Posts Tagged ‘social enterprise’

An Open Letter to Social Enterprise Startups Looking at Africa

Dear Young Entrepreneur,

I receive emails from you, on average, once a week, sharing excited news about your plans to enter the African market, or pilot an innovation, or disrupt some existing solution. I’m thrilled and pleased for you, and wish you the best for your future plans.

However, I must write this today, after receiving yet another email last night. Most of you write me asking for insights on your planned approach, or to request a call to “tap my deep expertise” of the African informal economy and consumers. I truly appreciate your thinking of me as the go to person for these matters.

Yet, there’s a gap here between our thinking that’s rather obvious to me but doesn’t seem to be as obvious to you. Professionals like doctors and lawyers have studied and worked hard to build their deep expertise in their areas of speciality over decades. I have done the same. I am now in my 50s, and have accrued over 25 years of experience with new markets on 4 continents.

Would a doctor or lawyer agree to offering their insights and deep expertise to you based on an email request for a phone call or conversation? Or would they prefer a business appointment be made or consulting fees for the call be discussed first?

If the latter, then why is there an expectation that I, with my business operating expenses, and overheads, would be willing to give away the same effort and time invested in developing expertise to you?

I understand that startups are cash crunched, I’ve consulted with many of them, but they’ve always found a way to respect my learning and my experience even if we discover that our fee structure may be nominal or there’s an extension of time for payment. Offering something in return is not simply a matter of a business transaction, its a matter of respect. Respect for my time, my effort, and that very experience and expertise that led you to reach out to me in the first place.

I welcome inquiries and enjoy working with young people. I look forward to hearing from you. I just hope that this letter will offer you some food for thought on how to frame your approach to me.

@Prepaid Africa Connecting Dots – October 2015

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October was a busy month for us – The African Development Bank hosted their first Innovation Weekend in Abidjan from the 9th to the 11th of October. Our contribution was thinking about the problems we face as the starting point for new venture design.

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Emerging Futures Lab’s Niti Bhan, collating everyone’s problem statements. Abidjan, 9th October 2015

Savvy young people from across Francophone West Africa gathered to conceptualize startups over the course of the weekend, culminating in grand prizes and the opportunity to grow into viable businesses. Much excitement.

The startups; PayFree, a multiplex platform for payments; La Ruche, a marketplace for artisans to sell their wares; Coliba, a mobile platform for managing urban waste; and BioPRO, an intervention seeking to help rural people get access to energy and electricity will each receive an AfDB fellowship with Ampion to accelerate these projects to become viable companies.

 

Continuing with the Francophone flavour, our next big news is introducing our Beninese collaboration – Ms. Yacine Bio-Tchane, who has been blogging in French on the emerging consumer markets in the region. Emerging Futures Lab now has a Francophone West African footprint.

Portrait robot du nouveau consommateur africain
La ruée vers la Côte d’Ivoire des marques internationales
Les taxi-motos, potentiels livreurs en Afrique de l’Ouest
Où se trouvent les plus grands consommateurs en Afrique?

 

 

tumblr_nwsbz0ytDw1qghc1jo1_500Finally, Senegal hit the headlines with the launch of indigenous wine from the shade of the baobabs.

 

 

 

ColdhubsNigerian innovators have become a hot trend – Coldhubs is an outdoor solar powered fridge, developed by Nnaemeka Ikegwuonu as a sustainable solution for minimizing post harvest losses faced by farmers. Meanwhile, a team of students from Nnamdi Azikwe University (UNIZIK), Awka, have built a made-in-Nigeria mini bus, which they say is the first of its kind.

tumblr_nx7cu51yEp1qghc1jo1_500And finally, from the Nigerian diaspora, Dr. Samuel Achilefu, has won the prestigious St. Louis Award for 2014 for creating cancer-visualizing glasses.

 

 

And to round up this exciting month, we cover the just concluded India  Africa Forum Summit, held in New Delhi 26th to 28th October.

