Turing “Cants” Into “Cans”: The Affordability Factor

This week’s Strategic Innovation at the Base of the Pyramid (Anderson and Markides, MIT Sloan Management Review, Fall 2007) and Inside the Tata Nano Factory (Business Week, May 9, 2008) reinforced that it is not only possible but is also vital to set a price point that is affordable to consumers.  This often requires working through design and budgetary limitations.

Digging deeper into the affordability factor of social innovation, I remain impressed with companies like Tata Motors and One Laptop Per Child (Negropante) that have “rewritten the rules” about setting price points for otherwise expensive mechanical and technological devices.  They’ve had to audacity to prove that it is possible to produce products that are attractive to consumers, meet an immediate need, and even influence other companies to lower their prices.   

One similarly inspiring story is that of Matthew Callaghan, MD (fellow CMU alum) who is developing an affordable ventilator for use in hospitals providing life-support to patients (http://csi.gsb.stanford.edu/another-biodesign-success-researchers-develop-low-cost-medical-ventilators-global-disasters).  By creating similar price parameters as both Tata and Negropante did, Callaghan is meeting a need that has the potential to save the lives of thousands of patients.  With the goal of bringing the ventilator price point down from $40,000 to less than $800, Callaghan hopes to make this product available to markets around the globe, particularly those affected by natural disasters.  Additionally, he believes that this product can serve the needs of western markets, driving down the costs of life support at hospitals attempting to cut costs. 

Could this be the next proof that we can lower prices?  Callaghan’s invention is set to be released in 2014 (http://www.popsci.com/diy/article/2010-05/invention-awards-breathing-easy).  We’ll know for sure then. 

Missing component at the "base of the pyramid"

The Four A's framework for Strategic Innovation presented in "Strategic Innovation at the Base of the Pyramid"  thoughtfully acknowledges the complexities associated with innovation integration in developing markets. Delivering an affordable product to serve even the poorest of consumers, ensuring acceptability to tailor to specific needs,  prioritizing availability so that even the most isolated communities (considering that they could be the ones most in need of the innovation) can acquire it, and raising awareness through alternative communication methods -- is undoubtedly a bottom of the pyramid approach. But I think the pyramid is missing a component that pertains to both replicability and sustainability.

A friend sent me the embedded video link on Isang Litrong Liwanag "A Liter of Light," a replicable and sustainable project designed by students at MIT. The project empowers community members to build their own solar bottle bulb that provides a good source of daylight at 55 watts: http://isanglitrongliwanag.org/

The video tells the success story of the project in Sitio Maligaya, a poor village in the Philippines where some inhabitants would just sleep due to lack of light. Nicknamed "Solar Demi," one villager took the initiative to brighten up the dark homes by utilizing local resources to construct the bulb. He has pointed the community building bulb initiative to install 643 bottles. Furthermore what strikes me is the care of scarce natural resources even though this may be a fresh new concept to the community members -- bleach is added to the water in the bottles so that algae does not accumulate and light is not detracted.

Strategic Innovation should include the "Ability" concept, that includes potential for sustainability and replicability to empower the people or communities that they impact.

http://www.youtube.com/watch?v=JOl4vwhwkW8&feature=player_embedded

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.

For the Good of Humanity--I'm going shopping.

In the past week I've made a major purchase in the way of my wardrobe. A pair of shoes. The shoes I bought are made of bright red canvas and they add a pop of color to any outfit. Last class, we discussed highly affordable do-it-yourself eye wear that debuted in India and is now spreading to other high-need areas. We also continued to discuss how movements in the realm of social innovation have a big impact on movements in the for-profit private sector. My shoes, the bright red ones, are TOMS Shoes. TOMS Shoes is a company that has a one for one model. If you buy a pair, they give a pair to a child in need. All for a price tag of $54. It just so happens that TOMS shoes have exploded in trendiness in the past year. You can see Keira Knightly here with some red TOMS not too far off from the ones I bought. TOMS has done so well that they have recently begun a new line of platform heel TOMS. Now, whether or not children in third-world countries are receiving glitter platforms every time you purchase glitter platforms is a question I don't have the answer too. I do know, however, that among my peers, TOMS has made being charitable trendy. When you receive your TOMS in the small, conservatively-sized brown box, you also receive a blue and white flag featuring the TOMS logo. I'd like to think of this flag as symbol of your broadcasted action to the rest of the world. Wearing the simple canvas shoes says, "I care about my fellow man." But do all the wearers of TOMS care about or think about the child on the receiving end of the other pair? Maybe not. I'm sure there are people who find out what the TOMS company is about long after they've dawned their leopard print pair. Does it matter if not all of TOMS customers understand the impact their purchase has? As current and future social innovators, that is up for us to decide. How aware do we want our customers to be?

