Rob Katz

Pop!Tech: Paul Polak on Scaling the Bottom of the Pyramid

Paul Polak 2Paul Polak is wearing a sweater vest.? This will come as no surprise to anyone who’s met him or seen him speak.? The man loves sweaters–cardigans, sweater vests, pullovers.? Hell, in Camden today–with temperatures hovering around 40 degrees in the midday sun–Paul’s sweater makes a lot of sense.? But despite his grandfatherly image, Paul is a truly a young, tireless innovator and entrepreneur at heart. ?

Polak is the founder of the non-profit International Development Enterprises (IDE) and the author of Out of Poverty (review here).? He is dedicated to developing practical solutions that attack poverty at its roots. For the past 25 years, Paul has worked with thousands of farmers in countries around the world to help design and produce low?cost, income?generating products that have already moved 17 million people out of poverty.His goal – like Bunker Roy’s – is to create a franchise of barefoot, women microentrepreneurs based on the ruthless pursuit of affordability. Polak suggests that a company could set up a water kiosk where entrepreneurs could sell water at an affordable price, profitably.? (Sounds familiar!)

Paul PolakHe starts his presentation with some seemingly random facts–200 million Americans have hemorrhoids; men talk on cell phones 16 percent more than women do.? His point: we know everything we need to know (and more) about affluent consumers.? But we know next to nothing about the other 90 percent of the world’s customers.

Serving these customers means re-thinking business.? But it also means re-thinking development.? To do so, Polak has based his work on what he calls the three great poverty eradication myths:

  1. we can donate people out of poverty
  2. we can end poverty through national economic growth
  3. multinational companies, as they are now, will end poverty
Poverty Eradication Myths

(Photo credit: Robin Miller from Dalberg Global Development Advisors)

So, now that we understand the myths of poverty eradication, how do we start building businesses that solve practical problems:

  1. go to where the action is
  2. talk to the people who have the problem–and LISTEN to what they have to say
  3. learn everything there is to know about the specific context
  4. think and act big–don?t do anything that can?t reach a million people
  5. think like a child–children have no limit to their thinking
  6. see and do the obvious
  7. if somebody already invented it, you don?t have to
  8. design to critical price targets
  9. design for measureable improvement in the lives of more than a million people
  10. work to practical, three-year plans
  11. keep learning from your customers
  12. stay positive–don?t be distracted by what other people think (if there were a need for it, the market would have already created it)

Polak zips through his PowerPoint, eager to leave time for audience questions.? The first questioner asks him why he needs to make a profit from these companies.? Polak responds, “I don’t remove the profit motive–I embrace the profit motive.? The only way to create a revolution with big business is through profit–and the only way to really end poverty is to bring in business?making money–THAT creates a revolution.”

After the session, I sat down with Paul for a brief interview.

Rob Katz, Now that you’ve left IDE, why have you formed both a for-profit and a non-profit?

Paul Polak, D-Rev and Windhorse International: There are a number of different, practical, down-to-earth strategies to end poverty.? Some of them cannot be effectively delivered in a for-profit way; some are best when done through a non-profit vehicle, but using market-oriented approaches.? For instance, no big company can turn a profit at a 12 percent margin–a village treadle pump dealer can, but a big company can?t.? The for-profit is for those products that can have higher margins and–by association–better scalability.? It’s geared towards changing the way businesses design/distribute/market products–which is the revolution I?m trying to jump start. ? What’s the most important lesson you’ve learned from 25 years of running IDE?

Paul Polak: The most important thing I’ve learned in my career is that you have to talk to poor people and listen to what they say.? Everything comes from that–the poor are my teachers, my friends–start there. How do you build a company where people listen to the poor?

Paul Polak: Ask any successful Western company, and they talk to their customers on a regular basis–it ain?t rocket science here, you just have to talk with your customers.? Very few companies can survive without the ongoing dialogue with customers. What’s the biggest mistake you’ve made in running IDE?

Paul Polak: Tough question–there’s a legion of mistakes.? But the biggest thing I learned from is best told through an example.? The first project we did was build 500 donkey carts in Somali refugee camps in 1981-1984.? It was the most successful project that had been done in Somalia.? So I took that project and applied its principles in Nepal, where 40% of the population lives 1-3 days from a road and has to deal with un-navigable rivers.? We did a high-tech jet barge for transport–and it failed miserably–you needed the infrastructure required of an airport to make that thing work!? It taught me to go back to the simple, affordable things. What’s the most important quality of an entrepreneur?

Paul Polak: Passion and commitment–entrepreneurial spirit.? And even with my best intentions, I have about a 60% batting average in picking leaders and executives.? So you have to be flexible. What’s your answer to people who want to be involved in the fight against poverty in developing countries but don?t or can?t move to there?

Paul Polak: Buzz off.? Seriously.? For us at D-Rev and in the design courses we?re doing at Stanford and MIT, it is an absolute, rock-hard pre-requisite that the students must go to the field.? Or, at the very least, you can work for someone who does go to low-income communities often.? Even talking to someone who’s been to the field is not enough. If you could ask for one thing from the community of people interested in the base of the pyramid space, what would you ask?

Paul Polak: There are some elemental flaws in big business, even without incorporating the BoP markets.? Help us change the global market of business.? We need designers, engineers, money–this has got to be a global movement.? What’s worked for me is creating models–reaching 3 million families–but it took 2.1 million products sold to get some attention.? It would be incredibly helpful to have more attention for more businesses, sooner.? The big money bet is changing how big business designs and markets its products.