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Inaugural Issue Complimentary Copy

Social Enterprise. Ideas. People.

beyond profit

May/June 2009

Impact Investing

Bold Models to Drive Development at Scale

Shaping For-Profit Enterprises Through Disruptive Innovation Can We Teach Social Entrepreneurship? 10 New Ideas that Could Change the World

www.beyondprofitmag.com

An Intellecap Publication


SOCIAL CAPITAL MEDIA PRESENTS | THE SECOND ANNUAL

SOCIAL CAPITAL MARKETS CONFERENCE

SOCAP09 Photo by Aaron Maret

SEPTEMBER 1ST | 2ND | 3RD | FORT MASON CENTER | SAN FRANCISCO | CALIFORNIA THE WORLD HAS CHANGED: The economy, perceptions of risk (financial and profession), the definition of market rate and the U.S. administration. SOCAP09 is about making sense of the times and celebrating the renewed will and determination of the pioneers of social change. Join us at SOCAP09 as we demonstrate how social capital is in the eye of weathering the economic storm. In times of extreme scarcity arise intense creativity and impatience. Human capital takes on new importance as entrepreneurs and funders learn how to do more with less. We will bring together a unique mix of the world’s top social innovators – investors, donors, entrepreneurs, and thought-leaders... catalysts of change across the globe. Come to SOCAP09 to learn how to create effective partnerships, learn from best practices and tap new assets.

WHAT TO EXPECT AT SOCAP09 SOCAP09 will have two days of deep content dives followed by a third day of participant led sessions. Join us as we explore: » The Obama Administration’s focus on social innovation and how to gain access to opportunities for partnership » Social venture funds’ prominent role in the new economy » Creating common ground and effective collaboration between the private sector and development agencies » The social capital movement across the globe » The “Green New Deal” – Opportunities for investing in green infrastructure and urban green job creation » The rise and future effects of infrastructure groups and intermediaries to move organizations to scale » Fair Trade’s growth and segue into the mainstream as a demonstration of consumer behavioral change » Progressive media that moves people to action » Mobile technology platforms worthy of investment » Capital working together: Exploring effective partnerships & demonstrating examples of combining resources in scarcity

CONNECTION CONCIERGE PROGRAM Launching in early summer, the connection concierge program will be a full content management system allowing SOCAP09 attendees to enter their information into the database and search by multiple criteria to connect with fellow attendees before, during and after the conference. At last fall’s sold-out SOCAP08, we convened more than 630 social investors, philanthropists, entrepreneurs and development agencies from 6 continents and 26 countries. Now we’re back with SOCAP09 to take the next steps. Photos by Jerry Michalski

FOR MORE INFORMATION AND TO REGISTER VISIT WWW.SOCIALCAPITALMARKETS.NET

|

SEE YOU AT SOCAP09


Proudly presents the Inaugural Issue of Beyond Profit

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A global magazine that presents Ideas and People from the Social Enterprise sector. Through Beyond Profit, Intellecap supports new approaches and models, and gives unique insights into a market that has the potential to draw millions of people out of poverty.

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Intellecap is a globally recognized social investment advisory firm that catalyzes the growth of for-profit social businesses and creates an ecosystem that nurtures social entrepreneurship worldwide.

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may/june 2009

CONTENTS 16

SECTIONS: Radar

10

Outlook

12

Upfront

13

Companies Doing Good

14

Deal Zone

15

10 Ways

24

IMPACT INVESTING Harnessing Capital Markets to Drive Development at Scale By Antony BuggLevine

22 INVESTMENT Is Recession a Good Time to Invest in Social Enterprises? By Linda Rottenberg

28 ENTREPRENEURSHIP

26

10 New Ideas that Could Change the World Sankalp entrepreneurs talk about the evolution of their businesses

INTERVIEW Pamela Hartigan: A Good Time to be Unreasonable


beyond profit

38

SECTIONS:

INNOVATION The Questions at the Bottom of the Pyramid Real Challenges of Global Intrapreneurs By Chris White

43 TORCH BEARERS Can You Teach Social Entrepreneurship?

The Father of Social Entrepreneurship as an academic subject, Greg Dees, explains

34

INNOVATION Shaping For-Profit Enterprises Through Disruptive Innovation By Hari Nair

54 REFLECTIONS How I Became A Social Entrepreneur By Seth McSwain Cochran

Media Hub

46

Guru

48

Club Hopping

50

Juxtapose

51

Clean & Green

52


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Want to stay connected with the Beyond Profit team in between issues? Would you like to interact with other readers, contributors and our staff? We’d like to invite you, dear reader, to join us on Facebook, Twitter and LinkedIn and take part in the conversation. Visit our Page and become a Fan to interact with other readers and share your thoughts on the businesses, ideas and people from the sector. Link: http://www.beyondprofitmag.com/facebook/ or just search for Beyond Profit on Facebook.

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... and don’t forget to visit our website – www.BeyondProfitMag.com – for subscription information and the latest insights and reports from the ground. 6

beyond profit may/june 2009


FROM THE EDITOR Welcome to the inaugural issue of Beyond Profit! Despite the fact that the world economy and its media hierarchy seem to be crumbling, against all odds you hold in your hands, dear reader, a new magazine, the start of a new social business!

Cover Photograph Leonardo Aguiar Cover & Page Design Chronosphere Disclaimer The views and opinions expressed by the authors are not necessarily those of Beyond Profit magazine, its Staff, its Editor, or of Intellecap and they assume no responsibility for them. For editorial, contributions, subscriptions, advertisements and other queries, please contact: Beyond Profit c/o Intellectual Capital Advisory Services Pvt. Ltd (Intellecap) 512 Palm Spring, Link Road, Malad (W), Mumbai 400064 Tel: +91-22-4035-9222 Printed and published by Intellectual Capital Advisory Services Pvt. Ltd. Printed at Bell Graphics, Lower Parel, Mumbai © Intellectual Capital Advisory Services Pvt. Ltd. All rights reserved through the world. reproduction in any manner without permission is prohibited. We would love to hear how we can give you what you want…please write to us at team@beyondprofitmag.com

Why, you ask? Why start a new business—a new publication, no less—now? We believe that our world could use more good news: Companies doing right. People who put community above self. Investors that look beyond a quick financial return. We believe that people and businesses that are looking beyond profit—at their impact on society, and their ability to change systems, processes and communities—are worth knowing about. I recently started reading a book called Deep Economy by Bill McKibben. In it, McKibben, an environmentalist and writer, observes that “more” is no longer synonymous with “better.” For way too long, he writes, we have assumed that the growth of economies, and the pursuit of our own interests in a market society would make us richer. But they haven’t. Instead, too many of us have big houses, eat avocados out of season, and drive SUVs. Meanwhile our climate deteriorates, the world’s bright young minds languish, and poverty rises. Social enterprise was until recently thought of as passing trend, but now we recognize that we need it, it is here to stay. To quote Jose Maria Figueres, the former president of Costa Rica, whom I met at the Skoll Forum last month: “We have been living on values based on the notion that ‘if you consume, you will be happy, and the more you consume, the happier you’ll be.’ Development does not mean getting six million people to consume as we do.” Figueres is right. We can’t continue down this tired path. We must push ourselves to find new models and methods—not to create More, but to live Better, both for ourselves and for those around us. We are leaving old style “none for you, two for me” thinking, and are entering a new zeitgeist that should spur us to change how we live. But we can only do that if we change the way we think about how we want to live. It’s time that we start thinking beyond profit—about harnessing markets for large-scale sustainable change, and using business to shape lives in a positive way, because philanthropy can’t do it alone. You’ll find plenty of examples of beyond profit thinking within this issue: a franchise that can turn low-income men and women into entrepreneurs, a bookstore in Cairo that is creating a culture of literacy, an Indian courier company that employs the deaf. We hope that through Beyond Profit, we will not only spread the good news, but will also spur innovation. We hope to be a conduit, helping investors find growing businesses, enabling entrepreneurs to surmount their challenges, and inciting you to start thinking beyond profit. Enjoy the issue! Lindsay Clinton

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THE TEAM Lindsay Clinton, Managing Editor Lindsay directs the strategy, content and brand development of Intellecap’s social business publications. Lindsay was previously marketing and communications director for The White House Project, a NYC-based organisation focussed on preparing and empowering women for political and cooperate leadership. She also worked for two years at a leading international women’s magazine. Aparajita Agrawal, Knowledge Advisory Aparajita joined Intellecap in 2004 as one of the Intellecap’s first employees. Today she leads the Knowledge Advisory Team and spearheads strategic communication advisory and information management, including conceptualizing and managing Intellecap’s knowledge portals and sector-wide initiatives such as Srijan and Sankalp. Ranjit Koshi, Partnerships Ranjit has helped develop Intellecap’s flagship publication Microfinance Insights, focusing on content planning, editing, writing and design execution. Currently, Ranjit works on building partnerships Microfinance Insights and Beyond Profit. Vibha Mehta, Advertising Vibha manages advertising outreach for Intellecap’s print and online publications. Prior to joining Intellecap, Vibha worked at the Institute of Directors, New Delhi as the Director-Outreach. Asako Matsukawa, Research Asako is a new member of Intellecap’s Knowledge Advisory team, working on Microfinance Insights and Beyond Profit. Prior to joining Intellecap, she worked for the knowledge management division in BASIX. Her research interest ranges from social impact, labor condition to gender equality. Adrienne Villani, Content Development Adrienne recently joined Intellecap and works on branding and communications, as well as contributes ideas and content to Beyond Profit. Previously, she worked in care and support roles for HIV+ children in Delhi. Sujatha Muthayya, Content Development As part of the Knowledge Advisory team, Sujatha Muthayya has helped create the Sankalp Social Enterprise and Investment Forum. Prior to joining Intellecap, Sujatha has worked on law liberty livelihood policy initiatives with the Center for Civil Society in New Delhi, taught political Science at Madras Christian College and most recently facilitated incubation at The Rural Technology and Business Incubator at the Indian Institute of Technology-Madras. Special thanks to Boris Mordkovich, and Rashmi Pillai for their contributions to our pilot issue.

Why Beyond Profit? At a time when traditional businesses and their leaders are failing, the world is seeking new models to bring innovative solutions to solve issues related to poverty, the environment, education, and health. Social enterprises, businesses that have a double or triple bottom line, change societies and systems, invent new approaches, and create sustainable solutions that generate social development. Beyond Profit, a new social enterprise magazine, presents the stories, challenges, viewpoints, and best practices of social entrepreneurs, their enterprises, and those that invest in them from around the world. We cover the spectrum of social ventures from not-for-profit to for-profit, with emphasis on the latter. We offer geographically diverse coverage, with a focus on activities in emerging and developing markets.

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beyond profit may/june 2009


CONTRIBUTORS Meet a few of our writers and panelists in this issue.

Antony Bugg-Levine A former communications director at the South African Human Rights Commission, Antony Bugg-Levine now leads the Rockefeller Foundation’s Initiative on Harnessing the Power of Impact Investing. Prior to joining the Foundation, he was Country Director of TechnoServe, Kenya where he lead the design and implementation of business solutions to rural poverty. He is also an adjunct professor at Columbia Business School where he teaches ‘Business Innovations in International Development.’ Learn more about Impact Investing from his piece “Impact Investing: Harnessing Capital Markets to Drive Development at Scale,” on page 16.

Shari Berenbach As CEO of Calvert Foundation, Shari Berenbach has raised over US$170 million from investors to help underserved communities around the world. With over 25 years of experience, Shari has developed innovative financial instruments and partnerships critical to helping people that traditional banks fail to serve. Prior to joining Calvert Foundation, Shari led projects for the International Finance Corporation that channeled more than $250 million to developing countries.

John Elkington John Elkington is the Founding Partner & Director at Volans, a global company that works to scale innovative solutions to financial, social and environmental challenges. Elkington is a world authority on corporate responsibility and sustainable development. BusinessWeek has described him as “a dean of the corporate responsibility movement for three decades.” In 2008, The Evening Standard named John among the “1000 Most Influential People” in London, describing him as “a true green business guru,” and as “an evangelist for corporate social and environmental responsibility long before it was fashionable.”

Harish Hande Dr. Hande is an engineer and a renewable energy entrepreneur with extensive grassroots experience in meeting the energy requirements of rural households. He is the co-founder and MD of SELCO-INDIA, a firm that has brought solar lighting systems to over 95,000 households in rural India. Hande was named “Social Entrepreneur of the Year 2007” by the Schwab Foundation for Social Entrepreneurship, and in 2008 was named by India Today, as one of the 50 pioneers of change in India.

www.beyondprofitmag.com

Hari Nair A Partner at Innosight Ventures, Hari Nair oversees the incubation and early stage evolution of pro-poor micro-enterprises, with a primary focus on India and emerging markets. Since late 2006, Nair has worked on launching Innosight’s activities in India, working with a strong network of believers and practitioners of Disruptive Innovation (read more on page 34). He currently drives Innosight’s sociallyfocused efforts, and continues to be recognized as an expert in consumer modeling, early stage incubation and open innovation. 9


RADAR Bioenergy Holds the Promise for Rural Development in Developing Countries April 8, 2009 A new report by United Nation’s Food and Agriculture Organization (FAO) and the Department for International Development (DFID) that examined projects in 12 countries around the world suggests that bioenergy production can be a major livelihood source for rural communities in poor countries. Despite the bioenergy debate being centered around liquid fuels used for transport, about 80% of bioenergy production involves the use of sources like wood, for household cooking and heating in the world’s poorest areas. The study reveals that in the 15 start-up bioenergy projects in 12 countries in Latin America, Africa and Asia, the local community benefited from improved energy access both for domestic and business use.

New Business Incubator for Social Entrepreneurs by GoodCompany Ventures

April 7, 2009 To support social entrepreneurs with innovative solutions to social problems and unmet social needs, GoodCompany Ventures, a Philadelphia-based organization comprising social finance investors and start-up experts, launched a new business incubator. The program is aimed at providing these entrepreneurs with mentoring and access to a network of capital sources. A venture fair will mark the end of the program where enterprises will get an opportunity to pitch their ideas to investors. The 2009 program, developed jointly by Resources for Human Development, Inc. (RHD), and Murex Investments, will begin in June and will see a selection of eight to twelve candidates. Applications are being accepted until May 15. Visit www.GoodCompanyVentures.org. 10

Latin American Social Entrepreneurs of the Year 2009 Awarded in Brazel

April 16, 2009 The Schwab Foundation announced the new selection of leading Latin American Social Entrepreneurs 2009 at the Opening Plenary of the World Economic Forum on Latin America, in the presence of President Lula of Brazil and President Uribe of Colombia. One Brazilian, one Chilean and two Colombians were recognized for their innovative models and path-breaking achievements in land rights, education and rainforest conservation. The Schwab Foundation for Social Entrepreneurship, an affiliate organization of the World Economic Forum, conducts the search and selection of social entrepreneurs in Latin America, Africa, the Middle East, India and South-East Asia. It selects 3-5 social entrepreneurs per year from each region. Selected social entrepreneurs are connected to the world’s business, political and media leaders through the events and initiatives of the World Economic Forum.

School for Social Entrepreneurs in Australia

April 8, 2009 The first School for Social Entrepreneurs (SSE) was started in Auburn, Australia, to provide skills development opportunities for people who are developing creative solutions to social problems. The School’s program, replicated from a successful UK model, aims at identifying social entrepreneurs and supporting them to establish sustainable enterprises. The inaugural program in Sydney will support 18 local social entrepreneurs, transforming their ideas for social change into reality. The program will be a mix of weekly group study sessions, oneto-one tutorials, mentoring sessions, project visits and a three-day residential school.

Monitor Group Releases Report: Emerging Markets, Emerging Models

March 26, 2009 Monitor Group, a leading advisory and consulting firm, released “Emerging Markets, Emerging Models,” a report analyzing the actual behaviors, economics, and business models of successful “market-based solutions”—financiallysustainable enterprises that address challenges of global poverty. Monitor conducted more than 35 field investigations, primarily in India, supplemented with research covering 19 countries across the world, but focused the research on India, which offers an advanced laboratory of social enterprise approached. Conclusions were based on more than 600 in-person interviews with low-income customers and small suppliers, and detailed interviews with – and research on – over 270 social enterprises in India. Monitor Group will also be holding a two day conference in Delhi, India May 18 - 19 to specifically discuss Indian-based findings of the report. Those interested in attending will be able to register starting on April 6 at www.mim.monitor.com.