Non-profit or For-profit. That is the question.

As someone in the technology field, my frame of mind has been more of "how do we push the envelope?" and "how do we innovate something?". My other passion has been in health and health technology. So far the health side has been making great leaps and bounds both domestically and internationally, but the bureaucracy has been a boundary to get involved and be successful didn't seem worth taking over. On one hand, getting involved with a big for-profit company just seems like there are too many strings attached. For example, insurance companies or consulting companies involved in health often have multiple stakeholders with conflicting objectives. Meanwhile, on the non-profit side, there's this greedy? part of me that feels insecure being financially dependent on grants and other sources for my own income.

This aspect of for-profit companies doing "social good" is absolutely fascinating for me and perhaps is the answer to my insecurities. For some reason I previously had a misperception of this whole thing. Maybe I'm completely ignorant, but what these companies are doing are completely new and incredibly motivating for me. Unilever redefining typical distribution channels for emerging markets, Danone serving both high end and low end markets, and of course the Tata Nano are all inspiring.

Take a look at this link from the Stanford Social Innvotion Review. The articles for class give really compelling examples of for-profits doing good. If you want to see the risk, benefits, and motivations behind all of your options for your own social innovation, the guide breaks it down for you. Maybe the answer to my own dilemma is to work and gain experience for a few years, then break out into my own for-profit social innovation group and create a business model that is both agile and profitable in order to keep the business sustainable.

Government Innovators?

The role of government in social innovation is an interesting debate. For decades governments have been in the business of dispatching billions in aid to developing regions. For example USAID, which represents a small portion of the international aid monies, requested 47 billion dollars for FY 2011. This enormous amount of money is intended to affect health, hunger, and humanitarian relief (http://www.usaid.gov/performance/cbj/156214.pdf). These USAID priorities are very similar to those of social entrepreneurs working in similar areas. Yet, even with huge funds at their disposal government aid institutions have a difficult time making an impact. Government bureaucratic organizations are slow to change and generally do not encourage large innovations from with-in. There are of course examples where large scale aid has fostered innovation, but generally these institutions are not flexible enough to act on trends and innovations. Only recently has the US government even entered the field of fostering innovation. With the creation of the Office of Social Innovation and Civic Participation, the US government has recognized the amazing potential of this field. They established the Social Innovation Fund, which gives out 50 million dollars in capital to emerging social innovations, but even this simple idea has its’ critics. Controversy surrounds the gantees, some claim bureaucratic favorites are at play, others might question the transparency (http://www.socialvelocity.net/2010/08/beating-innovation-to-death/). Governments, regardless of the potential drawbacks, are in a unique position to encourage social innovation. They clearly have the money, but they also have many of the support networks necessary for successful enterprise. While government help will not be the answer from many social innovations they have the potential to make a huge impact on this field. I hope that in the future to see more not less government innovation.

Are non-profit organizations and philanthropy an answer to the enormous array of the world's ills?

Since this topic usually evokes strong emotions and a lot of debate, I would start off by saying that I thought so till a few years back.

I must confess that I am a techie and I had no idea of how business models worked till sometime back.But now that I have had an exposure to how businesses work, I reckon sustainability and large impact can only be had if the social enterprises are for-profit. I think an important distinction here would be between "for-profit" and what I choose to call "for-profit-only" organizations. As the names suggest, the former can be a social enterprise, but it would be difficult to imagine the latter being social.