16BYAThe hype

India-Africa summit is meant to strengthen trade ties
India is trying to match China’s engagement in the continent
China is accused of exploiting Africa’s natural resources

Reality check

India isn’t really doing any better than China
It exports 67% consumer goods, 2% raw materials
Imports are mostly raw materials – salt, ores, oil, metals

Why social enterprise marketing tends to fail – hidden competition, invisible consumers

A couple of years ago, I was frequently in East Africa, consulting with a consumer product company  set up as a social enterprise in the renewable energy sector. An extensive distribution network across Kenya had been established through what they called TT – traditional trade. Yet their sales were nowhere near the figures one would expect from such an extensive exposure to the market. They were struggling to reach their target audience efficiently and cost effectively. Soon after starting fieldwork, I began to get the sense that there are some fundamental issues with the way social enterprises were developing, creating and implementing their market entry strategies.

Many of these issues also apply to consumer product companies targeting the emerging middle class, given the size of the ‘floating class’ and the prevalence of informal retail. Purchasing power assessments as well as hard currency conversion create their own confusion regarding consumer segmentation as “poor”. Some may choose to set the bar at 5euros a day, to identify those at the “Bottom of the Pyramid” (BoP) while the African Development Bank pegs the same amount as “middle class”.

Assuming there’s no competition

Most of these firms, particularly those coming in from the outside and seeking to serve the ‘poor’ in the developing world seem to be operating in a vacuum. Observing their market entry actions point to an underlying assumption that they are entering a virgin market where no competing solutions for their product or service exist.  If this fundamental premise is mistaken then every element of their marketing, communication, distribution and pricing strategy will naturally suffer.

A caveat here is that it might indeed be a virgin market for branded international solutions for that product category in the formal market but this is where overlooking the informal markets and existing practices in user behaviour can be far more dangerous since this is where the competition will come from in the form of substitutes or alternate solutions.

Because of the above assumption, little effort is made to uncover information about the customer, the market or competition or the operating environment. Whether this is due to a vacuum of information on lower income markets or the developing world, or this subject simply not being taken into consideration in a social enterprise, the fact remains that this oversight then gives rise to a series of errors (like the domino effect) – those in marketing strategy viz., marketing communications, value propositions and positioning not to mention pricing.

Conflating company mission with marketing strategy

While this is most commonly found among well meaning social enterprises entering these markets for the first time with their life saving products for the poor, large multinationals with previous experience in the developing world are not immune the minute they choose to focus particularly on the mass (or “poor”) market.

Tata Nano is the most obvious example of this although here one wonders how much of this had to do with their actual marketing communications and advertising for the Nano and how much to do with all the media hype around the car being specially for the ‘common man’? All the positioning and branding in the world through formal advertising and communication channels could not overcome the public perception of the Nano as the ‘poor man’s car’ created by every other article – from engineering news to international styling.

Similarly, if all the marketing communications, press reports and online information is geared towards the ‘poverty alleviating” mission of the company or product line then this lack of clear focus or understanding of who the target audience is will come through in the positioning and branding of the product in the marketplace.  The vast majority of social enterprise messaging is targeted towards their funders and investors not their potential customers.

And no one will aspire to buy the ‘poor man’s product’ if it means a clear signal of having failed to succeed or admitting defeat among their friends and neighbours. Everyone aspires to a better quality of life, regardless of perceived income segmentation.

Confusing value proposition with need

This lack of clarity and understanding about the target audience for a product or service and thus, its marketing communications and messaging then snowballs into incorrect positioning of the product or incorrectly identifying the value proposition for the end user.

The end result might be the same – the customer choosing to buy your product – but the pain points may differ tremendously across geographies and regions, not to mention socioeconomic strata. An example is water saving flush toilet mechanisms being sold in Nairobi as a sustainable, greener alternative – that is, the same positioning and value proposition as that used in the eco-conscious parts of the Northern European continent. Sales are sluggish. But when you take into consideration that there is a water shortage or that many communities need to purchase water in tankers to fill their household storage tanks, a simple shift in positioning to “Spend less money flushing down the toilet” or some such clever quip could in fact make a more sensible approach in this situation for the very same product.

This gets more obvious the lower down the income stream you go – Mama Mboga with her vegetable stand may not have the same priorities nor relate to the same value propositions that social impact investors do.

Winning awards vs building a trusted brand

And finally, this lack of customer orientation manifests itself in the development of the company’s brand. Awards may be won, and brand recognition created online with press mentions and social media, but the company still remains an unknown entity that nobody has heard of in the markets in which it should be sold.

