July 8

David Lehr

Making Better Investments at the Base of the Pyramid: A Framework for Impact Assessment

In “Making Better Investments at the Base of the Pyramid,” Ted London of the University of Michigan points out that even though most ventures serving the world’s poor have feel-good stories and data on milestones, most of them lack a systematic way to assess how well they’re reaching the people they set out to serve. Too often, the wrong indicators – milestones and tasks accomplished – are used, and these fail to capture the complete picture. London argues that without understanding exactly whom their ventures benefit and how, managers cannot effectively build on the approaches that work, and avoid those that do not.

London has developed a more holistic approach – the Base of the Pyramid Impact Assessment Framework – that guides managers through a detailed look at the impact a BoP venture has on the economics, capabilities, and relationships of local buyers, local sellers, and local communities. The framework identifies and examines negative as well as positive effects.

London acknowledges that VisionSpring, for instance, has created successful women entrepreneurs and enabled craftspeople who were losing their sight to work well beyond the ages they had previously been able to. He goes one giant step further by looking at how others in the community were also impacted. For example, as women became more independent and transcended their traditional roles, the potential for “community strife” increased. London’s framework also alerted VisionSpring to potential spending shifts within the community that might lower existing businesses’ income due to increased competition for consumers’ purchasing allocations. (Yes, more competition is good for consumer prices in the long run, but the impact on local businesses is decidedly mixed.)

Any tool that helps BoP business managers understand and anticipate the impact that their efforts might have is valuable. At the very least, London’s work reminds us that fostering entrepreneurship has consequences – both good and bad – beyond just the entrepreneur and his immediate family. Identifying these potential impacts is critical for effective program design and perhaps even more important for responding to the ongoing challenges that are sure to surface.

London’s framework can also be applied to communities emerging from a period of conflict –sometimes ideological, other times driven by ethnic or religious differences — where there might be multiple “communities” and the need to ensure a balanced approach between those communities is paramount. Without understanding impacts, a balanced approach can be extremely difficult to identify.

The BOP Framework could be taken even further by accounting for non-local impacts. VisionSpring also creates a downstream supply chain impact and jobs in other communities around importing, distribution, and transportation of their eye care products. They also refer some eye problems to other treatment channels, which might cause increased spending outside of the local community, but ultimately lead to a healthier and more productive local population. Truly understanding these “multipliers” can enable an even stronger statement to policymakers, potential funders and to the BoP venture managers themselves. It may also turn up hidden opportunities that can not be found by looking only locally.