NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

The ultimate goal of last week’s BoP Summit 2013 was to set a new course for improving the next generation of enterprises serving the poor. It’s an ambitious goal, and the summit leadership group decided the best way to accomplish it was to divide the tasks into nine working groups filled by the 200 attendees.

Throughout the summit and most intensively after the final plenary session, members of those nine working groups continued discussing and debating successes, challenges and potential next steps for each of their key topic areas. Near the end of the conference, representatives from each gave a short presentation on their group’s findings. Those presentations form the foundation for a much more in-depth “roadmap” for the sector that, with the help of the working group team leaders, the William Davidson Institute is compiling. WDI plans to share the roadmap in the coming months.

In an effort to keep the discussion going and to garner new ideas along the way, NextBillion is providing some of the early data points to come out of the working groups. It’s important to stress that this information is still in the preliminary stages, but we hope the NextBillion community – be they conference participants or simply active readers – can help by commenting on these early reports.

Here are the nine working groups and a brief summary of their initial findings:

Understanding the BoP: Building Ventures that Incorporate the Local Context (Moderator: Madhu Viswanathan, professor in business at the University of Illinois, Urbana-Champaign.)

The group discussed obstacles to gaining insights about BoP customers, entrepreneurs and marketplaces, discussed challenges in designing solutions for the BoP, explored how key challenges in understanding BoP markets can be overcome, and discussed how barriers to designing solutions for BoP markets can be bridged.

Among the challenges identified by the group: understanding local contexts, co-creating value, achieving appropriate scaling, and developing macro-level systems.

To understand the local context, the group said it is important for venture developers to enter a community with humility, and a willingness to learn and understand. They should then let that local context help drive the project. For next steps, the group said it was simple: Go there, be there. Seek local knowledge from universities, guides, experts, and anthropologists. Include local leaders in plans and hire local talent. And just as importantly, venture developers need to let go of their values and context in order to better understand the local context.

To determine appropriate scale, the group suggested that venture developers harness the local entrepreneurial talent, and that BoP organizations have a “chief context officer” to work with interdisciplinary immersed teams to develop bottom up insights that form strategic action.

For co-creation, the group said venture developers should identify basic needs, identify basic wants, and think about long-term sustainability.

And for a macro/systemic view, citizen organizations need to keep government in check, local wisdom and know-how needs to be leveraged, and investment in infrastructure is required.

Achieving Social Performance: Assessing and Enhancing Poverty Alleviation Impacts (Moderator: Sateen Sheth, manager, Research Project Implementation, WDI)

On the “plus” side, the group said there has been a movement towards output-focused standards, which have become part of the dialogue in the broader community. Among the ongoing challenges are maintaining the focal point on alleviating poverty so stakeholders see the relevancy. Also, there needs to be more sharing of existing metrics, more collection of actionable data, and a more patient outlook for long-term impact assessment.

For the roadmap, the group suggested three things. The first is to “wrangle the rainmakers.” That is, start an initiative to speed up the acceptance and adoption of common metrics and data aggregation by key funding groups. This will reduce the burden on organizations, and leverage synergies among key stakeholders.

Secondly, the group said the range of measurement approaches should be documented to simplify and make measurement more accessible to BoP enterprises so they can better serve BoP stakeholders.

The group also favored the creation of a center of excellence to enable sector-wide sharing. This would generate knowledge and learning that shorten the time to success, and that advance the field.

New Venture Development: Incubation to Acceleration—View from the Field (Moderator: Jim Koch, founding director at the Center for Science, Technology and Society at Santa Clara University)

The group said that many new venture growth models are unique, often blending grants, private equity and other creative forms of capital. But going forward, the group recommended setting more modest expectations for growth stages (a flatter S curve) and success indicators (e.g. short-term goals of breaking even instead of generating profits). The group also would like to see a more even distribution of capital and resources directed at different stages of social enterprise growth. As a next step, they said capital is vital at the early ideation and pre-incubation stages – not just at the scaling up stage.

Multinational Corporations and the BoP: Seeking Scale (Moderator: Filippo Veglio, director, Social Capital Focus Area, World Business Council for Sustainable Development (WBCSD)

The working group mentioned several internal and external challenges to scaling up products and services for base of the pyramid consumers. One internal challenge is establishing a clear set of metrics at the start. A possible solution would be to create new metrics that are verifiable by an external source. For next steps on this issue, the group said MNC collaborators could develop a framework for three types of BoP metrics: economic impact (sales), economic impact of those capabilities, and social impact.

Another internal challenge identified by the group was scaling capabilities. Part of the problem, the group said, was engaging middle management and attracting talent, as well as determining how to position a BoP business unit or division within a large organization. Some suggested solutions included updating BoP-track career development opportunities in an organization, and placing a BoP initiative in the appropriate location within an organization. A “next step” would be for MNCs and academic institutions to collaborate to embed BoP as a core curriculum component or focus.

