How can business anywhere be anything other than dirty business? This is a strong, solid view about corporate misconduct that cannot be denied (Punch, 1996). As against this, of late, a view has emerged that there are humane practices in the pursuit of profits, which constitute a humanistic or socially responsible business. This business is dedicated to meeting the basic needs of low-income segments as well. If you are sceptical about the possibility of this, then consider a few examples out of the many given in Camillus et al. (2017), which is a trailblazing book in this regard but unfortunately unavailable in the Indian market, unless, luckily, you get it from Delnet as I have got.
Take the striking case of the Ahmedabad-based Arvind Limited, the flagship of the Lalbhai Group in India. This company is one of the world’s leading producers of denim. We come to know that Arvind has long dedicated part of its profits to supporting social causes like entrepreneurial training for widows, improving local schools, providing vocational training for the rural poor, and providing clean drinking and better sanitation in the slums of Ahmedabad. All these activities fall into the realm of traditional corporate social responsibility (CSR) practices. In recent years, Arvind has gone beyond traditional, post-profit making CSR by incorporating CSR into innovative business models that are crafted to simultaneously address economic value and social benefit creation. The company has reduced the incidence of cotton farmers committing suicide—a tragedy that is all too common in India. Sanjay Lalbhai, its Chairman and CEO, has told this story in a video that is available at here.
The story goes like this. The Vidarbha farmers who were most at risk worked on non-irrigated land, dependent on monsoon rains. They borrowed money for expensive, genetically modified, pest-resistant seeds, and for fertilisers and pesticides. If successive monsoon rains failed, the farmers were likely to be unable to pay back the money they borrowed and their land would be forfeited to the moneylenders. With no ability to make an alternative living, farmers and their families often chose suicide to slow death by starvation. Motivated by their concern for the farmers, Arvind’s CEO and senior executives brainstormed a possible response to the farmers’ precarious circumstances. They decided to teach and enable the farmers to engage in organic cotton farming, which got the farmers out of the clutches of moneylenders because organic farming is fertilizer and pesticide-free. Even the cost of cotton seed was significantly reduced because the expensive, genetically modified seeds were not employed. Interesting to note is the way the company recruited 130 agronomists and embedded them in the villages to offer scientific counsel tailored to each farmer’s small plot of land. Arvind also proactively assumed control of the value chain surrounding the farmers’ activities, eliminating avaricious and exploitative middlemen, and fundamentally changed traditional farming practices. Besides protecting the lives and livelihoods of the farmers, Arvind also protected the environment, engaged many diverse stakeholders, enhanced its competitive position and standing with major international customers, and added significantly to its coffers.
Bandhan (Bandhan Financial Services Private Ltd.) as a microfinance institution has played an exemplary role in making financial service provisioning more inclusive. In 2001 it started with the purpose of uplifting the socially disadvantaged and economically exploited women in East India. In 12 years, it has extended its sphere of operations to 22 states, with a loan portfolio of $1.5 billion, offering reasonable interest rates to 6.5 million borrowers. Its socially responsible business model got rewarded by the Reserve Bank of India in terms of a banking license which will enable Bandhan to tap rural savings and bolster lending to the unbanked segments of society, and thereby also lower the borrowing costs and charge even more reasonable interest rates. Similarly, Bharti Enterprises, which is the conglomerate that owns Bharti Airtel, India’s largest private cell operator, is exemplary for social inclusiveness in going beyond the big metropolises, smaller cities, and towns to penetrate the impoverished nooks and crannies of rural India. Its low mobile phone tariffs have been due to the way it has chosen the technology and maintained the trust of the customers despite having earlier received complaints of poor service. Another interesting case is how CavinKare, which began as a personal care start-up called Chik India , has become a highly successful fast-moving consumer goods maker. It made the single-use sachets of shampoo affordable for the hundreds of millions of customers earning less than the World Bank poverty line of $2 a day, who could not afford to buy a whole bottle of shampoo. This was possible on the basis of a simple innovation in packaging and building a distribution system embracing literally millions of little shops. Similarly, Philips India’s ascendant competitive advantage for new low-cost personal care and kitchen products has been due to its building of a distribution system that ties it closely with the customer. Thousands of small shopkeepers and distributors are employed with the allocation of small territories, whereby employees as potential customers provide valuable insights to Philips.