In a sense, its overestimating the ability of a faceless brand to communicate value to the target audience. Some have called this issue one of Trust and in the past, I’ve referred to it as Commitment but the fact remains that this aspect is the most challenging and difficult to overcome as a barrier to acceptance. Even megabrands accustomed to instant global recognition such as Google may find that not only is their brand unknown and unheard of in these new and emerging markets but others may have gotten there before them.

Which, in a way, brings us back to the first point in the assumptions made at the very beginning of considering market entry strategies in the rising global middle class.

The need for human agency: Is the middleman always a monster?

Mobile phone charging receipt, Kenya  Photo credit: Niti Bhan

The unfair demonisation of the middleman is apparent in this recent article on solar power products for the low income market in Africa. “Putting African ‘power pimps’ out of business” is the headline and the rest of the text goes downhill from there:

It’s hard to imagine the concept of a “power pimp” in Africa unless you have lived there. But it makes sense and cents on a continent that lacks a unified power system. There is basically no electric power in most rural places unless you are enterprising enough to own a battery and generator of some sort –– making you the “pimp” by letting other people charge their cell phones at crazy inflated prices.

It’s a problem that humanitarians worldwide seek to address, but an Israeli solution would do this using a cell phone. The idea of Nova Lumos is to buy solar power by phone on a needs basis, putting the middleman (that pimp) out of business.

Nobody would stay in business for very long in their local communities if they were truly the “power pimps” this company has gleefully labelled them. The day 20 Kenyan shillings, about 25 cents – the standard rate for mobile charging up and down the country – is considered price gouging, rather than a standardized regional service, is one to wake up and question the gross assumptions underlying this sweeping generalization. It is no different from the top down blanket perception of the entire informal sector as “a bad thing” and the demonisation of micro entrepreneurs providing much needed services that fill the vacuum left by inadequate systems.

Its time we took a closer look at the role of the middleman, better termed as the intermediary between an unmet need in the market and the provision of a convenient and affordable service. Agency banking is one such example where enough research has been done to demonstrate the beneficial value of the middleman, not to mention the socent favourite MPesa, which would be crippled without the value addition of their nationwide agent network.

This ignorance of the realities on the ground and perception of the hyper local social networks in the rural economies of the developing world only too easily explain the consistent failures that the social enterprise industry has demonstrated to date with their attempts to enter these emerging markets.

Here is another snippet from the same article describing the product and service in terms that clearly demonstrate that absolutely no competitive analysis or market research has been conducted. A simple online search would show companies like MKopa and Econet wireless way ahead of the game, having completed pilots and launched in their respective markets.

Davidi Vortman, general manager of the company, tells ISRAEL21c that the idea is to sell small mobile solar systems to individuals –– for charging cell phones, lights or small appliances –– paid for in affordable increments using a cell phone.

“The system is small enough for one person to carry and simple enough for a person to put on the roof. Just connect it without any technician; and use a cell phone to operate it through a mobile phone with a simple SMS,” Vortman

Paying in increments by phone could eliminate this barrier. The challenging part will be securing the systems and penetrating the market before other companies jump on the bandwagon. Nova Lumos was founded in 2012 and is now carrying out pilot projects to test the system using several hundred units in Nigeria and Guinea.

What concerns me about these hyperbolic claims and sweeping generalizations is that they inevitably lead to spectacular failures on the part of this sort of enterprise yet the negative impact is primarily borne by the local populace. Not quite the kind of social impact we’re seeking …

Lessons from the Amul brand for grassroots enterprises

We also mourn the passing of Dr Verghese Kurien this weekend. The man behind India’s Operation Flood – a grassroots social enterprise based on dairy farmer’s cooperatives that grew into India’s biggest FMCG brand – Amul – while becoming the replicable model for converting India from a net milk importer to the world’s largest producer. Operation Flood is the world’s largest dairy development project. From his speech on the history of the Amul brand and the reasons for its success, I am going to pull out key snippets and look at them from the point of view of the timeless lessons to be learnt from those who have gone on before us:

The brand name AMUL, from the Sanskrit Amoolya, meaning priceless, was suggested by a quality control expert in Anand. The first products with the Amul brand name were launched in 1955. Since then, they have been in use in millions of homes in all parts of India, and beyond. Today Amul is a symbol of many things: Of high quality products sold at reasonable prices, of availability, of service.

