Presentation IT MNCs and the BOP for TNO IT4D group December 2009


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The presentation was delivered at the office of TNO IT4D group.

It highlights the research conducted on multinational ICT companies and the Base of the (economic) Pyramid.

The presentation includes extra slides at the end that elaborate the key findings.

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Presentation IT MNCs and the BOP for TNO IT4D group December 2009

  1. 1. BOP & ICT MNCS Base of the Pyramid approach reflected on the strategy of multinational ICT companies GUEST PRESENTATION - Anand Sheombar @ TNO, IT4D group 16 December 2009
  2. 2. CONTENTS • What is BOP • ICT & BOP • Research question • Research approach • Multiple case study method • Data collection – 5 cases • Case report analysis • Example M-PESA • Findings / hands-on summary • Conclusion • Implication
  3. 3. WHAT IS BOP? Base of the economic Pyramid (BOP) or Bottom of the Pyramid
  4. 4. ICT & BOP? Estimated BOP market and focus on annual ICT spending per region (WRI, 2007)
  5. 5. RESEARCH QUESTION Local partner (NGO, local Multinational ICT entrepreneur, local company governmental institution etc.) Base of the Pyramid (BOP) • How can multinational ICT companies (ICT MNC) benefit from entering the Base of the Pyramid (BOP) market in a commercial successful and sustainable way? • And what could be the opportunities in the BOP market for multinational ICT companies?
  6. 6. SUB (RESEARCH) QUESTIONS 1. What is the so called BOP market and how does it look like in Africa? 2. Of what interest is the BOP for the researched multinational ICT companies? 3. What kind of BOP business models & strategies are pursued by the researched multinational ICT companies? 4. What kind of products & services are developed and delivered to the BOP by the researched multinational ICT companies? 5. Assuming ICT MNCs cannot or will not enter this BOP market alone, with what kind of organization is a partnership forged by the researched multinational ICT companies? 6. Is there an interrelation between the main units of analysis of this research, namely BOP business models & strategies, products & services and partnership?
  8. 8. RESEARCH APPROACH • Focus mainly on qualitative and not quantitative aspects • Case studies • Semi-structured interviews • Focus on Africa
  9. 9. MULTIPLE CASE STUDY METHOD Multiple case study method (Yin, 2003)
  10. 10. DATA COLLECTION – 5 CASES Case Project IT MNC Description number I M-Pesa Vodafone (Safaricom Mobile payments & banking. in Kenya) II Village Phone Grameen & Nokia Rural shared telephone facility. III Village Nokia-Siemens Rural local phone network in Connection Networks (NSN) the village. IV World ahead Intel Sustainable technology for (Classmate PC) users in developing countries. V Unlimited Microsoft Various ICT activities aimed at Potential emerging markets. (Telecenter)
  11. 11. CASE REPORT ANALYSIS CASE REPORT ANALYSIS STRUCTURE Case analysis category Description Main unit of Business & Strategy Analysis ► Value proposition The sum total of benefits and costs, thus value, that result from engaging in business with that company. Business model Local capacity building It refers to the extent to which the company contributes to the local capacity of qualities communities. Embeddedness The extent to which the business is an integrated part of the lives of those at the BOP. Learning by the firm through native capability Inclusion of learning in the business model Scalability The potential scale and scope of the business model. Value chain scheme A graphic representation of the value chain from IT MNC to BOP consumer. BOP 1.0 or BOP 2.0 BOP 1.0 (Selling to the Poor) versus BOP 2.0 (Co-venturing) Relation business model & strategy, partnership and Graphic representation of the relationship between these three main units of products & services analysis. Sustainability; Triple P aspects Graphic representation of the sustainability of the company’s BOP venture (people, planet, profit) Main unit of Products & Services Analysis ► Availability The extent to which customers are able to readily acquire and use a product or service. 4A-Framework Affordability The degree to which a company’s products or services are affordable to BOP consumers. Acceptability The extent to which consumers and others in the value chain are willing to consume, distribute or sell a product or service. Awareness The degree to which customers are knowledgeable about product or services. Product & service development Development process. Main unit of Partnership Analysis ► Cooperation Analysis aspects of the cooperation of the IT MNC with local partners. Typology Classification of partnership.