The group said an external challenge is the difficulty of finding appropriate partners. A solution could arise from companies investing more heavily in partnership capabilities. Potential next steps for this challenge could include creating a knowledge hub on the NextBillion platform and/or other online forums for people to interact.

Non-Profits and BoP Ventures: Integrating Economic and Social Goals with Viability and Scale (Moderator: Chris Jochnick, director, Private Sector Department, Oxfam America)

The group said NGOs are the BoP sector’s “backbones” of choice – a key to partnering, and a keeper of the big picture. But challenges exist, such as the rigidity, capacity and mentality of NGOs, the dependence on giveaways, and short timelines.

A few suggestions to make NGOs more successful included focusing on becoming more adaptable and locally agile, and giving more attention to measurement as a vehicle for impact improvement and accountability. There also needs to be a clearer position on how NGOs leverage business for system change, and NGOs must have a voice in governance.

Providing Financial and Other Resources: Re-thinking the Role of Enterprise Support (Moderator: Thane Kreiner)

The group said that resources are currently lacking to move ventures from ideation to sustainable operations. They outlined four ideas for moving ideas forward.

The first dealt with the problem that neither donors nor investors fund organizational development, often that crucial window between post-innovation/incubation and investment. The goal is to enable an enterprise to transition from mission-driven to a mature company/investable proposition. Two potential solutions are to encourage funders to invest in less glamorous projects, and reduce costs of operational growth (such as toolkits) by sharing back-end work and getting access to enterprise technology systems.

The second issue is that social enterprises are not scaling to the level needed to maximize impact. The group said a goal should be to experiment with different models for scaling social/BoP enterprises. Some potential solutions to the problem include employing holding companies, open source franchising and cooperatives, and outsourcing business functions.

A third issue is that BoP enterprises don’t know how to access resources and support. The goal is to connect the right assistance to the right stage of organizational growth. Potential solutions include a platform for partnerships, a local-level technical assistance database, and a technical assistance marketplace.

The final problem is that many BoP ventures fail for the wrong reasons. The goal is to allow for graceful financial exits and transitions that move the BoP marketplace forward. Some solutions include reframing, turnaround investors, turnaround management teams, governance, and mergers and acquisitions.

Ecosystem Creation in Base-of-the-Pyramid Markets (Moderator: Radha Muthiah (pictured left), executive director at the Global Alliance for Clean Cookstoves; and Javier Ayala, executive manager, Vietnam Business Challenge Fund and leader of the Inclusive Business Program at SNV Asia)

Currently, there are different perspectives and points of view on the role of ecosystems in BoP enterprise development, the group said. There are also too many fragmented and short-term efforts in the

market, and a lack of tools and infrastructure to enable BoP enterprises and ecosystem development.

Some of the next steps the group suggested included building local and regional task forces to strengthen inclusive business ecosystems, shifting focus toward long-term support of BoP ecosystems, finding ways to coordinate existing capacities and platforms, and thinking big.

Building Institutions to Facilitate Enterprise Growth (Moderator: Stuart Hart, president, Enterprise for a Sustainable World and founding director of the Emergent Institute)

Some of the solutions that need to be amplified, the group said, included making more resources and possibilities available to entrepreneurs, an increase in impact investing, an understanding of issues and the market, and the use of technology to share learning. However, some ongoing challenges identified by the group are a lack of early-stage capital, a lack of an integrated approach, the idea that entrepreneurship is often oversold, and the fact that ventures are inflexible and not coordinated.

Some things that could and should be done, according to the group, include: moving from a necessity driven to a capacity driven mindset; leveraging local capital; being humble, sharing learning and being less territorial; and becoming more catalytic and less implementation-oriented.

Best Practices, Major Roadblocks and Next Steps: Agriculture (Moderator: Simon Winter, senior vice president – Development, TechnoServe)

The working group identified some areas of success that should be amplified, including food nutrition security, and long-term commodity crop models and branded high-value opportunities for small-holder farmers.

Some challenges in expanding ICT to improve farming outputs include illiteracy, financial illiteracy, a lack of trust, a lack of ecosystem of cash in-cash out agents to ensure national penetration, and a need to find information service provider models. To address these, the group outlined some next steps such as developing a strategic staircase for the next three, five and seven years, consortium building, and link sharing for the donor engagement process.

Another set of challenges include innovations not being replicated and scaled, impediments caused by policy environments, competition between different players, and inclusion of smaller entrepreneurs below the successful rung.

The group said a fund for replication and adoption of successful innovations supported by a case library is needed. The group said a concept document with proposed processes and potential partners, along with what the country selection and engagement would look like, should be drawn up. Existing case studies should be collected and a master list established. Then new cases should be developed to complete the library. An expert panel can be established to screen top cases.

Editor’s note: NextBillion readers and conference participants: We want to build on the momentum and energy that came out of these many sessions to help build a roadmap that will chart the course for the sector. Please leave your ideas, concerns, questions or respectful criticism in our comments section below.