Efforts to create innovations that can meet both social and business goals in low-income markets are fraught with unanticipated dangers. A study of 18 initiatives from around the world reveals how ventures can succeed where others have failed. It’s not easy innovating for the millions who are climbing from the bottom rung of the income ladder in high-growth and emerging markets. Even when much goes right, many initiatives go wrong.
Take the recent example of a large company that had developed a highly nutritious, low-cost food product. The company then recruited a sales force of local women, who developed recipes and coordinated cooking sessions in remote communities to market the product. A yearlong trial proved that prospective customers found the product affordable and easy to use. And profit margins were in line with expectations. But despite the company’s best efforts—“co-creating” a useful product with local communities; using salespeople with local knowledge—the venture failed.
The problem: The product didn’t reach enough new customers at a pace the company’s leaders felt was necessary to justify further investment. In short, the initiative didn’t scale.
In a past issue of Outlook, we explored how a number of companies are overcoming the many obstacles to “inclusive growth” and seeking new markets in low-income communities.
More recently, Accenture conducted further research into the subject, looking at what we call “inclusive business initiatives,” or IBIs—businesses aimed at profitably scaling innovation in these markets—and asking: Why do some initiatives achieve scale, bringing both social benefits to low-income populations and profits to the company?
To find out, we undertook an ambitious comparative study on innovation, looking at 18 initiatives in five countries: Brazil, China, Ghana, India and Nigeria. We discovered that successful initiatives met three key requirements for achieving the scale companies need to thrive.
1. Getting top leadership on board
- Lack of real or sustained support from the board and top management dooms many new projects
- Encourage top leadership to have a personal stake in the initiative.
- Prevent a short-term focus on the bottom-line.
- Get top leadership to allocate the right talent.
2. Collaborate with governments in strategic partnerships
- In theory, governments and businesses in high-growth and emerging markets should be aligned in their focus on inclusive growth. But it’s not that simple.
- Collaborate to help low-income consumers.
3. Partnering with local NGOs and small entrepreneurs
- In the absence of direct or indirect government sponsorship for an IBI, large businesses - must look elsewhere for help, often turning to partnerships with entrepreneurs and NGOs.
- Establish in-house platforms to help partnerships run smoothly.
- Partner with authentic NGOs.
Large companies are increasingly recognizing the valuable business opportunities that can come with developing and executing inclusive business initiatives. By creating innovations for low-income markets, they can not only help consumers enter the middle class but also fuel profitable new growth for themselves. This requires hard work and time. It may even call for a new mindset—including a willingness to look beyond an inclusive initiative’s short-term impact on company profits. But the investments can pay big dividends, if these new ventures are approached with both speed and discipline.
Published by Accenture’s Outlook – the Online Journal of High-performance Business, No. 1, February 2013, by Raghav Narsalay and Ryan T. Coffey.
About the authors:
Raghav Narsalay, who is based in Mumbai, leads the Accenture Institute for High Performance in India.
Ryan T. Coffey is a senior specialist with the Accenture Institute for High Performance. He is based in Mumbai.
For more information refer to:http://www.accenture.com/us-en/outlook/Pages/outlook-journal-2013-scalin......