John Paul

Can MNCs succeed at the BOP? Thoughts from the BELL Conference

I’m at the BELL Conference at Cornell University, and just came out of the Sustainable Innovation for Incumbents discussion, which addressed the challenges MNCs face when creating sustainable global enterprises, including those that tackle the BOP market.? The two main obstacles identified were:? 1) how to change the corporate mindset, and 2) what skills?/ competencies are required.? Both were discussed in depth by the audience, who gave a variety of?perspectives on the issues.

Changing mindsets seemed to be the bigger of the two challenges.? Why should a company spend money on a market perceived as having no credit, lots of corruption, and people who don’t or can’t pay?? There’s also a reputation risk for the company if NGOs and other advocacy groups perceive a for-profit company entering these markets as exploiting the poor.? Most corporate systems are driven towards short term profits, while BOP markets are often long-term investments.? It was also pointed out that middle management mindsets are often harder to change than upper management because of their perceived job risk of venturing into unfamiliar activities.? And then there are the institutional biases against development disruptive technologies, as opposed to incremental change.

Incumbent MNCs also need to develop certain skills to succeed in these markets.? They must be able to leverage the value of multiple partnerships, often with NGOs and governments.? They also must learn how to sell to BOP markets, which can be quite different from their prior experiences.? In most companies, there are also pressures to rapidly scale successes in the short term.? Doing so in BOP markets requires additional knowledge and skills.

There seemed to be more challenges offered than solutions, but a few good ones were mentioned.? Companies must create incentives for developing sustainability and succeeding in BOP markets.? For any new activity, a strong business case must be developed to minimize the perceived risk, especially among middle management.? Getting both shareholders and the board of directors behind the initiative is also critical.? New products and services also must be treated as ’normal’ within the business; if they are treated as a ’special case’ they will be marginalized over time.? Finally, new business models must recognize the differences in corporate cultures, and be designed to fit the ones in which they are implemented.

After the session, I had a brief discussion with the people sitting to my left and right, one?a business school professor and the other the Dean of a business school.? They both agreed that SMEs may have a better chance of succeeding than MNCs, because they are more dynamic and better able to change strategies.? I’m not sure I agree, although it does seem easier for an MNC to buy this institutional knowledge by acquiring such a company, then developing it themselves.? I’d be interested in hearing thoughts by others on this site who have had their own experiences trying to change corporate mindsets.?

World Resources Institute