1- Purpose: IB aims to address a social or environmental challenge. Traditionally, private sector had merely an economic purpose. Goal setting and impact measurement systems in IB integrate economic, social and environmental results.
2- Market: Inclusion of low income groups (a.k.a Base of Pyramid) along the value chain is key for an inclusive business. Inclusion can be achieved by integrating low-income people as suppliers, distributors or customers. Traditional enterprises leave behind low-income communities by not attending to their needs or not considering the long term environmental impact of the products sold.
3- Beneficiaries: In traditional businesses, directors, managers and executive boards have a clear mandate to generate revenues for the shareholders of their company. Inclusive business models are designed to generate profit for multiple stakeholders along the value chain. Governance is key to ensure equality, fairness and transparency.
4- Collaboration: Inclusive business creates enabling ecosystems around their business model to make it economically viable and therefore sustainable over time. Inclusive business usually offers access to credit, knowledge and technology thanks to the ties with other actors. Traditional businesses normally compete for resources instead of collaborating to generate new ones.
5- Innovation: Inclusive business faces the continuous need to innovate not only by creating or adapting their products to the base of the pyramid but also to build the infrastructure around their social business models. Traditional businesses usually innovate by adding features and complexity to their portfolio for the same target customers: the global middle and upper economic segments.
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About the author: iQ impact lab is the social innovation unit of INQUVE. We offer strategic advice, business development and evaluation services to #purpose driven projects.
Source photo: HUSK Ventures
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At MDF West Africa, we recently launched the IBA Hub Ghana, from which we provide business development support to entrepreneurs. We help them develop sustainable business models by optimizing their strategy with the use of the business model canvas and building the internal management capacity of the business, the owner and its staff. We currently support entrepreneurs in WASH (EnterWash) and Agribusiness (IAC’s Accelerator Programme). Here’s a few learnings from our side:
- Do it with them, not for them: Many entrepreneurs, especially when attracting finance, know the importance of a business plan. Often times, they hire someone to write it for them, using the jargon the investors like so much. However, they forget that team and commitment are equally important. When asked about aspects of their business model, it shows that the words are not theirs, harming their credibility. We ask the right questions for clients to have a better understanding of their businesses, but we make sure that the strategy for their growth comes from them.
- Make your examples relatable: We pride ourselves in being trainers and consultants at the same time; which enables us to enrich training with our experience from the field. When training our entrepreneurs, this means we can use real-life examples of similar businesses in their fields because we know about the struggles of fellow entrepreneurs and, even more important, the success cases. Working on relatable case studies shows entrepreneurs what (not) to do and allows them to discuss and compare this to their own situation.
- Help entrepreneurs look at things from a new point of view: We’ve noticed entrepreneurs spend a lot of time ‘selling’ their product or business, without knowing what it is that the investor or customer is looking for. One of our entrepreneurs, a honey producer, has been dealing with sceptical customers. Unfortunately, Ghana’s market has many honey producers who mix sugar with their honey, so is not always easy to prove that the production is proper, and it makes it harder to convey the health benefits of the product. After one of our workshops, he said: “when you are passionate about what you do and you put 24 hours a day, 7 days a week, 52 weeks a year into it: naturally, you become defensive. But at IAC, I’ve learned the need not to be. Rather, to understand and empathize with my consumers and serve their peculiar demands“. Where this entrepreneur had become quite desperate, a simple tool such as a customer persona gives him a better insight in the customer’s perspective, allowing him to adapt his sales strategy.
- Create commitment and supportive environment: Ghanaian entrepreneurs have been somewhat ‘spoiled’ when it comes to free business advice. However, we have noticed that providing free support to entrepreneurs hasn’t been helpful for commitment and participation in our workshops. Some even ask for transport money to get to the venue and show up late, because there is little commitment from their side. However, subsidies are becoming scarcer, so there is a need for more commercial business development. By having the entrepreneurs pay for our services, they are more engaged in our trainings, and within a group of like-minded entrepreneurs, sharing of experiences is much easier. During our programs, we create enough time for peer-to-peer learning. Discussing their business case with fellow entrepreneurs benefits both parties with new perspectives. We try to match entrepreneurs from different fields, so that they can speak about their business case openly, without having to share their insights with a direct competitor.
IAC works with both start-ups and SMEs in the agricultural sector, on improving a) access to market, access to finance or c) improving operational efficiency. We work with e.g. input suppliers, producers, processors and distributors (often entrepreneurs perform several of these activities at the same time) – e.g. poultry farmers, dried mango producers, honey producers, fruit- and vegetable producers, coconut vendors and fish processors. An example:
A poultry farmer in the Greater Accra Region
We’ve recently supported a poultry farmer, whose previous batch of birds had been struck by disease. Due to this, he did not have enough working capital to invest in buying chicks for the next batch.
