Designing Companies for the Base of the Economic Pyramid

Designing Companies to Address the Problems of Poverty
Christopher Hastings
@hastingscj
ObservingInnovation.com
christopher@observinginnovation.com

Basics of the BOP

Who is the Base of the Pyramid?
London

Quick Stats
Hammond et al

Asia outweighs all the other geographies in the BOP
Hammond et al

Poverty Guides
Payne

What is a BOP Business?
BoP-as-consumer ventures are scalable profit-oriented ventures operating in the
informal economy, catalyzed by external participation and co-created with those at the BoP, that connect non-local goods and services to BoP markets.
BoP-as-producer ventures are scalable profit-oriented ventures operating in the
informal economy, catalyzed by external participation and co-created with those at the BoP, that connect BoP producers of goods and services to non-local markets.
London

Triad of Design (how it happens)
Getting Stuff Done
Brown

Current Motives and Models of CSR
Aquilera et al

I.E. Current businesses may not get us where we need to be going based on their current CSR activities.

A New Step
Donations and grantmaking are a crucial component of a company’s corporate identity
It has two faces, one for themselves and one for their customers/community
CSR makes sense for companies in their relationship with community, but very rarely for themselves

So why should they be involved?
“Opportunities for innovation are found on the whole, only way down and close to events…
By the time the deviation becomes ‘statistically significant’ and thereby visible to the planner, it is too late.”
Drucker

What’s the goal?

Changing stuff takes time…
Williamson

Drivers of Social Transformation
Pralahad

How do we get there?

How is Innovation occuring?
Internal Sources
Unexpected
Incongruity
Process need
Changes in market/industry structure
External Sources
Demographics
Changes in perception, mood, meaning
New knowledge, both scientific and nonscientific
Drucker

12 Strategic Characteristics of BOP Products
Pralahad

What business are we designing?

How do you make a business model?

Business Model Framework
Osterwalder

M Johnson

How do you know you found the right business model?

Paul Polak’s “Don’t Bother” Rules
If you haven’t had good conversations, with your eyes open, with at least twenty-five poor people before you start designing, don’t bother.
If what you design won’t at least pay for itself in the first year, don’t bother.
If you don’t think you can sell at least a million units at an unsubsidized price to poor customers after the design process is completed, don’t bother.

Design Goals and Principles

Design Principles
Stanford Design Bootleg

10 Empathy/Management Principles
BOP Protocol

What makes a great non-profit?

Forces for Good Model
Crutchfield and Grant

SCALER values
Bloom and Chatterji

So how do we make a BOP business that combines the best of both for-profit and non-profit?

6 Principles of BOP Activity
Co-Creation
External Participation
Local  Non-local
Patient Innovation
Self-financed Growth
Institutional Consideration
London

Born Global Firm
A small subset of SMEs around the world emerge in multi-country operations – if they internationalize early they are known as born global firms.
Cauvisgill, Knight

Who has done it?

Examples
D-Rev / IDE / Whitehorse / Design for Extreme Affordability
Unreasonable Institute
Mystery of hidden enterprise at BOP

MILLEE
Develops learning games to teach children English via mobile
Developed extensive in-country partnerships
Six years of product iterations

AUIRE
Color and Money Identifier
For visually impaired
Based in Brazil
Working Prototype
Interesting B metrics:
- Employment rate
- Salary of Cust.

The more popular…
Tata Nano – vehicles
d.light – solar lights - $15-30
Avarind – Cataracts - $20
VisionSpring

Casas Bahia - Brazil
Household Products
Started in 1950s
40% penetration
70% no proof of income
85% financed
20% cell phone sales

Shakti Initiative
Hindustan Unilever’s project in rural India partnering with rural MFI networks
iKiosks, Troupes and Distributors
2x
2001
2003
2007
2008
17 60 2800 45K 100K
3 MM
100 MM

Where do we start?

Principles for Search
Entrepreneurial Alertness or Search
Forgiving Business Models (Reliance not Risk)
4 Rules
Bird in Hand
Affordable Loss
Crazy Quilt v SWOT
Influence v Avoidance
Fiet 2006, Sarasvathy

Loose Principles for BOP
Build products that are half complete
Leverage others networks
Poverty alleviation is first elevating social esteem
Design with the end in mind
Materials sourcing matters

What other principles do we add?
Where do we start to tackle these problems together?
Christopher Hastings
@hastingscj
ObservingInnovation.com
christopher@observinginnovation.com

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Designing Companies for the Base of the Economic Pyramid

by Christopher Hastings

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