Chevrollier, N. 2014. Inclusive business: New business models, new opportunities, new skills. GREAT Insights, Volume 3, Issue 2. February 2014.
The rise of inclusive business
SimGas B.V. is an innovative design and production company focused on delivering affordable small-scale biogas and bio-sanitation systems to customers in (sub)tropical regions especially Eastern Africa. By providing clean, affordable energy and sanitation solutions, SimGas offers households tools to improve their lives and income positions. SimGas B.V is an example of a new breed of company seeking both financial and impact returns by involving low-income groups in their business as consumers, producers and entrepreneurs: a so-called Inclusive Business. Luring this group of four billion people commonly known as the Base of the Pyramid (BoP), companies seek in BoP markets growth opportunities, a new source of innovation, a first mover advantage or a long-term survival if they operate in saturated markets.
New employment opportunities for low-income groups
Inclusive businesses provide unique employment opportunities for low-income groups by engaging them and co-creating with local communities. In agriculture for instance, smallholders become engaged to produce new agri products for local markets. The Fruit Republic for instance is the first professional fresh produce trade company of Vietnam sourcing fruit and vegetables from smallholder farmers all over Vietnam and selling to middle class consumers in shops in the main cities such as Hanoi or Ho-Chi-Min. Impact Sourcing (1) is another way to engage low-income groups as producers in inclusive business. Impact Sourcing represents the socially responsible arm of the Business Process Outsourcing (BPO) and Information Technology Outsourcing industry. Benefiting from an increasing online penetration in developing countries, it employs low-income group people in BPO centers and creates unique employment opportunities. Finally, in rural Bangladesh, JITA provides rural distribution services to a number of well known brands, to make their produce (shampoo, yoghurt, shoes, etc.) available at rural village level at an affordable price. Retailers are women known as ‘Aparajita’, a Bangladeshi word meaning ‘one who cannot be defeated’. Started as an non-governmental organization (NGO), it is now a for-profit business employing 4,700 ‘Aparajita’ who have seen their incomes rise from less than US$12 per month to an average of US$20 per month (2). Inclusive business creates unique opportunities for low-income groups in developing countries whether as producers, distributors or employees.
Intrapreneurs in multinational companies
While small and medium enterprises (SMEs) and mid-size organisations have started to seize these BoP opportunities, it is equally true for multinational companies. Over the past decade the approach of multinational companies has evolved when developing products and services at the BoP. Initially, multinationals followed a one-direction approach selling products and services to the poor. The value for companies was clear, but the extent to which it served the poor remained questionable. Often, strategies failed to succeed because products were not developed together with the BoP. The next generation BoP approach came into place. People at the BoP are embraced in the innovation process as valuable business partners. A shift from business strategies targeted at the BoP to inclusive business together with the BoP. Today people at the BoP are included in projects as entrepreneurs, producers and consumers as described in the previous section. They co-create Inclusive Innovations partnering with companies, civil society and public authorities. The current developing view, ‘ BoP 3.0’ strategies, combines different stakeholder perspectives working collaboratively towards integrated system solutions (3).The strength of the company taking the lead is reinforced by smaller, more flexible, innovative, local and international companies. These are strong partnerships that have collective impact on the BoP.
These trends have a direct influence on the type of mechanisms multinational companies develop to address the BoP market. They still develop their own innovation with the BoP but they often provide technical and business support to BoP entrepreneurs (local or international) they invest financial in. In corporates such as Danone (4), GDF/Suez (Rassembleur d’energie) or Schneider Electric (Programme BipBop), these three legged programmes (innovation, support, investment) enable companies to create a systemic change in the BoP ecosystem they work in and ultimately accelerate their own development in the BoP market. Often so-called “intrapreuneurs” pushed the innovation boundaries of the corporates to establish these programmes. Navigating through the internal corporate governance, they sustain the impact and financial vision of these new lines of business.
New skills needed: 4Ps
Whether it is from an SME like SimGas, a social business such as JITA or a multinational such as Schneider, new professional skills are needed to start and sustain the operations of an inclusive business. Passion, Perseverance, Partnership, Patience, or the 4Ps, are necessary. A genuine Passion for business that creates sustainable impact at the BoP. Perseverance to sustain efforts to develop these frontier breaking ventures, Partnership to create joint-ventures between companies, NGOs and public authorities, and Patience since to scale an inclusive business takes between five to ten years. This is the new bread of professionals needed that will continue developing a new inclusive business industry.
Nicolas Chevrollier is Programme Manager at the BoP Innovation Center, Netherlands.