When he came to us, there was an opportunity to apply for a grant from the Ghana Poultry Program (GPP), which would allow him to invest part in resources, and part in business development support. In order for him to apply for this, he needed to have his cost and revenue streams mapped out, as well as a cash flow statement. We supported him in listing all these things, using the IBA tools, and provided feedback on his application form to GPP.
From our meetings, we figured that there were very tangible improvements to be made, such as: paying employees after sales, buying another (cheaper) type of feed, and keeping better track of expenses such as transport to and from the farm. We also worked on mapping the potential customers and focusing on the ones that would pay a higher price, in order to increase his margins. We’re still awaiting the results from GPP, but in the mean time he is operating with improved operational efficiency.
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Find out more information on MDF West Africa, IBA Hub Ghana and the EnterWASH and IAC programmes.
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What differentiates IAP from other Funds?
Mike: IAP seeks to provide end-to-end support for new innovations in low-income markets – not just through funding, but with local support and technical advice, and through to helping investees become investment ready and finally connecting with investors who can support the scaling of the initiative in the longer-term.
In IAP, there is a strong focus on innovation. How do you define what is innovative in your evaluation?
Mike: Innovation is about finding a new way to meet a need and address poverty in the local market – in a way that is more effective, impactful and valuable than the status quo. Innovation is not just about the product, but about delivering a new and effective end-to-end business model for addressing the challenge of poverty.
Geertje: Together with our local teams we evaluate whether the proposed concept already exists in the local market (eligible IAP country) or not. Are there other similar products or business models in the local context? Furthermore, we look at the level of innovation of the idea in the local context. The higher level (‘disruptive’) of innovation, the higher score it gets. Finally, our question is whether the innovation is critical for the success of the proposed inclusive business idea.
Impact is also an important consideration. How do you measure the level of impact of ventures applying to the Fund?
Geertje; We look at the number of LIP (low income people) reached by the proposed project: either LIP as employees (number of jobs), LIP as producer or distributor with increased income or LIP as consumers/beneficiaries with access to basic goods and services. Furthermore, we take into account the percentage of women involved and whether there is a focus on working with young LIP. In first instance we only look at the social impact of the proposed project, but of course there is a relation with scale potential and whether more LIP can be reached after the project closure when scaling the concept to other places, markets etc.
Mike: For impact, I try and consider both breadth and depth. By breath, I mean how many low-income people are helped by the initiative. For depth, I look at the extent to which each person benefits from the initiative. Initiatives that will help really transform lives of many people have the greatest positive impact.
From you current experience evaluating IAP applications, what is the most common mistake that applicants make in their application?
Geertje: We are really looking for combined factors of innovation, viability, social impact and scale potential. What I see from many applications is that one or two of these fields are well described, well others do not become clear from the concept notes. Another recommendation is to explain more on the “HOW” of your proposed concept. So, how are you going to reach women (not only how many and why), or how will your business idea becomes a sustainable business idea also after IAP support, or how are you going to mitigate certain risks etc.
Mike: As an average, applications have “scored” lowest against the innovation criteria. Applicants should be careful to consider how greatly their whole business model is different from existing solutions. Applicants should aim to be clear on how their initiative is not just incrementally innovative, but can transform the way things are done for large-scale impact.
Any further thoughts on IAP in general?
Geertje: IAP offers a great opportunity for social entrepreneurs active in the 4 IAP countries. Our ambition is to specifically focus on supporting those innovative inclusive business concepts that can bring high to very high scale and reach high numbers of low income people as suppliers, distributors employees and or consumers.
Selling high price products to rural farmers, with Mirik Castro
In this episode, we join Mirik in Northern Tanzania as he talks us through their strategy of selling relatively expensive biogas products to poor rural farmers in East Africa. Mirik has been working in business since 2005, working to turn businesses around that were not surviving the globalization of commerce. When his brother Sanne Castro approached him with a new biogas product he had invented, the two brothers entered into business together. IBA venture Simgas offers affordable, high-quality biogas systems for household use.
Some of the things you’ll learn on this podcast include:
- Why they decided to launch in East Africa rather than South East Asia.
- Why they moved from a very centralized approach to one that is hyper local, with hub managers installing biogas systems in a 10km radius, with a heavy reliance on IT to monitor quality.
- How they’ve productized the construction installation into a product installation
- How they’ve standardized 30 distinct steps of installation, and each step is documented and stored in a database for diagnosing problems in the system later down the line.
- How this installation monitoring system is linked to employee incentives for high quality installations.
- Some of the indicators that told them their highly centalized model wasn’t working, and the steps they took to confirm their intuition that a hyper local model was the better way.
- Reasons why a hyper local model is actually relatively cheap compared to the centralized version.
- How, on the downside, a higher volume of stock is required for a hyper local model, meaning a more capital intensive model.
