BFP: What do you do?
Monitor overall advises companies, governments and social sector organisations on issues of growth, in ways that matter to them most. Monitor is also in the business of managing capital — it has its own group that manages a US private equity fund. But we primarily offer strategy, marketing, innovation and leadership advice to organisations on their key strategic issues.
BFP: What is the best part about your job?
MK:Two things. First, is really making a difference in terms of poverty outcomes and generally having a social impact; and second, and the challenging part, is being at the leading edge of an area where we are still figuring out what works.
BFP: What have been your greatest challenges?
MK: We’ve learned after cataloguing over 1,000 inclusive businesses that the biggest challenge in the inclusive business world is the balance of both commercial sustainability and the delivery of real results on the social dimension. That’s what’s new and different. For decades people have been focused on government programmes to address social issues, and separately on firms to earn money. How do you develop a business model that is sufficiently profitable and also delivers real social impact? That’s the big challenge.
BFP: How have you overcome these challenges?/ What advice, would you give to others?/ What is the secret of your success
MK: One of the recurring themes in all of our publications and the work we’ve done is the importance of getting the right business model to address these markets. In most, if not all cases, you cannot use the same business model to create an inclusive business solution, as you are using in your main middle-class markets in the OCED countries. The time and process of developing and validating a new business model is expensive. You are suddenly engaged in a complex web of much smaller transactions than you are usually making in your mainline sourcing or selling business. And by virtue of the fact that you are trading with or engaging the poor in your supply chains or as consumers means it is not going to be terribly lucrative, the price points just cannot sustain it. Consequently there is usually less margin available to be able to validate and prove out new business models. Our recent publication, From Blueprint to Scale, spells out the need for much more patient and early stage capital to help build out and improve the business models.
One general finding from our Africa work is that the business models that have success have a mixed customer base. They don’t exclusively serve the base of the pyramid (BoP), they serve the BoP and usually at least the next segment up.
On serving the BoP as consumers, we usually distinguish between market entry and market creation. Our findings show that you can get to scale really quite quickly if you’re doing market entry. For example micro-finance, where a market serving low income segments already exists, even if the existing market is largely informal and often exploitative. The underlying demand is already there. But market creation is different, and it’s expensive. Sometimes, for products for which you’re doing market creation, an enterprise can’t realistically take on the cost of building the market and building the awareness. In this case the adjustment to the model my well be that we need a public sector donor partner to help pay for building the demand and awareness to then make it possible to deliver the product/service in a commercially viable way. For example, in this Monitor report about the business case for financial capability, we outline what a shared agenda would look like for stakeholders in this field, where we argue that donors should absorb the cost of figuring out good financial education pedagogy.
BFP: If someone wants to do what you do, where should they start?
MK: If you want to be a consultant in our field, you would need three things: 1) Good solid commercial consulting skills, you have to understand the commercial economics of businesses and how to best advise companies; 2) a tactile feel for the commercial and social realties in emerging markets. We need people that have been on the ground and have a sense of the realties of life in emerging markets and the informality and dynamism of local economies. As well as fearlessness about traveling to obscure places. 3) It is helpful to understand how donors think. In my particular case, I worked at Monitor, then left and worked in private industry. Then I then spent half a dozen years working at the World Bank Group before coming back to Monitor. Having that ability to translate between donors and business is very important.
BFP: Finally, what do you hope to get out of being part of the BFP community?
MK: I hope to increase the scope of my knowledge of what is going on in this space. The inclusive business world can sometimes be an echo chamber of the same stories floating around for years. So what I like about BFP is that many of the stories are different. I hope you will continue to bring in more of the non-usual suspects.
Thank you to Mike Kubzansky for taking the time to do this interview.