Chapter Details

Introduction

In 1989, a young man traveled to Malawi in hopes of making an impact.

More specifically, he wanted to use the power of business to help address social issues. An engineer and MBA by training, he had grown disillusioned with his professional activities—first as a design engineer and then as a senior consultant focused on business valuation. So he set off for Malawi as a Peace Corps volunteer, tasked with providing useful advice to micro-, small-, and medium-scale enterprises. These were businesses run by some of the poorest people in the world. Certainly, helping build those businesses would improve people’s lives and make the impact he hoped for. (Read more)

Interest in BoP enterprise has been expanding dramatically in recent years, both in terms of the literature on that subject and the number of BoP enterprises that have been launched.  Unfortunately, few such enterprises have achieved sustainability at scale, which is necessary to assure economic viability and alleviate poverty on a large enough scale: here referred to as “impact enterprises.”  One reason for this is that the learnings of successful impact enterprises have not been widely shared.  The chapter differentiates between “fortune-finding” and “fortune-creating,” and asserts that the latter strategy is far more effective.  Both business leaders and development professionals have good reason to work together to build impact enterprises—but this is far from easy.  Obstacles include challenges of value creation, value capture, and the successful bringing-together of two realms that have traditionally eyed each other skeptically.  The chapter concludes with a chapter-by-chapter summary of the book’s key prescriptions.

This chapter opens the discussion of the first of the three foundations of the book described in the preface: understanding how to build better BoP impact enterprises. It stresses the importance of innovation, as opposed to an overriding focus on execution, with an emphasis on “business model R&D—i.e., efforts to invent appropriate business models for specific and demanding contexts. The chapter draws upon a multiyear analysis of 18 BoP initiatives to explore key design variables that should be considered in BoP business-model invention, whether alone or in combination.  The “Business Model Innovation (BMI) Framework” is introduced, which captures the four design variables—resources, metrics, structure, and problem solving—that tend to have an outsized effect.  The chapter includes case studies of companies that launched significant BoP initiatives—Nike, CEMEX, and “Mondophysic” (a pseudonym)—to show these variables in action, and to explore which innovation processes succeeded, and why.

This chapter addresses the all-important challenge of scaling: that is, moving from the pilot phase to an impact enterprise.  A framework called the “C-I-E scaling strategies” is introduced, focusing on co-creation, innovation, and embedding.  Each of these three strategies is divided into component parts.  Co-creation involves crafting solutions with the BOP and “finding the positive.”  Innovation involves orchestrating effective experiments and building market opportunities.  Embedding involves buiilding collaboration-based competitive advantage and developing social embeddedness.  Case studies explore the challenges of scaling: the collaboration between two NGOs (CARE and Peace) and a for-profit (Pioneer Hi-Bred International) to bring new kinds of seeds to India; and ITC’s efforts to transform rural agriculture in India.  Secondary case studies focus on Honey Care Africa’s efforts to scale up honey production in Kenya, and Movirtu’s initiative to build a sustainable business based on offering a mobile identity that wasn’t tied to a particular mobile device.

This chapter focuses on the second of the book’s three foundations: creating value with the BoP by understanding the poverty alleviation opportunity.  Alleviating poverty is critical, because it sits at the heart of the impact enterprise’s value proposition.  The more value that enterprise creates for the BoP, the more value it can capture for itself.  Unfortunately, most impact enterprises have a hard time defining their value added, and instead resort to either anecdotes or output measures.  A more effective approach begins with an understanding of the multidimensional nature of poverty, which includes economic, capability, and relationship well-being.  The chapter provides a tool— the BoP Impact Assessment Framework (BoP IAF)—to help enterprises determine how their value propositions come to bear on each of these dimensions.  The IAF is applied in extended cases studies, which focus on VisionSpring (eyeglasses for the poor in India) and Sanergy (sanitation in urban Kenya).

This chapter begins the discussion of the book’s third foundation: establishing an ecosystem of partners.  These partners are defined as “scaling facilitators”: i.e., the collaborators who will help the impact enterprise scale up through the use of different implementation models.  These collaborating organizations can provide support at the enterprise level (venture development) and at the macroeconomic level (market creation).  The chapter introduces a tool called the Partnership Ecosystem Framework (PEF), which helps the impact enterprise 1) understand the universe of potential scaling facilitators, and 2) organize those potential partners into an appropriate portfolio.  Two models used by scaling facilitator—impact investing and last mile distribution—are described through case studies focused on Acumen’s investments in Water Health International and CARE’s work with Hindustan Unilever Limited.

This chapter looks at how an ecosystem of scaling-facilitation partners is identified, developed, and managed over time. It advocates for the creation of a “chief ecosystem director” (CED) position within the impact enterprise—or, at the least, incorporating this role with the existing top management team—to accomplish these important ecosystem-management tasks.  It provides an example of a CED at work, in the complex and evolving relationship between Oxfam and the global reinsurer Swiss Re. It describes the three major challenges faced by the CED—overcoming biases about seeking subsidized support, dealing with internal resistance to partnerships, and responding to cross-organizational tensions—and suggests strategies for dealing with those challenges.  The concept of “collaborative interdependence” is explained and discussed, emphasizing the CED’s responsibility for bringing together independent-but-complementary organizations.

The closing chapter recapitulates some of the lessons learned in previous chapters, and also looks forward at likely next steps in the evolution of BoP impact enterprise.  The hard-won wisdom of the last decade or so is that BoP impact enterprise is more about fortune-creating than fortune-finding—which means that the would-be impact enterprise has to innovate, as well as execute. That innovation takes place in a complex context of potential scaling facilitators, who have to be identified, selected, recruited, and managed.  Most informed observers today agree that the alleviation of poverty along its many dimensions can be enhanced through the creation of impact enterprises.  It is certainly not the only solution; NGOs will continue their good work, and governments will do their part.  But it has to be part of the solution.  We have to fulfill the promise of building BoP impact enterprises that are sustainable at scale.

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