Archive for the ‘Sectors’ Category
Energy Generation for Low-income Customers
Low-income markets are often the most neglected when it comes to access to energy. Traditional energy sources have been firewood, and kerosene stoves. There are recognized health risks that come with these. Not to mention that they are not efficient. A new breed for energy solutions are making their way into these low-income markets. Next Billion, a great resource for information on all things within the development sphere, has put compiled a profile of some organizations that are catering to BoP markets through their innovative products.
Enhacing Food Value Chains
Agricultural practices have a direct bearing on how an economy feeds itself and the general quality of life of a population. Adopting sound agricultural practices is therefore crucial for any economy. Agri-businesses no doubt, play a strong role in enhancing agriculture value chains.
According to a recent report by the World Economic Forum, “Next Billions: Business Strategies to Enhance Food Value Chains and Empower the Poor,” more than 70% of the bottom of the pyramid depends on agriculture value chains for their income. The benefits of enhancing these value chains through new business models is no doubt huge.
Tapping in on this opportunity, the report takes a look at the several business models that can be employed to enhance value for the several actors in play. The report presents solutions to producers, consumers and solutions to empower entrepreneurs.
It also makes recommendations for stakeholder engagement, such as strengthening incentives for business engagement, providing complementary funding and capacity, facilitating corporate engagement.
The report offers business models that have the potential to create substantial value for the poor consumers, producers and entrepreneurs as well as for companies. It hopes to provide a roadmap for companies seeking a win-win approach in emerging markets, and those that wish to establish a workable, profitable and scalable business model.
Read the complete WEF report here.
Enabling Access to Energy at the BoP
The focus on renewable sources of energy has been reinforced in recent weeks by the BP oil spill off the Gulf Coast in the U.S. While one part of the globe voraciously consumes energy, 1.6 billion people globally have no access to electricity. A further 3 million still use traditional biomass for cooking, the health hazards of which have been substantially documented.
However, there are several – mainly local entrepreneurs – that are offering valuable energy solutions to this very segment of people. Most of these enterprises are removed from the traditional energy enterprises, and offer solutions based on local needs, and local possibilities. The Ashoka Network, in collaboration with Hystra, a hybrid organization that works with business and social sector entrepreneurs to design and implement strategies for the BoP, conducted a study on the work of these enterprises.
The study, “Access to Energy for the Base of the Pyramid,” is an in-depth look at several market-based approaches to BoP energy requirements. It looks at the different kind of technology available such as:
- Grid connections: which turns the BoP into legal, paying consumers
- Devices: such as solar lanterns and biomass cook stoves
- Solar home systems: Which deliver electricity to households
It also looks at systemic support to deliver these solutions. These include the roles of co-operatives which take on that challenge of providing sustainable power supply and create income generating opportunities, and the role of finance and various financing intermediaries. It also makes recommendations for action, outlined for various system enablers – aid agencies, governments, social investors and so on.
The study puts out two interesting observations – that it is not only important to focus on providing solutions that are cost and need-efficient, but also to optimize “human capital.” And secondly, that the most successful social entrepreneurs are also the ones who have tried harder to get the users who were implied in the value-addition process involved.
Download the entire report via the Hystra website.
How Innovation Really Works (and 10 ways to recognize an innovative enterprise)
Think for a minute of the following: the jet plane, the television, the Internet, and the cell phone. What do each of these have in common?
Now, think about this. The jet plane effectively shrunk the world, making travel between Singapore and New York only 22 hours. The Internet allows a passenger wishing to travel between Singapore and New York to book his ticket from the comfort of his home. The cell phone allows him to check-in for his flight while driving to the airport, or to simply use his cell phone to access the airline-generated bar code that acts as a boarding pass. And the television (or an adapted version of it) entertains him while he travels the 16,000 km to his destination.
In short, each of these are or have been path-breaking. They, among countless other technology, have changed the course of the everyday life in several ways. Would we consider them innovative? Almost certainly so, I would think.
The term ‘innovation’ however is often used loosely. Often, it refers to simply anything new. The Monitor Group in India recently released a study it jointly conducted with leading business publication, Business Today titled, “How Innovation Really Works.” The report takes on the notion of innovation as simply “launching new products.” Through examples based on an Indian context, the report frames innovation against a proprietary framework — the Montior Group’s Ten Types of Innovation.