Sonal Shah Heads Obama’s Office of Social Innovation

April 17, 2009 Sonal Shah, who formerly led Google Global Development Initiatives, the philanthropic arm of Google.com, has been appointed head of the new Office of Social Innovation and Civic Participation in the White House, according to India-West, an online news source. The White House had not officially confirmed the news as this magazine went to print, nor had they updated their website to describe exactly what the office will do.

beyond profit may/june 2009


RADAR Climate Entrepreneurs Key to Low Carbon Future

March 30, 2009 New research by World Wildlife Fund (WWF) shows that the use of some of the innovative technologies available today can result in carbon emission cuts of hundreds of millions of tons. The two new reports by WWF, one focusing on Swedish climate entrepreneurs and the other focusing on Indian companies “with solutions that the world needs,” draw on the 17 case studies from developed economies and emerging markets to highlight how the power of innovation can counter the challenge of climate change. For example, new ways of bringing natural light into large buildings, developed eight years ago by a Swedish construction consultant can save an estimated 220 million tons of CO2 equivalent in emissions per year. Find additional examples of innovating thinking online at http://assets.wwfindia.org.

20 Global Entrepreneurs Selected for the Summer “Incubator” Program at Santa Clara University

April 7, 2009 The seventh annual Global Social Benefit Incubator (GSBI) program at Santa Clara University that received over 350 applications worked with Silicon Valley veteran financiers, marketers, and executives as well as Santa Clara University faculty to help promising but resource-starved entrepreneurs with key business concepts, preparing a cohesive business plan, generating ideas for funding sources and investors, and finding ways to increase their impact while maintaining positive cash flow. Members of this year’s class are working on businesses to improve the self-reliance of their countries’ poorest residents, focused in four broad areas: ICT; economic development; alternative energy; and health and education.

Supporting Investments in Small Businesses in Developing Countries

March 26, 2009 A new economic development network comprising philanthropic organizations, social venture funds, foundations, business assistance providers, and international development firms to increase investment in small and growing businesses in the developing world has been launched. ANDE, part of the Aspen Institute in Washington D.C., has received financial support from the Bill & Melinda Gates Foundation, Citi Foundation, Google, The Lemelson Foundation, Omidyar Network, The Rockefeller Foundation, Shell Foundation, and Skoll Foundation. Thirty five organizations are part of this network, which marked a major step forward in addressing the disparity between investment in small and growing businesses compared to other business sectors in emerging markets.

Sundance Institute Announces Award Recipients for Social Entrepreneurship-focused Documentaries

March 26, 2009 Sundance Institute and Skoll Foundation announced the final five grant recipients of the Stories of Change: Social Entrepreneurship in Focus through Documentary initiative, a three-year partnership designed to enable the creation of new, feature-length independent documentary films that frame, examine and amplify social entrepreneurship. Stories of Change drew over 300 proposals for innovative film projects. Ten films have been chosen, with the first films likely to be completed as early as 2010.

African Entrepreneurs Develop Effective Solutions to the Problem of Sanitation

March 26, 2009 In Africa, about 62% people lack access to toilets and safe ways of disposal of human waste. Three African innovators have developed sustainable, low cost solutions to this problem. South African entrepreneur Trevor Mulaudzi has started “The Clean Shop,” to clean up filthy and unusable facilities, and educate people about the importance of keeping them clean. David Kuria of Kenya founded Ecotact, that builds freestanding bathroom facilities called “toilet malls.” Social entrepreneur Joseph Adelegan of Nigeria has devised a way to turn waste from a cattle slaughterhouse into fuel, cleaning up rivers and groundwater, reducing greenhouse gas emissions, and creating sustainable jobs in the process. These three leading social entrepreneurs and Ashoka fellows are now working together, and with several others in Africa, on similar innovative solutions.

HBS Selects its First Social Entrepreneurship Fellow

March 29, 2009 Harvard Business School announced the selection of its first-ever Social Entrepreneurship Fellow, Elizabeth M. Scharpf. Scharpf’s idea, “Sustainable Health Enterprises,” or SHE will receive $25,000 to make lowcost sanitary napkins from locallysourced materials for women in developing countries. The creation of the Social Entrepreneurship Fellowship, which will be given annually to an HBS alum, is indicative of a growing focus on social enterprise at the business school. Scharpf’s project was chosen because, in addition to addressing a specific social issue, it will create jobs in the affected community.

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OUTLOOK ATTEND SHINE09, The UnConference for Social Entrepreneurs May 15th, London, UK Come together with social entrepreneurs, and discuss your ideas, network, and debate the future of social enterprise. The event is peer-created, using a mix-and-match format, so you get the best of everything. www.amiando.com/shineunconference.html Global Forum for Business as an Agent of World Benefit June 2nd-5th, Cleveland, OH, USA Join 600 delegates as they discuss how design thinking has the power to accelerate business innovation and transform challenges into opportunities for positive change. www.globalforum2009.org

FOLLOW SocialEarth A new blog and Twitter personality, which sends out a daily email blast, short and sweet, highlighting something new in the social enterprise space. Follow at www.twitter.com/ socialearth

BE UNREASONABLE

TRACK

Second International Conference on Energy and Sustainability June 23rd–25th, Bologna, Italy The two day event will discuss issues related to sustainability in energy production, energy storage and distribution and energy management www.wessex.ac.uk

The Unreasonable Institute has developed a summer fellowship for young social entrepreneurs with bold ideas from around the world. Through an intensive application process, young social entrepreneurs apply to become Unreasonable Fellows and attend Summer Institutes.

The Social Enterprise 100 Index

2009 World Water Week August 16th–22nd, Stockholm, Sweden The Stockholm International Water Institute-hosted event will focus on the theme, “Responding to Global Challenges: Accessing Water for the Common Good.” www.worldwaterweek.org

They are also looking for mentors in the field of social entrepreneurship, investment, business, poverty eradication, engineering, health, and the civil sector. Application opens October 15, 2009 www.unreasonableinstitute.org

*SoCap 2009 September 1st-3rd, San Francisco, CA, USA Don’t miss the largest social enterprise event of the year. The 2009 SoCap conference will be bigger than before, bringing together entrepreneurs, funders, NGOs, and governments to talk about the business of doing good, and doing it well. www.socialcapitalmarkets.net * Indicates a Beyond Profit recommended event 12

It enables social businesses to monitor their growth and social impact. Launched in April in partnership with the Royal Bank of Scotland Community Bank and Social Enterprise Magazine in the UK, the RBS SE 100 Index captures vital data from key growth markets. The index will publish the top five in a new market each month and the top 100 at the end of the year. www.se100.co.uk

COMPETE Cultivating Innovation: Solutions for Rural Communities Entry Deadline: May 13, 2009. Prizes: Three top winners get $5,000 each In partnership with the Bill & Melinda Gates Foundation, Ashoka’s Changemakers is looking for innovative solutions that span the entire agricultural value chain – from seeds to sales. Three-quarters of the world’s

beyond profit may/june 2009

poorest people—the 1 billion who live on US$1 a day or less—rely on agriculture to feed themselves and their families, yet many can not grow enough to sell or even eat. If you’ve come up with strategies, tools and opportunities for small farmers to boost their productivity, increase their incomes, and build better lives for themselves and their families, enter now! www.changemakers.com/en-us/ agriculture


UPFRONT

PRIME NUMBERS: THE POWER OF SOCIAL MEDIA

$2.5 m

is the total amount that has been raised through the causes application on social networking site Facebook, by its 200,000,000 users.

631,737

is the average number of Twitter users per day, as of March 2009 (Source: BuzzGain)

92% 81% 63%

of companies polled said that social media marketing is effective in building their brand reputation. (Source: “Chart of the Week,” MarketingSherpa 2009) of would-be donors trust in social media and are willing to participate in a discussion on philanthropy if the information is highly credible and of strong quality. (Source: “Community Philanthropy 2.0 survey,” Mashable, the social media guide) of companies plan to increase their social media marketing budgets in 2009 (Source:“The ROI on Social Media Marketing,” Aberdeen Group, 2009)

BEYOND PROFIT CHALLENGE: WHAT’S YOUR EQ*? *(Environmental Quotient)

1. The EU emission norms (known as Euro I, II, III and so on) most notably do not impose mandatory emission standards of which major pollutant? 2. Where was the most recent Global Climate Change Summit held? a. Kyoto, Japan b. Bali, Indonesia c. Stockholm, Sweden d. Beijing, China 3. What is Carrotmobbing?

Credit: Les Chatfield

4. True or False? Wind turbines need winds of at least 40 kmph/25 mph for the use of the turbines to be cost effective. 5. According to the Kyoto Protocol, one unit of carbon credit measures up to... a. One metric ton of emitted carbon dioxide or other equivalent greenhouse gas b. Ten kilo ton of fossil fuel c. 2.36 tons of carbon emission per 1 million people of a country’s population

For answers, turn to page 53 www.beyondprofitmag.com

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COMPANIES DOING GOOD Tour d’Afrique: Going The Extra Mile Since 2003, every January a group of intrepid men and women begin a life-changing journey as they pedal their way through an 12,000 kilometers, 4-month cycling expedition/race through African. Considered to be the longest, most grueling bike ride in the world, it is organized by Tour d’Afrique, a company that raises awareness about cycling as an alternative means of transport. What better way to do it than to have normal people–not trained athletes–complete these rides each year? Tour d’Afrique runs several expeditions per year in Africa, South America and Asia – each ranging from 10,000 to 13,000 kilometers. Although their headquarters are in Canada, the organization aims to contribute to the people and the communities of the areas that they pass through. Much of the staff is hired locally, the organization works with a variety of local partners and suppliers, and every rider is strongly encouraged to raise funds for a charity of choicen. To date, over $700,000 has been raised by the riders and 700 bikes have been donated to health-care workers and other deserving individuals in Africa.

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Ecotact: Meeting the Need

Helping people “do their business” is David Kuria’s business. In 2007, David founded a venture called Ecotact – dedicated to bringing clean and well-maintained pay-per-use toilets to the urban population in Kenya, a region where over 50% of the people do not have access to sanitary toilets and the government hasn’t invested in public facilities in decades. David’s solution was to build “toilet malls” - quality public bathroom facilities that are staffed and cleaned by local staff. In order to make them sustainable, clients are charged a small fee, starting at US$0.05. However, the “toilet mall” also generates additional revenue, by offering side services, such as shoe shines, snacks, and newspaper sales. Each of these complexes have the capacity to serve over 1,000 users per day. For many of them, it has been a much desired and appreciated service, as it provides them with a clean and private environment that they would not have had otherwise.

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Rajlakshmi Cotton Mills: Investing in People Growing cotton is, no doubt, hard work. The industry is competitive, the margins are low, and often, companies wind up ignoring human issues in order to squeeze out a bit of extra profit in production. Rajlakshmi Cotton Mills believes in taking a different approach. As one of the top organic cotton mills in India, they are setting the bar high to make sure that everyone on the production chain is treated fairly. They have committed to purchasing their cotton only from certified Fair Trade suppliers and were one of the first organizations to get a SA8000 certification - a global social accountability standard for decent working conditions.

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But they didn’t stop there. Investing in their staff was a part of their business, so they’ve provided primary and secondary education for their workers’ children, and a revolving loan scheme for workers. Moreover, they have given almost 10% of their shares to the farmers with whom they do business.

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DEAL ZONE Voxtra: US$2m in International Development Enterprises, India

$2m

April 2009: Voxtra, a social impact investor focused on empowering the disadvantaged and strengthening livelihoods, will support IDEI with a US$2m grant over six years to develop a supply chain for low-cost treadle pumps and conduct marketing activities to raise awareness in the remote and underdeveloped state of Assam in Northeastern India. The target of the program is to sell 25,000 treadle pumps to smallholder farmers, enabling the farmer families to increase their net annual cash income by US$400 on average. Voxtra gives grants, debt and equity. Their current focus area is India, and sights are set on Southeast Asia and eastern and southern Africa. www.ide-india.org | www.voxtra.org

Element Partners: Raise US$486m for Clean Technology Fund, USA

$486m

March 2009: Element Partners, a private equity firm based in Pennsylvania and California and focused on making clean technology investments, closes its Element Partners II LP (Element II) fund. The initial target was to raise US$400m, however, the fund was oversubscribed and closed at US$486m in committed capital. Element Partners currently has investments in 22 portfolio companies, including alternative energy, water treatment, and bio fuels. www.elementpartners.com

EESTech: US$60m deal with Aryan Clean Coal Technologies, India

$60m

April 2009: Economically and Environmentally Sustainable Technologies (EESTech) and Aryan Clean Coal Technologies have signed a joint venture agreement to install 10-mega watt Hybrid Coal Gas Technology systems over a five year period. The deal, valued at more than US$60m, will allow the energy generated by the system to be sold to the coal mining companies through twenty-year power purchase contracts with any surplus amount being distributed to the national grid. EESTech currently also has three environmentally sustainable technologies related to the water, coal mining and energy industries. www.eestechinc.com | www.sainikaryangroup.com

India Financial Inclusion Fund: Raises Additional US$20m

$20m

April 2009: Mauritius-registered India Financial Inclusion Fund, an India-focused equity fund that invests in microfinance institutions (MFIs), proves that microfinance is still a hot-bed for investors in the current economic turmoil by raising US$20m in fresh capital. The US$58m fund is advised by Hyderabad, India based Caspian Advisors Pvt Ltd., and is focused on investing in high-growth MFIs and microfinance enablers. The Fund’s primary mode of operation is through equity investments in companies that are directly or indirectly associated with the business of bringing the poor within the formal financial system. www.caspianadvisors.com/India Financial Inclusion Fund.html www.beyondprofitmag.com

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COVER STORY

Impact Investing:

Harnessing Capital Markets to Drive Development at Scale Impact investing is emerging at a time when financial markets worldwide are in turmoil. While industry participants can do little in the short term to address the wealth destruction that is reducing available capital, they can work strategically to position the industry to absorb a greater share of investment capital when markets inevitably thaw. By Antony Bugg-Levine


COVER STORY

In Hyderabad, India, a private school is expanding after receiving a loan from the India School Finance Company. The Company, capitalized by Gray Ghost, a US$200 million investment fund in the United States, is demonstrating that educational opportunity can be expanded through for-profit investment in schools that charge as little as US$4 per month. Around Virunga National Park in the Eastern Congo, farmers are receiving premium prices selling vanilla and coffee to Gourmet Gardens, a Ugandan exporter. Despite the political instability that keeps mainstream lenders away, Gourmet Gardens secured a working capital loan for these purchases from Root Capital, a US-based non–profit that lends to farmers cooperatives and agriculture aggregators around the world. In Chicago, USA a business is providing new jobs with good benefits to low-skilled workers after receiving a loan from ShoreBank, a pioneering community bank. ShoreBank could give the loan because major insurance companies and pension funds –including Prudential and TIAA-CREF, two of America’s largest financial institutions – made equity investments and targeted cash deposits to expand its lending capacity.

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lthough they may not know it yet, the students in Hyderabad, the Congolese farmers and the business owner in Chicago are all participants in the rapidly emerging industry of impact investing. Like the individual and institutions who invested in the India School Finance Company, Root Capital and Shorebank, impact investors seek to make for-profit investments that can also provide solutions to social and environmental challenges.

When we consider the scope of the world’s social and environmental challenges we see there is not enough charitable capital to meet them. We must ask, “Where will we find the money to complement charity and government to bring solutions to scale?” The Rockefeller Foundation launched our Harnessing the Power of Impact Investing, initiative in November 2008 because we believe that impact investing has the potential to be part of the answer.

These impact investors offer a bridge between traditional philanthropy - that can incubate innovation and mobilize attention on exciting solutions - and the private sector capital markets that ultimately hold the wealth required to take these solutions to a satisfactory scale.

However, as the recently published report Investing for Social & Environmental Impact by the Monitor Institute highlights, the ability of this new industry to deliver on its potential is not inevitable. Industry leaders will need to work together to measure and ar-

ticulate the industry’s successes, build infrastructure to increase its efficiency and create products that respond to investors’ demand for transparency and liquidity.

