Posts Tagged ‘reculture’

A Precursor for Systems Design and Social Change from Finland

Sitra, the Finnish innovation fund, has released an excellent analysis and work plan for systemic change at scale – how to change the national mindset to become a society focused on sustainability and wellbeing.

I remember noting Finland’s leadership in systems design and strategic planning back in 2007 during our Cox Europe Mission to observe multidisciplinary creativity in business and higher education. One of the reasons, I still believe, why Helsinki became a World Design Capital.

This report considers the circular economy (or, REculture as I’ve often called it). While the whole document is entirely the work of Sitra, one cannot help but recognize the contributions made by Doblin, the pioneer of design planning back in Chicago. After all, all of us who were taught by Larry Keeley were introduced to the 10 types of innovation  page 44).

This gives me hope, as my team and I start exploring the method for triggering systemic change for an entirely different kind of complex, adaptive system – that common in the developing world context. This means that we can draw upon the lessons we learnt back in school and then seek to evolve them for the disparities in the operating environment.

Unlike Finland, where there is high trust in the system, and things run rather smoothly, even after the worst blizzard, the average rural market town in East Africa has unreliable and inadequate infrastructure, higher mistrust in systems, and almost no credible sources of historic data for any kind of trends analysis much less an easy and affordable way to monitor and evaluate anything less than highly visible (mobile phones) gross changes in the ecosystem.
sitraThus, while we can be inspired by this straightforward roadmap for the Finnish context, I already know that our progress will not be as simple or linear. Most likely we will have a lot more exploration and discovery, such as mapping the landscape, as well as needing to adapt our approach in conditions of greater uncertainty where planning is a challenge, and preparation means survival.

As a Finnish entrepreneur, I’m grateful for this contextual opportunity to be inspired by this living example even as I proceed further with my own work.

Mainstreaming REculture into the materials supply chain

In July 2009, I was inspired by my then working space in the Research wing’s open office at the Aalto University’s Design Factory in Espoo, Finland, to launch a group blog called REculture: Exploring the post-consumption economy of repair, reuse, repurpose and recycle by informal businesses at the Base of the Pyramid

In a post titled RE culture: The BoP innovator’s/entrepreneur’s biggest opportunity space is post consumption, I explained my concept so:

Stepping back, if you take the broad space of REuse, REpurpose, REpair and REcycle (though I’m still debating whether that last quite applies in the same context as we’d expect it to mean in the developed world) – its the low hanging fruit for the BoP entreprenuer’s opportunities for income generation. […]

… it seems at first glance that they look to be more or less the same thing i.e. how different is it to reuse a plastic bottle to contain some liquid from recyling it? particularly if the manufacturer had intended for it to be a disposable container?

Yet, from the big picture perspective, one can say (and it has been said before) the whole concept of recycling is a cost in the OECD world whereas its actually a source of income, in a myriad ways, among the BoP. 
[…]
That is, the lower income market tends towards maintenance and extending the lifespan of the products (through repair or repurposing it) they purchase rather than disposing it for convenience or replacing it for a trendier style.
[…]
However, what’s interesting about this,  is the fact that these opportunities would
a) very rarely be spotted as one in mainstream consumer culture;
b) not be a gap per se due to a difference in mindset/worldview OR even
c) not be profitable enough, given the comparative cost of labour vs the price of the product involved.

These conditions for making money, and more so, making money that is deemed a valid ROI seem only to be available among the lower income demographic and in the developing world.
[…]
So, at this point, early stages of exploration though it is, one could say that the whole area of “post consumption” consumer practices – most of which have withered away like the appendix in the ‘rich’ world – forms one major basis for both products and services, with value addition to varying degrees, in the ‘informal economies’ of the developing world.

Earlier last week, however, I received the McKinsey Quarterly and the diagram below caught my attention. Take a closer look at their labels for each stage of the “Supply Circle”, formerly known as a supply chain:

Value is created by looping products, components, and material back in to the value chain after they fulfill their utility over the life of the product. Yes, indeed, the leaders in the field are exploring these hitherto unconsidered sources of inspiration for process innovation.