I remember reading Muhammad Yunus's autobiography (Banker to the poor). He had mentioned that he was of the opinion that philanthropy cannot solve most of the world's pressing problems. While starting to lend out small loans too, the loans were specifically lent out to women (because they admittedly were more responsible) . Women were also interviewed to figure out who amongst them was most resilient. This was done to improve the chances of a payback. And so Grameen to-date does well on its loan paybacks than most other banks. And that is because they never started out with the intention of doing charity. They wanted to help the poorest of the poor to fight poverty (and resilience is required to fight) not to do charity. As discussed in class, research also shows that people value things more if they pay (even if it were a small amount) for them than things which they don't pay for.

Given that people who want to solve problems at the bottom of the pyramid go the for-profit way, they need to pay great attention to the first of the 4 A's - Affordability. The upside for the social enterprise is that it gets to apply this low cost high volume strategy in mature markets as well.

A New Model for the Arts

After reading this week's articles and Jessica's post below, I began to think about the L3C model and arts organizations. L3C's is the bridge between the nonprofit and for profit worlds. It's a taxed organization with a social goal and its second goal was to make money. The L3C model can have important implications to arts organization outside of their non-profit model.
ArtsJournal's weblog posted an article on April 29, 2011 called Using the L3C Organizational Model. The author states that creating an L3C as part of a non-profit's organization has the opportunity to further their mission, provide some profit and engage the board.
Non-profit arts organizations could have a broader reach than what is specifically outlined in their mission. However, most focus specifically on their art and possibly education programs. Adding an L3C to the organization brings the potential for new revenue and a new audience. For example, producing popular theater works under an L3C could help to fund new and experimental works under the mother organization.
The most interesting aspect of a L3C model outlined in the ArtsJournal post was the ability to engage board members. Many, if not most, board members come from the corporate, for-profit world. Their ideas and experience can be invaluable to an arts organization especially when working to build an L3C under the original organization. Of course, the organization uses its board to raise funds and awareness within the community, but the L3C model has the chance to further their participation and buy-in to the arts.
The L3C opens up a world of opportunity to arts organizations that they have previously ignored or frowned upon in the past like Jessica said. Exploring new opportunities, especially when the 501ciii may not fully support an organization's needs, will be vital to the evolving nature of the arts.

The Future of Education and Online Grade Schools

Article: http://www.cnbc.com/id/44255406

This article discussed the increased use of Internet based grade schools as an alternative to traditional public schools. This form of education is different than homeschooling in that the subjects studied and the curriculum are still controlled from the state level, but there are usually more options (especially for advance learners) than may be available in traditional schools. To me, it makes sense in this age where everything can be done through a computer that schools would also begin to move in this directive, even if it is still such a small percentage of the population that currently uses chooses to use online schools for their children's education.

While the presence of online public schools has allowed new possibilities for certain parents that prefer the setting or the flexibility of online schools, I think the implications and applications of this kind of education can go much further. As this kind of education expands, families that live in areas with low performing schools will much more easily be able to get a (potentially) more favorable education for their child at no extra cost. As discussed in the article, the constant cuts in school budgets we are seeing during the recession will not affect online schools to such an extent due to their much lower costs to operate. In the future, as access to technology expands even further, children across the world could be able to take advantage of this type of learning that goes so far beyond what is often available in schools now. Of course, this is dependent on the access to the computer and the Internet, but as we discussed in class there have been several efforts to give children access to these technologies in the name of education.

This expansion of online schools could also impact other important aspects of attending school, such as socialize and becoming part of society as well as after school sports, clubs, and activities. Additionally, the decreased enrollment in certain districts could harms performance even more for children still attending traditional schools, or they may push schools to improve in such a way that would make them competitive with other emerging means of education. In any case, the potential of having education tools so easily available to children can have huge impact on their lives.

Chasing the Dollar

In a lot of circles in the nonprofit arts sector, it is a bit taboo to talk about profit. Any discussion about money as any sort of end goal often evokes glares for mentioning such a blasphemous concept. To acquire financial gain from earned revenue surely must come at the expense of the quality of art. Since the birth of the non-profit model, the arts have been at war with the dollar. We in the business don’t like to focus on it, just ask for it. Sure, we absolutely need those Benjamins, but the arts much prefer fawning over generous seniors with fat pocketbooks to carry their annual budgets over the horrific thought of focusing on the market and what people will pay for. Why? Does money have to taint the arts?

