[GKD-DOTCOM] Profitability as an Indicator and a Driving Force

[Al Hammond]

Sam Lanfranco makes some nice points about profitability as an indicator
and driving force, even for "non-profit" or socially-motivated projects.
I'd like to turn the point around and argue that being profitable, or
the profit motive, is not a good basis for judging the social motivation
or social potential of an activity. In effect, I'd like to challenge the
more-or-less automatic assumption, which I see expressed in many parts
of the NGO and development communities, that a for-profit activity
cannot also have a socially beneficial goal. Of course, many businesses
have no social motivation. However, in our research, we have found that
many of the successful companies in BOP markets have an explicit social
metric or goal as well as a business goal. This is true in large
companies as well as in entrepreneurial start-ups.

I agree that profitability is, in several senses, an important indicator
for many activities--and I think that the profit motive does not
disqualify an entity from also having a social motive.


Allen L. Hammond
Vice President for Innovation & Special Projects
World Resources Institute
10 G Street NE
Washington, DC 20002  USA
V (202) 729- 
F (202) 729-7775
[EMAIL PROTECTED]
www.wri.org
www.digitaldividend.org




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

[Adriana Labardini]

Dear GKD List Members,

If someone is still skeptical about the potential impact of ICT in
productivity, knowledge opportunities, finding resources and expertise
and social capital, just take a look at this very discussion forum that
without the Internet would take hundreds of people having to pay travel
expenses plus opportunity costs of their time to be able to have a
dialogue like this. So thank God for Tim Berners-Lee, the creator of the
World Wide Web. The problem is how many have ACCESS to ICT and at what
price?

This hits the very keen observation of Mr. Sam Lanfranco about the
existence of a market failure when it deals with providing basic
infrastructure for even telephone services, not to mention Internet, to
poor, remote, disperse communities mostly in developing countries.

To our great disappointment, introduction of competition of telecomm
services in countries like Mexico did not raise the penetration of
services in rural areas, and service diversification and penetration
happened basically in medium and large cities. Even cellular phones that
grew exponentially, are not affordable or available for poor, rural
people. So in a regulated industry such as telecommunications, reaching
the BOP through affordable, ad hoc ICT services where purchasing power
is low, fixed costs high and competition policies weak, takes a really 
BOP-empathetic approach and a NEW MINDSET:

1. Perhaps there wouldn't be a market failure if providers were to offer
services at the same prices they do to urban/wealthier customers, on the
theory that they will have a much larger market with great needs of
communication and information, provided they are affordable.

2. Reducing the cost of deploying infrastructure through disruptive
technologies that leapfrog the expensive wire-based ones. For example,
through WiMax networks that can even be owned by the community or town.

3. Government support of these access technologies through policies and
incentives that enable use of free spectrum, which means giving up
proceeds from spectrum auctions.

4. Working on the demand side training people on the use of IT and
developing useful LOCAL applications that meet the communities' needs
rather than providing cookie-cutter solutions.

I am sure some of you have worked, or are currently working, on economic
development projects through ICT using innovative technologies. Please
share your experiences and challenges as to access issues and using
unlicensed spectrum and VoIP, and if you dealt with regulatory problems.

Thanks to you all for your enlightening comments and stories.


Adriana Labardini
Attorney 
Mexico City
[EMAIL PROTECTED]
(52 55) 5812 1356




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

[Jean-Patrick Lucien]

My comments:

How about an NGO running a franchise where they license those
cyber-cafes to small entrepreneurs.

1) The NGO provides the training and investment seed to individuals who
want to start their cyber-cafe.

2) The individuals purchase a franchise license to run the cyber-cafe.

3) The investor in return pays a yearly franchise fee to the NGO and
also complies with some rules set to protect the community. For example,
the cyber-cafe has to remain in the community.

4) A portion of the franchise fee is used to cover internal costs to pay
the NGO and also to support other projects in the community.

This way, the NGO does not control the financial profit of the investor
but controls the benefit of the cyber-cafe in the community.


Regards,

Jean-Patrick Lucien 
EDEM Foundation 
www.edem2.org




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Re: [GKD-DOTCOM] Can Technology and a Business Approach Make Globalization Work for the Poor?

[Chetan Sharma]

Further to Al's message below: whereas business models of Datamation or
Drishtee or N-Logue can at best enjoy limited success in employment
generation due to obvious limitations of resources and marketability, I
endorse Al's point of view of big companies targeting poor communities
and would like to illustrate two case-studies of big businesses from
India:

**ITC Agri-business's "e-Chaupal" project leveraging on their inherent
need to procure agri-inputs and raw materials for their business, has
deployed technology amongst thousands of villages in India. The farmers
operate an internet kiosk which remains the singular, cost-effective
procurement point for the farmers. ITC uses the kiosk to deliver other
services to the farmers as a responsible Corporation.

