Going back to the
first lecture in Foundations in Social Innovation and Enterprise, Professor Tim
Zak mentioned at the end of class that for-profit companies are the
philanthropists of the future. I wasn’t sold on that idea especially because I
had the assumption that non-profit organizations were the only ones helping out
the less fortunate by providing much-needed social services and programs. Now
after a few more lectures and articles, I see his point. Crucible 1: The Great Rebalancing from the article What Happens Next? Five crucibles of
innovation that will shape the coming decade, talks about how some
companies are marketing products to emerging economies. “Rebalancing” refers to
adjusting the traditional exchange of developed country companies to its own
consumers into including consumers from emerging economies1. After
doing a little of my own research on this “rebalancing,” I came across a great
article from Wired titled Want to Help
Developing Countries? Sell them good stuff cheap. This article discusses
some of the practical reasons why big “western” companies are taking notice of
emerging markets by pointing out the obvious2.
Wired mentions
three facts: helping people is a good thing, for-profit companies are seeking
new ways to make money, and many developing countries have huge populations.
Another fact, selling an inexpensive product to lots of customers often
produces more profit than selling an expensive product to fewer customers. All
of this together makes it a no-brainer for companies to start marketing to
developing countries. The key to being successful is making quality products
for low prices and focusing on products that help in everyday activities.
Things that we take for granted such as light, clean water, education, etc.,
are the subject areas where innovative products are wanted and needed. The best
part of great innovations is that it helps the poor move up the economic
ladder. Inventions such as the Tata Group’s Nano automobile and Global Easy
Water Product’s efficient irrigation drip both help people make a living by
providing inexpensive personal transportation and cheap watering capabilities
for farmers. Last fact, people are willing to spend money on something that is going
to make them more money2.
Here’s a thought,
instead of foundations only making grants to non-profits, maybe they should
consider investing money to start-up, for-profit companies designed to invent,
make, and distribute innovative products in developing countries. Start-up
companies may be more desirable for this venture because they aren’t accustomed
to catering to first-world tastes. Another benefit is that for-profit companies
will feel the market pressure and be further pushed to succeed and create
sustainability. This idea will be further explored in my next post.
Bibliography:
1.) “What Happens Next? Five crucibles of innovation that
will shape the coming decade” Global
Forces. McKinsley Global Institute.
2.)"Want to Help Developing
Countries? Sell Them Good Stuff - Cheap." Wired.com. Conde Nast
Digital, 27 Sept. 2010. Web. 20 Sept. 2012. <http://www.wired.com/magazine/2010/09/st_essay_pennies/>
How For-Profit Companies can best meet the needs of the BOP
ReplyDeleteWhen I read this article I could not stop thinking Micro-Loans! I am a strong proponent for micro-loans because of their ability to empower local citizens, hold them accountable and provide them with an opportunity to be financially independent. Micro-loans is a wonderful way to reach the BOP and end the down-spiral that never allows many of the world’s poor to ever climb out of poverty. As the article mentions it is not only the case the poor suffer by the mere virtue of not being able to afford much of their vital needs such as adequate food, shelter, education. But it is also the case that their economic status renders them powerless to many things such as predatory lending schemes, exorbitant charges for goods such as groceries and even the inaccessibility of nutritional groceries; this is very much the case even in urban areas in the U.S.
So in my opinion micro-financing is placing a dent in the problem. However, to have a greater effect, legislation should partner with social innovation. Companies who outsource to maximize profits, leaving the poor in both their home countries and hos countries both worse-off should be required to either pay the citizens a higher “ minimum wage” established by the host countries in which they are outsourcing to or participate in charitable ventures, such as micro-finance lending which will help end that bitter cycle which creates “Race to the Bottom” effect. By holding those in power more accountable you create a sense of fairness that social innovation cannot achieve on its own.
Social innovation encourages and by all means allows those most in need to pull themselves up by their bootstraps. But what happens when the rules to the game are schewed to the advantage of those already have money and power. In this case social innovation must work with governments to create solutions that are more sustainable over time and will have far reaching effects. The end result, is that as BOP consumers have the potential to yield purchasing power which will constitute a greater portion of the economic pie, there stands to be gains for both BOP as well as those better off.