The objective of the “Building the Ecosystem” process is to incubate and advance ideas for mutual value creation by catalyzing a diverse network of partnerships among the MNC and different actors within the local community. This locally-based, semi-institutionalized network performs a number of functions, including:
The “Building the Ecosystem” process can be conceptualized as a mutual value chain comprised of four overlapping tasks that are guided by a common vision:
It is important to note that, to do the Building the Ecosystem process properly, the MNC must already possess a deep understanding of local capabilities, values, needs, actors, and socio-economic systems, as well as have formed a working trust with the local BoP community. In addition, it is expected that the idea or proposed business venture has already passed through a number of “filters”, including having received broad endorsement from the local community and having been assessed against locally-created metrics for well-being and value creation. Internally, the MNC must possess team members with experience in a number of methodologies, including participatory learning, asset-based community development, and baseline needs analysis. Therefore, it is assumed that firms have gone through an “Opening Up”-type process in arriving at the current stage. This process is not intended for companies with little to no history working in the local community and/or for incubating “externally-conceived” ideas (i.e., ones not arrived at in collaboration with the local community through participatory means).
In addition, the Building the Ecosystem process assumes that three structures are already in place: a “Core Team”, a local “base camp”, and an organizational or “knowledge” link between the MNC Team and the corporation. The Core Team should be comprised of a multi-functional MNC Team with extensive exposure to the local ways of life, as well as a core set of partners that are representative of the community. In beginning the Building the Ecosystem phase, the Core Team will likely have taken on additional local partners based on the idea selected (e.g., the originator and or key local proponents of the idea). The base camp serves as an interface point between the Core Team and the greater community, while the organizational link to the corporation allows the MNC Team to share and leverage its learning and knowledge throughout the corporation and to deploy firm knowledge to the BoP effort.
As with “Opening Up”, the model above suggests a sequential process. However, the four sub-processes that comprise the “Building the Ecosystem” phase are highly interdependent and overlapping. Indeed, the partner ecosystem should be viewed as a fluid entity, one that adapts and evolves as local needs and actors change. Bearing this in mind, it is important that both the organizational structure of the network and the mechanism by which partners are linked together be flexible.
The following sections are summaries of each of the four sub-processes.
The objective of this step is to develop an understanding of the resources needed to launch the proposed enterprise and those that are currently available, either locally or within the MNC. Through this process, the Core Team begins to develop a map of potential partners. This is a highly iterative process, for resource forecasts will undoubtedly change as the venture begins to take shape and become more concrete. The process and the findings should be documented and made available to the community through the base camp. There are four key tasks that comprise this step:
The purpose of this task is for the Core Team to articulate the specific objectives of the proposed venture for the various constituencies and to then forecast the venture’s resource requirements at each stage of the value chain. The stated objectives will likely influence the shape of the value chain and the type of resources needed by the venture. As stated above, this process will be highly iterative, with forecasted resource needs varying as the venture develops.
Employing participatory techniques (see Appendix 1), the Core Team should begin to develop a map of the locally-based resources and capabilities that can be brought to bear in launching the proposed venture. This step requires that the Core Team suspend assumptions of how things should be done, recognizing that the local BoP community may possess very different, yet effective, socio-economic institutions and norms to facilitate commerce.
As an example, some banks serving BoP communities have successfully utilized trust-based “solidarity” groups instead of formal credit checks and collateral requirements in encouraging loan repayment. These “hidden assets”– forms of local knowledge hidden by virtue of Western or Top of the Pyramid norms of development – may support any number of aspects of the venture’s value chain: from the way financing is offered, to how distribution is conducted, to the manner in which customers are educated about the product. Appendix 2 provides a list of various dimensions along which the local community can be segmented in order to better understand the diverse social structures and hidden assets in place.
At this stage, the MNC Team should begin to document and map the resources located within the MNC that could support the venture. As during the Opening Up phase, this is an opportunity for the MNC to challenge its assumptions, as the local BoP context simultaneously makes obsolete some of the MNC’s competencies while opening up new possibilities. The Core partners can play an important role in this critical assessment, using the insights and perspectives of the local community to rethink the MNC’s resources and to identify its own “hidden” resources.
The context of the BoP venture presents the MNC Team with a unique opportunity to develop and incubate new competencies and capabilities potentially disruptive of its Top of the Pyramid markets. Therefore, at this stage, the MNC Team should identify the specific capabilities and competencies that it wishes to develop through its involvement in the chosen BoP enterprise, as this decision will influence the selection of partners and the business model.
