Is the market-based approach the solution to poverty?

             We often think of providing aid as a solution to alleviate and reduce poverty. But the article “The Next 4 Billion” gives us insight into using a different approach to help low-income people. The article urges us to think more about the four billion low-income people at the base of the economic pyramid (BOP) and target them with our innovations to ultimately reduce poverty.

            The article suggests using a BOP market analysis and a market-based approach to create opportunity for low-income people. Our view is shifted from providing charity to providing goods or services at reasonable prices that will benefit those in the base of the economic pyramid. By addressing the needs of those at the base of the economic pyramid through affordable services and goods, it is believed we can “rais[e] welfare, productivity, and income.” But have these approaches proven to helped low-income people in large amounts climb out of poverty on their own?

            There is no question that those at the base of the economic pyramid have buying power and need better services and goods. In fact as the article mentions, the BOP market is one of $5 trillion. But their needs seem too vast to think that using these approaches can make a significant difference. The first approach towards alleviating poverty should be to focus on improving the health, education, and finding a way to raise the income of low-income people. The market-based approach sounds very promising, but can we create enough inventions or reduce the costs of products enough to significantly make a difference in the areas of health and education? In the article “What Happens Next?” it was mentioned that GE devised an ECG monitor one-fifth of the price of one sold in Western countries. This will help hospitals in third-world countries to better meet the needs of low-income patients, but how many more advancements in the field of business and technology and how many years will it take to truly provide those base of the economic pyramid with enough services and goods to climb out of poverty on their own?

Mobile phones as an innovation platform

Numerous commentators have referenced the striking pace of global mobile phone adoption. In our reading, the World Resources Institute identified it as a success story in The Next Four Billion (e.g., fivefold subscriber growth in developing countries between 2000-2005 to ~1.4 billion). The authors forwarded a number of figures on market growth in example countries and referenced the value proposition to people of a wide range of incomes. I would argue that mobile phone adoption is the prime example of the Bottom of the Pyramid (BOP) business strategies identified by WRI - and perhaps food for thought on ways social ventures can sustain value for the communities in the developing world they serve. 

Source: http://techcrunch.com/2012/05/27/mobile-developing-world/

A quick fact: 70 percent of mobile phone shipments today are feature phones. A.k.a. talk and SMS only. A.k.a. there is not an app for that. I highly recommend thinking about this fact when Apple releases its new iPhone next week, no doubt the funnest/most magical/retina-y phone - nay, object - ever conceived by man.

Now consider what people's ingenuity has allowed this other 70 percent of phones to accomplish:

- Banking: differences in (traditional) bank access have led to discrepancies between mobile money adoption in developing markets and the developed.

- Healthcare Access... for cattle, too

- Agricultural Pricing

- Sanitation

Back to 4 Billion, the mobile phone industry (including associated services launched off the mobile platform as above) has met all of the characteristics of BOP-oriented business from the article. I will focus on one: Localizing value creation. I recently came across an article in The Economist discussing the ready-to-launch technology startup scene in Kenya ("Silicon Savannah"). It is a quick, but very interesting read. Suffice it to say that many things brought up in the article flip the "from the west to the rest" model of tech and innovation transfer on its head. Kenyan mobile phone market penetration and government investment in Internet connectivity have allowed organic development of many features commonly associated with traditional centers of innovation (e.g., Silicon Valley) in downtown Nairobi: venture capitalists, technology incubators, venture competitions, etc. All of this happened without the need for continued external input since the latent need blossomed as infrastructure improved.

Perhaps this is one of the small indications of the "Great Rebalancing" referenced by McKinsey in our reading: emerging economies becoming less reactive and more assertive on the global stage. Regardless, this example highlights the strength of market-based enterprise as an agent of social change. Development projects may come and go; funding sources dry up and renew. Yet connecting an enabling technology (mobile phones, data access) with latent needs (communication, information, security, financial structure) allows for innovations to bubble up from the grassroots: sustained (at a macro level) by the markets in which they exist, developed directly by and for local populations. 

Rethinking The Obvious

When I saw in the syllabus that we had to read “Design Thinking for Social Innovation”, an article published in the Stanford Social Innovation Review, I was very glad because I had already read it. Then, I remembered that soon after this article was published, Jocelyn Wyatt, one of the authors and social innovation lead at IDEO, went to Stanford University to give a lecture about IDEO’s work and their design thinking approach for promoting social inclusion worldwide. This lecture can be found at http://sic.conversationsnetwork.org/shows/detail4697.html

In sum, Jocelyn Wyatt advises social entrepreneurs to focus on community needs, culture, preferences and expectations, because our intuition and common sense might not always match the community’s actual problem. So, in order to provide a useful solution, it is very important to keep close communication with the final users at all times. Also, inspiring the community and getting them involved in the whole process increase success probabilities, since they would embrace the project as their own.

