Once upon a time honey was considered to be one of the most natural and healthy food products. As modern, chemical intensive agriculture started dominating farm practices, doubts were cast whether pesticide residues would be found in honey. Sure enough, when the research and analysis was done, many different pesticides and even antibiotics were found in the honey. See http://articles.timesofindia.indiatimes.com/2010-09-16/india/28225876_1_honey-brands-antibiotics-honey-samples

Introduction of foreign species of bees to improve honey production meant that commercial beekeepers had to resort to use of antibiotics to prevent the bees from succumbing to infection. Bee keeping also requires that when honey is not available substitute feed sources have to be used. So the honey has the potential to be contaminated from several sources.

The standards for organic production of honey specify the following:

1. General principles
2. Conversion period
3. Origin of the bees
4. Siting of the apiaries
5. Feed
6. Disease prevention and veterinary treatments
7. Husbandry management practices and identification
8. Characteristics of hives and materials used in beekeeping

The details of the European standard can be seen at

http://www.beekeeping.com/databases/eu_organic_honey_standard.htm

Social enterprises have found that production and sale of organic honey and the byproducts can be highly beneficial as additional income to small and marginal farmers.

Artificial Insemination technology that BAIF introduced and spread throughoutt India (see http://dev.ikf.in/baif/about_us_about_baif.asp)  has gone towards improving cattle livestock, improving milk yields and better remunerations for farmers. There was another technology breakthrough implementation that gave dairy farmers raised incomes and better input quality control for the milk processing plants.

A small company called Shree Kamadhenu Electronics Pvt. Ltd. pioneered the technology and implementation of Milk Collection Systems.

“Shree Kamdhenu Electronics Pvt. Ltd. (INDIA) provides one stop solutions to the dairy sector Since 1996 under the brand name ‘AKASHGANGA‘ ™. We offer a total integrated solution for Automatic Milk Collection Systems (AMCS). More than 3,252 AMCS units are already installed. Simple, but appropriate solutions to facilitate timely collection of milk and thereby generating higher earnings for the rural milk producers by introducing Quantity, Quality based Payment System for the Milk Producers.”

(see http://akashganga.in/index.html)

The company is being modest on its own web site. The really important piece of technology they introduced was a means of quickly measuring the % of fat in the milk brought to the collection centre by the farmer.

This measurement when integrated with the existing Automatic Milk Collection System  gave farmers more transparency, better incomes (higher milk fat means higher earnings) and better quality control for the milk processing plant. The system helped remove the practice of dilution of milk with water practiced by farmers and rewarded them for offering a better product.

“One key operation is to measure/weigh milk, indicate fat percentage, price payable to the supplier, indicate customer number, date-time and session of supply through a printout. For the record of Village Cooperative, a report is generated at the end of each session containing customer  number, milk  procured in litres fat content, amount payable to each customer separately for Cow milk and Buffalo milk. This report also contains additional feature to print total weight and average fat for Cow milk and Buffalo milk separately. Every ten days customer wise ledger containing information on total milk supplied and the amount payable to the customer for the period is generated.”

(see http://akashganga.in/KeyBenefits.htm)

One small company with a daily impact on a very large number of small dairy farmers.

Chennai city, one of the major metropolises of India, is situated at the northern coastal edge of the State of Tamil Nadu. The city is more well-known by its older name of Madras. Currently, Chennai is inhabited by more than 7 million people in an area of 176 sq km. Water supply for this population is maintained by tapping a combination of surface storage reservoirs and aquifers. The Chennai Municipal Water Supply and Sewerage Board (CMWSSB), a statutory body established in 1978, is responsible for water supply and sewerage services in the Chennai Metropolitan Area. The main sources of public water supply in the city are the three reservoirs — Poondi, Redhills and Cholavaram — with an aggregate storage capacity of 175 million cubic metres (MCM). The other major resource is groundwater from the well-fields in the Araniar-Kortaliyar basin and the southern coastal aquifer, and also a large number of wells and tube-wells spread all across the city (Figure 1).  Over-extraction of groundwater resulted in a rapid ingress of seawater, which extended from 3 km inshore in 1969 to 7 km in 1983 and 9 km in 1987[[i]]. Groundwater levels within the city also fell and brackish water began to appear, even in localities which earlier had good quality groundwater sources. The CMWSSB calculates water availability based on surface and aquifer contributions under its direct control. Since it perceived reservoirs and other surface supply as more significant for a long time, very little attention was paid to subsurface storage or ground water recharge. As an outcome of research, done by several agencies the CMWSSB embarked on a campaign to create ground water recharge facilities in the city, and later throughout the State. This led to significant changes in ground water levels and to the quantum of water available to the population of a growing metropolis.

