am going to attempt to bring some definition to the idea of scaling a BoP venture. In my next post, I will try to tackle the importance of scaling BoP ventures from a macro level.

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"We must imagine a world which combines in equal measure economic development and eradication of poverty, ecological stewardship and social justice. We must harness the forces of globalization to create this outcome. We have to imagine this future. If we cannot imagine it, we cannot create it. We cannot create this world if we cannot imagine it. I do hope that we can bring to this task our collective imagination, passion, courage, humanity, humility and intellect. We cannot expect less of ourselves." - CK Prahalad

Last year, I had the chance to listen to CK Prahalad give his lecture entitled, "Democratizing Commerce" at the University of Michigan. He urged the audience to push for a globalization that benefits all, particularly the poor. I listened with great intent and thought that his final comments of the talk were quite profound, particularly related to BoP strategies.
A few thoughts on what Prahalad suggests as the building blocks for business leaders seeking to create a more inclusive global economy:

• Imagination: Creating BoP ventures that serve the poor entails having the eyes to see what could be in an environment often neglected and left for dead.
  
• Passion: This is the fuel that keeps BoP entrepreneurs up late at night, fighting against all odds, and refusing to bow down to the complexities and challenges of creating enterprises that serve and employ the poor.
  
• Courage: When entering communities of the poor, a BoP entrepreneur must be willing to accept the inherent risk that comes with serving the poor, seeing the failure that may come as a step in the right direction rather than a signal to give up and go home.
• Humanity: Whether you are the privileged elite at the ToP or the poorest of the poor at the BoP, we all share one thing in common: our humanity. Since the beginning of time, we humans have lived in the pursuit of purpose, significant and meaningful relationships, fulfillment, happiness, and longevity. The fact that some of us have been given unbelievable opportunities and privilege is grace. By grace I mean that which we do not deserve but we receive anyway. It is critical in our pursuit of poverty alleviation that we from the ToP develop what Jacqueline Novogratz from Acumen Fund calls "moral imagination," or the ability to empathize with the poor and to place ourselves in their shoes so that we can "make tough decisions in the name of the greater good."
• Intellect: Bill Gates, in his Harvard commencement speech in 2007, reflected, "The crucial thing is to never stop thinking and working – and never do what we did with malaria and tuberculosis in the 20th century – which is to surrender to complexity and quit." The issue of poverty is highly complex and needs our collective thinking and brainpower in order to bring forth true transformation.

Now, I'd like to expound more on the subject of humility because I think this is the one characteristic that is the most elusive, as it cannot be obtained through effort, work, or education. The reason it is so difficult to obtain is because the mere desire for it precludes one from having it. Have you ever heard a person state, "I have finally become a humble person!" The statement alone is a signal that humility has not been gained.

 

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In 2007, I had the opportunity to consult for a newly formed NGO trying to establish a BoP venture in South East Asia. The NGO's management team had years of experience running small-to-medium sized businesses, had raised a sizable amount of capital, and had formed an all-star team of advisers. To the management team, South East Asia's economic potential was on the up-and-up; they felt that this was a great opportunity to leverage their professional expertise and capital for a social good.

I traveled with the team to the region on a short trip and we developed a business plan – we identified specific unmet needs across a range of communities, created a pricing structure whereby customers who had higher disposable income effectively subsidized the poor, and found local partners to help scale up the venture. Everything was set to go.

However, at the end of the day, the project didn't launch because no one from the management team wanted to move full-time to the region to live among the people the NGO wanted to serve. In other words, no one wanted to do the heavy lifting of starting a BoP venture. The management team thought, incorrectly, that it could simply manage the venture from the States – parachuting in and out of the region multiple times a year. There were a variety of reasons for this approach: family, comfort, lifestyle, and finances – to name a few.

The idea was great, but the commitment wasn't there to make it a reality. If I had actually known that this was plan early on, I probably wouldn’t have traveled with them overseas, saving them time and money. If the NGO wanted to succeed, it needed its own personnel on the ground, working with the local people. There are many in the business community who are eager to do something good for the world, but what they don’t see, at least initially, is the cost involved in making it happen. It goes well beyond writing a check for charity. Check writing: that is the old model.

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Last summer, while writing case studies for the William Davidson Institute on base of the pyramid (BoP) related organizations, I had the opportunity to meet and interview a number of practitioners to discuss their approaches towards using market-based solutions to address poverty.

The conversations were highly stimulating and insightful, giving me much to mull over. After taking time to reflect on all that was said, I observed this reoccurring theme: outside of financial resources, one of the greatest needs in the BoP sector, at both the intermediary and venture level, is talent.

A great challenge for BoP intermediaries and the ventures that they support is making themselves a place of choice for professionals from the developed world. From interviews and my own personal experiences, I believe that the greatest barrier to accomplishing this goal is career development. For many professionals who are considering a career in the BoP sector, it is not compensation that deters them, but the lack of training and development.

Currently, there are very few BoP organizations that are heavily investing in training programs for their personnel; this primarily because of limited time and financial resources. As a result, in many cases, once a professional joins a BoP organization, there is limited to no career path. If BoP organizations can find ways to work together to develop professional training and career paths for their personnel, this will significantly help in attracting and retaining professionals to the field and making it a place of choice for the best and the brightest.

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