Another fascinating case is the way GE (General Electric) has accomplished its goal of meeting poor customer needs in the medical systems business. It achieved major breakthroughs in the cost and functionality of electrocardiogram (ECG) and ultrasound machines so much so that it could profitably sell at a price point suitable for the low-income segments of the Chinese and Indian populations. The ECG machines developed in India are battery-powered, because the electric grid does not reach into every village. The machines are small enough to fit on the back of a bicycle, which is often the only viable mode of transportation in rural areas. The machines are simple enough to be operated with little training; they have telemedicine capabilities that would enable doctors in distant locations to review the data and assess the patient’s condition, and the machines are made at a fraction of the cost of the existing products that have been developed to serve the higher-income populations of more developed countries.
Finally, consider Ashok Jhunjhunwala’s TeNet—a venture to bring modern communication to rural India. As a professor at IIT Madras with a team of brilliant computer and electrical engineering colleagues, he realized that for the impoverished rural people, communications technology was of little interest in comparison with larger concerns. What rural Indians needed, was “health, education and livelihood”. Accordingly, his company fashioned innovative value propositions based on harnessing communications technology to provide programmed primary and secondary education, basic telemedicine services, and new jobs for managers of local kiosks that would offer the telecommunications services. As TeNet expanded its operations, investors were attracted, and rural India benefited. This is a good example of how technology must be driven by customer and contextual needs. The Government of India bestowed on Jhunjhunwala the prestigious national Padma Bhushan award can, thus, be appreciated.
I, thus, invite you to read Camillus et al. (2017) to appreciate how many Indian and foreign companies have realized the importance of “big, hairy, audacious goals” (BHAGs) to drive and direct breakthroughs in technology and business models in relation to the pressing and basic needs and the limited purchasing power of the base of the pyramid. In other words, there are companies that have learnt to seek synergy between economic value and social benefit!
How can you not appreciate such businesses?
By Annavajhula J.C. Bose, PhD Department of Economics, SRCC
References
John C. Camillus, Bopaya Bidanda and N. Chandra Mohan. 2017. The Business of Humanity: Strategic Management in the Era of Globalisation, Innovation and Shared Value. Routledge.Maurice Punch. 1996. Dirty Business: Exploring Corporate Misconduct—Analysis and Cases. Sage.
Take the striking case of the Ahmedabad-based Arvind Limited, the flagship of the Lalbhai Group in India. This company is one of the world’s leading producers of denim. We come to know that Arvind has long dedicated part of its profits to supporting social causes like entrepreneurial training for widows, improving local schools, providing vocational training for the rural poor, and providing clean drinking and better sanitation in the slums of Ahmedabad. All these activities fall into the realm of traditional corporate social responsibility (CSR) practices. In recent years, Arvind has gone beyond traditional, post-profit making CSR by incorporating CSR into innovative business models that are crafted to simultaneously address economic value and social benefit creation. The company has reduced the incidence of cotton farmers committing suicide—a tragedy that is all too common in India. Sanjay Lalbhai, its Chairman and CEO, has told this story in a video that is available at here.
The story goes like this. The Vidarbha farmers who were most at risk worked on non-irrigated land, dependent on monsoon rains. They borrowed money for expensive, genetically modified, pest-resistant seeds, and for fertilisers and pesticides. If successive monsoon rains failed, the farmers were likely to be unable to pay back the money they borrowed and their land would be forfeited to the moneylenders. With no ability to make an alternative living, farmers and their families often chose suicide to slow death by starvation. Motivated by their concern for the farmers, Arvind’s CEO and senior executives brainstormed a possible response to the farmers’ precarious circumstances. They decided to teach and enable the farmers to engage in organic cotton farming, which got the farmers out of the clutches of moneylenders because organic farming is fertilizer and pesticide-free. Even the cost of cotton seed was significantly reduced because the expensive, genetically modified seeds were not employed. Interesting to note is the way the company recruited 130 agronomists and embedded them in the villages to offer scientific counsel tailored to each farmer’s small plot of land. Arvind also proactively assumed control of the value chain surrounding the farmers’ activities, eliminating avaricious and exploitative middlemen, and fundamentally changed traditional farming practices. Besides protecting the lives and livelihoods of the farmers, Arvind also protected the environment, engaged many diverse stakeholders, enhanced its competitive position and standing with major international customers, and added significantly to its coffers.