Why is impact emerging now?

investing

The seeds for the impact investing industry were sewn in the 1980s and 1990s with the socially responsible investment and corporate responsibility movements. They challenged the prevailing attitude that companies’ and investors’ only responsibility is to maximize financial returns. At the same time, as microfinance gained international renown, and advocates of a commercial approach gained visibility, the idea that investment, rather than pure

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philanthropy, could generate development outcomes became increasingly widespread. Inspired by these examples, entrepreneurs and managers in multi-national corporations pioneered business models beyond microfinance to provide basic social services to poor people and address environmental problems. Impact investing is emerging as the investment counter-party to these businesses. It would be naïve to believe that the wealth destruction and credit market contractions of the past 18 months have not shaken this new industry. Structural changes that spurred its emergence, however, remain in place to drive its growth when the credit markets revive: • Growing importance of private capital - Sources of capital for development have shifted during the past decade for many (but not all) poor countries. Private sector capital flows, primarily in the forms of foreign direct investment, mobilized domestic savings and remittances, have replaced foreign aid and private philanthropy as the primary sources of capital for investment. • Wealth concentration among the “investment-oriented” - Many individuals and families acquired significant discretionary capital in the past decade. This capital has been concentrated among precisely those people – entrepreneurs and financiers – whose personal life experiences primed them to see investment as a potent tool. They reject the canard that presence of profit is evi18

dence of exploitation. • Impatience with traditional approaches: After half a century of experiencing remarkable success as well as failure, traditional philanthropic options are uninspiring to some. This frustration can be counter-productive when it dismisses the experience and insights of development professionals and the complexity of the challenges they face. It, however, creates an opening for social entrepreneurs who offer a compelling alternative to philanthropy. These structural trends create fertile soil wherein the impact investing industry is germinating.

Harvesting the fruits of impact investing

Despite, and sometimes because of, a proliferation of activity, the impact investing industry is poised at a delicate moment. Impact investors have already made their mark in a few sub-sectors, most notably US-low income housing, and, more recently, micro-finance and green energy. Yet, impact investing capital is not being brought to bear at the requisite scale of hundreds of billions of dollars. The industry remains beset by inefficiencies and distortions that currently limit its impact even in areas where impact investing should be viable (such as healthcare delivery, slum upgrading, agriculture development and education). Our language, analytical tools, capital markets and legal system – that

beyond profit may/june 2009

are still structured to support activity on the binary of philanthropy or profit maximization – do not fully support impact investing. In this context, impact investing can be frustrating. But these frustrations are not unique. They are the archetypal challenges that confront pioneers in new industries. Fortunately, investors’ frustrations are also entrepreneurs’ opportunities. Global innovations and collaborations are now pointing to potential solutions to these barriers to the industry’s maturation: Building platforms for collective action - While various efforts, outlined below, address specific barriers to efficient investing, impact investors need a broader understanding of the contours and structures of this new industry to enable them to work together. We need to know how big this industry is, who its participants are, who has capital, who has deals and how to connect them more efficiently. In response to this need, the concept for a Global Impact Investing Network is gaining momentum around the world, with hubs of activity coming together in various countries (including a planned launch in India in late April 2009). The 2008 launch of the Aspen Network of Development Entrepreneurs also provides a promising platform for the substrata of investors interested in supporting small and growing businesses in emerging markets.


Microfinance: Pole Position or Sitting Duck? As the impact investing industry emerges, microfinance institutions sit in a fascinating position.

Creating credible standards for measuring social impact - Commonly-understood terms reduce transaction costs for mainstream investors. Our research with wealth advisors and private client bankers also indicates that the development of a credible, independent rating agency to measure the social impact of investment will be crucial to unlock this source of impact investing capital. In light of this research, the recent launch of a process to develop a Global Impact Investment Ratings System and Impact Ratings and Investment Standards is particularly exciting. By mobilizing investors as well as activists, academics and entrepreneurs, this initiative has the potential to break through the historic logjam that has kept similar efforts fragmented. Developing capital markets - Intermediation, or the placement of money between investors and the businesses and projects that can use it productively, is generally sub-scale and inefficient. Impact investors face high transaction costs in sourcing deals, conducting due diligence, closing and syndicating investments. Investment funds, investment bankers and market platforms have not yet achieved the scale and visibility to provide viable conduits for billions of dollars of latent impact investment capital. The intermediation challenge is, however, being met by innovators working across a spectrum of segments and business models:

• Impact investment banking - In London, Social Finance was launched in 2007 as an integrated investment bank serving social sector clients in structuring and placing impact investment capital. In San Francisco, Imprint Capital, a buy-side impact investing advisory boutique, was launched in 2007 and is now serving a range of family offices and private foundations to make impact investments. A new division of the South African Social Investment Exchange, SASIX Financial, is providing similar services to corporate and institutional investors and government. Intellecap in India is expanding its advisory services bouquet to include a range of impact investment services. They are working, in different ways, to provide investors with more efficient deal sharing capability, more attractive investment structures and the liquidity that many require. • Wealth advising - Money mangers are tapping client interest in impact investment to grow their customer base and deepen client loyalties. In London, Investing for Good assists wealth advisors to identify and scrutinize impact investments. Veris, a wealth advisor in the US, is building a product suite to offer clients impact investments and screened fund options. ResponsAbility, an independent money manager launched in Zurich, Switzerland in 2003, manages more than US$650 million in impact investments. Developed with the support of Credit Suisse, this Geneva-based company offers a rare,

They are well-placed to use the skills, networks and business models they developed serving microfinance clients and investors to expand into the broader impact investing market. Some established microfinance players are launching new impact investing products such as Swissbased Blue Orchard, whose founder created Bamboo Finance in 2007 to invest in medium-scale enterprises in poor countries. Others are diversifying the offerings within existing microfinance vehicles, such as ResponsAbility, which offers investors exposure to investments in socially-oriented alternative media and Unitus, whose second equity fund includes an allocation to investments beyond microfinance. Grey Ghost Capital has also broadened its US$200 million investment funds beyond microfinance. Concurrently, the emergence of the impact investing industry will break the near monopoly that microfinance has until recently enjoyed over investors interested in generating positive financial returns while promoting economic development in emerging markets. As an indicator of this trend, when JP Morgan Chase launched an impact investing unit in 2007, it did not launch a “Microfinance” unit (as Citibank had done two years earlier) but rather a “Social Sector Finance” unit whose ultimate ambitions span a broader range of impact investments. Against this backdrop, microfinance fund managers and advisors will face unprecedented pressure to prove why microfinance provides a more effective blend of financial return and social impact than, for example, investing in private schools, health clinics or medium-scale enterprises.

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COVER STORY

but exciting example of a mainstream distribution channel being utilized for impact investment. • Fund management - Both, Root Capital, the US-non profit funds investing in the Ugandan vanilla exporter, and E+Co. another non-profit investment fund that invests in energy services companies in poor countries, have recently launched ambitious scale-up plans. So have Bridges Ventures in London, the Acumen Fund that invests in social enterprise in India, Kenya and Pakistan, GroFin in Africa and Agora Partners in Central America. Innovators in established fund management companies, such as the managers of impact investing units in TIAA-CREF and Prudential, are growing impact investing portfolios that total hundreds of millions of dollars across asset classes. • Retail client mobilization - Innovators have developed mechanisms to make impact investing accessible to retail investors. The Calvert Community Investment Note can be bought in the US for US$1,000 minimum from brokers ($20 minimum when purchased online) and offers up to a 3% coupon which is relatively attractive in the current environment. They are currently considering expanding this offering outside the US. Securing supportive policy reform Currently, for-profit businesses and investors who seek to create social value are left to force-fit their aspirations, 20

often uncomfortably, into existing nonprofit or for-profit legal structures. Legal innovation, however, is also gathering steam. The 1995 Dutch reform that provides personal capital gain tax breaks to environmentally-beneficial investments is serving as a model for similar regulatory reform efforts. The UK government created a new corporate form of for-benefit “Community Investment Corporations” in 2005. In France and South Africa, recent legislation will compel investors to place some of their capital in impact investments. The grassroots efforts to create a B Corporation1 (a new classification of company that uses the power of business to solve social and environmental problems) and L3C2 legal form in the United States are similarly starting to build momentum for a new regulatory regime to meet the interest of impact investors.

What is the economic downturn doing to the industry?

Like a butterfly emerging from its cocoon into a hurricane, the impact in-

beyond profit may/june 2009

vesting industry is coalescing just as international credit markets face great turmoil. If I could predict with certainty what effect market conditions will have on this industry, I would be making venture capital investments rather than writing articles in social enterprise magazines. However, it does seem that, at least for now, both triumphalism and despair are overstated. The financial crisis seems to have created a boon in terms of making human resources available to the impact investment industry. Around the world, experienced finance professionals, recent business school graduates and talented expatriates bear much lower opportunity costs to enter this industry. In some cases, they are returning to work in emerging markets of increasing interest to impact investors. While impact investors are not immune to the challenges facing investors raising capital and syndicating deals in this credit market, anecdotal evidence shows that they remain committed to this new 2

1 www. Bcorporation.net http://americansforcommunitydevelopment.org/


COVER STORY

of microfinance, education finance, healthcare finance etc. — do not realize the value of coming together to build a single industry infrastructure, they will suffer from duplication and fragmentation.

industry. Many of the impact investment asset management, advisory and banking organizations have remained solvent, and in many cases, grown during a period that has seen mainstream financial services firms brought to their knees. In the end, the interplay of income and substitution effects will determine the medium-term trajectory of the impact investing industry. Industry participants can do little in the short term to address the wealth destruction that is reducing available capital. We can, however, work strategically to position the industry to absorb a greater share of investment capital when markets inevitably thaw.

What will it take?

The success of this new industry is not certain. The danger remains that “impact investing” will become a mere marketing tool that investment promoters use to raise funds without generating substantial social and environmental benefit. If leaders in the sub-sectors—

Building a mature impact investing industry will also require brave self-examination by impact investors and the businesses and funds into which they invest. The impact investment industry needs to be realistic about the kind of returns it will offer and investment products it will need to develop to become a viable proposition for the institutional investors, who control most of the world’s investable assets, but are bound by rules that limit their freedom to invest in unproven and sub-market products. The industry also needs to become more confident and honest about explaining the need for subsidy in many areas, through lower return and higher risk tolerance. The recently-released report of the Monitor Inclusive Markets research project in India provides a benchmark for thorough analysis. The report is built on the willingness of organizations and companies such as Byrraju Foundation, SKS and VisionSpring to expose their business practices to public review. It shows that impact investors will have to accept that subsidies will be temporarily necessary in some sub-sectors as social enterprises test and refine applicable business models, and permanently appropriate in other sub-sectors where in-

vestment generates substantial positive externalities that cannot be internalized into a company’s profit. Where does impact investing go from here? We know from the success of other innovations –such as the development of the private equity industry in the last 50 years– that a small group of leaders must work effectively to accelerate the pace and manner in which an industry matures. The impact investing industry will reach its potential in the beginning of this century if the innovation and stamina of entrepreneurial risk-takers can be coupled with industry-building leadership. The economic crisis has shaken confidence in established investment ideologies and their mainstream proponents. The emergence of the impact investing industry provides a potentially compelling alternative, by offering to imbue investment with social purpose and, ultimately, to increase the scope of solutions to social problems that continue to proliferate even as philanthropy resources dwindle. Antony Bugg-Levine is a Managing Director at the Rockefeller Foundation in New York where he leads the Harnessing the Power of Impact Investing initiative. A native of South Africa, he previously led the Kenya office of the NGO TechnoServe and worked as a consultant with McKinsey & Co. He is also currently an adjunct associate professor at Columbia Business School. Disclosure: Rockefeller Foundation has current investments in Acumen Capital Markets, Root Capital and Calvert Foundation.

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INVESTMENT

Is Recession a Good Time to Invest in Social Enterprises? By Linda Rottenberg, CEO and Co-Founder, Endeavor Social entrepreneurs are problem-solvers, not idealists. We’re driven by innovation, not by charity. And we don’t believe in hand-outs. We use entrepreneurial strategies to achieve social change. Most notably, social entrepreneurs solve problems that governments and the private sector fail to adequately address. In this current recession - in which more questions than answers have arisen about how to restart the global economy - social entrepreneurs are the voices of hope and the agents of change that we need. Endeavor, the non-profit that I cofounded in 1997 and which supports the most promising-yet-undiscovered High-Impact Entrepreneurs in emerging economies, addresses a pressing challenge common to all emerging markets: wealth is not meritocratically distributed. Entrepreneurs with the best ideas face significant barriers to scale their business: a lack of mentors, a lack of trust, a lack of networks, a lack of good management, and a lack of smart capital. Endeavor helps these entrepreneurs break down these barriers by offering the soft power of the private sector:

mentorship, networks, talent, leadership skills, and inspiration. With Endeavor’s support, these entrepreneurs scale their businesses to create jobs, create wealth, and build a prosperous future for their economies. One such entrepreneur is Shane Immelman from South Africa. Shane spotted a problem: over 4.2 million students in South Africa and 80 million across the entire continent lack desks. To remedy this, he designed a Lapdesk – an ergonomically-designed, portable desk made from plastic which a student

could use both in the classroom and at home. Confronted by the next challenge of then distributing these desks to remote areas, Shane targeted corporations to brand the desks with their logos and socially-responsible messaging. In just five years, Shane has been able to deliver nearly 500,000 desks and has made a profit at the same time. Shane has visions of taking his model from 18 African countries over the past two years to be active in 60 countries globally within the next five years, including Africa, Latin America, South Asia and East Asia. In doing so, he is eradi-


cating a problem that emerging markets have not been able to tackle and giving children the opportunity for a better education and a better life. Another example is Sameer Mehra, who runs Suminter India Organics, a company that helps farmers in Maharashtra and Gujarat convert small-scale farms to international organic standards. Once certified, Suminter India Organics buys farmers’ produce at a premium, and then exports the high-quality organic foods and textiles to European and US markets. In just five years, Sameer has created 100 jobs locally and has helped 4,000 farmers. With Endeavor’s support, by the end of next year, Sameer expects to have converted 7,500 farmers to these standards, giving these farmers an opportunity to compete in the under-supplied US$45bn+ organicproduct industry. Endeavor, Lapdesk, and Suminter India Organics are all social enterprises that came of age just before this global recession. There are three fundamental reasons that they will thrive in spite of the recession: A-team talent, strong business models, and smart risk-taking. These are exactly the reasons that investors’ interest should be piqued. Let’s start with strong business models. Social entrepreneurs have learned important lessons from the private sector. When the movement began twenty years ago, there were no hard metrics to measure success, such as jobs created, percentage of regions newly powered with electricity, or students receiving secondary education. Each social enterprise learned to develop empirical metrics. For example, through rigorous research on our portfolio, we know that

our 220 companies have created nearly 90,000 jobs and US$2.5bn in annual revenue in 2007. We also track each company’s growth to help determine our own value-add. Credible, results-oriented models have attracted talent to the sector. More and more professionals are sacrificing a little bit in compensation to use their expertise to help others thrive. Working at a social enterprise provides “psychic equity” to employees, which, even if they return to banking or consulting, they will carry the experience with them. Indeed, at present, Endeavor receives approximately 50 resumes each week from talented people who have fallen victim to the economic crisis. This influx of talent is exactly why now – amid this recession - is the right time to invest in social enterprises. For, as every investor and every entrepreneur knows, only companies with the right team and the best talent receive capital. The day that Lehman Brothers collapsed marked the beginning of a new financial era. As banks struggle to support established businesses with working capital, while stock markets continue to decline, and while consumption decreases, the private sector has become risk-adverse and is failing to restart the economy. Increased pressure has been put on the government to restart the economic engine. Government cannot do this alone, nor – despite its best intentions -can it act with the urgency that this recession demands. Everyday, the news features a litany of social problems: climate change, inefficient health systems, and water scarcity to name just a few. For most people, these challenges are depressing. But for

social entrepreneurs, these are the opportunities. And that is also why social entrepreneurs – those innovators who have fought for so long with so few resources to show that their ideas are effective and scalable –should play an instrumental role in escaping this recession. Social entrepreneurs align interests: they are innovative, they can be profitable and they have the potential to have a massive, transformative impact. If I were an investor in this current climate - where there is little low-hanging fruit, let alone an IPO on the horizon - I’d take the risk on social enterprise now and help the world build a better future for tomorrow. Endeavor is a non-profit that identifies and supports High-Impact Entrepreneurs in emerging markets. Endeavor engages the private sector in mentoring and advising these entrepreneurs and catalyzes entrepreneurial cultures in developing economies. For more information about Endeavor: www.endeavor. org; for Lapdesk: www.lapdesk.co.za; and for Suminter: www.suminterindiaorganics.com. Linda Rottenberg is CEO and Cofounder of Endeavor. Since 1997, Linda has pioneered a new model for development that engages the private sector in mentoring and advising the most promising-yet-undiscovered entrepreneurs as well as jumpstarts entrepreneurial support networks in these economies. Headquartered in New York, with established operations in Argentina, Brazil, Chile, Colombia, Mexico, Uruguay, Turkey and South Africa, Endeavor is currently launching its model in Egypt, Jordan, and India.

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INVESTMENT

What Are The Odds? 10 Ways To Get a VC’s Attention

Wesley Selke, Investment Manager at Good Capital, tells us how social entrepreneurs can attract VC funding. Remember your audience and be professional. Even though we’re in the business of doing good, we still want to invest in great businesses with solid management teams. While most of the entrepreneurs I’ve encountered have been professional, some have overplayed the “good” card. I once got an email that started off with, “Please, please, please, please, please look at my business plan…” Needless to say, I didn’t look at the plan.