Art serves many functions in society, and it doesn’t need to 501c3 model to prove it. You don’t have to be labeled as a charity in order to do good work in a community. In fact, could it do better without it?

In one of the articles this week, ‘A Social Solution, Without Going the Nonprofit Route,’ Marci Alboher provides a fantastic example of how business can still have a social focus with a story about solar-powered lamps were used in poor, rural parts of the world. As said in the article, it all comes down to one question: “As you grow, will the economics of your business work in favor of your mission or will they work against it?”

We all know that money has a bad rap. It often is the cause of greed, which leads to a plethora of negative consequences. Chasing the dollar has led many down a dark path. But does it have to be that way?

In order to enact a great deal of change or impact, you more than likely have to be financially stable on some level, whether you are helping to purify water in South America, or working on producing an important exhibit about the civil rights movement. So being cognizant of the dollar is important. In fact, some would even say critical.

Now, with that being said, there are areas of the arts industry where the good ‘ol grant and donor strategy is appropriate. It is true that sometimes art is not fully appreciated or realized during its time, and there must remain ways for it to still thrive and be produced. However, that is another topic.

What lies ahead for the non-profit arts sector is yet to be seen. What is quickly becoming apparent though are the cracks in the current model. Art that remains in the ivory towers and accessible to only a sliver of society has a very unlikely chance of survival. The economics of the business of the arts and their missions are not currently compatible in today’s environment. There needs to be some sort of shift. And while it might be hard to openly admit that someone is making a profit off of giving lamps to people in poverty, it’s working to fulfill their mission. It might be hard to admit that you choose half of your season with the wants of the community in mind, but when the curtain comes up, the seats are all filled, and there might be a better chance they’ll be filled for every show. So I guess the question is, whether in the arts, the developing world, or another area…can we switch money into a catalyst for positive change?

Teach for America - Quality v. Sustainability?

Some of the first exposure I had to the idea of social entrepreneurship or social innovation was Wendy Kopp's, founder of Teach for America (TFA), book One Day, All Children... outlining her identification of a need, the conception of what would become TFA, and how she and the organization have gotten to where they are today. Currently, in the United States, TFA is practically a household name - at least among college students where TFA does most of its recruiting. According to TFA's website, the organization is the "growing movement of leaders who work to ensure that kids growing up in poverty get an excellent education." The organization recruits some of the most talented college graduates, provides them with about five weeks of training, and asks for a two-year commitment in a high-poverty classroom. TFA is a rapidly growing non-profit with a staff of 1500, not counting the thousands of corps members (9300) currently teaching in classrooms ranging from pre-K to 12th grade. With all that the organization has accomplished during the past 20 years, it still has passionate opponents. While reading the article "A Social Solution Without Going the Nonprofit Route" and the comments that early childhood education might not be the best fit the for-profit model because quality could be compromised, it reminded me of some of Teach for America's criticism. Though TFA is legally a non-profit, it has a large budget and must maintain aspects of it's model to continue to experience the incredible success that it has had thus far in attracting donors.

For example, a 2010 article in the Washington Post highlighted several suggestions for TFA that emerged from a recent study on the program's effectiveness. One suggestion is that, due to the $70,000 cost per recruit to the school district, corps members should be required to make a five-year commitment. One of the bases for TFA's fundraising success is that the organization is an exclusive, highly selective program with a roughly 10% acceptance rate in the most competitive years. Many of its corps members would have other lucrative job options, but choose to contribute their first two years out of undergrad to public service. With a five-year commitment, undoubtedly it would be harder to convince these top students with dreams of law school and Wall Street to take a chance on teaching for the first five years of their career. If the pedigree of their recruits dropped, would the organization be as financially sustainable? Would their new, arguably less qualified recruits be able maintain the level of success that current corps members have had in the classroom based off of five weeks of teacher training? In addition, would they be able to uphold the costs of providing their corps members with five-years of support in the classroom instead of two? By not asking for a greater commitment, whether at least for three years or five years in the classroom, is TFA causing a greater disservice to the school districts that they are trying to help? I think that TFA is a good example of the conversation we had previously in class about "doing no harm" - but that is virtually impossible for any initiative or social innovation to not cause some harm to somebody involved. TFA has undoubtedly done a number of good things in it's existence. But in the current economic climate, with ramped layoffs of experienced teachers, is it still doing more good than harm for students and the education field as a whole? How is this determined, and how much harm does an organization have to do before it is no longer beneficial to society? These are tough questions and ones that TFA organization leaders may need to answer to justify their continued model. The Washington Post article is linked through the title of this post.