It was this basic insight that led us to the research project among the jua kali of Kenya in August of 2010. Innovation under condition of scarcity  capture our initial findings from the fieldtrip to observe, document and be inspired by the informal manufacturing ecosystem in the resource scarce parts of the developing world. My research associate Mikko Koskinen and I prepared this set of slides showcasing this informal industrial ecosystem whose practices, we believed, could conceivably inspire new ways of manufacturing and material use for a more sustainable future. You’ll note in the second last slide the table of research outcomes as they related to business, design and of course, engineering. After all, we were part of the Design Factory, an interdisciplinary experimental platform for innovation. You’ll find mention of REculture as a concept for sustainability and value creation here and here, based on my original work in Finland.

Today, the fundamental concept, that of being inspired by those who make do with so little, has gone comfortably mainstream. McKinsey states on their website:

This article offers a practical set of tools to help manufacturers and waste-management companies capture the resource-productivity prize. Manufacturers are likely to achieve the quickest impact if they start by focusing on their areas of core competency. But to secure the full value of their efforts, companies must optimize their operations for resource productivity in four broad areas that cut across their business and industry: production, product design, value recovery, and supply-circle management. By taking a comprehensive approach to resource productivity, companies can improve their economics while strengthening their value propositions to customers and benefiting society as a whole.

The Informal Economy Symposium, Barcelona on October 12th 2012

Our aim with this symposium is to explore the global scope, innovations and potential futures of the informal economy.

Opening Keynote will be John Keith Hart, who coined the term “informal economy” and the day long symposium on the 12th of October will be closed by John Thackara.  There will be three panel discussions, as follows:

PANEL 1: SCOPE, MEANING AND TENSIONS IN THE INFORMAL ECONOMY

This panel will explore the scope, tensions and influences of the informal economy. It will set the stage, provide case studies, and present new themes that make clear why the informal economy is a key topic for business and society today. It will address critical questions for the symposium: What are historical foundations, contemporary developments, conception and misconceptions of the informal economy? What parts are institutionalised or marginalised and which are not?  What does regulation look like?  How is the informal economy similar or different in emerging vs. developed markets?  What kinds of goods and services does it include?  Are there good and bad informal economies? How are the informal and formal linked? How do labor, goods and services move within and between them? Why does contemporary business need to understand the informal economy?

PANEL 2: THE FUTURE OF MONEY AND THE INFORMAL ECONOMY

This panel will explore the use of money and other exchanges in the informal economy. This panel builds on the previous, starting with the premise that the informal economy is a place to create new value for business and society. It will discuss the relationship between regulated finance and informal exchanges, focusing on, among other things, mobile money. Some key questions to be addressed include: How is the use, exchange and idea of money similar or different in formal vs. informal economies? How do digital technologies encourage and expand informal practices and exchanges?  What are the ways to establish financial links and other bridges between formal businesses and informal practices? What are specific financial needs in various informal economies? What are the challenges faced by companies operating in financial services and other businesses when addressing the context and practices of the informal economy?
panelists: Ben Lyon, Ignacio Mas, Niti Bhan  moderator: Rich Radka

PANEL 3: INNOVATION AND OPPORTUNITIES IN THE INFORMAL ECONOMY

This panel will look at innovation within the informal economy. Rather than approach informal economic practices as make-do strategies of people in the margins, panelists explore the potential for the lean and agile practices of the informal economy to adapt to contemporary global shifts. Some key questions to be addressed include: Can informal economic practices be indicators of future economic activity? What can these practices teach us about our own innovation efforts and modes of doing business?  What does the persistence of informal economies mean for the future of business? What challenges does it present? What are some ways companies can act on opportunities?

You can register for the symposium here, or follow the blog and twitter hashtag #informaleconomy.