There is something more, though, that makes the Amul brand special and that something is the reason for our commitment to quality and value for money. Amul is the brand name of 2 million farmers, members of 10,000 village dairy cooperative societies throughout Gujarat. This is the heart of Amul, it is what gives strength to Amul, and it is what is so special about the Amul saga.
[…]
You will appreciate that when the lives of lakhs of farmers depend on a brand, and when your history is grounded in the Independence movement, when not only competitors but even your own government questions you, then your resolve to be the best is like the finest steel.

Amul, therefore, is a brand with a difference. That difference manifests itself in a larger than life purpose. The purpose – freedom to farmers by giving total control over procurement, production and marketing. Amul and all other milk products produced by cooperatives were born in struggle. It was the producers’ struggle for command over the resources that they create, a struggle to obtain equitable returns and a struggle for liberation from dependence on middlemen. It was a struggle against exploitation. A refusal to be cowed down in the face of what others believed to be the impossible.

Amul’s birth was thus a harbinger of the economic independence of our farmer brethren. Amul’s mission was the development of farmers, nutrition to the nation, and heart in heart, the real development of India.
[…]
This led to replication of the Anand pattern through the Operation Flood programme which has, amongst others, three major achievements to its credit, namely: making dairying India’s largest self-sustainable rural employment programme, bringing India close to self-sufficiency in milk production, and trebling the nation’s milk production within a span of two and a half decades to make India the world’s largest milk producer.
[…]
Over the course of Operation Flood, milk has been transformed from a commodity into a brand, from insufficient production to self sufficient production, from rationing to plentiful availability, from loose, unhygienic milk to milk that is pure and sure, from subjugation to a symbol of farmer’s economic independence, to being the consumer’s greatest insurance policy for good health.
[…]
There is also something very special about milk, something which requires that any brand for milk and milk products to act not simply as a seller, but as a trustee. Milk is not a white good or a brown good. It is not something people save their entire lives in order to buy – like a car, or a house. Milk is not a status symbol; rather it is the symbol of nutrition. Milk is a nearly complete food, providing protein, vitamins, minerals and other nutrients so essential to maintaining good health.
[…]
Our commitment to the producer, and our contract with the consumer are the reasons we are confident that cooperative brands, like Amul, will have an even bigger role to play in the next fifty years. Resources need to be deployed with a purpose and a commitment to deliver better results. There is no limit for a marketing exercise then. It must build India and its culture a second time round.

When I began this exercise, I noticed first the issues of quality, distribution, brand promise and cooperation that he starts his speech with. Aha, I said, these are the lessons that social enterprises seeking to serve the BoP (or whatever you want to call them) could learn from but when I read further, I realized that the true story was no less than one which was about scale, about nation building and financial independence, about a brand which emerged from the farms and fields of rural India to reach grocery stores in every country I’ve been in. (Asian groceries, mind you, as we seek our “taste of India”).

What then is the real lesson to be learnt here? And where is the mention of Amul’s success, much less Operation Flood’s, in the case studies of social enterprise we so often come across? Maybe the answer can be found by going back in time to analyze the reasons for its success, and ability to scale.

Why have I been getting so grumpy about well meaning social enterprise?

Yesterday’s post deconstructing The Economist article on the promise of solar lighting for the millions of poor living without electricity made me question my strongly worded response. Another recent one is from well meaning Guardian, whose first of the 15 innovations they claim will change lives in Africa is the now forgotten Hippo Roller. Even the designer behind that project prefers not to talk about it, but trust the media to dig it up in order to flesh out their content. Theirs is the third Africa specific section to be launched in the recent weeks and yes, there’s a dearth of information for the armchair journalist.

Why do articles like this make me cranky?

Because they do more harm than they help. By inaccurately portraying the market and its opportunities – whether its the lower income demographic in Africa or India – they inspire well meaning but fundamentally unsound business plans and social entrepreneurs to sink valuable time and effort into ineffectual social goodness. It is irresponsible journalism.

