business models (& business modelling) for sustainable ... · phone ladies! grameen bank!...
TRANSCRIPT
BusinessModels(&BusinessModelling)
forSustainableDevelopment
AlessandroRossiforMasterCodeClass4
1
2
assignment
how does a donor-funded business modellook like? ?
OFFER
DISTRIBUTION CHANNELS
CUSTOMER RELATIONSHIPS
CUSTOMER SEGMENTS
REVENUE STREAMS COST STRUCTURE
KEY ACTIVITIES
PARTNER NETWORK
KEY RESOURCES
3rd party-funded business models
donor!proposal!
donations!
proposal writing!
OFFER
DISTRIBUTION CHANNELS
CUSTOMER RELATIONSHIPS
CUSTOMER SEGMENTS
REVENUE STREAMS COST STRUCTURE
KEY ACTIVITIES
PARTNER NETWORK
KEY RESOURCES
3rd party-funded business models
donor!
recipient!
proposal!
mission!
donations!
reputation!
proposal writing!
OFFER
DISTRIBUTION CHANNELS
CUSTOMER RELATIONSHIPS
CUSTOMER SEGMENTS
REVENUE STREAMS COST STRUCTURE
KEY ACTIVITIES
PARTNER NETWORK
KEY RESOURCES
3rd party-funded business models
donor!
recipient!
proposal!
mission!
donations!
reputation!
proposal writing!
tendency to
focus on
donor (money
source)!
no direct
“$feedback”
from beneficiary !
dreamIqbal Quadirhad a
OFFER
DISTRIBUTION CHANNELS
CUSTOMER RELATIONSHIPS
CUSTOMER SEGMENTS
REVENUE STREAMS COST STRUCTURE
KEY ACTIVITIES
PARTNER NETWORK
KEY RESOURCES
mobile connectivity!
customer-funded business model
OFFER
DISTRIBUTION CHANNELS
CUSTOMER RELATIONSHIPS
CUSTOMER SEGMENTS
REVENUE STREAMS COST STRUCTURE
KEY ACTIVITIES
PARTNER NETWORK
KEY RESOURCES
mobile connectivity!
network management!
network!
Telenor! license!
network management!
customer-funded business model
OFFER
DISTRIBUTION CHANNELS
CUSTOMER RELATIONSHIPS
CUSTOMER SEGMENTS
REVENUE STREAMS COST STRUCTURE
KEY ACTIVITIES
PARTNER NETWORK
KEY RESOURCES
mobile connectivity!
villagers!
network management!
network!
Telenor! license!
network management!
customer-funded business model
how do you provide
connectivity to
villagers when they
are too poor to buy
a phone?!
OFFER
DISTRIBUTION CHANNELS
CUSTOMER RELATIONSHIPS
CUSTOMER SEGMENTS
REVENUE STREAMS COST STRUCTURE
KEY ACTIVITIES
PARTNER NETWORK
KEY RESOURCES
mobile connectivity!
villagers!
phone ladies!
Grameen Bank!
network management!
network!
Telenor! license!
network management!
customer-funded business model
by providing an
intermediary a loan
to buy a phone and
resell call services!
OFFER
DISTRIBUTION CHANNELS
CUSTOMER RELATIONSHIPS
CUSTOMER SEGMENTS
REVENUE STREAMS COST STRUCTURE
KEY ACTIVITIES
PARTNER NETWORK
KEY RESOURCES
income opportunity!
mobile connectivity!
villagers!
phone ladies!
phone ladies!
Grameen branches!
Grameen Bank!
network management!
network!
Telenor! license!
network management!
customer-funded business model
OFFER
DISTRIBUTION CHANNELS
CUSTOMER RELATIONSHIPS
CUSTOMER SEGMENTS
REVENUE STREAMS COST STRUCTURE
KEY ACTIVITIES
PARTNER NETWORK
KEY RESOURCES
income opportunity!
mobile connectivity!
villagers!
phone ladies!
phone ladies!
Grameen branches!
Grameen Bank!
communication revenues!
network management!
network!
