Next Generation Business Strategies for the Base of the Pyramid: New Approaches for Building Mutual Value [ハードカバー]

As a mission driven international agricultural development NGO we see the traditional donor/recipient model transitioning to also become a market driven provider/consumer model. London, Hart and the other leading authors of this work provide us with a roadmap of issues related to designing new business strategies and models. London begins this work by advancing the thinking beyond simply selling to the BoP to, instead, doing business, or co-creating wealth, with the BoP. According to London "BoP businesses (ventures) are revenue-generating enterprises that specifically target the BoP demographic described as buyers, sellers, and entrepreneurs" (p. 9).

As our own NGO considers the potential of mobile money transfer to make agricultural value chains more efficient we appreciate Simanis's guidance about the challenges of market creation as opposed to the more usual strategy of market entry. A challenge of market creation, from a product design perspective, is the emergence of an economy of choice that renders an economy of scale obsolete. Whitney points out that this is exacerbated by the limited knowledge of the patterns of daily life at the BoP unlike the deep databases of demographic and market knowledge that describe developed country marketplaces. Such market creation and embedded product design is best done, as described by Hammond, by combining the resources, capacities and capabilities of both bottom up/local as well as top down/global approaches. Viswanathan guides us on the extremely intimate microlevel insights expected from a local player. Hammond believes that BoP ventures are maximized when such bottom local players are combined with the financial and technological networks and management expertise of global players.

Hart provides fresh thought leadership focused on decentralized, Green Sprout (as opposed to centralized Green Giant) environmental technologies such as biofuels, point of use water and more. Mobile money transfer might also be a fair example of his excellent point that the BoP can be the incubator of green and other innovative concepts and technologies that would otherwise threaten corporates and other stakeholders if incubated at the top of the pyramid (ToP). Once these models and other technologies are developed and proven at the BoP they can then be leapfrogged into the TOP markets.

To fund these innovative, local/global business models, Kennedy and Novogratz describe the characteristics of philanthrocapitalists and social entrepreneurs. While still focused on profitability to ensure self-sustainability, they demonstrate their social commitment by accepting higher risks and lower rewards while delivering needed resources to the venture. There are numerous NGOs and other entities that are setting up holding companies and other constructs that will benefit from the guidance in this book for how to position themselves as socially funded participants in local/global BoP business models. London then pulls it all together and describes the way forward and the need for more work in the BoP space on issues such as working with donors/governments, measuring impact and the internal organizational challenges of BoP ventures.

Kudos to you both and other authors for writing a ground breaking book clarifying many early misconceptions about BOP. Your collective effort will be enormously valuable to those who are very passionate about solving key challenges for BOP. I hope that your research and book will have even more impact. I recommend your book to anyone interested in building BOP solutions. In fact, I am already planning to recommended it to organizations (Indians For Collective Action, Pallium-India-USA, ICA Social Entrepreneurship) where I chair or advise.

Though I have gained immensely from your book, I found many critical gaps based on my working experience with BOP world. I am hoping that you will review this unique perspective as it does require rather different dialog with some of the players described in the book. It is possible that some issues may require further study and I am willing to assist you in the process should it be desired. Finally, I hope that you will cover them in next revision, if you agree that they are genuine gaps. Before people starts thinking of building BOP empire, to be entrepreneurs needs to be aware additional traps not covered in this book.

I rate this book 5 star in spite of pointed gaps in my review below, as I don't see these gaps in the book but rather gaps that needs further attention. The most interesting chapter for me was Chapter 3, "Taking the Green Leap to the Base of Pyramid", where author gives a sharp contrast to two shades of green technology approaches - "Green Giant" vs "Green Sprout". Author makes an argument that is very fresh and thinks that Green Sprout approach started from BoP can eventually improve model for the ToP, as well. Chapter 3 describes debate a rather visionary argument based on frontal assault borrowed from military dictionary. Primary thesis as I see is that this new assault can be started by incubating sustainable technology at the poverty at the base. The Green Leap: Entrepreneurial Judo is likely to succeed when there is a critical mass is created before this innovative approach can work. Though intention is very noble, I would like to highlight that examples like LifeSprings, Ecotact, WHI, D.light are still not scalable enough and approaches described in the book for example Patient Capital are not necessarily going to yield any better results. My suspicion is based on my following factors -