Writing such slapdash articles only serve to create a rosy view, blurring into fuzzy altruistic goodness, which overlooks the hardcore realities of establishing profitable business enterprises in these challenging markets in order to serve the most demanding customers successfully. They leave you with the impression that all you have to do is ensure your product reaches every supermarket shelf and it’ll simply sell like hotcakes.

If it were still only the beginning of the “fortune seeking at the bottom of the pyramid” era, when companies and startups had to be encouraged to look at this market, then this overblown hype and hoopla might be understandable. Today, some half a decade or more later, it simply serves to underline the ignorant arrogance with which these populations are viewed.

Deconstructing the solar lighting market hype

Nairobi solar lantern shop, July 12th 2012

The Economist’s Q3 2012 Technology Quarterly has a paean on the promise of solar lanterns replacing nasty, stinky kerosene once and for all. Of note is the careful mention of MKopa, a Nairobi based startup founded by Nick Hughes of MPesa fame, until now conducting pilot tests in stealth mode. But the rest of the article is still the usual rehash of the immense promise of solar lighting to finally get rid of that incumbent fossil fuel, something social enterprises like d.light have been attempting to fulfill for some 4 or 5 years now.

Why isn’t anyone asking what’s taking so long for this mythical promise to bear fruit? I’d like to start by deconstructing the article and identifying the implicit underlying assumptions that tend to trip the promise keepers.

As previously happened with mobile phones, solar lighting is falling in price, improving in quality and benefiting from new business models that make it more accessible and affordable to those at the bottom of the pyramid. And its spread is sustainable because it is being driven by market forces, not charity.

Show me the case study of a successful example of this product becoming a sustainable business proposition. Every company mentioned in the article is either in pilot testing new business models or talking about their performance and brightness, even while distributing via NGOs. If this is a consumer product business for patient capital then why aren’t the Chinese brands waiting (or mentioned, for that matter)?

Phones spread quickly because they provided a substitute for travel and poor infrastructure, helped traders find better prices and boosted entrepreneurship. For a fisherman or a farmer, buying a mobile phone made sense because it paid for itself within a few months. The economic case for solar lighting is even clearer: buying a lamp that charges in the sun during the day, and then produces light at night, can eliminate spending on the kerosene that fuels conventional lamps.

 The economic case might be clearer but the reality is far more complex than that. Lets compare the market entry strategies of mobile manufacturers in their pioneering heydays and the solar lantern makers. Where is the user research and consumer insight on existing household energy usage and purchasing patterns that might shed a light on this ongoing multi-year promise?

The mobile phone is a personal asset. Most people put aside bits and bobs of cash towards their purchase of their phone. It belongs to them and there is prideful ownership and status involved with models and brands.

The solar lantern is not a personal asset. It belongs to and will be used by the entire household. There may be more than one adult earning member of such households. The decision making involved is one of group dynamics, never as simple or easy as that of an individual purchase.

Eliminating spending on kerosene is not the same as generating income by the way of the phone.

Additionally, the phone has become a ‘must have’ and is aspirational, in addition to connecting you instantly to your social network. Small and portable solar lanterns are not yet status symbols nor aspirational in anyway, given that much of the marketing communication places emphasis on saving money on kerosene. Whooptydoo, says the subsistence farmer whose dreams might include TV sets and radios, to be added over time, in modular fashion, to the solar home system.

In an informal test of solar lights carried out by The Economist in Africa, users grumbled about the soapy quality of light and lantern-style design. But the company has won plaudits for its other models: its largest lamp, the S250, was included by the British Museum in its “History of the World in 100 Objects” exhibition as the 100th object. .

I mean, really, The Economist? That is weaselling out of accurate consumer feedback isn’t it, if you state that users (the people who are going to sustain the businesses remember by purchasing the devices) don’t like the lanterns but hey, look, the British Museum likes it. Remember the design awards granted to the LifeStraw? Look at what happens to them:

 Carefully hidden away in case someone comes to check up on the beneficiaries of generous charity. When asked why it wasn’t in daily use, the response was that it was far too difficult and took too much time when it was easier to pour a 20 cent bottle of purifier into a bucket.