Telenor! license!
network management!
customer-funded business model
RESULTS
Rashmi, 24 Bangladeshi village phone lady 2-3 $ daily income
there are about 250ʼ000women retailing telephoneservices in 60ʼ000 villagesgiving access to about 100million people
the 250ʼ000 telephones areproducing revenues at anannual rate of well over $100million for GrameenPhone
each entrepreneur makesabout $2 in profits per dayor about $700 per year
il caso Grameenphone
25
classoutline• basicsonsocialinnovation• TxtEagle casestudy• techniquestoinnovate• finalassigment
SI:apossibledefinition[GeoffMulgan,2006]
• businessinnovationisgenerallymotivatedbyprofitmaximizationanddiffusedthroughorganizationsthatareprimarilymotivatedbyprofitmaximization.
• socialinnovationreferstoinnovativeactivitiesandservicesthataremotivatedbythegoalofmeetingasocialneedandthatarepredominantlydiffusedthroughorganizationswhoseprimarypurposesaresocial.
• keepinmind:idealtypes vs.hybrid/realtypes,partnershipsandjoint socialventure,etc.
needs:theKenyacase
• 40Mpeople• poverty:dailypro-capitaincomeofEur 2.6• highunemploymentrate(2010->≈ 50%)
thebusiness
• medical transcripts:– market sizeof20BillionUSD– standardsolutions:$0.1pertextline(65chars,98%accuracy)
• software localization• manuals andtechnicaldocumentation• (marketsurveys)
the“scratch anitch”perspective
• NathanEagle• MITyoungfacultyfromtechnol.school• shortstayinKenya(girlfriend):– firsthandexperienceoflivingconditions
• returns home• startupcompanyTxtEagle
TxtEagle:atimeline
• 2008- BostonstartupsponsoredbyMIT• 2009- entersinKenyaandRwanda• 2010- 17Africancountries• 2011– 100countries– 220allianceswithlocalfirms– 8.5MUSDventurecapital
maturemobiletechnologies• TACS– GSM– UMTS– LTE• GSMtechnologies– mature– obsolete?surpassed?– cheapnetworktechnologies– cheaphardwareforusers
• mobilemarket– developedcountries:stagnating,maturemkt– developingcountries:exponentialgrow:
• Kenia:200k(0.5%)usersin2000->20M(50%)in2010– GSMstilltheleadingtechnology
TxtEagle:thebusinessidea• mobilecrowdsourcingsolutions• mobilesolutionsfordeployingmicro-tasktocrowdsourced
laborforcesviaSMS(160charsmessagingsystem)• activities
– collecting ataskfromacustomer– partitioning inindependentmicro-tasks– delivery ofmicro-taskstoaffiliates– gathering backtheoutputsfromaffiliates– regroupingofoutputs– qualitychecks(redundancy,controltasks,ratingofaffiliates,
etc.)– shippingofthefinaloutputtothecustomer– managementofmicro-paymentsforaffiliates
TxtEagle:valuecreation[1]
• cost savings:– medical transcriptions• standard solutions:$0.1pertextline(65chars,98%accuracy)• SMS: $0.02pertextline(1/5drop!,sameaccuracy)
• greathourlyrate:– $3/h– 1dayofwork≈ 1monthoffamilyexpenses
TxtEagle:valuecreation[2]
• useofUSSDprotocol(freeSMS)• alliances withtelcom providers• micro-paymentviaphonecredit– wholesalepurchaseatadiscount– resale atnominalprice– phonecreditasdigitalpurse– phonecreditasbankcheckingaccount
TxtEagle:usescenarios• Ruth&Betty,Home-Maker/VillagePhoneOperator,Butare,Rwanda.Ruthisthemotheroffourandwhileshe
readsandwritesEnglishfluently,shehasn’tbeenabletofindmuchworkinherlocalvillage.She’dliketoownaphone,buthasn’tbeenabletosaveupthemoney.BettyoperatesavillagephoneinRuth’svillage.By‘renting’thephonetoRuthfor50cents/hourduringoff-peaktimeswhenBettyhasnoothercustomers,Ruthisabletocomplete3hoursoftranscriptiontasks– accumulating$7.50intohersavingsaccountand$1.50intoBetty’saccount.AcoupleofmoresessionslikethatandRuthwillbeabletoaffordherownphone!
