However in parallel, the Planning commission of India estimates that 27.5% of the total population of India lives below the poverty line. This is measured based on per ca pita consumption expenditure of a household below Rs. 356.35 for rural areas and Rs. 538.60 for urban areas. That is below $1.25 per person.
In addition, a 2007 report by the state-run National Commission for Enterprises in the Unorganized Sector (NCEUS) found that 65% of Indians, or approximately 750 million people, lived on less than 20 rupees per day (equivalent parity with $2 per day) with most working in the "informal labor sector with no job or social security. Of this population approximately 80% live in the rural or semi urban context.
What this means in simple terms is that approximately 750 millions Indians are outside the purview of what is classically perceived as the ‘traditional market’ for most goods and services. This ‘under served’ market has the attention of the world ever since Bottom of the Pyramid was written.
This market is expected to behave and function in a different manner than traditional. And so Sales & Marketing teams often try to penetrate this market with modified urban strategies, fail in their efforts to create any impact - and then respond with the sentiment that the fortune at the bottom of the pyramid is a myth and that ‘this market is not yet ready for our products – it needs to mature’.
Increasingly I find organizations reaching this conclusion after some attempts - and subsequently stopping initiatives in really penetrating these under served markets. Instead the Chairman or CEO converts it into a CSR initiative. Inclusion then suddenly gets limited to a 'feel good' factor under Corporate Social responsibility.
CSR works on the limited paradigm of Philanthropy - rather than sustained impact.And so while there are several CSR initiatives, the sum total of all such initiatives creates very little impact.
Notwithstanding these dilutions, the sheer size (750 million people) of these under served markets commands a perspective. And while these complex ecosystems need maturing, it is clear that the sequence for impact will need to be:
Step1, create a fortune for the bottom of the pyramid - through economic and social opportunity creation and inclusion
And then step 2, capture a portion of the new value created in an equitable manner. This will form the fortune at the bottom of the pyramid.
The success of the Micro finance model is a testimony to this sequence. In a recent visit to an MFI center near Hyderabad I met a group of women who have benefited from these small loans. A stone cutter who could often not even feed her children a few years ago is today running her own micro-enterprise, providing employment to 10 others. She is perfectly happy paying the high interest charged - is driving the MFI to give her larger loans - so that she can grow faster. Her aspiration today is for gold jewelery, a pension scheme for future investment and durables. Service providers in these areas will today find this woman a 'mature' consumer who is ready to consume!!
But if we go deeper into the process, the steps clearly include first creating new value by delivering the most relevant service (organized micro finance) and then capturing resulting value (higher interest rates + new opportunities for other servivces) - in a manner that it benefits everyone involved.
This in many ways, I believe, is the basis for a truly impactful 'inclusive growth' story.
Such an approach presumes a few critical innovation sensitive areas:
1. Focus on crafting unique win-win business models - not just having an idea to 'help' a community. Crafting business models needs 'business thinking' profit/ loss/ income/ expenditure. These terms are often anathema to social organizations. That's a mindset that needs change.
2. Crafting unique 'Engagement Models' - of how entities will interact with each other in socially acceptable ways. A business model that makes a land owning farmer sell FMCG products to his village will probably not work. Because the farmer considers 'selling soaps and shampoo' below his social dignity. Therefore insights are needed about the relevant social norms, such that unique engagement models can be crafted.
3. Collaboration amongst entities in the ecosystem - its not sustainable (or feasible) for a single entity to create new value models, deliver that value and also find ways to capture it. Therefore you may need an MFI to create new value, a rural distribution network to add depth and capture some value, a telecom network to deliver and capture some value, a school/ hospital to enhance capacity to create value in the long term. So here a key question is how can such entities identify each other and co-create new models and work together to create and capture value?
4. Deploy technology to consolidate information, learning and data capture across collaborating entities. This is probably the most critical element. If everything else works, but there is no technology to consolidate learning, analyse data and make relevant decisions - there is no way to scale an inclusive growth model. Mobile networks, computers, satellite scans, GPRS etc are now reaching deep parts of India. How do we build solutions that connect all these into central frameworks where data can be consolidated?
Do such examples exist? What can we learn from them?
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