For a decade now, advocates for the poor in the world’s emerging economies have been urging companies to seek new markets among the have-nots, the left outs, the far away. The argument runs something like this: Not only would such initiatives bring social and economic benefits to the globe’s lowest-income segments; in addition, large swaths of the poor from today’s emerging markets will form the backbone of tomorrow’s middle class.
According to OECD estimates, the global middle class could increase from 1.8 billion people today to 3.2 billion by 2020 and to 4.9 billion by 2030. Almost all of this growth (85 percent) will be in Asia. Equally striking is the predicted rise in this group’s purchasing power, which is projected to increase from $21 trillion today to $56 trillion by 2030.
An idea whose time has finally come? From the standpoint of creating new sustained sources of business value, it appears to make eminent sense. But consider the results of an Accenture survey of Indian manufacturing executives.
Virtually every respondent—98 percent—said they recognized the benefits of a business model that includes the have-nots. More than two-thirds, moreover, believe that businesses that embrace inclusion will outperform peers that do not. But when these executives are asked about what they are actually doing, the numbers dip significantly. Only 30 percent, for example, say that inclusion is currently indispensable to their innovation processes. And more than a third of the executives pointed to other deficits, such as the absence of HR policies designed to help companies hire and retain employees who are willing to experiment with inclusive business models.
Still, it’s not surprising that almost all respondents had something positive to say about inclusive growth. After all, when nearly 7 out of 10 of them say they see inclusion as a lever to help them outperform peers, you know this is much more than lip service. However, the fact that most companies have neither the people nor the policies in place to make inclusive growth a reality suggests there are other issues at work as well.
This “commitment deficit”—the gap between the recognized value of an inclusive growth strategy and the actual current activity that would execute such a strategy—indicates that there are barriers preventing executives from acting on their beliefs. What’s holding companies back?
To answer that question, Accenture conducted primary research on inclusive business models in the Indian manufacturing sector. Besides surveying local Indian executives, we also interviewed 55 C-suite executives at multinationals engaged in manufacturing in India.
While our research was focused primarily on India, we believe that the findings are applicable to other emerging countries. A number of the barriers to serving the rural poor are the same regardless of geography and—as we found in a separate research report on consumers in emerging markets—many of the buyer values are the same for this segment throughout the world. Finally, some of the companies we surveyed have experience serving the rural poor not only in India but in other emerging markets as well as in developed markets. From the research, we found a number of obstacles that can prevent a company from succeeding with an inclusive growth strategy. These barriers are not insurmountable, however: For each challenge, solutions exist that can help companies successfully follow an inclusive growth agenda.
The path to profitability is murky:
Can companies really make money serving the poor? In our survey, this was the chief concern of Indian executives, and nearly half expressed doubts about the commercial sustainability of an inclusive growth strategy. Several challenges lie at the root of this concern. First, many companies know next to nothing about poor or rural markets. They’ve made little or no investment in learning about customer tastes or preferences; neither do they have a sense of what skills potential employees might possess, or even need.
For more information refer to http://www.accenture.com/us-en/outlook/Pages/outlook-journal-2011-inclus...
Authors: Raghav Narsalay and Anish Gupta, Outlook, 2011.
About the authors: Raghav Narsalay leads the Accenture Institute for High Performance research team in India. He is responsible for creating new reports and points of view on innovation, international macroeconomics, rural markets and business models. Mr. Narsalay is based in Mumbai. Anish Gupta is the managing partner of Accenture’s Products group in India. With more than 15 years’ experience in business consulting, Mr. Gupta has worked with clients across Asia. Among other projects, he has led the business transformation of an Indian family-owned consumer goods company, developed a pan-Asian business model for a home appliances global leader, and conceptualized a business model for a proposed agribusiness initiative for a leading Indian conglomerate. Mr. Gupta is based in New Delhi.