Next Generation Value Creation

1. Next Generation Value Creation

2. Our video

3. Welcome Emily Cristina Sharon

4. Why are we here?

5. Overview of Session • Introductory conversation • Case studies • Breakout discussion • Wrap up & action items

6. Let’s jump right in

7. What is collaboration at the BOP?

8. BOP Engagement Matrix Next Generation Value Creation Wealth Creation Engagement Partner Producer Collaborator Creator Collaboration Sales of Products and Services Inclusive Growth BOP Engagement BOP Business Philosophy Business Philosophy Customer Purchaser Shopper Client Traditional View of BOP Consumption

9. Prosperity Regeneration Productive capacities of BOP Organized, developed, leveraged as inputs to business Collaboration Strengthens competitiveness & business growth BOP becomes important contributor to economy

10. Benefits for MNCs Market Share Increase Penetration Market Entry Product Innovation Expand Distribution Build Brand Loyalty Sourcing Efficiency Global Leadership

11. Benefits for BOP Social Empowerment Advancement Development Generation of income

12. How can you identify the right strategy for your organization?

13. Ask the right questions Define the Goal Determine BOP Strategy Execute on the How

14. Cases Considered Nestlé Hindustan Unilever ITC e-Choupal

15. Nestlé AtéVocê

16. Nestlé AtéVocê - Challenge • Nestlé’s goal in Brazil was to deepen their penetration into both densely populated urban areas and remote rural parts. • Nestlé created Nestlé AtéVocê, and innovative distribution strategy to reach BOP consumers in the favelas through a network of micro-distributors and direct sales agents. • Nestlé AtéVocê has created additional business value for Nestlé Brazil, while generating livelihood and prosperity at the BOP.

17. Nestlé AtéVocê - Solution Nestlé Grow sales and market share OBJECTIVE Micro-distributor Innovate distribution models involving community members STRATEGY Saleswomen Homes Micro-retailers Reach customers in their homes and customary places of purchase TACTICS

18. Nestlé AtéVocê - Benefits 15% sales growth/yr 3 x Nestlé Brazil Nestlé OBJECTIVE Micro-distributor Jobs created Income generated 2-3 training sessions/yr STRATEGY Saleswomen Homes Micro-retailers Access to nutritious foods TACTICS

19. Hindustan Unilever

20. Hindustan Unilever - Challenge • Hindustan Unilever’s goal was to create a distribution network in rural India to reach untapped buying potential. • However, rural India suffered from a lack of brand awareness, complicated and expensive access, low per capita consumption, and low brand awareness. • As a result, Hindustan created Project Shakti, a distribution strategy reaching BOP consumers in villages of less than 2000 people. • Project Shakti has capitalized on expansive market potential and built branding, while generating empowerment and income opportunities for rural Indian women.

21. Hindustan Unilever - Solution Hindustan Enter rural Indian market for long-term opportunity and growth OBJECTIVE Micro-distributor Create distribution models involving SHG community members and micro-credit financing STRATEGY Women’s network Homes Personally reach customers in their homes TACTICS

22. Hindustan Unilever - Benefits Untapped potential reached through new sales & distribution channel Model replicated elsewhere Hindustan OBJECTIVE Micro-distributor 13,000 Shakti ‘ammas' earn independent monthly income of 700-1,000 rupees Key partnerships established with micro-creditors and SHGs STRATEGY Women’s network Micro-entrepreneurs act as brand ambassadors, promoting standard of living improvements Homes TACTICS

23. ITC e-choupal

24. ITC e-choupal - Challenge • ITC’s goal was to enter and compete in the international commodities market. • But regional bureaucracies created information asymmetry between farmers and agribusinesses, resulting in slow, inflexible and expensive access to low quality farm output • ITC created the e-choupal concept, which created a dual link to farmers: informational, through the installation of internet kiosks at the village level, and physical, through the installation of crop aggregation sites near farmers. • e-Choupal has lowered the cost and raised the quality of inputs for ITC and raised farmers’ disposable income

25. ITC e-choupal - Solution ITC Compete in global markets OBJECTIVE Source directly from farmers e-choupal STRATEGY Information Saagar aggregation Information transparency via technological innovation Crop aggregation close to farmer TACTICS TACTICS