Scarcity as a driver for innovation

Frugality and affordability are very much in the news of late, what with the most recent essay on Change Observer and this post on Paul Polak’s new blog both highlighting similar concepts but from the point of view of very different markets. It seems to imply the trend towards frugal design or extremely affordable yet relevant and useful products is emerging to the forefront of the mainstream, regardless of whether its the sophisticated mainstream consumer culture or the challenging markets of the lower income demographic. In which case, this is a timely moment in which to give a brief introduction to the conditions of scarcity within which we looked at informal manufacture, fabrication and innovation during our recent trip to Kenya and how these conditions drive innovation. Necessity, after all, has always been the mother of invention.

Infrastructure

Infrastructure availability or systems that we take for granted such as running water, stable electricity supply without voltage fluctuation or blackouts is an ongoing challenge in this operating environment (the majority of the unevenly developed world). This need not necessarily imply “poverty” so much as scarcity or uncertainty – for example, the latest Economist has a great article that underlines this point with regard to India’s chaos having little to do with its economic growth potential and ability. The variability of infrastructure not only influences product development for these markets but as we recently noticed, drives innovation in sometimes surprising directions that we may not always perceive of as an “unmet need” immediately.

Tap (Faucet) lock, Nakuru, Kenya 30th August 2010

These are locks for your water tap, available in the jua kali market in Nakuru, Kenya. They not only prevent the unauthorized use of your water (particularly if its from a tank of finite capacity that you may have paid good money to get filled) but also protects your tap itself from theft (the metal can be sold as scrap to be melted down and reused).

Fuel and energy

While much of the drivers for renewable energy solutions in the developed world are concerned with environmental and energy security issues, (valid in themselves yet still considered a luxury, imho, in the mindset of the customer due to premiums), product development and invention in the emerging markets is based more fundamentally on scarcity and need for affordable reliable power and fuel supply. Does this change the way the problem is framed for the inventors/makers and how does this shift in perspective influence the solution development? As Paul Polak points out:

If you don’t design to realistic customer-derived price points from the very beginning, any tool you design for a poor customer will never be adopted at scale.

Aluminium smelter’s workshop, Nairobi, Kenya September 2010

And it doesn’t necessarily have to be a solar lantern for a poor customer per se – it can be the micro-entrepreneur who wants to lower his costs to the minimum in order to maximize his daily profits. Here is an aluminium smelter’s workshop, the can on the left contains used motor oil which he burns to melt the scrap metal down into ingots for reuse. On the other hand, he is dependent on electricity supply to power his air blower that vaporizes the heavy oil enough for it to burn and loses income if the power is out.

Transportation and distribution

If you’re in the informal economy, you don’t have access to the far flung top of the line logistics and distribution networks that other businesses do, or at least not at scope and scale available. Furthermore, due to the variance in infrastructure and operating environment, this is a challenge even for the biggest companies if you’re in a market like India’s much less the less developed nations. I’ve touched upon this further in this article but here I’m bringing this forth as one more element of scarcity that acts upon the operating environment, and so can lead to some ingenious and/or innovative solutions. Developed in context, they are often very affordable and relevant as they seek to solve locally observed problems.

Modified boda boda bicycle, Maker Faire, Nairobi Kenya 27th August 2010

Boda bodas are bicycle taxis popular in Africa, particularly East Africa, originating in Kenya. Here, these two makers from a smaller town outside of Kisumu came to display their specially modified boda boda. The back carrier has not only been elongated to increase the carrying capacity of the vehicle (which is what this is) but the gentlemen had also figured out that 250 kgs was the average load therefore they had calculated the necessary size of the modification accordingly. In addition, since their local area was both hilly and had uneven paths, they added shock absorbers to help the driver and improved the braking mechanism. Of course, they’d also added the facility to both charge your mobile front at the front of the bike while charging a car battery at the back from the dynamo. There is fodder for an entire article on the bicycle as the platform for innovation in emerging markets but that’s for another day.

