Some time ago, the winner for the CGAP Microfinance Photography Contest was announced. Although I really have not had much time to write these days (blame my econometrics assignments!) some of the photos that have been posted in their website remained in the corner of my mind. These photos are not only aesthetically pleasing, but also (and more importantly) they serve as a gentle reminder of why we, the practitioners, the researchers and the entrepreneurs, love what we do.
I very recently had the chance (and pleasure) of judging some of the entries submitted to the Stanford E-Challenge, which invites students, both undergraduate and graduate, to form teams and submit business plans where social impact is the primary goal. The top five teams compete for a share of $50,000 in prize money with the first place winner receiving at least $25,000. It was very refreshing to see such an amount of energy positively channeled to, basically, changing a world we are not happy with. It was also surprising to see that many business plans shared (in my humble opinion) the same types of weaknesses. One of the most important ones was the fact that they neglected important details about the customer and why would a generally very risk-averse type of customer be interested in what your business have to offer. Most plans did not tackle extensively the ‘How’ question.
How? How exactly are you envisioning that this will make a difference? Of course, I can imagine how a particular product may improve the livelihoods of your customers, but what do you, the business team, have in mind? How exactly do you want to do it? How do you want to change the world your customer lives in? Even teams with members who had spent considerable time working as volunteers in the BoP somewhat forgot about this. Who is your customer? How does she think? What keeps her awake at night? What tradeoffs will she make to purchase your product or service? How will she make ends meet?
This was for me quite striking. Business teams were putting forward business models, but they were not joining those models with the people they were aiming to serve. Many business plans were developing a theory, a model, while what will end up making a business profitable will be selling a product or a service. And it will be customer who will pay for it. This does not detract from the fact that a good business model is invaluable. Nonetheless, good business models are like good shoes. Before choosing the right kind of shoes, tell me where you are going and which path do you want to walk. Then we can try to figure out the best pair of shoes for you.
The CGAP photos are a window to what business at the BoP entails. It is not about selling products or services. It is about selling something that will have a lasting (often permanent) effect on the customers’ lives. My first post at NextBillion touched upon how important it is for business models to link with the aspirations of our prospective customers. How important it is to help her achieve her dreams. Your customer sells radishes, spins cloth or trades with camels. With her in mind, tell me about what she really needs and how you will change her life. And then, let’s talk about the business model.