Editor's Choice February 2015: How Successful Companies Reach the Base of the Pyramid
How do successful companies reach the Base of the Pyramid? This month's Editor's Choice is a handy guide by the International Finance Corporation (IFC) laying out a dozen strategies that have worked.
IFC has 400 clients incorporating the Base of the Pyramid (BoP) into their value chains, and this practical report draws out the specific tactics that they have used 'time and again' to source from BoP suppliers or sell to BoP consumers. Tactics that deliver value to risk-averse consumers, make financing and payment more feasible, or aggregate thousands of scattered suppliers are all covered. We can read how Roshan adds value-added services to its mobile telephony offer in Afghanistan, how Bridge Academies leverage data-enabled systems for scaling low-cost education in Africa, how Bankaool finances smallholder inputs in Mexico, and how Engro Foods aggregates milk from 300,000 dairy farmers in Pakistan.
It's a report in two unequal halves. First the challenge of sourcing from BoP suppliers (farmers) is covered. Three main challenges are identified as high transaction costs, inconsistent quality and unpredictable volume. The three main strategies or 'solutions' are aggregating suppliers, building capacity of suppliers, and helping farmers access finance. Each strategy has at least two tactics, and at least two good examples. The section ends with a particularly interesting 'insight' page, on how companies are using market insights to understand their BoP suppliers (who they are, whether they are satisfied) to help improve their sourcing and sustainability strategy.
The larger half of the report covers engaging BoP consumers. It follows a similar structure, but with a wider range of strategies and tactics. I've summarised them in the diagram here:
There are three reasons I like this report. The first is that the strategies and how they are categorised makes sense. There are always a million ways to slice or dice a set of recommendations. This report, with one set of strategies for sourcing from suppliers and three sets of strategies (relating to the product, distribution and marketing) for selling to consumers, will make sense to any business person dipping in.
Secondly, each suggested strategy is illustrated with one example and they are good examples. They are significant companies, in Latin America, Asia and Africa, all IFC clients, that appear to be succeeding at the BoP. More details on each example can be found in case studies.
Thirdly, it is neither light-weight nor a tome. The 44 pages are an easy read, no solution takes more than a page. But it does more than gloss over the well known principles that companies need to design innovatively, harness retail networks and facilitate payment and financing.
If I could ask for more, I'd ask for more recognition of the challenges involved. What I call a 'strategy' the report calls a 'solution'. That may be too strong a claim. The case study examples have used these solutions, but I don't doubt there were some challenges along the way, and there will be for anyone else adopting them. Perhaps the next report will be on the implementation issues that arise when such strategies, tactics or 'potential solutions' are deployed.
The report Shared Prosperity through Inclusive Business: How successful companies reach the BoP was co-authored by Eriko Ishikawa and Kathy Gaertner Mignano.
Read the blog 'Learning from what works' to find out more about the report.
Visit our Editor's Choice page to see the Editor's Choice blogs from previous months.