Read the entire paper here.

The IFMR Trust recently released a report along with the World Resources Institute on clean energy options for the base of the pyramid in India.  A previous Villgro post described the impact this report should have on energy entrepreneurs and investors but the general BOP practitioner can learn a lot from this new research as well.  The document starts from a Macro level view of the market potential and then goes into more detail about specific issues that certain companies face.  All of the information paints a highly valuable picture of challenges at the BOP that we all can learn from.

One of the first things to note was the surprising variations in market size.  Of the $2.11 billion estimated aggregate potential market for the four sectors studied in the report more than 96% of it was for Decentralized Renewable Energy Sources leaving only 1.2% for solar home systems ($27.39 million), 0.8% for Solar Lanterns ($18.58 million), and 1.1% for Energy-Efficient Cook stoves ($24.13 million).  While every report’s numbers need to be taken with a grain of salt, seeing these low numbers should prompt BOP practitioners to try and understand the total market size potential for their own industry so as not to be blindsided by limited growth opportunities or high competition crowding that, if this report is correct, one can imagine will happen in this one.

Another benefit of this document is that it paints a picture of several businesses and the immediate challenges that they face.  For example, one of the challenges discussed is the charitable distribution schemes that distort the local market.  A real life example of this is how the free kerosene stoves and televisions promised by the Tamil Nadu has made the citizens there assume that the energy efficient cook stoves should be given to them for free as well creating a hard market for the energy efficient cook stove companies to enter as most of their customers are reluctant to pay for the product.  This report is chalk full of other ideas like this that can quickly educate someone about what issues to look out for in the BOP.

A relevant issue that is pointed out in the document relates to incorrect assumptions that can be easily made in impact assessment and market acceptance.  This particular situation reveals that some BOP energy companies might look more beneficial and feasible on the surface because they state their impact based on the assumed value of the fuel their clients are saving.  You would figure there is no problem with this but while an energy efficient stove might have a significant reduction in the amount of fuel needed, it can’t automatically be assumed that it will be of value to the end user. This is because in many cases they get their fuel for free by just gathering biomass and burning it.  When simple situations like these are illustrated throughout this document it becomes easier for one to imagine where there are incorrect assumptions about their own impact or market.

The rest of the report includes an overall introduction to India’s rural BOP clean energy market, the specific systems and products in place, and the roles of different players like NGOs and Governments.  It is a great primer for their intended audience but also has a lot of insight that can be utilized across many sectors utilizing social innovation in India.  You can view a copy of it here.

Siddharth Tata was invited by IFMR to take a hard look at DNE’s (Dairy Network Enterprise) Dairy Healthcare and Productivity Services Delivery Model in Thanjavur and tell them about things they needed to watch out for. His
comments include financial sustainability, the capacity of MFI partners, and importance of communication.

Read Tata’s entire post on the IFMR blog, here.