Throughout the lecture, Jocelyn Wyatt describes a series of cases in which IDEO has been involved. From them, I would like to highlight one in particular: the “Actúa Ya” campaign that took place in Peru to promote citizen involvement in political affairs. I like this case because I worked in a very similar USAID funded project in Mexico: the “Seguridad con Justicia” or “Security and Justice” campaign www.seguridadconjusticia.org.

In this project, we were supposed to make citizens more aware about the need to ask their government officials for accountability on security and justice topics.  To accomplish this general objective, we lobbied with political parties, candidates and elected officials so they would include security and justice topics in their political platforms. Also, we organized several debates, town hall meetings and roundtables to inform the people about the importance of changing the Mexican legal and judicial system. Nevertheless, our project was extremely passive. So, even when people learned about the topics, they were not getting involved. People were not communicating with their candidates nor participating through our website.

As Jocelyn Wyatt did in Peru, in Mexico we decided to “ideate” a new approach for our campaign. We studied where were the people we wanted to reach, which were their preferences and their activities. We did some research and we found that the common citizens don’t trust political leaders when they talk about security topics and they like to watch soccer games. Accordingly, we reached out the main soccer teams and ask some of their players to be the “Seguridad con Justicia” campaign’s spokes people. The results were evident. The hits on the website rocketed and thousands of people began to participate in our campaign.

By applying design thinking principles and human centered innovation, we learned that interpersonal trust and inspiration are key issues for achieving successful enterprises. Having a trusted soccer hero asking the people to get involved in a project gave them the confidence and the inspiration to get involved. If my TV soccer hero is concerned about security and justice topics in my city, why shouldn’t I do the same? To accomplish a successful outcome, we had to stop thinking the obvious and ask the community what their real needs and concerns were. 

Design Thinking At Work in the Peace Corps

The story about fetching water in Brown and Wyatt's Design Thinking for Social Innovation reminded me a lot of what my cousin, Rajeev Goyal does and has done regarding social innovation. My cousin is a former Peace Corps volunteer who has since been the national coordinator for the Push for Peace Corps Campaign, which expanded federal Peace Corps funding by $60 million.

This falls under the “Policies to Support Social Innovation” portion of our class, and I thought that it might be of interest to some of you. Rajeev spent some time in a remote village in Nepal where he organized the construction of a water-pumping system. This one project gave him insight into how the government and social innovation are related to each other, and how they can often be at odds with one another. He essentially took what he learned from government structures abroad and brought it to our nation’s capital. In addition, he emphasized the importance of utilizing the resources that were already in the village by teaching the people different skills as opposed to bringing in new materials and expecting the outcome to be sustainable. Similar to teaching women how to effectively gather food that is nutritious or how to carry large amounts of water between destinations, his solution had a foreseeable outcome that would allow the people in the village to adapt new practices and even build from their current state in the future.

In regards to Nick’s comment, “With the appearance of the human-centered design toolkit, are we not risking to box in our ideas and fall prey to generating ideas and change through the use of frameworks? The last thing we would want is for design to be a simple manual.” I think that designing solutions through human-centered frameworks is only the first step towards creating sustainable solutions. Once we create this metaphorical box of ideas in a way that is manageable and understandable, we can think outside of it and make the development more innovative as the changing needs of the people involved become more apparent. What I am still struggling with is the timing of all of this- when is it best to move past the human-centered design framework towards different (potentially risky) solutions? How long should we observe the outcomes of an innovation before making changes to it? I think it largely depends on the population and geography of a region.

If you are interested and want more information regarding my cousin’s work, this is a link to his book that he is having published: http://www.amazon.com/The-Springs-Namje-Ten-Year-Villages/dp/0807001759/ref=la_B007R724FS_1_1?ie=UTF8&qid=1346787821&sr=1-1 (I have also pre-ordered a copy so you can just borrow mine once I get it).  His story is pretty inspiring and I’d love to put anyone who might be interested in contact with him!

Design Thinking

I was first introduced to IDEO several years ago at a Greenbuild conference and was instantly enamored. As a designer that didn’t necessarily want to do ‘typical design’ work at an international design firm, the concept of human centered design seemed so simple but fit so well into my professional objectives. I realized then that this was the piece that I had been trying to articulate in my work (something unfortunately not a given when supposedly 'designing for the people') – I have since done this by scaling back and transitioned into community development and planning- where I have a better chance to observe, know and understand the people for whom I design. I also appreciate this article's understanding that designers aren’t just there to ‘package’ solutions, but that they can inform the solution in creative ways and they make their living pulling influence from watching people and daily life.It is this sentiment that has allowed me to broaden my scope and pursue a variety of projects - and why I am a landscape architect studying policy.

