In the West African nation of Ghana, the women who pick and process shea nuts into shea butter may seem like unlikely candidates for software solutions provided by the global information and communications technology (ICT) leader SAP.
Yet that is just the market SAP is targeting to test high-tech solutions for low-tech problems. By working with the international NGO PlaNet Finance, which provides loans and technical assistance to groups of shea nut harvesters, SAP plans to use its technology to improve the global competitiveness and position of Ghana’s shea nut industry. It will do this by implementing software solutions to improve PlaNet Finance's operations and processes; by creating an on-demand version of PlaNet Finance’s technology offering for micro-finance institutions; and by providing micro-financing, education, and technology to women working in the shea nut industry in rural Ghana.
In effect, the Ghanaian women will receive the investment required to develop a key industry and a more reliable source of income, and SAP will benefit by understanding the needs of a new potential market.
These women in Ghana are among the world’s poorest people—a group that comprises the base of the pyramid (BOP). According to the World Resources Institute, nearly 4 billion people today survive on less than US$3,000 annually, and this demographic is growing, presenting both a challenge and an opportunity for companies who address its needs.
By developing ICT solutions for the BOP, business has the opportunity not only to improve the welfare of the world’s poor; companies can also profit by testing innovative new products and solutions and reaching growing markets. What follows is our guide to building a successful approach.
Build the Business Case
One of the key challenges in using a typical business case for BOP initiatives is the tension between long-term change and the push for short-term profits. To address this issue, rather than focusing on the immediate return on investment (ROI), incorporate both the opportunity for profit as well as the longer-term benefits into the business case. These additional benefits include innovation developments, facilitated market entry, and alignment with current corporate responsibility priorities.
The first element of the business case should demonstrate the opportunity the BOP presents. While developed markets are becoming saturated, the BOP is a large and growing demographic with low ICT penetration. According to the World Resources Institute, global BOP spending on ICT is more than US$51 billion. In many regions, such as Asia, where the BOP accounts for more than half of the total ICT spend, the BOP represents a large portion of the ICT market. Success in the BOP can position a business for strong long-term growth.
Consider the example of China Mobile, which has invested significantly in cellular telephone network infrastructure in rural China, which has a large BOP population. By offering cellular connectivity to this group, China Mobile has not only improved the lives of rural Chinese by giving them better access to important information like crop prices and health resources, it has made significant revenues. The company reports approximately 3.5 million new rural customers per month.
The old adage that “necessity is the mother of invention” clearly applies here. Faced with the requirement of a low purchase price, along with other potential constraints such as a lack of infrastructure, difficult environmental conditions, and user profiles that are vastly different from current customers, businesses must develop clever adaptations to serve the BOP.
These adaptations can have a positive blowback effect in their application to higher-margin products. For instance, GE’s MAC800 electrocardiogram (ECG), originally created in Bangalore, India, was designed for rural areas that often did not have access to high-quality diagnostics. The 7-pound device is far more portable other ECGs on the market that can weigh as much as 65 pounds. It is also about 80 percent less expensive than its larger cousins. After being further adapted for the Chinese market, the devices were sold in Europe and the United States as a lower-cost alternative for smaller hospitals and clinics.
Finally, BOP offerings can align closely with corporate social responsibility (CSR) priorities, providing indirect benefits to the company by fulfilling the firm’s CSR goals. BOP offerings can enable leaps forward in productivity to speed economic development and reduce poverty. There are also enormous opportunities to support objectives like eliminating hunger and disease, enhancing environmental sustainability, narrowing the digital divide, advancing education, and promoting equality. The benefits of these activities for brand enhancement, employee well-being and engagement, and recruiting are substantial.
Using these and other points as part of a business case for BOP solutions will help move your company from idea to implementation.
Include Society’s Needs in Your Innovation Platform
ICT product designers and developers typically start from a “values-agnostic” stance in their work. Their role is to create a product to fit a certain need that is usually articulated in terms of functionality or commercial value. Addressing the BOP opportunity requires a framework that allows designers to think creatively about solving sustainability issues from the outset.
As outlined in our report “Aligned for Sustainable Design,” coauthored with the design firm IDEO, BSR advocates for “sustainable design intelligence,” which follows an A-B-C-D framework:
- Assess material impacts of projects and the design capacity in the organization.
- Bridge the right functions and people to make valuable, tractable change.
- Create internal and external learning projects.
- Diffuse lessons and accountability mechanisms that affect better decision-making around the organization.
Integrate BOP Opportunities into Your Business Strategy
The exploration of BOP opportunities can be incorporated into your business strategy with a three-step approach:
Scale Up Winning Projects
The nature of BOP markets requires a low-margin, high-volume model in order to maintain satisfactory returns. While local engagement helps create products that are relevant for the BOP, once proven successful, winning ideas should be transferred to other markets to maximize the ROI.
For instance, Vodafone/Safaricom enjoyed great success with M-Pesa, a mobile banking joint venture in Kenya that generated more than US$50 million in revenues and helped Safaricom grow its market share from 74 percent to 81 percent. Recognizing the potential in other markets, Vodafone is taking this “mbanking” concept into other countries in Africa and Eastern Europe.
Companies that can successfully create and scale offerings for the BOP will be well positioned to take advantage of changing demographics, and to positively impact the world’s neediest segment.
Define and measure success. Success at the BOP will not look the same as success in other markets, and poor performance in traditional measures like payback period and short-term ROI can prematurely doom a BOP initiative. To avoid this pitfall, it is important to clearly define success for your BOP initiative at the outset, and create targets that are reasonable for the challenges and opportunities this market presents.
Depending on your company and its long-term strategy, consider measurements for innovation, sustainability impact, brand recognition, scalability, or, when looking at traditional measures, consider a longer-term payback period or ROI. Once success has been defined, keep stakeholders informed of your progress, challenges, and next moves in order to manage expectations.
- Get local. One of the challenges in developing ICT solutions for the BOP is getting close to consumers to improve understanding about their needs. This challenge goes beyond mere geography, and can include cultural divides, technology access divides, language and literacy, infrastructure, and environmental issues. Especially in business-to-consumer offerings, BOP success requires locally relevant products. Select markets where your company has an interest in long-term growth, and create a strong local presence to co-develop business opportunities to help overcome these hurdles. Creating products for business or government customers that help clients reach local consumers will position them, and you, for success.
Identify and engage partners. Partnerships can help you overcome some of the challenges presented by the BOP. NGOs can lend the on-the-ground knowledge and connections to engage a BOP community and build trust with local stakeholders. Aid organizations can provide funding or micro-loans to get over initial cost hurdles. Governments can create infrastructure, build public support, and lend other organizational support. And other companies can provide complementary competencies or fill gaps in expertise.
However, it’s important to note that collaboration can also present challenges, especially when partners have different cultural backgrounds, missions, and working styles. Partnerships work best when the parties trust each other and are open and committed to the project. To ensure a fruitful partnership, be clear about goals, expectations, and methods.