cross-sector innovation

Like many people, probably, I associate innovation with advanced technology and information goods. Unilever (whose brands include Lipton tea and Hellmann’s mayonnaise) doesn’t spring to mind as cutting-edge.

Yet, this week’s readings reinforce the notion that no-frills, dependable household goods are especially ripe for BoP-oriented innovation. The articles highlight fast-moving consumer goods like yogurt and shampoo, and durables like fridges and washing machines. Those industries happen to feature high-volume capacity and efficiency, so they’re a natural fit for producing at lowest-cost for the widest possible distribution.

Nonetheless, it’s not obvious to me that social innovation, as we’ve defined it, is within their core competency. The dominant strategy for household product companies has historically been to carve out a lasting brand position within an oligopoly. For example, Coke and Pepsi own the cola market, and nobody wants them to change their core product. In mature markets, consumer product developments are rarely revolutionary – mostly on the order of four razor blades instead of three or a “pro-health” vs. “anti-cavity” spin for toothpaste.

Inventing totally new distribution channels (such as remote coordination of rural door-to-door sales) is something that, at least in theory, other types of organizations ought to do better. Grassroots organizations and NGOs with a coherent mission-based culture should be spryer and more ingenious than mature-market consumer packaged goods (CPG) giants. My recollection is that Yunus’s Creating a World Without Poverty attributes a lot of the on-the-ground innovation to Grameen rather than Danone.

Last week in class, a classmate asked why many NGOs are relatively ineffective at running the standard value chain of a business. Lack of funding is only part of the answer. Another element, in my experience, is lack of intellectual capital and capacity-building orientation. As a nonprofit employee and volunteer before grad school, I spent a lot of time reinventing the wheel and falling short of best practices, because we couldn’t hire or train people on business skills.

This tension invites two questions: 1. are standard-cycle industries fundamentally shifting in a way that makes nonprofits outmoded? And 2. where do cross-sector joint ventures like Grameen Danone fit into the BoP market-creation scramble? Grameen Danone Foods Ltd. is so compelling because, through mutual trust and a clear organizational mandate, it achieved the best of both worlds: disruptive vision and sustainable, scalable capacity. I strongly hope that current trends will result in more cross-sector partnerships and mutual capacity-building, rather than subsuming mission-based organizations.