stanford graduate school of business: social venture 101 20november08
TRANSCRIPT
Social Venture 101: Starting a Social Venture
source responsibly. TM
Leila Chirayath JanahFounder & CEO
What I’m Going to Talk About Today
How I ended up here
Overview of business process outsourcing
The problem with outsourcing for development
One (small) solution: Samasource and Socially Responsible Outsourcing
Case studies
Achieving impact
Questions?
How I ended up here
Overview of business process outsourcing
The problem with outsourcing for development
One (small) solution: Samasource and Socially Responsible Outsourcing
Case studies
Achieving impact
Questions?
10 years ago...
Los Angeles, CA Akropong, Ghana
Competing Views on Development
vs.
Home Work
Bombay, IndiaDharavi, South Asia’s largest slumOver 2.5M people living on 175 hectares
Bombay, IndiaCall center floorMany of India’s 1M BPO workers commute from slum areas
Aha! MomentTechnology and knowlege jobs can lift entire families
out of poverty.
The next Bangalore?
1 million English-speaking youth finish high school and college in Ghana and Kenya each year. They can’t go to Bangalore, much less the U.S.
How I ended up here
Overview of business process/IT outsourcing
The problem with outsourcing for development
One (small) solution: Samasource and Socially Responsible Outsourcing
Case studies
Achieving impact
Questions?
“The services trade at arm's length that does not require geographical proximity of the buyer and the seller.” (Jagdish Bhagwati, Columbia University economist)
Business Process Outsourcing (BPO) is practiced by most of the Global 1000 and includes a wide range of services:
Decision-based processes
Rule-based processes
Data entry, document management and scanningData entry, transfer and coversion
tasks
HR services, live chat and SMS services
Transcription, expense processing, video captioning, medical billing, online reseach, translation
Client-facing processes Creative services, software and web application development, call center, web-design and maintenance
What is outsourcing, anyway?
Where is it done?
Eastern Europe$3.3B
China & Southeast Asia$3.1B
Latin America & Caribbean
$2.9B
Middle East & Africa$425M
$120-150B global business process outsourcing market
India$17B
Source: NASSCOM-McKinsey Study 2005; http://www.indobase.com/bpo/global-market-of-bpo.html
USA$90B
Key Players
Large Outsourcing Firms
Online Marketplaces
...7 billionaires
1%11%
25%
17%
46%USCanada, UK, AustraliaEurope & Latin AmericaIndiaAfrica
How I ended up here
Overview of business process/IT outsourcing
The problem with outsourcing for development
One (small) solution: Samasource and Socially Responsible Outsourcing
Case studies
Achieving impact
Questions?
277% of per-capita income spent on tertiary education in some
countries
+>130M skilled workers in Africa
and rural Asia
+60% unemployment among
university and high school graduates
=
Talent Surplus
Client Deficit
Perception that economically depressed regions are open for
aid, not trade+
Few opportunities for smaller firms to connect to US clients
+ No socially responsible
option that promotes economic development
=
The problem: many poor regions are left out
32 million rural Chinese leave their towns each year for big cities, in search of work
45 million rural Chinese youth are currently enrolled in senior secondary schools
Source: Wang, Dewen. “China’s Rural Compulsory Education: Current Situation, Problems and Policy Alternatives.” Working Paper Series No.36. 2003
The Organization for Economic Cooperation and Development (OECD)
reports that there are 130 million surplus workers in rural India
Source: “Rural BPO.” Drishtee BPO Presentation. March 2008.
Source: Kenya Ministry of Education; Ghana Ministry of Education; Samasource research November 2007 - March 2008.
Over 990,000 young people graduate from secondary and tertiary institutions in
Ghana and Kenya each year and face staggering unemployment
The problem: talent surplus (part 1)
“The dilemma in Kenya, and Africa at large, is that the cost of education is getting so
high...upon finishing, you can’t get a job that will offer returns commensurate with what
you’ve done in school.”
Freda Adundo, IT degree candidate, Kenya
“You find people completing their university education with
honors, and the best they can get is a one-off job doing something unrelated to what they studied. So you end up going back to the rural area where you grew up to do
farming.”
Peter Kimwele, business degree candidate, Kenya
“It’s like the Western countries are missing a generation which they want to import
from Africa...our economy and our brains are in America. Why can’t people earn an
income while they stay here?”
Martin Ntembe, business degree candidate, Kenya
The problem: talent surplus (part 2)
Source: Samasource interviews (Kenya School of Professional Studies: Nairobi). November 2007 - March 2008.
How I ended up here
Overview of business process/IT outsourcing
The problem with outsourcing for development
One (small) solution: Samasource and Socially Responsible Outsourcing
Case studies
Achieving impact
Questions?
