!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Strict//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-strict.dtd"> Streamline Training & Documentation: Serving the "Bottom of the Pyramid"

Tuesday, December 09, 2008

Serving the "Bottom of the Pyramid"

Some of my previous posts have looked at social entrepreneurship — people coming up with new solutions to social problems and then implementing them on a large scale, often in a profit-making way (as opposed to mostly depending on government subsidies and grants for funding).

Continuing in this vein, I'd like to highlight a project in Mexico whose story is particularly well-documented and thus can serve as an instructive case example of how some social entrepreneurs work to achieve their objectives in a sustainable fashion.

The project (pdf) in question involves combining the efforts of two non-governmental organizations and a for-profit firm to supply affordable irrigation systems to impoverished small-scale farmers. As described by Ashoka, an umbrella organization for social entrepreneurs that is facilitating the project, it involves
... a partnership between a leading water distribution and irrigation company [Amanco] and a group of selected Ashoka Fellows with strong local presence in rural communities in Mexico. Together, they are inventing a new type of rural distribution channel, not only to deliver irrigation systems appropriate to the needs of small farmers, but also to bring value-added services such as affordable technical assistance in production, crop certification and marketing and financing mechanisms needed by most clients at the grassroots level as well as other critical products. The partners are committed to developing sound business solutions that will ensure impact at the farmer level by increasing household incomes, position [Amanco] to lead in this underserved market representing hundreds of millions of dollars in potential sales, and enable social entrepreneurs to generate new sources of income for their organizations and further their social mission.1
Amanco (pdf) is supplying the irrigation technology on preferred distribution terms to the non-governmental organizations, along with promotion materials and training; the company is "committed to long-term product innovation in order to further decrease the cost and tailor the irrigation systems to small farmers' needs."

Ashoka points to three principles that have emerged from their experience in working with social entrepreneurs on projects like the irrigation project in Mexico. A business firm must:
  • Design products and services that tap into the wealth of the poor (e.g., land, livestock, saving capacity).

  • Adopt a radically altered business model, one in which engaging in a large number of small transactions is profitable.

  • Leverage the power of communities as both consumers and producers, i.e., design a business model that takes into account how boosting income from production increases family buying power, which can then further raise income in a virtuous circle.
After a year or so of running their two pilot projects in Mexico, Ashoka had drawn several lessons:
  • Successful partnering of social entrepreneurs and traditional profit-making companies is not simple. The partners should expect to take time to get to know each other and to refine their approach.

  • It is essential "to intricately link the products sold (i.e., irrigation systems) with the mission of the social entrepreneurs." (Note that not all social entrepreneurs will benefit from partnering with a profit-making company.)

  • There is a steep learning curve for most organizations. External financial resources and specialized human resources, as well as appropriate systems and work processes, are required.

  • All partners will need to shift their mindsets to some degree. Ashoka found that this shift in perspective can be promoted through such factors as:

    1. Involvement of an outside facilitator to accelerate the trust-building process.

    2. Systematic reflection on lessons learned, achievements, and bottlenecks.

    3. Evaluation metrics that are periodically revisited.

    4. External mandates and incentives that create pressure to perform.

  • At the business firm, designate a team leader reporting directly to the CEO and dedicate human resources that can focus exclusively on the new business model.

  • It takes time to reach critical mass and capture the interest of key players in the business firm.

  • Expect to learn as you go, e.g., the business firm can expect to make technical changes as it gains field experience, and the social entrepreneur can expect to have to explore a variety of possibilities for mobilizing financing.
Note that the Ashoka irrigation project can also be seen an example of the profit-driven strategy for alleviating poverty that C.K. Prahalad calls for in his influential 2004 book, The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits. Prahalad argues that it is entirely feasible to create wealth among the 4 to 5 billion severely impoverished people of the world by using innovative business models. The idea is to balance positive social impacts and profit-making goals in a way that fairly benefits all participants.

1 From ashoka.org, retrieved 12/9/08. (Ashoka is named after "the Indian leader who unified the Indian subcontinent in the 3rd century BC, renouncing violence and dedicating his life to social welfare and economic development. For his creativity, global mindedness and tolerance, Ashoka is renowned as the earliest example of a social innovator.")

A 2007 update on progress with the Mexican irrigation project is here.


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