Bandhan (Bandhan Financial Services Private Ltd.) as a microfinance institution has played an exemplary role in making financial service provisioning more inclusive. In 2001 it started with the purpose of uplifting the socially disadvantaged and economically exploited women in East India. In 12 years, it has extended its sphere of operations to 22 states, with a loan portfolio of $1.5 billion, offering reasonable interest rates to 6.5 million borrowers. Its socially responsible business model got rewarded by the Reserve Bank of India in terms of a banking license which will enable Bandhan to tap rural savings and bolster lending to the unbanked segments of society, and thereby also lower the borrowing costs and charge even more reasonable interest rates. Similarly, Bharti Enterprises, which is the conglomerate that owns Bharti Airtel, India’s largest private cell operator, is exemplary for social inclusiveness in going beyond the big metropolises, smaller cities, and towns to penetrate the impoverished nooks and crannies of rural India. Its low mobile phone tariffs have been due to the way it has chosen the technology and maintained the trust of the customers despite having earlier received complaints of poor service. Another interesting case is how CavinKare, which began as a personal care start-up called Chik India , has become a highly successful fast-moving consumer goods maker. It made the single-use sachets of shampoo affordable for the hundreds of millions of customers earning less than the World Bank poverty line of $2 a day, who could not afford to buy a whole bottle of shampoo. This was possible on the basis of a simple innovation in packaging and building a distribution system embracing literally millions of little shops. Similarly, Philips India’s ascendant competitive advantage for new low-cost personal care and kitchen products has been due to its building of a distribution system that ties it closely with the customer. Thousands of small shopkeepers and distributors are employed with the allocation of small territories, whereby employees as potential customers provide valuable insights to Philips.
Another fascinating case is the way GE (General Electric) has accomplished its goal of meeting poor customer needs in the medical systems business. It achieved major breakthroughs in the cost and functionality of electrocardiogram (ECG) and ultrasound machines so much so that it could profitably sell at a price point suitable for the low-income segments of the Chinese and Indian populations. The ECG machines developed in India are battery-powered, because the electric grid does not reach into every village. The machines are small enough to fit on the back of a bicycle, which is often the only viable mode of transportation in rural areas. The machines are simple enough to be operated with little training; they have telemedicine capabilities that would enable doctors in distant locations to review the data and assess the patient’s condition, and the machines are made at a fraction of the cost of the existing products that have been developed to serve the higher-income populations of more developed countries.
Finally, consider Ashok Jhunjhunwala’s TeNet—a venture to bring modern communication to rural India. As a professor at IIT Madras with a team of brilliant computer and electrical engineering colleagues, he realized that for the impoverished rural people, communications technology was of little interest in comparison with larger concerns. What rural Indians needed, was “health, education and livelihood”. Accordingly, his company fashioned innovative value propositions based on harnessing communications technology to provide programmed primary and secondary education, basic telemedicine services, and new jobs for managers of local kiosks that would offer the telecommunications services. As TeNet expanded its operations, investors were attracted, and rural India benefited. This is a good example of how technology must be driven by customer and contextual needs. The Government of India bestowed on Jhunjhunwala the prestigious national Padma Bhushan award can, thus, be appreciated.
I, thus, invite you to read Camillus et al. (2017) to appreciate how many Indian and foreign companies have realized the importance of “big, hairy, audacious goals” (BHAGs) to drive and direct breakthroughs in technology and business models in relation to the pressing and basic needs and the limited purchasing power of the base of the pyramid. In other words, there are companies that have learnt to seek synergy between economic value and social benefit!
How can you not appreciate such businesses?
By Annavajhula J.C. Bose, PhD Department of Economics, SRCC
References
John C. Camillus, Bopaya Bidanda and N. Chandra Mohan. 2017. The Business of Humanity: Strategic Management in the Era of Globalisation, Innovation and Shared Value. Routledge.Maurice Punch. 1996. Dirty Business: Exploring Corporate Misconduct—Analysis and Cases. Sage.