1. People Participation: Remember history of great social entrepreneurship is there but still limited. Two best examples that I can give from my childhood progressive home state of Gujarat, India are SEWA and NDDB. Self Employed Women's Association (SEWA) is a membership-based organization of the poor self-employed women workers. These 1.3 million trade union members work in the informal sector of the economy and do not have a fixed employer-employee relationship. SEWA's main goal is to organize the women worker's for full employment and self reliance. NDDB empowered millions of small & marginal farmers through village dairy cooperatives.

These models have shown that unless people are participative in overall solutions in income generation, it cannot be a sustainable solution. These and Grameen examples in Bangladesh have demonstrated such a successful social enterprise model. However, they have also shown that they are very complex and messy, takes many years to build and they are not easy to replicate.

2. Incubation and Patient Capital: I applaud concept of patient capital but there are few issues that author needs to further review. This struggle is a first struggle needs to be own up by developing countries before you replace Green Giant approach with Green Sprout for TOP. To do that unless you enable them in right way, you will never be successful.

Look at the example that have been given in the book. Most examples in the book have been lead by a foreign social entrepreneurs, list of authors and even 100 attendees at CSR conference. Though, I applaud and congratulate their role in building vision and early solutions, I believe that critical mass cannot be created until we have startup culture ready to transform social leaders ready to create 100s of successful social startups partnering with each other and sharing knowledge with each other rather than current competing culture. This battle ultimately belongs to a land where there are such radical problems. The ultimate factories should come from there . Patient Capital are making same mistakes that Foundations made forever. Foundations either spent enormous amount of money by working with distant NGOs and spent large amount of donor's money by implementing costly social impact frameworks to demonstrate NGO success stories or relied heavily on well known horses like Barefoot, Grameen or SEWA. However, remember both founders and these large NGOs are notorious when came to sharing knowledge outside and transparency. The way Chapter 2 describes Patient Capital, I think that they would be making the same mistake as foundations did with their precious money. They are ultimately working on creating discrete social startups which are incapable of cooperating between each.

Until Gandhiji demonstrated exploitation by British Raj to Indian people and involved them in their struggle, independence movement didn't start. Until Egyptians rose up or their rights, Mumbarak regime was very happy with long status quo in Middle East. Rather than betting on successful social startups, Patient Capitals should be channeling their limited dollars by creating open, cooperative and shared models, so that 100s of other startups can emulate right models. Their focus should be to strengthen many fledgling local incubators like some I met during my recent visit to Gujarat, India. These incubators are rather not strong but they do understand following factors better than anyone else. Ultimate goal is to create a strong working models in key areas like low tech healthcare, public healthcare distribution, sustainable energy and let local progressive government come and eventually fund sustainable research for their own human index improvement. These cooperative incubators with the help of Patient Capital should be transparent enough that anyone can take knowledge globally. My point is that Patient Capital has limited dollars and if they continue with their current path, they would be making enormous mistake, as they are not every good at understanding important socio-cultural factors such as following.

a) Social Startup culture: Though it is important that next generation scalable solution come from the Indian, African and Chinese entrepreneurs as they have most at stake many culture are not innovation centric. This will require a radical thinking by those incubators about how to transform current auntie factor into a culture of social enterprise.

b) Glocal Locations: I am happy to see emergence of Acumen, E+Co, New Ventures, Root Capital and TechnoServe, However, I am highly suspicious about their ability to drive real impact until they move their HQ to India and/or Africa and change their approach like I have described above. They will completely miss out importance of mentorship without fully understanding public health or developing issues for poor. I really don't think that that they can rely on building satellites in those countries, as my recent trip to India confirmed a massive skill gaps in management and many other area, a critical role (even more than seed funding) that Patient Capital should be providing. I happen to believe many of these country do have a capacity to raise the fund but there is no way they can manufacture skill necessary to succeed.