The article ends with a product that’s a concept developed in a studio. Who is hoping and how that this designer device will magically obtain a viable business plan with effective distribution and sales? The Economist might have been better off focusing on MKopa and Eight19’s efforts to experiment with new pay as you go business models, though I can already see their solution’s limitations particularly in the Kenyan market’s context. They could have talked about Econet Solar or Angaza or MeraGao in India, in the same vein of experimental business models instead of defaulting to the hopeful batteries and museum pieces that will grace the dusty shelves of retail outlets.

Btw, that SunKing you bought in an African supermarket? How many rural low income BoP customers shop there, do you know? 

Lessons from working with Social Enterprises

Aisle Manager at Nakumatt

By the end of my most recent project, I was convinced that the label “Bottom of the Pyramid” (or Base of the Pyramid) also known as “the BoP” was one of the biggest barriers for organizations seeking to serve these emerging consumer markets in the informal economies of the developing world.

The alternative long and descriptive sentence is not as snappy as the BoP and I struggle with this everyday as I try to capture the characteristics and qualities of this market. But the problem with the label is that it has come to be closely associated with poverty alleviation rather than an emerging market opportunity, and thus gets loaded with the detritus of the aid and development industry. If you are to be a sustainable business, you need to generate revenue if not make a little profit and for that you need to consider your target audience as your customer, not your beneficiary.

The peculiarities of social enterprises seeking to serve the poor include the existential struggle between doing good and good business. But the emphasis on the BoP as the poor, the underserved and overlooked (by myself included) diverts us from taking them seriously as financially shrewd even if economically challenged customers in their own right. We barely know where they shop and why, how they make their decisions to purchase and how they plan to pay for them, in fact there’s little or no serious consumer research on these segments of the population. No wonder if they are not considered serious consumers to be wooed and won over like any other.

“Should we be profiting from the poor?” ask a plethora of well intentioned articles when those who do business with each other in the informal, cash based economies have no such compunction when doubling the price of kerosene as a premium for the convenience of transporting it 10km closer to their customers.

If we took away this well meaning yet now increasingly problematic label (with all the associations of poverty and helplessness), we’d perceive a diverse group of people with varying needs, aspirations, cash flows and consumption habits. We’d be segmenting them with the same rigour of a Unilever or attempting to reach them wherever they shop like Coca Cola. We would not be sitting around measuring impact of the soda or wondering how to scale. I’m going to wrestle with this wicked problem further but in the meantime, here are some collected thoughts from my observations in field recently:

Questioning the value of the term Base or Bottom of the Pyramid aka the BoP
But why aren’t they buying my fantastic life saving product?
Assessing social impact vs financial sustainability for Base of Pyramid business models
Why so much “BoP” marketing fails in the developing world

 

Social enterprises and the target audience for their value propositions
What does it mean when Chinese manufacturers enter the social enterprise space?
Systems thinking and the mobile for economic impact and wealth creation
Raising some concerns about urban user research insights being applied to design for rural markets

 
Navigating the African market opportunity
Caution: The emerging African market PDF stampede
Cracking the informal markets in Sub Saharan Africa: the need for strategic improvisation
Insights from the South African low income market (BoP) opportunity
The ingenuity economy: grassroots social enterprises abound

 

What does it mean when Chinese manufacturers enter the social enterprise space?

“The market has been destroyed for solar” or so I heard today from someone who prefers to stay anonymous but I’d hazard a guess knows a fair bit about what is happening on the ground in East Africa from the point of view of social enterprises.

Interestingly, I’d brought up the question of whether “It was time to move on from the label “the BoP””, something I’ve been pondering over for quite some months now. And that was when the conversation had turned to the popular products for low income customers – improved cookstoves, solar lighting, agricultural equipment like water pumps and the like.

This will not be the definitive post or article on the topic – consider this an appetizer or rather, the beginning of the pondering on the weak signals seen in the market and what they might imply for social enterprises and their ilk, but also the larger “BoP” marketplace as a whole.

You see, what I’ve seen now in the market are branded China made products in categories that were only recently created by BoP focused social entrepreneurs and designers. The Chinese manufacturer has no other bottomline but that which makes a profit on a product for which they perceive a high volume demand. And witness the rise of the Tecnos and the Birds even as the category creator and erstwhile market leader Nokia battles for continued dominance in developing markets.