The frameworks defines (business) innovation as being “path-breaking, disruptive, and sustainable.” It divides the ten types of innovation into four broad categories: Finance, Process, Offering and Delivery.
Further, it lists out particular types of innovation under each of the category. Let’s take a look at what these types of innovation are, and the enterprises used to illustrate them.
Finance innovation involves Re-inventing Business Models and Creating Extended Networks. An example of the former can be found in Gyan Shala, a no-frills schooling project in Gujarat and Bihar. An example of the later can be found in FabIndia, which created an extended network of 17 community-owned companies that supply its products.
Process innovation involves two kinds of innovation — an Enabling Process and Core Process. An enabling process is one which supports an enterprise’s primary work, while a core process are capabilities that others can’t duplicate. An example of an enabling process is the Gujarati newspaper Dainik Bhaskar, which uses an external network to get news input through potential consumers. Thus indirectly building its own subscriber base. Core processing innovation can be seen in the working of Moser Baer, a CD/DVD manufacturing firm which diversified its operationg to the home-movie market.
Offering innovation can be found in three ways — Product Performance, Product System and Service. The report refers to TCS’s software product BaNCS as an example of a product performance innovation. Recognizing the benefits of using technology to make banking services more accessible to rural markets, TCS developed the “cloud computing” based software to provide branchless banking services to the State Bank of India. A product system innovation creates ways in which individual products can connect with each other to create a larger system. Case in point, ITC’s e-choupal. The system developed by ITC enables farmers to connect via village kiosks, creating a agri-commodity procurement platform. And lastly, a product service innovation is where companies create value in engaging with the customer once the core product has been purchased. An example of product service innovation mentioned in the report is TCS.
The last category of innovation accroding to the framework is Delivery Innovation. Delivery innovation can be in three ways — through an innovative channel, a distinct brand, and creating value through a unique customer experience. Moser Baer rapidly expanded through the Indian market by creating a distribution channel that banked on widespread, targeted outreach. Being able to release a home movie within a window period of 10 days to six months created a unique customer experience, which has contributed significantly to its growth. ITC’s e-choupal, beyond creating an innovative system has also been able to innovate further via leveraging the e-choupal brand to build its network.
The examples used in the study are not necessarily a reflection of the kinds of companies that might fit the bill. However breakthrough innovation almost always include multiple types of innovation, atleast 3-4 of the 10 within the Monitor Framework (the study selected eight organizations that fulfilled this criteria).
Clearly the framework might not lend itself to all models that exist. Still it is a useful way to recognize where greatest value lies, and to help build a business with lasting impact. Investors, incubators and other enablers interested in creating lasting social value too can use this framework as guideline towards assessing which enterprises to back.
Read more about the BT-Monitor study here, and tell us what you think about it. Also, have you come across a social enterprise that fits into this framework?
Towards Greater Inclusion of Small Holder Farmers
Last week Villgro held its annual Learning Week for its 2010 Fellows. Among the various issue-areas, we took a look at how businesses models can successfully engage with small holder farmers. We looked particularly at two models – contract farming, and deep procurement. In both models large agri-businesses engage with farmers directly to source raw material and products for consumer consumption. Both models seek to cut out the middle men, and create a more direct, uninterrupted line of supply. However, both models also tend to work with medium and large-scale farmers, rather than ones with smaller land holdings.
Traditionally these farmers have been shielded from interacting directly with retailers. Previous legislation in India that ostensibly sought to protect these farmers from unfair prices have now been lifted, allowing wholesale retailers to directly interact with farmers, rather than go through government-regulated mandis where middlemen acted as procurement brokers. This, combined with growing urbanizatio nand changing consumer patterns has allowed both large agri-businesses and farmers new opportunities to work together, and promises to change the way agriculture is done in India.
But where does the small farmer fit into this? Several examples have pointed to their incorporation under contract farming arrangements for food giants such as McCain, and Pepsi, and domestic agri-business firms such as Calypso Food and Suguna Poultry. Others have been engaged as sourcing channels for Indian retailers such as ITC, and Reliance Fresh. However, studies such as the Monitor Groups Emerging Markets, Emerging Models have shown that less than 50% of the farmers engaged currently are small holder farmers.