c) Value Chain: Product scalability for BOP is still in nascent stage. In my humble opinion many of the examples described in the book may scale up to certain level but they are unlikely to reach critical mass or killer application similar to mobile applications. I recommend building series of working models that can demonstrate a working value chain like we have seen in many existing products in TOP. For any incubator to succeed, it needs various key elements and demonstrate that a complete value chain works between product vendor and product consumers. These factors are access to right size capital, access to variably of consumer patterns for product input, and distribution network and BOP funding for a product purchase. BOP thought leaders and practice leaders like you should be first proposing a working models that can succeed with following unique characters.

a. Example 1: Distribution Network and Access to BOP Product Purchase Exists: Though most of the BOP is unorganized and do not have a well defined market, I do believe that there are few rare examples where market is already there. For example SEWA already has more than 200000 women requiring smokeless chula or every family needing solar lanterns, and need for replacing current diesel tech with alternative energy for salt workers. Though, examples of SEWA/NDDB/Grameen are rare they do exist. Hence, I suggest working with these organizations to demonstrate a successful iterative process and shared process between product vendors and co-ops who manages their own funding and distribution.

b. Example 2: Above doesn't exist: I believe most other product falls into this category where product vendors do not have a direct access to existing market that SEWA, NDDB, and Grameen can provide. I have seen few examples that is trying to build a complete product life cycle like D-REV, KickStart and Villgro. Thought with an exception of Villgro, first two are based in US. I happen to believe that people groomed in western culture, studied in Ivy League, and successful career in corporate world, cannot build effective solution that BOP really needs, unless they personally move their HQ in one of those counties.

Building a working scalable model should be a top priority and I believe that no one can do better job than Patient Capital . Before they sprinkle their precious dollars, I hope that they rethink their priority.

d) Participative Model for Government: In developing countries like India, ultimate rollout of scalable approach must involve leadership of local government. Though there are many challenges to this including inefficient and corrupt governance, this entity must become a box in a in your Green Leap: Entrepreneurial Judo as ultimately they are responsible to show improved human index. That said developing country governments have tried to implement many top-down solutions without much success. Social entrepreneurs role should be to demonstrate enough large scale impact that government feels obliged to act upon. I do believe water example follows this and you have already covered it appropriately in your book.

e) Bet on right solutions: Developing fund in this area are still very limited and it would be rather big mistake if you don't take stand for a right solution and let market figure out as suggested in the book. Let me explain why!

Why should emerging market and especially poor people relearn what is already painfully leant by west. For example, fast food have created a massive healthcare challenge here in US. In fact, developing world has already fallen into this trap. Ask anyone in rural village, what happens when man receives excess cash. Go to any of these village and you will see rampant alcoholism, unstoppable tobacco consumption created by irresponsible Gutka marketing and women abuse as night settles. You will be wrong to say let market sort that out. Social entrepreneurs not only have a responsibility to build a sustainable solution but they should also think about how BOP culture will transform. For that matter, I believe that solution that focuses on income generation should be a top priority. For example agriculture education gap is even higher priority from agriculture market creation.

If you have read through this, I feel happy that I succeeded in demonstrating views and my time for this rather unusual long response was well spent. I look forward to having further discussion or assisting anyone who considers themselves in a same boat. Please feel free to contact me directly at usheth@gmail.com.

Once again congratulations for a rather extraordinary book.

Dr. Hart and Dr. Landon began their collaboration and activities in the Base of the Economic Pyramid almost a decade ago. Streams of publications, workshops and collaborations have followed as enterprise and civil society began to address economic development for the poor. I have followed their work almost since the beginning, as they seek to define and understand how BOP markets work and most importantly how enterprise should approach these markets for the good of all.
For every success in the BOP by western organizations, there are hundreds of failures due to fundamental misunderstandings about these markets and consumers. Hart and Landon continue to clarify and report both successes and failures, and most importantly, both are in the field with colleagues, collaborators and students, seeking successful approaches for "sustainable enterprise" in these markets.
New models and experiments in enterprise structures are emerging and the collaborative approach of this book and the elaboration in the introduction on how the metaphor and activities of the BOP have evolved are fascinating. The undue criticism of their early metaphors of this important market demographic has now been set aside and the various authors have captured in this book, the transformational work that is taking place throughout the world. Bravo!