Editor's Choice

The Editor’s Choice blog is a monthly review of a top resource or report in inclusive business.  There are so many resources, documents, tools, reports, videos out there, it can be hard to know where to start.  We choose one that we like and tell you why we like it and who else should find it useful.   Until the end of 2017, Editor’s Choice blogs were written by Caroline Ashley as Hub Editor.   Going forward, they are written by a range of guest editors, both from the core team and from beyond.

Editor's Choice May 2014: Beyond the Pioneer

Results Measurement and Impact
Scale
Nepal
Global
12. May 2014

How long does it take for inclusive business models to become an industry at scale? And what support is needed? These are the questions at the heart of the latest Monitor report, Beyond the Pioneer: Getting Inclusive Industries to Scale.

The report is challenging not reassuring. It challenges industry facilitators - foundations, aid agencies, multi-laterals, non-profits, impact investors and governments - to intervene and to resolve the barriers that prevent inclusive business models scaling. The authors have found a few examples where scaling can be observed and draws out the story of each. But the message is that it is hard, complex, slow, and takes a combination of strategy, coalition and occasional dose of serendipity.

The three key messages are:

  1. There are examples of scale, but many more examples of inclusive business models that have not scaled.
  2. Scaling barriers are often not at the level of the firm itself, but in the industry ecosystem around it.
  3. Facilitators need to expand their focus from just building inclusive firms to building inclusive industries.

The sections that unpack existing cases of inclusive industries going to scale are among the most interesting. We all know about the growth and struggles of micro-finance in India, but Chapter 2 explores what happened in the quarter century between the launch of Grameen Bank by Mohammed Yunus in neighbouring Bangladesh and the famous industry woes of recent years. The number of players and partners whose experimentation, grant support or lobbying was critical is too high to count.

Another case study focuses on mobile money, not in Kenya, the home of famous M-pesa, but in Tanzania, where Safaricom has found it much harder to reach success at scale. Looking at what has constrained that success tells us much about the barriers to scale. As in some of the other cases, it was an ambitious, grant-funded intervention that broke a key bottleneck: a $4.8 mn grant to Vodacom to defray the cost of building mobile money distributors. The grant unlocked further investment by Vodacom and also built distribution channels on which others could build. It's an example of industry facilitation that doesn't come cheap, but does look to have been worth it.

If you are interested in mobile money, micro-finance, clean cookstoves, smallholder tea/commodities, low-cost healthcare, then you will enjoy the case studies for the stories they tell.

The authors divide barriers to scale into four types: barriers within the firm (eg lack of skills), barriers in the value chain( eg lack of credit rating services), lack of public goods (eg market information) and governmental barriers (eg inhibitory regulatory framework). Over 50 enterprises were surveyed for their own views of barriers to scale. The most commonly identified problem by far was lack of financing for customers, distributors and producers in the value chain. For firms engaging poor consumers the next most common problems were regulations, lack of distribution channels and lack of suitable labour/inputs. For those engaging poor producers, lack of suitable labour, weak sourcing channels and lack of hard infrastructure all featured strongly.

In The 4Ps of Inclusive Business, we depicted a ten year time line for a single business to go from inception to scale, based on experience of 40 inclusive businesses in the Business Innovation Facility pilot portfolio. In Beyond the Pioneer, the message is that time horizons should stretch beyond a decade or two. Certainly success can't be measured in project cycles of a few years.

Beyond the Pioneer, written by Harvey Koh, Nidhi Hegde and Ashish Karamchandani, from Monitor Deloitte, is a complement and obvious sequel to the earlier Monitor report, From Blueprint to Scale, which coined the term 'The Pioneer Gap.' That 2012 report urged philanthropic venture capital to support firms' transition from blueprint to validation so they are ready for investment. The new report looks at whether and why networks of firms are shifting to scale. There is a message for businesses - plan for scale and don't try to go it alone. But the main message is for industry facilitators, who are urged to step up. They are recommended to fund, advocate, collaborate, commit to local action on the ground, resolve barriers for the whole industry not just one firm, find a role that fits an external (not try to do everything), and finally to both commit and adapt: commit for many years but be flexible as things change.

There are interesting parallels to donor approaches around 'making markets work for the poor' (M4P) which also focus on the ecosystem around the firm. The latter focuses on identifying and catalysing interventions in how markets work that ultimately boost access and reduce poverty for poor households. The Monitor approach is simpler but broader. It takes as given that scaling inclusive business models is the end goal - the analysis is not on what change would work for the poor, but on what would scale the model that is inherently good at the Base of the Pyramid. Both models look across the ecosystem for how to make it happen (M4P with a rather unappetising donut, Monitor with a simple set of 4 concentric ovals). Monitor focuses strongly on a range of actors - certainly not just donors, but investors, multi-laterals, governments and companies too. My guess is that the clarity of their call to action will gain some traction and help these players to make stronger and longer commitments to working together in pursuit of industry scale.

More Information

Download the Monitor report from the Practitioner Hub resource library here

To read previous editions of Editor's choice, click here