BOP & ICT MNCSBase of the Pyramid approach reflected on

the strategy of multinational ICT companiesGUEST PRESENTATION - Anand Sheombar

@ TNO, IT4D group 16 December 2009

• What is BOP• ICT & BOP• Research question• Research approach• Multiple case study method• Data collection – 5 cases• Case report analysis• Example M-PESA• Findings / hands-on summary• Conclusion• Implication

CONTENTS

WHAT IS BOP?

Base of the economic Pyramid (BOP) or Bottom of the Pyramid

Estimated BOP market and focus on annual ICT spending per region (WRI, 2007)

ICT & BOP?

Multinational ICT company

Local partner(NGO, local

entrepreneur, local governmental institution etc.)

Base of the Pyramid(BOP)

RESEARCH QUESTION

• How can multinational ICT companies (ICT MNC) benefit from entering the

Base of the Pyramid (BOP) market in a commercial successful and

sustainable way?

• And what could be the opportunities in the BOP market for multinational

ICT companies?

1. What is the so called BOP market and how does it look like in Africa?

2. Of what interest is the BOP for the researched multinational ICT companies?

3. What kind of BOP business models & strategies are pursued by the researched multinational ICT companies?

4. What kind of products & services are developed and delivered to the BOP by the researched multinational ICT companies?

5. Assuming ICT MNCs cannot or will not enter this BOP market alone, with what kind of organization is a partnership forged by the researched multinational ICT companies?

6. Is there an interrelation between the main units of analysis of this research, namely BOP business models & strategies, products & services and partnership?

SUB (RESEARCH) QUESTIONS

MAIN UNITS OF ANALYSIS

• Focus mainly on qualitative and not quantitative aspects

• Case studies• Semi-structured interviews• Focus on Africa

RESEARCH APPROACH

MULTIPLE CASE STUDY METHOD

Multiple case study method (Yin, 2003)

DATA COLLECTION – 5 CASESCase number

Project IT MNC Description

I M-Pesa Vodafone (Safaricom in Kenya)

Mobile payments & banking.

II Village Phone Grameen & Nokia Rural shared telephone facility.

III Village Connection

Nokia-Siemens Networks (NSN)

Rural local phone network in the village.

IV World ahead (Classmate PC)

Intel Sustainable technology for users in developing countries.

V Unlimited Potential (Telecenter)

Microsoft Various ICT activities aimed at emerging markets.

CASE REPORT ANALYSISCASE REPORT ANALYSIS STRUCTURE

Case analysis category DescriptionMain unit of Analysis ►

Business & StrategyB

usin

ess

mod

el

qual

ities

Value proposition The sum total of benefits and costs, thus value, that result from engaging in

business with that company.Local capacity building It refers to the extent to which the company contributes to the local capacity of

communities.Embeddedness The extent to which the business is an integrated part of the lives of those at the

BOP.Learning by the firm through native capability Inclusion of learning in the business modelScalability The potential scale and scope of the business model.

Value chain scheme A graphic representation of the value chain from IT MNC to BOP consumer.

BOP 1.0 or BOP 2.0 BOP 1.0 (Selling to the Poor) versus BOP 2.0 (Co-venturing)

Relation business model & strategy, partnership and products & services

Graphic representation of the relationship between these three main units of analysis.

Sustainability; Triple P aspects Graphic representation of the sustainability of the company’s BOP venture (people, planet, profit)

Main unit of Analysis ►

Products & Services

4A-F

ram

ewor

k

Availability The extent to which customers are able to readily acquire and use a product or service.

Affordability The degree to which a company’s products or services are affordable to BOP consumers.

Acceptability The extent to which consumers and others in the value chain are willing to consume, distribute or sell a product or service.

Awareness The degree to which customers are knowledgeable about product or services.

Product & service development Development process.Main unit of Analysis ►

Partnership

Cooperation Analysis aspects of the cooperation of the IT MNC with local partners.

Typology Classification of partnership.

EXAMPLE M-PESA (CASE I)

M-PESA CASE ANALYSIS HIGHLIGHTS• Banking for the unbanked.• Distribution via M-PESA agents • Partly embeddedness in BOP.• Usage different from initial design.• Opportunities for scaling up;

even outside BOP markets .• Affordable: Pay As You Go charging model• “Private social private” partnership.

