11.2 Innovating sustainable solutions for developing countries: can BOP strategies be the mean?

Jacob Ravn , Institute of Development and Planning, Aalborg University, Aalborg, Denmark
As highlighted by numerous reports from the Intergovernmental Panel on Climate Change (IPCC) developing countries are highly vulnerable to climate change, and mitigation remains challenging as gaps exist in understanding the vulnerability and the opportunities for adaptation and mitigation. An overarching challenge is the need for improved capacity to conduct integrated, multi-disciplinary investigations and develop sustainable solutions. During the past years, a number of facilities have been established to reduce and cope with the effects of global warming such as the Clean Development Mechanism, technology transfer, funding through Global Environment Facility etc. The main driver for targeting the challenges has so been driven by “traditional” public policy and development economics initiatives, but more recently a number of voices have argued for the inclusion of private sector to tackle the challenges. Not only as a partner, but as a driver as private sector holds capital, infrastructure and knowledge etc. that potentially could meet the vast demands at hand.

 This trend steams from the pioneering work of C.K. Prahalad that basically argue that the 4 billion people living at the base of the pyramid (BOP) for less than 2 $ a day constitutes a huge market for private companies if they are able to provide products and service to meet the demands as for instance clean water, cheap energy etc. A market that constitutes an apparent untapped purchasing power of estimated 5.6 trillion $ from which:

  • Private companies can make significant profits by addressing the needs at hand.
  • Private sector can contribute to poverty alleviation, by meeting the evident demands for clean water, sustainable energy etc.
  • Multinational companies should play a leading role in this process of selling to the poor.

 In the literature (Hart & Christensen 2002; Prahalad 2006; Kandachar & Halme 2008), as well as in practical examples, two distinct lines of thought are found when targeting BOP markets in developing countries. An example of technology driven innovation to meet the BOP demands for clean drinking water is Life Straw – a high tech “straw” consisting of 12 chemical filters to purify water (www.vestergaard-frandsen.com/lifestraw.htm). Another approach is based on existing competences in companies, when for instance soap producers penetrate the market through product adaptation - as for instance by selling soap in smaller boxes. 

 A number of projects have been launched within the last years to meet the demands in the BOP markets, and thereby tested collaborations with non traditional partners to understand the cultural values in the potential market, re-calibrated cost structures, re-organised distribution channels, marketing etc. The cases show that business targeting BOP markets can contribute to poverty alleviation  and to mitigation of climate changes (GrameenPhone, Lightuptheworld, www.cemex.com, microfinancing).

 However, rather little is known about the dynamics of the BOP business models that often is based on close collaborations and alliances between private sector, NGO’s and universities. The majority of the BOP cases have focused on activities of multinational companies in developing countries, but fare less is known about business strategies and models targeting BOP markets, when deriving from small and medium-sized enterprises (SME) that constitute 95% of the private sector.

 Adding to this the current knowledge is relatively weak in the understanding of BOP business models, which take the departure in sustainability practises. The BOP paradigm is often applied based on an interest in new markets and to increase availability of products and services to new potential consumers. From a sustainability perspective this is not durable, as the current consumption patterns have influence on global warming.

 Further in the effort of developing sustainable business models a core challenge is the active participation and co-development of end users in the products and services innovation. Initiatives such as the BOP-protocol (http://www.bop-protocol.org/ ) underlines the inclusion of end-users, but concerns arises around this participatory approach, as the initiative, agenda and not the least resources is steaming from the private sector. The concern is therefore if new upcoming solutions are addressing the basic needs as outlined in the Millennium Development Goals (http://www.un.org/millenniumgoals/) or if the BOP approach is merely a new approach to penetrate untouched markets.

 Based on these initial concerns, the aim of this paper is to undertake a discussion of the current BOP paradigm to support the development of a sustainable, participatory multi-stakeholder business model frame work, which moves from:

  • Focus on multi-nationals companies towards inclusion of SME’s
  • Market penetration towards sustainable development
  • Private sector /CSR initiative towards a participatory, bottom-up initiative
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