Al Hammond

A New Model for Success at the BOP: Interview with David Wheeler, Part 3

Click to view Part 1 and Part 2 of the interview.

Doesn?t this model depart significantly from conventional wisdom in its hybrid character?with both for profit and non-profit components playing a significant role? What’s important about this model for larger companies, particularly multi-nationals interested in BOP markets? What’s important about it for traditional enterprise development efforts?

The model does depart from traditional strategy models predicated on ?command and control? thinking and economic rationalism from an individual firm perspective. So we would be hard pressed to conduct a Porter 5 Forces industry analysis on the networks we looked at, although I guess anything is possible. But we do like to think that the SLEN model is entirely consistent with the ?resource based view? of strategic management which is associated with Jay Barney, CK Prahalad and others. We just have to think about resources as being linked to relationships and novel partnerships as much as being controlled by the firm as an independent entity.We also have to think about the value creation process in hybrid business models as being socially constructed–that is to say different actors define value in different ways and that is OK. Not everyone needs to be motivated by money, or saving the planet, or addressing social justice issues 24 hours a day. Sure it is nice to have well intended people who share your values in your network, but sometimes it just makes sense to do a deal and for people to take different forms of value from that deal. That is why the question of pragmatism (?what works??) comes powerfully into play. If you are a small entrepreneur, why not build some of your social capital through an NGO? If you are a development agency, why not invest in small businesses for market based social outcomes? In our experience, the poor are not looking for prescribed routes to economic development as a matter of priority; they simply want an outcome.

As we said in the paper, this means that MNCs and large domestic companies need to think more like facilitators of networks rather than seeing themselves simply as pinnacles of supply chains (either as vendors or buyers). Our more recent research suggests that MNCs that jumped into the BOP space are now struggling with the implications. Unless of course they are in cigarettes or soda, in which case they worked out the implications long ago. If a life sciences company or a consumer goods company wants to be involved in the marketplaces of tomorrow they need to focus first on relationships and only second on sales–at least in the short term. Ironically enough given how they have been criticized in recent years, it is the extractive industries that have often been in the forefront of experimentation in SME development in developing countries. This has been spurred by license to operate issues, but business practicalities too. The BTC pipeline has a lot of detractors, but BP has done some very interesting things there on SME development linked to their needs as a purchaser of goods and services. The key thing here seems to be mindset: is the MNC looking for quick access to a new market or is it looking to be a long term social partner which may lead to longer term integration into a developing country marketplace. With the former approach–which I think was the unintended message of the early BOP arguments–there was always going to be a huge struggle. With the latter approach the struggle will be a different one; it will only be the long term thinkers among MNCs that will have the patience to engage this way and then it may lapse into philanthropy.