-Whitney Coble

First-World Culture Shifts and its Effects on Third-World Countries

It’s interesting, as a member of a first-world country, to hear the arguments and various viewpoints on entering the markets of developing countries.  On one hand, I live my life daily with ‘first-world problems’, like “oh my goodness, the button on my iPhone needs multiple presses to work” while my assignment readings address people who are just now receiving the benefits of a mobile device for pennies on the dollar.  It brings to mind a lecture I was fortunate enough to attend this week given by Jess Schell.  While his lecture was the implications of human psyche and extrinsic versus intrinsic motivation in game design, there was one idea he voiced that I found interesting.  In summary, he talked about how our culture (specifically the United States, but it is also applicable to other developed countries) are moving away from the industrial-era efficiency-driven business models towards the consumer trend of realism, reality, and quality of life.  This is an interesting juxtaposition to our businesses that are stepping into developing countries and redefining the “efficiency” model to help people who wouldn’t otherwise be able to help themselves.

I find this interesting because of two things: are we doing this because of our new focus on quality of life and realism, and what will the future look like if we progress at the rate we are going now?

The articles reiterate the message of “know your audience”.  Whether it’s socio-economic factors, cultures, political atmospheres, or religious beliefs, you need to know the real lives of your consumers regardless of whether you are selling a Bentley or a Tata.  In developed countries, we see a trend of desiring reality (like organic groceries or reality TV) and the rising need for businesses to be profitable, but also “be good stewards of the environment and society” (Alboher).  Fifty years ago, the United States was all about efficiency, even to the point of removing the human factor whatsoever.  People were more interested in making money over a long period of time and less about whether or not they actually liked the job.  This paradigm has shifted, and with it comes social responsibility.  We want to enjoy our lives, and a big piece of that has manifested in helping to better the lives of others.  The efficiency of our past comes together with this new perspective and has created the culture of social innovation – even if it still has a profit-driven structure.  One key idea I read was in the words of Danone manager Faber, that the company strives for “satisfactory and durable profits, but not to maximize profits.”  This never would have come to fruition fifty years ago, when efficiency was the main driver of motivation.

As for the future, I can only speculate with my small sample of experience.  It seems that the developed world’s shift to realism has identified developing countries as a ‘real’ and tangible presence to apply our refined efficiency and aligns with our goals of enjoying our own lives.  However, as other countries benefit from our efficiency, how much forward can we move?  What long-term impact will most of these products have for the people in the developing countries?  While I have only respect for companies and organizations who are contributing to solving the most pressing problems of the developing worlds – what are the long-term benefits or solutions?  Once a population has clean water and fair market prices because of text-message information, where do we go from there?  Is there a way we can help these communities become self-sufficient, to be able to address these problems themselves in the future?  Or, as we see in our current conflicts in the middle-east, is this something we should even have a hand in?  I have no argument against solving immediate, crucial needs, but how can we really improve their ‘quality of life’ for generations to come?

Clearly I have no answers to these questions, but this evolution of cultures and social ventures has seen an exponential acceleration of changing business models and practices, applicability of efficiency and technology, and the impact of developed on developing countries.  I hope to see it be sustainable and to be able to one day raise all people to the same or similar qualities of life, but only time will tell.

nonprofit vs for profit

It seems like there is a lot of talk in the world of social innovation and entrepreneurship having to do with for profit vs not-for-profit business models. The black and white distinctions seem rather shortsighted to me. While the tax structures are different, it doesn't seem like there is enough of difference to make one seem inherently better than another. Not-for-profit organizations seem to be more favorably thought of, but to me, I think the stigma that sometimes goes along with for profits is unwarranted. There are so many examples of for profit companies who do excellent things for the social good (e.g. D.light, described in the article by Marci Alboher, Toms shoes, and many others). The main problem to me is that not-for-profit business models really need to be rethought in general. Just because something is nonprofit doesn't mean its necessarily going to be the best for enacting social innovation. Not all not-for-profit organizations are as charitable as they would like others to believe (blood banks for example are often big businesses that rake in a lot of money, despite their nonprofit label). Aside from that, there really isn't such a clear distinction between the two, and I think it's fairly obvious that not-for-profits can often learn from the business models of their for profit counterparts.The biggest issue for me is not the specific business model of an organization, but rather its focus. Not every mission is best served by not-for-profit status. Social innovation, like all other ventures, varies greatly depending on the specific innovation being marketed. In order to do the most good, organizations should focus more on what they want to do and less on the tax structure they attain in the process.

