“Nowadays it seems as though almost every entrepreneur, company leader, non –profit manager, and development community professional in the [BoP] domain talk about how well their BoP initiatives are doing. From these discussions it would appear as though BoP endeavours enjoy a tremendous success rate. All that is needed is just a little more money perhaps, and they will have cracked the code to financial sustainability and scalability, as well as generating substantial positive social outcomes.
That is just not the case.”
So begins ‘A Roadmap for the Base of the Pyramid Domain’ – this month’s Editor’s Choice. The Roadmap takes a high level view, on where the BoP domain has travelled in the last decade, and where it needs to go now. It’s not about what specific enterprises should do, but about the entire domain that seeks to support scalable impactful business. It emanates from well established authors and institutions in the space: Ted London (the BoP Initiative at the William Davidson Institute) and Stuart London (Enterprise for a Sustainable World and co-author of ‘The Fortune of the Bottom of the Pyramid’ in 2002), with their co-author Sateen Sheth.
The analysis of where we have travelled is probably uncontroversial: substantial progress has been made. More than ever, business and market-based approaches are seen as part of the solution to global poverty. We are past the BoP 1.0 which was about introducing the BoP as a viable market, and finding a fortune. But substantial challenges remain. While some ventures have thrived, ‘a larger number have failed or have been converted into philanthropic endeavours because of the lack of financial upside, and most of the rest remain local or regional in character.’ This analysis is now common currency – despite the proof that BoP business can scale because a few are succeeding, the majority are still bumping along.
Scale is at the heart of the approach in this report. Indeed, the authors introduce a new definition of a BoP enterprise which defines out those that do not seek scale: a BoP enterprise is ‘a venture that seeks sustainability and scalability, operates in the underdeveloped market environment, plans for scalability beyond the local market, and actively manages towards producing significant net positive changes in well-being across the BoP, its communities and the broader environment’. There is an element of wishful thinking in the definition and I’m not sure where this leaves smaller social enterprises that are not seeking scalability (and I don’t think they all are) – presumably counting as a social enterprise but not a BoP enterprise.
So given the challenges and mixed record so far, what is needed going forward? The Roadmap recommendations are not radical or novel, but they are a good analysis of 4 key areas needing action, with ‘stretch’ and ambition. Although they beg the question of who will take on responsibility for the initiatives they call for:
(i) Scalable enterprise: at the enterprise level, the focus is on developing more sustainable and scalable models. This, the authors say, requires best practice on how to move well beyond the thousands of pilots.
(ii) BoP Ecosystem: everyone is talking about the BoP ecosystem these days, because the market environment for BoP business is indeed fragmented and immature. The Roadmap recommends an initiative to assess the current landscape of support partners, then fill gaps and develop tools. The development community has an obligation to help out here.
(iii) Understanding and enhancing social impact: the stated challenge is that most BoP enterprises do not have a clear understanding of how to assess and enhance the multidimensional set of impacts they generate and the link between poverty alleviation and enterprise performance. That much is clear. The proposed solution adds a dose of jargon, entitled ‘Mutual Value Creation Initiative’ but essentially aims to improve understanding of impact creation.
(iv) Training and knowledge: BoP enterprises face a pressing need for talent, but a global delivery system to provide training does not exist. The Roadmap calls for training programmes to support BoP enterprises and develop future BoP leaders.
The reason I chose this report for Editor’s Choice is that essentially I agree with this diagnosis of four priorities for moving forward, if BoP enterprise is to go to the next level. I think two more could usefully be added, rather than submerged into within these four: one being appropriate finance and the other being evidence. The need for appropriate debt and equity cuts across the issues of achieving scalability and a supportive ecosystem, but is a huge challenge. The need for evidence builds on good understanding of impact, and on models that scale, but is also a driver of a strong ecosystem. The authors vision of a future for the BoP community is certainly one where we have better understanding and share our knowledge, so is implicit in the agenda.
The recommendations are partly a set of proposal for the William Davidson Institute (at the University of Michigan) to champion, but they are also a call to arms to others in the inclusive business community. For big picture programmes, such as the new GIZ-supported Inclusive Business Action Network, they provide a set of recommendations. Indeed Ted London shared these at the IB Action Network launch. For the rest of us operating in our own pockets of activity, they help provide a sense of perspective: a long road has been travelled over a decade, and there is a decade more of road-building ahead. As we reflect in our overall theme on the Hub this month, Looking Back, Looking Forward, it is wise to stand back every so often, to see where we are, set our compass and reset our energy for the next phase.
A Roadmap for the Base of the Pyramid Domain: Re-energising for the Next Decade is published by the William Davidson Institute at the University of Michigan (2014). Authored by Ted London, Sateen Sheth and Stuart Hart.
For other blogs, reports, and interviews on the theme of Looking Back, Looking Forward in IB, see our December 2014 newsletter and related items. #IBForward