1

Present a well thought out business model. Some entrepreneurs have big ideas and audacious goals but have difficulty translating these into the nuts and bolts of generating revenue and profits. The better developed a business model is, proven through customer and revenue traction, the more compelling an opportunity will be for funders. Also, don’t try to be everything to everybody and get focused on your core offering.

2

Make sure you do your competitive research. Many entrepreneurs think they’ve come up with the “new, new thing” only to discover that so have another 100 or so people in other parts of the world. Do your research, know your competitive advantage, and don’t just try to be the next Facebook.

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3

Keep the initial request for funding short and sweet. Send a short 1-3 page executive summary to see if there’s interest before dumping a 50+ page business plan. These rarely get read in their entirety.

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Present a well-developed social mission that relates to your business. If you’re in the book business, it probably makes more sense for you to support literacy rather than clean drinking water initiatives. The more a social mission is built into the business model, the more likely it is to expand as the business grows and stand the test of time and ownership. Identify quantifiable social metrics that you plan to track over time.

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INVESTMENT

6

Consider registering as a B Corporation. It’s quickly becoming the gold standard for social enterprise and differentiates companies truly committed to social and environmental responsibility from all the green marketing hype. This is appealing to many funders in the space. (For more information, visit www.bcorporation.net).

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Be open to discussing a variety of different liquidity options. Know that when you take on growth capital from a venture fund, there will be some sort of exit down the road whether it’s an acquisition by a mission-aligned larger company, initial public offering, or some other alternative. Discuss ways in which an exit can be achieved that sits well with the management team and preserves the longevity of the company’s mission.

8

Don’t ask VCs to sign non-disclosure agreements. This just adds friction to the process and increases the chances that a funder will not review the investment opportunity. Funders see a lot of competitive businesses and the unwritten rule is that they will keep your information confidential.

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If you’re invited into a VC’s office, don’t jot down notes from their white board. That’s a breach of confidentially and it’s just plain tacky. This decreases the chances that you’ll get funded. See point #1 about professionalism. (This actually happened to me recently).

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Don’t get visibly angry if your funding request is turned down. Given the sheer volume of funding requests received by most venture funds, chances are you’re going to get turned down. However, if you handle yourself well, you can maintain a relationship with the funder and put yourself in a better position for referrals or future funding requests if your business takes off.

About Good Capital Who: Good Capital is a venture firm that invests in organizations that leverage the power of the market to create positive social change. What: Their fund specifically looks to invest in expansion stage companies that are addressing social issues related to poverty alleviation, improving education, and access to healthcare, and with a historical annual revenue of at least US$1m. Focus: Typically, they invest in companies that have figured out a scalable business model that can both be profitable and make a positive impact on large populations. Past Investments: Better World Books, Adina for Life

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A Good Time to be Unreasonable Interview: Pamela Hartigan, Director, Skoll Center for Social Entrepreneurship Pamela Hartigan became the new director of the Skoll Center for Social Entrepreneurship at the Oxford Said School of Business earlier this year. With experience as the first Managing Director at the Schwab Foundation, and a CoFounder and Partner at Volans, she is an entrepreneur in her own right. Beyond Profit editor, Lindsay Clinton, caught up with Mrs. Hartigan at the Skoll World Forum on Social Entrepreneurship in Oxford on March 27. Beyond Profit (BP): How do you define social entrepreneurship, and what makes a a social entrepreneur different from an entrepreneur? Hartigan: Social entrepreneurship is entrepreneurship. It is innovative, resourceful, and leverages new opportunities to create new systems and products. It is about system change. It is not about palliative, charitable solutions to poverty. It is actually about finding sustainable, innovative pathways to completely change the system. Social entrepreneurs are very practical, innovative, and solutions-oriented. They want to completely change the situation for whatever condition is spurring inequity. The difference between social and business entrepreneurs is that when business entrepreneurs set up their enterprise, they have to focus on how to make a profit. Why? Because the assumption is that they have to pay back their investors and begin to make profit. The social entrepreneur, in contrast, is actually setting out to correct market and government failures. And while it might be profitable, the bottom line is to not to make a profit, but to change the system. 26

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BP: How do you differentiate between social entrepreneurship—focusing on the person—and social enterprise—the business? Hartigan: Social entrepreneurs create social enterprises. But not every social enterprise is created by a social entrepreneur. There are many managers that set up a social enterprise because the government has a need that it can’t respond to. So, they get some funding for a community-based organization to deliver those services—and they slap the name “social enterprise” on them, which is very confusing because there is nothing innovative or systems changing about them. So, not every social enterprise is a socially entrepreneurial enterprise. BP: How does Corporate Social Responsibility (CSR) fit into all this? Hartigan: CSR is very different. It’s an add-on. A company decides, well, we have been maximizing profits, and our clients are not happy with us. So, how do we actually address this by setting up a tangential initiative to our company, that


INTERVIEW may not have anything to with the business? Basically, it’s window dressing.

visions of ‘huge’ and ‘scale’ seems to be certainly a gender difference.

The good news is that companies are actually waking up to the fact that it is actually extremely valuable to bring together their core business with social and environmental goals, and we’re seeing more of that.

BP: A lot of social entrepreneurs don’t actually identify as such. They think, “I work in health.” Why is that? Hartigan: You’re absolutely right. Social entrepreneurs don’t identify as such, and when people say that they are social entrepreneurs, I’m immediately suspect. Because, the really great social entrepreneurs—the ones who have been about it for years—simply don’t use the term. Many in fact say, “I never knew what I was until someone said, ‘You’re a social entrepreneur.’” Usually, these folks say, “I’m an engineer and I came up with a way to save women billions of hours…” But, just because someone doesn’t call themselves a social entrepreneur doesn’t mean that they aren’t one.

BP: At the Skoll Forum, there has been a lot of discussion about social business might change problems like economic turmoil, climate change, and education. Why are we gravitating towards social entrepreneurship now? Hartigan: It’s complex. For the past five years, social entrepreneurship has been thought to be a passing fad. But, because of the economic meltdown, people are realizing that the reason this is happening is because the way that we make our money has been completely separated from what makes us happy as people. And, social entrepreneurs married those two things. Our society, or at least our financial community, has completely dichotomized the way that we make our money and the way that we impact society. Social entrepreneurs are the harbingers of where we need to go because it brings together these two things. I always used to say, “A social entrepreneur is what you get when you combine Richard Branson with Mother Theresa.” BP: Impact has become such a buzzword. How do we measure it? Who is making the most? But, isn’t it enough to know that I’m helping coffee farmers in Colombia or kids in India. Why is knowing your impact important? Hartigan: If you don’t know your impact, you can’t improve. In essence, what you don’t measure hasn’t happened. If you don’t know your impact, how do you know whether you’re doing more damage than good? The age of unaccountability and lack of transparency is over. BP: What about scale? These days you can’t start and run a business without explaining your plans to scale. What’s wrong with “small is beautiful”? Hartigan: There are thousands of small, beautiful businesses, which is fantastic. There are many entrepreneurs who are interested in and are focused on their local communities and they are doing incredible things. But, at the Skoll Center, we are very much focused on how-big-can-small-get. Because the world has such huge problems that we really need to affect them on a massive scale. BP: Where to women fit in social entrepreneurship? Hartigan: Women are entrepreneurial by nature. We have to solve problems and develop creative solutions, but I think that the difference is the following: I think that there are thousands of women entrepreneurs, but women are much more interested in the small, local business. As you go further up the ladder of socially entrepreneurial initiatives, you’ll find that most are [run by] men. They have women that work with them and are probably running their operations for them, but

BP: What advice would you give to someone who knows that they want to be a social entrepreneur, but is not sure what his/her big idea is? Hartigan: Well, two things. One, it’s okay not to be an entrepreneur. Unfortunately, with the glamorization of entrepreneurship, everyone thinks that they have to go out and create the next big idea. I think that’s insane. I think that across the board, entrepreneurs desperately need strong teams behind them, and that’s where I see the business school coming in because they teach accounting, finance—the fundamental tools you need to grow solid organizations. First of all, you don’t decide you want to be an entrepreneur. You ARE an entrepreneur. It’s like, you can’t help being the way you are. Because I tend to believe that people are born with entrepreneurial traits—and they can be nurtured and stimulated or stifled—which depends on the society in which you were born and whether they nurture innovative thinking, creativity, risk-taking, failure—all the things that are part of being an entrepreneur. BP: You’re the co-author of The Power of Unreasonable People. What makes social entrepreneurs unreasonable? Hartigan: They’re only unreasonable to people who think that what they are doing is completely off the wall. George Bernard Shaw said, “Reasonable people adapt themselves to the world. Unreasonable people attempt to adapt the world to themselves. All progress, therefore, depends on unreasonable people.” You can look at our last couple of decades and all the horrific situations we have had in terms of poverty, climate change, energy depletion, deforestation—all of these things are carried out by so-called reasonable people. And nobody sets out to create any of these things. But, if your one pursuit is short term profit, you’re going to be a lot less concerned about all these other things. So, we have the situation that we have now. A few people have become extremely wealthy, and a whole lot of others have not. And we have organizations who are running around picking up the pieces because of this greed and lack of long-term thinking. So, the system isn’t working. We need unreasonable people. www.beyondprofitmag.com

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ENTREPRENEURSHIP

10 New Ideas that Could Change the World The launch of the inaugural issue of Beyond Profit coincides with Sankalp, South Asia’s largest Social Enterprise and Investment Forum. Below are the stories of ten Sankalp Entrepreneurs. They were selected for their innovation, tenacity, vibrancy, and most of all, their potential for impact. Adrienne Villani and Sujatha Muthayya report.

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The stories presented are not reflective of the Sankalp awards process.


ENTREPRENEURSHIP A New Slate: Beyond Reading, Writing, Arithmetic Butterfly Fields, Sharat Chandra Sankalp Category: Education for All

While children around the world have had the privilege of conducting science experiments, taking music lessons, and dabbling in art classes as part of their school curriculum for decades, the average Indian student has led a more academically-focused existence. In 2005, Sharat Chandra decided to do something about this. His organization, Butterfly Fields, now tries to infuse creativity into the minds of young students and make learning “easy, enriching, and enjoyable.” Working with mainstream schools as a form of enrichment program, its centers provide children with opportunities for hands-on learning, social interaction, and real-life problem solving. The learning center enables children to explore and practice skills to their own satisfaction. Teachers are encouraged to

focus their classes on conceptual learning and to make them more exciting and motivating. Students are asked to constantly question and challenge the way things are around them. In just one year, armed with a core team of five, Butterfly Fields has created 25 innovative curriculum advancements and 150 hands-on activities linked to this curriculum. The Butterfly Fields approach is a paradigm shift in ideas about learning in India. Chandra believes that very little has changed either in pedagogy, methods of learning, or assessment in the last five decades and he looks to the telecom sector for inspiration: “What happened in the telecom sector in India too has to happen in the education sector – thoughtful deregulation, flow of professional talent in the delivery, setting up of proper data collection mecha-

Credit: Kshitiz Anand

nisms, and the sharing of data by keeping it in the open domain to fuel further research.” If the Butterfly Fields approach succeeds Chandra believes that India will emerge as the largest pool of skilled and quality human resource for global markets. It is our hunch that we will see Butterfly Fields as a significant contributor in grooming the newer generations to achieve this vision.

In a Whirlpool of Innovation

Vortex, Vijay Babu Sankalp Category: Highly Scalable Social Models

On November 23, 2008, a small queue of people filed past an ATM in an internet kiosk, inserted their biometric cards, got their thumbprints verified and withdrew the National Rural Employment Guarantee Scheme (NREGS) wages due to them. In this small way, these villagers in Tamil Nadu, India played an important role in the first deployment of Vortex’s indigenous lowcost ATM technology. Vijay Babu, CEO of Vortex recalls, “Earlier, the distribution of NREGS wages was done manually and involved delays. Now, our ATM solution has been coupled with no-frills accounts for all the NREGS beneficiaries in about 4 villages, and the government transfers payments to the villagers’ individual bank accounts.” The journey started in 2004 when a few

leading banks in India approached Professor Jhunjhunwala of IIT-M to find a way to reduce the total cost of ownership for an ATM, especially for rural areas. Their requirements were clear - they wanted an ATM that could be easily used by the average rural person, could consume less power, could handle the power loses of rural locations and be able to dispense dirty notes. Armed with this product specification, Mr. Kannan along with the TeNeT Group of IIT-M set out to design a completely indigenous low-cost ATM. Their solution, called the Vortex Gramateller, did not require air conditioning, consumed less than 50 watts of power, had a built-in battery back-up for four hours of operations, and could accept soiled notes for dispensing. In the context of rural India and high levels of illiteracy, they also integrated a biometric authen-

tication unit which displaced the need for a PIN. As simple as the Gramatellar looks, it has been a long journey for the product. Vortex started the R&D in 2004 and the first pilot ATM for a leading bank in India was installed in March 2008. In the last 6 months, they have shipped about 20 ATMs to about seven banks. Thanks to Vortex, the path to financial inclusion is even clearer now.

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ENTREPRENEURSHIP Live and Dye Naturally

Aura Herbal Textiles, Sonal and Arun Baid Sankalp Category: Environment and Clean Energy

Indian prominence in herbal dyeing goes back more than 4000 years. Historically, India was known as the “golden sparrow” because of its pioneering role in the use of indigo. People who wanted indigo as their primary spoil repeatedly attacked the subcontinent. But, Indian prominence in herbal dying began to decay in the 19th century when the technique was lost due to the invasion of cheaper and easy-to-use synthetic dyes. Sonal and Arun Baid, with their company Aura Herbal Textiles, hope to return India to its previous position of distinction in this field. “I can proudly say, after studying different natural dyeing processes all over the world, that India had the most intelligent process and recipes for the herbal dyeing,” says Arun Baid. After successfully experimenting in

their kitchen nine years ago with the ancient technique of herbal dying to see if the process actually stained fabrics, Sonal and Arun Baid started their own company, which today, has 75 employees. Aura Herbal Wear produces herbal textiles and dyes, helping to prevent global warming and pollution related to textiles. What also sets Aura apart is their choice of medicinal herbs in their process; amazingly, the medicinal qualities of the herbs are retained in the fabric. To a certain extent, Aura Herbal Wear produces “clothes that heal.” The Baids see themselves as offering customers the choice to use herbal dyed textiles over chemically dyed ones. Says Arun, “Environmentally-conscious individuals and institutions will all benefit from our process, which is the only process that can create a total

eco-cycle in textiles – from organically growing the cotton and herbs to turning the cotton into fabric to dying it with herbs. The waste generated then goes back to the farms as manure to generate the cotton and herbs again.” As demand for “natural fibers” increases due to greater global awareness of the ecologically harmful effects of chemical dyes, so does the Baid’s business. Arun Baid sees a future where herbal dying will be the only option left for processing textiles.

Shedding Light on Small Solutions for Big Changes Small-Scale Sustainable Infrastructure Development Fund, Vipula Sharma Sankalp Category: Environment and Clean Energy

In developing countries, the public sector is unable to provide necessary utility services. Consequently, many poor households and communities lack the infrastructure necessary for poverty alleviation and to maintain good health. Currently, it is estimated that two billion people in the developing world live without access to clean water, reliable electricity, and effective sanitation. This is where the Small-Scale Sustainable Infrastructure Development Fund (S3IDF) steps in – providing utility services through decentralized smallscale mechanisms and at a cost that people can afford.

ply chains and unconnected poor communities, implementing financing options for residents and extending their access to infrastructural know-how. “In our model, the poor are multiple stakeholders – as users, SME employees and even owners – of these pro-poor, environmentally-friendly, and financially sustainable enterprises,” says Vipula Sharma, CFO and acting CEO of S3IDF. “Enterprises mentored/incubated by S3IDF are financially viable and completely recover their capital and operational costs while giving a good return to the entrepreneur even after including financing costs.”

takes this well-known fact, and doubles its impact by serving income generating end-users, such as shop keepers, grain millers, farmers, women’s groups, and other small enterprises in an innovative and entrepreneurial way.

Through its Social Merchant Bank model, S3IDF provides the poor with linkages to technology, financing, and business know-how. S3IDF acts as an interface between modern energy sup-

For S3IDF, the market is there: poor people spend a high proportion of their income on traditional and inefficient energy services, such as firewood, candles, batteries, and kerosene. S3IDF

According to S3DIF, small-scale solutions are also much more viable because the interventions required are localized and decentralized in comparison to large-scale ones.

