Collaborations for the Next 3 Billion: Facilitating unusual alliances to launch & scale inclusive innovations
Inclusive businesses can increase their impact through collaboration
Healthcare innovator Moka Lantum, Founder of Microclinics Technologies, is preparing for a pitch to a large pharmaceutical company: The Nairobi-based startup provides mobile-enabled patient and clinic management systems to peri-urban and rural clinics and is on expansion course. The software developed by his company, tracks commodities in clinics and enhances availability, accessibility, quality and affordability of medicines in low income markets. The network of clinics and pharmacies as well as his “Blue Angels”, a network of trained youth that promote the service, can be an interesting distribution channel for healthcare and pharmaceutical companies and can potentially lead to cost savings of 30-60 per cent for 2.5 million customers.
However, information asymmetry makes partnerships difficult
Pharmaceutical companies have been following the uptake of such innovations with interest, as the data can be used not only to develop more targeted marketing interventions, but also to develop more targeted products. Moka hence has a clear value proposition for partnerships with healthcare corporates like Boehringer Ingelheim, Merck or Novartis; however, navigating these “elephants” has been challenging: “Finding the right person in a corporate can take up to a year. Often decisions are made not in Kenya but Germany or the US, where the headquarters are.” At the same time, corporates recognise the innovation potential in developing and emerging markets; however, they often lack the structures and mechanisms to engage with the startup economy.
Partnerships are needed to boost innovation for the 3bn
While there is a wide consensus about the potential of corporates and small and growing businesses in partnering to reach low-income households at the “Base of the economic pyramid” with products and services that meet their needs and aspirations, there are still 3 billion people living on less than US$2.50 per day. Innovations are needed to make healthcare, education, energy, financial services, water and sanitation, and other basic services accessible, reduce vulnerabilities and provide livelihood opportunities for the poor. While startups and small and growing businesses have the intent to create impacts through their business models at scale, they often are resource constraint to scale their model quickly. Corporates on the other hand, lack the agility that is needed to develop innovations for low income markets and to introduce and iterate products quickly.
Facilitating unusual alliances & creating an ecosystem to scale inclusive business models
In 15 years of working with small and growing businesses and large corporates in India & South Asia, Africa and South East Asia, we at the Intellecap & Aavishkaar Group have created an ecosystem that supports businesses that want to make an impact in low income societies with capital, knowledge and networks. Through our capital advisory business and own funds, we have channelized more than USD 600 million in high impact enterprises of different sizes. Our consulting and advisory team is helping startups, small and growing businesses and corporates to develop, pilot, roll-out and commercialise innovations that target the BoP. Through Sankalp Forum, we have created a powerful community of more than 25.000 practitioners. However, through working with corporates and small and growing businesses, we realised the need for an infrastructure that facilitates unusual alliances and high impact collaborations. Advise is required in identifying collaboration opportunities as well as partnership and engagement models, designing pilots, developing business and operating models of partnerships as well as scale-up of joint initiatives.
Collaboration for Impact Facility aims to create market infrastructure for partnerships
To fill this gap, Intellecap and USAID under the framework of the Partnering to Accelerate Entrepreneurship (PACE) Initiative are piloting a market infrastructure that helps to reduce the information asymmetry between corporates and small and growing businesses and innovators. The recently launched Collaboration for Impact Facility is a service offering that helps inclusive businesses to establish high impact partnerships. Launched in February 2016 at the Sankalp Africa Summit, we have gathered lessons over the past 6 months for the support ecosystem that we want to summarise in this article.
- Advisory on partnership engagement models
Corporates often start their engagement with other inclusive businesses with low-touch approaches that do not require long-term institutional commitment, but rather offer an opportunity to get to know a variety of innovators and test hypotheses for new business models at low risk. GE’s Healthymagination Challenge and their partnership with the Miller Center to accelerate mother and child innovations in Sub-Saharan Africa is one example of such a powerful engagement model. Our conversations with corporates in East Africa, India and South East Asia show that there is a need for advisory services for setting up and structuring such engagement approaches.
- Design and implementation support to set up accelerators
Corporates all over the world are increasingly interested to set up incubation and acceleration programs. Recently launched examples include an e-health accelerator program launched in Nairobi by Merck or the Barclays Rise program, aimed at identifying fintech innovations and among them specifically enterprises that increase financial inclusion. The trend of setting up accelerator programs is moving beyond the IT space into the hardware sector: Bosch in partnership with the Center for Innovation Incubation and Entrepreneurship in Ahmedabad and Dasra has recently launched a Healthcare Accelerator in India. This trend is a recent one: Of 105 corporate acceleration programs, 45 were established in 2015. While corporates are interested in setting up accelerators that source high impact innovations, many require support to design the acceleration program and align it with the strategic objectives of the corporate.
- Co-Creation support
An increasing number of corporates is interested “high touch” approaches to collaboration such as corporate venturing and co-creating inclusive business models together with innovators: Boehringer Ingelheim partnered with Ashoka do launch a joint Making More Health initiative, identifying innovative business models to provide healthcare to low income communities with the potential of later co-creating solutions. Unlike traditional innovation approaches, co-creation enables significant reduction in R&D expenses, fastens product development and opens up doors to new markets. However, corporates and innovators not only require support in discovering each other but also to develop a joint business model.
- Investment & integration advisory
An increasing number of corporates are looking to make strategic investments in high impact startups to gain insights into emerging markets and next generation technologies. In India, the Godrej Group has set up Omnivore, a VC fund with a corpus of US$ 50 million, focusing on innovative agri-startups that has already invested in 11 agri-startups. In the past months, we have seen an increasing interest of corporates to set up fund structures and explore strategic investment approaches. We hence see an emerging need for advisory services in the corporate venturing field, e.g. develop fund structures, sourcing enterprises and facilitating investments. The same is the case for acquisitions and strategic integration: Corporates recognise the need to acquire innovative business models to keep pace with disruptions. Advisory services are required that help to integrate innovations that are externally acquired.
As innovation cycles become shorter, unusual alliances become critical to create impactful solutions that can scale.
There is an increased acknowledgement that inclusive innovation require collaborations between corporates, startups and innovators. While corporates have deeper pockets for R&D, startups and small and growing businesses offer a way to identify new use cases for technology and test product and business model innovations much faster. For startups, corporates provide the opportunity to scale their innovations, leveraging resources, expertise and networks of their corporate partners. Efforts in the ecosystem can help to facilitate, accelerate and scale these high impact partnerships. Examples of ecosystem initiatives could include:
- Market places that help in the discovery of collaboration opportunities
- Technical assistance facilities that helps in the piloting of the collaboration models
- Seed-capital through Proof of Concept Funds provides risk capital and enables piloting of collaborations models
- Documentation of learnings of success stories and failures of collaborations
This blog is part of the September 2016 series on Inclusive Business Development Services, in partnership with the Inclusive Business Accelerator. Don’t miss the whole series on support available to inclusive business from practitioners, donors and intermediaries including Afrilabs, DFID, Endeva, EY and many more…
 Deloitte University Press, John Ream & David Schatsky, Feb 2016
Photo Credit: Moka Lantum, Microclinics Technologies