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Social Entrepreneurship

Social Entrepreneurship

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Published by dipayanb
Social entrepreneurs combine technology with market-driven, innovative distribution strategies and smart financing options to drive innovation in products and services that are relevant and affordable for the people at the bottom of the pyramid. Here are some examples.
Social entrepreneurs combine technology with market-driven, innovative distribution strategies and smart financing options to drive innovation in products and services that are relevant and affordable for the people at the bottom of the pyramid. Here are some examples.

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Published by: dipayanb on Feb 16, 2010
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02/24/2010

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Social Entrepreneurship
Dipayan
 
Baishya
 
During the last couple of decades it has been conclusively proved that government intervention orforeign aid can achieve only a limited success in eradicating poverty and uplifting societies. On theother hand, free markets coupled with the freedom of opportunity and enterprise has beeninstrumental in creating wealth for a much wider segment of population and has changed thestandard of living for millions.Free-marketeconomic reforms of the past two decades have broughtan unprecedented surge of wealth to India, China, Brazil and nations in central and Eastern Europe as well as in Latin America and Africa. Capitalism has helped usher in an era of wealth and economicgrowth that foreign-aid programs have tried but failed to do since World War II. Yet, as one drives through the cities of any of these emerging economies, one can’t help but noticelarge swaths of land covered by slums wherein people live with a shockingly low standard of living. And that is when one wonders if markets have failed to deliver?
The Gap
 A closer look reveals that almost everyone living in these areas are gainfully employed and have alivelihood – without it they wouldn’t have chosen to live through the hardships of city life. Yet, theirincome doesn’t translate into a higher standard of living. The same holds true even for the rural poor where doubling of income from $1 a day to $2 a day doesn’t translate in a significant improvement inthe standard of living.
 
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Recent studies and books such as ‘Fortune at the Bottom of the Pyramid’ showed that there is a largeaddressable market for companies to cater to, which if tapped properly could earn the enterprises a‘fortune.’ Buoyed by such sentiments large multinationals launched products to tap into this segment.Cola at Rs 5, shampoo at Re1 sachet are just some examples of these. Though they have met with somesuccess, they definitely haven’t earned a ‘fortune’ for the companies or have significantly changed thelives of its customers.Possibly that is because none of this ‘innovation’ was relevant to their lives and the standard of livingof the poor. For the rural or urban poor a change of standard of living comes from more improvementin the basic necessities of life – sanitation, clean water, healthcare, education, energy and ofcoursecertain food and consumer products. And even doubling of income doesn’t necessarily translate into better access to safe drinking water, sanitation, better healthcare or any better standard of living.In fact, studies have shown that the urban poor often end paying a far larger premium for basicutilities and necessities than the affluent in the city. While people living in apartments in Mumbai donot pay for water, the poor in the slums of Dharavi in Mumbai pay a price for it. The price of milk, riceor even electricity is higher within slums than it is outside. To access hygienic sanitation and dignity, afamily of five has to shell out a minimum of Rs 300 a month at the community toilet. That’s 10% of theearning for a $2 a day earner. While it is apparent that the poor are willing to pay for each of these, they end up paying a far higheramount that people outside the slums pay for. Even if the $2 a day earner doubles his or her earningand starts earning $ 4 a day, it doesn’t mean that he or she can set up a clean toilet in her house, or buy a water purifier or afford preventive healthcare. For that he or she has to earn almost five times ormore. The reason for this is the lack of an efficient market within the slum areas. Seldom do the poorfind relevant products and services that have been developed with an understanding of their needsand available at a price that they can afford.However, things are changing and one can notice the emergence of a new wave of entrepreneurs whoare building businesses to tap into this gap in the society. They are the social entrepreneurs.
The Social Entrepreneurs
Social entrepreneurs combine technology with market-driven, innovative distribution strategies andsmart financing options to drive innovation in products and services that are relevant and affordablefor the people at the bottom of the pyramid. Here are some examples.D.Light Designis taking advantage of the advances in light emitting diode (LED) technology to
 
provide portable lights that are both AC-rechargeable and solar-rechargeable, and can provide up to
 
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40 hours of light on a full charge. What’s more, it even has a socket to charge mobile phones as well.For families without access to electricity or very limited access, owning these lights mean that thechild in the family can study longer or women or men in the family can work longer in their houses.D.Light is using an incentive-based, market-led distribution strategy that aims to reach out these $10lights and improve the lives of 10 million families in Tanzania and India by 2010. And they haveanother 1.4 billion people to reach out to who do not have access to electricity.Japanese firm Sumitomo has tied up with a number of social enterprises in East Africa and Asia tomanufacture mosquito bed nets made from special polymers impregnated with a long-lastinginsecticide. These bed nets are effective for up to five years instead of the usual six months and do notrequire any re-treatment. Thus with use even if the nets tear-off, they remain effective in malaria-prevention. In Africa, where a million people die every year from malaria, one of Sumitomo’s partnercompanies, Tanzania-based A to Z Textilesis aiming to decrease the cost of production of these netsfrom $7 to $5 by acquiring massive scale in production and distribution.This autumn in Bangladesh and Kenya, slum dwellers will have access to thePeepoobags that are
 
single-use toilet bag that turn human waste into fertilizer. It doesn’t require water, is odour-free andsafe for burial. The Swedish manufacturers expect that with scale they will be able to sell these foraround Rs 2 a piece. At probably an even lower price, this product can change the lifestyle of 2.6 billion people who do not have access to a toilet. What remains common across all these social enterprises is that they are building and distributingproducts and services that can change the standard of living of the people at the bottom of thepyramid and are delivering them at a price point that is affordable to them. They are customized forthis segment and do not aim to target higher income groups. They are aiming for massive scale todrive down costs and improve accessibility. And in each of these cases they are tapping into a new generation of capital that is funding such enterprises.If it is a question of scale, isn’t it easier for large multilateral conglomerates like Unilever, Tatas orPfizer to develop such products? Not necessarily. The cost structures and overheads of largecorporates are geared to develop products for the more affluent. ‘Reverse Innovation’, a phrase andthe idea that has become popular since GE Chairman, Jeffrey Immelt’s article inHarvard BusinessReview , will focus on more evolved products, while social entrepreneurs focus on the basic necessitiesof the poor.

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