• David,MaasaiHerdsman,Kisumu,Kenya.WhileDavidhadbeenunabletocompleteformalizededucation,he,alongwithmanyofhisMaasipeers,doesownamobilephone.Davidcompletesvoice-tasks,helpingNokiatrainaspeechrecognitionengineonhisnativeMaasaidialect.WhenDavidwishestocompleteatask,he‘flashes’thetxteagleAsteriskboxthatcallshimback,askinghimtorepeatspecifickeywordsandphrases.After30minutesofwork,Davidhasearnedenoughairtimetolasthimaweek(assuminghedoesn’ttradeitagainforanothernecklacetogivetohisnewwife).
• Sophie,UnemployedSchoolTeacher,Kilifi,Kenya.Sophieisanactivememberofherlocalwoman’smicrofinanceinstituteandunderstandstheimportanceofsavings.However,sherarelyisabletomakeendsmeetforhergrowingfamilyandhasnomoneytoopenatraditionalsavingsaccount.Occasionallysheisabletoborrowherhusband’sphoneandusesittobeginearningsmallamountsofmoneybycompleting
• translationtasksforNokia;textingbackthecorrecttranslationtowordssuchas“AddressBook”inhermother-tongue,Giryama,shesoonisontheroadtoaccumulatingherownsavings.Emmanuel,Recenthigh-schoolgraduate(age14),Mtwapa,Kenya.Emmanuelhasjustfinishedsecondaryschool,butisunsurewhattodonext.Hehasalotoftimeonhishandsbuthecouldreallyusemoneyofhisown.Emmanuelbeginsexperimentingwiththetxteagletranscriptiontasksandfindsthathegetsfairlyhighaccuracyscores.Nowinsteadofspendinghistimeloiteringaroundthevillagewithhispeers,he’sridinganewbikehepurchasedwithhissavings.
TxtEagle ataglance• partnershipbetweenvariousprofitorientedcorporations:techstart-up,venturecapitalists,telcom providers,hardwareproducers
• disruptiveinnovation:aradicallynewwaytoofferaservicewhichdisintermediate traditionalprovider
• importantsocialconsequences:– people outofthelabour market– poverty trapandcompetencetrap– addition tofamilyincomes– improvementinlivingconditions
vignettesoninnovatinginSI
• bottomofthepyramidapproach• catalyticinnovation (disruptiveinnovation)• designthinking• positivedeviance
BoP – shift ofmindset• traditionalapproaches– poorarehelpless– needcharity,subsidies,publicassistance
• marketbasedapproaches– allpoorhouseholdstrade,buy,sell(cash,labor,bartering)– hybridbusinessstrategiesthatincorporate
• consumereducationorothercapacitybuilding• microloansandproducer/consumerfinance• cross-subsidyfromdifferentincomegroups• franchiseandotherdistributionarrangementswhichproducejobsanddistributeincome
• partnershipwithNGOsandpublicsector
BoP – newfocusforbusiness
• unprecedentedphenomenon:– emergingnewcustomers– revolutionaryas:e-business,mobilebusiness,etc.
• forcetorethinkcommonbusinesswisdomon:– hitech/lowtechinproductandservices– scaleandprofitability– price/performance– productivity– sustainabledevelopment
anexample:Hindustan Lever [1]
• detergentbusiness• northern/northwesternIndia• Lever:MNCwiththetypicalToP approach• Nirma:– newcomerlocalfirm– newformulation,process,packaging,distributionandpricing
– focusedonthepoor• Lever:laterecognitionandresponse
anexample:Hindustan Lever [2]
• sustainabledevelopment– soapformulation• lowerfattowaterratio• indigenousoils• novel,greenerprocessing
– localcompany• researchwithlocaltalent• localemploymentandawareness• commitmenttothebottom
anexample:Hindustan Lever [3]
• hugesuccess:– Nirma:$150Msales,grossm.18%,ROCE121%– Lever:$180Msales,grossm.25%,ROCE22%– LeverP:$100Msales,grossm.18%,ROCE93%
• lessonslearned:– bottomcanbeveryprofitable– lowmargin+highunitsales– volume->capitalefficiency!– profitvs.grossmargins
newbusinessmodels fortheBoP
• price-Performance• robustproducts(e.g.transport,dust,heat)• capitalefficiency• laborintensity• newalliances• SG&A,O/Hstructure• volumes andlogistics• packaging• sustainability
designthinking• avoidpreconceivednotionsaboutneedsandsolutions
• integratetheuser’sviewandneedsinconcepts,prototypes,innovativesolutions
• lookforfeedback(validation)• constructiveandexperientialapproach• systemicapproach:needsofusers,infrastructuresfordelivering,etc.
