Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Tom Abeles]

Al Hammond's posts on GKD are wonderfully articulated. And I think they
are on target. They validate the models developed by Harvard's Clayton
Christensen (Seeing What's Next) for example.

The focus on this list seem to me to be formed around social justice and
similar issues, where the ICT's are just the surrogates in this ongoing
debate between the neo-classical economic advocates (business models)
and the emerging heterodox thinkers (more driven by social justice
issues). The fact that these ICTs that Hammond cites bring social
benefit is more in the way of a rationalization that the standard
economic model can make money and still be socially and environmentally
responsible. The social activists on the lists, though, start with the
issues of social justice which is paramount, and if it makes money, that
is also good, as long as its not too much.

The problem is that the business model starts with private capital and
entrepreneurial spirit and risk. Such funds are unavailable to those
seeking social justice; thus, the latter group has little to do except
to try to inform the private capital of its social responsibility.
Advocating for public sector support, gives the social justice
organizations the funds they need to implement a different model.
Unfortunately, this latter model is dependent on government largess to
sustain it and there is little effort to concentrate on a business model
which seems to contradict the ideas around social justice.

If the larger ideas underlying the models that Hammond describes, work; 
and, if the business community does adhere to issues of environmental 
sustainability and social justice, then the roles of the NGO's will be 
seriously abridged and altered and, possibly, their voices may be muted. 
The NGO's have more than issues of thwarted social justice on their 
agenda. These are big IF's; but the NGO's may need to seriously 
reconsider their roles in this arena.

A number of years ago, the surrogate was "appropriate technology" or
"micro enterprises", today, ICT's and tomorrow...??

Thoughts?


On Wednesday, November 3, 2004, Al Hammond <[EMAIL PROTECTED]> wrote:

> Bettina Hammerich and Jim Forster both make useful points. Of course,
> markets don't attend well to everything. But the core of providing
> useful services at prices people will pay--and the market discipline of
> listening to customers that Forster underscores--is a strength of the
> business approach, one that might be usefully incorporated further into
> development strategies even in very poor communities.

..snip...




This DOT-COM Discussion is funded by USAID's dot-ORG Cooperative
Agreement with AED, in partnership with World Resources Institute's
Digital Dividend Project, and hosted by GKD.
http://www.dot-com-alliance.org and http://www.digitaldividend.org
provide more information.
To post a message, send it to: <[EMAIL PROTECTED]>
To subscribe or unsubscribe, send a message to:
<[EMAIL PROTECTED]>. In the 1st line of the message type:
subscribe gkd OR type: unsubscribe gkd
Archives of previous GKD messages can be found at:

Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Lee Thorn]

Dear Colleagues,

Thanks for all the input, both on this forum and privately.

I agree: financial sustainability of IT products in rural areas means
either 1) government or supragovernment subsidy or 2) profit-making.

If 'profit-making', this profit can be taken by an individual
entrepreneur or by a community (itself or an association within it or a
cooperative) or government institution (like a school) seeking profit.
Jhai has experience in all these forms in small applications in various
programs (coffee, high school ICT, Jhai PC, weaving). They all can work
(or fail) with people in remote rural villages, we find. Our database is
small, so I choose not to draw conclusions on which form is better. Our
experience is that the key thing is that the process must be 'owned' in
an empowered sense by the people of the village who use it.

'Profit' is what is left over after all outputs, including, I should
think fixed costs, replacement cost, MAINTENANCE, and running costs, are
covered. We have developed a tool (with farmers, local entrepreneurs and
Stanford MBA/engineering students) that can be modified infinitely for
particular situations. If you want it, write me and I will include you
in our distribution of our next Jhai Update. I'd give it to you, now,
but it includes a small application that I was given by a Stanford
student who is now in Singapore and I have to find out how you might
purchase that part.

Running cost includes electricity costs. In remote areas generation has
to be done by alternative means. In the (probably) short term
alternative electrical generation will be more relevant everywhere, but
especially where money is in short supply. This is due to the increased
demand for petroleum and the soon-to-be fall off of supply.

If one uses lead acid batteries, then questions of disposal of them
becomes an issue of sustainability. In fact, years ago I had the
opportunity to spend an afternoon with an inventor who holds most of the
patents for passive solar. He told me that one should look at all
components' elementary forms and ask oneself what would happen if
everyone in the world adopts this? What happens environmentally and what
happens in terms of costs. I think this is a good idea.

In all cases, if the community or enough individuals within a community
does not want the thing, then they won't use it. This means market
research. Market research cannot be overlooked. To get good market
information from a remote, poor village, in my experience, is not a
simple thing. It requires trust, otherwise the cultures of dependency
will lead to people saying 'yes' to almost anything that has any chance
of improving their standard of living...with a high probability that
whatever is given becomes junk.