Having outlined the resource requirements and surveyed the local capabilities and MNC resources that might be deployed, the focus shifts to formalizing the network of partners that will support the enterprise. The process of growing the ecosystem should be documented and the “findings” kept in the local community.
Four primary tasks comprise this process: identifying and selecting network partners, formalizing and localizing the network, bridging the MNC’s resources, and expanding the MNC’s absorptive capacity.
Utilizing participatory methodologies, the Core Team should engage in a process of mapping potential partners against the various tasks and activities throughout the enterprise’s value chain. Appendix 3 contains various categories of actors that should be explored as potential providers of needed resources and capabilities. Appendix 4 provides a matrix useful in analyzing these different ecosystem actors and the roles they may play in the enterprise.
There will likely be multiple actors and solutions for the various tasks identified in the enterprise’s value chain. Two criteria would assist in choosing partners. First, one of the central goals guiding the venture is to build community capacity by leveraging and expanding local capabilities to fulfill needed functions. Therefore, as much as possible, local partners should be emphasized over “foreign” organizations*. Second, choice of partners should also be based on the mutually agreed-upon metrics (e.g., retaining and expanding wealth in local community, empowerment and capacity building, equitable distribution of benefits throughout the community, benign or positive impact on ecological systems) against which the initiative was originally screened (see “Opening Up”, Needs and Asset Identification). Thus, if gender equity was identified as an important performance dimension, then one possible selection rule might be women-run organizations.
Indeed, as the ecosystem evolves and the venture takes shape, new activities and actors will suggest themselves and roles may shift. For this reason, the evolution of the network should be constantly monitored in order to maintain its diversity and the richness of its ties. In addition, the Core Team should periodically review the list of actors in Appendix 2, being sure that changes in the stakeholder environment are reflected in the network’s composition.
*The local community should make the decision of whether an organization is deemed local or foreign.
As the partners are identified and selected, it is important to establish a locally-based “office” which provides a common contact point among the partners, as well as between the network and the greater community. This local enterprise office helps to increase transparency and accountability and can also serve to make available the data and documentation relating to the venture – knowledge that might be of value to other community members wishing to launch new enterprises.
In addition, the members of the network need to be linked together in some fashion (perhaps using information communication technologies) to foster dialogue and communication. Finally, the Core Team should be expanded to reflect the ecosystem partners, with thought given to an organizational design that fosters transparency.
In collaboration with the Core Partners, the MNC Team should determine the MNC’s role in the new venture and the specific capabilities and resources that it will provide. This decision should take into consideration not only what the MNC is currently capable of doing, but also the competencies the MNC wants to acquire and the implications for the greater community. Indeed, there may be situations when it is better for a local partner to provide a skill that the MNC also possesses for reasons of building local capacity or providing local employment opportunities.
As a rule of thumb, the enterprise should utilize and build off of locally-based resources and systems as much as possible, being mindful of the need to establish a sustainable business enterprise. At this point, the MNC team might be expanded to include additional key resource holders in the MNC.
To facilitate the acquisition of new competencies, the MNC Team needs to build a baseline of knowledge and skills that act as a scaffolding for higher-order, more tacit skills and competencies. Therefore, it is important that the MNC Team recruit into the partner network individuals and organizations that possess such knowledge and experience. In addition, the MNC Team should make sure that the network structure presents opportunities for significant engagement and collaboration with these “competency-carrying” partners.
With the partner network in place, the Team’s efforts shift to outlining a business plan for the proposed venture. Five key tasks are involved in this process: co-creating a set of metrics for assessing community value creation, co-developing a business plan, retaining alternative business models, clarifying the MNC’s strategic intent, and creating internal alignment.
Participatory methodologies play a critical role throughout this process. Both the process and the results should be documented and made available to the broader community through the local enterprise office.
Though general criteria for local well-being have already been generated through the Opening Up process, the expanded Core Team’s task is to create specific metrics that link the operation of the proposed venture with these criteria. In collaboration with the greater community, the Core Team should create a “scorecard” that identifies these various dimensions of performance, along with a set of indicators by which to track the venture’s effects. Target levels to be achieved by specified dates will help chart the venture’s progress and alert the Team to unintended consequences.
