Martin Herrndorf

What Does It Take to Build a Market? (An India Session @ SOCAP Europe)

How big can impact investing become? When looking for an answer (and hoping to find an encouraging one), it’s best examine a big country – like India. That’s precisely what did McKinsey & Co. and Omidyar Network did. The two organizations presented a BoP market study at SOCAP/Europe revealing a bullish outlook.

The session, convened by Omidyar Network and its partners, brought together leading insights into the Indian market, with a focus on energy and medical technology, and leading entrepreneurs in which Omidyar has invested. The goal was to move from “mission to mainstream,” in order to mobilize the vast resources needed for the Indian market.

Market Size – Some Nuggets

As a start, Omidyar Network and McKinsey presented their market study (see a write-up on the SOCAP website for details). The outlook was bullish, and put the market for medical technology at the BoP in India at $10 billion by 2020, or as big as entire Indian pharmaceutical industry in 2007. With similar scale, the energy market could reach $6-6.5 billion by 2020. This is not only question of commercial interest, but also about mobilizing the resources to “improve the lives of hundreds of millions of Indians,” as stressed by Jayant Sinha, Managing Director of Omidyar Network India Advisors.

Second, most of the demand is still latent – 53 percent in health care and 63 percent in energy – pointing to the need to actively develop these markets, uncover the market barriers existing today, and ways to overcome them.

Models to Markets – Shifting Perspectives

Moving to a markets perspective also will challenge some “BoP pet projects.” For example, the market micro-grids (or systems powered by small hydro-electric or biomass plants in villages that are off the national grid) will be ten times as large as that for household solutions – questioning the value of yet another solar lamp project. (Still, there will be a market, and innovation leader d.light was featured later in the session).

There also might be a need for new market infrastructure. Take certification: Indian doctors rely on technology approved by U.S. public health bodies, which leaves open the question of how adequate these often expensive devices are for the Indian reality, and creates a market barrier for Indian suppliers targeting Indian (BoP) customers. Really growing the market to its full potential requires creating the underlying infrastructure, such as respected local certification agencies, to unlock the promise of venture investing.

A market perspective might also challenge perceptions of “social impact”. Chris Beshouri, President-McKinsey Philippines, said he was “struggling with notion of social impact,” explaining that “just providing services that people don’t get otherwise is a social impact.” While a relatively straight-forward and easy to understand notion, it calls into question the need for elaborate impact assessment. The experience seems to be shared by others. I once heard Jordan Kassalow, founder and CEO of VisionSpring explain how he convinced board-members of the social impact of providing glasses to people who otherwise wouldn’t have access to eye glasses: He asked the board members to take their own glasses off for a few minutes.

An “inclusive market” perspective allows us to take a broader look at the issue – a well-developed market that serves people’s interest might be more relevant than specific efforts to create “impact.”

India-Europe Comparison

As I attended the “Indian” right after the “European” session (a post on that will be published shortly), it exposed me to some interesting comparisons between the Indian bullishness and European caution regarding the promises of venture investing. What are the reasons for this gap? Is it the size of the challenge? Is it the scarcity of, and problems with, public and charitable resources in India?

In any case, the session showed how taking a market perspective uncovers some myths, and points to new and some provocative solutions.

P.S.: I incidentally set “from models to markets” as the topic for the oikos UNDP Young Scholars Development Academy in Bangalore, August 2011 – nice to see how India itself is driving that discussion!

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Health Care, Impact Assessment
Base of the Pyramid, impact investing