Scaling up a green and inclusive business is a challenge many entrepreneurs are now facing. What lessons did participants take away from the discussions at the International Business Forum 2013?
ISTANBUL, Turkey — Of the many green and inclusive entrepreneurs and private company representatives that attended the 16th International Business Forum in Istanbul, most were heads of a microenterprise or SME—small or medium-sized enterprises. As efficient as their business model might be, they all shared a key challenge: scaling up while balancing commercial viability with a limited income that must take into account the needs of a large customer base.
India’s Greenlight Planet, for instance, seems to be following a clearly defined strategy. Director of Communications Anjuli Pandit said, “We don’t want to be profitable right now. We need to invest more.”
She added, “When you are [in] a scaling period, you don’t want to be profitable during that period. It’s a sign that you’re not scaling properly. It means you are not using your resources properly.”
Accordingly, Greenlight Planet has been in equilibrium this year with its operating results, and the company plans to remain so and continue at this pace until 2015, Pandit said.
Know the Community You Are Talking To
Regarding the way Greenlight Planet is scaling up, Pandit had two words: “community building.” When dealing with those at the bottom of the economic pyramid, product affordability is an indispensable requirement, but marketing—in particular, corporate image—is also essential. After a tragic poisoning incident killed more than 23 children in a school district in Bihar, India that Greenlight Planet sold its products to, the company decided to contribute to the community it had become part of. To express its condolences, the company donated one of its solar lamps to every family that lost a child.
Amine Chouaieb, founder of Chifco, a Tunisian energy-saving consulting firm, highlighted how finding innovative ways to communicate was affecting green and inclusive businesses, or GIBs. He told the story of Opower, an American software company that promotes energy efficiency. Inspired by behavioral economics, it achieved significant results in lowering households’ energy consumption by asking families to compare their consumption with that of their neighbors.
With inclusive businesses, communication must be not only innovative but also appropriate to the particular community you are focusing on. When Ahmed Cisse, founder of the food group-buying website Tongtong in Senegal, wanted to increase his 100 total orders by reaching more customers, he had to partly redesign his website’s selling process. Inflation and numerous intermediaries between producers and consumers make food in Dakar expensive, but the main problem, in this case, was computer illiteracy. Cisse started hiring intermediaries at a district level to manage the computer interface for Tongtong’s potential customers. Local districts benefited as well, because the intermediaries earn 50 percent of Tongtong’s profit for each transaction they work on.
Partnering to Scale Up Quickly and Surely
Adam Abate, founder of Ethiopian software engineering company Apposit, believes the key for scaling up is partnering. “Nairobi doesn’t need five food-delivering companies. If they merge, they could address a bigger scale,” he said.
More specifically, Abate recommends partnering early. That’s what he did with his company when conceiving the Paga mobile-payment software for Nigerian company Pagatech, instead of simply creating a subsidiary. “[They] got 1 million users in about three years,” who account for “65 percent of the Nigerian [mobile-payments] market,” Abate said.
That it is only the beginning, he added, given that “[Nigeria] is still a young market.” Putting this into perspective, the pioneering mobile-payment system M-PESA in Kenya boasted 17 million customers as of March 2013.
As a solution frequently used to scale up, partnering can be done in many ways. Cavit Yantaç, DPE Lead at Microsoft Turkey, said that “small IT companies should partner with big companies, such as Microsoft.” Big transnational corporations, or TNCs, are always looking for new access to markets through national companies to localize their products and services, he noted. In exchange, the absorbed or partnering company may benefit from business development support—thanks to access to worldwide offices—as well as a possible technology transfer.
“TNCs own main technical skills,” said Charles Ocici, executive director at Enterprise Uganda, a public-private foundation that fosters SMEs’ creation through the various advisory and counseling services they provide.
Alternatively, selling a share of one’s company to an angel investor or an impact investment fund is another option for scaling up. Sometimes this route has demanding implications, but these stakeholders provide funds and give access to their extensive business networks.
Eventually, public-private partnerships may allow a company to grow on the basis of a freemium—“try for free”—business model, like the Guatemala National Cleaner Production Centre. Meeting the stakeholders an entrepreneur may want to partner with, especially during his or her company’s early stages, can be difficult when living in a country where few of them are present. However, more and more hubs are being set up in developing countries to help solve this problem.
Some of these scaling-up strategies may also be applied to more traditional companies. But when applied to GIBs, scaling up should not impinge on their primary goal, which is to keep generating positive externalities while remaining cost-effective. Felix Oldenburg, Europe director at Ashoka, a nonprofit supporting social entrepreneurship worldwide, claims that “GIBs are companies you have to be patient with.” Meaning that you may not be able to scale up a GIB as rapidly as a traditional company.