Care should be taken that the scorecard is meaningfully employed even during the early stages of the venture’s formation and that people be trained to take and to interpret the measurements. This entire cycle of collecting and analyzing meaningful performance data will help ensure that the MNC and the new venture adhere to the implicit social contract entered into by virtue of engaging with the BoP community.
Unlike a “traditional” business plan, the business model for the venture needs to be jointly developed with the ecosystem partners. Indeed, all of the partners should have “ownership” of the business plan and feel that they will meaningfully benefit from the partnership. To that end, it is important to explicitly discuss how the venture will generate value along the various dimensions – economic, social and environmental - identified by the Core Team and the greater community.
It is important that everyone involved in the venture should share in the benefits. In addition, the Team should consider the potential negative impacts of the venture on the local community and plan accordingly. This process is fundamentally about creating a shared vision among the various partners.
During the co-development of the business model, alternative models may be suggested by which the same or other products or services can be produced and delivered. The Core Team should document all of these models, as they may become viable or attractive opportunities in the future. In addition, the Team should make some provision for those ideas that it chooses not to pursue but for which there are supporters within the community. Support may take a variety of forms, from providing access to the partnership network to in-kind or financial assistance.
In developing the business plan, the MNC Team needs to clearly articulate its strategic intent with the enterprise and how the enterprise will advance corporate-level strategic objectives. This process entails creating an architecture that maps out the specific outcomes desired – financial, competency-based and otherwise – and the interim steps that need to be taken in accomplishing each objective. Metrics play an important role in this process, as they provide the means by which progress against the various goals can be assessed and by which to communicate the contribution of the BoP venture to the corporation’s strategic position.
Care needs to be taken in the choice of metrics, as those traditionally utilized in Top of the Pyramid markets may be ineffective in capturing the contribution of BoP enterprises. In particular, due to the high uncertainty yet high potential upside at the BoP, a real-options based evaluation framework is advised. In addition, given the potential size of the BoP market, financial metrics ought to focus on the net marginal impacts of the venture (e.g. Return on Capital Employed) in place of gross product margins.
It is important that the MNC Team establish an incentive structure for its own team members that reflects the uncertainty of the new venture and can be utilized internally to community the Team’s performance. Though short-term profits are possible, it is important that financial targets be balanced with longer term, non-financial criteria in order to provide the Team with the necessary flexibility in adapting to contingencies.
Having jointly created a business plan, the Core Team needs to re-engage with the broader community in an effort to gain broad support and trust for the venture. There are four primary tasks involved in this process: presenting the business plan to the community, establishing mechanisms for ongoing community input, building the MNC brand, and reassessing opportunities for value creation.
The Core Team should vet the business plan with a broader constituency of community members, other stakeholders, and possibly even competitors. The fundamental objective of this task is to listen attentively for overlooked concerns and possible alternatives, adopting a stance of humility and respect for different perspectives. Changes should be made to the business model as appropriate, and additional partners added to the Core Team as necessary. The idea is not to get unanimous agreement – since that may not be possible, even though it is desirable – but to engage in an open, respectful and transparent dialogue with the community that results in broad support of the path forward.
In the spirit of transparency and in recognition of the venture’s responsibility to the local community, the Core Team should institute a mechanism that allows for the broader community to periodically report-back on the venture’s performance and to raise possible concerns. One option might be to include community members in the collecting, analyzing and reporting of scorecard metrics. The data and the reports would be made public and accessible to the community through the local enterprise office. Additionally, the Core Team could institute regular “town-hall” sessions that provide a forum for raising concerns.
Engagements with the community present an opportunity for the MNC Team to raise awareness of the MNC’s brand. Establishing the MNC brand as reliable, trustworthy, and of high quality increases access to valuable resources and capabilities within the community, enhances legitimacy, and may generate additional business opportunities. To effectively manage this process and to leverage the MNC Team’s interactions with the greater community, the MNC Team should establish a clear brand strategy. This strategy should make explicit the relationship of the local BoP venture to the MNC’s corporate brand.
The MNC Team should also utilize the feedback from the community in assessing the MNC Team’s own strategic plan. In addition to ensuring alignment between the community and the MNC’s objectives, the feedback may bring to light parallel opportunities to leverage the MNC’s current suite of products and services. Additionally, the MNC Team may identify new competencies or capabilities that it can develop and deploy locally or in its Top of the Pyramid markets.
The key content dimensions of the “Growing the Ecosystem” process can be summarized in the following 4 P’s model:
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People & Preparation
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Performance
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Partners
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Places & Structures
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