(Low-income)

Consumer

Educational marketing

Faulu MFI

M-PESA agents

Safaricom telecom operations

CBA banking activities

M-PESA developmentjoint project

Public private funding

BOP business model & strategy

PartnershipProduct &

service development

HANDS-ON SUMMARY

CONCLUSION –ANSWER ONRESEARCH QUESTIONSHow can multinational ICT companies (ICT MNC) gain

benefit from entering the Base of the Pyramid (BOP) market in a commercial successful and sustainable way?

• Shift in mindset• Quality aspects of the business model• Unconventional partnerships• Factors that could impact the health of the

partnership• Alignment is needed between “BOP Business

model & strategy” with the chosen “Partnership” and the “BOP Product & Service development

CONCLUSION –ANSWER ONRESEARCH QUESTIONS -IIAnd what could be the opportunities in the BOP market for

multinational ICT companies?

• BOP has massive and a growing underserved markets

• Local innovations can be leveraged across other BOP markets.

• Multinational ICT companies learn from local partners or from the local BOP community

• Transfer to their higher-income markets (innovation blowback).

IMPLICATIONSResearch: • ICT for development (ICT4D) ; partnership issues• Quantitative research (survey) ICT MNCs in the BOP• Comparative research (local companies)Practice:• Inspiration for ICT MNCs to engage with the BOP

(differently).• Sustainablity aspects; BOP strategies in conjunction

with clean technology could lead to competitive advantage, academics argue.

Education:• Awarenes for BOP

Questions? Contact address: anand.sheombar@gmail.comLinkedIn: nl.linkedin.com/in/anandsheombar

Additional information (extra slides) I. Findings for business model qualities II. Discussion of findings BOP business

model qualitiesIII. Value chain schemesIV.Discussion of value chain schemesV. Relation business model & strategy,

partnership and products & servicesVI.Discussion of Relation business model

& strategy, partnership and products & services

VII.Findings products & servicesVIII.Discussion findings products &

servicesIX.Findings PartnershipsX. Discussion findings Partnerships

FINDINGS FOR BUSINESS MODEL QUALITIES

Business Model Qualities

VodafoneM-PESA

Nokia MTN Village Phone

NSNVillage Connection

IntelWorld Ahead Classmate PC

Microsoft Unlimited Potential

Value proposition Banking for the unbanked.Locally responsive strategy.

Affordable village telecommunications.Micro-finance funding and repayment for the Village Phone Operator.

Affordable connectivity and access to mobile phonesFranchise-based business model.

Sustainable technology.Classmate PC as learning device and connectivity.

lCT that is accessible, affordable, and relevant to community’s needs.Telecenters of community interconnectivity.

Local capacity building M-PESA agents.Local entrepreneurial activity.

Village Phone Operators.Local entrepreneurial activity

Village entrepreneurs . Local companiesTraining educators.

Telecenter operators.Local entrepreneurial activity.Community Technology Skills Program

Embeddedness Partly embeddedness. Partly embeddedness. Partly embeddedness. Embedded in local educational structure. Partly embedded.

Partly embeddedness.

Learning by the firm through native capability

MFI, local M-PESA resellers.Usage different from initial design; adjustments were made.Time on the ground

MFI, Village Phone Operators, telcos.Exploratory design research.

Village community.Educational marketing.Field research

Incorporated in its product life cycle (PLC).Ethnographic research.

Telecenter operators.Research on the ground.

Scalability Opportunities, also outside BOP.

Scaling out and adaptable in an environment with a microfinance structure..Worldwide potential.

Scaling out and adaptable

.Worldwide potential.

Scalable, replicability and expansion.

Scaling out and adaptable and replicable.

DISCUSSION OF FINDINGS BOP BUSINESS MODEL QUALITIES

• Value creation localized by the use of local BOP-entrepreneurs.

• All cases contribute to ICT for development.• The local community is often included in the

capacity building.• The cases resemble situations of partly

embeddedness.• MNCs learning from local partners and in

particular the BOP-community.

VALUE CHAIN SCHEMES

DISCUSSION OF VALUE CHAINSCHEMES• In none of the cases full embeddedness was

reached and this is shown in the value chain schemes;

• Participation of the BOP community mainly focuses downstream in the direct contact with the BOP-consumer.

