This blog is written by Jessica Scholl, Programme Coordinator at the International Business Leaders Forum, and was first published on the Business Innovation Facility (BIF) practitioner hub www.businessinnovationfacility.org. BIF helps the development and uptake of inclusive business models by companies in developing countries. IBLF is a founding member and implementer of BIF.
Imagine this: You manage a successful company that distributes Portable Toilet Cabins (PTC) in India. You see 24% of India’s urban population living in slums with very limited access to formal toilets, 50% of India’s population still defecating in the open, and around 6,000 children dying each day from diseases related to poor sanitation, such as diarrhoea.
You see the makings of a strong demand: a need to be met and a large untapped consumer base. You have the supply (the PTC) and you know that a “pay-per-use” financing model could keep costs to the customer low while generating profit after a slightly elongated break-even period. You’re a business man and you’re attracted to the viability of this model. This market promises to give your PTC more exposure than any of your other markets yet.
Now imagine this: You live in a crowded urban slum in New Delhi with few assets and even less disposable income. Life isn’t comfortable, but you have your systems. A man, clearly not from the slum, approaches you one day offering you access to a newly installed PTC for a small pay-per-use fee. Ha, you think. This man wants me to pay for something I already do for free. Does he think I’m a fool?
By sharing ownership of the project and revenue, the company could rely on the local partners to dedicate time and energy to changing attitudes and behaviours on the ground and the local partners could rely on the company to provide training and support.
Herein lies the challenge faced by many a business when entering base of the pyramid (BoP) markets. Different conceptions of “need,” distrust of outsiders, and all the other challenges associated with operating a formal economy business in an informal market too often create insurmountable roadblocks. At this point, many businesses are faced with the question: Do we turn the car around and head for another market, or do we get out of the car and figure out how to clear or bypass this roadblock?
For those that choose the latter option, collaborating with unconventional partners may prove essential. These “partnerships” may not simply provide a one-stop, bulldozer solution, but rather may provide the tools and resources to find innovative solutions. Standing outside the car at our road block, a business may be wise to approach nearby villagers with their shovels and local maps of the area.
This is precisely the approach the PTC business in our original scenario eventually took. They understood that they needed to work with local actors that both understood the importance of sanitation and were respected in the community. By sharing ownership of the project and revenue, the company could rely on the local partners to dedicate time and energy to changing attitudes and behaviours on the ground and the local partners could rely on the company to provide training and support.
It was through this partnership—one with a clear sense of mutual benefit—that the company was able to bypass the roadblocks and expand their core business into markets inaccessible to others in their industry. Simply good business.