One (small) solution:
a new socially responsible outsourcing concept among US enterprises
Defining and promoting
Missionto create knowledge jobs for skilled, economically disadvantaged people
to create business value for US enterprises through low-cost, high-quality business process and IT outsourcing services
small- and medium-sized outsourcing firms (SMOs) in economically disadvantaged regions
Training
SMOs to a global marketplace for servicesConnecting
Method
Defining and promoting
Training
Connecting
a new “socially responsible outsourcing” concept among US enterprises
small- and medium-sized outsourcing firms (SMOs) in economically depressed regions
SMOs to a global marketplace for services
One solution: socially responsible outsourcing
Socially responsible outsourcing promotes economic development and reduces poverty
Foreign capital Small firms Low-income Individuals
$$$a small slice of the
$160B services outsourcing industry
micro-, small- and mid-sized businesses
poor people with untapped talent
Socially responsible outsourcing creates positive social impact by:
directly generating jobs for skilled workers in low-income regions with high unemployment levels
indirectly generating jobs for semi- and unskilled workers
reducing skilled-labor emigration, or “brain drain,” in low-income regions
1Ghana
Senegal
Kenya
Uganda
0 1,000 2,000 3,000 4,000
2
Outsourcing jobs in sub-Saharan Africa
1 direct job 2.5 indirect jobs
3
One solution: socially responsible outsourcing (2)
Wait, what does “socially responsible outsourcing” mean?
Includes firms located in: (a) a developing country, as defined by the World Bank*; (b) an economically distressed region (e.g., Ceara, Brazil; Bihar, India)
Hire firms in poor or very poor regions
Hire micro-, small- and mid-sized firms
Hire firms that are owned by, or employ a majority of,
disadvantaged people
“Disadvantaged” means: belonging to an ethnic or religious minority group, living at or under the poverty line, physically or mentally disabled
Includes firms that employ between 1 and 249 people
Right now, it’s a nascent set of guiding principles for buyers who want to help low-income and socially disadvantaged people pull themselves out of poverty.
Buyers are encouraged to follow any 2 of the 3 principles in choosing a service provider for outsourcing work.
Principle
*http://www.imf.org/external/pubs/ft/weo/2008/01/pdf/statapp.pdf
Clarification1
2
3
What kinds of service providers are included?
Principles Example
Digital Divide Data, a nonprofit Cambodian data entry firm that employs 500+ socially disadvantaged people
1
Hire firms in poor or very poor
regions
Hire micro-, small- and mid-sized firms
2+
1
Hire firms in poor or very poor
regions
+Hire firms that are
owned by, or employ a majority of,
disadvantaged people
3
Hire micro-, small- and mid-sized
firms
2 +Hire firms that are
owned by, or employ a majority of,
disadvantaged people
3
Daproim Africa, a 10-person digitization company headed by a person from rural Kenya
Preciss International, a 15-person data entry firm headed by 2 women
Oriak Digital, a 10-person online research and transcription firm headed by a Kenyan woman
For case studies, see the following slides.
Current Focus
Defining and promoting
Training
SMOs to a global marketplace for servicesConnecting
Samasource is piloting a web-based brokerage process with 8 small firms in Kenya, India, and Nepal
a new “ethical outsourcing” concept among US enterprises
small- and medium-sized outsourcing firms (SMOs) in economically depressed regions
SMOs in Africa and rural Asia firms
US enterprises
Brokerage model
direct jobs
indirect jobs (x2.5)
due diligence > quality assurance > payment solutions > web-based tools
Our platform and sales team will help US firms identify, manage and pay providers...
...and create needed knowledge jobs in poor regions
Data entry, transfer and conversion tasks
Specific rule-based processes
Decision-making and problem-solving processes
Client-facing processes
1-4 plus industry knowledge
4
5
3
2
1
2 contracts signed: Website development3 proposals out: Web testing (750 Industries); Website redesign
American Association of University Professors
Services offered include data entry, digitization, transcription, website and software development
Projects and proposals underway or in development
Brokerage model: results to date
Continued
2 proposals out: online research (World Trade Press); fact-checking (Google)
3 contracts secured: validation of books (Benetech) library card conversion (Digital Divide Data)1 proposal out: additional book digitization
(Benetech)
Brokerage model: prospective market
NonprofitsRationale: Nonprofits face increasing competitive pressure to outsource and have mission-related reasons to outsource responsibly; existing options in India, China are risky from a PR perspectiveSize: 1.4 million registered 501(c)3 organizations spend $5B on administration & overhead annuallyOver 98% of nonprofits outsource at least some IT-related functions
Socially Responsible CompaniesRationale: CSR movement moving deeper into global supply chains; increasing number of “triple-bottom line” companies concerned with social, environmental, and financial impactSize: Networks like Business for Social Responsibility have 200+ members committed to CSR practices; sector could spend up to $6.6B annually on responsible outsourcing
Stories from the Field“One of our workers, Mona, has two kids
and is a single mom. She really cried when our contracts were terminating earlier this
year. This is her life, this is her livelihood. We need to generate a sustainable pipeline for
business development to ensure this doesn’t keep happening.”
“Samasource is really adding value by allowing
organizations to focus on delivering quality services to clients rather than procuring
business.”