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ENTREPRENEURSHIP Meeting a Quadruple Bottom Line

Credit: Peter Sheik

Adithya Medical Services, J. Karthikeyan Sankalp Category: Healthcare Inclusion

Diagnostic x-ray generation systems have not changed much since their discovery by Wilhelm Conrad Roentgen in 1895. The system involves capturing high-energy penetrating x-ray beams on a photographic film and processing the film to get a negative of the patient. Adithya Medical Systems is revolutionizing this system. Driven by the failing quality of x-ray machines entering the Indian market, Adithya created a solution. By directly converting x-rays into digital images, Adithya has eliminated costly x-ray film. Using their patented technology, they have reduced the cost of digital imaging 90%. Says Mr. Karthikeyan, one of the founders of Adithya, “By breaking the price barrier, we are making this high-end technology affordable to the diagnostic center next door.”

Adithya currently targets government hospitals, small hospitals, and standalone diagnostic centers in semi-urban and rural areas as potential consumers of its product, where x-ray film often runs out. While medical technology companies have revolutionised the industry, Adithya has taken this one-step further by creating a quadruple bottom line product. Adithya delivers high quality health care at low cost by working with reduced capital and operating costs. It protects the environment by eliminating liquid pollution, reducing radiation, and saving energy – there are no consumables used compared to the film-based x-rays and operators are less affected by radiation. It has deskilled opera-

tions and made it possible to employ unskilled youth – the product is highly user friendly and can be operated even by a 10th pass (high school) student, opening up employment opportunities in several rural and semi-urban areas. And it has created a profitable and salable product because it can be added to existing x-ray generators. Additionally, Karthikeyan says, “By going digital, access to high quality diagnosis is made possible. The images can be digitally transmitted across the world for diagnosis by an expert radiologist.”

Finding the Missing Link: Value for Producers and Consumers Industree Crafts, Neelam Chhiber Sankalp Category: Agriculture and Rural Innovations

While globalization and international trade have reduced barriers between countries in the past quarter century, domestically, in India, these barriers still remain erect. India’s urban and rural markets are still poorly connected, but Industree Crafts is playing its part to reduce these barriers. Industree connects two ends of the spectrum - the rural artisan and the urban market. “Industree was set up as a result of our realization that the craft sector in India is badly organized. The quintessential thing to be done to improve the lives of the craftsmen, who are the most exploited lot in the whole value chain, was to create a dedicated craft brand for the products of rural artisans in the most remote of Indian villages, and to provide them training to improve the marketability of their products,” says

Neelam Chhiber, Industree’s Founder and Director. Sustainability is at the core of Industree’s mission and work. According to Chhiber, the most important aspect of Industree’s work is “empowering primary producers – providing them with the necessary skills, institutionalizing them, and helping them move up the value chain.” At Industree, artisans own equity in the production and the retail of their products; there is no stronger way to build self-esteem. Industree works through a hybrid model that includes a for-profit component, Industree Crafts Private Limited (ICPL), and a non-profit wing, Industree Crafts Foundation (ICF). Industree focuses both on domestic re-

Credit: Srinivas Rao

tail and export markets in its quest for expanding markets for sustainable production. In 2007, though, it scaled up its presence in Indian retail, as this market is less prone to demand fluctuations, easier to understand for the company, less risky, and demands lower capital investments. Essential for long-term social change, Industree is upholding its commitment to remain a sustainable and fair trade brand and continuously spreads awareness on sustainable consumption.

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ENTREPRENEURSHIP Here, the Grass is Always Greener Wonder Grass, Vaibhav Kaley Sankalp Category: Highly Scalable Social Models

Habitat is an essential part of life. There is a sense of security that arises when people have a roof over their heads. Not only does habitat provide shelter from the elements, but also it contains and nurtures relations, emotions, and aspirations. Wonder Grass seeks to meld these two important characteristics of habitat by bringing bamboo and bamboo-based building systems into the mainstream construction industry in India. Not only are Wonder Grass’s “habitat solutions” affordable and beautiful, but by working in bamboo, they are sustainable and responsible. “We started Wonder Grass to establish bamboo as a material at par with every other building material in the mainstream construction industry,” says Vaibhav Kaley, Director of Wonder Grass. According to Kaley, a sustained and entrepreneurial effort in bamboobased construction will continuously reduce building costs by improving the

efficiency of supply-delivery chains. The housing shortfall in India today stands at 22-25 million dwelling units. On average, 250,000 housing units are damaged every year due to natural disasters. The demand for building-solutions is rising exponentially in fast growing urban centers as well as in remote, rural areas. Bamboo, a resource with which the Indian subcontinent is bestowed in abundance and a resource that is spread across the length and breadth of the country, presents a regenerating and sustainable alternative to address these burgeoning housing demands. The spread and demand for bamboohousing prompts farmers to initiate bamboo plantations on their land, which become a source of steady income for the family; the increase in bamboo plantations in the peripheries of villages has an indirect spin-off effect on the local ecosystem; and bamboo brings carbon-

economy benefits. This large demand for housing exists both among the luxury segment and among the common man. Hence, Wonder Grass approaches this issue with a two pronged strategy – designing and building sustainable habitats for the luxury segment in urban centers, a low volume/high margin business, and designing and building affordable dwelling units for rural households, a high volume/low margin business.

Weaving Rural Dreams

Rural Outsourced Production Enterprise (ROPE), Nedumbally Narayanan Sreejith Sankalp Category: Agriculture and Rural Innovations

If you thought the great Indian outsourcing story ended with giants like InfoSys, look again. In a small village called Melakkal near the Indian town of Madurai live two of the newest faces of India’s outsourcing story. Murgesan and Malarkodi, his wife, work with women who weave rope from banana fiber. Little do they know their product feeds into IKEA’s supply chain. In fact, they have never even heard of IKEA. In 2006, while working with a rural BPO based in Madras’ Indian Institute of Technology’s (IIT-M) Rural Technology and Business Incubator (RTBI), Nedumbally N. Sreejith’s dreampt up a new outsourcing opportunity: leveraging local resources, fine-tuning skills, forming producer groups, and supplying artisanal products to larger companies. Sreejith approached RTBI with his idea, 32

called Rural Outsourced Production Enterprise (ROPE), which they later funded. ROPE developed a model of sub-contracting production needs of urban clients to village-based production centers, and utilized technology for efficient production organization, execution, and delivery. ROPE’s model is unique for several reasons. They offer customized production to suit clients’ needs. Their approach competes with modern manufacturers on price and quality. The model is scalable as there is a large rural need, a vast number of outsourced products, and the production centers require low capital and overhead. Furthermore, the use of ICT enables efficient operations. ROPE’s rural centers produce hand woven and knitted products, like mats, carpets, and window shades. In the future,

beyond profit may/june 2009

Courtesy of ikea.com

they plan to expand into cotton and silk fabrics and apparel. Some of the prominent names in their client list include IKEA, Industree Crafts, and CwithCo, New York. While Sreejith dreams of expanding into new markets, the dreams of Murugesan and the women of his group for access to better education, healthcare, and increased incomes come closer to reality.


ENTREPRENEURSHIP Weathering Heights

Neurosynaptic Communication Private Limited, Sameer Sawarkar and Rajeev Sharma Sankalp Category: Healthcare Inclusion

Meet Neurosynaptic, makers of lowcost, high-quality telemedicine and weather monitoring kits. Founded in 2002 by Sameer Sawarkar and Rajeev Sharma, Neurosynaptic Communication Private Limited (NCLP) brings technological solutions to problems at the bottom of the pyramid. Their outof-the-box thinking puts answers to healthcare and agriculture in a box. Sawarkar says, “We started with a question – can telemedicine and remote diagnostics bridge the healthcare divide for rural areas affordably?” NCLP developed the ReMeDi™ (Remote Medical Diagnostics) range of products and comprehensive telemedicine solutions in collaboration with the TeNeT group of IIM-M to address this question. This solution allows transmission of various vital parameters about the patient to a

doctor for preliminary diagnosis. To address the lack of availability of trained medical professionals in the villages, the solution has been developed such that after a minimal amount of training, even a high-school graduate can operate it. The solution provides complete Electronic Medical Records, images, various health parameters like ECG and heart sounds, as well as audio-video conferencing at very low bandwidth, making it an excellent platform for rural and remote healthcare in villages. Taking on agriculture with the same innovative thinking, NCPL has designed and piloted automated weather monitoring systems. “The high cost of weather monitoring stations and the non-granularity of the data are the major draw-

backs for accurate weather monitoring in India,” Sameer says. NCLP has developed Indradhanu Automatic Weather Stations which measure various weather parameters like atmospheric pressure, temperature, humidity, etc. and transmits them to a central server over the Internet or via a GSM connection. Indradhanu has been certified by the Indian Meteorological Department for accuracy and other specifications.

Cultivating the Joy of Learning

Joy of Learning, Prashant Joshi, Vivek Wagh, and others Sankalp Category: Education for All

The stresses of education are hitting children earlier and earlier. Test scores determine their future, and the stress of studying for and taking these exams eats at parents, teachers, and students. Prashant Joshi, Vivek Wagh, and others founded Joy of Learning to combat this academic stress and anxiety, complimenting mainstream education and attaching positive emotions to learning activities. Joy of Learning is a small organization engaged in developing educational aids, including books, cards, and other materials, especially for early childhood education. It aims to develop products that enable education for children, which is essentially stress-free and enjoyable. According to Joshi, “Joy of Learning helps children to develop their academic skill-sets, with minimal effort and without the drudgery of rote learn-

ing.” Perhaps most importantly, Joy of Learning provides a system that gives commensurate impetus to the bright students as well as the slow learners. On Joy of Learning’s methodology, Joshi notes, “We hear a song just once, and if we like it, we remember it. This happens because of intensity of involvement and positive attitude. If an educationist is able to evoke similar interest in learning, it too can become equally effective.” Up to now, Joy of Learning has concentrated its efforts on mathematics, “the killer subject,” which brings about “math phobia.” Joy of Learning attempts to combat this phobia by creating board games and card sets that enable children to play various games that enhance mathematical thinking, improving efficiency in calculation, and

developing conceptual clarity. Joy of Learning runs Activity Centers and conducts camps for children, where they improve their skill sets under trained supervision. While Joy of Learning is still operating at a skeleton level, its books have been included in the reading lists of four schools in Nagpur for the 2008-2009 academic year. In the future, Joshi hopes to find partners to help him scale up operations.

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INNOVATION

Shaping For-Profit Enterprises Through Disruptive Innovation In the last decade, the sheer size of the lower-income market has enticed multi-national companies and investors to search for ways to reach this customer base. While some have made successful forays into this market—for example, microfinance or small unit products - there is a new set of emerging enterprises being shaped through disruptive innovation. These innovative products and services not only create consumption, but also create entirely new markets. Hari Nair, partner at Innosight Ventures, explains his company’s philosophy, and explains how innovations that are smaller, cheaper and simpler than the market leaders can often reshape a market. Disruptive innovations are all around us, either creating new markets or challenging entrenched incumbent technologies or products. Internet blogs for example have challenged mainstream media like newspapers and magazines, while Apple with its Ipod or Nintendo with its Wii game console has engaged a large group of otherwise non-consumers into purchasing music and video games. While disruptive innovations are seen and used at all levels of the market spectrum, their focus around closely meeting consumer needs via combinations of customized functionality, specifications, and higher affordability, make it a valuable tool in creating products and services that connect with the circumstances of members of the lower-income population. Typically, with less emphasis on technology and more concentration on situational applications, they help shape meaningful solutions that offer convenience, affordability, access, and utility to lower socioeconomic groups that current alternatives may not provide. In recent years, the lure to access the spending power of large 34

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lower-income consumers has led large corporations and venture capital to chase many markets. We have seen companies engineering low unit price products to encourage trial and consumption, as well as the rush of social venture capital to invest in the growing microfinance sector. While these innovations have certainly grown the market, there is a new set of emerging enterprises being shaped via disruptive innovation and new business models. These innovations not only create consumption, but also create entirely new markets.

Great Opportunities Are Shaped

History tells us that almost all great products and services begin as something not so great. For example, the first personal computer was sold in 1950 as a kit and did virtually nothing. More recently, few would have thought that the web site created in 1995 by Pierre Omidyar to sell Pez dispensers and other collectibles would be one of the few remaining companies that continue to set the benchmark for e-commerce. Remarkable success often involves some measure of insight and luck. But more importantly, notable business successes


INNOVATION

are nearly always shaped by the skillful, patient and thoughtful decision-making of uniquely capable managers. The traditional venture capital approach emphasizes the search for opportunities and relies on deep insights around long-term trends. Firms usually have access or commission consulting studies and market research. Investors construct complex models and discounted cash flow sheets to identify the best potential investments. Those predicted to have promise are funded with a clear and specific business plan in mind; funds are then allocated (sometimes in massive quantities) to achieve that pre-determined plan – with limited deviation allowed from the original investment thesis. In contrast, we believe that success is shaped rather than predicted, so we shape our own outcomes through in-market iteration of our business ideas. We aggressively, quickly and cheaply push initial offerings into the market. We then let customers determine success or failure. If they buy, we quickly shift our focus to achieving profitability; if they don’t buy, we figure out why and quickly and cheaply iterate the offering until we find something that delights them.

Spotting Opportunities Others Cannot See

The principles of disruptive innovation, as defined by Harvard Business School professor Clayton Christensen (a counselor and shareholder in Innosight Ventures), tell us that most successful companies innovate faster than customers’ lives change. They ultimately end up producing products that are too good, too expensive, and too inconvenient for large segments of customers. In the process, they unwittingly open the door to entrants that can offer simpler, more convenient and lower-cost products and services to those customers who have no need, or lack the means, to keep up with the accelerated pace of innovative change. Our venture portfolio is targeted towards creating new markets or reshaping existing markets by delivering relatively simple, convenient, low cost innovations to a set of customers who are ignored by industry leaders. To identify customers who will welcome disruptive innovations, we use a “jobs-to-be-done” approach. This theory holds that products are successful when they connect with a circumstance: a job that customers find themselves needing to get done. For example, we recently helped develop a low cost appliance which will help rural consumers who don’t own

refrigerators keep their drinks cool and preserve their leftover food for a few days. We believe products that make it easier for consumers to do something they are already trying to accomplish become what we call, “killer applications.”

Got Dirty Clothes?

Village Laundry Service (VLS) offers micro-franchises to carefully selected and efficiently trained entrepreneurs. Operating under the brand name Chamak (meaning “shine” in Hindi) they offer washing, drying, and ironing to consumers who lack clean, affordable, and accessible laundry service. Chamak offers high-quality washing services to middle-income families, students, and single workers in India at an affordable price point. These customers typically have limited access to efficient washing facilities. VLS franchisees are enterprising low-income people who have little education and opportunity to start their own business. For a very low start-up fee (1-2% of regular franchise

Franchises like Village Laundry Service enable low-income people to start their own businesses


INNOVATION

fees), these entrepreneurs are carefully selected and trained by the VLS Academy and provided specially engineered single-machine laundry booths. These booths operate much the same way a regular franchise does: the franchisee is responsible for the success of the business, has access to VLSbranded and marketed products and supplies, and earns based on performance. A VLS franchisee stands to minimally double his previous earnings, increase his social status, and gain valuable basic business knowledge. The business model is driven by flexibility as the rollaway kiosk with self-contained water supply allows VLS to position its kiosks in expected high demand locations and the flexibility to move to other corners if demand does not materialize as quickly as expected. Meanwhile, the franchisee, previously an ironer, earning INR200 (US$4) per day dramatically improves his income; VLS allows him to more than double his income by expanding his “share of pocket” from existing customers and attracting new ones. C.K. Prahalad, renowned author of The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits, wrote: “Large-scale and wide-spread entrepreneurship is at the heart of the solution to poverty.” He suggests that in order to succeed both monetarily and socially, companies need to offer the enterprising poor empowerment, choice, and selfesteem. VLS provides incentives to all involved parties to perform, and it is self propagating. Franchisees must perform (keep the rig utilized with target volume of wash per day) in order to make better livelihoods, so they will strive to thrive. They are more likely to train themselves to excel in their craft, to care enough to ensure quality, to work harder with longer hours, and to grow their business. The most successful franchisee will open additional booths, thus expanding and transforming his/her family’s socio-economic status. VLS is incentivized to fuel this behavior as it creates natural reach and scale, while building its brand and reach, while driving the business to profitability.

Value of Being Parsimonious

We use a distinctive and systematic process for making good things happen with very little money. Conventional wisdom says that it takes millions of dollars to produce compelling prototypes and initial revenues, but all of our ventures are structured to achieve success with modest investment: 36

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Md. Shameem a Student at MS Ramiah College is a Razor Rave customer.