In 2004 Proctor and Gamble was able to accelerate the launch of their new line of crisps, Pringle Prints using a new approach to innovation – open innovation. P&G was looking for a way to introduce edible printing on to each crisp. The idea was to have trivia, pictures and words printed on each crisp. Rather than develop the technology in-house, P&G floated the requirement globally, and acquired the technology from a small baker in the Italian city of Bologna. Taking this route allowed them to take the product to market at a fraction of the cost of the traditional innovation model. The term ‘open innovation’ was first used by H.W Chesbrough, of the University of California, Berkeley in his book Open Innovation: The new imperative for creating and profiting from technology.   Open innovation is defined as “the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively.”[i]

Traditionally, companies follow the invention model to innovation. If it is a well established firm, they create infrastructure and recruit the best talent from their internal fund to produce innovative products. A fortunate startup or a mid-sized firm would do the same using the funds from venture capitalists. The idea behind this is to keep the innovation within their four walls and gain an edge over their competitors. The focus in this model is on talent and not on the business model. World class talent developed valuable innovation that finds its way to the market. Through this process, the innovations which are not useful to company’s core business are shelved. Often the people involved in developing the idea leave the firm and commercialize the innovation on their own. As a result the firm which financed the innovation is not able to enjoy the benefits. Chesbrough, uses the example of Xerox Palo Alto Research Centre (PARC) to explain how Xerox failed to capitalize on disruptive innovations developed by their own staff. These products were later launched by companies set up by former Xerox employees. The market capitalization of these companies collectively exceeded Xerox itself.[ii]

Secondly, the invention model is not able to sustain the high levels of top-line growth. Stagnation in R&D productivity leading to flattened sales and squeezing by nimble competitors mandated change in the innovation model.  Important innovations were originating mostly from small and midsized entrepreneurial companies. Individuals, university and government were looking for ways to make money out of their intellectual property. The above factors led to the new paradigm of open innovation.

Rather than developing all the innovations inside the firm, the idea behind open innovation is to look outside the boundaries of the firm for innovations that can solve business problems. Also, the intellectual property created inside the firm can be licensed to other firms for application in other markets. It is important to understand that open innovation is different from outsourcing innovation. Outsourcing is transferring work to low-cost players. But open innovation is about finding good ideas that are almost ready-made solutions that suit your requirements. Open innovation is a form of crowdsourcing that helps companies to have a rapid design process with the help of ideas of people available globally.

Changes in the way innovations are done in firms have led to emergence of players who play a significant role in connecting technology seekers and providers. They act as knowledge brokers between the R&D labs of multinationals and scientists in government and private labs, consultants and universities. The benefits that the firms that seek them get are several times greater than the seeking charges that these brokers charge.  Ninesigma, Innocentive, Yet2.com are some of the intermediaries who provide services to accelerate the process of open innovation. Other ways of looking out for innovations outside the firm would be to have your own people to look out for ideas or look out for innovations among the partners and suppliers you engage with.

The Institute for One World Health (IOWH) is a perfect example of a social enterprise capitalizing on open innovation. The organization is a pharmaceutical social enterprise founded in 2000 that is dedicated to developing drugs that can cure diseases affecting millions irrespective of their ability to pay for the drugs. They conduct an international search for most promising solutions that can cure the most infectious diseases in the world. After evaluating each identified lead, they closely work with the inventors, form partnerships to seek funding, and secure rights to develop these innovations for the noncommercial markets in the developing world where they are needed most. Through their efforts, they are able to provide an appealing outlet for idle intellectual property of pharmaceutical and biotechnology companies. Pharmaceutical scientists, drawn to a mission of saving lives and improving health worldwide, are eager to participate in groundbreaking and compassionate research and development. IOWH also plays a significant role in bringing promising drug research from the lab into the clinic and onto regulatory approval and manufacturing.

These examples show how open innovation can lead to more players entering the market, as well as direct benefits to us, the consumers who use these innovative products. The IOWH example shows how social enterprises can use the idea of open innovation to possibly create greater social impact. Open Innovation has helped realize the full potential of every innovation. But we must remember that it is not a substitute for in-house innovation, which is still required for the development of ideas that do not find a solution outside the company.

[ii] http://www.quickmba.com/entre/open-innovation/

According to Rosabeth Moss Kanter, who writes here, if a company can integrate the benefits that it offers society more closely into its existing business, that integration can be very sensible and beneficial for the business. Moreover, she highlights that some smart companies are finding that including a focus on benefiting society in their mission can help yield competitive advantage by creating a corporate culture that leads to high performance and profits.

