The Many 'I's of Innovations in Inclusive Business

Count the ‘I’s of “Innovations in Inclusive Business” and you might be tempted to conclude there are only five. Depending on your sense of humour you might even discover there are six or indeed seven. Recently, when the BIF Country Managers from Zambia, Malawi, India, Bangladesh & Nigeria came together, I learned there was more to such innovation than meets the eye.

Do companies deliberately set out to be innovative and inclusive? Was Humpty pushed or did he just have a great fall? As we review the portfolio at the end of the BIF implementation phase, who are the main drivers behindinnovations in inclusive business? The companies themselves, people at the base of the pyramid, donors and policy makers, consultants or a combination of these actors?

The argument goes that companies would only exert themselves in this way if they believe there is a substantial pot of gold at the end of the inclusive business rainbow. They are enticed if there are challenges in meeting (with what they currently have or deal with) new opportunities, existing or unexpressed market needs thus warranting the need to do it better or differently. We already know the agenda is strongly supported by policy makers and donors who want to leverage the power and reach of business in helping the poor Consultants in turn, very clearly see a new industry developing into which they can insinuate themselves for the long term more sustainably at an ever-increasing scale. but the question is what do people at the base of the pyramid see? Are they truly a part of this innovation or merely beneficiaries of it in some way at the end?

So, what are innovations in inclusive business?

Finding new ways to use what we currently have, or better and different ways of engaging what we currently deal with? For me both these scenarios describe improvements to the business model (which may or may not be inclusive). So, by the same token, innovations in inclusive business are less about inventions: creating stuff that never existed before (in isolation, as it is not really about products, processes, services, technology or ideas per se, but about what is done to the business model).

To me, innovations in inclusive business require companies to do things better, differently, by looking beyond what they currently have or deal with (sometimes suggesting a level of discontinuity). The discontinuity is easier to conceive by companies who are willing to set aside what they currently have or deal with, in their thinking at least, in order to see a greater and more desirable future than can be reached along current trajectories of their business model. The more the solution they discover goes beyond what they currently have or deal with, the moreinnovative they would have to be to pull it off.

So innovation is found along a continuum between incremental improvements incidental to the business model on the one hand and discontinuous improvements, intrinsic to the business model on the other hand. So, includingthe BoP, and working to align incentives across the value chain requires a certain level of innovation.

By now, I hope you would also start to conclude that innovations in inclusive business can lead all the way fromincremental impacts to transformative impacts depending on choices made by the company investing in such business models. The proposition being that those that are more transformative, with more discontinuity in the business model, are more likely to change the position and power of the BoP, and truly improve their position.

What does this mean for investment and risk? The financial outlay required to implement, innovative, inclusivebusiness models could be substantially more than that required to support incremental change. We also have concluded that looking beyond what a company currently has or deals with will take a number of strategic partnerships and relationships, which have to be established and managed.

Rolling out an innovative, inclusive, business model incrementally, telegraphs the blueprint to competitors who may have the resources to seize the initiative and scale it up whilst the big bang approach also comes with tremendous risk. Implementing innovative, inclusive, business models is therefore much more risky than attempting to tweak an existing model incrementally. Question is, just how rewarding could this be conceptually – is the game worth the candle?

Inclusive business by definition suggests commercial and other benefits to the company as well as commercial and social benefits to the BoP, both together. This can be an isolated investment in that just the company and a limited set of the BoP are impacted. When the solution put forward by a company not only impacts positively on its top and bottom line; delivers social and commercial benefits to the BoP but also overcomes some market or sector level constraints to do so, this integrated, innovative, inclusive, investment starts to be of a scale that could lead to systemic change.

Should it also incorporate changes at the policy level such as by attracting government subsidies for the developmental role played, the business model potentially becomes transformative.

I suspect the original proponents of inclusive business always had Integrated, Innovative, Inclusive, Investmentsin the business model in mind and this is the real scale at which they seek impact. If there were good adoption of this approach to innovation by business within one country, it would not be too much of a stretch of theimagination to see how the private sector could become the engine of sustainable growth.

At this point, if you were to ask me how many are the ‘I’s of innovations in inclusive business, my answer would simply be four.