- How trust in the company and affordability of the product have surfaced as the two key requirements for success
- Who their ideal salespeople are in the community, to reinforce the trust aspect.
- Who their customer is, in terms of status in the community, what motivates them, what their average monthly income is, and other characteristics.
- Why traditional MFIs, who are used to selling a higher volume of lower value products, are not the ideal organizations to sell higher value products to rural populations.
- How they’re solving their working capital finance challenges and the partners they’re working with to raise $150k increments relatively quickly.
- How they expand into a new community, who they strike partnerships with, who they target as their first customers, and how they quickly ramp up to many many more sales in each country until each hub becomes profitable.
- What part of his job over the last few years Mirik would happily giveaway.
We delve into the different leadership roles of Managing Director, COO and CEO and how they work together.
Resources:
Connect with Mirik:
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Post originally published here: https://findingimpact.com/fip-011-raising-early-stage-finance-with-nicky-khaki/
reproduced with authorization.
]]>The program will focus on a) access to finance; b) new markets; and c) operational efficiency.
This Accelerator Programme is scheduled to begin on June 1 & 2, 2017.
Entrepreneurs choose one of the three tracks and benefit from:
- an individual intake session
- a personalized action plan
- a two-day group workshop on the Business Model Canvas (BMC) and value proposition
- six half-day sessions tailored to their growth needs
- a final day where we revise your BMC and practice pitching
During the programme, entrepreneurs will have a personal coach available to them one hour every week and we will ensure proper networking.
Any business in the agricultural value chain is welcome to apply. IAC is able to offer this programme at a discounted price of GHS 1,500 (actual price being GHS 6,000).
Sign up by filling out our online registration form. Registration closes May 29th!
For more information, please see the flyer or contact Dominic on +233 (0)246390998 or [email protected]
]]>The BoP Innovation Center – one of IBA’s network partners – supports entrepreneurs and organizations to develop new products or services for the Base of the Pyramid and get them to market. We receive lots of emails from people that want to pitch their idea to us which we think is great. While we are not an impact investment enterprise, we do like to team up with entrepreneurs if we like the idea and the people behind it. In some cases we take these ideas into our own programs as our programs can provide a testing or acceleration space for respectively early and more mature ideas.
Whenever innovators ask what we could do to help them go from idea to impact, often we don’t talk about where to find the money right away. On the contrary, we would first like to learn more about what drives the team, the idea and the business model behind it. In other words, the essentials that are required to attract investments in the first place. So why not go through some of the typical questions we like to ask at BoP Innovation Center:
- Do you have the DNA of an Inclusive Innovator? Innovating for the Base of the Pyramid is not an easy job as the markets are very volatile and complex. This means you need to be equipped with a certain attitude and skillset and, even more important, you should not be afraid to make mistakes. By working closely with innovators, we have learned that the chances of success increase when the team is purpose-driven, empathic, agile, and collaborative (read more about what defines an Inclusive Innovator in our earlier blog series).
- Is your offering Desirable? All too often innovations strand because they are the result of what the innovators thinks that people at the Base of the Pyramid need. That’s why inclusive innovators need a consumer-centered design approach and perceive the BoP as a (heterogenous) group of consumers with their own aspirations that drive their purchase decisions (you’ll be surprised how much different these can be from what you thought). Therefore, we encourage innovators to test their proposition as early as possible and not wait until they only have a functional prototype ready (low-key prototypes like storyboards and roleplay can already provide you with a lot of consumer feedback). When you’re testing your proposition, make sure you not only test people’s willingness to purchase your offering but also find out if they would want to keep spending their money on it and, most importantly, keep using the product/service. This will ultimately define the social impact and the financial viability of your business case. We have seen improved cookstove businesses fail because the entrepreneurs underestimated the behavior change that was required for BoP consumers. As a result, people went back to their old (unimproved) cookstoves and the new cookstove ended up eating dust.
- Is your offering Feasible? With the desirability of your offering validated, it’s important to start thinking about how to produce and distribute your offering at large volumes to bring down the costs. This requires innovations to talk to as many manufacturers as possible and explore the costs and quality implications of local vs. remote manufacturing. At the same time, we encourage innovators to design for the extreme conditions at the Base of the Pyramid in which their offerings will be used. This reduces the chances of product or service failure and the needs for local maintenance and repair services which can become extremely costly and difficult to organize. Again, doing early tests will give you the best answers.
- Is your offering Viable? Last but certainly not least, any innovation relies on a solid business model that allows you to reach scale. This is about how you balance costs and revenues and how you plan to market & distribute your offering, knowing that low-income markets are often informal and underdeveloped and that rural consumers are hard to reach. Many offerings that are new to these markets require awareness raising which can be achieved by, for example, cleverly piggybacking on public or private programs that seek to reach similar impact. Having the right partners for marketing, distribution and consumer financing is therefore key if you want to scale and sustain the business. We still see many innovators trying to do too much on their own which is a pity because it has never been this easy to collaborate with private and public sector partners at the BoP.