I found this article from the Harvard Business Review soon after listening to that Greenbuild lecture and was eager to know more about this field - it includes a small profile on Tim Brown from IDEO. My favorite analogy found in this article is how Edison’s approach to the light bulb was founded by a thorough understanding through direct observation of what people want and need in their lives. People think of the light bulb as a scientific breakthrough, and while it is, it is also a great example of providing people with something they didn’t even know they needed. Now, it is so integrated into our lives that it seems commonplace- I think this is a sign of a good innovation which is true for many design breakthroughs.

 I love the graphic on page 5 and I have often used the helpful hints on how to incorporate design thinking into my process on page 8. Hope you enjoy this also:

http://www.unusualleading.com/wp-content/uploads/2009/12/HBR-on-Design-Thinking.pdf

The rise of design thinking

While reading one of this week's articles, Design Thinking of Social Innovation, I was struck by the beautiful simplicity of the concept and confused as to how this human-centered approach had only been recently institutionalized.

As the author points out, "time and again, initiatives falter because they are not based on the client's or customer's needs and have never been prototyped to solicit feedback".

The idea of quick, "dirty" prototyping to receive feedback from the community and beneficiaries is part of a system of lean business startup in the business world. Why design a product that no one is going to use? Though the needs of the population you are serving may be met at the mid-point in product development, will they still be met at the finish? Prototyping allows design thinkers to conduct social experiment and actually test their ideas.

Many of the stories in the article feature product innovations in less developed regions in the world (eyeglasses for children in India, a woman's cooperative in Rwanda). Certainly, the advent of design-centered inspiration, ideation, and implementation (the three "spaces" in the design thinking process) is a welcome change to the rigid and outdated frameworks in use by international development agencies like the World Bank and the IMF. Indeed, if a cookie-cutter recipe to providing clean drinking water doesn't work in a specific country, then design thinkers will look for work-arounds and improvisations with a distinctly local feel.

My question to you this week is: With the appearance of the human-centered design toolkit, are we not risking to box in our ideas and fall prey to generating ideas and change through the use of frameworks? The last thing we would want is for design to be a simple manual.

Favorite quote from the article:

Henry Ford: "If I'd asked my customers what they wanted, they'd have said 'a faster horse.'"

Frugal Engineering and the U.S.?

After reading the article on frugal engineering, I became interested in how frugally-designed products, specifically for the transportation sector, are received in developed countries. The article mentions many products originally marketed for “the bottom of the pyramid” (BOP) that end up being sold in the U.S. and Europe as well; yet does not provide many tangible success stories. Also, the article constantly tries to assure its audience that just because a product is frugally designed doesn’t mean it lacks high quality and serves its primary purpose. Perhaps Western consumers and businesses have adopted the notion that frugal engineering creates “cheap [as in inferior] versions” of the products they regularly use and enjoy.

As stated in the article, frugally engineered products are meant to “provide the essential functions” its consumers need at a price they can afford. Someone living in an impoverished and possibly inhospitable environment would not demand a Bluetooth or a Bose sound system installed in their vehicle before they would even consider purchasing it. This, of course, is not meant to critique a Westerner’s preference in automobiles (most in developed countries simply have the means to dictate the market). Yet that same individual living in an under-developed country perceivably would demand the same performance and reliability out of their vehicle regardless of it lacking additional comforts – and that is what frugal engineering delivers.

For example, Tata’s “Nano,” which was mentioned consistently throughout the article because of its low cost, only has dealerships in India (visit http://www.tatanano.com/home.htm for more information). I was curious about how the “Nano” would fair overseas in North America. In terms of cost, a basic 2012 Prius costs about eight times as much as a Nano (~$3,000<$24,000). In terms of performance, even though the Prius has a bigger engine (4 cylinders>2 cylinders), the Nano gets better gas mileage (60 mpg > 42 mpg). In terms of the North American market, however, the Prius has been utilized by only a small subset of the 260 billion U.S. drivers (probably due to its price and the social bias that comes with driving one). Would the Nano do much better in the U.S.? I’m certainly not qualified to say, but I definitely think it would be purchased by an even smaller subset of the U.S. driving population because it lacks the large engine and the comforts (and distractions) of a standard car.

