Finished David Bornstein’s “How to Change the World”? Looking for your next read? Mackin Bannon, a senior marketing major from Warsaw, Indiana, brings us this week’s Student Spotlight as a review of social entrepreneur Paul Polak and serial entrepreneur Mal Warwick’s book, “The Business Solution to Poverty: Designing Products and Services for Three Billion New Customers”. The book argues that the way to end global poverty is through a market-based approach employing what they called “zero-based” design. Do you think this is the way to solve the poverty problem? Let us know what you think in the comments section below!
To buy the e-book from Better World Books, visit: http://bit.ly/1fDKnnJ
One of the key concepts in The Business Solution to Poverty is what Polak and Warwick call “zero-based design.” Essentially, it calls for entrepreneurs to form a clean slate in their mind when designing for the poor and create unique products and business models specifically tailored to the needs of individual markets. Any assumptions based on past situations are unacceptable. Polak and Warwick outline eight keys to successfully applying zero-based design to businesses targeting the poor:
- Listen to the needs of your customers.
- Transform the market to “change economic behavior, create huge numbers of new jobs, and transform the character of villages around the globe.”
- Design for scale from the very beginning, with the intention to reach hundreds of millions of people.
- “Design and implement ruthlessly affordable technologies and supremely efficient business processes,” with prices 90% lower than First World prices.
- Design the business with a generous profit margin in mind to attract private capital.
- “Design for radical decentralization” to employ and reach those isolated in rural areas.
- Implement aspirational branding to generate sales and an appreciation for the product in buyers’ minds.
- Use jugaad innovation. “The Hindi term jugaad connotes improvisation, working with what you have, and paying unflinching attention to continuous testing and development. A cynic might call it simply ingenuity.”
This zero-based design is absolutely key to successfully make an impact at the bottom of the pyramid. Because the culture and lifestyle for the poor can differ so greatly from people in First World countries, many products sold in, say, the United States would not be applicable or desired by those in rural Africa. Additionally, it would be extremely hard to be profitable with many First World products. Keeping prices higher would lead to minimal sales, while lowering prices too much will eliminate any profit margin. Products and business models for the bottom of the pyramid need to be designed differently in order to meet the customers’ needs and price points. If products are to be sold at just 10% of what they cost in the United States, they will need to be designed and manufactured in a much simpler fashion.
Another important point Polak and Warwick made was designing for scale from the very beginning. One of the things social enterprises struggle with the most is scaling their model, whether because of a poor model or a lack of funding. However, to be able to reach the billions of people living in poverty across the globe, companies must be able to scale and continually increase their reach. Poverty is not going to be eliminated by a huge number of small enterprises, as they often struggle to find the funding, people, and ideas to succeed. Smaller numbers of large businesses should be the future, as they can attract private capital and top-notch employees. The authors also noted that large businesses have the ability to create aspirational branding.
One potential issue with zero-based design is the combination of personalizing products and models and growing to enormous scale. One of the keys to scaling a business to different markets is to have a base model that can be implemented anywhere, which may conflict with the idea of listening to consumers. However, personalized aspects can be added on to the base model in each new market, as long as the foundation is there. While it may not be possible to have literally zero assumptions when entering a new market, the concept of zero-based design is certainly a good one, and one that, if applied effectively, could make a big impact on eliminating global poverty.
Banner photo courtesy of lecercle