The following review ran recently in The Clean and Green Club.
The Business Solution to Poverty: Designing Products and Services for Three Billion New Customers by Paul Polak and Mal Warwick (Berrett-Koehler, 2013)
Several years ago, I reviewed The Fortune at the Bottom of the Pyramid, a remarkable book about improving people’s lives at the very bottom while monetizing that improvement in the form of business profit. The Business Solution to Poverty picks up where “Fortune” left off.
Based not on academic theory but on real-world hands-on experience starting such companies in places like Bangladesh, Polak and Warwick say there’s a great deal of money to be made serving the world’s very poorest inhabitants: 2.7 billion people living on $2 per day or less.
However, it’s not a mater of just walking in and rolling up your sleeves. Succeeding in these markets–plural, because conditions and cultures vary widely in different parts of the world, or even different parts of a single country–requires extensive research, following key design and economic principles, and DEEP understanding of the local cultures.
Products must be items that people with almost no discretionary income will pay for and use, because these will better their lives, directly and rapidly. They must be durable…extremely cheap to manufacture…designed so a non-literate population can use AND maintain them…and systematically deliverable to places with no roads, no infrastructure, and no tradition of buying from the outside. And they have to both fit well enough into the existing culture and be disruptive enough to dramatically improve people’s lives.
- Treadle pumps that can be installed for $25 including the cost of drilling a well
- Ceramic water filters
- An ultra-low-cost warmer for premature babies
- Artificial knees that cost $75 instead of many thousands.
The authors cite numerous failures, many at the hands of governments or NGOs who, in the authors’ view, don’t scale up enough to make a big difference because they lack the profit motive and thus have less need to make sure their projects actually WORK on the ground. Private businesses, including those run by the authors, have had their failures too–but their batting averages tend to be higher, especially if they do plan for scale. Polak and Warwick say successful businesses will talk to at least 100 customers before going forward–and this research may lead to creative marketing strategies such as theatrical presentations, in situations where traditional Global North media won’t work. If people can’t read, the newspaper will not tell them about you. If they have no electricity, then marketing on radio, TV, or online won’t work very well. Aware of the marketing challenges, Polak and Warwick list “aspirational branding” as a crucial ingredient.
The chances of success are highest, the authors say, when the ventures address basic core needs: energy, water, health care, and jobs (oddly, food is not on their list)–and when there’s accountability. They are critical of many microloan programs, for instance, because they often see the money diverted away from seeding a business (a long-term approach that lifts people out of poverty) and into basic survival–and then the money is gone and there is no business to funnel in capital.
I agree with almost all their numerous success principles in these challenging markets. However, they make–and I question–the assertion that successful businesses must be able to scale up within the first decade to 100 million units and $10 billion in revenues per year in order to be worthwhile. While I recognize that a systematized, replicable infrastructure capable of those numbers is a good thing, I also do believe there is a place for the smaller venture that might be working in just one or two communities, yet still makes a real difference in people’s lives. And a place for the entrepreneur who still wants to make a difference but wants to stay small. [Editor’s note: We agree. Polak and Warwick didn’t mean to imply otherwise.]
To make this whole thing concrete, Polak is starting or consulting to four specific businesses that meet the authors’ criteria:
- A bicycle-delivered safe drinking water company
- A low-carbon biofuel made from agricultural waste that in the past had been burned without capturing the energy
- Solar-powered LED lanterns that are safer, cheaper, and more effective than kerosene lamps–and pay for themselves in the savings of a few months’ supply of kerosene
- Door-to-door health education and sales of franchised high-impact health products that protect against malaria, diarrhea, and worms