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Patience needed at the base of the pyramid

Michael Jarvis's picture

Webcoveroutreachjun08newsizeDiscussion of business models targeting the poor as producers and consumers often centers on the same limited number of examples. Why are more initiatives not going to scale or getting noticed? In part, we may simply have unreasonable expectations. Market innovations from the Post It Note to bagless vacuum cleaners took years to come to market and win over consumers.  If the normal R&D time frame is 7-10 years, why should we expect base of the pyramid models to deliver results in 6-12 months? Analysis, such as that of the BoP Protocol from the team at Cornell University, suggests adapting existing models is not enough. Total innovation is best to build new markets with the poor. That takes time.

This R&D issue was raised repeatedly by faculty and participants during the new executive program Inclusive and Sustainable Business: Creating Markets with the Poor run by the World Bank Institute (WBI) in Washington last week. The course brought together mostly MNC and national firm management to dive deep into aligning the corporate and development agendas at the BoP. While recent surveys point to the lead of local firms in this area (see Ryan’s recent post), it was reassuring to see the interest and enthusiasm from multinationals to better understand this market. During the week a wide ranging of examples were discussed, including those involving the World Bank Group such as Lighting Africa. The latest edition of WBI’s Development Outreach magazine (pictured), launched during the courses, focuses on business and poverty and collects together 13 cases together with an overview developed with leading business schools.

Comments

Doesn’t this argument confuse a few things? First, the implicit argument is that innovative business models at the bottom of the pyramid would come from large corporations, since it is they who do a large part of formal R&D. Wouldn’t one rather expect innovative business models from start-ups or SMEs, who don’t have to fight not-invented-here syndromes and pointy haired bosses? Second, how many examples are there where innovative business models have been the result of formal R&D? Aren’t they rather the result of creative entrepreneurship? From the angle of conventional innovation research, shouldn’t one address innovative business models as a case of disruptive innovation, which, according to Clayton Christensen, is something that large corporations find consistently difficult to deal with? My suspicion is that there is a quite different obstacle to innovative business models at the BOP. It’s quite simple, really. There are rather few places on this planet that provide a really fertile environment for innovative business models. Silicon Valley is one of them. Many developing countries even battle to create an environment to replicate robust business models, and in fact discourage entrepreneurship. But even significant cuts in red tape wouldn’t create the kind of ecosystem that stimulates innovative entrepreneurship. In order to achieve that, one would have to complement the enabling environment approach with other types of activities which, unfortunately, seem to be little understood.

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