stuart hart erik simanis duncan duke the base of the pyramid protocol: co-venturing at the bop...
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Stuart Hart
Erik Simanis
Duncan Duke
The Base of the Pyramid Protocol:Co-Venturing at the BoP
Greening of Industry NetworkWaterloo. Ontario
June 16, 2007
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Agenda
The BoP Protocol:
1. Background - The Why and What
2. Implementing the Protocol – The How
3. Building a New Capability – The How
4. Q&A
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< $3,000/yr
Tier 4~4.0 billion
> $15,000/yr Tier1
~800 million
II. Radical Innovation: Incubation site for
“disruptive Tier 1 technologies” (Hart & Christensen, 2002)
The Business Sense of BoP Strategy
Global Population Per Capita Income (PPP)
III. Competitive Pre-emption: Breeding ground for next-gen,
global-scale competitors (Christensen, Craig, & Hart, 2001)
I. New Market: Massive & growing under-
served market(Prahalad & Hart, 2002;
Prahalad 2004; Hart 2005)$3,000 - 15,000/yr
Tiers2 & 3
~1.5 billion
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The MNC: Traditional Customer Base
“Tip” of the Income Pyramid
“Base” of the Resource Pyramid
The “ToP”
Customer85% of Global Resources
> $15,000/yr Cost structures, business models, & research methods based on a
“Western infrastructure”
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The BoP: Serving a Different Customer
“Base” of the Income Pyramid
“Tip” of the Resource Pyramid
The “BoP”
Customer
Less than $3,000 per year
15% of resources
Will require cost structures,
business models, & research methodsbased on a different
infrastructure.
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Many Companies are Beginning to Experiment with the BoP
Nutristar, Nutridelight (nutritional drink), Pur (water purifier)
Hindustan Lever (detergent for the poor in India and Brazil), Annapurna (iodized-Salt for the poor)
Making solar power affordable (India)
Banco Real, microcredit in Brazil
Vodacom community services in South Africa, joint venture between Vodafone and Telkom SA
Solar powered digital camera in India and community information systems
Program in South Africa to help entrepreneurs enter the supply chain and profit from new business ventures.
Water for all program to periurban areas in Brazil
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First Generation BOP Strategy:“The Child With a Hammer”
• BOP 1.0– Different price point– Redesign packaging– Low cost production– Extended distribution– Partner with global
NGOs
• BOP 2.0– Deep dialogue– Putting the last first– Build capacity– Leapfrog solutions– Ecosystem of local
partners
“Selling to the Poor” “Creating Mutual Value”
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The BoP Presents:
NOT a marketing problem
NOT a technology problem
…but a Business Model challenge
• Food & Nutrition and FMCPs
• Water Purification, Distributed Energy and ICTs
The “Sachet Mindset”
The “Killer Ap Mindset”
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You can’t solve a problem using the same mindset that created it.
How do you “imagine”, pilot, and scale business models for a BoP infrastructure if
your past and current business is ToP?
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Customers Partners
Clients Colleagues
Engaging the BoP differently…
Requires a New Strategy & Venturing Process…
Co-Create the Business!
Co-Venturing
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The BoP Protocol is a co-venturing process
that enables MNCs to…
Forge lasting partnerships with income-poor communities through mutual dialogue and joint learning
• Co-create new businesses embedded in the local cultural and physical infrastructure that creatively marry the community’s resources, technologies & capabilities with those of the MNC
• Co-create new BoP markets that recognize and derive genuine value from the business’ products and services
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BoP Protocol™: A Collaborative VentureSponsored By:Cornell University
University of MichiganWilliam Davidson Institute
The World Resources InstituteThe Johnson Foundation
Generous Support From:DuPont
Hewlett Packard SC Johnson
Tetra Pak
www.johnson.cornell.edu/sgewww.bop-protocol.org
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BoP Protocol™: Project Overview
ProtocolVersion 1.0
ResearchOn
DevelopmentMethodologies
andBoP Strategies
2003-2004
Pilot Test:SC Johnson
Kenya
• Participatory Rural Appraisal (PRA)
• Rapid Assessment Process (RAP)
• Quick Ethnography
• Empathy-based Design
ProtocolVersion 2.0
and Field Guide
ProtocolRefinement
Full ScaleImplementation with Candidate
Companies
Dupont/Solae: India
ExecutiveEducation
2006 and Beyond
Workshop IDesigning
The Protocol
October 2004
Workshop IIRefining
The Protocol
October 2005
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Co-Generated Business Concept
Locally-Embedded Business
Co-Constructed Business Model
BoP Protocol: Overview
