Lionel I really like the power of these combinations of tech-enabled business models. How do companies go about identifying them?
How Can Corporates Use Technology to Make a Deeper and More Responsible Contribution to Inclusive Business?
As a follow-up to Q1: What lessons can multinational corporations draw from these successes? How can smaller companies and start-ups position themselves for greater success?
I agree with Tom - tech is a big disrupter. Applying platforms is another exciting space - for example Digifarm and Lynk, in Kenya. New innovations at the BoP where customers are clients, clients are contractors. I think we’re only just beginning to see the many ways in which this will be applied.
In the report, we picked out nine examples as case studies that illustrate three main trends.
First, we highlight that companies are finding more profitable models using new technologies - e.g. Babylon Health is connecting millions of doctors to patients at very low cost, creating fantastic impact on health in countries like Rwanda and gathering lots of valuable data. We see similar platforms in areas like supply chain and logistics, in ride sharing, in gig economy etc.
Second, we highlight models are growing very quickly… for example the Jio telecoms network in India growing to 330 million subscribers in 3 years or microinsurer startup BIMA taking on 80,000+ new customers a month. We see rapid growth in lots of model - everything from solar panels to affordable medicine
Third, we highlight lots of venturing activity… e.g. ENGIE buying over 20 renewables investments in developing coutnries including Fenix International and Mobisol… AXA buying Microensure, Shell buying Husk Power etc.
The main lessons are that it’s more profitable, faster growing and more use of strucutred venturing and innovtion approaches… and also more “South to South” investment (e.g. from India or China into Africa) and more “unicorn” companies coming from developing markets themselves
Tom, I think the identification of combination could be relatively easily done through a semi-structured innovation process as the report as well other pieces of literature present a wide range of ideas. However, the secret is in applying these concepts to the reality on the ground and to anchor the value proposition in the culture of the target countries.
MNCs can learn to be more flexible, with their operations but also with their financing, for example - more innovative ways to maintain project hurdle rates. Smaller firms and start-ups need access - to good people, funding, and partnerships. The stronger the ecosystems is in providing that level of access, the better the entire industry will be in separating the wheat from the chafe more strategically.
Tech is a big disrupter and a build up opportunity. Two caveats though : 1. tech is rarely if ever a solution in itself. Early starters in the SHS pay as you go industry had to learn the hard way that customer appraisal and installation of solar systems required real, on the ground service. 2. Because many poor customers live in areas where infrastructure is not always available, companies need to build rather holistic solutions, not the thin value slivers that are usual in the developed world. Which may mean developing additional services, to actually solve a problem, not offer a solution.
Thanks Kris. You answer suggests that there are pros and cons to being either small and nimble or large and well resourced, as we all know. Partnering and/or venturing can perhaps bring out the ‘best of both’ a
For me some of the big lessons are that the value of data is growing so quickly it is making lots of new models viable - this could be lots of platforms that connect students to teachers (Ruang Guru in Indonesia) or doctors to patients and use AI (Reliance Industries investing in Embibe in India) or people to jobs (Babajob in India)… it also underlies a lot of financial inclusion models (like Mastercard and Visa investing heavily now). It is even leading to the rise of “Super Platforms” like Go Jek in Asia… where they offer 18 different services from ride hailing to gig economy jobs from one app, and Jumia the e-commerce platform in Africa. All this growth is powered by using big data analytics on millions of customers
On the flexibility front, MNCs should be aware that it is possible to experiment for a fraction of the cost. So doing and improving should carry more weight than planning and designing in the initial phase.
To build on Francois’ and Kris points, there is a real opportunity between start-ups and MNCs to create fruitful ecosystems by combining the nimbleness of small entreprises and the infrastructure, outreach and marketing power of large multinationals. However, even behind inclusive businesses, most organizations are still on a learning path in that journey.
Two other big things are:
- platforms that connect two sides of a market that was previously very inefficient
- business models that span across different industies like agriculture, transport and banking for example
Twiga Foods is a big example of doing both these two things well - it connects farmers to buyers in cities far away with an app and Twiga handles the logistics… they then partner with banks to extend loans to both the farmers and the retailers… so they grow both sides of the market and make it much more efficient
I think a major barrier is the high interest rates in LMICs and difficulty getting financing for pay-as-you-go models that require up front financing, which is why development finance institutions are crucial for funding, if not directly to MNCs, then to their partners, ditributors or others in the value chain (probably not directly to consumers, but to a company that then bears the risks of lending to consumers)
Great insights from everyone so far! Moving on to our next question:
Q2. What are some of the inherent trade-offs embedded in inclusive business approach that companies may face? How can these be avoided, mitigated, or otherwise addressed?
Yes, thanks Lionel. I’m getting more intrigued by the need for blended solutions, de-risking strategies, and how to even de-risk the de-riskers. Guarantors and others are great models, but in the conversations I’m having recently, there are still tools and even behavior changes needed to better address this need. Anyone seeing innovations or have ideas here?
The main challenge is the cost of R&D or product development or market development for low income customers, since it is hard to make much profit that would pay back that cost, which is the value of donor funds to subsidise this. Ultimately the low income market is a low-profit market that often requires sacrificing something like product quality, or can lead to charging the poor more per portion of a product which may be affordable, but is more expensive at the same time. Companies must focus on actual innovation that deliver savings somewhere along the value chain or take a whole new approach to delivering a solution. An important issue that needs to be addressed is the competition which is often not a rival product, but could be just “not doing something” or doing something in a very different way (e.g. second-hand or third-hand products)
The way eKutir in India developed layers after layers of value for farmers through its network of agent, without actually providing more than the platform is a great illustration of Evin’s point, one that MNCs should use more given their social constraints
Agree - and there is phenomenal growth in the number of tech accelerators in Africa too… there are some really good maps online now showing hundreds of accelerators that exist now. Afri-Labs in a good network of these. Startups, donors, investors and MNCs can both plug into this localised ‘ecosystem’
So are the successful examples people have mentioned today all holistic solutions? or have some of them found a way to make a ‘thin value sliver’ work? this is a very useful way to look at typologies, thanks
[Q2] For me, one of the major barriers that companies face is the time horizon for the investment. It is one of the obstacles mentioned in the report. This a very difficult barrier to overcome in many companies, especially in those whose average ROI is short. To mitigate this obstacle, it not only requires a progressive educational process towards the leadership. It also requires creativity to detect interesting findings, tangible and less tangible elements during the project’s incubation that would make the idea stick with the company and its (potentially changing) idea. This is where a mix of innovation and intrapreneurship is required to make them a success.