Professor Minna Halme from Aalto University on the Importance of the Base of the Pyramid Markets and Practical Solutions.
Minna Halme is the Professor of Corporate Responsibility at Aalto University. Her current research focuses on sustainable innovations for poverty alleviation, business models for sustainable services, and societal impacts of corporate responsibility. She has worked with a number of European and national research projects on material efficiency services, sustainable household services, responsible organization cultures, and sustainable business strategies.
In our 20th of April event, Dr Halme made two presentations and the presentation here is a combination of them both. The presentation starts with background to the BOP approach, and the vast opportunities lying within the 4-billion-large BOP market. To show practical examples, she presents different business cases. She highlights corporate challenges for inclusive innovation and suggests solutions by highlighting different types of innovation that is needed for the Base of the Pyramid business models. Dr Halme explains also the focus that Aalto University and its partners have taken to working with the BOP market.
4. Aims of Aalto & its network
Vision: To enhance wellbeing Focus on capabilities and
and reduce poverty through strengths of the people and
innovative sustainable design communities
and enterprise Emphasis to build long
A collaborative network of term partnerships and
private sector, civil society, linkages between
academia and public sector innovation ecosystems
Minna Halme
9. Nearly 200 BOP business models have been documented.
Initiators range from multinational companies to SMEs, social enterprises
and non-governmental organizations.
BOP business examples
Minna Halme
10. Why go for the BOP?
Some BOP markets are large and attractive as stand-alone
entities.
BOP markets are a source of innovation (disruptive innovations):
Local innovations can be leveraged across other BOP markets: A global
opportunity for local innovations.
Innovation blow-back: BOP can be a catalyst of innovations also for the
developed markets.
BOP markets can be a source of resource efficient innovations, because of
scarcity of commodities such as water and electricity.
Opportunity for radical industry renewal.
Additionally, BOP-business may offer an opportunity for
innovative corporate responsibility
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11. Cemex
Problem: Lack of housing for the poor
Solution: Cemex’s saving & credit scheme Patrimony Hoy allows poor customers
to add on to their homes kitchen, bathroom, one at a time
Groups of three families save
76 weeks
Good quality materials
Advice and technical help in the building the addition
Outcome: Since its inception, over 265,000 poor families have built additions to
their homes with PH. 60 % of participants say they would not have been able to
build their house without the program.
The program creates jobs mainly among local masons and those trained as
promoters. 95 % of promoters are women, 51% of whom had no previous working
experience. 29% of participants use their homes, or extra rooms that they have
built through their participation in Patrimonio Hoy, to build their own businesses.
12. ITC eChoupal procurement hubs for farmers in India
(1/2)
Problem: Small farmers do not always get a
fair price for their produce at Mandi
markets (Indian government controlled
produce auction; picture), where cheating
is a common practice during the weighing
process. At the same time, companies can
have difficulty finding good quality soy to
make food products.
Case: ITC is a major agritrading company in
India, which buys mixed quality soy from
agents to make food products, particularly
food oil.
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13. CASE eChoupal procurement hubs for for farmers in India
ITC 6: ITC eChoupal procurement hubs farmers in India
(2/2)
(2/2)
Solution: eChoupal (two-part program):
Part 1: Through a chain of village internet kiosks,
farmers get access to grain and seed rates prior to
taking their produce to the market and can sell when
the rate is high or acceptable. ITC trains coordinating
farmers to help in this process (picture).
Part 2: ITC procurement hubs are set up with
electronic weighting to avoid cheating in Mandi
markets, to inspect soya quality and pay the farmers
accordingly and immediately.
Outcomes: ITC procures good quality soy and
removes agent commissions and farmers get a fair
price for their produce. 6,500 eChoupals serve
40,000 villages and 4 million farmers in India. Today
eChoupals trade in 13 commodities (2 million tons;
$400 million).
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14. Microfinance over the internet
PROBLEM: Subsistence entrepreneurs have too little
money or can’t get bank loans.
SOLUTION: MyC4 is a microfinance bank operating
through the internet since 2007.
• MyC4 grants loans to small enterprises in African countries
• Investors are individuals and organizations in developed
countries.
• Each investor can choose the loan recipient, follow
how the enterprise succeeds and can also give advice.
• Local ”providers” in Africa screen prominent
entrepreneurs.
REVENUE MODEL: MyC4 charges a 6% interest fee
on the loans when they are repaid.
OUTCOME: Over 19,000 investors from 115
countries have invested over €15 million through
the MyC4 website. Over 8,000 businesses in
seven African countries have been funded.
15. Grundfos Lifelink
PROBLEM: Lack of safe drinking water
SOLUTION: Water systems for rural communities, schools
and hospitals
It is crucial to develop community ownership
Users pay with mobile phone & pre-paid key fob (RFID
Technology).
Local banks participate in financing
Solar panel is power source
Maintenance and repair costs are included in the water
price
On-line remote monitoring with GSM/GPRS
Quick repair in case of faults
Locals have been trained as repair mechanics
Minna Halme
16. BOP business innovation checklist
Types of innovation needed for BOP business models
Product Delivery Adaptation to Relationship Partnership
innovation innovation Infrastructure and labor and network
innovation innovation
Affordability and Efficient Design for Deskilling work Untypical
quality delivery hostile processes business
Different process environment Local actor partners
functionality Group credit (e.g. erratic involvement Multi-
Commercial schemes electricity, dirt Trust-based stakeholder
scale Effective roads) relationships relationships
Resource distribution Hybrids: new Mutual benefit Common goals
efficiency systems technology in Utilization of
deficient Capabilities
Usable development complimentary
interfaces infrastructure resources
conditions
Last mile by Network
local assembling and
subsistence coordination
entrepreneurs
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17. Corporate challenges for inclusive innovation
BOP-markets are considered challenging for market-related barriers
Deficient market information and regulatory environment, lacking physical infrastructure or access
to financial services
But inclusive innovation can often be hampered by corporate management
frameworks
Short-term profit maximization, business unit based incentive structures, and uncertainty
avoidance. Inclusive business innovation processes do not conform to these frameworks
Promoters of inclusive innovations may face shortage of time for the tasks they have, lack of
adequate financing, and lack of access to expertise from within their organization.
Overcoming constraints: Intrapreneurial bricolage
Dedicated innovators may act like entrepreneurs within a large organization. They ”make do” with
whatever scarce resources are at hand such as substantial amounts of their free time, private-life
networks, or previously discarded technologies, and make creative combinations of these resources
in order to promote their inclusive innovation. Occasionally they work underground and even
against their superiors’ orders.
Success depends on organization’s tolerance to intrapreneurial bricolage
Read more: Halme, M, Lindeman, S & Linna, P. 2012. Innovation for Inclusive Business: Intrapreneurial
Bricolage in Multinational Corporationsjoms. Journal of Management Studies. doi: 10.1111/j.1467-
6486.2012.01045.x_
18. Thank you!
Professor Minna Halme
For information:
http://management.aalto.fi/en/research/groups/bop/
& www.aaltoglobalimpact.org/
Minna Halme
