The objective of the “Enterprise Creation” process is to transition a proposed venture from concept stage to going concern by pilot-testing, evaluating, and formalizing the enterprise in a collaborative and equitable manner. The end-result of this process is a sustainable business model that generates value for the MNC and expands wealth and capacity in the BoP community by producing products and services that meet locally-defined needs. Key principles that guide this process are co-creation, mutual gain, transparency, and long-term commitment and responsibility. By engaging in this process, the MNC signals an increased level of commitment to the BoP community.
The “Enterprise Creation” process can be conceptualized as a mutual value chain comprised of three overlapping processes that are guided by a common vision:
The “Enterprise Creation” process is intended for a firm that is materially involved in launching a BoP venture designed in collaboration with the local BoP community*. The process assumes that the plan has received broad community endorsement and that a set of metrics has been co-created for monitoring and evaluating the venture’s performance. Organizationally, this phase requires the prior establishment of a number of structures, including:
Due to the complexity and uncertainty of the local environment, the transition from start-up to going concern is best understood as a learning process that incrementally expands and formalizes structures through a series of small-scale, iterative interventions. As such, the sub-processes that comprise the “Enterprise Creation” phase should be viewed as highly interdependent and non-linear in nature. Organizational controls should be configured in a manner that recognizes this environmental uncertainty and encourages an iterative learning approach.
The following sections are summaries of each of the three sub-processes in Enterprise Creation.
*An alternative to a firm’s material involvement in the creation of a BOP venture is for the firm to use a venture capital (VC) approach. To do so, the firm would establish a multi-expertise “VC team” in charge of investing in BOP projects. The task of the team would be to provide seed money to individuals (e.g., sustainable social entrepreneurs, employees within the MNC wanting to establish their own businesses) and/or existing ventures (e.g., small and medium enterprises operating at the BoP, BoP-based non-governmental organizations, incubators at local universities).
Small-scale, co-designed pilot projects are a critical mechanism for testing the proposed business model and for generating real-time learning in a low-risk manner. Co-design and co-management of the pilot projects helps build local business capacity, aligns the effort with diverse needs, and marshals local resources and commitment to the effort.
Four primary tasks comprise this process: forming an Implementation Team, co-designing pilot tests, leveraging the MNC’s network, and establishing competency-building channels.
The Implementation Team should be drawn primarily from the Core Team members involved in the co-development of the business plan. That said, it is important that the Implementation Team include people with the necessary skills and mindset for advancing a venture beyond the concept stage. Therefore, depending on the talents and experience of the team members, it may be necessary to bring onboard additional MNC people and/or NGO personnel with experience in new-venture development (particularly within the geographical area in question), as well as community members with entrepreneurial talents.
The possibility of successful implementation is enhanced if the team members can coalesce and function as one cohesive partnership. Mutual respect should be the key element of the team’s culture.
Relative to top-of-the-pyramid efforts, the pilots should be smaller in scale and greater in number in an effort to manage uncertainty and respond to contingencies. Furthermore, the timeline for implementation must be flexible and embrace a pace of change that is appropriate for the community. Indeed, the timeline must be tied to ‘local’ time as compared to ‘corporate’ time. The Implementation Team should be prepared to manage and negotiate among the different time horizons and expectations of the various constituencies.
To maximize learning, the pilot sites should be representative of the diverse conditions within the BoP community (e.g., ecological, ethnic, gender). As with the business plan, the pilot’s design should leverage and build off of existing socio-economic structures and local capabilities and resources, paying particular attention to mechanisms that help expand local business capacity. Community “competitions” organized around specific challenges or obstacles confronted by the Implementation Team offer one potential mechanism for tapping into the local knowledge.
The process and the resulting pilot designs should be documented and made available to the community through the local enterprise office.
In the design of the pilots, the MNC Team should explore arrangements with the MNC’s existing businesses and operations that could support the pilot’s objectives and expand local capacity while generating additional value for the corporation. For example, it may be possible to arrange for another of the MNC’s businesses to procure its raw materials from local producers or directly from the pilot itself at a lower cost. Other possible arrangements which could increase the probability of the new venture’s success by bolstering the community’s capacity include:
The pilot projects present the MNC Team with a low-risk opportunity to actively learn and experiment with the new skills and capabilities needed in building desired competencies. Therefore, the MNC Team should structure the pilots so that its Team is best positioned to interact with and acquire the skills and tacit knowledge that other partners may possess. In addition, the Team should design the pilots so that the MNC has the opportunity to test-out and further refine new capabilities and competencies.
Maintaining a modest and low profile in the community, the pilot projects should be executed in stages in order that interim learnings are captured and the pilots reconfigured accordingly. Five primary tasks comprise the “Pilot Test and Assessment” process: staging & assessing the pilots, monitoring feedback mechanisms, establishing an exit plan, managing a competency portfolio, and refining the strategic plan.
The pilot projects should be structured and executed as a series of milestones or stage-gates in order to build-in opportunities for periodically assessing the venture’s impacts and for responding to contingencies. At the completion of each stage and with the help of local community partners, the Implementation Team would evaluate each pilot using a scorecard of metrics and indicators that were designed in collaboration with the broader community (see “Growing the Ecosystem”, Business Plan Development).
