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Accenture Outlook | Inclusive Business Initiatives: Scaling Innovation for an Emerging Middle Class

Accenture Outlook | Inclusive Business Initiatives: Scaling Innovation for an Emerging Middle Class

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Published by Accenture
Efforts to create innovations that can meet both social and business goals in low-income markets are fraught with unanticipated dangers. A study of 18 initiatives from around the world reveals how ventures can succeed where others have failed.
Efforts to create innovations that can meet both social and business goals in low-income markets are fraught with unanticipated dangers. A study of 18 initiatives from around the world reveals how ventures can succeed where others have failed.

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Categories:Types, Business/Law
Published by: Accenture on Mar 28, 2013
Copyright:Attribution Non-commercial


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The journal of high-performance businessThis article originally appearedin the 2013, No. 1, issue of 
High-Growth Markets
Inclusive business initiatives
Scaling innovation for anemerging middle class
 By Raghav Narsalay and Ryan T. Coey
Eorts to create innovations that can meet both socialand business goals in low-income markets are raughtwith unanticipated dangers. A study o 18 initiatives romaround the world reveals how ventures can succeedwhere others have ailed.
Outlook 2013
Number 1
It’s not easy innovating or themillions who are climbing rom thebottom rung o the income ladder inhigh-growth and emerging markets.Even when much goes right, many initiatives go wrong.Take the recent example o a largecompany that had developed a highly nutritious, low-cost ood product.The company then recruited a salesorce o local women, who developedrecipes and coordinated cookingsessions in remote communities tomarket the product. A yearlong trial proved thatprospective customers ound theproduct aordable and easy to use. And prot margins were in line withexpectations. But despite the company’sbest eorts—“co-creating” a useulproduct with local communities; usingsalespeople with local knowledge—the venture ailed.The problem: The product didn’t reachenough new customers at a pace thecompany’s leaders elt was necessary to justiy urther investment. In short, theinitiative didn’t scale.In a past issue o 
, weexplored how a number o companiesare overcoming the many obstacles to“inclusive growth” and seeking newmarkets in low-income communities.More recently, Accenture conductedurther research into the subject,looking at what we call “inclusivebusiness initiatives,” or IBIs—businessesaimed at protably scaling innovationin these markets—and asking: Why dosome initiatives achieve scale, bringingboth social benets to low-incomepopulations and prots to thecompany? To nd out, we undertook an ambitious comparative study oninnovation, looking at 18 initiativesin ve countries: Brazil, China, Ghana,India and Nigeria. We discovered that successulinitiatives met three key requirementsor achieving the scale companiesneed to thrive.
1. Getting top leadership on board
Lack of real or sustained support from the board and top managementdooms many new projects.
This is true even or a major eort at alarge company. But inclusive businessinitiatives ace special hurdles.Many boards, or example, demandto see sales and even prots quickly once they have approved an IBI.Directors and senior leaders oten ailto appreciate that shaping purchasebehaviors and winning trust in low-income communities requires more timethan middle-class market initiativesneed. Further, when doubts about anIBI’s potential surace, leaders otenwithhold the needed talent or nancialresources and reuse to sanctionorganizational reorms that wouldhelp better align the venture with therequirements o external partners.Eective IBI leaders, however, apply several innovative approaches toovercome these problems.
Encourage top leadership to havea personal stake in the initiative.
 When board members and senior leadersare personally committed, initiativesponsors and managers will haveenough time to develop the local con-nections necessary or achieving scale.In India, or example, HindustanUnilever Limited’s CEO ostered high-level commitment to IBIs by building adecision-making structure that appealedto the board’s entrepreneurial spirit.
Sponsors andmanagers o inclusivebusiness initiativesmust encouragesenior leaders to takea longer-term view.
Outlook 2013
Number 1
CountryCompanySectorKey inrastructural defcit addressedKey institutional defcit addressedIBI business structureBrazilValeMiningCreated business inrastructureor middle- and low-income suppliersrom remote locationsProvided training to small entrepreneursin remote locations through organizedpartnershipsHomegrownNaturaConsumerproductsDeveloped supply chain and innovationinrastructure to process indigenousknowledge and materials in the goalo creating wealth with low-incomecommunitiesDeveloped systems to linklocal knowledge and indigenouscommunities to marketsHomegrownItauBankingCollaborated with local vendors toprovide fnance to small entrepreneurs andlow-income householdsN/AHomegrownUNICAAgriculturalproductsN/ACollaborated with sugarcane cutters, theirunions and companies tocreate institutions or trainingcane cutters and identiying suitable jobopportunities or themIndustrycollaborationKlabinAgriculturalproductsProvided collateral to armers to helpthem access credit acilities throughorganized banksCreated new institutions to secure betterreturns on orestry products produced byarmersHomegrownChinaSiemensChinaMedicalequipmentBuilt healthcare and diagnostic centersacross dierent parts o rural ChinaDeveloped an extensive programto train doctors in rural locationsMNC subsidiaryHaierConsumerproductsN/ACollaborated with local entrepreneursto create reliable ranchise networks inremote villagesHomegrownSAIC-GM-WulingAutomotiveCreated an aordable transportationplatorm or rural armers andenterprises to engage with urban marketsN/AJoint venture amonggovernment, adomestic private-sector company anda oreign companyNokiaTelecom-municationsCollaborated with local partnersto develop handset applicationsconnecting low-income populations toorganized marketsEstablished an extensive sales channel inthird- and ourth-tier townshipsas well as in rural areas in China withthe support o local communitiesMNC subsidiary
Companies in the research sample
To ensure geographical and cultural diversity in the sample, we selected inclusive business initiatives rom fve emerging marketsin eight sectors. These initiatives are a core business activity o their parent companies, and each company has annual saleso more than $300 million.
(Continued on page tk)
 Ater a 15-month exploration process,HUL selected six ventures or urther investment over the next three years.To ensure top management’s continuedsupport, the six project managersreported regularly to a newly created ventures director and made quarterly progress reports to the chairman andother board members.HUL’s board eectively operated as venture capitalists, granting projectmanagers resources in the ormo people, money and specializedcompany expertise. Team leaderswere also given scalability milestones,and teams were allowed to moveto the next level o venture und-ing only ater reaching them. Thiscompetitive environment kept boardmembers heavily involved in theinclusive ventures, even thoughthey accounted or only a small parto the company’s bottom line.

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