“Business development is a major challenge for us. We can’t afford to send salespeople
to the US every few months to drum up businesses and work on branding”
Gilda Odera, Skyweb Evans, KenyaGagan Singh, Source for
Change, India
Steve Muthee, Daproim, Kenya
How I ended up here
Overview of business process/IT outsourcing
The problem with outsourcing for development
One (small) solution: Samasource and Socially Responsible Outsourcing
Case studies
Achieving impact
Questions?
Case Study: Oriak Digital
View Video >> http://www.youtube.com/user/samasource
Case Study: Daproim Africa
• Headed by Steve Muthee, a young entrepreneur from rural Kenya
• Started in 2006 with 4 people• Types of services: form and survey processing,
transcription, digitization (tiers 1-2)• Before Samasource; average revenue per project
$4K• First large project with Samasource: $13K• In pipeline: projects between $10K and $100K• Plans to grow to 20-30 people
Case Study: Preciss International
• Run by two women, Ivy Kimani and Mugure Mugo
• Started in 2002 with 5 employees
• Types of services: online research, data processing, subtitling
• 4 proposals/trials initiated through Samasource
• In pipeline: projects between $10K and $100K
• Planned growth to 70-80 employees
Case Study: Digital Divide Data
• Nonprofit social venture started by Harvard grads in Phnom Penh
• Employs 500 people at 3x Camodian minimum wage
• First project: digitizing old issues of the Harvard Crimson
• Operationally self-sufficient with revenue from services such as digitization, double-key data entry, and survey management
• Social programs: education for sex-trafficked women, on-site medical care, scholarship program -- financed through donations
How I ended up here
Overview of business process/IT outsourcing
The problem with outsourcing for development
One (small) solution: Samasource and Socially Responsible Outsourcing
Case studies
Achieving impact
Questions?
Results to Date
Pilot
~10 vendorsdata entry,
transcription, software
10-25 vendorsdata entry,
transcription, software
25+ vendorsdata entry,
transcription, software
35+ vendorsadditional services
Kenya, India Kenya, India East Africa, India East Africa, India
Offline (MOUs with specific firms),
oDesk
Online supplemented by
offline inputs
Online with minimal offline
support
Online with minimal offline
support
Self-reportedSelf-reported with
background check/follow-ups
Self-reported with 5-10% annual
auditing by third party
Certification and 5-10% annual
auditing by third party
Who
Alpha launch Beta launch Full launch
Where
How
Standards
2008 early 2009 late 20092007
Milestones Reached
July-November - 5 contracts; 15.5K visits
March-July - oDesk partnership, GSVC finals Nairobi pilot & Facebook Developer Garage; 50% increase in Kenyan service providers since then
Feb - Deployed client survey (40+ responses)
Jan ’08 - Web platform with Kenyan vendor
Nov/Dec ’07 - Won Business in Development Challenge; conducted feasibility study in Kenya with 20+ vendors
Premal ShahPresident, Kiva
Darren BerkowitzFounder & CEO
Emeka OkaforDirector, TED Global
Katherine BarrPartner, Mohr Davidow Ventures
Ken BanksDeveloper of Frontline SMS
Mohamoud Jibrell CIO, Ford Foundation
TeamLeila Chirayath
CEOJoy Sun
Initial director
Alice WangBusiness Development and Finance
Henry ThairuKenya Program Advisor
Visiting Scholar, Stanford University
Consultant, Katzenbach Partners
World Bank Development Research Group
BA, Harvard University (African Development Studies)
Expertise: Outsourcing, social enterprise, development
Investment Associate, FT Ventures
Investment Banking Analyst, JP Morgan
Consultant, UN Industrial Development Organization
BS, Economics, BS Finance, MIT
Expertise: Outsourcing, finance, and business strategy
Director, Clinton Foundation HIV/AIDS Initiative
Stanford Graduate School of Business (MBA expected June ’10)
BS, Georgetown University (Foreign Service)
Expertise: Non-profit management and operations, development
Deputy Vice Chancellor, Jomo Kenyatta University of Agriculture and Technology
Chairman, Kenya Council of Science and Tech
PhD, Norwegian University of Science and Technology, Trondheim (Thermodynamics)
Expertise: Entrepreneurship, education, technology in Africa
Advisory Board
Key Lessons for Aspiring Social Entrepreneurs
• The hybrid model: to be or not to be?• Avoid agnosticism - look at critical decision factors and choose
• For SS: team priorities, cost to launch, risk inherent in business model
• If possible, identify a revenue model• Incubation time - overestimate• Refine your pitch (to team members)• Recruit an all-star advisory board• Partner whenever possible• Take advantage of free stuff
• Google tools, Salesforce, conferences, etc.• Find a peer group
• Physical space• Measuring progress/benchmarking
Above all, know that this is one of the hardest things you’ll ever do, and prepare for it.
(living in a van, selling your guitar, tutoring on the side, etc.)
Thank you!
Leila [email protected]
www.slideshare.net/leila_cwww.samasource.com
www.youtube.com/user/SamasourceFacebook.com >> Samasource
www.sourceoutpoverty.org