2. minna halme_bop_keynote_200412Presentation Transcript
Key learnings for successful inclusive business models: Examples of Grunfos Lifelink, Cemex, ITC eChoupal and MyC4 Minna Halme
Base of the Pyramid Approach Minna Halme
Nearly 200 BOP business models have been documented.Initiators range from multinational companies to SMEs, social enterprisesand non-governmental organizations.BOP business examples Minna Halme
Why go for the BOP?Some BOP markets are large and attractive as stand-aloneentities.BOP markets are a source of innovation (disruptive innovations): Local innovations can be leveraged across other BOP markets: A global opportunity for local innovations. Innovation blow-back: BOP can be a catalyst of innovations also for the developed markets. BOP markets can be a source of resource efficient innovations, because of scarcity of commodities such as water and electricity.Opportunity for radical industry renewal.Additionally, BOP-business may offer an opportunity forinnovative corporate responsibility 4
CemexProblem: Lack of housing for the poorSolution: Cemex’s saving & credit scheme Patrimony Hoy allows poor customersto add on to their homes kitchen, bathroom, one at a timeGroups of three families save76 weeksGood quality materialsAdvice and technical help in the building the additionOutcome: Since its inception, over 265,000 poor families have built additions totheir homes with PH. 60 % of participants say they would not have been able tobuild their house without the program.The program creates jobs mainly among local masons and those trained aspromoters. 95 % of promoters are women, 51% of whom had no previous workingexperience. 29% of participants use their homes, or extra rooms that they havebuilt through their participation in Patrimonio Hoy, to build their own businesses.
ITC eChoupal procurement hubs for farmers in India (1/2) Problem: Small farmers do not always get a fair price for their produce at Mandi markets (Indian government controlled produce auction; picture), where cheating is a common practice during the weighing process. At the same time, companies can have difficulty finding good quality soy to make food products. Case: ITC is a major agritrading company in India, which buys mixed quality soy from agents to make food products, particularly food oil. 6
CASE eChoupal procurement hubs for for farmers in India ITC 6: ITC eChoupal procurement hubs farmers in India (2/2) (2/2)Solution: eChoupal (two-part program):Part 1: Through a chain of village internet kiosks,farmers get access to grain and seed rates prior totaking their produce to the market and can sell whenthe rate is high or acceptable. ITC trains coordinatingfarmers to help in this process (picture).Part 2: ITC procurement hubs are set up withelectronic weighting to avoid cheating in Mandimarkets, to inspect soya quality and pay the farmersaccordingly and immediately.Outcomes: ITC procures good quality soy andremoves agent commissions and farmers get a fairprice for their produce. 6,500 eChoupals serve40,000 villages and 4 million farmers in India. TodayeChoupals trade in 13 commodities (2 million tons;$400 million). 7
Microfinance over the internetPROBLEM: Subsistence entrepreneurs have too little money or can’t get bank loans.SOLUTION: MyC4 is a microfinance bank operating through the internet since 2007. • MyC4 grants loans to small enterprises in African countries • Investors are individuals and organizations in developed countries. • Each investor can choose the loan recipient, follow how the enterprise succeeds and can also give advice. • Local ”providers” in Africa screen prominent entrepreneurs.REVENUE MODEL: MyC4 charges a 6% interest fee on the loans when they are repaid.OUTCOME: Over 19,000 investors from 115 countries have invested over €15 million through the MyC4 website. Over 8,000 businesses in seven African countries have been funded.
Grundfos LifelinkPROBLEM: Lack of safe drinking waterSOLUTION: Water systems for rural communities, schoolsand hospitals It is crucial to develop community ownershipUsers pay with mobile phone & pre-paid key fob (RFIDTechnology).Local banks participate in financingSolar panel is power sourceMaintenance and repair costs are included in the waterpriceOn-line remote monitoring with GSM/GPRS Quick repair in case of faults Locals have been trained as repair mechanics Minna Halme
BOP business innovation checklist Types of innovation needed for BOP business modelsProduct Delivery Adaptation to Relationship Partnershipinnovation innovation Infrastructure and labor and network innovation innovationAffordability and Efficient Design for Deskilling work Untypical quality delivery hostile processes businessDifferent process environment Local actor partners functionality Group credit (e.g. erratic involvement Multi-Commercial schemes electricity, dirt Trust-based stakeholder scale Effective roads) relationships relationshipsResource distribution Hybrids: new Mutual benefit Common goals efficiency systems technology in Utilization of deficient Capabilities Usable development complimentary interfaces infrastructure resources conditions Last mile by Network local assembling and subsistence coordination entrepreneurs 10
Corporate challenges for inclusive innovation BOP-markets are considered challenging for market-related barriers Deficient market information and regulatory environment, lacking physical infrastructure or access to financial services But inclusive innovation can often be hampered by corporate management frameworks Short-term profit maximization, business unit based incentive structures, and uncertainty avoidance. Inclusive business innovation processes do not conform to these frameworks Promoters of inclusive innovations may face shortage of time for the tasks they have, lack of adequate financing, and lack of access to expertise from within their organization. Overcoming constraints: Intrapreneurial bricolage Dedicated innovators may act like entrepreneurs within a large organization. They ”make do” with whatever scarce resources are at hand such as substantial amounts of their free time, private-life networks, or previously discarded technologies, and make creative combinations of these resources in order to promote their inclusive innovation. Occasionally they work underground and even against their superiors’ orders. Success depends on organization’s tolerance to intrapreneurial bricolage Read more: Halme, M, Lindeman, S & Linna, P. 2012. Innovation for Inclusive Business: Intrapreneurial Bricolage in Multinational Corporationsjoms. Journal of Management Studies. doi: 10.1111/j.1467- 6486.2012.01045.x_
Thank you! Professor Minna Halme For information: http://management.aalto.fi/en/research/groups/bop/ & www.aaltoglobalimpact.org/ Minna Halme