So how, can businesses move to being more inclusive of small farmers? Bill Vorley, Mark Lundy and James MacGregor in their paper, “Business Models that are Inclusive of Small Farmers” describe a range of business models for inclusive market development. The papers focuses specifically on models that improve inclusiveness, fairness, and financial sustainability of trading relationships between farmers and agri-businesses, whether processors, exporters or retailers.
The paper identifies three broad models through which this is possible.
- Producer-driven: This model is driven by small-scale producers or large farmers. The aims to create new markets, higher market prices and stabilize market positions for small producers, and large supply volumes for large farmers. An example of this model is the work of Cuatro Pinos, in Guatemala.
- Buyer-driven: This model is lead by processors, exporters and retailers who are looking for regular, reliable and quality supply to meet their supply-chain needs.
- Intermediary-driven: This model is driven by traders, wholesalers, and other traditional market actors, or by NGOs and allied support agencies, or as in the case of China, national and local government bodies. The objective of these actors are varied. trader and wholesale driven models tend to target discerning customers, while NGOs traditionally champion the cause of the poor farmers, and governments regional development.
The examples of several organizations are used throughout the paper to highlight these models. Cuatro Pinos, for example, is a cooperative that identifies existing farmer groups, associations and “lead farmers,” and works with them to test production schemes and provide production support to promising farmers. Credit and assistance is later discounted from the initial product deliveries.
MA Tropical Food Processing is a Sri Lankan firm that operates on the producer-driven model, providing extension services to farmers for production, record keeping, and post-harvest practices. It also acts as an intermediary for commercial credit from banks.
Impact
The authors also present a table compiling the impact on these farmers, using MA Tropical Food Processing as an example. The figures show an almost two-fold income level among farmers part of the MA chain as against those outside of it. Among common crops, farmers tend to receive a higher price per kilogram on average, when compared to other village traders.
Limitations
The models are not without their limitations though. In the buyer-driven model benefits can be limited by high transport charges and delayed payments. Also, producers also demand exclusivity in supply. Suppliers consequently also face the probability of side selling by producers, among other limitations.
The paper proceeds to lay out how small farmers can be prepared to join mainstream agricultural production and what businesses should consider in order to work successfully with small farmers. It also takes an in-depth look at the role of the public sector and donor organizations in supporting the greater inclusion of small-scale farmers.
To read more about the models suggested by the authors, click here.
Agri-biotechnology in India
Biotechnology has been in the news recently for not the best reasons. The proposed introduction on Bt Brinjal raked up much controversy across the country. Agri biotechnology is not new, however. In 2002, the Government of India approved the commerical cultivation of Bt cotton. This lead to the growth of agri biotech among biotechnology firms.
Recent increase in government support – through dedicated R&D laboratories, regulatory framework and policies – has contributed to this growth. Private participation is also on the increase.
The potential is however met with its own share of challenges. India has perhaps gained notoriety for stemming several international patents filed for agricultural produce that has been indeginous to this part of the world for years – basmati rice and turmeric powder to name a few. The need for stonger laws is one such challenge.
A 2007 study by Rabobank delves into these future of agri-biotechnology and addresses some key issues and challenges. For more on the report, visit www.rabobank.com/far
Rural Energy: Power Play for the People
The idea of supplying free electricity to farmers has created political ripples across the country based on the belief that supplying electricity for free would be an onerous option for the Government as electricity production is expensive. Chandrakant Pathak a mechanical engineer from Gujarat remarks that free electricity for farmers is not all that impossible and it is quite an easily achievable goal and points that anything that moves can be used to generate power. He has invented an array of interesting improvised power generating gadgets to suit the needs of rural people.
This article documents all those interesting innovative power generating and modified power-consuming gadgets of everyday use, like motor pumps, flour mills and even electric vegetable shredders that could run on manual or bullock power. He believes that if accent was placed on local power production by the people, not only would the cost per unit of power come down dramatically, but the entire power problem would become non-existent in a few years.
Read the full article here.