US$250,000 or less to achieve initial revenues and US$1m or less to achieve profitability. We begin by assuming we’re partially right and partially wrong in everything we do. We take an “emergent” approach to building our ventures; that approach emphasizes retaining flexibility and gathering feedback from the marketplace as we figure out what’s right and what’s wrong about our strategy. We continually structure “quick and dirty” tests to help us obtain new, proprietary sources of information. And we don’t keep the strategy static – we continually shape and mold our businesses and strategy to meet the realities of the marketplace. But we don’t hesitate to shut down things that the market tells us very clearly simply won’t fly. Importantly, our multi-geographic presence allows us to achieve very low factor costs – most of our hardware and software is developed through close third-party partnerships in India and Singapore. We ensure we have different schools of experiences within the team to help each venture iterate through the uncertain early stages.

Razor Rave: Grooming on the Go

Single serve products (sachets) have found success in India as its population desires quality brand names but is unable or unwilling to pay for regular bulk packages. At any given neighborhood mom-and-pop store, known locally as a kirana, hundreds of brightly-colored single-use packets of detergent,


INNOVATION

Most successful companies innovate faster than customers’ lives change. They ultimately end up producing products that are too good, too expensive, and too inconvenient for large segments of customers.

shampoo and lotions hang from hooks.

forms of long-term advantage.

Razor Rave’s micro-franchise booths provide single serving premium shaves, facials, face-powdering, cologne sprays, and other male beauty services. Delivering instant, convenient, and affordable feel-good boosts for young men on the go, Razor Rave targets a growing market of image-conscious professionals and students. Previously, these young men were unable to consume these products and services due to high prices, substandard quality, or lack of knowledge.

We do well by doing good. The discarded customers we embrace include the socially disadvantaged, so our business model naturally leads to social good, allowing us to link financial and social investors in new and unique ways for mutual benefit. Financial investors benefit from our social motives through cheaper access to capital, receptive foothold customers and new segments, general goodwill generated and knowing their money is earning “double-bottom line” returns. Social investors benefit from the financial disciplines that both make ventures economically sustainable and create access to massive pools of talent and capital

Barbers form Razor Rave’s main entrepreneur franchisee base. The barber entrepreneurs that take up Razor Rave franchises have previously worked for a fixed salary, though the value they create far outweighs what they are paid. The franchise allows them not only to earn based on their output, but also to provide customers a more holistic experience with the use of a wider range of male beauty products and services.

A Replicable Model for Success

Our repeatable process emphasizes modest investments that grow with market-based proof. We form perspectives on possible opportunities through observation and discussion; our local team explores dozens of ideas every year, before eventually assembling about 10 business plans and taking 57 new ideas to market for initial testing; ventures are refined and iterated with the help of targeted field experiments (learning pilots) with “foothold” customers (intital consumers for the product or service) with key unmet jobs-to-be-done. As we see confirmation of widespread market demand, we focus on quickly achieving breakeven profitability and locking-in

Our current portfolio includes five ventures with revenues and seven others that have passed through initial marketplace testing; we have several other business plans ready to enter the initial testing phase. Through 2015, we expect to launch 30-35 new ventures and produce at least half of them that have significant value to potential buyers. We have also set a goal of impacting 100,000 under-privileged lives by creating a significant transformation in their household income levels.

Hari Nair is a Partner at Innosight Ventures, a venture capital firm inspired by the theories of Disruptive Innovation of Professor Clayton Christensen of Harvard Business School. Innosight Ventures has offices in Singapore, Mumbai, and Baltimore. Hari’s primary focus is on India and emerging markets. www.beyondprofitmag.com

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Credit: Lyn Gately

?

The Questions at the Bottom of the Pyramid

Real Challenges of Global Intrapreneurs

Andrew squints at the silhouettes of the shacks ahead. The harsh heat of the day has subsided, leaving behind an escort of mosquitoes. A small smile spreads across his lips. He caught sight of what he had been looking for. Community meetings, convened in a circle on the clay floor of Anu’s home in this slum in the center of Mumbai, were something he looked forward to. This encounter would be, to say the least, a little different from his last meeting. Just 24 hours earlier, Andrew had been at JFK airport in New York. His head was still spinning from that afternoon’s adrenaline and Diet Coke-fueled meeting with his company’s management team. It had begun as expected, with the usual mix of PowerPoints, P&Ls and projections, ROIs and risk assessments. As the conversation progressed, the sentiments of his colleagues morphed from idealism and optimism to skepticism and criticism. The tone then swung to confusion and condescension. “What on earth are we doing trying to build a business in a slum?” they demanded.

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INNOVATION In-tra-pre-neur [in-truh-pruh-nur] noun: a person in the pursuit of new solutions for the BoP on behalf of a company; modern day Indiana Jones: part academic, part businessman, part action hero; just as, if not more, comfortable sitting in mud hut, as talking business in a three piece suit The Quest for the Fortune

Creating a sustainable and truly global economy is a noble aspiration. Many corporations, entrepreneurs, governments, academics and non-profits are pursuing this goal. Progress looks like a dark desert at night with a thousand fires burning. Some fires are burning brighter than others, but they have not yet fused together to form a torch that can change the world. Although all the stakeholders are doing their part, in this article, I will focus on those fires being lit by large corporations. In 2002, The Fortune at the Bottom of the Pyramid ushered in a new level of consciousness in international business strategy. Although the idea of simultaneously making a profit and making a difference was already well established, the anecdotal case by C.K. Prahalad and Stuart Hart that the four billion people each living on less than US$4 a day (the bottom of the economic pyramid or simply “BoP”) held the potential for immense profit captured popular imagination. Multi-national companies (MNCs) around the world launched initiatives to adapt and market their products and services to the world’s poor. Seven years after the publication of the original article, while the luster of The Fortune at the Bottom of the Pyramid remains bright for many, those charged with accessing this opportunity for their company and the poor communities in which they work, are still in search of an effective map to the treasure; many obstacles threaten to derail their progress. We interviewed these “global intrapreneurs”—those that walk the middle ground between creating social good and doing it on behalf of a mainstream business—and spoke to leading scholars and thought leaders to get a snapshot of the quest for The Fortune. What does this fortune look like? The recent Next Four Billion report (www.wri.org/thenext4billion) estimates the purchasing power of the BoP at US$5 trillion a year. But the real value goes beyond mere profit for large corporations. For example, Procter & Gamble’s Pur water purification product has saved thousands of lives over the last nine years. Several companies are testing the Cornell University-led “BoP Protocol,” a market-creation approach which emphasizes the importance of MNCs “becoming indigenous,” seeding an environment conducive for community wealth creation through entrepreneurship rather than just selling their products. Others, such as Nestle, provide microfinance for individuals to

buy a cart and offer a selection of products fortified to address local dietary shortcomings, for door-to-door sales and distribution. In doing so, they have essentially created thousands of poverty-alleviating micro-franchises in rural communities in Brazil and Cote d’Ivoire. The real fortune being sought is the simultaneous accomplishment of a trifecta of goals -corporate profit, relevant and sustainable social impact and local poverty alleviation.

The Questions at the Bottom of the Pyramid

To find out more about the roadblocks facing global intrapreneurs, we tracked some down in airports, in implementation sites, and in their offices. We wanted to find out what is working, and what isn’t. What are the challenges involved in reaching BoP customers? How are these challenges being addressed? I. Securing Internal Support: How can companies gather data affordably in order to make a compelling business case and develop accurate projections? If a company wished to launch a cleaning product in San Francisco, much of the necessary data would be readily available to analyze the business case. If the available data were inadequate, marketing research firms would be falling over themselves to secure a contract to fill the gap with focus groups and presentations. However, to gather equally relevant data from the different realities of the residents of Dharavi, the largest slum in Asia, is a different proposition, requiring different methods. Executives have expectations about what information they will be given to make business decisions. According to Justin deKoszmovszky, Strategic Sustainability Manager of S.C. Johnson, publicly available data is often too high level to be useful. For a social intrapreneur, though, budgets often do not allow the pursuit of additional information. This lack of data limits the ability to make the case for further funding; it is a vicious cycle. Even where adequate external data has been secured, for some BoP social intrapreneurs it is unclear where the goal is. CJ Fonzi, who led the field team on an innovative DuPont BoP initiative in 2008, notes the challenge in measuring profitability for BoP projects in their early stages. “Do you calculate the financial bottom-line with US-based management support or without?” pondered Fonzi. “For many initiatives, profitability with all costs considered will not be achieved until large scale distribution has been coordinated and/or the product team has been localized.” Until that stage, the difference in corporate cost structure of England versus Ivory Coast is just too big a hurdle to overcome. II. Testing on a Budget: How can we run pilot programs at an affordable cost with low-margin business models? www.beyondprofitmag.com

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INNOVATION Clearly, four billion people spread over more than a hundred countries do not have identical needs or buying habits. Taking time to understand the local environment and co-create or customize products, services, business models and business processes is essential. Yet, how does a company do this on a tight budget? As Nestle seeks to grow its excellent door-todoor distribution network beyond 9,000 women in two countries, and S. C. Johnson takes its community cleaning programs beyond Kenya and into new markets, how can budgets be kept as lean as possible? To some extent, some of us in the emerging BoP Industry may be guilty of a similar kind of impatience that we see in corporate culture itself. Erik Simanis reminded us that it took Muhammad Yunus seven years of trial, error and refinement on a small scale before it was deemed ready to accelerate the growth of the much-celebrated Grameen microcredit model. Once proof of concept is achieved, it is much easier to secure the necessary resources for expansion. In addition, there are opportunities for implementation partnerships to be formed to localize cost structures while benefiting from a greater understanding of local realities. III. Patience: How can we balance corporate pressures for profitability with commitments for impact in the community? The budget squeezes inspired by the international financial crisis have driven the questions at the bottom of the pyramid toward the top of the CFO’s agenda. Yet, success in engaging these new markets requires patience. The pioneering nature of the work means that estimating timelines can be very challenging. This ambiguity – and the lack of understanding within the mainstream business community- makes BoP business lines easy targets for corporate strategy divisions looking to cut costs. The market of the poorest people in the world remains relatively untapped. Even in India’s microcredit success story, access extends to just 10% of the 700 million eligible borrowers. Within this number, the poorest 5% are considered “Ultra Poor,” falling outside the scope even of microfinance. Achieving scale in a meaningful way in markets of this size and complexity will necessitate the patience for innovation to blossom in products, services, business models and business processes – patience that is hard to find in the current tight budgetary environment. The lack of patience may stem from an inappropriate paradigm, suggested Cornell University Professor Stuart Hart, whose research and work with Prahalad inspired The Fortune of the Bottom of Pyramid. “Companies pour millions of dollars into technological R&D every year and offer the supportive environment needed to make breakthroughs,” Hart says. “But this understanding of the patience required seldom extends to innovating new business models and processes.” 40

beyond profit may/june 2009

In fact, the mismatch between the patience required to pull off this kind of transformational market building and the fast, results-driven culture of large corporations was possibly the largest overarching theme running through our interviews. There is another side to the story, however. It is true that some initiatives are losing the corporate battle and being canceled before reaching fruition. Yet, the biggest microfinance institutions report that they continue to be approached with partnership offers by several large companies each week, clearly lured by the seemingly ready-made demand-aggregation network of millions of potential customers. Therefore, while it would seem that individual programs are threatened, in principle at least, the quest for the Holy Grail at the bottom of the pyramid remains appealing. IV. The challenge of growth: How can we scale while adapting the product composition and its delivery mechanisms to the needs of each local community? Ted London, Director of the BoP Initiative at The University of Michigan’s William Davidson Institute and faculty member at the university’s Ross School of Business, named ‘achieving scale’ as a top challenge facing the BoP field today. Tatiana Thieme, a BoP Business Anthropology consultant and Cambridge University PhD student studying this area, highlighted an important open question: “Just because products and services have been developed for a particular market and successfully piloted does not mean that it will translate equally well to another market where the infrastructure, community structures and local dynamics are different.” Examples of projects that have achieved profitability through scale are sadly few and far between. Professor Paul Hudnut of Colorado State University and Bainbridge Graduate Institute articulates the “4 Cs of BoP Scaled Products: Cigarettes, Coca Cola, Condoms and Cell phones.” So, can scale consistently be achieved with products that create relevant social impact? A good place to start is in integrating appropriate impact assessment methods from Day One. As Ted London, whose new Impact Assessment framework will be published in the May 2009 edition of the Harvard Business Review, correctly noted, scaling without having a good estimation of the effect of your actions is both, irresponsible and counterproductive. Hart suggests that, to some extent, swifter scaling is a question of timing. For situations where the market has been seeded and there is general acceptance of the product, more rapid growth through access points such as microfinance institutions or internet kiosks may be possible. In these situations, a new question arises: who can be an appropriate partner? For Procter & Gamble, a social marketing model in partnership with local NGOs such as health clinics or schools has


INNOVATION proven most effective until now. In addition, there are dozens of candidates among the ranks of microfinance institutions in many larger countries. But all of them are not equally equipped in terms of market reach, organizational culture, process and capacity to help reach potential clients quickly and effectively. There are, however, no short cuts to the bottom of the pyramid. The identification and structuring of the right partnership or technological platform at the right time has the potential to accelerate the rate of return of simultaneous profit, local wealth generation and social impact. Until then, it will be more of the same - visiting communities, village-to-village, to assess their needs and buying patterns. Indeed, several companies and thought leaders we spoke with emphasized the importance of adapting product composition, size and cost structures to the needs of the local markets and the value that it brings to these communities. Our pioneers will be learning, innovating and customizing while continuing to make the business case to their corporate bosses.

Looking Forward

In the final analysis, significant challenges clearly remain in a field that is still only starting to gain definition and order. Thousands of little fires are lit and continue to burn even in these times of economic difficulty. But building business models and processes to achieve simultaneous profit, social impact and poverty alleviation on a large scale will require skill, innovation and patience from pioneering global intrapraneurs and companies. For example, Procter & Gamble’s PUR clean water initiative was struggling to find its way after four years as a for-profit venture, its track record characterized by relatively low penetration and large losses. A change of business structure to be non-profit opened gateways to additional funding streams and its reach grew dramatically. Five years later, Dr. Greg Allgood, Director of the Clean Water initiative at P&G, informed us that their progress has been such that if the company made a slight adjustment to the price point now, it could be a profitable business line. Procter & Gamble, however, is very clear that the total benefits of the program—employee motivation, stakeholder relationships and as a means to learn about BoP distribution strategies— far outweigh any profit that would be generated. Clearly, incubation takes time and dilemmas remain in identifying the most appropriate business models for each particular product, service and market. Possibly the greatest hope for the future, therefore, may not lie with isolated initiatives. The best equipped may be corporations that embody a higher form of corporate responsibility. Unsurprisingly, those who have seemingly made the most progress in answering the questions at the bottom of the pyramid are those who have been trying for the longest time. They are also the companies that have most integrated business at the BoP into the heart of their companies and the mainstream

Successful Partnerships at the BoP

British Petroleum India Energy Ltd. Partners with Swayam Shikshan Prayog (SSP) British Petroleum (BP) realized that solving the energy problem of rural India can be a profitable business proposition. It partnered with Bangalore-based Indian Institute of Science to develop a low-cost, smokeless cooking stove that runs on pellets made from agricultural waste. The stove, called Oorja, meaning ‘energy’ costs INR 675 and provides a lowcost, clean, fuel-efficient and safe solution to the energy needs of rural Indian kitchens. Oorja is sold through selected SSP clients (Jyotis) who first purchase the stove and pellets in bulk and retail it from their homes to the community. The BP pilot at SSP began in August 2006 and 15,000 stoves were sold by the end of the year, with a turnover of INR8m (US$160,000). Danone Poland Three years ago Danone Poland – established in 1992, part of Groupe Danone, a leader in the global food industry – developed a breakfast product that has high nutritional value for children and is affordable for low-income consumers. A milk porridge product based on semolina and milk, Milk Start is enriched with vitamins and minerals. The project team established partnerships with a state child health and nutrition organization, Poland’s largest manufacturer of instant products and the country’s largest food retailer. The partners committed to offering the lowest price possible with the highest nutritional quality. The collaboration brought many innovations, including economical packaging for singleserve sachets to drive down production costs and increase accessibility. Milk Start was launched in September 2006 and reached sales of more than 1.5 million sachets by the end of 2006, including about 33,000 households with children under the age of 15.

of their corporate strategies and philosophies, not as a side program or one-off initiative. Erik Simanis notes the varying importance of business-level, country-level and corporate level internal support on different kinds of BoP projects and their stages of implementation. Further, these projects need to be sustained and nurtured throughout their lifecycle. It is this degree of commitment that creates the environment and culture necessary to incubate patiently. To a great extent, financially sustainable and integrated BoP business lines are the pinnacle of truly sustainable and strategic Corporate Social Responsibility. Answering the questions at the bottom of the pyramid may be the key to ushering in a new era of capitalism which generates profit, offers wealth-creation opportunities for the poor, spreads products to reduce sickness and spreads education around the world – welcoming billions of people to participate in a more inclusive, sustainable global economy. The thousands of little fires lit by corporations, entrepreneurs, academics, governments and non-profits may yet become an blaze that will change the world. Chris White is a business strategy consultant with Intellecap. For follow up questions, please contact Devyani.Parameshwar@intellecap.net. www.beyondprofitmag.com

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PHOTO JOURNAL | William’s Windmill

William Kamkwamba built his first windmill when he was 14. Here he is, pictured on the top of his windmill, doing some maintenance work near his home. William’s windmill is a part of the AfriGadget project which explores solutions to everyday problems that Africans face through indigenous knowledge and out of the box innovations. The propellers are made of plastic pipes supported by sticks so that they should not bend when the wind is strong, and placed almost vertical to the direction the wind is coming, unlike most windmills where the propellers directly turn the spindle connected to the turbines. William added three pulleys to his machine to increase speed and generate more energy. The last pulley of the three is connected to a bicycle wheel. When this wheel turns, it turns a generator which produces electricity. William was a TED fellow in 2007. Read his blog for inspiring stories about making things work in rural Africa. http:// williamkamkwamba.typepad.com/williamkamkwamba/ Want to know more about AfriGadget? Visit: www.afrigadget.com


Photo: Tony Fischer, Carpe Diem Photography

Can We Teach Social Entrepreneurship? Greg Dees, co-founder of the Center for the Advancement of Social Enterprise (CASE) at Duke University’s Fuqua School of Business has been called the “Father of Social Entrepreneurship as an academic subject.” Indeed, he has been observing, studying or working with the field for nearly 30 years, longer than many budding social entrepreneurs have been alive. Beyond Profit’s Managing Editor Lindsay Clinton talked with Professor Dees recently about using academia to develop the talents of social entrepreneurs, US President Barack Obama’s role in advancing social innovation, and how developing countries can build a supportive ecosystem for social enterprise.