26. ITC e-choupal - Benefits ITC ITC savings $100K per day OBJECTIVE Incentivize growth of higher quality crops Increase income e-choupal STRATEGY Information Saagar aggregation Farmers costs cut by $250K per day (aggregate) Reduce transaction cost of sale by 50% TACTICS TACTICS

27. What are key factors for success?

28. 4 C’s for Sustainable Collaboration Community Continuity • Local market knowledge • Local legitimacy • Relationship building • Location matters • Intermediaries • Building buy-in • Incentives • Education & training • Ongoing support Co-creation Conduct • Inclusive development • Innovative thinking • Unshackling the organization • Environmental • Ethical

29. Key Success Factors: Community • Engage local market knowledge • Involve local people and local partners • Focus on key relationship building • Create jobs and livelihood to incentivize success • Create local legitimacy by identifying key gatekeepers • Understand community constraints and politics • Identify geographies and communities that are a good fit; location does matter • Work with intermediaries, such as community organizations, nonprofits, NGOs, government agencies

30. Key Success Factors: Co-Creation • Engage individuals from the host culture at the onset for inclusive development • Learn from and about the host culture • Ask questions to understand the current mindset • Cultivate a two way-dialogue • Partner with and empower local entrepreneurs • Be open to innovative thinking and nontraditional sourcing of ideas; the “trickle up effect” • ‘Unshackle’ the organization: be open to letting go of preconceived notions and traditional concepts that may have worked in developed countries

31. Key Success Factors: Continuity • Cultivate a long term perspective both internal to your organization, and external to the community Internal • Build buy-in within your organization at all levels • Align incentives with your program goals • Consider the entire value chain for engagement opportunities • Share best practices to foster continuous innovation External • Focus on the education and training of local partners • Provide ongoing support to partners

32. Key Success Factors: Conduct Ethical • Plan holistically for the success of all partners involved • Consider the sensitive needs and desires of the culture and community Environmental • Consider the entire ecosystem and how your operations may impact it both positively and negatively (eg. which needs will your strategy meet, and which current solutions will your strategy displace)

33. What challenges do we see?

34. Challenges are significant but surmountable Community Continuity • Cultural nuances • Market fragmentation • Lack of Infrastructure • Lengthy Returns • Upfront Investment • Internal buy-in Co-creation Conduct • Preconceived notions • Shift of Mindset • Regulatory hurdles • Resource Constraints

35. Challenges: Community • Cultural nuances may be unique to a certain geography, rendering learnings non-transferable • Market fragmentation can create significant inefficiencies • Lack of or weak infrastructure may exist • Agendas of community leaders or interests groups may not align with your goals

36. Challenges: Co-Creation • Creating a shift of mindset: organization practices may be based on developed countries or successes elsewhere in the developing world • Disrupting preconceived notions of culture may be more complicated than expecting • Cultivating a true two-way dialogue takes patience • Promoting ideas that originate external to the organization may create resentment and defensiveness

37. Challenges: Continuity Internal • Upfront investments may be significant to ensure success • Returns often require a longer term perspective • Quantification and measurement of returns is hard • Building internal buy-in at various levels and among disparate business units can be challenging External • Cultivating relationships and training may be costly and require ongoing maintenance

38. Challenges: Conduct • Regulatory hurdles, both legal and political, are unique to the geography and ever-changing, requiring evolution and constant adjustments • Dealing with resource constraints may require flexibility and the ability to find alternative solutions • Sustainability and profitability goals may conflict with one another or those of partner organizations

39. Balanced measurement scorecard Vision, Mission, and Values BOP Impact

40. What is your role? NGO Government MNC Others?

41. Rules of Engagement No criticism There are no wrong answers Contribute, don’t be shy Be enthusiastic Have fun Develop other people's ideas Stay focused!

42. What is your plan of action?

43. Let’s share

44. Wrap up

45. Share your vision. Change our world. Kellogg Innovation Network at the Kellogg School of Management

46. Appendix

47. KIN Model for Global Prosperity Ethical Community Prosperity Environment Economy Sustainable Profitable

48. Base of the Pyramid

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