Materials and Tools

Far more than in India but I can’t recall the situation in the Philippines at this moment, was the obvious scarcity of appropriate and affordable hand tools, small machine tools and raw material in Kenya.And certainly, there’s no Home Depot or some such there. And Kenya is supposed to be the most advanced in this sphere in the East African region. I would really like more information in this area so please write in or comment if you have knowledge.

Scrap from aluminium casting ready for re melting into ingots

Hammerheads made from old car axles

This earlier post compares two simple manual machines, the local variant of which uses far less energy and material to effect the same purpose and this one takes a look at the prototype of an affordable coffee grinding machine.

Working capital, cash flow and insurance (Risk and uncertainty)

A natural but challenging side effect of operating in the informal economy is access to financial tools and support systems available to small businessmen everywhere else. Bank rates are very very high (the risk of Africa!) and so access to capital for investing in new machines or growth is hobbled by the owner/entreprenuers insistence and preference on saving up and using cash instead. This takes time, slowing down economic development at the grassroots. Microfinance tends to favour consumer behaviour rather than investments or micro-enterprises and regardless, does not tend to take irregular income streams into account.Interestingly enough, mPesa is making a difference in this sphere but again, as a workaround rather than a product targeted at this need. This aspect of products designed to support micro-entreprise was the biggest challenge in the Philippines as well as my colleagues at the Philippine Business for Social Progress have informed me. These very same lacks, one could call it a systemic mistrust, drive creative solutions of a sort perhaps that may not always be preferred as much as the more positive ones mentioned above.

Backpanel of inverter, Nakuru, Kenya 30 August 2010

For example, the gentleman who makes these inverters is forced to put Japan components on his products so that customers will take the risk to purchase his product. He also offers a 1 year warranty and installs what would be an off the shelf, plug and play comp0nent anywhere else himself on the premises. The display and control shown here has inspired a lot of insight on contextual knowledge of technology – “Up for on”, issues of trust and commitment as well as the risk aversion already seen among BoP consumers.

While this has been wholly focused on Kenya, the conditions of scarcity are only variations on the themes that can be seen around the world. In the meantime, they offer much food for thought on the operating environment.

First published October 7th 2010 at Aalto Design Factory, Finland

Island Life

Shankar Jadhar’s friends describe him as an “all-rounder”. The 40 year old Dharavi resident is married with 5 children and lives close to the traffic island which he has laid unofficial claim to, from where he conducts his business. He had been a barber for 20 years but when the road was altered 5 years back he lost his barber’s stall. Now he’s set up a makeshift stall and a shack to store items for his work in Dharavi’s recycling chain, encompassing multiple sources of income from the single location.

He buys various items (shoe soles, plastic bottles, glass bottles, wiring for its coper content) from local ragpickers which he then sorts and cleans up to sell on to middle men who deliver specific goods to recycling units elsewhere in Dharavi. There are bigger operations that do the same job utilising salaried workers but Shankar enjoys the independence of being self employed and amongst his community as he works. He makes better money from his recycling enterprise than his barber stall so he’ll make haircut & shaving customers wait till evening if he has a big haul of recyclables to get through.

On average he profits Rs 150-200 per day. Sometimes he employs up to 2 others to assist when he has a lot to get through (paying Rs 30-50 per day). On further questioning of his friends it seems that often others help him for short periods at no cost as his spot is a kind of neighbourhood hangout centre – though I’ve noted on numerous visits that Shankar is always busy on something and doesn’t sit around himself. Although he has erected a semi-permanent structure on the traffic island, the authorities have turned a blind eye due to the bribes he pays 2-3 times a year (Rs 100-200). Being well regarded in the area, Shankar has never been a victim of theft.

During monsoon his earnings are reduced by around 25-35%. He also fails to earn if he is sick or during the 3-4 weddings he attends a year plus income drops during the monsoon season. I’ve started to discuss savings and loans with him and will be getting more into this during upcoming interviews. His income is supplemented by his wife’s Rs 2000 per month salary which she earns washing dishes, etc for a middle class family in Bandra for 4 hours daily.