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TORCH BEARERS

Beyond Profit (BP): As the so-called “Father of Social Entrepreneurship as an academic subject” you advance entrepreneurship through formal research and study. How important is the relationship of academia to developing social entrepreneurship? Dr. Greg Dees: Academics contribute to the field in at least three ways. Through research, something that can be done in partnership with practitioners, we can develop knowledge in a more extensive way than is possible for individual practitioners. We’re able to study large numbers of cases in different settings, find the patterns, draw out the lessons, frame them, and share them. When we do this well, the findings are useful for social entrepreneurs, investors, and policy makers. Through education, we open up new possibilities, particularly for young people. When I was in school in the ’70s, people were doing social entrepreneurially things, but there was no concept or term for it, and no courses on it. Now students see it as an option, because we have the concept. The third thing that academia does is to validate this concept more broadly in the eyes of society. Once something is accepted as a subject for academic research, you start to see it more in the media, and policy makers take it more seriously. For example, centers on social entrepreneurship at major universities such as Duke, Oxford, and Harvard signal the importance of this concept and the practices associated with it. BP: A quote from you on SocialEdge, the Skoll Foundation’s blog, reads, “Progress in the social sphere depends on a process of innovation and experimentation…an active, messy, highly decentralized learning process.” Can you teach something as messy as entrepreneurship? 44

Dees: Even a messy process works better when the participants are knowledgeable. Nobody is born knowing different financial strategies for supporting a social venture, the key challenges of scaling a social venture, or what has worked to improve early childhood education in developing countries. Social entrepreneurs are more likely to be effective when armed with be best knowledge that can be gained from prior messy experiments. That’s a large part of what we do when we teach.

A supportive infrastructure includes financial, human, intellectual, social, and political capital. Basically, we need institutions to match social entrepreneurs with appropriate kinds of funding; institutions that attract and develop the talent that social entrepreneurs need to do their work well; organizations that will develop and share the knowledge that is necessary for entrepreneurs to be effective; and mechanisms that allow social entrepreneurs to connect with people who are relevant to their success.

We’re not “teaching” them to have the personal characteristics required to be a successful social entrepreneur any more than a music teacher teaches the personal characteristics to be a gifted musician. However, good teachers do more than “teach.” They also coax, encourage, inspire, reward, and model the kinds of characteristics associated with success.

A supportive environment doesn’t mean that you walk in a door and someone hands you money. It means you have an opportunity to access the capital you need—but on a competitive basis. Ease of access is important, but so is rigor and discipline.

Though we don’t teach courage, for instance, we can inspire potential social entrepreneurs to act with courage by exposing them to people like themselves who have started social ventures. A teacher can draw out the potential of a student to be a social entrepreneur and most human beings have that potential if they want to exercise it. BP: In India, there is a perception that there isn’t a supportive framework for social entrepreneurs. The government doesn’t provide much support and many of the available networks are not necessarily providing the appropriate tools. What does a supportive social entrepreneurial ecosystem look like? Dees: In the business world, rather elaborate structures have been developed to support entrepreneurs and their ventures. There are funding options, consulting firms, business publications, and networking organizations, etc. We don’t have nearly as much of that for social entrepreneurs, even in the U.S.

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Beyond capital infrastructure, we need public policy officials who will be creative and thoughtful about creating the right environment, including appropriate legal forms of organization, tax laws, and regulations. A simple example of where policy can make a huge difference was Grameen in Bangladesh being permitted to operate as a bank and take savings deposits. This required public policy action and it has been essential to creating the kind of funding structure that has enabled Grameen be completely independent from outside funding for the last decade. MFIs without the ability to take savings deposits have had a much tougher time achieving financial independence. And there are a number of other important supportive factors: media that understands and covers social entrepreneurship, corporations receptive to partnering with social entrepreneurs, and a culture that encourages private initiative to solve social problems. BP: The UK has the Third Sector


TORCH BEARERS

Cabinet Sector office, which supports development of social enterprise in the UK. What has President Obama proposed to do in the US in order to support social enterprise? Dees: There is strong reason to believe that President Obama will create a White House office on Social Innovation or something along these lines very soon, if not by the time this interview is in print. I would not be surprised to see the Obama administration propose a social innovation fund that might require matching funds from the private sector. Several conversations are underway about how such a fund should function and who should control it. BP: Speaking of the Obama White House…they are pretty busy at the moment juggling the needs of ailing banks and insurance companies. What effect do you think the current economic crisis will have on social enterprise? Dees: It is having a ripple effect in economies around the world, and is putting stress on people, businesses, and governments everywhere. As a result, there is speculation that a much larger number of people will fall into poverty in developing and developed countries. This increased need will create pressure for more innovative solutions and more resilient business models for addressing social problems. Everyone is going to be looking for more ways to leverage their limited resources, talent and skills, and one way to do that is to partner with social entrepreneurs. Governments are going to be strapped for cash and will look to social entrepreneurs to deliver social value, and businesses are going to be looking for new sources of revenue, including in base of the pyramid markets. Of course, organizations that are heavily dependent on major foundation funding are going to struggle, as endowments shrink. Many in the founda-

tion world say the worst is yet to come. If tight money forces people to be more disciplined, it is not completely a bad thing. It will heighten performance assessment and evaluation. BP: Where do you think the sector will be in ten years? Dees: Ten years go pretty quickly. I have friends who are impatient for rapid change. The current crisis might work to accelerate the change, but changing the basic paradigm for solving social problems will take time. In ten years, I do think we are going to see much more of a common understanding and knowledge of the role social entrepreneurs can play in creating a healthy vibrant society. Leaders are going to recognize that social entrepreneurs can serve as a powerful learning laboratory for society in terms of how we might solve problems, and we’ll see them get more recognition. That’s going to play out in the way that governments relate to social entrepreneurs. We’re going to see experimentations with “government by network,” or decentralized governance, which is an attempt to serve public objectives through a variety of institutional structures, including social entrepreneurs. We are also going to see businesses experiment with social entrepreneurship. Of course some of these experiments will fail, but some are likely to change the way businesses operate. I would like to believe that we’ll also see a breakdown in the old way of thinking that organizes institutions around legal frameworks. It used to be that the social sector was synonymous with nonprofit organizations. I hope we can move past the old simple categorization of three sectors—business, government or nonprofit—and just talk about organizations in terms of what they are trying to accomplish. The problem is that people

associate “social” with “nonprofit,” and nonprofits with charity and that’s not really the image we want to convey. I agree with Muhammad Yunus, in his book Banker to the Poor, that charity doesn’t usually solve the underlying problem. And while we may need it from time to time, we also sustainable solutions. I hope that people will start to think about social entrepreneurship as a problem solving mechanism, not just some variation on charity. BP: Yunus has become an icon not only for microfinance, but also for social entrepreneurship. Are there any other people that you think should be up there with him, as a mentor? Dees: There are so many amazing social entrepreneurs that it is hard to single anyone out for all-star status. Of course, Bill Drayton has long been a mentor to many of us in the field and a social entrepreneur in his own right. Fazle Abed, if you want to take another Bangladeshi, has done phenomenal work. Abed’s organization, BRAC, doesn’t get the kind of recognition that Grameen gets, but it does phenomenal work, and has a long track record of entrepreneurial ventures. In the U.S., Wendy Kopp, founder of Teach for America, is often cited as a stellar social entrepreneur. However, I think it is a mistake to simply make heroes of the visible successes in this field. Many grassroots social entrepreneurs are doing amazing work. And social entrepreneurship is essentially a team sport. We need heroes, but most of the heroes I know would be the first to tell you that they do not do it on their own.

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MEDIA HUB

SCREENSHOTS See what social entrepreneurs are up to around the world through five documentary films. Asako Matsukawa reports. Combating Land Flight in Morocco featuring Rachida Izelfanance Global 3000, Deutsche Welle, 2009

This short documentary produced by a German television company, Deutsche Welle, tells the story of Rachida Izelfanance, a young Moroccan woman who was born and raised in France. She has now set out to work towards the development of her motherland, Morocco. She buys cactus fruit from the farmers and sells its extracted oil to the European cosmetic market where the oil is in high demand. Her quiet, yet convincing narrative comes across in the slow, steady development of the plot, which lets you steep in her determination. Rachida’s sturdy principles, based on the protection of the natural ecosystem and self-sustainable community development, underlie her business practices. Her efforts are slowly bearing fruit: today more women in Morocco have stable jobs and are able to keep their children in school.

Photo by Allie Caulfield

Watch it: www.beyondprofitmag.com/links/film1

The Healthcare Franchise NOW, PBS, 2007 The first part of the film exposes the horrible reality of the health care system in rural Kenya, where the majority of the general public does not have access to quality medicines, causing millions of preventable deaths in the country. A group of American consultants who specialize in business franchising is ready to tackle this problem. Creating a franchise network for the healthcare system may sound unrealistic, however, the principles of franchising—namely the standardization of quality, consistency and scale—have proven to be a possible solution to bolstering Kenya’s foundering health care system. The question is, “Can American corporate values in franchising align with the humanitarian spirit of local practitioners?

Watch it: www.beyondprofitmag.com/links/film2 46

beyond profit may/june 2009

Photo by Paul Evans


MEDIA HUB India – Design Like You Give A Damn Frontline World, PBS, 2008 The power of design for comfort, practicality and aesthetics can make incredible contributions to community development in the developing world. In fact, those who live in developing countries who are closely tied to community life are more vulnerable to natural calamities, as well as effects of environmental degradation. As a result, they need well-designed architecture more than most. This story is about architects who unleash their untapped creativity for poor communities, pursuing personal meaning and satisfaction in their profession. The drawings and prototypes of innovative architectural designs will leave the viewer thinking entrepreneurial thoughts: “How can I use my skills for social good?”

Watch it: www.beyondprofitmag.com/links/film3

The Play Pump: Turning Water into Child’s Play Frontline World, PBS, 2005

Trevor Field, a retired advertising executive, has embarked on a new adventure that has brought about colorful smiles to millions of children and adults in South Africa. Having seen a number of African women burning up their time just fetching water everyday, and innumerable deaths caused by a lack of access to clean drinking water, his “Play Pump Water Project” invented a children’s merry-go-round which pumps up underground drinking water as kids spin. The fusion of his corporate expertise and his passion to create a bright future for these African children demonstrates the essence of social entrepreneurship. It’s all very inspiring even if you already know about the concept of play pumps.

Watch it: www.beyondprofitmag.com/links/film4

Running the Sahara

Director: James Moll, LivePlanet and Allentown Production, 2008 One morning a few hours before sunrise in a coastal town in Senegal, three professional runners set out for an unprecedented journey which resulted in extremely rigorous but life-changing 111 days. The chronicle of this quest, narrated by Academy award actor, Matt Damon, takes you through the ups and downs, fatigue, solitude, joy and unique rewards that three sturdy men encounter during the run. Born out of this project is an interesting initiative called H2O Africa Foundation. One of it’s goals is to build wells for drinking water along the route they ran. Entrepreneurial spirit is the backbone of this synergy which is driving the partnership between an expedition, a feature film and an integrated charitable trust.

Watch it: DVD available for purchase at www.runningthesahara.com/ www.beyondprofitmag.com

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GURU

What I Didn’t Know Then…

Stories of lessons learned from entrepreneurs around the world. I didn’t know…what an Entrepreneur is (or that I became one!)

- Nadia Wassef, Co-Founder, Diwan Bookstores

tion of culture. Buying a book became a quality retail experience - a revolution in Cairo, Egypt.

Seven years ago, my sister and I teamed up with two friends to open a bookstore—a place that applauded and encouraged the production and consump-

The first month we opened, I hoped that we wouldn’t close immediately. After the first year, I aspired to break even. Five years later my appetite had scaled. Today, I realize that I am an Entrepreneur. Now, more than wanting to share reading with others, I am driven by the thrill of creating a need in a market, filling that need, and as a result—altering

- Sam Hutchinson and Josh Adler, Founders, Prefix Technologies, a software solution for magazine publishers

Our key lessons have been around focus and guidance. Focus on your own ideas and goals within an industry that you’re passionate about. We began by responding only to customer demand with our specialized services which derailed our in-house product development. It is an easy trap to fall into as the money early on is very good. However, you will eventually need to invest in your own products and core strengths to build a truly unique and profitable busi-

people’s lifestyles. We are opening our seventh outlet and we currently employ 205 people. In two years I want to employ 400 people and have a total of 22 outlets. It isn’t a culture of “more” that captivates me; it is the way that a good business can change the people around it. Our passion for what we do enables us to be creative and sustain the pressures of being women entrepreneurs in a developing country. Being an entrepreneur is about deciding to change the world around you.

We didn’t know…how to focus and or value guidance ness. We are now highly focused, but wish we’d done it sooner. More recently we’ve discovered that you don’t need to do this alone, which is the way most entrepreneurs choose to operate. There are support networks and organizations especially for entrepreneurs all over the world. Seek them out! The benefits we’ve seen since using them cannot be measured for our growth as individuals and for the business.

I didn’t know…the legal ecosystem

- Kavikrut, Founder, Mobile Medics Healthcare; now Business Manager, Piramal eSwasthya, a rural healthcare project

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I faced many hurdles on the way to launching my rural healthcare venture, Mobile Medics. Although the company was born out of an international award winning business plan, we became aware of a legal complexity only during on the ground execution. The problem: Indian laws prohibited us from selling drugs off a Mobile Medical Van. Only after months of researching hundred pages of laws, analyzing various medical supply chains, and talking to legal experts, we solved this problem by designing an innovative drug delivery model that was both legally and finan-

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cially accountable. Overcoming this challenge boosted the team’s confidence but the launch of the pilot was delayed by three months. This meant more time and money, two of the most important factors that startups depend on. We passed the business plan through filters of profitability, operational feasibility and market acceptance, but not legal viability. Entrepreneurs should not only design financial models, operational processes and market strategy but also thoroughly understand the legal environment that they are stepping into.


GURU

Sounding Board As a young social entrepreneur I am constantly struggling with the issue of branding. We are an innovative courier service that employs low-income deaf adults in Mumbai. As soon as corporate clients hear that we employ the deaf only, the first thing that comes to their minds is that we are a non-profit. We aren’t--we are a for-profit business. Eventually, we will be a hybrid, and will have a for-profit arm, as well as a foundation that will work on issues for the deaf--but even then, they will be separate. How can I send a clear message to prospective clients that we are a professional, efficient player in the courier business? - Dhruv Lakra, Founder/CEO, Mirakle Couriers Skoll Scholar, 2008

Shari Berenbach is the CEO of Calvert Foundation where she has raised over $170 million from investors to help underserved communities around the world.

