There is a common mantra in business that companies can “do well, by doing good.” And while that may be true; too often, “doing good” is more difficult than meets the eye and many businesses opt out, even if “doing good” could bolster bottom lines.
But what if there was a way to make “doing good” easier for businesses to implement? One that extracted promising practices for how companies can increase their bottom line, while also creating value for the communities they serve. Such guidance could lower the barriers for entry to this type of work and, likely, crowd more businesses into this “win-win” space. At Habitat for Humanity’s Terwilliger Center for Innovation in Shelter, we aim to support just that.
First, however, we must consider how housing markets can function more efficiently in the Global South and tackle the challenge of “access.” Too often, low-income households are locked out of formal housing markets, and lack access to quality products and services for their informal home construction and improvement. In this way, they have become an invisible segment in the market. Unrealized business gains in this market are likewise invisible and untapped by those who learn how to effectively serve this segment.
To change this pattern, we at the Terwilliger Center, have partnered with companies across Latin America, East Africa and South and Southeast Asia to pilot models that help them profitably serve the invisible segment. In doing so, these businesses can achieve a competitive advantage, while strengthening the communities where they operate.
This type of engagement is different from corporate social responsibility, or CSR. In our collaborations, we help businesses profitably serve the low-income segment within core business products or services. At the same time, we help these same businesses provide deeper systemic benefits to the communities being served. As a result,we typically work directly with specific business units – such as product innovation teams or distribution networks – to define and implement these initiatives and measure success through different metrics from CSR initiatives.
To understand how this works in practice, we will zoom in on a project in Peru, where our team helped a business partner create value for its business and for low-income households. Then, we zoom back out to reflect on how to implement a successful project that profitably serves the invisible segment, based on our wider work in this area.
A “win-win” micro-pilot in Peru
In 2022, the Terwilliger Center partnered with Peruvian company Volcán, which has since been acquired by Saint-Gobain. Volcán’s focus for the pilot, which took place in the Ayacucho highlands – a rural, colder region of the country – was to demonstrate the value, if any, of building homes with thermoacoustic drywall. The company hoped to showcase the material’s efficiency in the construction process, as well as to validate costs. Thermoacoustic drywall, as the name suggests, was developed with the intention to improve buildings’ thermal and acoustic conditions, but had yet been introduced to the Ayachucho highlands market or low-income segment.
Together, the center and Volcán ran a micro-pilot and constructed 40 homes for Volcán to test its drywall technology using a government subsidy. To accompany this effort, Volcán trained masons on how to use the new product, to ensure proper installation and a quality result for households. The Terwilliger Center also used the opportunity to help Volcán better understand the low-income and semi-rural customer segments and how to appropriately – and profitably – serve them.
Through the initiative, Volcán saw first-hand how targeting low-income customers was beneficial to its bottom line. At the same time, Volcán reduced the price of its thermoacoustic drywall considerably during the micro-pilot – making the product more affordable to low-income households and thus facilitating access for a new market segment. And indeed, the product did improve the thermal and acoustic conditions of customers’ homes.
But, the true confirmation that this project was a “win-win” for the company and families came from Volcán’s – now Saint-Gobain’s – desire to expand this pilot to the capital city of Lima, home to approximately one-third of Peru’s population. Saint-Gobain, has hired a civil engineer with commercial services experience to focus on serving low-income clients nationwide.
What we learned
While we continue to run pilots with multiple corporations, we can still glean early learnings from our work to date, for new companies to take forward that profitably serving the invisible segment. In short, companies should:
- Start small, with a clear scope. A business is best positioned for success if it begins with a clear objective, and only seeks to pilot one product or service as it leans into this work. Then, as the business better understands the lower-income segment, and how its initial offering is received by (and benefits) them, it can expand its offerings.
- Include all relevant business units. Because this work is not meant to function as a charity exercise for lower-income segments, and instead seeks to increase a company’s bottom line; the relevant business unit/s must be involved. By contrast, if a company abdicates responsibility and taps its CSR unit to lead this work, then the pilot is likely to falter. Additionally, local teams from the business must be involved in the country of operation. If they are not, the efforts will again, likely falter.
- View this work as a longer-term investment. Because this work is more systemic in nature, it takes time. There is a higher level of effort to understand the end customer, and then to tailor a product or service to this customer. And often, this work requires a business to build a new muscle to better understand a customer segment, which it is less acquainted with. In practice, this means that a company must show commitment to this work, as part of its long-term strategic planning. And, it must harness a growth mindset over a short-term profit mindset.
While serving the low-income segment profitably is not always easy, for committed businesses, the payoff can be well worth the effort. A successful project can ultimately deliver a “win-win” for a company’s bottom line, as well as the community being served. In doing so, it strengthens the market by improving affordability, accessibility and appropriateness of materials for the low-income segment. And, there is much opportunity for businesses to build upon this work, and create value in the process, in the housing sector, and beyond.
Here at the Terwilliger Center, we are continuing our efforts to support businesses to “do well, by doing good.” We plan to use the power of collaboration, matching smaller innovative businesses with larger corporates to scale impact. To learn more, get in touch with Paula Woodman at PW******@ha*****.org.