On the other hand, Kanter argues that there are a number of reasons why incorporating social good into strategy can improve a company’s long- term performance.

• Can help motivate employees.
• Help to maintain a cohesive culture despite the diversity.
• Can help spark innovative thinking by exposing employees to new ideas and perspectives.

Also, the writer points out that the reason many companies now want to enter emerging markets is because those markets are growing. But companies are discovering that there are so many social and environmental needs in emerging markets and those needs can be a good source of new product or service ideas that people will pay for.  For instance, in November 2006, Danone launched a yoghurt called Shoktidoi, designed to provide a response to the nutritional needs of Bangladeshi children at an affordable price.

Furthermore, for surviving, companies have to do some good for society to continue doing well financially. Fundamentally, companies that are not somehow doing good will eventually have problems. For Kanter, information about a company’s behavior anywhere in the world is more readily available to people all around the globe. That is why most companies try to invest part of their benefits in their Corporate Social Responsibility programs.

In conclusion, Kanter agrees that thinking about creating societal benefits through business should be part of setting strategy. If, as a business leader, you start thinking deeply about growing your company, in the future that means thinking about unsolved problems and unmet needs. Solving some of those problems and addressing some of those needs can, if done well, benefit both your company and the larger world.

But reality is much different. The journey has just begun. Many fledgling companies and many ventures within established companies fail to capitalize on successful prototypes because they make one strategic error: they do not understand scale-up. In this post Robert Moore looks at three common mistakes in the transition from promising start-up to full scale venture.

Charles Baden-Fuller and Ian MacMillan recently wrote for the Harvard Business Review blog on a topic that is very important to every one of the businesses here at Villgro.  From Coir Atlas which provides bamboo/jute alternatives for the wood separators used in steel transportation to a rural BPO called Desicrew, all of the Villgro Incubatees have or will realize a need to shift their customers and products if they are going to scale.

In just this last month I have seen each of these issues in many of the Indian social businesses.  While this article talks about the difficulty in scaling correctly in general it is vital that the social enterprise sector think about these concepts early on especially because the social goals they want to meet makes this transition to scale even more complex.

The three basic concepts introduced by Baden-Fuller and MacMillan are

1. Realize your customers are not the same as users
2. Recognize that first users are not the same as scaling users
3. Anticipate that first products are not the same as scaling products

While it is easy to see the user of your product as the customer it is also important to look for other revenue streams that might not be the end user.  If you take Wonder Grass for an example, their goal is to sell their affordable housing product to both the village end user and to other organizations that will provide the houses to the end users.  If Wonder Grass solely relied on the ability for the villagers to buy their product then it would take much longer to grow to scale.

The authors’ second and third points are where complexity develops in the social enterprise sector.  Many social businesses have a particular customer or user in mind when starting the business because of the social benefit they hope to create.  When starting small it might be easy to reach your intended user but growing to scale can involve issues with unmanageable distribution channels or even being tempted to focus on a more accessible user who isn’t as bad off and won’t provide as much of a social benefit.  Another complexity of this space is that normally the transition from your first to your scaling products would indicate an increase in revenue potential but in the social enterprise space sometimes it means taking a cut in the ultimate earning potential your company can make, especially if that transition involves trading financial return for a social one.

In this sector there are a lot of companies who have taken many years to figure out who their scaling user or what their scaling product and the only reason they are still in business is because they have been supported by the entrepreneur’s previous successes or been given grants to address the social need they are trying to impact.  The rest of these social enterprises however do not have the luxury of wasting time and if they aren’t careful will find themselves with customers, users, or a product that does not scale.  If they take these ideas of scale into account now the issue of scale will be much easier to accomplish and they will be able to successfully take their impact to the next level.

Here at Villgro our incubatee companies not only spend a lot of time figuring out how to successfully market new products or business strategies to rural India but also how to learn from their mistakes when they fail.  An issue that all of them come across is that the Indian market is disparate which forces them to incorporate tweaks in their marketing plan for each area that they want to market to.  This causes trouble when trying to quickly scale their companies but our incubatees are not alone, with large MNCs dealing with this same problem and most recently the Unique Identification Authority of India as it launches its first large scale national test.

