THE BUSINESS

SOLUTION
TO POVERTY
Designing Products and Services
for Three Billion New Customers

BOP & RURAL MARKETING BOOK PRESENTATION PAUL POLAK

GROUP 3 MAL WARWICK
CONTEXT OF THE BOOK
• Estimated 2.7 billion of world population living on $2/day or less – Enormous market
opportunity; untapped
• International Finance Corporation & World Resources Institute estimates “Bottom of the
Pyramid” people’s collective purchasing power at $5 trillion
• Greatest Potential for reducing poverty in today’s global environment lies in the power
of business
• Economies of scale most important in the market for the bottom billions; businesses to
thrive if services and products meets the basic needs of quality, reliability and price
• Companies wanting to extend their reach into emerging markets must aim to serve the
$2/day customers (termed “tomorrow’s middle class”) and later move up the pyramid –
top down approach to the problem never successful
• The book envisions businesses with at least 100 million BOP customers, thus addressing
one of the central issues in economic development: Scale – ability of businesses to
gather substantial capital & talent to manage operations of considerable scope
Why should businesses be interested in fighting poverty?
Poverty – Humankind’s greatest shame
• Horrendous waste of talent – if freed from shackles of poverty, imagine the number of
scientists, doctors, teachers, innovators, community leaders that might emerge
• End of wide-scale poverty – lower level of conflict in world , ethnic hatred, communal
violence, religious extremism
• Poverty, root cause: over farming, deforestation for fuel, defecation in freshwater
bodies, burning of carbon-intensive fuels for cooking/ heating, lack of education, high
infant mortality, overpopulation, dwindling natural resource base
• Powerful case for ending poverty & also compelling for business for 5 reasons:
Huge market opportunity – 2.7 billion Saturated existing markets – low growth rates

Disruption & changes – no businesses can overlook

new market opportunities
Corporations moving down market, stealing Access to scarce resources - resources more
competitors market share and making profits – accessible to BOP people; create new market and
Hyundai, Unilever, Mahindra tractors introduce sustainable methods to use them
 Consumers in markets where poverty is prevalent don’t
behave the same way that consumers do in First World
markets.

Greatest mistake committed by businesses is that they made

adjustments to their existing products and services,
eliminated features, used cheap materials thus lowering
quality, rebranded them as cheap, cut costs, only to discover
that the offerings failed to meet the needs, expectations and
aspirations of the poor.
 Eight Keys to Ending Poverty
Listening Transforming the market
See poor people as customers. Seek to purposefully listen Goal – create transformative new market which will set
and understand the context of their lives – their needs, off a chain reaction, change economic behaviour, create
wants, fears and aspirations huge number of jobs and transform villages
Transform
Listening
the market

Scale Ruthless Affordability

Design for scale from beginning. Begin with a pilot Design and implement very affordable technologies
project in 50 villages. With success, roll out to about and supremely efficient business processes offering
50 new villages per month and then increase. Learn as Ruthless prices no just 30-50% less than First World prices but
you go. Design a sustainable an profitable global 90%
Scale affordabili
enterprise and not just a product or service
Zero-based ty
design
(Develop offers
from scratch/
position of
assumed
Private Capital ignorance) Last-mile
Private Last-mile Distribution
Design fir generous profit margin so that private sector Distributio
Capital Design for radical decentralization that incorporates
market forces are energized – play major role in n
last mile distribution, employing local people at
expansion by drawing pool of private capital. Also cost
wages in a marketing, sales and distribution network
of doing business among very poor demands high
that can reach even the most remotest rural people
contribution per transaction – embrace high margins
for sustainability
Aspiration
Aspirational Branding Jugaad
al
Even for $2/day market, without aspirational branding Innovation Jugaad Innovation
Branding
that generates in buyer’s minds, an appreciation of most Hindi term “Jugaad” connotes improvisation, working
widely appreciated attributes and benefits; Coca Cola is with what you have and paying attention to continuous
just a slavered, fizzy drink. Branding convinces us that testing and development.
paying a premium will make our lives more rewarding
5 reasons why Poor are different from you and me
• The book takes us through the lives of 4 potential BOP customers residing in Bahrimpur, Odisha who live at wages
<$2/day: Sunil Mahapatra (12,500/yr, treadle pump- income increased by 7,000), Neelam Nanovati (16,900/year),
Deepali Shrestra (harijan – important leadership role), Badu Bahera (entrepreneur, owns kirana store, supplies water
and milk) who are engaged in different activities but have one central problem – Poverty
• Spring Health – An early stage start-up providing safe drinking water at low price to the villagers throughout te region
– follows a model that the book aspires will tackle poverty
The Differences
The poor just get by – think only about The poor receive little news– comes only
survival from one day to other without through word of mouth, occasionally by ratio,
luxuries influenced by the panchayat
The poor rarely travel– live and die in a single
place, travel only to relative’s places nearby
and markets, isolated, unaware
The poor have very few choices– No access to The poor live with misfortunes never far
education, health care, food; vulnerable to away– uncertain lives, affected by political
whatever comes to their village, inferior conflict, disasters, threats of wars the most
But do you know what poverty is?
Indian Central Govt: People living at income less than Rs.
28.65/ day/ person in urban areas; less than Rs. 22.42 in
rural areas
China: less than $363 (RMB 2300) – poverty line
World Bank: No specific definition in terms of purchasing
power, but $2-day-person is the benchmark followed
33% say they don’t have money for food; 38% poor living
standards; 39% say are in difficulty – Gallup’s world poll
An estimated of 925 million people go to bed hungry, >
1/3rd of 2.7 billion BOP people
Not possible to put a precise figure on no. of people living
below subsistence level. <$1-day – “Extreme Poverty”- WB

