Jessica Davis of the World Business Council for Sustainable Development (WBCSD) summarizes her impressions from the Impact on Base of the Pyramid (BOP) Ventures Conference in Delft, the Netherlands (16-18 November 2009) How do we ensure inclusive business models are as successful in reality as they are in theory? This was one of the many topics explored at the Impact on Base of the Pyramid (BOP) Ventures Conference in Delft, the Netherlands, from 16 to 18 November. The conference succeeded in bringing together some leading thinkers in the inclusive business / BOP field to debate key challenges on how to measure impact and ensure mutual value creation. The excellent mix of academics, business representatives, government officials and NGOs generated some lively discussions bridging the gap between good theory and successful reality.
I presented the WBCSD Measuring Impact Framework and provided some thoughts on how it could be specifically adapted to inclusive business models. I spoke about some of the challenges in developing the Framework as well as highlights from case studies, and ended with key considerations for anyone interested in measuring impact – the 4 Ps: Purpose, People, Perspectives, and Practicality.
- Purpose – why measure; the objectives for doing an assessment shape the type of assessment a company will do.
- People – who does an assessment matters; companies must engage external parties for objectivity and stakeholders to understand impact.
- Perspectives – how people perceive impacts matters just as much as numbers; what is negative to one person, is positive to another.
- Practicality – how much time and financial resources a company is able to put into assessments matters. Just because you can’t do an assessment à la Unilever/Oxfam in Indonesia, doesn’t mean you cannot do an assessment that provides valuable insights to improving your business model.
I was joined in the panel discussion by Sourav Mukherji from the Indian Institute of Management in Bangalore who is preparing three case studies in the context of the UNDP Growing Inclusive Markets initiative. Furthermore, Ted London introduced some of his current work at the William Davidson Institute including the impact assessment framework recently featured in the Harvard Business Review.
On the topic of impact assessment, a more intimate discussion was organized with representatives of Practical Action, Unilever, Oxfam, GTZ and SenterNovem. They presented very different approaches but all valid in their own right:
- GTZ has the most traditional monitoring and evaluation approach of the group – but has really pushed to move from tracking input and output indicators to look deeper at impacts and links to the Millennium Development Goals. Check out their new publication entitled: Energizing Development: Report on Impacts.
- Unilever presented the study on the company’s impacts on poverty reduction in Indonesia with support from Oxfam who also presented their poverty footprint methodology which is currently in the open consultation phase. When discussing indicators, Unilever emphasized that it is import to keep metrics as close to what managers use in their everyday activities – in other words, allow managers to adjust metrics so they resonate with them and can easily be followed up.
- Oxfam shared some of the ways they are building on the lessons learned from Indonesia through the development and application of the footprint methodology. This has a number of similarities with the WBCSD’s Framework, particularly in the way it tries to map the business impacts against development priorities. Oxfam recently published a short overview of the methodology and will launch the full methodology sometime next spring.
The discussions were lively and frank but participants seem to still be left with questions about how to apply footprint approaches aimed at large multinationals to smaller scale inclusive business models. Many organizations, including WBCSD, are working on this, and WBCSD hopes to provide some insight from two upcoming case studies and a summary of impact approaches due to be published in early 2010.
Overall, it was clear from the presentations that we are finally starting to extract some lessons learned from the successful and unsuccessful inclusive business pilots implemented over the last few years. In some sense, this was a reality check. We are seeing models that fail – fail to meet company’s profitability targets, fail to meet the needs of the target group/lowest income segment, fail to build trust, fail to scale, fail to ensure company commitment, etc.
Institutions like Hystra, Monitor Group and the WBCSD-SNV Alliance have tried, with as much objectivity as possible, to compare and contrast inclusive business initiatives on the ground – classifying, categorizing and analyzing what worked and did not work. These failures are invaluable to improving inclusive business models and ensuring more take up by companies. We must fail to succeed, right?
Below are some highlights from the presentations on mutual value creation:
- The Monitor Company reviewed over 250 market based solutions (MBS) for bottom 60% (B60) of the economic pyramid in India and classified these into 7-8 models which integrate low income populations as suppliers or consumers. They define market based solutions as: commercially viable, benefiting the B60, and reaching scale. An ideal MBS would do all three. See their report released earlier this year entitled Emerging Markets, Emerging Models. Nishant Lalwani from Monitor argued that while some MBS could be achieved through incremental change, their research showed that in the Indian context at least, radical change or brand new business models would be needed for the BOP/B60. He added that there are many great innovations by social entrepreneurs which are not reaching scale, oftentimes because entrepreneurs/companies think about scale too late. Large companies have the reach and ability to scale but from Monitor’s research, are still too tempted by the middle class to make the investment and long term commitment to working with the BOP. While there are exceptions, he appealed to the audience to search for ways to leverage innovations by social entrepreneurs with large companies’ ability to scale.
- Pieter de Baan of SNV Netherlands Develoment Organization provided an overview of the WBCSD-SNV Alliance’s work in Latin America, highlighting the case of Nestlé Peru. The Alliance helped Nestlé develop a new distribution model to reach new markets in urban slum areas by supporting women entrepreneurs from the community as distributors. Some of the lessons learned from the Alliance’s 3 years of experience implementing inclusive business models will be included in a new publication out at the end of the year.
Laurent Liautaud from Hystra, a consulting firm, presented highlights from their new publication that analyzed over 130 BOP models in the energy sector and used a set of criteria to evaluate their success including their economic viability, scalability and ability to solve the “problem.” A few concrete examples showed the important role of regulation in incentivizing investments and behaviors in the sector and the dangers of certain forms of loans/subsidies which can actually increase the poor’s vulnerability if not designed appropriately and transparently.
Finally, Eric Lesueur joined the panel to present some of the challenges and opportunities for Veolia in working with the Grameen Healthcare in Bangladesh to improve access to clean water. While an admitted newcomer to the BOP family, the company has a long history of building public-private partnerships supporting access to water and sanitation. Through the partnership, Veolia is applying an existing solution to treat surface water and provide access to clean water to over 100,000 people. While water charges are levied on consumers, the company admitted a need to improve the economics to make the initiative economically viable.
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