This chapter is from the book
This chapter is from the book
This chapter is from the book
An Overview of the Book
In selecting authors for this book, we purposely chose BoP thought leaders from different backgrounds, perspectives, and experiences. Accordingly, the book is organized into three sections, reflecting the perspectives of the different authors: Part One, “Roadmaps for Success,” provides frameworks and roadmaps for assessing and improving BoP ventures’ potential for success. The two chapters in this section offer complementary analytical lenses through which to view the development of any BoP business. They also serve to provide the appropriate context for the more focused material that follows.
In Chapter 1, “Building Better Ventures with the Base of the Pyramid: A Roadmap,” Ted London presents BoP venture leaders and development practitioners with a framework, based on the perspective of “creating a fortune with the BoP,” to guide their enterprise-development efforts. In particular, he provides core principles that leadership teams should apply at each of the three stages of BoP venture development: designing, piloting, and scaling. London advocates that venture development grounded in mutual value creation offers the best prospect for generating economically-viable enterprises that also enhance the quality of life in BoP communities. He further argues that appropriately applying the core principles at each stage of development can mean the difference between success and failure. London closes his chapter by proposing a new perspective on cross-sector collaboration that can more effectively integrate business effort to build viable BoP ventures with development community investments in creating new market opportunities.
In Chapter 2, “Innovation for the BoP: The Patient Capital Approach,” Bob Kennedy and Jacqueline Novogratz describe the “markets versus development assistance” debate, making the point that neither of these traditional approaches has worked particularly well in serving the BoP. They then describe what might be termed a “virtuous convergence”: the coming together of social entrepreneurs and “philanthrocapitalists” who have invested in pools of patient capital (i.e., capital that explicitly takes the long view in calculating return on investment). The former create new solutions; the latter bet on the best of those solutions, help build organizational capabilities, and provide the funds needed to scale. Drawing on their own extensive experience with both of these groups, they identify four types of innovations that are critical to success in BoP markets and explore the on-the-ground experience of four BoP ventures.
Part Two, “Strategic Opportunities,” addresses two of the principal strategic challenges facing the BoP domain in the coming years: the BoP environmental challenge and the BoP market-creation challenge.
Stuart Hart’s Chapter 3, “Taking the Green Leap to the Base of the Pyramid,” focuses on the conscious effort on the part of BoP ventures to move beyond the early models of “finding a fortune at the BoP”—which involved adapting environmentally unsustainable products and services to sell to BoP consumers—and to move to a model in which “green” solutions derived with the BoP can serve all strata of the economic pyramid. He contrasts “Green Giant” and “Green Sprout” technologies, with the former being centralized, investment- and policy-driven approaches favored in the developed world, and the latter being distributed, small-scale, small-footprint approaches that are necessary in BoP marketplaces. The “green leap,” he argues, will emerge from a creative convergence of the green technology and BoP communities. After citing examples of the green leap in action, he proposes a portfolio of actions and initiatives to help accelerate the Green Revolution around the world.
Chapter 4, “Needs, Needs, Everywhere, But Not a BoP Market to Tap,” by Erik Simanis, opens with the surprising example of a product that seemed destined for success in the BoP space and yet failed to match expectations. He makes the case that despite the manifest needs in that space, there may not be pre-existing markets. The BoP challenge is more accurately seen as one of market creation, rather than market entry. Market creation, in turn, depends on both framing the value proposition and defining the strategic innovation process in ways that make sense in the very particular environment of the BoP. Yes, Simanis argues—creating new BoP consumer markets is complex, expensive, risky, and time-consuming, and yet that may be where the best opportunities lie.
Part Three, “Effective Implementation,” focuses on three critical operational challenges for BoP business, with a particular focus on developing a deep understanding of the nuances of market research, product design, and venture scaling in the BoP context.
Madhu Viswanathan opens this section in Chapter 5, “A Micro-Level Approach to Understanding BoP Markets.” He intersperses theory with a “bottom-up” perspective presented by BoP consumers, producers, and entrepreneurs in their own voices. He describes and illustrates the thought processes of those who transact daily in BoP marketplaces and draws out the implications of those thought processes for BoP venture managers. He also draws out the critical coping strategies used by those who live in extremely challenging circumstances and again considers the implications for venture development. He makes the case that to a surprising degree, BoP market- places are dominated by ongoing relationships, rather than one-time transactions, and concludes the chapter with practical advice for designing and implementing enterprise solutions for the BoP.
Patrick Whitney’s chapter, Chapter 6, “Reframing Design for the Base of the Pyramid,” comes at the design challenge from a very different yet still complementary perspective. He argues that new design principles being adopted to create breakthrough products at the top of the economic pyramid also can be used to create successful innovations for the BoP. He notes the surprising similarities in the “reframing” design principles of the iPhone and those of the Chotukool refrigerator (designed for use by consumers in India who had never owned—or even dreamed of owning—a device that could keep produce cool and fresh for extended periods). In the case of the refrigerator-producing company, the designers spent enough time “on the ground” to imagine a scenario whereby customers might also become “partners” generating income for themselves by selling refrigerators to family and friends. Whitney argues that the “direct design” model (whereby companies analyze markets and create new offerings) is less relevant to the BoP than “strategic design,” which allows for a radical reframing of the design process. But because developed-world companies like Apple are already well-versed in strategic design, businesses designing for the BoP should take heart, follow suit, and adapt accordingly.
The third and final chapter in this section, Chapter 7, “BoP Venture Formation for Scale,” by Allen Hammond, tackles the aforementioned issue of getting to scale. This is critical for any BoP venture that hopes to become sustainable, and for any enterprise that hopes to have a meaningful social impact (as most BoP ventures do). But scale has tended to be elusive among both corporate and de novo business startups, in part (Hammond suggests) because many bottom-up new ventures simply don’t plan adequately for scale. He explores in detail two alternative scaling-up strategies. One focuses on the business structure—and urges BoP ventures to plan to be both global and local (both bottom-up and top-down) at the same time, the better to source capital and technology, while also paying attention to local needs and challenges. The second focuses on activities outside the business structure, and urges BoP entrepreneurs to build a supporting ecosystem for the venture as well as the business activity itself. One particular form of such a supporting ecosystem is a hybrid model—one or more partnerships between the venture and civil society entities—that enable a diverse ecosystem and hence multiple sources of solutions. The chapter also illustrates how such strategies might be put into action with examples from a new BoP venture that Hammond and a number of collaborators have launched.
We close the book with our thoughts and reflections looking forward. Our goal in writing this book is to present the underpinnings of a new perspective for the BoP domain. We are well aware that more work needs to be done, and in our conclusion, we draw attention to important issues that need further consideration. What new problems and challenges have been identified? What areas have not been adequately tackled? What gaps remain?
The BoP domain is at a critical juncture. We hope this book offers insight into the way forward. We believe that the next generation of BoP ventures should emphasize the opportunity to create a fortune with the BoP. The evolution of the domain, clearly, is not finished. We are on a learning journey, and these are exciting times for BoP venture leaders and their partners. We must continue to extend the boundaries of our understanding. We must not stop asking, “Where do we go from here?