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Commercialization of Inclusive Businesses at Emerging Markets: Concrete Examples


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Professor Minna Halme from Aalto University on the Importance of the Base of the Pyramid Markets and Practical Solutions.

Minna Halme is the Professor of Corporate Responsibility at Aalto University. Her current research focuses on sustainable innovations for poverty alleviation, business models for sustainable services, and societal impacts of corporate responsibility. She has worked with a number of European and national research projects on material efficiency services, sustainable household services, responsible organization cultures, and sustainable business strategies.
In our 20th of April event, Dr Halme made two presentations and the presentation here is a combination of them both. The presentation starts with background to the BOP approach, and the vast opportunities lying within the 4-billion-large BOP market. To show practical examples, she presents different business cases. She highlights corporate challenges for inclusive innovation and suggests solutions by highlighting different types of innovation that is needed for the Base of the Pyramid business models. Dr Halme explains also the focus that Aalto University and its partners have taken to working with the BOP market.

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Commercialization of Inclusive Businesses at Emerging Markets: Concrete Examples

  1. 1. Commercialization and scaling up inclusive businesses at emerging markets Minna Halme
  2. 2. Focus on low-income emerging markets (Base of the pyramid)4 billion peoplelive with lessthan 5€ (PPP) perday Minna Halme
  3. 3. Base of Pyramid Approach Minna Halme
  4. 4. Aims of Aalto & its networkVision: To enhance wellbeing Focus on capabilities andand reduce poverty through strengths of the people andinnovative sustainable design communitiesand enterprise Emphasis to build longA collaborative network of term partnerships andprivate sector, civil society, linkages betweenacademia and public sector innovation ecosystems Minna Halme
  5. 5. Finnish partners (2010-2012) Minna Halme
  6. 6. International Partners Minna Halme
  7. 7. Key learnings for successful inclusive business models: Examples of Grunfos Lifelink, Cemex, ITC eChoupal and MyC4 Minna Halme
  8. 8. Base of the Pyramid Approach Minna Halme
  9. 9. 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
  10. 10. 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
  11. 11. 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.
  12. 12. 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
  13. 13. 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
  14. 14. 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.
  15. 15. 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
  16. 16. BOP business innovation checklist Types of innovation needed for BOP business modelsProduct Delivery Adaptation to Relationship Partnershipinnovation innovation Infrastructure and labor and network innovation innovationAffordability and Efficient Design for Deskilling work Untypical quality delivery hostile processes businessDifferent process environment Local actor partners functionality Group credit (e.g. erratic involvement Multi-Commercial schemes electricity, dirt Trust-based stakeholder scale Effective roads) relationships relationshipsResource 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
  17. 17. 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_
  18. 18. Thank you! Professor Minna Halme For information: & Minna Halme