Global South (as defined in book) typically experience un- or underemployment; encounter
barriers to opportunity based on gender, race, ethnicity, religion; lack some or all basic
human needs including clean water, nutrition, shelter, healthcare, education, clothing; lack
hope and self esteem
The are 3 agents who have the power to end poverty
Governments
(Public Sector)
Upgrading the legal system, expanding
physical infra, improving business
conditions, make police and courts
more accountable, control over natural
resources
Prevalence of poverty = failure of
government
Antipoverty
Agents
Citizen Sector
(NGOs, CBOs,
Trusts)
Rather than furnishing human services
that govts fail to provide, it is more
sensible for NGOs and CBOs to devote
more time organizing for change in govt
policies and practices, highlight errors in
govt policies affecting BOP, police
predatory business activities, operate
market based programs to address BOP
challenges.
Cases: Partners in Health, Microcredit
finance institutions, A Glimmer of Hope
Private
Businesses
Profitable businesses have access to
substantial capital, talent and capable of
reaching scale. Less susceptible to
political pressure.
Poor people poor because they lack
money. Most direct solution – provide
jobs. Indirect solution – enable poor t
save money by providing services and
products that replace expensive ones.
Eg. Access to clean water – health
improves - more employable – more
savings on hospital bills – better food
and nutrition
How foreign aid works or doesn’t work
• UN foreign Aid - $ 5 billion as of 2013; World Economy - $ 65 trillion; Meagre Aid (<1%) – Not enough to lift people
out of poverty
• OECD (Organization for Economic Co-operation and Development) contribution - $133.5 billion in overseas
development ($1 billion/developing country)
• Traditional Methods Failing
• Instead of working with poor, enabling them to earn more money, nations only seek to change economic
environment by growing GDP, building infra, transferring massive foreign aid, exporting goods and services –
only rich benefit from these
• Community development – CBOs, NGOs, INGOs – face problems in fundraising – very meagre impact
• Microcredit – High interest rates, poor avail credit facilities not to start new ventures but to feed themselves –
increasing burden and leading to suicides
• Social Enterprise – making people incapable by providing freebies rather than promoting employment and
enabling them to earn more
• What Works?
• Healthcare: HIV/AIDS, Smallpox, Polio – either eradicated or under control now. Malaria, Diarrhoea, TB still a
challenge. WHO and aid from rich countries helping the sector. Bill and Melina Gates foundation helping
healthcare in a major way
• Education: Worldwide literacy rates (1950: 56% to 82%); Developing countries (47% to 76%, Sub Saharan Africa
(28% to 60%). “Net primary school enrolment” now at 90% worldwide – but faces one big problem –
Absenteeism of teachers due to low salaries and benefits, UNICEF & UNCF, Numerous NGOs working hard
 Zero-Based Design and The Bottom Billions
What to do before you launch your business-
Poor people have to invest their
Key Takeaways- own time and money to move out
of poverty
Zero based design requires that you begin from scratch,
without preconceptions or existing models to guide you,
beginning with your goal in mind- a global enterprise
that will attract at least 100 million customers and $10
billion in annual sales within a decade, operating in a
way that’s calculated to transform the lives of all your
customers.
The don’t bother trilogy: If you
don’t understand the problem 1.To meet the biggest challenge in
you’ve set out from your customers’ development- scale- your enterprise
perspective, if your product or
service wont dramatically increase
must aim to transform the lives of 5
million customers within 5 years and
their income, and if you cant sell 100 million during the first 10
100 million of them, dint bother
Begin at the end with your goal
Consider how your business can
transform the market
1.Design for scale
1.Design for generous profit
margin
1.Pursue ruthless affordability
1.Design for last mile
distribution
1.Incorporate aspiration
branding
1.The corporation of future
 The Ruthless Pursuit of Affordability
Zero-Based Design in Practice:
Low-Cost Drip Irrigation Case Study
In designing products that will open up new markets among the world’s
poor, ruthless affordability is the single most important objective.
Identify the heavy hitters
Paul and his colleagues began by defining key contributors to the cost and designing around them. These features included the
expensive filter, the thickness of the tubing wall, and the high cost emitters. They designed acceptable alternatives to each one
Put your product on a radical weight-loss diet
To reduce the weight of the system and thus further lower the cost, they used thin-walled pipes