The results of the assessment should be documented, reported back to the community, and then made available through the local enterprise office. At this point, the Implementation Team would reassess the pilot’s operations and make the necessary adjustments to the product or service offering and/or the enterprise’s business model. Transparency and honesty are key principles that would guide the Team’s actions and decisions throughout this process.
It is important that the Team monitor the parallel feedback loops that allow individuals within the community to express concerns that would otherwise escape the Team’s attention (see “Growing the Ecosystem”, Community Consultation). In addition, the Team should proactively seek out “marginalized” voices (e.g., the poorest members of the community) to ensure that they are, at a minimum, not made worse off through the intervention. Doing so allows the Team to respond in a timely manner to potentially negative (as well as positive) unintended consequences and to adjust the pilots accordingly. The scorecard and its set of metrics and indicators should also be adjusted to reflect this feedback.
The possibility exists that the Implementation Team may decide to terminate some or all of the pilots based on the pilots’ performance or other unforeseen circumstances. In preparing for this eventuality, the Team should put into place an exit plan that strives to leave the community better off than before the venture was initiated. One possibility might be to pledge all of the pilots’ assets (e.g., equipment, technology) to the community. The Team should pay particular attention to ensuring continuity in the lives of those directly involved in the establishment and operation of the pilots.
As stated earlier, simultaneously staging several small-scale pilots allows the Implementation Team to experiment with various derivations of a business model, incrementally adapting those that appear promising while closing down ones that fail to generate the desired results. The MNC Team should approach its development of new capabilities and competencies in the same fashion, using the pilots as a way to explore in parallel the development of several new capabilities and competencies. By maintaining an “options portfolio” of new capability development efforts, the MNC Team lowers the risk associated with any one effort while expanding the possibility of developing new, disruptive capabilities.
As the BoP business model begins to take shape, the MNC Team should assess the financial and strategic viability of its revenue model. This task requires that the MNC Team forecast financial flows, identifying the key factors that will shape the profitability of the venture. In addition, the MNC Team should identify and gauge potential challenges to its ability to deliver customer value and to capture part of this value in the form of profits. The revenue model should be refined and metrics adjusted to optimize the MNC’s profit potential and to enhance the competitive sustainability of its position.
Once a viable business model has evolved and the incremental learning from the pilots is nominal, the Implementation Team should formalize the business. At this point, the focus turns to establishing the enterprise’s governance structure and building onto the insights and achievements of the pilot projects. All decisions should be documented and made available to the community through the local enterprise office.
The “Enterprise Formalization” process is comprised of five primary tasks: formalizing the governance structure, scaling out from local systems, establishing contingency plans, launching and leveraging new capabilities, and creating a growth trajectory.
The Implementation Team needs to address two key issues when establishing the enterprise’s ownership and control structure. First, it must ensure that an equitable portion of the venture’s profits is retained within the local community. One option would be to establish a Community-Based Organization that receives a dedicated percentage of the venture’s annual profits. Second, the governance structure should provide some degree of oversight and decision-making authority to the local community. Given that the Implementation Team itself is comprised of representatives from the local community, one option would be to create a Board of Directors that includes each of these team members. The same performance assessment and feedback mechanisms utilized during the pilot stage (e.g., the scorecard) should be continued once the business has been formalized. The principles of transparency and equity should guide this process.
To expand the scale of the pilot projects, the Implementation Team should continue to build off of local systems and capabilities as much as possible. There should be special sensitivity to the uniqueness of each site, and every effort must be made to learn from the local situation when broadening the effort to other areas. Thus, this task is about transferring the learning processes developed throughout the enterprise’s formation, while allowing the local context to guide the specific content of the business model.
The Implementation Team should put into place plans and structures for dealing with the possibility that the MNC may decide to pull-out of the venture. The Team, guided by the principle of long-term responsibility and commitment, should create an exit plan that ensures a “soft landing” for the business, as well as the community. Again, the intention is to leave the community better off than before the venture was initiated. Options may include establishing a “venture transition” fund or pledging to the community any assets that the firm contributed to the business.
The BoP enterprise should serve as a launching site for the capabilities and competencies developed by the MNC over the course of the pilot phase. Indeed, the MNC team should strive to integrate these competencies into the core of the new enterprise’s value proposition, thereby strengthening its own competitive position and expanding the MNC’s opportunities to further develop and refine them. In addition, the MNC Team should actively seek out other businesses within the MNC that may be able to deploy these new competencies in their particular markets. One of the central objectives of this process is to fundamentally redefine or disrupt the mature markets currently served by the MNC by using the newly-developed competencies to provide new functionality or existing functionality at a far-lower cost.
The MNC Team’s experience in co-creating the BoP enterprise should serve as a platform for communicating a BoP growth strategy within the corporation and for ultimately expanding the MNC’s presence to other BoP markets and communities. Central to this process is the creation of an organizational network that brings the MNC’s country and product managers into conversation with the MNC Team and other Implementation Team members. The focus should be on identifying those aspects of the BoP enterprise’s business model and the enterprise creation process that can be creatively combined with other resources and capabilities in meeting the needs of other BoP markets. The new BoP Enterprise could serve as a BoP Center of Excellence for the MNC, providing a site for training and hands-on learning.
The key content dimensions of the “Enterprise Creation” process can be summarized in the following 4 P’s model:
|
People & Preparation
|
Performance
|
|
Partners
|
Places & Structures
|