John Elkington is a Founding Partner and Director of Volans. In 2004, BusinessWeek described him as “a dean of the corporate responsibility movement for three decades.”

Dr. Harish Hande is the founder and managing director of SELCO-India, which provides sustainable energy solutions and services to under-served households and businesses.

Shari suggests

It is important to help people to get past their prejudices and biases that people who are hearing impaired are unable to excel in other arenas, or that non-profits cannot be counted on to provide reliable professional services. Please consider, however, that organizations of all sizes (both for-profit and non-profit) struggle with branding! My advice would be to concentrate on a simple, compelling message. Since you are advocating for the deaf, perhaps a fun way to spread the word about your organization would be to use the hand signal for “we deliver” along with the words, and post this around the city. When you have a strong, easy-to-understand message, it will be easier for current and potential customers to understand and remember what you do – and hopefully recommend you!

John suggests Branding is about building a powerful set of expectations in your customer’s head – expectations that persuade those considering whether or not to buy your product or service and then delivering–in every sense. The fact that you are only employing deaf people, while it may be highly commendable, is not a commercial strength. It is a distraction from the business the customer wants to do with you. Very few customers will be willing to think in terms of a double bottom line, let alone a triple bottom line. They want to get things from A to B. If I were in your shoes, I would bend over backwards to persuade current and potential customers that I could meet their needs in something like the following sequence. We’re Fast. We collect and deliver where and when you want. We’re reliable. We run rings around the competition in terms of meeting the needs of our most demanding customers. We’re secure. We are the first choice for clients who want sensitive information protected throughout the collection and delivery cycle. We’re cost-effective. We know you have other choices, so we provide you with a service that puts a smile on your accountant’s face. Oh, and then there’s another part of the story. Our values. We keep it quiet, but we are a globally recognized for-profit, social enterprise that employs highly skilled deaf people to help customers meet all the above objectives, every time.

Harish suggests

Concentrate on the business aspects such as delivery, punctuality reliability and the edges you have over other traditional courier services. Do not emphasize the fact you are employing deaf people - you are not asking for sympathy - you are trying to compete and convey that you are better than others. You need not push for people to think you are a for-profit or non-profit - your work and the results should destroy that myth sometime later. But, have patience on that. I still get asked the question after 15 years. www.beyondprofitmag.com

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CLUB HOPPING

Social Entrepreneurship at Universities Whether thinking about starting an enterprise or wanting to be a changemaker, students are coming together to discuss pressing social problems and arrive at new solutions. Abhiyan Where: Indian Institute of Management-Lucknow, India Contact us: misterjain@gmail.com At the crossroads: Abhiyan was started in 1999 to connect entrepreneurs, venture capitalists, academicians and professionals. Organized efforts: We organize events, talks and competitions to enhance student-entrepreneur interactions. We have “Drona - The Gurukul,” an advisory board for virtual incubation and mentoring, and publish a quarterly newsletter “Enterpre.” Initiating interactions: We are associated with the Indus Entrepreneurs (TiE), National Entrepreneurship Network (NEN), Global Entrepreneurship Network (GEN), National Innovation Foundation (NIF), India. StudentBusinesses.com, Seedfund, Indian Angel Network, Barings Private Equity, techTribe, Nucleus, IndiaCo, Band of Angels, Capital 18, and e-cells and incubation cells of premier business schools and engineering colleges in India. What’s cool: Nirvaan is our annual national level event where start-ups and MBA and engineering students get an opportunity to procure VC & angel funding and mentorship. We also organize “Whackopreneur”, a creative idea contest; interactive talks & workshops. Social Entrepreneurship Club Where: Foster School of Business, University of Washington Chapter, USA Contact us: sammierayner@gmail.com From 0 to 50: A social entrepreneurship course in the MBA program in the fall of 2008 brought together the eight of us who wanted to do something in social entrepreneurship and later we expanded to fifty members. We attract all kinds: We have students from International Studies, Biology, Art and Political Science as members. Partnering beyond campus: Our partners are Washington CASH (Community Alliance for Self-Help), SeaMo (Seattle Microfinance network), Kiva Club (on campus), Water1st, Krochet Kids International, TOM’s Shoes, Village Volunteers, Mary Gates Foundation, and Global Business Center (on campus). Special engagements: We organized a speaker event with Kiva’s CEO and Founder, Matt Flannery on 5th March, in partnership with SeaMo. We will continue to assist CASH with their outreach strategy and will build on Lumana Credit, an offshoot of the micro-credit program we established in Ghana.

Social Entrepreneurship Club (NSEC) Where: NUST SEECS (School of Electrical Engineering and Computer Science), Pakistan Contact us: shamila.keyani@seecs.edu.pk Integrate to ideate: NSEC is a platform where students identify social problems and together they find innovative and sustainable ways to solve them. Socially responsible and relevant: We are working with UM-Healthcare Trust on a “tele-healthcare” project and with Brightspyre (Pakistan’s online job portal) to arrange seminars, career counseling sessions and startup coffee insider sessions. STEP (Special Talent Exchange Program) and NSEC are working on conducting seminars and skill training session on people with disabilities. We also collect waste paper from university and get it recycled in a paper recycling plant, DIU. Health..for us and for the environment: We are organizing a medical camp as part of the tele-healthcare project, lady health workers’ training program, seminars to raise awareness of physical disabilities and social and environmental issues. 50

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JUXTAPOSE

A Roof Over Their Heads T

he poor and underprivileged exist in varying degrees of relativity in every society, be it in the developed or developing world. With global dialogue, constructive solutions are created to combat this societal inequality in all cultures and nations. Juxtapose takes two social initiatives, one in a developed country and one in a developing country, and highlights the commonalities and cohesion among them.

Brad Pitt and Make it Right: Providing Hurricane Katrina Victims with Homes

Monitor Group: Low Income Housing Solutions for Urban India

In August 2005, Hurricane Katrina devastated the city of New Orleans and the lives of millions of Americans in the process. It was the greatest natural disaster in US history, causing an estimated US$81.2bn in damages and much more in human suffering.

One of India’s biggest challenges lies in its social inequities. In no other field is this disproportionate divide more visible than in access to affordable housing in urban India.

When actor Brad Pitt visited the Lower Ninth Ward of New Orleans for the first time after the storm, he was shocked by what he saw: the remnants of people’s lives strewn across the streets and an entire neighborhood torn apart and turned upside down. The Lower Ninth Ward is one of the richest cultural communities in America and was, until Hurricane Katrina, a crossroads of families, music, and social interaction. Brad Pitt and Make It Right have sought to build something better than what existed before. Pitt understood instinctively that a New Orleans rebuilt without the Lower Ninth Ward would never be whole. With an emphasis on high quality design, while preserving the spirit of the community’s culture, Make It Right is currently building a neighborhood of sustainable and safe homes. The project, launched in 2007, is building 150 state-of-theart, energy-efficient residences. Solar panels adorn the roofs of the new houses. Concrete columns hoist some of the homes off the ground, to provide some degree of protection from flooding. At least 91 of the proposed 150 homes have already been sponsored, and the first family moved into their eco-friendly Make It Right home in December 2008. More information can be found at www.makeitrightnola.org.

In urban India, an estimated 21 million people struggle to find adequate housing facilities. With 80% of urban households earning less than INR12,000 (US$240) a month, a majority of city residents cannot afford to own their own home. Lack of government spending, inadequate or inaccessible financing options, and a limited supply of low-cost housing have resulted in many low-income households living in abysmal, often inhuman, conditions. But, according to the Monitor Group, there is a way out. Market-based solutions offer a way to empower and enable lowincome households realize their dream of owning a home. Over the course of its research, Monitor interviewed over 1,000 potential customers, 50 developers, 20 financial institutions, 10 microfinance and specialized lending organizations, and conducted an investigation of property prices in urban areas. Even with current land prices and construction rates, Monitor has found it possible to build housing that low and middle-income urban customers can afford, given access to credit, and that developers are willing to build. Specific details on the models and more information on Monitor Group can be found at www.monitor.com. www.beyondprofitmag.com

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CLEAN AND GREEN

Green with Envy

A Look at 3 New Models for Creating a Cleaner Planet Husk Power Systems, Charlottesville, VA, USA www.huskpowersystems.com

Husk Power Systems (HPS) provides low-cost power on a pay-per-use basis that enables farmers to reduce irrigation costs by 45%, entrepreneurs to create businesses and increase profit margins, and households to dramatically reduce energy costs. The power behind this is the proprietary technology developed by HPS, which converts rice husk into energy. The technology, capable of producing between 35 to 100 kW of power, is currently being used by around 3000 villagers in India. Moreover the service increases productivity in villages as fuel doesn’t have to be procured on foot. Finally, HPS systems eliminate over 190 tons of CO2 emissions annually per village by replacing kerosene, diesel, and methane output with renewable sources. Credit: Lana Cease

SaafWater, Karachi, Pakistan www.saafwater.com

SaafWater is leading the way in clean, efficient and safe water purification solutions for rural areas. Using a network of SaafWater ladies who go door-todoor in their neighborhood, SaafWater distributes a simple Daily Capsule – a chlorine solution that can treat one family’s daily supply of drinking water. The ladies are individual, independent franchisees who buy the product at wholesale prices and sell them at a mark-up. The only requirement to be a SaafWater lady is basic numeracy and literacy, and a willingness to learn. The Karachi-based organization provides its franchisees with full training, a uniform and SaafWater Daily Capsules at a highly subsidized rate. Credit: Klearchos Kapoutsis

EcoPeace/Friends of the Earth Middle East, Tel Aviv, Israel www.foeme.org

EcoPeace/Friends of the Earth Middle East is a environment organization that brings together Jordanian, Palestinian and Israeli environmentalists with the objective of promoting a joint effort to protect the region’s environmental heritage, and to foster conditions for sustainable development that will create conditions for lasting peace. Some of their current projects include charting out a plan for sustainable development of the Dead Sea region, the revival of the Lower Jordan and other solar energy and climate change initiatives in the West Bank. EcoPeace/Friends of Credit: smile4camera Peace Middle East recently received a US$750,000 award from the Skoll Foundation to expand its activities in the region, and is a member of Friends of Earth International, the largest grassroots environment organization.

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beyond profit may/june 2009


QUIZ

What’s your EQ? Answers to the Beyond Profit Challenge (page 13)

1. Carbon dioxide (CO2). Most governments have begun to set norms for emission particularly for gases such as as CO (carbon monoxide), HC (hydrocarbons) and N2O (nitrous oxide). Euro norms refer to the permissible emission levels from both petrol and diesel vehicles, which have been implemented in Europe. The Euro norms require manufacturers to reduce the existing polluting Emission Levels in a more efficient manner by making certain technical changes in their vehicles. Credit: Tim Frumbert

2. Bali, Indonesia. The Bali Summit was organized by the Government of Indonesia, and was notable for the “Bali Roadmap,” including the “Bali Action Plan” which charts the course for a new negotiating process designed to tackle climate change, technology transfer and reducing emissions from deforestation.

Credit: Sean McGrath

3. Carrotmobbing is a method of activism that leverages consumer power to make the most socially-responsible business practices also the most profitable choices. In other words, businesses are induced (the Carrot) to make positive changes – like installing solar panels on their premises or reducing their waste output - in order to get rewarded by hordes of customers (the Mob) who descend on the business to spend money there. View www.carrotmob.org and their fun video to understand the concept. Credit: John-Morgan

4. False. Wind turbines need only 20 kmph/12.5 mph to be cost-effective. However most wind energy is found at high altitudes where continuous wind speeds of at least 160 kmph (100 mph) are common.

Credit: Alan Cleaver

5. One metric ton of emitted carbon dioxide or other equivalent greenhouse gas. Signatories to the Protocol agreed to fix quotas on the maximum amount of greenhouse gases developing and developed countries can emit. Each government in turn is allowed to set quotas on the emission allowed by a certain business or organization. The trading of surplus credit is generally called carbon trading. Credit: William Marnoch

www.beyondprofitmag.com

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REFLECTIONS

No is not an Option

How I Became a Social Entrepreneur

listened to podcasts. I positioned myself to pounce on any opportunity that might wander within striking distance.

Striking Opportunity

“I would love to take on that challenge,” I proclaimed. “Oh, and sorry for eavesdropping.” I had walked by the open door of our European HR director, who was telling the director of our corporate foundation that he didn’t have time to set up a chapter of the foundation in Berlin. My interjection startled them. The HR Director was surprised, but he quickly realized that I could clear this project from his roster. His skepticism vanished. “Excellent,” he said, relieved. “You will do a great job!”

“To be honest, I think $25,000 is an arrogant goal,” a potential donor told me with a furrowed brow. I respected this man and his judgment, but in my mind the words “arrogant” and “goal” had no place together, especially when describing my fundraiser. “Audacious maybe. Perhaps unrealistic or even crazy,” I reasoned, “but can an objective actually be arrogant?” I paused. “Think of it like this: worst case, I fall short and help more kids than I would have otherwise; best case, I blow past this modest target.” Not amused, the man shook his head and walked away. I later convinced this same man to contribute nearly US$1,000 to my fundraising trek up Mt. Kilimanjaro in Tanzania. ‘Summit for Smiles’ attracted donors from 28 other countries who together gave a total of US$40,000 to fund cleft palate corrective surgeries for 155 children.

Getting there is Half the Fun

There are plenty of stories about incredible people who have selflessly addressed noble causes. I am not one of those people. I do this work because it makes me feel better than almost anything else. I want to dispel the notion that you have to be some sort of superhero to do social good. My move into social enterprise started from the farthest extreme of the social spectrum: corporate restructuring. I am certainly no saint. I used to tear businesses apart before I started helping put lives back together. My experience is evidence that anywhere is a great starting point: origin is less relevant than destination. I agree with Ralph Waldo Emerson, who said that the voyage of the best ship is a zigzag line of a hundred tacks. When I started I had no idea what I wanted to do, so I read, asked questions, 54

beyond profit may/june 2009

Let me be very clear: I had no idea what I was doing. Despite politics and skepticism, I built a team that could help me reach our goal of giving away US$50,000. Though none of us had experience in corporate social responsibility, we collaborated brilliantly. The corporate foundation had been unable to expand internationally and I took up the challenge to change that by leaning on my friends around the company to implement the well-documented structure we developed in Berlin. With persuasion and lots of late nights, teams formed in the Czech Republic, India, and Australia. These groups have pumped nearly US$1m into local communities since inception. Nothing magical here, just well timed eavesdropping and good people working hard.

Taking the Leap

These experiments with social change inspired me to find my own path to making change. I began searching for a worthy cause when a friend sent me an article about obstetric fistula. Initially moved, my research revealed an environment where my skill set could help. With no medical background and only a three week trip to Africa, I quit a promising career to start OperationOF, a social enterprise focused on obstetric fistula, a maternal health issue called affecting women in remote African villages. Totally nuts. I figured I would jump off the cliff and learn out how to fly on the way down. While I definitely could have been better prepared, I only know how because of my startup experience. If had to do it all again, I would start earlier. My advice to anyone interested in becoming a social entrepreneur is as follows: Believe in the improbable. You can do it. Be ready for your break. Enthusiasm prevails. You are only as good as the people who help you. Start now. Seth McSwain Cochran is the founder and executive director of OperationOF. He welcomes your questions and comments at seth@operationof.org


PHOTO JOURNAL | Living Water

Every year, the number of deaths from water related diseases is larger than those from wars and natural disasters. A lack of access to clean drinking water is a silent crisis experienced by the poor, and tolerated by those who hold the resources, technology and the political power to put an end to it. Water is the source of life with security, stability and dignity. The cost estimate to provide access to safe drinking water and sanitation to the world poor varies from US$9 billion to US$30 billion. It is not very difficult for the several billion dollars to be misused. What is really lacking is competent, consistent and responsible implementation. To learn more about Living Water International’s initiatives, visit http://www. water.cc/ Photo by Living Water International


Social Enterprise & Investment Forum 28 April 2009 Sankalp brings together social businesses and stakeholders sharing a common conviction that capital should be invested to create multiple bottom-line returns. The annual Sankalp Awards are also announced at this forum

A Must Attend for Enterprises & Investors

Showcasing hundreds of social businesses in action

100+ regional and international investors , business incubators, policy makers & corporates

Organizer

Multi-sectoral representation • Rural Innovations • Healthcare Inclusion • Education for All • Clean Energy • and more…

Stellar panelists and wide array of relevant sessions to choose from

Sankalp 2009 Lead Partner

Sankalp 2009 Associate Partners

Details on Sankalp 2010 will be announced in August 2009

www.SankalpForum.com


beyond profit - issue 1