By Amy Alexander for Investors Business Daily
At Thanksgiving, Americans are challenged: Feed the hungry. Clothe the poor. The best way to do it? Capitalism, say Paul Polak and Mal Warwick, authors of “The Business Solution to Poverty.”
“The endless possibilities that can come out of bringing more people into the market economy promise a brighter future for us all,” Warwick told IBD.
Safe drinking water for India
In Orissa, a state in India, clean drinking water was once a luxury. Larger cities have giant purification systems, but bringing them to remote villages is expensive. Orissa’s locals, who make $2 a day, traditionally sipped and cooked from the same spot where they bathed. This made them sick.
The typical response: pity and charitable donations. Polak, a Golden, Colo., psychiatrist-turned-entrepreneur, saw another way.
Sensing a burgeoning marketplace, he had his Windhorse International, a for-profit outfit that seeds businesses in developing countries, launch Spring Health Water in 2011. Now it partners with locals in Orissa who operate water treatment tanks on behalf of Spring Health.
The water sells for pennies, but demand is high and margins low, so those coins add up. This year’s projected earnings: $284,000.
Spring Health hopes to double its income annually over the next five years, which could add up to millions in sales. Already, residents of Orissa are healthier and happier.
Spring Health employs local delivery drivers, inspectors and managers. The shops that sell the water at a 25% commission are seeing a spike in sales of other goods and are smiling about it.
Goal: To provide safe drinking water to more than 100 million people through shops in 400,000 villages around the world in 10 years.
Warwick and Polak offer these hints for uncovering business chances in impoverished corners:
“Don’t look at poor people as alms seekers or bystanders to their own lives,” Polak and Warwick wrote. “They’re your customers. Always set out by purposefully listening to understand thoroughly their lives — their needs, their wants, their fears, their aspirations.”
• Get it out. Decentralize operations. Sometimes the last 500 feet of distribution keep businesses from moving products into rural areas.
• Make money fast. Remember, your goal is to fatten your firm so it can continue to grow into new markets. Make sure your margins let people at even the humblest level of the enterprise get a nice cut. Said Warwick: “Design for scale, and design for generous profit from the word go.”