Profitable Business Models and Market Creation in the Context of Deep Poverty.
A Strategic View.
Christian Seelos & Johanna Mair
IESE Business School, Barcelona, Spain
How it all started.
Question: Why are there so few convincing cases of BOP models?
Observation: We find so many innovative business models in the entrepreneurial sphere (our research
and teaching on social entrepreneurship).
Research Agenda: How can our research on entrepreneurial organizations be a valuable contribution to
corporate practitioner needs for BOP strategy formulation?
• Derive some initial hypotheses from case studies and field research.
• Submit proposal to a competitive bid for company-sponsored research by the European Academy for
Business in Society (EABIS).
• Proposal was considered highly relevant to companies and selected for funding (Feb 2005).
• Present initial findings in a workshop to several companies (Sep 2005). Key question: „How to do it?“ -
traditional BOP prescritions perceived as complicated and far removed from corporate reality.– finetune
research questions, approach and relevant literature perspectives.
Key finding: Close engagement with corporations helped to keep research
relevant and evolve into those areas where practitioners perceived the
largest need for insights.
How to recognize and access economically undervalued resources to be able
to generate economic returns?
Description Economic Value
Intangible • Mr. Yunus was considered a person of • To protect Telenor’s reputation it was
Resources impeccable integrity. critical to find the right partner that would
resist the corruption prevalent in poor
• Yunus’ prior success and social and • Important local knowledge reduced
business experience building the uncertainty and search costs and enabled
Grameen Bank and other Grameen agreement on economic and social
• High level of awareness for and trust in • The name GrameenPhone was crucial to
the brand “Grameen” by both poor and get a license and for marketing. Building a
middle-income people. new brand would have been very costly.
Tangible • The Norwegian Agency for • Ability to acquire a key asset relatively
Resources Development (NORAD) had already cheaply significantly reduced the
invested in a fiberoptic network for the investment risk.
internal communication of the national
railway system, which was never used
to its full capacity.
• The rural development strategy opened • Development organizations bear some of
access to funding provided by the Asian the market risk in return for efforts at
Development Bank, the IFC, the social and economic development; this
Commonwealth Development lowered Telenor’s cost of capital.
Corporation and NORAD.
Capabilities • Special skills in accessing, • Opportunity for integrating a vastly
communicating and working with the untapped potential rural market into the
rural poor in more than 50,000 villages overall business model; already drives
in Bangladesh. more than 10% of the revenues of
• Deep expertise in setting up a successful • Enabled selection of appropriate phone
microfinance system, providing loans owners and efficient payment collection;
and ensuring the accountability of microfinance enabled poor people to
individual members of the rural poor. convert future earnings into current
financial ability to buy phones instead of
depending on donations.
Key finding: When corporations employ their capabilities to remove a
bottleneck in an existing pro-poor organization, they may get preferential
access to important resources as a basis for a profitable business model.
How to configure profit and not-for-profit resources into an overall business
model able to achieve private strategic objectives?
Revenues EBITDA Subscriptions
Revenues, EBITDA (US$ Million)
• Grameen brand reputation
• Trust in Yunus capabilities and as
200 shield against corruption
100 Connectivity to:
Urban Middle Class
2001 2002 2003 2004 2005 2006e +
Strategic Goals Connectivity
Enable Economies of
Rural Jobs businesses Jobs scale
Numbers of Village Phone Subscribers
+ • Development funds
250000 Connectivity to: Need to cover all of
• Cheap loans
Rural Poor Bangladesh
• Existing fiberoptic network
200000 • Existing Grameen Bank network • Microfinance capability
• Experience working with poor people • Efficient community
150000 • Knowledge of trustworthy individuals in management
100000 • Poor got used to be held accountable for
contracts and payments
2001 2002 2003 2004 2005 2006e
Key finding: Profitable BOP models and creation of markets require innovative
new business models. Innovation comes less from new resources/capabilities
but from new configurations of existing building blocks.
How to structure alliances that limit risk to partner goodwill and competence?
Strategic Interface Strategic
Urban Economic Grameen Rural
Users Returns supply Bank Poor
Rural Economic Waste Urban
Farmers Returns demand
Private benefits Simple Interface Private benefits
Key finding: BOP alliance partners employ their unique capabilities in existing
structures (competence); they are better off the more the company partner fulfills
his private strategic objective (goodwill). Simple and transparent interface is key.