I totally agree with Sam Lanfranco. A) You have to choose your shots. B)
small NGO's have certain advantages over large NGO's: it is much more
likely we won't be selling cookie-cutter solutions and much more likely
we actually know the people we are working with. These beliefs are
central to why Jhai Foundation will do a roll-out of the Jhai PC by a
method that over time reduces our inputs to ground-level programs
because it reduces the need for us by programs. We also won't go into
manufacturing or the publishing business. If you would like to see our
business plan, please write me and I will add you to our Update list and
include the business plan again in our next Update. Our plan is
organized around two things: 1) our willingness to work initially with
grounded programs in carefully distributed locations; and 2) our
committment to devolution, open source, and open design protocols as key
factors of our work.

I found Jim Forster's comments particularly useful in this way: you have
to know your customer and listen to her.

I also think his outline of how capitalism works is apt, although I
would quibble here and there because, as we know, the devil is in the
details. But so what? And, of course, I know he would agree that
monopolies are by nature quite inefficient.

I personally find the key piece of business knowledge is that
relationships are nearly everything. You have to keep good books, you
have to be transparent as possible, and you have to constantly seek
improvement...but relationships rule.

I'm not naturally good at relationships. I'm a combat Vietnam veteran
and I grew up very hard. So I focus on relationships and how to make
them better. I focus on my deficits as a way to be more aware of myself
and I build as much as I can on my gifts. Both are helpful processes in
encouraging and following good quality relationships, I find. And, as
much as possible, really daily, I cultivate my spiritual life.

And when I have to make a choice between getting to know a poor person
or getting to know a rich one, I try to give preference to the poor
person. I simply find that more fun. I also find that when I refuse to
always choose the soft, easy way (which would be to hang out with
relatively rich people

Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Jim Forster]

Dear Colleagues,

I realize I left out one other point about ICT development and
profitability:

I was making the case for profit as an important metric, and indeed I
think that private, for-profit companies can and should take the lead in
much of ICT, but profit is not the only metric and there is an important
and natural role for the public sector in creating part of the network
infrastructure for ICT.

In the networking part of ICT I would propose a hybrid of public/private
investment, somewhat analogous to many of our transportation systems
(except railroads). The public sector builds the roads and highways, but
the private sector supplies the vehicles, fuel distribution systems,
trucking companies, etc. I think the road construction, while not cheap,
is quite smaller than the rest of the system.

In particular, I think in many cases it makes a lot of sense for the
public sector to build what we call "Layer 0" of the networking stack:
the physical layer. In cities that would be fiber conduits and possibly
fiber bundles. They could then rent access to these conduits or fibers
to companies that install equipment that uses these to make useful
services, such as voice and data connectivity. These companies in turn
would sell voice or data service to individuals and businesses.

Secondly, in some cases it may make sense for the public sector to take
the lead in building a backbone network, to which smaller regional or
community networks might attach. And in most cases the public sector
funds much of the educational system. The Internet is now a vital part
of the educational system, and as such, public funding of educational
uses of the Internet makes sense too.


Thanks,

-- Jim
   
   


This DOT-COM Discussion is funded by USAID's dot-ORG Cooperative
Agreement with AED, in partnership with World Resources Institute's
Digital Dividend Project, and hosted by GKD.
http://www.dot-com-alliance.org and http://www.digitaldividend.org
provide more information.
To post a message, send it to: <[EMAIL PROTECTED]>
To subscribe or unsubscribe, send a message to:
<[EMAIL PROTECTED]>. In the 1st line of the message type:
subscribe gkd OR type: unsubscribe gkd
Archives of previous GKD messages can be found at:

Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Sam Lanfranco]

This question is really two questions. The first part is "Must a
venture/project" earn an adequate return to be sustainable?" The answer
is an obvious yes, but leaves open what is meant by an adequate return.
An adequate return must generate a revenue flow to sustain operating
expenses. It should also provide for the replacement of the initial
investment (fixed assets). Whether it needs to return a competitive rate
of return on those initial assets depends on the nature of that
investment. If it is venture capital (from investors) it needs a rate of
return in addition to covering operating expenses. If it is a grant
there may only be need for replacement investment.

The second part of the question is "Must the profit motive be a driving
force for success". The answer here is more mixed. The profit motive
includes maximizing revenue, but it also involves minimizing expenses.
The profit motive is as much about good cost management as it is good
marketing. Both are possible without an explicit self interested profit
motive on the part of those who own the assets and receive the profits,
but both are more difficult and require extra dedication and care.

There is a further complication here, in that some development projects
are undertaken because there is what economists call a "market failure".
For such development projects this usually means that the benefits are
spread wider than just to those who pay. The market demand for the
service or produce will be less than socially optimal unless there is a
subsidy to reduce costs and lower prices. Education and health are areas
where one frequently finds market failure.