  13. 13. M-PESA CASE ANALYSIS HIGHLIGHTS • Banking for the unbanked. BOP business • Distribution via M-PESA agents model & strategy • Partly embeddedness in BOP. • Usage different from initial design. Product & • Opportunities for scaling up; service Partnership development even outside BOP markets . • Affordable: Pay As You Go charging model • “Private social private” partnership. M-PESA (Low- Public private CBA banking Safaricom telecom M-PESA Educational development income) funding activities operations agents marketing joint project Consumer Faulu MFI
  15. 15. CONCLUSION –ANSWER ON RESEARCH QUESTIONS How can multinational ICT companies (ICT MNC) gain benefit from entering the Base of the Pyramid (BOP) market in a commercial successful and sustainable way? • Shift in mindset • Quality aspects of the business model • Unconventional partnerships • Factors that could impact the health of the partnership • Alignment is needed between “BOP Business model & strategy” with the chosen “Partnership” and the “BOP Product & Service development
  16. 16. CONCLUSION –ANSWER ON RESEARCH QUESTIONS -II And what could be the opportunities in the BOP market for multinational ICT companies? • BOP has massive and a growing underserved markets • Local innovations can be leveraged across other BOP markets. • Multinational ICT companies learn from local partners or from the local BOP community • Transfer to their higher-income markets (innovation blowback).
  17. 17. IMPLICATIONS Research: • ICT for development (ICT4D) ; partnership issues • Quantitative research (survey) ICT MNCs in the BOP • Comparative research (local companies) Practice: • Inspiration for ICT MNCs to engage with the BOP (differently). • Sustainablity aspects; BOP strategies in conjunction with clean technology could lead to competitive advantage, academics argue. Education: • Awarenes for BOP
  18. 18. Questions? Contact address: LinkedIn:
  19. 19. Additional information (extra slides) I. Findings for business model qualities II. Discussion of findings BOP business model qualities III. Value chain schemes IV. Discussion of value chain schemes V. Relation business model & strategy, partnership and products & services VI. Discussion of Relation business model & strategy, partnership and products & services VII.Findings products & services VIII.Discussion findings products & services IX. Findings Partnerships X. Discussion findings Partnerships
  20. 20. FINDINGS FOR BUSINESS MODEL QUALITIES Business Model Qualities Vodafone Nokia MTN NSN Intel Microsoft Unlimited M-PESA Village Phone Village Connection World Ahead Classmate Potential PC Value proposition Banking for the unbanked. Affordable village Affordable connectivity Sustainable technology. lCT that is accessible, Locally responsive strategy. telecommunications. and access to mobile Classmate PC as affordable, and Micro-finance funding and phones learning device and relevant to repayment for the Village Franchise-based business connectivity. community’s needs. Phone Operator. model. Telecenters of community interconnectivity. Local capacity building M-PESA agents. Village Phone Operators. Village entrepreneurs . Local companies Telecenter Local entrepreneurial Local entrepreneurial Training educators. operators. activity. activity Local entrepreneurial activity. Community Technology Skills Program Embeddedness Partly embeddedness. Partly embeddedness. Partly embeddedness. Embedded in local Partly embeddedness. educational structure. Partly embedded. Learning by the firm MFI, local M-PESA MFI, Village Phone Village community. Incorporated in its Telecenter operators. through native resellers. Operators, telcos. Educational marketing. product life cycle (PLC). Research on the capability Usage different from initial Exploratory design Field research Ethnographic research. ground. design; adjustments were research. made. Time on the ground Scalability Opportunities, also outside Scaling out and adaptable Scaling out and Scalable, replicability Scaling out and BOP. in an environment with a adaptable and expansion. adaptable and microfinance structure.. . replicable. Worldwide potential. Worldwide potential.
  21. 21. DISCUSSION OF FINDINGS BOP BUSINESS MODEL QUALITIES • Value creation localized by the use of local BOP-entrepreneurs. • All cases contribute to ICT for development. • The local community is often included in the capacity building. • The cases resemble situations of partly embeddedness. • MNCs learning from local partners and in particular the BOP-community.
