Beyond BASE: The Needs Are Here Now, So Are the Markets
The Inter-American Development Bank’s Opportunities for the Majority Initiative (OMJ) recently held its first international event on Business at the Base of the Pyramid. The First BASE Forum took place in Sao Paolo on June 27th-28th, 2011, with more than 700 in attendance and a jam-packed agenda. Between the Samba music during panel transitions and the Pao de queijo served at the brief but intense coffee networking, BoP business “thought” history was made as top business leaders from across Latin America mixed with heads of NGOs, think tanks, consulting firms and other industry players. Here just a few of the many themes that emerged from BASE:
1. BoP business is for everyone… If BASE made one message clear from the start, it is that Business as the BoP is everyone’s business – not just that of micro-entrepreneurs who often already come from emerging segments of society and have the agility to get close to the communities they wish to serve. It’s also not just for multinationals and large corporations with resources to invest in new market exploration and trial pilots. Small and Medium sized Enterprises (SMEs) are also “anchors” that know how to deliver goods and services to low-income communities, which will be demonstrated going forward as OMJ, the Inter American Investment Corporation (IIC), Itau Unibanco, the Republic of Korea’s and Endeavor launch a new program offering training and financing to accelerate business models of up to 600 SME companies serving the BoP.
2. “Opportunity” is in the Majority. The numbers speak for themselves. Pedro Bulcao of SINAF, whose microinsurance business model thrives on serving the poor in Rio’s favelas and peripheral communities delivered the message loud and clear. Serving 40 million Brazilians who are not on the radar screen of most companies is good for business, and for the economy. In Latin America. the numbers are exponential, 360 million people from low-income segments with approximate per-capita incomes of under USD$350/month but a collective annual purchasing power of US$500 billion, vastly underserved due to the lack of companies seeking to compete for market share with quality goods and services. Is your company looking for growth opportunities? You get the hint.
3. BoP 101: If you haven’t heard yet, the main difference between traditional business and BoP business? Low margins and need to reach scale to be sustainable – repeat ad infinitum. Companies engaged in “live” BoP projects will tell you that the key to profitable businesses is through accessing distribution platforms and forming partnerships to reach large-scale capillarity. You can build your own, as several companies are doing to reach the BoP with health care services – look at Sorridents, Brazil’s largest dentist franchise with over 100 locations built and 1 million clients, some of whom are reached through their mobile dental clinics. Or you can leverage others’, as is the case with Salud a Su Alcance of Guatemala, with over 300,000 clients gaining access to low-cost basic medical services through a distribution network including Banrural, one of Guatemala’s largest commercial banks, and a new partnership with Fedecredito of El Salvador, to distribute its basic health care coverage program through the typical business hub in most communities: the municipal market network. Finding the right “mix” of distribution networks and partnerships is not a standard “copy-paste” formula to get it right for your business, and doesn’t happen overnight, but it’s the holy grail of doing good business at the BoP in a way that helps makes a difference for a lot of people.
4. It takes an ecosystem. Most BASE attendees already preach and practice that market solutions are the best complement to public social programs and philanthropy to serve the poor. After all, what other sector inherently embeds the constant drive to innovate and improve efficiency in order to profit and scale, four of the magic ingredients needed to ensure the success of any business model seeking to meet the needs of large underserved markets? But BoP business today is still different (see #3) and companies can’t do it alone – at least not easily. It takes a whole host of enabling factors to make this budding industry get off the ground: regulation supporting the models, partnerships, access to credit, specialist advisors who understand BOP markets, talent attracted to develop the models, risk takers willing to enter new markets, just to mention a few. And it takes venues to learn from others’ successes and failures, and to share stories to inspire other entrepreneurs to join the “industry”, as rightly pointed out by Rodrigo Villar of New Ventures Mexico. Rodrigo’s right, so OMJ is already working on BASE II in 2012.
5. Be the Best: Michael Chu – one of the founding fathersof Banco Compartamos, which became the poster child of success for the original BoP inspired business model – microfinance- and now managing partner of the Ignia Fund – summed it up beautifully. The BoP needs the BEST from business: B: top quality products and services; E economic, i.e.affordable accessible prices; S solidarity, so that all benefit from the model, not exclusive to the top social classes, T today: the BoP has urgent unmet needs now. Nizan Guanaes had a different wake up call to businesses just starting to gain a glimpse at the 70 percent of the population currently not part of their “core” clientele. Get out and meet the “Donha Marias” of the region, the “prototype” BoP actor responsible for driving an important share of the current economic boom in Brazil. You will learn that while Donha Maria may still ride the bus to buy beans and cooking oil, she is tired of just meeting “basic needs”, and aspires to much much more! And it’s up to you all to provide her with the best products and services and the best quality possible at the best possible prices. The “poor” don’t just want affordable access if it means poor quality.
OMJ closed BASE with a formal commitment from the IDB to work towards doubling its current level of investments to support business with social impact at the base of the pyramid, but that is by far not the major headline. For anyone who was there or who is reading this, please help make BASE a baseline in BoP business history, so that between the networking connections made in Sao Paolo and the new business ideas brewing inspired thanks to the numerous powerhouse panelists we all leapfrog a notch or two towards the ultimate goal: getting businesses to include the BoP in the day to day core business strategies so that that we don’t have to talk about “BoP business” as if it were different anymore…