Purchasing (Em)Power

“The whole offering must cohesively hinge upon preserving and ensuring the dignity of your new customers. The poor are not looking for handouts, but rather opportunities; providing them with such products or services through a filter of 'charity' or 'social work' serves no one.” (core77.com/blog/featured_items/the_5ds_of_bop_marketing_touchpoints_for_a_holistic_humancentered_strategy_12233.asp) I believe this quote adds merit to the discussion as to why the for-profit model works. In most industrialized countries, your purchasing power increases your status. In developing countries, the ability to purchase certain products can increase earning power and self-respect. The Kickstart Money Maker Pump is an example of the success of a “social business” that allows the poor to work toward improving their wellbeing without accepting a handout. Kickstart pump dealers in Mali say that if they gave these pumps to farmers, they would not use them because they would not be convinced of their value. Because they bring their own money to purchase them, they are more convinced of their usefulness. These dealers say “it is that simple” (http://www.youtube.com/watch?v=njN9B3091t4&feature=related ).

By providing low income households with affordable and useful products, companies create a chain reaction of positive growth. Word of mouth is the key to marketing useful products to low income families in rural areas. As the video from last week’s class demonstrated, many low income people who begin to generate a higher income from a product they purchase do not want to advertise their economic growth. It would be useful for the marketing strategies behind such products as the Kickstart Money Maker Pump to utilize the culture of the low incomes areas they are targeting. Some examples of these strategies would be to have product demonstrations during village celebrations or use a local resident as a town crier to advertise a product. These methods will assist in the marketing of a useful product without exposing those already benefiting from using the product. Less fortunate people of the surrounding areas may look to take advantage of their neighbor’s new found wealth.

What role will nonprofit organizations play the future in developing countries?

I started this semester skeptical about the idea of for-profit companies addressing social problems in developing countries fearing exploitation of the poorest, most vulnerable populations. However, as we advance through the course, I find myself questioning my previously held beliefs and asking rather, what role nonprofit organizations will play in this age of globalization, as businesses race to capture a share of the BOP market?

Several models we explored promote for-profit organizations as the way to create lasting change. In the reading for this week, A Social Solution, Without Going the Nonprofit Route Sam Goldman, the cofounder of D.Light, extends this idea saying "that only as a business could a project become large enough to reach the great number of people who use these lamps as their primary source of light.” Further, in the PBS video we watched last week about the water pump KickStart one of the people interviewed, Mark Bell, a professor of international agricultural development went as far to say, “The well-meaning tradition of nonprofits in developed countries, giving tools and equipment to poor people in Third World countries, is a poor model.”

Is the traditional model a poor fit? I tend to agree. The traditional nonprofit model often has no revenue stream, as goods are given away for free. Therefore, they depend heavily on charities, donations, and the government for their funding. However, that funding stream is vulnerable to people’s generosity, changes in the economy, and government politics. Moreover, what happens when funding dries-up? The organization leaves and the people in need must fend for themselves again. Yes, some people were helped, but the social issue persisted.

This is changing, though, as emerging economies grow and developing countries grow their wealth. As developing countries as they gain wealth and spending power, they are more equipped to tackle their own social problems and less reliant on outside support. For example, I stumbled upon a nonprofit organization called Akshaya Patra on the Stanford Center for Social Innovation website (http://csi.gsb.stanford.edu/social-enterprise-reduce-hunger-india). This innovative non-profit organization started in 2000 and now feeds about 1.2 million children throughout India. The model combines local products, local labor, and pre-existing government funding (directed to feeding poor school children) with innovative kitchen technology developed through frugal engineering. The key difference between this non-profit and the traditional non-profit, doesn’t lie in its funding structure as Akshaya Patra is funded through the government and private donations. The distinction is that the organization is a local solution that relies on local products, local labor, and domestic support.