Energy planning and the developing world
To “go green” today is much less a fashion statement as it may have been even five years ago. Today its not just cool, or hip to go (environmentally) green, one is often expected to do so. I was recently chastised for buying a set of incandescent light bulbs, and was only let off the hook, when I pointed out that my need was rather urgent, and the store didn’t stock the long-lasting enviro-friendly ones. My guilt hit away at me the entire evening, and to be honest, I haven’t been able to install those incandescents.
The search for alternative energy needs continues as the perils of global warming get more real year on year. The development of new energy systems however are determined by choices. These choices are becoming more and more pronounced and articulated.
As technology develops to meet these choices, business need to plan for a future of changing scenarios. Shell, a leading energy company actively plans fo varying scenarios to help them manage their future better. According to the company, scenario planning helps focus on “critical uncertainities. On things we don’t know about which might transform our business. And on the things we know about in which there might be unexpected discontinuities.”
As part of their scenario planning, in 2001 Shell looked at the possible energy scenarios in 2050. They identify two possible scenarios – Dynamics as Usual or The Spirit of the Coming Age.
Dynamics as Usual contends that various competing priorities will limite the adoption of radical technology change. For example, countries like India and China will seek greater economic growth, while developed OECD countries will seek to improve energy efficiency furthering the life of the internal combusion engine. This scenario will aslo see fluctuating government support for renewable energies.
The Spirit of the Coming Age will see ’superior ways of meeting energy needs’ being developed. This, Shell contends, will be a world of experimentation and many failures. Fuel cells appear to be the order of the day in this scenario. Not surprisingly Shell suggests that technology innovation will often arise from niche market fringes, where physical constraints force innovation and consumers are willing to pay a premium. Incumbent suppliers, they suggest, often ignore these markets.
The forecast in both scenarios have interesting implications for energy solutions in the developing world, and by extension the BoP. Personally, I belong to the group that believes that the developing world needs to take more cognizance of environmental challenges, and must rise up to those challenges by seeking out alternative, efficient solutions that do not compromise economic progress. Easier said than done. But here’s where technology support can play a huge role. If we can successfully engage the IITs, IIScs and the innumerable other technology labs in India to provide solutions to our energy needs, we could provide the right kind of solutions for the coming age. Innovation, after all is often borne out of necessity.
Your thoughts?
Read the entire Shell Scenario Report here.
The Indian Dairy Sector: Issues for the Poor
Earlier, we had a piece by Anand Krishnaswamy about an innovative milk vending technology developed by Chennai-based Invention Labs. That piece looked at the demand side of milk, and how it reaches the end-user.
But what of the supply side? How does the market and policy environment affect the poor who work within the dairy sector? A 2002 paper published by the FAO highlights some of the critical issues facing poor people withing the Indian dairy sector.
An excerpt from the Executive Summary is below:
This paper analyzes the changes in dairy markets, policies, and trade over the past two decades and discusses what can be expected in the next decade. We analyze the changes in production, consumption and trade, as well as the changes in policies and the industry structure, and discuss how various factors have affected the market and trade situation. The paper is organized as follows: we first discuss the macro-view of the Indian dairy sector. Then we discuss policy changes and the expected effects of globalization and trade liberalization on the scale and scope of production. In the next section we discuss the changes in the cost and return structure of dairy production and the processing sector, trends in input and output prices, and breeding and health services. In the last section we discuss the impacts of commercialization of the dairy sector on socio-economic, health- environment issues.
Read the original paper here.
An Innovative Milk Vending Machine for India’s Dairy Sector
In March 2006, four friends and alumni of the Indian Institute of Technology, Madras connected form different parts of the globe and started talking. Their desire was “to build a product-based company that would solve some real problems of India.” By mid-2007, they were all in Chennai, India and had set up shop as Invention Labs. Since their set up they have engaged in several projects. Recently they made their foray into building the “Milk Tree,” a vending machine for milk sachets.
In this article, Anand Krishnaswamy illustrates how this innovative product has the potential to change the way dairy farmers, co-operatives, suppliers and consumers interact and the positive spin-off for the dairy sector. Anand is a consultant with the Lemelson Foundation’s India Liaison Office in Chennai.
Read the entire article here.