Co-creating business's new Social Compact by J eb brugmann and c.k.prahalad. NGOs emerge as corporate sector"s,,De facto" regulators # with the ability to coordinate "smart mobs" # A potent example: Attack on Coca Cola by local NGO over use of water in village in Kerala Account spread over Internet like wildfire Millions of dollars in lost sales and damage to reputation Make the corporate conform to their norms
Co-creating business's new Social Compact by J eb brugmann and c.k.prahalad. NGOs emerge as corporate sector"s,,De facto" regulators # with the ability to coordinate "smart mobs" # A potent example: Attack on Coca Cola by local NGO over use of water in village in Kerala Account spread over Internet like wildfire Millions of dollars in lost sales and damage to reputation Make the corporate conform to their norms
Co-creating business's new Social Compact by J eb brugmann and c.k.prahalad. NGOs emerge as corporate sector"s,,De facto" regulators # with the ability to coordinate "smart mobs" # A potent example: Attack on Coca Cola by local NGO over use of water in village in Kerala Account spread over Internet like wildfire Millions of dollars in lost sales and damage to reputation Make the corporate conform to their norms
by J eb Brugmann and C.K. Prahalad 1 Motive > What?: Convergence of Corporations & NGOs > Why?: Create innovative business models > To?: Grow new markets at bottom of pyramid & niche segment in mature market Business NGOs Civil Society Changing Relations: Businesses, The Civil Society & NGOs
New Opportunities: Bottom of the Pyramid
NGOs: Taking the new role of Entrepreneurial Ventures
2 A ROCKY START
Two decades of liberalization by governments At the behest of IMF and World Bank Business and civil society fought bitterly Point of Contention: nature & rate of economic reform Government reduced its intervention
3 UNANTICIPATED CONSEQUENCES: CONVERGENCE OF PATHS NGO emerge as corporate sectors De facto regulators With the ability to coordinate smart mobs A potent example: Attack on Coca Cola by local NGO over use of water in village in Kerala Account spread over Internet like wildfire Millions of dollars in lost sales & damage to reputation Make the corporate conform to their norms 4 HEAVY INVESTMENT BY COMPANIES TO COUNTER NGOS Initially companies did it defensively; followed by proactive strategies Social Market Slogans Setting up non profit entities CSR initiatives Cause based marketing programs Chevron on Global Energy Issues & Unilever on women issues Microsoft Director worked with NGOs 5 EMERGENCE OF MARKETS AS AN ARENA FOR INTERACTION OF COMPANIES & NGOS Utility of NGOs Possess Local knowledge Local infrastructure Understanding of Local cultures Consumption behavior Utility of Corporations Provide Business models Acumen Funding
JV between Telenor & Grameen Bank: Sell cellular phones Decline in Government aid & Private Sector charity: NGOs eyeing entrepreneurial opportunities WIN:WIN for both: Companies can market well & NGOs calibrated business models for good.
6 STAGES SUMMARIZED Stage one Companies and NGO realize they have to coexist. Look for ways to influence each other. Stage two Some companies get into bottom of the pyramid segments and niche markets. They learn from and work with each other. Stage three They enter into co creation business relationships Companies become a key part of the NGOs capacity to deliver value. 7 THE PATH TO CONVERGENCE The Be- responsible Stage The Get-into- business Stage The Co-create - Businesses Stage 8 THE BE-RESPONSIBLE STAGE Realization of possibility of mutual existence Work to meet limited objectives Collaborate with the enemy Creation of three convergences 9 CONVERGENCE OF STANDARDS OF PRACTICE & EMERGENCE OF JOINT REGULATORY FRAMEWORK Benefit to Corporations Access to NGOs knowledge of local market & social network Benefit to NGOs Developed more expertise in marketing & specialized business practices 10 CONVERGENCE OF BRANDS, MARKETING & COMMUNICATIONS AND EMERGENCE OF FIRST JOINT PLATFORM FOR MARKETING & CUSTOMER MANAGEMENT Case in Point: Cause-related marketing
Learning from each other: Co.: Viral Marketing NGO: Commissioning of Advertising Agencies to design campaigns Company NGOs loyalists NGO Companys customer & employees 11 CONVERGENCE OF PROFESSIONAL CADRES AND CAREER PATHS & EMERGENCE OF MGT PROFESSIONALS DEDICATED TO WORKING WITH COS ON SOCIAL CAUSES AND NGOS ON BUSINESS ENDEAVORS Cos Gather intelligence on NGOs Tools to pursue opportunities in untapped markets CSR NGOs Persuade Cos to change ways Develop competencies to do business Many managers building careers by moving back and forth between the two sectors 12 THE GET-INTO BUSINESS STAGE Failure on part of Cos to cater to the 4 Billion consumer market in developing countries
Few Cos Success in Bottom of Pyramid mkt.
Few NGOs success in untapped market segment 13 CASE IN POINT: PICK N PLAY Pick n Play: South Africas largest retailer CSR Initiative: Support black farmer & cooperatives Co operatives: Provided mgt & mkt. skills Farmers: directly source produce to urban areas
Health Store Foundation Aim: Provide people with safe medicine in Kenya Created 68 Child & Family wellness shops Provide turnkey mgt systems & support Training to owners Select optimum store location
14 ISSUES WITH THE GET-INTO BUSINESS STAGE One retail outlet per 5800 people vs one per 3.4million people Companies that succeed leveraged relationship with NGOs ABN AMRO Accion initiative for microfinance in Latin America Shell Foundation venture capital funds to local entrepreneurs Pick n Pay support to weak farmers Difficulty in managing new roles Business investment strategy to achieve both social and investment goals?? Can local NGOs earn profits through consultancies?? Are you a competitor or a collaborator? Microfinance Vs Banks Cooperatives Vs retail outlets 15 NEW RULES OF COMPANY-NGO ENGAGEMENT Jointly define the norms that will govern their future relations and behavior. Private and civil society sectors will cocreate markets. Task oriented relationships, rather than ideology driven dialogues. Align global positions and standards. Neither companies nor NGOs can see one another as adversaries. Creating legitimacy in the society by creating bold value propositions. Advocate common policy positions and jointly develop co regulatory schemes.
16 THE CO-CREATE BUSINESSES STAGE
Development of integrated business model
Both become key parts of each others capacity to deliver value
17 OPPORTUNITIES OF SUCH VENTURE Ability to target Low income consumer/ niche market Create hybrid business model to cater to bottom of economic ladder Revive corporations social legitimacy while expanding NGOs impact 18 CASE IN POINT: BRITISH PETROLEUM
Aim: Develop Fuel Efficient Stove for poor consumers in rural India Requirement: Option to switch between fuels based on Current income Availability of fuels Cooking styles BP in collaboration with IISC Bangalore developed a portable stove that could use LPG or biomass as fuel Distribution through three NGOs Established channel in 5 states Work together on Product features Promotion campaign Financing options Distribution Safety considerations
19 ADVANTAGES OF THE CO-CREATE BUSINESS MODEL TO SHAREHOLDERS
Availability of pre existing distribution channel to BP Building reputation for the NGO Shared credit for developing the product Collaboration with a global firm Financial advantages Unique venture in efficient value chain Global corporation Informal local organization Research Institute
20 CONCLUSION: A MUTUALLY BENEFICIAL ALLIANCE The two parties are dependant on each other Both realize the mutual benefits which they derive from each other Application of asset and competencies by both partners Value creation greater than sum of individual efforts