There are then three lessons to be drawn here.

First, "profitability" as the need to pay attention to keeping costs in
line and worrying about pricing/marketing is essential whether the
operation is a private "for profit" operation or a social "for
community" project. Capitalists ignore this at the risk of their
capital. NGOs ignore this at the risk of their projects.

Second, If the profit motive of owners is not the driver for efficiency
and effectiveness in the provision of goods and services, some other
explicit benchmark measures need to be in place to assess and discipline
the projects. For community projects this needs to be more than
"bookkeeping", it needs to be strategic financial planning.

Third, If projects involve addressing externalities an explicit strategy
of dealing with externalities needs to be part of the strategic
planning. Are private sector projects subsidized to better align wider
benefits with project costs? Are NGO project subsidies assessed in terms
of their ability to align wider benefits with costs?

The sustainability of good projects requires "profitability" as a
performance indicator and performance tool. If the "profit motive" is
not the driving force for decision makers, something else must operate
as the driving force for cost and marketing decisions. If there are
externalities these must be explicitly addressed in strategic planning
and in how projects are costed, funded, and how their goods and services
are priced.

Lastly, all of these require a level of management, administration and
accountability that is seldom found in development projects.



Sam Lanfranco
Distributed Knowledge Project
York University




This DOT-COM Discussion is funded by USAID's dot-ORG Cooperative
Agreement with AED, in partnership with World Resources Institute's
Digital Dividend Project, and hosted by GKD.
http://www.dot-com-alliance.org and http://www.digitaldividend.org
provide more information.
To post a message, send it to: <[EMAIL PROTECTED]>
To subscribe or unsubscribe, send a message to:
<[EMAIL PROTECTED]>. In the 1st line of the message type:
subscribe gkd OR type: unsubscribe gkd
Archives of previous GKD messages can be found at:

Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Kevin Jones]

Jim Forster makes some good points below. One thing I'd like to add is
that the pricing changes coupled to getting externalities to be included
in the cost of goods sold is a branding issue that extends all the way
from state fiscal and monetary policy down to the level of consumer
purchases costing more at the cash register.

That pricing change will come if it's accompanied by a value change that
is deep and heartfelt and desires expression throughout a lifestyle. A
first target might be the LOHAS market (lifestyles of health and
sustainability). Get this ethically purchasing consumer to wake up to
poverty and get them willing to pay to fight the conditions that foster
it and you have something. If you can get the selfish yuppies who are
trying to treat their own bodies and minds well to think about extending
that kind of regard to somebody else who has less than they do, then it
could work.

They'd have to see how global economic justice is in their best
interests, just as they have become enlightened consumers of personal
products and services, this is about them becoming enlightened
consumers, about expanding their horizons of what is in their best
interests. You would in effect get them to pay a poverty
fighting/environment cleaning surtax, but do it through being willing to
pay a premium for poverty fighting just like they already do for
environment cleaning. It would also have to be tied to those developing
world cultures selling their culture effectively into the developed
world, just as the developed world shoves media and culture into the
developing world. The transmission of value would be two way... If that
happened, then market forces can make the difference.


Here's Jim's response to a previous post:
 
> Bettina Hammerich made some very good points in her recent posting that
> also pertain to the current question of the role of profitability,
> including:
> 
>> * Businesses are more likely to be efficient service providers
>> 
>> * Governments and NGO's can be corrupt and/or ineffective
> 
> and
> 
>> * Environmental and human rights are not best served by the free market
>> 
>> * The level playing field is uneven and everyone is not "free to choose"
>> 
>> * MNCs are not transparent
> 
> Perhaps some of the concerns in the second group can be addressed in
> time. I would hope, for instance, that some of the environmental effects
> could be reduced by burdening the products with projected environmental
> costs and in some way capturing the externalities. This is easier said
> than done but simple examples include requiring recycling fees at the
> time of purchase. MNCs are not transparent; neither are some NGOs and
> some governments. All should be pressured to be more transparent.
 
..snip...



Creating conversations between tech marketers and their customers

Kevin Jones, co-founder, Microcast Communications




This DOT-COM Discussion is funded by USAID's dot-ORG Cooperative
Agreement with AED, in partnership with World Resources Institute's
Digital Dividend Project, and hosted by GKD.
http://www.dot-com-alliance.org and http://www.digitaldividend.org
provide more information.
To post a message, send it to: <[EMAIL PROTECTED]>
To subscribe or unsubscribe, send a message to:
<[EMAIL PROTECTED]>. In the 1st line of the message type:
subscribe gkd OR type: unsubscribe gkd
Archives of previous GKD messages can be found at: