Companies are showing a growing interest in the 3 to 4 billion people who live on less than USD 6 a day. On this market, Good Enough Innovation is a way for social business players to combine economic viability with a positive social impact.
Companies are showing a growing interest in the 3 to 4 billion people who live on less than USD 6 a day. Conquering this market requires breakthrough innovations, and Good Enough Innovation enables social business players to create products that combine economic viability and social impact. An interview with David Menascé, Professor, HEC Social Business/Enterprise and Poverty Chair.
Social business, Bottom of the Pyramid, Good Enough Innovation… are we talking about the same thing?
While the ultimate objective is the same – reconcile economic sustainability and social impact – these terms do, however, refer to different practices.
The Bottom of the Pyramid (BoP) concept invented by CK Prahalad schematically refers to both a population segment – the 4 billion people living on less than a few dollars a day – and a strategic approach which aims to invent both economically profitable and socially positive business models.
The notion of social business is a bit different. The ambition of social business, which was popularized by Professor Muhammad Yunus, is to invent economically sustainable models with the express aim of achieving a social objective. As state aid falls short of needs, it involves inventing economically sustainable mechanisms to solve social problems – access to water, energy and sanitation – with a distribution of added value that is different from the one made in traditional strategies. Indeed, Muhammad Yunus based social business on the “no loss, no dividend” principle, whereby any profits generated are to be reinvested in the social business.
In this context, the notion of Good Enough Innovation is a modality of action. It is no longer a question of defining the “why” but the “how”. The Good Enough concept refers to a way of considering innovation on these markets.
What are the main difficulties experienced by companies, associations and NGOs when they want to address these populations?
Companies which invest in the BoP market generally face two types of pitfall. On the one hand, it is often difficult to offer products that are really tailored to local needs and the reality of local practice. In large companies, innovation is often synonymous with sophistication and R&D teams more naturally tend to develop complex products. On these markets, on the contrary, the products and services need to be significantly simplified.
But, on the other hand, the reverse difficulty can also arise. Certain companies confuse simplification with lower quality products. Consumers then have the feeling that they are being offered “products for the poor”, which does not necessarily make them feel like buying them.
Consequently, there is a difficult balance that needs to be achieved: offer products that are both affordable – i.e. simple enough so that they are not expensive – while being aspirational, i.e. the need to be positioned as premium with regard to local practice. It is this balance that we have called “Good Enough Innovation”.
How can Good Enough Innovation be implemented? What are the success factors?
The first thing is to understand the reference framework for a product. On these markets, the reference is very rarely a similar product. For example, micro-insurance is not in competition with other micro-insurance products, but with family solidarity. It is essential to understand this framework. It is subsequently necessary to understand consumers’ needs, but also their desires. The road to hell is often paved with good intentions. There is, of course, the need to consider the social impact but also, perhaps especially, the desires of a traditional consumer.
Finally, the difficulty is internal: there is a need to devise organizational structures and an intrapreneur profile able to call into question the dogmas of an organization in order to propose breakthrough innovations tailored to these markets. These approaches call into question a number of cultural patterns, particularly in France where simple solutions are not always promoted.
We see that there are successful local experiences, but that the difficulty often lies in scaling up the project. Why? What are your recommendations to remove this difficulty?
Scaling up continues to be one of the main difficulties of BoP strategies. It takes time to reconcile a real social impact with a profitable model. A long-term approach is necessary with very clearly established strategic interests, otherwise there will be disappointment. However, once a model has been established, we can see a relatively rapid scaling up: the model of mobile banking in East Africa is a good example of this.
The opinions expressed on this blog are those of the authors and do not necessarily reflect the official position of their institutions or of AFD.