Regardless of marketing the Nano to North Americans, an even bigger opportunity may have been missed. As this article and the article on “Design Thinking for Social Innovation” note, North American companies are often playing catch-up to foreign companies that are designing frugal products. Perhaps these Western companies are skeptical of their competitor’s business decisions and the lasting impact of their products, but these do not seem like sufficient excuses. If one of the major car manufacturers from Detroit could employ American workers to mass-produce low-cost cars and then export them to the countries where citizens would depend on them for subsistence, well, then perhaps the American auto-industry could return to its former glory. But, then again, maybe that is asking too much.  

Look what's happening

Not to be a huge keener, but I thought this would be interesting to many of you! I missed our lecture on financing, so maybe this was already mentioned, but just in case, it looks like the US is starting to adopt some legal structures that support not quite not for profit/ or for profit social enterprises: http://www.nytimes.com/2011/10/13/business/a-quest-for-hybrid-companies-part-money-maker-part-nonprofit.html

After this class, staying informed and in loop

This class has been a great learning experience and testing ground for ideas. Thank you to Professor Zak and my fellow classmates!

I have started to read the Innovation section of Global Public Square, it is very interesting and a way that I will continue to stay informed: http://globalpublicsquare.blogs.cnn.com/category/innovation/

What I like about this site is that it compiles articles and editorials on not just innovations, but the circumstances surrounding them. As we can imply from class and as is presented here, social innovation isn't just associated with creating a new market niche or taking risks, it's about how we can assess food shortages and how a solution such a Plumpy'Nut can mitigate even a few of the complexities and be made accessible, or how we can simplify an initiative and yet be innovative as we learned about the MIT students' initiative to take pictures in space, or how even a slight modification to an existing technology can have a significant impact in addressing certain needs as conveyed in the World Bank's Development Marketplace Learning at Leisure initiative on this site.

New Business Models to Attract New Audiences

In "New Business Models In Emerging Markets", the authors focus on four aspects to building the new model; the customer value proposition, a profit formula, key processes, and key resources. While, these are key for emerging markets, they may be important for current markets to attract new business.

Arts audiences are literally dying. As the audience ages and fewer young people are brought into the theater, museum, symphony etc. organizations are finding it difficult to generate earned and contributed revenue. Trying to get young people invested in an organization or art form starts by having them experience the art. More and more organizations are offering deeper student or young adult discount or events that attract a younger audience. An avid lover of the theater may pay $60 for a seat, while the one right next to them is sold for $15 to a student. This customer value proposition is important to drawing in a new audience. Once they are hooked and they can afford it, patrons will value the product more and be willing to pay for it.

The new profit formula for arts organization can take on two aspects; earned and contributed revenue. We already talked about earned revenue with less expensive tickets. Contributed revenue is an entirely different issue. I received a letter in the mail asking me to donate $150 to my alma mater. When I break it down to about $12 a month, it's not that bad, so we don't go out to eat one time. However, being asked for $150 out of my bank account was not an option. For younger generations, organizations need to focus on installments billing. Paying 10 dollars a month over a year is great and can get the younger audience further invested in the work.

The key resources and processes hinder on the same variable: technology. Marketing and branding have always been an important part of running an arts organization, but they is completely changing for Generation Z. They spend over 10 hours a day with some sort of media and often several kinds at one time. Organizations need to invade these platforms rather than focusing on the traditional pathways to their audience. A systems group is currently working with the Carnegie Museum of Art to map out a social media plan and how to sustain it. This will be integral to attracting a new audience and insuring the museum's mission. This process has the chance to revamp their audience and bring new life into the organization.

Building new models for business does not have to focus on emerging markets. The for-profit sector may have this luxury, but many non-profit organizations do not. They must reconfigure their business model for their current state. Attracting a new audience to the arts will determine the survival of many organizations in the next twenty to thirty years.

Build something new out of the old.

This is in response to Christine's post about Masdar City. The graphic is beautiful and the idea of a sustainable city in the desert is a very cool idea, but whenever I see something so shiny and new, I think of areas that have been left behind. I'm not totally knocking what is happening in and around Abu Dhabi, more reacting to the sense that to be innovative something must be new and totally created out of nothing.

What I get excited about is the repurposing of existing buildings and structures into new model spaces that can not only drive the creation of ideas, but also elevate an area. Pittsburgh contains tons of these examples and I even work at one of them, the Mattress Factory. The Mattress Factory has taken 2 (soon to be 3) decrepit buildings in a historic neighborhood in Pittsburgh and transformed them into contemporary art spaces. Among my favorite examples are the churches in the city that are being refurbished and repurposed into arts spaces, breweries, residency centers and entertainment venues.