What does it mean when a Chinese brand enters what hitherto were considered “social impact” product categories? Are social entrepreneurs – many of whom are still supported through grants and funds, as they seek to improve the lives of the poor – prepared for an increasing competitive environment? Not just from other international social enterprises either but from purely commercial solutions?

What we also realized in today’s conversation was that it was the BoP focused social enterprises who were doing all the heavy lifting of market creation – experimenting with value propositions and product and services that people would want, creating awareness and demand while investing their time, effort and resources in ensuring the best outcome for all stakeholders. As was pointed out to me, it was the social enterprises who tended to ensure that they offered high quality, well designed, durable and reliable products to the ‘poor’, something that the competition is not known to do.

And so, it brought us to the sentence that started this post – “the market has been destroyed”. While its just one category at the moment, how soon before its all the others as the increasing purchasing power and aspirations of the informal economy seek the best bang for their rupee, kwacha or shilling?

The customer is the king; the beneficiary will remain a pauper

We weren’t beholden to our customers until we starting thinking like a business.

We didn’t hold ourselves accountable until we started treating our ‘beneficiaries’ as customers.

No investor took us seriously until we dropped the ‘social enterprise’ label.

~ Ben Lyon, Founder, KopoKopo, Nairobi, Kenya

When I wrote “Why so much ‘BoP’ marketing fails in the developing world” recently, I had sensed that there was a more fundamental problem – either one of implicit assumptions or basic premises – than those which I’d identified through observations in the marketplace. It took these three powerful statements from Ben Lyon, founder of Kenyan startup KopoKopo, to throw light on the issue.

Were these social enterprises treating their customers like kings or were they dealing with them like the beneficiaries of development aid?

Identifying this distinction, we believe, is critical and can make the difference between success and failure. In fact, taking the thought a step further, I now wonder whether this underlying premise might not be the reason why so many social entreprenuers are unable to scale.

The lens through which you percieve your intended customer base and thus, evaluate their needs, purchasing power, wants and wishes becomes the focal point around which your product or service, its business model and distribution strategy as well marketing communications will revolve.

When we seek to serve a very demanding customer who just happens to manage within an extremely challenging environment, we raise the bar on our own performance and metrics of success. For no one will spend good money on something that offers little value or return on investment.

But as long as social enterprises continue to perceive the target audience for their goods or services as ‘beneficiaries’, with all the attendant baggage of assumptions and perceptions, they will never quite be able to address the challenges of creating a market for a profitable and thus sustainable, enterprise.

Maximizing profits alone may not always be the right answer, but even the triple bottom line approach embraced by European businesses can offer a more valuable orientation than simply “doing good”, which may overwhelm critical considerations of “does this actually make sense and does the market actually want it”. I’d written this snippet earlier, before I’d identified where the seed of the confusion seemed to lie.

Because the demand being addressed by these messages is not that of the target audience, who are ultimately the ones for whom these products are made.

Everyday, research shows that the barriers to adoption include:

Improved cookstoves rank poorly on all three dimensions: their benefits are rarely valued highly by customers at the outset, they are expensive, and they require a significant change in lifestyle to be put into use.

Lets start with benefits alone – which is where the topic of identifying the correct value propositions for the target audience comes in. If your messaging and marketing is all about the best selling drill addressing an audience of home improvement contractors but what your actual customers need is a hole in the wall, how will you manage to bridge this gap in communication when you face your customers directly?
By focusing on the value propositions – be they environmental, healthcare related or otherwise – meant for every other stakeholder but the end users aka the customers of the product themselves – organizations may never quite identify nor refine the benefits as they relate to the poor customer, in the context of their lives, and their decision to purchase and use the said products.

And this conflation – of marketing messages meant for shareholders (in formal business terms) being sent to the end customers – will continue to create a barrier to sales and demand creation unless we start taking this demographic seriously as a paying customer. The roots of this challenge are also embedded in the way the concept of “the BoP” has evolved away from Prahalad’s original vision of a vast new market and opportunity into a catchall label for the poor, the downtrodden and the precepts of poverty alleviation.