“Opening Up”Launch a non-business specific immersion guided by two-way
dialogue and humility to catalyze generation of new business
concepts
“Building the Ecosystem”
Deepen commitment among thecompany, community and other partners in order to construct
the business model
“Enterprise Creation” Evolve the business structure & build the market base through staged and
flexible resource commitments
New Market Creation
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BoP Protocol: MNC Initiatives
The SC Johnson Company
The Solae Company (Dupont)
• Launch Date, June 2005, Kenya
• Launch Date, April 2006, India
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BoP Protocol: Pre-Field Activities
Team Formation &Preparation
LocalPartner
Identification
Community Site
Selection
SnowballNetworking
Identifying deeply embedded & attuned
community-basedorganizations
Inculcating sharedethic & developing
common baseof skills
Matching geographies with firm’s strategic
intent
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Pre-Field: SC Johnson, Kenya
KIBERA, Nairobi
NYOTA, Nakuru District
I. Site Selection
III. Partner Selection
II. Team Selection
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Pre-field activities challenges
• Local corporate members on field team
• Buy-in from top & mid level management
• Corporate knowledge & capabilities available to team
Corporate leadership
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BusinessConcept
Co-Generation
FlexibleBusiness
Co-Creation
BusinessModel
Co-Construction
NewCapability
Development
BuildingThe Market
Base
BuildingShared
Commitment
CollectiveEntrepreneurship
Development
Project Community
Development
BuildingDeep
Dialogue
Phase IOpening Up
Phase IIBuilding theEcosystem
Phase IIIEnterpriseCreation
BoP Protocol: Core Processes
Co-CreationLogic
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BusinessConcept
Co-Generation
CollectiveEntrepreneurship
Development
ProjectCommunity
Development
BuildingDeep
Dialogue
Phase I: Opening Up
Building theEcosystem
Phase IOpening Up
EnterpriseCreation
FlexibleBusiness
Co-Creation
BusinessModel
Co-Construction
NewCapability
Development
BuildingThe Market
Base
BuildingShared
Commitment
Co-CreationLogic
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Project CommunityDevelopment
Building trust & critical openness by practicing
humility
Attracting a committed and
representative group
Opening Up
BuildingDeep Dialogue
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Business ConceptCo-Generation
Collective Entrepreneurship
Development
Creating an innovation platform & shared business
language through joint exploration of needs &
resources
Generating actionable ideas that harness partner
capabilities & meet local needs
Opening Up
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Opening Up
• 9 “Taka ni Pato” youth groups committed to building a business in Nairobi’s slums with the support of an SCJ & CFK management team
• Offer a diverse set of cleaning and pest control services direct to homes and businesses in Nairobi’s slums
• Provide suites of services that bundle SCJ products like Pledge®, Glade®, Toilet Duck® and Baygon® along with existing youth services (e.g., garbage collection and carpet cleaning)
SCJ Business Model Innovation
SELL:
ENABLE:
MANAGE:
“Community-Based Cleaning & Waste Management Company”
“ToP” Business “BoP” Business Cases of Product Service
Distribution Micro-Enterprise
Retail Trade Community Partners
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Opening up challenges
• Local embedded community partner• New organizational identity for community members
Partners
Capabilities
• It’s not development + business, it’s doing business differently
• Build & practice a co-creation logic
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BusinessModel
Co-Construction
NewCapability
Development
BuildingShared
Commitment
Project Community
Development
Phase II: Building the Ecosystem
BusinessConcept
Co-Generation
Phase IIBuilding theEcosystem
OpeningUp
FlexibleBusiness
Co-Creation
BuildingThe Market
Base
CollectiveEntrepreneurship
Development
BuildingDeep
Dialogue
EnterpriseCreation
Co-CreationLogic
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Building the Ecosystem
Project CommunityDevelopment
Building SharedCommitment Building an organizational
foundation and a strong group identity
Developing shared vision of the business &
commitment to joint action
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New CapabilityDevelopment
Business Model Co-Construction
Building the Ecosystem
Using Action Learning to Develop Organizational &
Business Skills
Using Action Learning to evolve the value proposition
and brand from the ground up
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Business Model Development:CCS Pilot Business Model
CYE OBJECTIVES
• Self-defined
• Flexibility for business evolution
CCS SERVICE LEVELS
• Services grouped into “suites” that include:
Garbage CollectionIndoor CleaningPest Control & IPMScreening WindowsWall repair & paintingOutdoor (grass cut,
