This is his contribution to the 2012 Barometer of Social Entrepreneurship …
Lessons to maximise social impact
Global poverty has become an urban phenomenon. In 2002, 746 million people in urban areas were living on less than USD 2 a day (Ravallion, Chen and Sangraula, 2007). Such a segment cannot be catered to by philanthropy or social responsibility-based initiatives. What it needs is a focused business strategy-driven, fully market-based, intervention.
In an article titled “A new alliance for global change”, Bill Drayton and Valeria Budinich define Hybrid Value Chains (HVCs) as the association of for-profit business with the non-profit sector to:
"make global economies and create lasting social change. Businesses offer scale, expertise in operations, and financing. Social entrepreneurs offer low costs, strong social networks, and a deeper understanding of customers and communities."
HVCs have been tested in the housing, healthcare and agriculture paradigms across Latin America and India. Specifically in the affordable housing market in India, there is a huge gap of nearly 25 million housing units needed for the informally employed sector in the Indian cities.
Hybrid Value Chains in India
The HVC model in India catalyses both for-profit developers who could deliver large-scale housing at market rates, and the housing finance (mortgage) providers to collaborate with the not-for-profit and citizen sectors. Together they aggregate demand and bring the knowledge of working with the target group to the business. We have unlocked a market of over USD 120 million by catalysing nearly 12,000 homes as part of the total potential market of over USD 250 billion.
From the work of Hybrid Value Chains, Ashoka has learnt some important lessons on scale change:
- Identifying key roles for existing or new actors: Many times, to achieve scale, new business models evolve, which requires that new actors or existing stakeholders perform new roles. The objective is to identify those roles and ensure that people are available to continuously perform them.
- Self-replication: Ashoka always looks for self-replicating models where either the perfect storm is brewed and it could move on its own, or one of the stakeholders makes it their own. To achieve national scale, HVCs can use the local entrepreneur model to take care of local relationships, project management and scale for best replication across multiple cities at the same time.
- Self-sustainability: Why would people continue to do what is proven in a pilot study or a geography-based project? The key is to ensure that none of the stakeholders depends on either a grant or a subsidy to do what they did or to be able to replicate it. If a market-based model exists, then each stakeholder does it for their own growth along with the project.
- From open-source to open-growth: When the problems which we are tackling are of continental scale, the more the actors are involved, the better it is for scale. Competition and intellectual property cannot be seen through the traditional lens; here the core belief must rest on collaboration with peers to ensure scale. This is about co-creation and partnership for growth.
Business strategy-driven market-based intervention
Scale is relative. When referring to emerging economies across the world, scale is definitely in millions if not billions. To achieve such a large footprint for any idea, there has to be a fundamental shift in the way we look at products, services, partnerships and profit.
What comes out very clearly is that, in such an extraordinary market scenario, we cannot afford to have anything that will prevent collaboration. We need to tear every wall down to achieve massive scale.
Do you agree?