The unique identity program, also called Aadhaar, is a program designed to assign a 12-digit identity number to a majority of Indian citizens over the next four years.  Coming from the USA where we have the social security number, I can definitely see how having a UIN will make the lives of Indian citizens better – especially those who have no other formal means of identification such as passports or drivers licenses.

But the social implications don’t end there.  This is a massive undertaking in marketing and something this big will truly provide some great opportunities to learn more about the Indian market.  To complete this task an advisory team has been formed which includes Kiran Khalap – Founder of Chlorophyll brand consulting firm, D.K. Bose – one of India’s most experienced social marketers, Praveen Tripathy – President of Pidlite Industries which is regarded as one of the smartest marketing companies in the country, Santosh Desai – chair of Futurebrands, and Sumeet Vohra – marketing head of Proctor and Gamble India.

There is a great quote by D.K. Bose on the project that goes “Marketing quite often is seen as an effort towards profiteering, an effort towards extorting people’s motivation.  This, meanwhile, is concept marketing, value marketing, intangible marketing. When you promote education, you don’t say ‘I’m marketing education’. You’re marketing certain values and concepts.”  This quote is significant because it describes a challenge the social entrepreneurs in India also face every day.   I often feel that they aren’t given the credit they deserve as they are not only creating profitable businesses in difficult markets but molding values and introducing new concepts as well.

As the Unique Identifier Authority spends the next six months launching a learning program and a large scale national test, social entrepreneurs should pay close attention to its successes and failures as it will provide valuable learning for how to ultimately reach more and more of the many markets that make up India.

Mayank Jaiswal, Villgro Fellow 2010, takes a look the the concept of disruptive innovation through the lens of conventional strategic management theory.

Read Hari Nair’s full article here.

Hari Nair, in his piece, “Shaping For-Profit Enterprises Through Disruptive Innovation,” presents the concept of “disruptive innovation.” In this analysis I have attempted to understand it through the lens of conventional strategic management theory.

In the diagram alongside, the curve ODT represents an efficient Price Quality Frontier (which essentially means that it represents the best quality for a certain price and vice versa available in the market).

Disruptive innovation moves the frontier to point C so assume a curve passing through OCT rather than the solid curve shown passing through ODT. What this means is a business has found a new way of doing something which either provides a better quality at the same price as the efficient frontier or same quality at a lower price than the corresponding efficient frontier.

Let us further assume that A and B were established players who were providing a certain quality for a certain price. For example A is a Ramada Inn, which is a budget hotel with best quality in class similarly B is a Taj Palace, high quality for high price. We also see that both A and B have ‘influence circles’ – it is the area from which A and B derive their consumers. Thus if a company comes along and ‘breaks’ the frontier at D and raises it to C, we can have two types of migration – the ‘quality migrators’ people willing to pay slightly higher prices for a much higher quality or ‘price migrators’ people willing to settle for slightly lower quality with a considerable decrease in price. Thus we see flight of two types of consumers.

Additionally, it might so happen that region D was a consumer ‘wasteland’ say 20 years ago – i.e. no consumers existed in that region. However, with the change in the economic conditions may be region D has now become a ‘hot spot’, the entrenched players A and B usually miss out on these if they are not conducting timely surveys of the consumer landscape, and keeping themselves abreast of the latest changes in consumption patterns.

Razor Rave is a case in point. A can be thought of as the street hair dresser and B as the high end salon. With the entry of Razor Rave kiosks and the fact that there is more disposable income with Indians especially in the middle class, Razor Rave is C. It has come in where no players existed and has created disruptive innovation by serving the consumer professionally (quality axis growth) at not very high price points.

The theory has implications for new social enterprises as well. I If new enterprises can develop innovative approaches which provide better services orquality at similar prices or similar quality at lower prices and can identify “consumer wastelands” which will be no more, there is scope for a successful enterprise to be set up. The need and chances of developing such enterprises in the social space are very high given the current rate of growth in countries like India.