**The Dutch-British Conglomerate Hindustan Lever, one of India's largest
companies (part of the Unilever Group) deploys marketeers from the
community for generating demand for its soaps, detergents, food
products. The project entitled "SHAKTI" meaning (STRENGTH) is meant to
target communities to take control of their markets by creating a demand
for Unilever's products. In the process, rural communities become
distributors as well as retailers of Unilever's top class products.

Regardless of the scale and size of these projects and the impact they
have on poverty, their positive contribution in livelihood generation
and poverty alleviation cannot be negated.

Chetan Sharma
Datamation Foundation
New Delhi (India)
www.datamationindia.com


On Monday, November 8, 2004, "Al Hammond" <[EMAIL PROTECTED]> wrote:

> I agree fully that benefits must reach the very poor, whose greatest
> need is often livelihoods. And you are right that globalization--on the
> export platfrom model--has so far contributed little to such people. But
> I do believe that when companies target poor communities as customers,
> something different happens. Because to succeed, they need to build the
> capacity to consume in their customers; and to reach those customers,
> they may need to employ lots of local entrepreneurs, creating jobs; and
> given how price-sensitive low income customers are, the companies will
> have to have a compelling value proposition, and price performance
> ratio, or their customer simply won't buy. In Indian terms, it is the
> business model of Datamation, of n-Logue, of Drishtee, of
> Reliance--rather than the out-sourcing or export manufacturing
> models--than can have impact on poverty.




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Re: [GKD-DOTCOM] How Can ICT Create New Business Partnerships?

[Barry Coetzee]

Dear Colleagues,

I run a small (15 employee) IT company in South Africa that provides
electronic payment solutions to African banks and payment processors.
Over many years now we have developed products that are "scaled" to meet
the requirements of the market. This has allowed us to survive despite a
continual onslaught from multi-national companies (MNCs).

Our philosophy is that we HAVE to make the "poor" (the majority of our
population) profitable. They will be our only market once the MNCs have
'cherry-picked' the top-end of their market. My experience is that there
are very few partnerships with MNCs. They buy-out the locals if they see
any profits. However, as their focus is actually their home states, they
do not want to build on the local industry, but to further distribute
the products and services that they developed at the head-office. Thus,
my experience is that, in general, MNCs look after their own interests.
In Africa that tends to be the top end of the market. The result of this
is that the difference between the "haves" and the "have nots" tends to
increase with the advent of MNCs.

The result of this is that we in Africa generally have vastly
inappropriate technology available. It is easier to support Oracle
databases in Africa than to support Microsoft SQL, PostgerSQL or any
other "smaller" database. This is peculiar, as, in general, there are
very few businesses that will ever require the scalability of a high end
database.

In the field of financial services I have personally heard and read the
same line over and over from the MNCs. "The market is un-profitable".
The reason for this unprofitability in most cases is that the COST of
the MNCs infrastructure is scaled for "rich" people and therefore
inappropriate to the markets in Africa.

There are very few NGOs which operate in the areas that we do so our
experience with them is limited. I can say that, of late, the emphasis
has really moved to sustainability.

My business focuses on creating products that are scaled correctly,
light on infrastructure, low on support, multi-lingual, low on training
and as cheap as possible to roll-out. In this way we operate in a market
that is ignored by the MNCs. We can be sustainably profitable (not
wildly so) by providing unique products that people in our community
really depend on.

Our vision is that this is the bottom of the toughest market around. If
we can make some profits here, then we will be in the right place to
make more profits when, through trade assisted by our products, this
market moves up.

Our mantra is - appropriate and sustainable - if you achieve that,
everything else falls into place.

Kind regards

BARRY COETZEE 
CEO 
iVeri PAYMENT TECHNOLOGY 

EMAIL: [EMAIL PROTECTED] * WEB: WWW.IVERI.COM 
TEL: +27 11 269-4000 * FAX: +27 11 269-4098



On 11/8/04, Global Knowledge Dev. Moderator wrote:

> Most corporations trying to enter markets in developing countries view
> the poor simply as consumers and consider NGOs as just an extension of
> welfare services. Yet international corporations often lack sufficient
> market data, an understanding of local needs and preferences, or
> distribution channels. ICT could help the poor and NGOs become business
> partners, suppliers, distributors and sources of market information to
> large companies.

..snip...

> Yet some argue that powerful multinational corporations (MNCs) drive out
> small, local companies in poor communities, and local businesses should
> be protected. Brazil nurtured its computer industry that way. This view
> contends that the power balance between MNCs and local entrepreneurs or
> NGOs is so uneven that the latter can't possibly protect their
> interests.

..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.
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