garbage, drains)
• Pricing: Flexible by group
BUSINESS
IDENTITY
• Community owned
• Partnering with an MNC
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Building the ecosystem challenges
• Engage broader community
• Business model is not a plan
Constructing the business model
Manage expectations
• Community members – income & status
• MNC – business model & scale of impact
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FlexibleBusiness
Co-Creation
NewCapability
Development
BuildingThe Market
Base
CollectiveEntrepreneurship
Development
Phase III: Enterprise Creation
BusinessConcept
Co-Generation
Building theEcosystem
Opening Up
Phase IIIEnterpriseCreation
BusinessModel
Co-Construction
BuildingShared
Commitment
ProjectCommunity
Development
BuildingDeep
Dialogue
Co-CreationLogic
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Building TheMarket Base
Collective Entrepreneurship
Development
Enterprise Creation
Deepening business to community linkages… Jointly evolving the value proposition
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New CapabilityDevelopment
Enterprise Creation
Building a platform for growth & expansion... Evolving an organizational
structure around the business
Flexible Business Co-Creation
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Enterprise Creation
•Basic spraying service•Lowest prices /high volume•Serving other slums
Group: Tuff Gong
Community: Mitumba
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Enterprise Creation
MECYG, in Mathare •Contracts for entire buildings•Cleaning common areas & toilets•Larger teams
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Enterprise creation challenges
• Flexible organizational structures
• Directed evolution of NGO partners’ roles
Maintain flexibility
Build organizational capabilities
• MNC – manage a business model incubation space
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BoP Protocol:Discovery versus Creation
• Discovery-Based BoP– “Target” the unmet
needs in the BoP– Estimate the size of
the market– Adapt current products
and technologies– Extend current
business model via structural innovation
– “Scale up”
• Creation-Based BoP– Be humble; begin with
an open mind– Spark competitive
imagination– Co-develop something
new– Build new business
model on trust and social capital
– “Scale out”
See: Alvarez, S. and Barney, J. (2006) “Toward a Creation Theory of Entrepreneurial Opportunity Formation” Working Paper
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Beyond The Public-Private Partnership
“Public-Private Partnerships”
BoP Community
BoP Community
“Co-Venturing”
MNCMNC
NGONGO Gov’tGov’t
BoP Community
BoP Community
MNCMNC
NGONGO Gov’tGov’t
The BusinessDriver
- Limited community capability development
- Incremental Innovation of Business Model
- Competitive Advantage: Highly Replicable
BoP Broker & Representative
RelationshipFacilitators
+ Relatively familiar partnership structure (MOU)+ Amenable to planning, managing & monitoring + Scale Up is imaginable & feels attainable
+ Deep capability development of community+ Frame Breaking Business Model Innovation + Competitive Advantage: Hard to Replicate
- High role uncertainty; unknown goals & ends
- Can’t plan or control an unknown future
- Unpredictable business model outcome
Business Model Inputs
Joint Entrepreneurs
Unique Capabilities& Resources
Unique Capabilities& Resources
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Beyond The Public-Private Partnership
“Public-Private Partnerships”
BoP Community
BoP Community
“Co-Venturing”
MNCMNC
NGONGO Gov’tGov’t
BoP Community
BoP Community
MNCMNC
NGONGO Gov’tGov’t
The BusinessDriver
- Low degree competitive advantage & community capability development• Incremental business innovation
BoP Broker & Representative
RelationshipFacilitators
+ Amenable to planning, managing & monitoring • Feels familiar
+ High degree competitive advantage & deep community capability development • Embedded Business Model Innov.
- Cannot be planned, predicted or forecasted
• Feels uncomfortable
Business Model Inputs
Joint Entrepreneurs
Unique Capabilities& Resources
Unique Capabilities& Resources
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• Engage with marginalized groups and communities in mutual business partnership
• Build long-term relationships of trust and understanding with BoP communities
• Creatively marry MNC capabilities and technologies with those of BoP communities
• Evolve the business model from the ground up
Native Capability
Building a New Corporate Capability
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Stuart HartErik Simanis
Duncan Duke
The Base of the Pyramid ProtocolCo-Venturing at the BoP
Greening of Industry NetworkWaterloo. Ontario
June 16, 2007
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Enterprise Creation
Group: Bunker •Comprehensive & labor intensive services•Higher prices / lower volume•Higher end of market
Community: Makina (in Kibera)