Reaching the Rich World's Poorest Consumers

Article from Harvard Business Review by Muhammad Yunus, Frederic Dalsace, David Menasce, and Benedicte Faivre-Tavignot

Some pointers that I've got are:
1. Concept of social business
2. The model
3. Making the model work

On Concept of social business

• Social business is a concept originally developed in the context of poor countries. Such as business has three key characteristics.
• First, it seeks to alleviate social problems, including all forms of poverty.
• Second, it must be run sustainably - that is, it should not lose money.
• Third, profits - when they exist- are reinvested in the business rather than funneled back to shareholders. Investors eventually get back only the money they initially invested. 

On The model

• Value propositions that social business models offer:
• Customer exclusivity - Unlike low cost models, social business models are exclusive: Companies determine up front which and how many consumers the programme will serve, and no one else is eligible for the offer. The target may be broad. In determining eligibility, social businesses usually work with nonprofits, which rely in turn on local associations and public programmes to find potential beneficiaries. This approach also reduces companies' costs. 
• High quality products and services - In a low cost business model, every consumer, whether poor or not, evaluates the trade off between the company's standard and low cost offers. If they are too similar, the company runs the risk of cannibalizing its standard offer. Thus, it must downgrade key attributes in the cheaper offer to create a distinct trade off. In a social business model, the offer can remain unchanged if the economics allow. This is important, because the goal of the social business is precisely to give poor people access to an existing product or service whenever possible. The commitment to high quality means that social businesses don't lower their costs by redesigning products or manufacturing processes, as low cost businesses may do. They focus on changing the economics of sales and distribution. The solution is often to partner with nonprofits or to work with distributors on a noncommercial basis. 
• Carefully designed solutions - Unlike low cost companies, which are defined largely in terms of products and services, a social business often (though not always) expresses its value proposition as a solution to a social problem customers have. An often important part of social business solutions is promoting behaviour change on the part of customers. 
• The hidden payoffs - The primary purpose of a low cost business is to create shareholder value by generating profits. Although the business makes products accessible to poor consumers, that is merely a means of delivering on its promise to shareholders. Because a social business seeks to alleviate social problems sustainably, however, its profits are plowed back into the company. But that's not to say that social businesses yield only social returns. In fact, the spillover effects of creating them may in the long run be as commercially valuable as the profits of a low cost business. Those effects include uncovering opportunities for innovation in new markets, motivating employees, and enhancing the company's reputation - along with demand for its products and services. 
• Breakthrough innovation - To be sure, low cost businesses do often trigger innovation in processes and design, but the innovation of social businesses tends to be more radical, because they are trying to maintain the original quality of their products and services. This forces them to break away from product-centred innovation and focus instead on consumer-centered innovation. Social business models also spark innovation through the high level of collaboration they involve. In particular, they enable companies to leverage existing capabilities in the not-for-profit sector. 
• Motivation - Our experience shows that social business models generate a lot of motivation and meaning for workers, who are often less engaged when their employer's sole purpose is to make shareholders happy. 
• Reputation - Large corporations that introduce low cost products are quickly suspected of trying to make money on the backs of the poor, which can damage their overall brand image. But when a company starts a social business, which is expressly not for profit, it an change stakeholders' perceptions. The model breaks down barriers and helps the company build new relationships based on trust. 

On Making the model work

• Always put the social goal first - Companies must keep in mind the point made earlier: Social businesses have social goals and business spillovers, not the reverse. If a social business is created to stimulate innovation or improve reputation, it will generate suspicion among its partners, threaten the cooperation needed for innovation, and look like corporate hypocrisy to company employees. This doesn't mean, of course, that you can't talk about the spillover effects - just that they have to take second place or you won't get them at all. 
• Be patient and selective in partnering - It takes time to construct the right model for the social problem you are addressing. Negotiations are necessary both internally and with external ecosystem partners. Finding the right organisations to partner with is difficult: You need to understand their cultures and mindsets - especially when they're nonprofits, whose participation and credibility are essential for success. 
• Keep it as simple as you can - Poor people in developed countries often have a lot of choice. For example there are more than 300 social service programmes in France, but each has its own, sometimes complicated, processes and eligibility criteria, and poor people with limited time find it hard to make an informed choice among them. Even when a social business can identify all potential beneficiaries, it's generally able to reach only about 30% of them. Some social business are now developing traditional push marketing initiatives such as advertising and couponing to raise public awareness of their products and services. 
• Start local - Don't try to launch a national programme from scratch. Figuring out how to collaborate with nonprofits is better handled on s small scale. Luckily, the customer exclusivity of social business makes it easy to run experiments. 

Yours,
Something Small Thinking Big