Curious to understand what BoP Innovation Center can do for you? Go through our online Inclusive Innovation checklist.
We hope this blog post gives inspiration and direction to the inclusive innovation journey you’re on. Don’t hesitate to get in touch or have a look at our Inclusive Innovation services. Also, we recommend you register your team on the iba.ventures website as it provides an awesome place to meet with like minded ventures, investors and mentors.
Originally published here: http://bopinc.org/updates/so-you-have-an-innovation-for-low-income-markets
The Inclusive Business Accelerator was launched in January 2015 and facilitates a platform with more than 6000 members from around the world, 300+ companies and 170+ trained business advisors.
First, you can become a member to make use of all functionalities of the platform. Second, entrepreneurs can register a venture profile. Below are 4 reasons to take this next step and become active.
What does the Inclusive Business Accelerator platform give you?
#1 – Dynamic venture profile
Register your venture profile. Create a visually appealing profile that captures people’s attention. Add your pitch, crunch your business plan and list your team members. Add your video pitch and add important presentations to your documents tab. Grow a dedicated following and engage members on your activity stream.
#2 – Fundraising Campaigns
Register a fundraising campaign. Keep your profile up to date so investors can follow your progress over time. Receive pledges from interested investors and connect directly. You decide who can participate in your next round and on what terms they can invest.
#3 – Exposure & Opportunties
As community manager I regularly post or share directly opportunities relevant for the ventures on the IBA community. Sign-up now to make sure you stay informed.
#4 – Proven track record
IBA and it’s network partners have a proven track record in supporting inclusive business entrepreneurs and via our global, online and local support we are here to support you!
Remember, the first step is to create a free IB Accelerator user account and login to the platform, the second step is to register your venture profile and start using the platform as an entrepreneur. Join the community and let’s bring the concept of inclusive business into the mainstream!
Edited and re-published from original blog post by Ben White.
]]>Raising Early Stage Finance, with Nicky Khaki
In this episode, Nicky Khaki talks us through early stage finance. He runs the EWB Venture fund that specifically targets early stage businesses and provides them with high-quality professionals to provide expertise to drive them forward. Nicky Khaki started out as an investment banker on Wall Street before working in Kenya for a year setting up small scale water shops in urban areas. He went back to University to study international development and then connected with Engineers without Borders Canada who were looking to formalize their investment offering for early stage businesses whilst providing professionals (or “talent”) at the same time.
- Some of the things you’ll learn on this podcast include:
- What the landscape of finance probably looks like for social entrepreneurs in Africa.
- What EWB Ventures looks for in a business to potentially invest up to $100k and specifically at what stage.
- Why EWB Ventures provides talent for 1-2 years when they make an investment into a company.
- We talk about their talent screening process and what the talent can expect when they get placed with a company.
- Recommendations for early stage entrepreneurs to cultivate investor relationships, including sharing a monthly update on progress.
- What an early stage enterprise should have ready when approaching an early stage investor, and why a financial model is not expected at this stage.
- We discuss common pitfalls Nicky’s seen with pitches to his organization, including (a) know your audience and making sure your presentation responds to that audience; (b) include what problems you’re facing and what do you need help with; (c) not interviewing the investor, to ensure they’re aligned with your style and approach; (d) talking about a major expansion in the pitch – which is crazy to do, even before you’ve reached revenue.
- If Nicky was setting up a social enterprise, which sector he would go into.
Resources:
- www.ewb.ca
- Bridging the “Pioneer Gap”: The Role of Accelerators in Launching High-Impact Enterprises
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Post originally published here: https://findingimpact.com/fip-011-raising-early-stage-finance-with-nicky-khaki/
reproduced with authorization.
]]>In the training in Uganda, several participants knew about the BMC and had even used it before with clients, but had never interpreted it the same way as IBA. They discovered a whole new angle as well as how to take clients step by step using the BMC as a guide to ask very relevant questions. In Lusaka, the participants asked very practical questions on service delivery using the IBA tools and demonstrated enthusiasm for using them fully in their work.
- The next Training of Advisors, which will be held in Accra on July 17-19. This training will cover the Inclusive Business toolkit, and is open for all Business Advisors. Joining this training will improve the advisors’ offer to customers with innovative tools and will expand their network, both online and offline, by joining IBA.
- The Inclusive Agribusiness Centre (IAC), which will start their Accelerator Programme in June. They will select 15 entrepreneurs for this 3-month programme.
c) Improving operational efficiency; with a focus on cost, revenue and optimizing margins.
For more information, keep an eye on IAC’s Facebook (https://www.facebook.com/InclusiveAgribusinessCentreGhana/) or Twitter (https://twitter.com/IAC_GH) page.