From the ToP to the BoP
In 2007, I had the opportunity to consult for a newly formed NGO trying to establish a BoP venture in South East Asia. The NGO’s management team had years of experience running small-to-medium sized businesses, had raised a sizable amount of capital, and had formed an all-star team of advisers. To the management team, South East Asia’s economic potential was on the up-and-up; they felt that this was a great opportunity to leverage their professional expertise and capital for a social good.
I traveled with the team to the region on a short trip and we developed a business plan–we identified specific unmet needs across a range of communities, created a pricing structure whereby customers who had higher disposable income effectively subsidized the poor, and found local partners to help scale up the venture. Everything was set to go.However, at the end of the day, the project didn’t launch because no one from the management team wanted to move full-time to the region to live among the people the NGO wanted to serve. In other words, no one wanted to do the heavy lifting of starting a BoP venture. The management team thought, incorrectly, that it could simply manage the venture from the States–parachuting in and out of the region multiple times a year. There were a variety of reasons for this approach: family, comfort, lifestyle, and finances–to name a few.
The idea was great, but the commitment wasn’t there to make it a reality. If I had actually known that this was plan early on, I probably wouldn?t have traveled with them overseas, saving them time and money. If the NGO wanted to succeed, it needed its own personnel on the ground, working with the local people. There are many in the business community who are eager to do something good for the world, but what they don?t see, at least initially, is the cost involved in making it happen. It goes well beyond writing a check for charity. Check writing: that is the old model.
I’m sure we all know people who want to start a BoP venture, but who have never set foot in a developing country or taken time to really understand the needs of the poor. And when pressed on gaining a firsthand knowledge of the poor, they hesitate. (And by no means am I suggesting that I am an expert in the lives of the poor. I live in Ann Arbor.)
It’s analogous to someone spending a lot of time and energy planning for a huge party, but not attending because there is something more important that day to do. If that’s the case, the party shouldn?t have been planned in the first place.
The fight to eliminate poverty using a BoP approach has more energy and resources around it than ever before. But to really make this happen, we will need to see more people who are willing to take themselves out of the developed world and to insert themselves into the living conditions of the poor, to get their hands dirty working in co-creating and co-developing ventures that can bring about real and lasting change.
In my time at the William Davidson Institute, I have come across a number of organizations taking this idea of embedding themselves into a poor community to create a BoP venture. I want to highlight a couple of these organizations:
CEMEX, a leading global building materials companies based in Mexico, developed an initiative called Patrimonio Hoy, a sales, distribution, and savings program intended to serve Mexico’s large self-construction housing market and to address the housing problems of the poor.
In launching the initiative, Hector Ureta, head of CEMEX’s Auto-Construction business, made a declaration of ignorance, stating that his team did not know and could not assume that they understood the life of the poor in Mexico. To better develop its BoP approach, CEMEX personnel immersed themselves into the communities to learn everything they could about the people, including savings and financing practices, building methods, local supply chains for goods and services, religious and local political leadership, as well as community activities and relationships. This approach has helped the initiative not only in profitability, but also in its local impact.
Hindustan Lever Limited
Hindustan Lever Limited (HLL), principally owned by Unilever, operates Shakti, a program which aims to extend the reach of HLL’s products to millions of consumers across thousands of rural Indian villages. HLL believes that one of its competitive advantages in serving the poor is its management’s understanding of rural markets. That’s why entry level trainees start by spending a few years living in a rural village–eating, sleeping, working, and living with the BoP. It is no surprise that HLL has been quite successful in developing products tailored for the rural markets and has given the poor greater choice than ever before.
There are other companies that have adopted a BoP perspective with an embedded approach as well, including P&G, SC Johnson, and The Solae Company to name a few. These companies – CEMEX and HLL included – are in no way perfect with their BoP ventures, as each faces very complex business and social challenges.
However, their BoP strategies will continually evolve and improve, not necessarily because they have brighter and smarter people, but because they have an on-the-ground presence in their communities. This presence allows for real-time feedback, ongoing co-creation and co-development, continually venture improvement and enhancement, and a greater overall impact in the lives of the poor.
Success at the BoP has its costs. The challenge to many of us, myself included, is whether we are committed and willing to give up many of our comforts in order to live with the very people we are trying to empower.