Minna Halme

Commercialization and scaling up inclusive businesses at emerging markets

Focus on low-income emerging markets (Base of the pyramid)

4 billion people

live with less

than 5€ (PPP) per

day Minna Halme

Base of Pyramid Approach

Minna Halme

Vision: To enhance wellbeing and reduce poverty through innovative sustainable design and enterprise

A collaborative network of private sector, civil society, academia and public sector

Focus on capabilities and strengths of the people and communities

Emphasis to build long term partnerships and linkages between innovation ecosystems

Aims of Aalto & its network

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Finnish partners (2010-2012)

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International Partners

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Minna Halme

Key learnings for successful inclusive business models:

Examples of Grunfos Lifelink, Cemex, ITC eChoupal and MyC4

Base of the Pyramid Approach

Minna Halme

BOP business examples

Nearly 200 BOP business models have been documented.

Initiators range from multinational companies to SMEs, social enterprises and non-governmental organizations.

Minna Halme

Why go for the BOP?

Some BOP markets are large and attractive as stand-alone entities.

BOP markets are a source of innovation (disruptive innovations):

Local innovations can be leveraged across other BOP markets: A global opportunity for local innovations.

Innovation blow-back: BOP can be a catalyst of innovations also for the developed markets.

BOP markets can be a source of resource efficient innovations, because of scarcity of commodities such as water and electricity.

Opportunity for radical industry renewal.

Additionally, BOP-business may offer an opportunity for innovative corporate responsibility

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Cemex

Problem: Lack of housing for the poor

Solution: Cemex’s saving & credit scheme Patrimony Hoy allows poor customers to add on to their homes kitchen, bathroom, one at a time

Groups of three families save

76 weeks

Good quality materials

Advice and technical help in the building the addition

Outcome: Since its inception, over 265,000 poor families have built additions to their homes with PH. 60 % of participants say they would not have been able to build their house without the program.

The program creates jobs mainly among local masons and those trained as promoters. 95 % of promoters are women, 51% of whom had no previous working experience. 29% of participants use their homes, or extra rooms that they have built through their participation in Patrimonio Hoy, to build their own businesses.

ITC eChoupal procurement hubs for farmers in India (1/2)

Problem: Small farmers do not always get a fair price for their produce at Mandi markets (Indian government controlled produce auction; picture), where cheating is a common practice during the weighing process. At the same time, companies can have difficulty finding good quality soy to make food products.

Case: ITC is a major agritrading company in India, which buys mixed quality soy from agents to make food products, particularly food oil.

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Solution: eChoupal (two-part program):

Part 1: Through a chain of village internet kiosks,

farmers get access to grain and seed rates prior to

taking their produce to the market and can sell when

the rate is high or acceptable. ITC trains coordinating

farmers to help in this process (picture).

Part 2: ITC procurement hubs are set up with

electronic weighting to avoid cheating in Mandi

markets, to inspect soya quality and pay the farmers

accordingly and immediately.

Outcomes: ITC procures good quality soy and

removes agent commissions and farmers get a fair

price for their produce. 6,500 eChoupals serve

40,000 villages and 4 million farmers in India. Today

eChoupals trade in 13 commodities (2 million tons;

$400 million).

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CASE 6: ITC eChoupal procurement hubs for farmers in India (2/2)

ITC eChoupal procurement hubs for farmers in India (2/2)

PROBLEM: Subsistence entrepreneurs have too little money or can’t get bank loans.

SOLUTION: MyC4 is a microfinance bank operating through the internet since 2007.

• MyC4 grants loans to small enterprises in African countries

• Investors are individuals and organizations in developed countries.

• Each investor can choose the loan recipient, follow

how the enterprise succeeds and can also give advice.

• Local ”providers” in Africa screen prominent entrepreneurs.

REVENUE MODEL: MyC4 charges a 6% interest fee on the loans when they are repaid.

OUTCOME: Over 19,000 investors from 115 countries have invested over €15 million through the MyC4 website. Over 8,000 businesses in seven African countries have been funded.

Microfinance over the internet

Grundfos Lifelink

PROBLEM: Lack of safe drinking water

SOLUTION: Water systems for rural communities, schools and hospitals

It is crucial to develop community ownership

Users pay with mobile phone & pre-paid key fob (RFID Technology).

Local banks participate in financing

Solar panel is power source

Maintenance and repair costs are included in the water price

On-line remote monitoring with GSM/GPRS

Quick repair in case of faults

Locals have been trained as repair mechanics

Minna Halme

BOP business innovation checklist

10

Types of innovation needed for BOP business models

Product

innovation

Delivery

innovation

Adaptation to

Infrastructure

Relationship

and labor

innovation

Partnership

and network

innovation

Affordability and

quality

Different

functionality

Commercial

scale

Resource

efficiency

Efficient

delivery

process

Group credit

schemes

Effective

distribution

systems

Usable

interfaces

Last mile by

local

subsistence

entrepreneurs

Design for

hostile

environment

(e.g. erratic

electricity, dirt

roads)

Hybrids: new

technology in

deficient

infrastructure

conditions

Deskilling work

processes

Local actor

involvement

Trust-based

relationships

Mutual benefit

Capabilities

development

Untypical

business

partners

Multi-

stakeholder

relationships

Common goals

Utilization of

complimentary

resources

Network

assembling and

coordination

Corporate challenges for inclusive innovation

BOP-markets are considered challenging for market-related barriers

Deficient market information and regulatory environment, lacking physical infrastructure or access to financial services

But inclusive innovation can often be hampered by corporate management frameworks

Short-term profit maximization, business unit based incentive structures, and uncertainty avoidance. Inclusive business innovation processes do not conform to these frameworks

Promoters of inclusive innovations may face shortage of time for the tasks they have, lack of adequate financing, and lack of access to expertise from within their organization.

Overcoming constraints: Intrapreneurial bricolage

Dedicated innovators may act like entrepreneurs within a large organization. They ”make do” with whatever scarce resources are at hand such as substantial amounts of their free time, private-life networks, or previously discarded technologies, and make creative combinations of these resources in order to promote their inclusive innovation. Occasionally they work underground and even against their superiors’ orders.

Success depends on organization’s tolerance to intrapreneurial bricolage

Read more: Halme, M, Lindeman, S & Linna, P. 2012. Innovation for Inclusive Business: Intrapreneurial Bricolage in Multinational Corporationsjoms. Journal of Management Studies. doi: 10.1111/j.1467-

6486.2012.01045.x_

Thank you!

Minna Halme

Professor Minna Halme For information: http://management.aalto.fi/en/research/groups/bop/ & www.aaltoglobalimpact.org/