ICTD and Social Entrepreneurship

Leslie DodsonATLAS InstituteUniversity of Colorado-Boulder

Sustainable What?

What the heck does sustainable mean? Fluffy, vague, overused term. Donors expect it. We use it.

Does financial sustainability mean: Costs are covered? The initiative “thrives?” The business turns a profit?

How does the community define sustainable?

One Definition of Financial Sustainability

A financially sustainable system should: Generate long-term revenue Maximize profitability Not threaten the financial wellbeing of

customers Not have any significant liabilities

www.espdesign.org

ICTD-Related Businesses

Crowdsourcing, micro-work Distributed work and information piecework m2Work, TxtEagle, Samasource

E-commerce, Web 2.0 enterprises Telecentres and other access points Equipment, calling cards, accessory sales ICT repair and maintenance

Social Entrepreneurship

Triple bottom line: people, profit, planet

Hybrid business model Social enterprises blend for-profit principles with

non-profit goals.

Social entrepreneurs seek to provide real social improvements as well

as attractive social or financial returns to investors

J. Gregory Dees. The Meaning of Social Entrepreneurship.

Overview

3 Features of Running a Business Revenue sources The Value Chain The Value Proposition

3 Key Components The Customer The Entrepreneur The Technology

3 Business Models Micro-Finance Micro-Franchise Micro-Consignment

3 Features of Running A Business

The Value Chain

Locate the business along the value chain

Raw goods supplier? Producer? Distributor? Marketing and Sales? Maintenance Provider?

This will help guide the role of the ICT and the potential for sustainability

Michael Porter. Competitive Advantage. 1985.

The Value Proposition

What is the ICT product or service?

How is it produced and delivered?

Who is the target market for the ICT? Demographics & psychographics How are buying decisions made? By whom? Are buying decisions made on price, quality, service,

convenience? How frequently is the ICT product/service purchased?

J. Timmons & M.H. Morris

Revenue Sources Access or monthly fees? Pay per use? Pay per view? Advertiser supported? Subsidized use? Flexible price?

What happens: if another vendor undercuts the price? If the product or service is given away? If the product becomes obsolete?

The Customer

ICTD and The “Bottom of The Pyramid” Customer

People in developing communities are avid buyers and consumers of ICT products and services

Developing communities represent new market opportunities

But…the “B-O-P” approach views the poor as customers, buyers, shoppers Can selling to the poor alleviate their poverty? Critics say the BOP approach exploits the poor

The Entrepreneur

The Iconic Entrepreneur

Entrepreneurship is often the last choice. “The poor are reluctant entrepreneurs.” The poor desire stability through steady income

Failure rate for startups in the US: 50+%

How much tougher is it in developing communities?

Without credit & banking - Without regulation Without infrastructure - Without contracts Without disposable income- Without access

A. Banerjee & E. Duflo. Poor Economics. 2011.1

1

2 Business Week

2

The Technology

The Technology

ICTD enterprises have to consider these and other technology-related costs

1. Design costs 2. Equipment costs 3. Training costs 4. Maintenance costs 5. Replacement/upgrade costs

3 Social Enterprise Business Models

Micro-Finance & ICTDAccess to Credit

Small, micro loans to the poor to finance ICT equipment or ICT-related businesses

Entrepreneur receives loan to buy tech or offer ICT services, uses sales revenue to pay back loans

Entrepreneur bears all of the financial risk up front

Micro-Finance & ICTDPros and Cons Benefits:

“My loan is my husband.” Provides working capital to under-served

populations Group support

Disadvantages: High interest rates Keeps borrowers in debt Constant pressure to pay back loan Group pressure and accountability

Micro-Franchise & ICTDAccess to Business-in-a-Box

Applies franchise concept modified to developing community

Replicable small enterprises with a social component

Reduced level of risk compared to starting a business from scratch

Micro-Franchise & ICTDPros and Cons

Benefits: Simplified, pre-packaged, standardized

business Business model and training provided Tested, proven businesses

Disadvantages: Inflexible. Can’t easily change business Requires management skills Owner responsible for hiring, firing,

managing employees Often need to buy in to a franchise

Micro-Consignment & ICTDAccess to Products

Entrepreneur is provided with a basket of products at no upfront cost

Entrepreneur pays for product after it’s sold,

keeps profit, restocks

Risk is shifted away from the entrepreneur

Micro-Consignment & ICTDPros and Cons

Benefits: Entrepreneur does not bear burden of holding

inventory. That risk held by an organization or NGO

Can work well with new products in new markets Much lower risk for entrepreneur

Disadvantages: Entrepreneur doesn’t decide what products to

sell Consignment process dictates products to be

sold

The Downside of Business(Not a Complete List!)

Charging for a product/service diverts money that may be needed elsewhere

Profit-seeking behavior breeds greed Business competition creates winners and

losers, haves and have-nots Profit doesn’t automatically create

widespread wealth The 1% syndrome If you build it, they may not come

Complications

Customers want the lowest price.Businesses want the highest profit.Donors want the biggest impact.Lenders want the least risk.Technologists want the widest diffusion.

Leslie DodsonATLAS InstituteUniversity of Colorado-BoulderLeslie.dodson@colorado.edu

Resources Social Entrepreneurship:

C.K. Prahalad: The Fortune at the Bottom of the Pyramid. 2004 Aneel Karnani: Fortune at the Bottom of the Pyramid: A Mirage.

2007 Value Chain:

Michael Porter. Competitive Advantage. 1985. Microwork:

m2Work: www.infodev.org TxtEagle: www.jana.com Samasource: www.samasource.org

Micro-Finance: Muhammad Yunus. www.grameenfoundation.org

Micro-Franchise: Jason Fairbourne. MicroFranchising: Creating Wealth at the

Bottom of the Pyramid. 2008. Micro-Consignment:

Greg VanKirk. www.microconsignment.com