Make redundancy redundant

They used enough pipes with just enough wall thickness to them from bursting

Avoid bells and whistles

Since the farmers they consulted weren’t concerned about the 10% reduction in efficiency, they settled for 80-85% rather than the 95%
offered by expensive drip-irrigation systems
Move forward by designing backwards
Returning to the concept incorporated in the original Israeli drip-irrigation systems, they drilled simple holes in the pipe instead of buying
more expensive high-tech emitters Contd.
 The Ruthless Pursuit of Affordability
Zero-Based Design in Practice:
Low-Cost Drip Irrigation Case Study
Design for extreme affordability rarely comes easily. Making anything both workable
and cheap may take years to careful, incremental adaptation and revision
Make it as infinitely expandable as a LEGO set
To avoid requiring farmers to purchase larger systems whenever they wanted to expand their use of drip-irrigation, IDE employed a
modular approach permitting customers to grow their systems simply and cheaply.
Use locally available materials
In Nepal, the tubing originally chosen was cheap, readily available HDPE pipe. In India, LLDPE pipe was easier to obtain. Only later, after
considerable field experience, did they switch from HDPE to PVC in Nepal
Streamline the manufacturing process
The cheapest plastic-tube-fabrication unit to produce the thin walled pipes, called lateral lines, which distribute water to each drip point,
costs $5,000 in India. It’s easy to operate, and the fittings and simple filters can be purchased from existing suppliers. All the components
are easy to assemble into drip irrigation system packages in decentralized assembly shops
Interchangeability lower costs
Once the drip irrigation system was fully tested and its features tweaked in each country, the specifications of each component were
standardized, and those specs were required of every shop that manufactured any part of the system in each country
Durability doesn’t last
IDE produced systems designed to last for two years, five years, and seven years by employing pipes with different wall thickness- instead
of the conventional(and more expensive) 7 year lifespan
Design for the market Attractive

Effective
Designing a branding and marketing strategy and having a top notch supply
chain is only the three quarters of the design challenge- 25% is radically
Design
transformative and affordable technology
Appropriate
Affordable
Technology

Keeping
customer in
perspective
lnkjcnj Ten step process for designing for the market
1. Customer derived price-point
2. Select acceptable price/effectiveness trade-off
3. Create a proof-of-concept prototype
4. Use test customers feedback to improve
5. Last-mile delivery infrastructure
6. Aspirational branding and marketing strategy
7. Use local media
8. Conduct field test
9. Scale-up systematically
10. Keep in mind the global implication of branding
Marketing Treadle Pump By IDE

Calendars, leaflets, posters

Drama, Rickshaw procession

Feature length movies, Troubadours

Giving customer chance to touch and feel the product

The integral role of local dealers

Influencing policy makers

Working through NGOs

Zero Based Design

• Markets can be merciless: MIT Professor. Amy Smiths immaculate design

(“Fuel from the fields”) for converting waste to charcoal failed to increase
income of villages in Haiti as nobody was willing to buy it- there was no
market
• Right solution to wrong market are bound to fail
• Paths to success:
• Change technology to increase output
• Change public perception
• Change the marketing
Design for Scale
Not all ideas are scalable

