Time for a fresh look at inclusive business
I remember the excitement in the early noughties when I first started hearing about big businesses such as Unilever, SAB Miller and Vodafone grasping the opportunity to reach huge numbers of people previously excluded from their supply chains. It seemed to be such a great win-win. Large companies – and multinationals (MNCs) in particular – necessarily work at huge scale, and the development sector was struggling to find solutions at scale. I was fed up with worthy projects that stopped when they ran out of donor money. Was inclusive business a magic bullet that could lead to a step change in helping people on very low incomes to access good quality health and education, clean water and nutritious food? I certainly hoped so.
Around this time, I ran a project for a company which had this vision. Looking back, however, we were all incredibly naïve about the challenges involved in turning a lofty vision into reality within the prevailing corporate environment. Worse than that, the vision itself was not based on the commercial rigour that the company applied as a matter of course to its core business initiatives. Unsurprisingly, we didn’t even get close to converting this vision into a sustainable business model.
Soon I noticed it wasn’t just the projects I worked on that were struggling: this seemed to be a trend. There were some successes, but even these began to be mentioned just a little too often to be comfortable that they weren’t just exceptions. Meanwhile, innovative social enterprise began to boom – which was equally exciting – but that promise of scale from existing larger enterprises still tantalised.
In 2019, some of us had perhaps reached a point where we could hardly remember why we found it all so exciting over a decade ago. Should we continue to support pilots that, though we were told were ‘successful’, failed to progress to become scaled enterprises? Replication became an issue: why weren’t the business models that did reach scale copied by others? But there were glimmers of light. Some companies were still committed, and visionary CEOs were ‘walking the talk’ on creating purpose-driven companies.
When DFID asked the Business Innovation Facility (BIF) to work more directly with MNCs we talked to people about why larger companies appeared to be struggling in the way I have described. The consensus was that this was often down to internal constraints within large companies. We decided to work with a number of partners to get a range of perspectives on this, and the reports in the Inclusive Business Boost series are the result.
I think the reports we are presenting have some great insights into these internal constraints. They also highlight what the companies that have remained committed to inclusive business are doing to create a supportive environment internally. They mix first-person case material illustrating what is working well in these companies, with shrewd observations from consultants with expertise in supporting companies to develop inclusive business models. They tell us about companies that have built on hard-learned lessons to develop approaches to inclusive business that are delivering results. This is now a million miles away from the simplistic approach that people like me took when we first started.
There are a number of common themes that emerge from the reports.
For example, it seems that lack of organisational buy-in and inappropriate management practices to support inclusive business persist. Profitability of inclusive business initiatives is also an issue. Risk-adjusted returns are not matching company expectations because projects are either reaching profitability too slowly or have inherently lower margins than companies need in order to meet investment hurdle rates. Finding and supporting people with the right skills and experience for inclusive business is also a common challenge in MNCs and, related to that, not knowing when to look outside the organisation for solutions.
These suggest some sharp questions for those promoting inclusive business within an MNC. For example, do MNCs learn enough from new business models that are emerging that are successfully reaching people on low incomes? Are they finding the right finance, expertise and non-traditional partners? Are they open to the opportunities that buying-in smaller companies with viable business models might present? All of these questions are explored in the Inclusive Business Boost reports, with some great examples of the answers that some companies that are finding.
However, the reports do more than illuminate successful approaches to addressing internal constraints. They challenge us to look beyond our traditional approach of developing inclusive business models in-house and consider a ‘make or buy’ strategy for inclusive business.
They also remind us that the world is rapidly becoming a different place than it was a decade ago, with many, new, tech-enabled opportunities and dynamic, new companies that should make us reconsider and reimagine what inclusive business can be.
The rise of new tech giants is also creating a burning platform for established companies that need to innovate or die. So they are developing new innovation capacity. Why shouldn’t these innovation structures and processes be used for inclusive business initiatives?
And what do our researchers not agree on?
When commissioning these reports the BIF team was deliberately asking different organisations to look at the same issue from different angles. While many of their findings are the same, there are also some different perspectives on where solutions might lie.
Some reports suggest that inclusive business models with the promise of scale and profitability are now possible in today’s tech enabled world that weren’t even a few years ago. One school of thought in the reports is that this means that the internal constraints that appear to prevent inclusive business from thriving may not actually matter so much after all. If this is right then normal business processes may be fine for developing inclusive business models. It also suggests that existing innovation pathways may simply be expanded in order to deliver successful inclusive business. Therefore solutions to the slow progress with inclusive business lie in focussing on business models that promise to meet internal investment hurdles and reject more quickly those that don’t.
Other reports would not fully agree with this analysis. They suggest that existing investment criteria should not apply to inclusive business, which has a value to the company and society beyond the metrics that would apply to other investments. Companies can focus on addressing the internal constraints that are still holding up progress in scaling successful inclusive business models.
I think these are excellent points to debate. I hope that as we engage with our peers to share and discuss these reports over the next six weeks, we can further explore these issues and help people within MNCs to find solutions appropriate to their organisation that will help them to reach the next level – and in doing so realise the promise that inclusive business continue to offer.
Inclusive Business Boost, funded by the UK Department for International Development (DFID), has commissioned five new pieces of research and analysis aimed at helping multinational companies (MNCs) understand and address the internal constraints that are preventing their inclusive business ventures from being successful. These reports will be released over the coming months, along with blogs and other web-based inputs from the report authors and other contributors.