The success of Akshaya Patra suggests that for-profit companies aren't the models that can solve social problems but I return to my initial question; what role will nonprofit from developed countries play in the future? Maybe traditional NGOs from developed countries will, in fact get phased out but I believe that is a good thing. It will signal a shift from an outside solution to a local and thus a balancing of equality.

Business Model not only a matter of sustainability but also a matter of humanity(for fourth class meeting)

We are keeping talking about the importance for the end-users to pay for the product they get by themselves regardless of the amount of money they pay.  It seems to be a widely accepted consensus that the sustainability of an innovation heavily depends on its price when it’s marketed to the consumers. Or at least there is the accessibility for consumers to be able to pay the not ultra-low price. I believe this is the main reason why when the Four A’s is mentioned, affordability also comes the first.

On the other hand, we often find business in private sectors proliferate quickly than we can possibly imagine. They seems to have magic power to reach the remotest consumers, nurture the best distribution channel, locate the most profitable niche markets, create the most efficient and effective mechanism to fulfill the business mission.  Even though they don’t think themselves as NGOs, NPOs, or social enterprises, they surprisingly have brought many good things to this world, especially to those most needy domains. And unanimously every private sector spares no efforts to make the price as low as possible so that a large population can be reached. P&G created cold-water detergent for people to do lundrary with cold water, which save electricity power originally used to heat water; FedEx combines copy service with documents delivery service, which not only improves efficiency and saved company operational cost but also saves oil or gas consumption broadly speaking; Waste Management company in order to improve business profits and make full use of those garbage they transport, they increase the usage of renewable materials; Danone sells yogurts in small packages to decrease the price and increase the market acceptability both for retailers and end-users, through which the company profits soars and at the same time people live in rural area can either make money out of it or improve healthy condition with using it……

If the current NPOs can be more financially independent, find a way to be self-sustain, and build up a connection directly between end-users and product or service suppliers, they can go further on the journey to do good deeds for community, especially those extreme have nots. It’s more effective to solve problems using business model.  

This is true not only from economy stance but also more importantly from a basic sense of respect of humanity. If the poor keep getting things distributed to them for free on behalf of saving them or helping them, we may at the same time disrespect them as capable human being who can solve basic survival needs through hardworking. Also donating and taking, or giving and taking are dominantly controlled by haves under current situation. It might also be a good thing for have nots to pay the things they get so that they can gain a sense of being capable of doing something, which will largely motivate potentials deep inside of them. When we know that market buying power collectively in poor world actually take up a very influential part of lots of profitable companies’ overall profits, we can’t overlook the power behind individuals.  

More Money In Emerging Market

When the Korean auto manufacturer Granbird and Hyundai saw Ghana to be the great beacon hope for commerce, it did not make bones about pitching camp in Ghana. A country located in Africa prides itself for stable democracy and emerging market.

The South Korean company manufactures coaches saw that most of the coaches on Ghanaian highways were rickety sometimes breaking down on the road. Even breakdown was even good so to say the least. The risk of decrepit buses was high. The company surveyed that the market was ripe but transport owners did not have funds to buy the brand news buses. Neither the financial institutions were willing to give out loans to fund such risky business because the country had attained notoriety of road fatalities. The question is: should the Korean manufacturer go back to Seoul?

The company revised its business model and decided to deal directly with those who wanted to own their coaches. One coach costs around $150,000. What the company did was that instead of the prospective owners going to borrow from the banks where interest rate was as high as the rising sky, decided to lease the vehicles directly to transport operators and spread the cost over a number of years with payment made monthly.

When the news became public, most people took advantage of the offer and almost all coaches on Ghana's highway got replaced because car owners could purchase coaches under a hire purchase and be paying a minimum monthly payment.

A year later, a Chinese automaker called Yutong bought into the process model and is also offering car owners a flexible deal in acquiring buses.

It is not wrong to say that businesses that adjust to the realities on the ground would conquer the emerging markets. This explains why some companies have found emerging market as a fertile ground for giant take off. It is so because the rules of the game had been rewritten to meet the inescapable realities.