KNOW-HOW – Inclusive business results
Enthusiasm for inclusive business is gaining momentum. This is because it offers to deliver both commercial and social returns. But hard evidence of those results remains slim, because they can be hard to track and even harder to quantify. In the Business Innovation and Innovations Against Poverty, tracking results is an essential element of running a successful programme.
We share ideas with companies on how they can assess their results, and operate our own monitoring system to seek to capture outcomes across the portfolio. Understanding the results of successful inclusive business requires focus on at least 3 different levels:
- Commercial return: New inclusive business models take time to reach profitability and unfortunately commercial sensitivity, coupled with the investment needed to break down figures in order to identify specific project results, make numbers all too scarce. While commercial viability is essential for development impact, what is evident is that profitability is not the dominant driver. Companies report positive commercial returns such as competitive advantage, more secure supply chains, growth of new markets.
- Development results: Inclusive business models can reach thousands of people at the base of the pyramid. As a general rule, those that engage poor people as producers, may reach a few thousand, while those selling to base of the pyramid consumers may reach tens and hundreds of thousands. Most inclusive businesses can report on the numbers that they reach. But what is really difficult to measure is how people’s livelihoods have changed as a result of the business; whether there are any losers; and what the wider impacts of inclusive businesses are on markets, sectors and systems. These longer-term impacts can be a large part of the story, so should not be ignored.
- Scalability: Truly successful inclusive models are those that go to scale. This means they combine commercial viability with a development solution that is adopted at scale. When scale is achieved by the pioneering company – such as it the case of M-PESA – it may be measured over time. When scale is reached by others replicating a business model – it is harder to track.
- The challenge of tracking results: Companies are used to tracking commercial performance, but often need to adjust their key performance indicators (KPIs) to incorporate social elements such as number of farmers reached, number of kilowatts delivered. These can all help track important outcomes.
A suite of indicators, known as IRIS indicators, are used by some of those who secure ‘impact investment’, but can be useful to all kinds of inclusive businesses. There are many other business approaches too: assessing a social footprint, calculating local economic multipliers, reporting against sector-specific criteria – different approaches serve different purposes. See for example, ‘Measuring the ‘inclusivity’ of inclusive busines‘ by Elise Wach (2012). Donor initiatives that support inclusive business have to assess their results, and many are developing their own measurement frameworks. Capture some of this debate in our Impacts Network. As a pilot with a mandate to learn and reflect on its experience, the Business Innovation Facility has developed its own approach to monitoring the results of inclusive business for the companies it supports.