• initially:productdevelopmentforbusiness• nowadays:socialproblems
e.g.:fetchingwaterincountrysideIndia
• dailyprovisionofwaterforfamilyneeds• currentsolution(usedforgenerations):
– local,always-open,100-meterdistantborehole– 11-liter,headtransportable,plasticcontainer– notsosafe,periodicallyinducingsickness
• newmarket-basedsolution:– foundation-runcommunitytreatmentplant– atwalkingdistance(500meters)– wellknownandreputable– affordable($0.2fora19-litercontainer)– waterfeesasstatussymbolforsomevillagers
• familiesstillusethetraditionalsource– whythat?
e.g.:fetchingwater[solution]
• designflawsinthecontainer– toobig– tooheavy– difficulttograspandholdatthehip/onthehead
• flawsinthedeliveryoftheservice– openinghours:notaccessibleforworkingpeople
• flawsinthemarketprovision– monthlypunchcardfor19litersaday
• notethatthesolutionworksverywellforthe“typicalcustomer”:familieswithhusbandsoroldersonswhoownbikesandcanvisitintheopeninghoursthefacility
disruptiveinnovation(Christensen)
• “normal”innovations:– largeincumbents– betterexistingproducts/services– premium,valueaddingversions– targetingmoreattractivecustomers(purchasingpower)
• “disruptive”innovation:– newcomersinthemarket,industrynovices– simpler,strippeddownproducts(goodenough)– verypricecompetitive– newmarketsegments(differentorlessattractivecustomers,,“poor”segments)
whynewcomerssucceed?• traditionalinnovationsreinforcemarketsstatus-quo:– intermsofproduct/service– intermsofneeds– intermsofconsumers
• disruptiveinnovations:– paradigmaltering– newneeds– lessrichdemand– moreovertheyhavegreatpotentialforimprovements,whichovertimeresultsinsubstitutingdominantproductsandservicesformoresophisticatedcustomers
someexamplesofdisruption
• personalvs.mainframecomputers• lowcostaircarrier
• elementsincommon:– majorimpactonindustrystructures– mightunintentionallygiverisetosocialchanges
• disruptiveinnovationswhichintentionallycausesocialchangearelabelledascatalytici.
disruptioninsocialinnovation
• traditionalorganizationsaddressingsocialneeds(hospitals,schools,etc.):– merereplicationoftraditionalbusinessmodels– “disruptive”modelsareverydistant
• catalyticinnovations:– new,“goodenough”solutions– tounsolvedsocialissues– forunderservedgroupofcustomers– whicharenotaddressedbystatusquo
disruptionprocessesforsocialinnovation:anexample
• UShealthcare– highestpro-capite spenditure intheworld– relativelylowhealthcarequalityindicators
• USpubliceducation– 2° forexpenses(OECDcountries)– 29° instandardizedstudentlearningtests
• over-provison ofstatus-quoenhancing solutions• misdirectedinvestments• under-provisionof– newsimplersolutions– foruserswithbasicneeds
catalyticinnovations:casestudies
• WorkingToday– affordableinsuranceforindependentprofessionals(contractors,consultants,par-timers,tempsinNYC)
• communitycolleges• walk-inclinics– basicmedicalservicesinachainofdrugstoresupermarkets(CVS)
positivedeviance
• asset-based,problem-solving,community-drivenapproachtofindingsolutions
• lookforpositivedeviants:– certainindividualsorgroups– havingaccesstothesameresources– facingsimilarorworsechallenges– uncommonbehaviors andstrategiesenablingthemtofindbettersolutions
• http://www.positivedeviance.org/
PDguidingprinciples
• practiceinsteadofknowledge• self-ownershipoftheprocessbycommunity– “Don’tdoanythingaboutmewithoutme”– findexistinguncommon,successfulbehaviors (PDinquiry)
– designwaystopractice&lifythosebehaviors– “someonejustlikeme”cangetresults– communitysetsbenchmarksandmonitorsprogress.– interactiveengagement,“letthecommunitylead”.
