A Sand County Almanac (Photo credit: Wikipedia)
Little did he know at the time that his observations about the natural world would one day provide a key insight in the development of sustainable ventures and economies at the base of the world income pyramid in the 21st century.
Like Leopold's single-minded wolf hunters, too many base of the pyramid (BoP) ventures and initiatives have been "rifle shots"--business strategies premised on the design and sale of low cost products to targeted low income end users. The landscape is littered with the remains of failed BoP ventures focused on the sale of such things as low cost water filters, solar lights, clean cookstoves, and myriad other household goods. Reasons for failure: product misfire, low sales penetration, high selling costs, and inability to scale.
As Tarun Khanna at Harvard Business School observed many years ago in his article Why Focused Strategies May be Wrong for Emerging Markets, such an approach can work well in developed markets where infrastructure and institutions are well-established. But in the developing world, such a "rifle shot" approach is a death sentence. That is why most successful corporations from the developing world are highly diversified "business houses"--they can supply the infrastructure and institutions (e.g. power, transport, distribution, education, health care) that are missing in the society itself. In short, they think (and act) like a mountain.
It is now becoming increasingly clear that the same logic applies to individual BoP ventures and initiatives--success demands that BoP enterprises create wide and compelling value propositions. For BoP innovators, thinking like a mountain means creating an entire business ecosystem that delivers value to local people and communities in multiple ways, not just through a single product.
Consider CleanStar Mozambique (CSM), a BoP venture that I have had a hand in helping to form. The company is a partnership between the Danish biotech powerhouse Novozymes, BoP venture pioneer CleanStar, biofuel plant builder ICM, and financier Bank of America. Sounds pretty complicated, right? Just wait until you hear about the business model!
CSM is creating a business ecosystem that:
1. Brings clean cooking solutions which eliminate indoor air pollution in urban households which are;
2. Fueled by affordable biofuel which is;
3. Produced in rural Mozambique by subsistence farmers who:
4. Convert to a multicrop system of sustainable agriculture which;
5. Dramitically raises farmers' incomes and food security while;
6. Producing excess Casava which is used as the feedstock in the;
7. Biorefinery which has been constructed near the small city of Beira which;
8. Has the potential to dramatically reduce the production of charcoal in cookstoves which;
9. Accounts for a significant share of the deforestation and greenhouse gas emissions in the region.
Conventional wisdom would suggest that CSM is too complicated and has too many moving parts to be successful. But this is conventional wisdom from the established markets at the top of the pyramid. Such logic does not apply when it comes to the BoP. The truth is that natural systems are complex but resilient at the same time: Stress in one part of the system can be compensated for in other parts. The whole is greater than the sum of the parts. CSM has already proven their ecosystem concept in Mozambique and is now preparing to scale the model up across Africa, and eventually the world.
What is the lesson for aspiring BoP entrepreneurs?
Create a wide value proposition with multiple, complementary sources of benefit and revenue generation embedded throughout the entire business ecosystem.
Escape the tyranny of the single product "rifle shot" in favor of an umbrella business concept that simultaneously reduces environmental burden, generates livelihoods, and produces profits for the investors. Think like a mountain.