By David Wilcox
How well does big business innovate to meet real needs, as opposed to creating demand through advertising for minor variations of existing products? What is more typical: The radical innovation that led to the iPhone or a new cereal formulation? And which type of activity are most businesses good at?
For Peter Drucker, "Efficiency is doing things right; effectiveness is doing the right things."
And that’s where the problem begins: We need a new generation of “virtuous cycles,” ones that start with Drucker’s definition of effectiveness and reinforces positive choices and the associated benefits to customers and society.
Real Innovation Opportunities: Where to look
Why are we not seeing more breakthroughs? As someone who actively attends “innovation summits,” I often end up questioning why so much investment is being funneled into figuring out where the opportunities exist? It seems much of the effort is confined silos that lead to a focus on niche markets and incremental innovation, rather than efforts such as those led by Steve Jobs. Yes, those do entail more risk but they also have the potential to redefine markets or enable entirely new ones.
Steve Jobs was unique but what would happen if more leaders were to balance profit-making goals with a commitment to doing the right thing?
For example, E-Health Point Services (Twitter: @EHealthPoint) is one of a few hundred thousand for-profit social enterprises worldwide. These are organizations that tackle a major social issue using market-based strategies, but keeping their social goal(s) firmly in sight. (Look at Ashoka and the Skoll Foundation for a great framework of business social organizations.)
E-Health Point was incubated at Ashoka with a mission to bring quality healthcare to underserved and mostly rural communities in developing countries—a huge but neglected market of several billion people. It is barely three years old and already providing 500,000 people access to healthcare and safe drinking water (which prevents water-born diseases) at affordable prices. What’s important to note here is that while a niche approach would accept that low-income customers are off the table, E-Health Point specifically targeted these customers as their market.
The E-Health Point Story
During the last decade the charismatic business guru C.K. Prahalad led a movement to address poverty and other related social problems using business approaches, arguing these are highly neglected opportunities. Many major corporations were intrigued. Leaders at International Finance Corporation (IFC: the inclusive investment arm of the World Bank) began exploring underserved markets. They deployed a field team to look at how the poor actually spent their money and the team found that when you add up all the goods and services that these several billion people buy, it equals a ton of money.
Large companies still haven’t made major inroads into these low-income markets, but social entrepreneurs have—embracing novel approaches, longer time frames for a return on investment and thinner margins. Their goal is to enable the world’s poor to access more essential goods and services and to get value for their money.
Al Hammond, who led the IFC study team, was one of these social entrepreneurs.
Using his understanding of low-income markets and other ideas about how to address rural healthcare needs, he approached Ashoka. But the catalyst for E-Health Point came when he met Amit Jain, an expert in rural water systems, at the Global Social Benefit Incubator (GSBI) at Santa Clara University. Hammond and Jain joined up with Chris Dickey, a third cofounder and public health expert, to create E-Health Point Services.
Billions of dollars have been spent on safe water for the poor. Billions of dollars have been spent on providing primary healthcare for the poor. The effects have been very positive for those reached, but most of those efforts have relied on donations and few are sustainable. In 2009, E-Health Point opened the first integrated water and healthcare clinics, based on a business model that can make a profit from serving massive markets ignored by traditional businesses.
Eighteen months of experimentation and innovation resulted in proving that the model works, and that the clinics can run cash flow positive, even at the extremely low prices which E-Health Point customers can afford ($.30 to see a doctor; $1.5 for a family’s monthly supply of safe drinking water). The effort required equally innovative ways to finance the venture, to identify new services (maternal and child health, for example) and to lower costs. But the venture has thrived and has begun to scale – E-Health Point is now bringing its services to 20 new communities every month.
License to Innovate
Social enterprise leaders have been speaking about scale for more than a decade. Many of the innovations that will enable business to become a positive source of customer solutions and jobs will come from social entrepreneurs. Another secret to success for all markets will be behavioral change among customers. Nowhere is this more critical than in healthcare.
In many ways E-Health Point is a global consumer behavioral change laboratory. Now with its model units operating sustainably and its ability to test a broad range of social marketing and behavior change innovations, E-Health Point is getting attention with three important awards in just six months:
Virtuous Cycles from Doing the Right Things
From the beginning, E-Health Point was built to scale and attract a broad range of social and standard investors. One of the cornerstones of their activities in Punjab, India has been to work with local governments, involving them in planning where to build the company’s new facilities. That led to the understanding that smaller villages – too small to support a clinic – still needed safe drinking water, so the cluster model was born: a clinic in a larger village able to provide health services to the entire cluster, standalone waterpoints in the smaller communities. More revenue and better service to more people.
Today, just six months after starting to scale, there are over 70 operational waterpoints. And in many cases, the government is helping with construction, building units to E-Health Point’s specifications and lowering the installed cost of each unit by a third. E-Health Point’s water prices are approximately half those of its competitors, so more families can afford the service. Adoption is rapid—typically about half of a village becomes customers within three months. The societal impact of clean water is tremendous. And health services can then be marketed to satisfied water clients, not strangers.
No Business Can Prosper in a Failing Society
Too much of the business world has talented people focused on doing things right in niche markets. Increasingly companies will need to tear down silos and integrate social innovation and social business leaders into their plans. The range of opportunities is truly endless. My current list of E-Health Point-like opportunities includes new energy enterprises, jobs for specialists (autism, for example), disabilities (hearing and vision improvement) and sector-specific micro-finance, but the list goes on.
Bottom line: If your company is providing basic services like water and healthcare, your license to operate in that country is secure.
About David Wilcox
David Wilcox is the founder of ReachScale, an organization that aligns the social responsibility goals of corporations with high potential social entrepreneurs working in areas of common interest.
This commentary is written by a valued member of the CSRwire contributing writers' community and expresses this author's views alone.
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