Scott Anderson

Weekly Roundup – 6/21/14: Impact sourcing gains, a ‘herd mentality’ in impact investing and what Tesla’s patent giveaway can teach social biz

A few random thoughts from the week …

Impact Sourcing Gains

Last year, NextBillion hosted the six-part series “BPO for the BoP” that explored what’s come to be known as Impact Sourcing. The series was authored by Sateen Sheth, former manager of research project implementation at the William Davidson Institute, who defines impact sourcing as socially responsible outsourcing. Impact sourcing companies provide call center and other technical jobs to low-income people in developing economies.

What differentiates them from garden variety outsourcers is that impact sourcing firms aim to reach to those economically, physically or educationally disadvantaged, often with a goal providing them with skills to move up the labor ladder. With support from the Rockefeller Foundation, Sheth interviewed several socially-inclined business process outsourcing (BPO) providers to better understand the impact workers and their families experience, as well as which countries show the highest potential to develop impact sourcing capabilities.

Since then, there’s been even more buzz around impact sourcing and its potential. Some of the firms profiled in Sheth’s research and in the subsequent NB series, were showcased in a piece this week in The Guardian. The article, by Marc Gunther, focused mostly on one of the leaders in the impact sourcing space, Digital Divide Data, which “now employs about 500 people in Cambodia, 250 in Laos and 450 in Nairobi, Kenya, its fastest growing operation.”

The story also mentions a new report on Outsourcing for Social Good: A BPO Perspective by TELUS International, a BPO provider and subsidiary of Canadian telecom TELUS Corp., which notes:

“It’s not a question of companies executing occasional, high-profile philanthropic initiatives. It means embedding this ethic in the very way the company conducts its business. This isn’t being driven by altruism. It is an innovative and sensible strategy for a new brand of business success for BPOs.”

There’s also has been a push toward building more impact sourcing operations and hubs in rural areas to develop and retain workers who normally would flee to find work in urban centers.

“By 2030, 40 million will be trying to migrate to the cities. That means we will be experiencing a significant amount of urban pressures, from shelter, water, and food perspective…and this is not going to be sustainable for the industry,” Accenture Philippines Impact Sourcing Lead Guia Bengzon told companies involved in outsourcing jobs during the ICT-BPM (Business Process Management) conference earlier this month.

Bengzon encouraged large-scale BPOs to allocate at least 10 percent of their outsourcing operations to rural areas.

Relatedly, impact sourcing firm Impact Hub this week released a mini case study on BPO work it helped designed with Social Tables, a tech startup with programs to help hotels and events planners better manage seating for parties and conferences.

It’s great to see impact sourcing continue to attract media attention and further investigation by research firms and tech startups.

Herd mentality?

Shruti Chakraborty with online publication Quartz, took a hard look at India’s impact investing sector and found homogeneity.

“India is among the largest destinations for impact investors. But those in this field, committed to sparking social change, seem prone to herd mentality just as much as mainstream investors. They are putting too much money in one, relatively safe, tried and tested model—microfinance.”

Chakraborty came to that conclusion based on data from Indian consultancy Intellecap, which in a recent study found $1.6 billion in impact investments have been placed in Indian social enterprises in the last 13 years. But the list of sectors weren’t nearly as diverse as some would hope:

“… 60% of that has gone to only 15 enterprises. And 70% of the total, or about $1.1 billion, was deployed in enterprises in the financial inclusion space, which accounts for only 21% of the social enterprises in India” Chakraborty wrote. “It’s practically an investment community that is dedicated to micro-lending.”

Prashant Chandrasekaran, associate vice president of consulting at Intellecap, agreed.

“There is a certain amount of herd mentality. There are clearly not enough risks being taken,” he said.

Opening Up

Elon Musk, founder and CEO of Telsa Motors, did something unfathomable in a world in which companies guard their patents with the unbreakable clutch of a mama bear guarding her cubs. Musk announced this week that Telsa would release all of its technology patents.

“We believe that Tesla, other companies making electric cars, and the world would all benefit from a common, rapidly-evolving technology platform,” Musk said. “We believe that applying the open source philosophy to our patents will strengthen rather than diminish Tesla’s position in this regard.

A convincing analysis in the Motley Fool explains why Telsa’s moves aren’t necessarily altruistic. Specifically, if other companies adopt its battery standards, more automakers will need a common mechanism for charging those batteries, something Tesla also needs in order to boost its own sales.

Granted, there are very few companies with intellectual property as valuable as Telsa’s and even fewer Elon Musks running them. But it’s one more sign that transparency is an increasingly valuable currency.This is what we try to get social entrepreneurs and market-aligned NGO leaders to do on NextBillion. And it helps in business, too. Open up. Share your successes and your failures. You’ll build credibility and you’ll build networks. You’ll also build on successes. (We’ve seen it happen).

Just a thought.

In Case You Missed It … This Week on NextBillion

NexThought Monday – Financial Innovation Moves Away from the Dark Side By James MilitzerWDI

The Science of Dirt (Part 1): Entrepreneur building and selling affordable, electricity-free water filters made with clay, sand and sawdust in India By Kyle PoplinWDI

The Impact of Inclusion: CGAP report looks at recent evidence of how financial inclusion can help the poor By James MilitzerWDI

The Science of Dirt (Part 2): High hopes for the scalability of $12 water micro-filters made of natural elements By Kyle PoplinWDI

Something New in BoP Housing: A new OMJ study explores four key business models tailored to low-income consumers By Christy Stickney

Everyday Financial Alchemy: How the poor make money appear on cue By Ignacio Mas and John Gitau

No More Guessing: The many pros (and a few cons) of IFC’s new Global Consumption Database By Caroline Ashley

Featured Event – SEEP 2014 Conference : Scaling Impact in Inclusive Market Systems By NextBillion Editor

Start Small, Stay Small: Can better finance help Latin America’s microenterprises take the next step? By James MilitzerWDI

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