GKD Weekly Summary (11/01 - 11/05) This week GKD members continued examining the win-win benefits that can be reaped from "pro-poor" business strategies, and provided some examples. They also turned to a discussion of the striking challenges involved in creating and implementing those strategies. Members also considered a new topic: the functional -- and dysfunctional -- role profit can play in promoting activity that provides real value to the poor.
This message attempts to summarize briefly the major discussion points made on the GKD discussion focused on "Technology, Globalization and the Poor." Inevitably, many valuable points will not be captured here, and new List members are encouraged to visit the List archives <http://www.edc.org/GLG/gkd/>. **A Technology and Business Approach to Development** Members continued examining the issues raised in week 1: the advantages of risks of using ICT and a business approach to achieve development goals. One member noted that reference to "the poor" might include a range of populations. Low income groups may well benefit from ICTs while the "desperately poor" may have little opportunity or motivation to use technology. Clearly identifying the target group -- or market segment -- of "the poor" is essential to offering products or services that are valuable to that particular group. Another member raised a point that GKD members from developing countries have discussed in the past: the fact that small enterprises and nonprofit organizations in developing countries often are very similar. Both are primarily motivated by an effort to generate a livelihood for those operating the organization. Both respond to their "market": funding sources influence NGO's focus and activities in the same way the revenue sources affect businesses' decisions and actions. More than one participant added that some funding opportunities or potential revenue streams are worth rejecting if they compromise the company or NGO involved. One participant offered a succinct analysis, emphasizing that businesses can be efficient service providers and that there is a business case for "bottom of the pyramid" (BoP) investment. However, he added, "social issues" such as environmental protection and human rights are not always best served by the free Market, and the global economy is not always a level playing field. One list member neatly summarized much of the discussion when he stated, "There are no single simple solutions for all, no vacuums where one actor can be single-handedly responsible for an outcome. Therefore, partnerships and dialogue between business, civil society, government, intergovernmental and UN institutions, seeking best practices, etc. will have to continue to be important." Some list members were uncomfortable with the idea that an NGO would profit from serving a population, and worried that the NGO's activities would be influenced more by profit than by service. Other list members countered this view, arguing that if NGOs can achieve sustainability through profits, and continue to offer services at reasonable rates, then profits are a valuable element in ensuring that the operations continue. Otherwise, the NGO might disappear and be replaced by a company that might charge a higher price for those services. **The Profit Motive** The discussion this week also focused on the role of the 'profit motive' and reflected the discrepancies and conflicting impacts that this powerful force can have on efforts to serve the poor. One participant captured the advantages that profit offers by describing it as a powerful feedback mechanism to those providing goods and services to the poor, "a very convenient metric that indicates whether the goods or services are useful when compared to alternatives." If products and services do not offer value to a particular population, the provider will have difficulty making a profit from it. Others noted that the profit motive also encourages providers to offer products and services efficiently. Participants also argued that the profit motive may have negative impacts on the poor. Although the profit motive can be powerful, it may lead providers to ignore many communities because they are not perceived as "profitable" populations to serve. Furthermore, even if companies do aim to serve the poor, their drive to generate profit can lead to pricing that is unreasonable for bottom of pyramid populations. **Profits and Sustainability** There was a general consensus that profits are necessary for sustainability. Whether a project is founded through philanthropy or entrepreneurship, it needs resources to sustain itself. An initial grant might get a project off the ground, but it is essential to find resources to cover ongoing operations costs. As one participant noted, "one year's operation costs can, in many cases, equal initial investment costs." Without profit, projects are forced to continually seek support from government, donors or other funders. If such support dries up, project activities end regardless of their value; on the other hand, if funders like the project, it can continue even if it has little value to the majority of "beneficiaries". **Looking Down-market for Profits** Several members argued that large companies will not focus exclusively on upper and middle classes in their search for profits. Although the idea that profits can be made at the bottom of the pyramid (BoP) is relatively new, several members supported this notion with cases. One example from Kenya revealed that telecommunications providers are seeking growth down-market amongst bottom-of-the-pyramid consumers. A member also sought to demonstrate the attractiveness of the BoP market by analyzing its size, concluding that, "across 18 countries, the BoP market has at least $1.7 trillion in income." **Hybrid For-Profit and Nonprofit Systems** Many participants suggested that a mix of for-profit and nonprofit/public activities are essential. One shared a model that uses institutional funding to create telecenters that must, in the long-run, sustain themselves. The funder seeks local partners who will run the telecenter to cover operating costs and serve the community at the same time. Through this approach, they have found that the telecenter "instinctively finds a happy balance between keeping the center sustainable and providing needed community services." Another participant held that in the ICT sector in particular, public-private partnership is a desirable model for development. The public sector can be key to creating the technology infrastructure through which companies will provide products and services. The concept is analogous to the development of transportation infrastructure: "the public sector builds the roads and highways, but the private sector supplies the vehicles, fuel distribution systems and trucking companies." Another participant shared a dynamic hybrid model in which telecenters could be sustained through the revenues earned by serving businesses. Those revenues would help sustain other nonprofit groups working on local development initiatives, and the telecenter would be self-sustaining. **Examples from the Field** Members shared many interesting examples of sustainable enterprises that were win-win opportunities for business and development. One project in Macedonia sought to use a business approach to development by creating an IT cluster in computer animation, that could compete in the global market. Although the initial funding was institutional, the effort aimed to develop expertise among the businesses that would enable them to compete effectively and independently. Another member shared an example of a Nepali cyber-cafe owner who used innovative means to reach out to the local market and build his business. A member also raised the example of Grameen Phone, a large company that used an innovative business model to find profits at the BoP. **Conclusions** In the second week of the discussion, members engaged in a lively debate about the profit motive and its influence on serving the poor. Members working in developing countries, NGOs, entrepreneurs, business analysts, community organizers, and academics provided a range of views and cases. Despite the variety of experience, members agreed that sustainability was key to the success of any project that aims to have long-term impact. Profitability can offer an effective means to achieve sustainability, but it requires intelligent business models and careful attention to principles in order to ensure that the activity serves the poor and is sustainable. **Links and References** Some of the references and links shared this week include: Jhai Foundation http://www.jhai.org Jhai Coffee http://www.jhaicoffee.com/ Digital Dividend Project http://www.digitaldividend.org Macedonia IT Cluster http://mca.org.mk Enlace Quiche http://www.enlacequiche.org.gt oneVillage Foundation http://www.onevillagefoundation.org ------------ 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]>. 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