Monday
May 16
2016

Ted London

NexThought Monday – Seeking Scale: The Unexplored Power of Standardized Tools and Customized Implementation

If you’ve worked in any industry or sector long enough, you start to see some patterns.

I have been working in the base of the pyramid (BoP) domain since 1989. During that time, I have been fortunate to engage with many entrepreneurs and business leaders seeking to develop and launch enterprises in BoP markets. When I first meet these entrepreneurs, they are excited and passionate about their potential impact.  They have a product or service and a proposed business model. Often they have won some sort of business competition or have some internal corporate seed funding. They are on their way, with the next big milestone being additional capital.

These are smart, committed people. Some have come to this point in their lives with substantial business experience in developed world markets. Others are fresh out of school. As we run into each other over time, I see the same thing happening again and again. They begin to recognize how much they didn’t know about BoP markets, and all of this leads to a déjà vu scene that has happened all to often:

“We thought we knew what we were doing, but we have made all the mistakes in the book,” lamented a colleague, who is an experienced entrepreneur in the technology industry. He believed his experience as a successful top-of-the-pyramid entrepreneur would translate well into a BoP context. It didn’t work out that way for him – or for many others.[1]

BoP entrepreneurs and enterprise leaders aren’t destined to repeat his experience. But first we need to change our thinking and adopt new tools to keep us from falling back into old patterns.

For too long, the implicit assumption seems to have been that each enterprise has to respond in a unique way to the specific context it faces. This thinking has downplayed the value of understanding lessons learned and the opportunity to use experience – both successful and less so – to understand best practices.

To be sure, each BoP enterprise faces a distinct context. But so does each enterprise in the developed world. Yet that hasn’t constrained the development of strategies, tools, frameworks and processes that business leaders can use to navigate the complexities of the environment in which they operate. To name just a few, there are Porter’s five forces, the four Ps of marketing and the SWOT analysis. What each of these has in common is a standardized framework that can then be customized to reflect the local realities that different enterprises face.

These frameworks, however, were designed for developed world markets. BoP enterprises operate in an impoverished environment and seek to serve impoverished people. While BoP enterprise development is not about reinventing the principles of business – enterprises must create the right internal design, plan for scale, build a viable value proposition and seek the right partners – it is about recognizing that these principles need to be applied in different ways. This means that the frameworks made for the developed world may not be  sufficient or correct.

 

Ted.London.store

A store selling clean cook stoves in rural India. The author is pictured left.

 

What we need is a toolkit that is specifically developed with the BoP context in mind. BoP enterprise leaders need standardized frameworks that they can modify to their unique context. At the very least, such a guide will help these enterprise leaders avoid some classic mistakes that many BoP ventures seem to make over and over, while providing a roadmap for their journey to scale.

The good news is that as a community we have begun to develop a set of tools, frameworks and strategies derived from examining and understanding success and disappointment in the field. These include the Business Model Innovation Framework (for developing an appropriate internal design), the Co-create, Innovate, Embed Framework (for moving from design to pilot to scale) and the BoP Impact Assessment Framework (for building a viable value proposition from the perspective of the BoP). These are all valuable tools and methodologies for managing growth and impact. I am proposing that we add the Partnership Ecosystem Framework (PEF), a tool that helps prepare the enterprise for building the cross-organizational collaborations needed for sustainability at scale.

In exploring partnerships, enterprise leaders have been guided by an interesting but incomplete question: “Who should we partner with?” While helpful, this question also sends BoP entrepreneurs and business leaders down a false path. Indeed, the trap for too many BoP business leaders is to focus on finding one partner – often someone who can provide financing – or finding partners in a sequential manner, one after the other.

A better question is: “How can we build a robust and evolving partnership ecosystem?”

Operating in an impoverished market with impoverished consumers and producers means that the enterprise faces a market environment where key building blocks may not exist, or may operate in very different ways. To overcome these gaps in a cost-effective manner, enterprise leaders must consider a range of potential partners that can provide support across a wide range of functions – for example, helping to facilitate operational activities, providing access to needed financial and other resources, influencing supply and/or demand or otherwise enhancing the context in which the enterprise operates.

Getting the question right is a good first step, but doesn’t fully solve the problem. The enterprise’s leadership team must still develop a proactive and effective partnership strategy that maximizes access to the resources available from potential partners. And these partners use a variety of approaches, including business accelerators, impact investment funds, last-mile distribution and strengthening market systems, to support to BoP enterprise development.

This is where the PEF comes into play. It is a standardized framework that allows enterprise leaders to strategically consider who should be in their partner ecosystem. By customizing to their specific situation and content, these enterprise leaders can systematically understand their capability set, their current partner portfolio, and then assess where the key partner needs remain.

The PEF organizes support from partners based on the focus and type of that support. As shown on the horizontal axis, support can target either enterprise development or market creation. The former provides support directly to specific enterprises. The latter focuses on creating a better market environment, which can benefit all enterprises serving that market.

Meanwhile, differences in the type of support are captured on the vertical axis. Support directed at capacity building increases the stock, or the value of assets, including an enterprise’s resources or a market’s infrastructure. Support directed at action enabling enhances the flow, or the total value of transactions, by facilitating enterprise activities and market transactions.[2]

This generates four quadrants that capture the landscape of support that can be provided by potential partners (see Figure 1 for a subset of possible support from partners). The result is a diagnostic tool that enterprise leaders can use to develop and manage their partnership portfolio.

 

PEF

Figure 1: Partnership Ecosystem Framework

 

boppromiseThe PEF is a standardized framework that BoP enterprise leaders can customize to their own situation. Our work in the field has shown the value of such an organized approach.[3] These leaders can better: 1) assess where partnership support is most crucial, 2) plot their existing set of partners and the support they are currently providing, and 3) identify key gaps that remain. This leads to actionable strategies that enable a BoP enterprise to build and maintain an integrated and evolving ecosystem of partners that responds to key challenges in the enterprise’s journey to sustainability and scalability.

This is a key part of the future of BoP enterprise development – standardized strategies, frameworks and processes that can be customized to the local context. At the very least, these will help enterprises avoid some classic mistakes. Better yet, this toolkit of frameworks can offer a blueprint for increasing the likelihood of an enterprise’s success.

 

Top image: University of Michigan students participating in a renewal energy project in Jordan. 

 

Ted London is Vice President and Senior Research Fellow for Scaling Impact Initiative at the William Davidson Institute. He is also a faculty member at the Ross School of Business at the University of Michigan. His most recent book is The Base of the Pyramid Promise: Building Businesses With Impact and Scale.

 

(Disclosure: The William Davidson Institute is NextBillion’s parent organization).

 


 

[1]This quote was captured in my book, The Base of the Pyramid Promise: Building Businesses with Impact and Scale (Stanford Business Books, 2016)

[2] Material from these paragraphs were initially presented in my book, The Base of the Pyramid Promise: Building Businesses with Impact and Scale (Stanford Business Books, 2016)

[3] In particular, I would like to thank Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH and the Inclusive Business Action Network for their support of our field research.

 

Categories
Education, Entrepreneurship, Impact Assessment
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Base of the Pyramid, books, education, scale, startup