Repurposing and renovating existing buildings and areas can elevate a geographic location to new heights. I don't know if everything being developed for Masdar City necessarily couldn't be applicable to existing cities. Why build a brand new city in the desert when you could improve a city at home. I guess my point is homegrown innovation. Develop new models, implement great new ideas and create lasting impact in an area that already exists rather than build it in a far off land. Human centered design for where humans already are and need it.

less is more

Are we too caught up in bells and whistles to appreciate and explore novelty? It seems like so many companies are focusing on product development in developing markets where they can create much cheaper alternatives to products that already exist. Creating medical equipment that hospitals in poorer countries can actually afford is an admirable achievement, but the disparity between what seems to be necessary here when compared to other places is somewhat troubling. In an effort to create more affordable alternatives, companies are finding new and innovative ways of doing things. I wonder if we are missing out on this kind of innovation by being so focused on having the most expensive, most detailed products available. It seems like it requires more novel thought to make things cheaper than it does to make them fancier. The focus in America on having products that doing 100 things at once seems like it is hindering us from thinking differently on what products and services we actually need.

The markets that need a new business model at home

My mother attended the same undergraduate university as me. Often when I was sitting in the library researching on my computer I would try to imagine her searching through reference stacks, peering at the microfilm screen, and waiting for updated binders of CQ researcher to be delivered. The thought of obtaining any degree without access to a computer and the internet is unimaginable to me. Awhile back when I first started hearing about groups that were trying to provide laptops and internet access to students, I was in that camp of people that question the value of internet access versus teacher training or other educational resources, but more and more I realize how important bridging this gap is. Sometimes in class I am frustrated hearing about products and services adapted to emerging markets and wondering whether these same approaches can be taken to address access and availability problems here within certain income groups in the states. Eyring, Johnson, and Nairs article discusses the importance of developing new business models to approach these new markets. I question whether this sort of incentive could exist here in the states. The economist article “beyond voice” discusses how the mobile networks coupled with inexpensive netbooks will probably drive expanded internet access. I was interested to find out a couple of weeks that this use of netbooks (but not mobile broadband) is actually being brought to the US through Comcast. FCC basically forced Comcast to promise to work on affordable internet access because of the NBC acquisition (but of course Comcast is not advertising that fact). Comcast is starting to provide a program called “Internet Essentials” where families who meet certain income requirements (the same as those whose children receive free or discounted lunch) can sign up for internet access for about 10$ a month, with free installation and a voucher for a small netbook provided by dell or acer. Critics say the connection is likely to be extremely slow (and those of us who are forced to use Comcast know the pretty poor quality of service those who pay standard rates get). Still- it’s something. Now families will be able to access internet beyond library and school hours. In each city, internet essentials is partnering with public servants and community groups to help publicize the program and provide internet literacy training. Here in Pittsburgh, the Urban League of Greater Pittsburgh is integrating training into existing programs. The program just started so there is little to no information of its impact, how many people have signed up, or other details. There’s also little info on the business plan. I wonder how sustainable the project is—the price is much less than current Comcast standard rates but given the slow connection and the infrastructure already in place, and the fact that there is a partnership with Dell and Acer to provide the netbooks, I wonder whether the 10 per month is covering the cost of the program. The program is scheduled to continue for three years, but if Comcast can prove it profitable, other internet providers will probably follow suit. We’ll have to keep our eyes on this project, and watch out for other approaches for meeting the needs of American’s beyond the middle/upper income groups. http://www.post-gazette.com/pg/11229/1167779-53-0.stm http://www.pcmag.com/article2/0,2817,2393253,00.asp#fbid=kwF9fAXM8yL http://www.internetessentials.com/news/News.aspx http://www.fiercecable.com/story/microsoft-best-buy-back-fcc-connect-compete-initiative/2011-10-12

Passion

We have spent a lot of time talking about the business of social innovation. We have looked into how is social innovation is paid for, what does a social good model look like, what is that process by which innovation comes about? These are all critical questions, without good answers to these questions and others like them social innovations would end up as merely good ideas and dreams. I think that we have overlooked the most critical part of true social innovation, something that cannot be taught --- Passion. This field needs “true believers”, people who believe in their vision and goals so much they will do anything to make it reality. Those who are willing to put the “99% perspiration” into an idea to really make it work. Darell Hammond is a perfect example of this. Even in a brief one hour presentation you can clearly see his passion. Through what at times seemed like sheer will he turned his passion into a national enterprise. While he clearly knows a lot about technical issues and business strategies I believe that it is his passion that makes him a success. These are the type of people that this field and this nation require, people of passion, who not only drive themselves restlessly toward their goals but in the process inspire others to the same level of passion and dedication.