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November 2006
Steve Rochlin, former Director of Research and Policy Development at The Center for Corporate Citizenship, is one of three co-authors of Untapped: Creating Value in Underserved Markets, a new book from The Center. In this article Steve looks at corporate citizenship's role in successful business development.
It seems that line managers often go out of their way to remind us that community involvement is a cost function. This was keenly driven home in a conversation I once had with the COO of a major utility. “No company,” he sneered, "'community' relates its way to success."
I disagree. I believe that the opportunity awaits for courageous corporate citizenship, corporate responsibility, and community involvement professionals to put their toe in the sea of profit and loss accountability.
In previous newsletters, two of my co-authors on The Center’s new book, Untapped: Creating Value in Underserved Markets, have addressed the opportunities and strategies for your business to do well and do good in low-income emerging markets.
For Center members responsible for driving corporate citizenship, the idea of selling, purchasing, hiring, and generating new product innovations may sound exciting but feel somewhat removed from your role – that the most you can do is share information with colleagues on the line, step back, and hope they champion the opportunity.
But there is more that you can do. The core strategies that lead to successful business development in base of the pyramid markets are:
1. Mine and translate local market information
2. Adapt business model to community realities
3. Change internal incentives and challenge cultural assumptions
4. Create partnerships and strategic alliances
5. Improve the enabling environment
Let’s consider the potential of the citizenship and community involvement functions by taking each in turn.
Mine and translate local market information
Suppose you work for a mobile telecommunications company. You know that over two billion people own cell phones, and that by the year 2012, costs for cell phone hardware and services will be low enough to make mobile phones affordable for double that number.
In your position as a citizenship or community involvement professional, should you advocate that the business join the race to seize that extraordinary market share, and if so how?
Who is better positioned than you to answer these questions? Consider that many of these potential customers earn very little income, have never owned a phone, and live in places that don’t lend themselves to traditional market research.
However, these are exactly the places that community involvement programs touch. The grantees, stakeholders, and NGOs with whom you build relationships and partnerships mean you are positioned to gather critical market research on this huge segment, to build the type of trust-based relationships and awareness that is key to brand positioning, and to help educate the market to take advantage of this technology in a way that improves the quality of their lives.
This is just what market leaders such as Nokia and Vodaphone are doing, where the corporate citizenship teams are working in partnership with business lines to drive this type of business development.
Adapt business model to community realities
Now imagine you work for Pathmark supermarkets. You realize there is a great, untapped opportunity to open a supermarket in Harlem. In a low margin industry, evidence shows that the inner city store projects some of the highest margins of any store. Locating a supermarket will provide lower cost and higher quality produce for local residents, and the store will generate jobs and attract greater investment.
Sounds like a no-brainer. So why not proceed with business as usual, buy the land and build the store?
Citizenship and community involvement professionals can see this mistake coming a mile away. With no trust, no relationships, and a history of anger and frustration over the perceived abandonment of big business in the inner city, why would the community welcome this or any other store with open arms? In fact, local grocers banded against Pathmark by fueling suspicions about its intentions. What seemed like a fantasy turned into a nightmare.
At Target, community and citizenship professionals work with the new market entry team so that communities actively welcome new stores. If community resistance seems too strong, or if the store will harm the local economy, Target stays away.
Change internal incentives and challenge cultural assumptions
Another example of this strategy at work can be found in industries that utilize farmed commodities for consumer retail goods, such as coffee beans or cotton in the clothing industry. For years the strategy has been to find the lowest cost and highest quality commodity possible.
In these industries, the corporate citizenship and community involvement professional has been the lookout to see first-hand the growing unrest at this strategy and the costs it can impose to the environment, the livelihoods of families, and the human rights of workers. These professionals have helped their colleagues see that building new incentives to purchase from ethically, fairly traded, and environmentally sustainable farms can actually yield productivity gains that keep costs stable and allow the business to charge a premium for a differentiated product. Starbucks, Green Mountain Coffee, Wal-Mart, Patagonia, McDonalds, Dunkin Donuts, and Nike are a few among more and more commodity retailers demonstrating this potential.
Create partnerships and strategic alliances
Now imagine you work for an insurance company. Pressures against redlining have encouraged your company to enter the low income markets, where residents have often been forced to purchase insurance from suspect providers at high-costs.
How can you successfully sell insurance to this market? If your company sells through independent agents, where can you find successful and competent entrepreneurs to sell your product to these markets?
Numerous companies such as State Farm, Travelers, and Safeco have learned that forming joint ventures with non-profit organizations is the only way to get started. In these circumstances, citizenship and community involvement professionals have the familiarity, skills, and relationships to build these the partnerships.
Improve the enabling environment
You may have the right combination of features and benefits, and a great price point – but none of that matters if you can’t deliver the product to market because of the poor quality of the infrastructure, or if the customers can’t buy the product because of the lack of savings or credit mechanisms.
When these conditions occur, companies often work in coalitions and partnerships to help improve the quality of the infrastructure and to address financial barriers. Again, the natural person to identify the problem, opportunity, and lead in the solution is the corporate citizenship or community involvement professional.
Cisco’s Networking Academy is a good example of a company’s effort to improve the enabling environment in a way that both creates value for communities, and helps Cisco to be able to sell more of its products in underserved communities.
The Cisco Networking Academy Program is a comprehensive e-learning program that provides students with Internet technology skills. Launched in October 1997 with 64 educational institutions in seven states in the U.S., the Networking Academy has spread to more than 150 countries.
Cisco's partners from business, government and community organizations form an ecosystem to deliver the range of services and support needed to grow tomorrow's global workforce. The Academy curriculum has expanded and can now be delivered in any location with Internet access. Now, with the United Nations Development Program, the United States Agency for International Development, and the International Telecommunication Union, Cisco has made the Academy program available to students in Least Developed Countries.
This creates value in underserved communities by providing individuals in these communities with the skills needed to get a good job with family-supporting wages and benefits. It also helps the communities to have the workforce required to be able to expand Internet communications throughout the community. It creates value for Cisco and helps it to sell its products.
Untapped Provides More Examples
The lesson is that these opportunities remain untapped largely due to a failure of imagination and a sense of inertia inside organizations about the way things are done. It’s long past time for the corporate citizenship and community involvement function to overcome this sense of inertia and take leadership that demonstrates the value that it and the business can deliver to shareholders and society alike.
To see more examples from a variety of industries dealing with B2B and B2C markets, take a look at the book, Untapped: Creating Value in Underserved Markets.
Steve Rochlin is currently Head of AccountAbility North America.
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