• Pick a scalable problem: Pick a problem that touches lives of billion people
• Plan for scale from the very beginning
• Use market- driven approaches to reach scale
• The idea and plan should be culturally independent
• Elements of scale:
• A powerful idea
• Escalating capital investment
• Skilled management
• Intensive SCM
• World class branding and marketing
• Efficient recruitment and training
• Strategic pilot and rollout waves
Design for delivery - the last 500 feet
• For anything, be it drip irrigation, kits, oral rehydration salts, penicillin, disaster relief food, moving goods
and services over the last 500 feet represents the biggest challenge
• Going the Distance
• Local Sales representatives – putting your own staff can be costly; rather employ village people as
agents who can profitably sell goods and services to poor customers – more affordable/ generates
employment
• Local Distributorship – India has about 11 shop outlets for 1000 people – most items on display in these
stores have no commercial distribution – shopkeeper gets stuff from nearby markets 2-3 times/week
and sell in his shop – more than 20 million small shops waiting for viable business models for
distribution – huge opportunity
• Village based aggregation centers – Difficult for volume buyer to collect goods from many scattered
one-acre farms – Much easier and cost efficient if there are aggregation centers where aggregated
goods can be collected by sellers.
• Profitable transport enterprises – All elements of efficient and profitable transport systems for poor
villages are already available – can have considerable profit – but what’s missing is a global network of
village based transport enterprises harnessing the available and affordable transport devices to move
goods in and out of remote villages profitably
Building a mission driven global business

• To build an enterprise with global scope requires vision, leadership, and “inclusive”
management
• Firms make money, retain workers, reduce environmental damage, foster innovation
and present opportunities to international investors.
• Decentralization is one of the keys to building a large, transnational business capable
of making headway against global poverty while turning a generous profit.
• “Our dream is to spark the creation of a new generation of global businesses
dedicated to transforming the lives of these customers, generating hundreds of
billions of dollars in sales – and earning profits substantial enough to attract
commercial investors.”
Opportunities Ahead – in Practice – Examples of 4 New Businesses
Spring Health – Safe drinking water for rural areas
• Applied design-thinking to bring clean water
• Supply safe, clean drinking water to underserved
rural communities
• Make the model sustainable in the long run
• Affects communities as a whole to cover scale
• Spreading awareness & educating on why clean
water is required
Affordable Village Solar – Cheap lighting & tools
• Solar electricity has low recurring costs &
usually only requires a one-time setup
• PV cells to power irrigation & households
• Replace diesel pumps to reduce emissions &
reduce overall impact on environment
• Scale will improve efficiency & reduce costs,
making the company sustainable in the long run
BioCoal from the Village – Agri-waste into biofuel
• Torrefaction process to create coal substitute
• Lowering carbon emissions
• Leads to a balanced carbon cycle similar to
nature itself
• Decentralized biomass conversion company
• Support & collaboration of global corporations
• Create a profitable & scalable business
Success International –Rural education
• Problem of absence in both students & teachers
in rural schools – taken from granted
• Low cost, high benefit model for education
• Network of private schools making use of
advanced communication technologies
• Moves away from the usual franchise based
model of Pvt. schools, towards standardization
 Key Takeaways
• Harness the power of business to foster social changes on a large scale
• Get rid of conventional approaches to eradicating poverty
• Best way to combat poverty – Help poor people earn money
• No development initiative has reached a significant scale in improving livelihoods
• Poor people must invest their own time & money to move out of poverty
• Tackle problems only after fully understanding poor people’s point of view
• Scale is the biggest challenge in development – must be enhanced exponentially
• Development initiatives must be designed from scratch and not derived
• Ruthless affordability is the most important objective in designing products to open up new markets
• Designing for this requires adaptation and revision over the years
• Designing a branding & marketing strategy, and a last mile supply chain makes up most of the design
challenge
• To achieve proper scale, the problem cover the scale of a billion people
• Product of service designed should be culturally independent
• Human resources employed must have relevant knowledge and experience of poor people’s problems
• Proper optimization and error-minimization is required to manufacture at such a large scale
• High product delivery costs hinder the achievement of scale
• Decentralization is the key to building a large & transnational business in this domain
• Stake-holder centered management is necessary, with lowest possible environmental impact
• Optimize the most valuable assets – people & intellectual property
THANK YOU