  23. 23. DISCUSSION OF VALUE CHAIN SCHEMES • In none of the cases full embeddedness was reached and this is shown in the value chain schemes; • Participation of the BOP community mainly focuses downstream in the direct contact with the BOP-consumer.
  26. 26. DISCUSSION OF RELATION BUSINESS MODEL & STRATEGY, PARTNERSHIP AND PRODUCTS & SERVICES • In this small sample a certain preference is observed. • A larger sample could alter this picture. • The hypothesis that actually any configuration of influence between the three factors is possible still holds. • The only key prerequisite is that the three main factors should be aligned for success in a BOP venture. • Sustainability focus lies on “people” and “profit”.
  27. 27. FINDINGS PRODUCTS & SERVICES Products & services Vodafone Nokia MTN NSN Intel Microsoft Unlimited Potential - telecenters M-PESA Village Phone Village Connection World Ahead Classmate PC Availability Particularly unbanked Anyone in the rural Anyone in the rural area Often in rural areas Rural areas as well in people, actually anyone. area urban regions Acceptability M-PESA agents as low- Village Phone Local village Complete solution for Local telecenter profile entrance point. Operators as low- entrepreneurs as low- education operators. profile entrance point. profile entrance point. Works within existing Services should match Research on non- educational models community’s needs. literacy lead to product improvements. Incentives for teachers. Evaluations lead to improvements. Affordability Pay as you go. Special rates for the Monthly subscription but Relative affordable prize Affordable while ensuring Operators, consumers pricing kept low. income. pay a small fee. Funding for initial deployment. Awareness Educational marketing via Documentation and Training of the village Teacher training. Training for telecenter M-PESA agents training of Operators. entrepreneurs. operator. Teachers instruct the Educational marketing Educational marketing children. Computer training. via Operators. via village entrepreneurs. Teachers train other teachers. Product & service Initial PPP funding Research centers. Research centers. Product development Research centers development centers. Actual usage is different Multidisciplinary Field research. Research on the ground. from the intended usage approach Multidisciplinary approach. Innovation blowback. Mostly embedded Spending time on the Exploratory design Significant time on the innovation. ground proved to be research. ground. invaluable. Ethnographic research Innovation blowback. methods.
  28. 28. DISCUSSION FINDINGS PRODUCTS & SERVICES • Availability: often offered in rural areas. • Innovation blowback. • Disruptive innovation. • Incorporation of clean technology was not really visible. • Affordability: focus on price performance. • Acceptability by price-offering and ease of use of services . • Awareness: educating customers in product usage by local BOP-entrepreneurs. • Multi-disciplinary research and spending time on the ground has become invaluable.
  29. 29. FINDINGS PARTNERSHIPS Partnerships Vodafone Nokia MTN NSN Intel Microsoft Unlimited Potential - M-PESA Village Phone Village World Ahead telecenters Connection Classmate PC Cooperation Partnership approach Microfinance and A franchising Mostly government Variety of partners.; with dedicated project repayment model model partnering. here NGO team. Strong partnership Sometime Need to have Significant degree of transformation of patience, results Protection of autonomy for Setting up of a partnership to come not fast intellectual property Safaricom. separate unit: Village employer- Phone Company. employee Pulled out the Backing of higher relationship. partnership with management. Variety in maturity in OLPC (different management skills Unequal risk opinion of the Expertise of local between local sharing. strategy) partners. partners. Integrating systems was an obstacle. Actual usage was different from the intended usage. Typology Private-social- private private-private- private-private- Mostly public private Varies from public- partnership. private-social private partnership, private partnerships partnership partnership sometimes multi- to private-private stakeholder. partnerships to multi- (multi stakeholder) stakeholder partnerships.
  30. 30. DISCUSSION PARTNERSHIPS • Unconventional partnerships are used for engaging with the BOP. • A variety of partnerships occur. • MNCs need to be aware of various interests when entering such a partnership. • Sometimes a dedicated unit or organization has been established. • Issues that are affecting the health of partnerships have been identified, categorized as driving force factors, skill factors, input- output factors, socio-cultural factors, systems factors, and trust factors.