RELATION BUSINESS MODEL & STRATEGY, PARTNERSHIP AND PRODUCTS & SERVICES

RELATION BUSINESS MODEL & STRATEGY, PARTNERSHIP AND PRODUCTS & SERVICES - II

DISCUSSION OF RELATION BUSINESS MODEL & STRATEGY, PARTNERSHIP AND PRODUCTS & SERVICES• In this small sample a certain preference is

observed. • A larger sample could alter this picture.• The hypothesis that actually any

configuration of influence between the three factors is possible still holds.

• The only key prerequisite is that the three main factors should be aligned for success in a BOP venture.

• Sustainability focus lies on “people” and “profit”.

FINDINGS PRODUCTS & SERVICESProducts & services

Vodafone

M-PESA

Nokia MTN

Village Phone

NSN

Village Connection

Intel

World Ahead Classmate PC

Microsoft Unlimited Potential - telecenters

Availability Particularly unbanked people, actually anyone.

Anyone in the rural area

Anyone in the rural area Often in rural areas Rural areas as well in urban regions

Acceptability M-PESA agents as low-profile entrance point.

Village Phone Operators as low-profile entrance point.

Research on non-literacy lead to product improvements.

Local village entrepreneurs as low-profile entrance point.

Complete solution for education

Works within existing educational models

Incentives for teachers.

Evaluations lead to improvements.

Local telecenter operators.

Services should match community’s needs.

Affordability Pay as you go. Special rates for the Operators, consumers pay a small fee.

Monthly subscription but pricing kept low.

Relative affordable prize

Funding for initial deployment.

Affordable while ensuring income.

Awareness Educational marketing via M-PESA agents

Documentation and training of Operators.

Educational marketing via Operators.

Training of the village entrepreneurs.

Educational marketing via village entrepreneurs.

Teacher training.

Teachers instruct the children.

Teachers train other teachers.

Training for telecenter operator.

Computer training.

Product & service development

Initial PPP funding

Actual usage is different from the intended usage

Spending time on the ground proved to be invaluable.

Innovation blowback.

Research centers.

Multidisciplinary approach

Exploratory design research.

Research centers.

Field research.

Innovation blowback.

Product development centers.

Multidisciplinary approach.

Significant time on the ground.

Ethnographic research methods.

Research centers

Research on the ground.

Mostly embedded innovation.

DISCUSSION FINDINGS PRODUCTS & SERVICES• Availability: often offered in rural areas.• Innovation blowback.• Disruptive innovation.• Incorporation of clean technology was not really

visible.• Affordability: focus on price performance.• Acceptability by price-offering and ease of use of

services .• Awareness: educating customers in product usage by

local BOP-entrepreneurs.• Multi-disciplinary research and spending time on the

ground has become invaluable.

FINDINGS PARTNERSHIPSPartnerships

Vodafone

M-PESA

Nokia MTN

Village Phone

NSN

Village Connection

Intel

World Ahead Classmate PC

Microsoft Unlimited Potential -telecenters

Cooperation Partnership approach with dedicated project team.

Significant degree of autonomy for Safaricom.

Backing of higher management.

Expertise of local partners.

Integrating systems was an obstacle.

Actual usage was different from the intended usage.

Microfinance and repayment model

Strong partnership

Setting up of a separate unit: Village Phone Company.

Variety in maturity in management skills between local partners.

A franchising model

Sometime transformation of partnership to employer-employee relationship.

Unequal risk sharing.

Mostly government partnering.

Need to have patience, results come not fast

Pulled out the partnership with OLPC (different opinion of the strategy)

Variety of partners.; here NGO telecentre.org

Protection of intellectual property

Typology Private-social- private partnership.

private-private-private-social partnership

(multi stakeholder)

private-private-private partnership

Mostly public private partnership, sometimes multi-stakeholder.

Varies from public-private partnerships to private-private partnerships to multi-stakeholder partnerships.

DISCUSSION PARTNERSHIPS• Unconventional partnerships are used for

engaging with the BOP.• A variety of partnerships occur.• MNCs need to be aware of various interests

when entering such a partnership.• Sometimes a dedicated unit or organization

has been established.• Issues that are affecting the health of

partnerships have been identified, categorized as driving force factors, skill factors, input-output factors, socio-cultural factors, systems factors, and trust factors.