• expandsexistingnetworksandcreatesnewones
PDcasestudy:malnutritioninVietnam
• 1991,newDirectorofSavetheChildreninVietnam• governmentrequest:createaneffective,large-scaleprogramtocombatchild
malnutrition• morethan65%ofVietnamesechildrenlivinginvillagesmalnourished• directorengagedthecommunity:
– identifypoorfamilieswhohadmanagedtoavoidmalnutritiondespiteallodds– facingthesamechallengesandobstaclesastheirneighbours– andwithoutaccesstoanyspecialresources
• positivedeviants:– tinyshrimpsandcrabs+sweetpotatogreens– mostcommunitymembersbelievedtheywereinappropriateforyoungchildren– feedingtheirchildrenthreetofourtimesaday,ratherthantwiceaday
• pilotprojects:– familieswithmalnourishedchildren– invitingthemtopracticethedemonstrablysuccessfulbutuncommonbehaviors whichtheyhad
discoveredintheircommunities– greatresults
PDandSocialInnovation
• greatforNGOs-typeofSI:– educationalprograms– empowermentandcapacitybuildingofcommunity
• mightbealsohelpfulforSocialEntrepreneursorPrivateEnterprises:– PDaccessingprivilegedresources?– isthereawaytoovercomesuchsystem?(SEperspective)– canwethinkaboutBoP marketsolutions?(PEperspective)
examples
• ”standard”solutiontoasocietalpressingneed:– Bankloanstofundentrepreneurs
• neglectedusersegments:– Poorentrepreneursthirdcountries
• approach:PD• “novel”solution(socialinnovation):– consumeristyoungprofessionalsgraduateswithnodebt
examples
• ”standard”solutiontoasocietalpressingneed:– publicretirementplansandtheelderlyneedforfinancialsecurity
• neglectedusersegments:– youngmillennialswithpoorjobmarketsecurity
• approach:PD• “novel”solution(socialinnovation):– consumeristyoungprofessionalsgraduateswithnodebt
examples• ”standard”solutiontoasocietalpressingneed:– publicretirementplansandtheelderlyneedforfinancialsecurity
• neglectedusersegments:– youngmillennialswithpoorjobmarketsecurity
• approach:Designthinking• “novel”solution(socialinnovation):– voluntarypensionplans– opt-outnudging– informationonageandcheckamountatretirement
examples
• ”standard”solutiontoasocietalpressingneed:– Healthcareneeds
• neglectedusersegments:– Allpatientsduetoshrinkingwelfarebudgets
• approach:catalitic• “novel”solution(socialinnovation):– minute-clinics(pharmacistdeliveredhealthcare)
grading• Responsible:Prof.Italo Trevisan
• 30%previousassignments• 20%Classparticipation• 50%Finalassignments
• (Possibleà questioninfinalexam)
post-assignment1• takeyourcaseofsocialinnovation• discussthebusinessmodelofyoursocialinnovation.Whatisisabout?howisitsustainable?howcanyouinnovatesuchbusinessmodel?Doesitpromotesustainabledevelopment?Whatshouldpolicymakersdo?
• instructionsforthesubmissionintheblog• Max2-3pages(5000chars)
post-assignment-2• takethecaseoftxtEagle• describeinaparagraphinwhattheinnovationconsist:– whichproblemdoesitsolve?– forwhoseusers/beneficiaries?– how?whereistheinnovation?– howdifferentfromtraditionalsolutions(ifany)
• Doesitpromotesustainabledevelopment?Prosandcons?
• Max2-3pages(5000chars)