Business Today

Riches from rags

Few disagree today that the next big fortune lies at the bottom of the pyramid. Here are lessons on how some early movers are getting to it.

E. Kumar Sharma | Print Edition: March 21, 2010

It's a damning statistic Shining India will cringe at. Over 1,000 children under five die of diarrhoea every day in India. Every day. In effect, a number greater than every child you know. Think about it. The numbers are better today than a couple of decades ago, but at its most basic the grim-reaperdatum comes from the inability of a producer to sustainably meet the needs of a consumer, or citizen in this instance. Multiple producers, really: Vaccine makers, sanitation providers, clean water merchants, oral salt companies and, even educators.

Diarrhoea is just one example; the missing producer is a common theme across a spectrum of products and services. Such economic actors, if you will, exist in settings that are relatively prosperous (read: cities) but fail to deliver in less wealthy settings. Reason: most business models today do not meet affordability (demand-side) and cost (supply-side) metrics in villages and deep, interior markets.

Companies traditionally structured around a bunch of shareholders, for example, will almost surely get a better return on their investment juicing out existing consumers better. So, Parle finds it more profitable introducing a new variant of its Bisleribranded bottled water than, say, set up a string of community water plants or sachet-packed water—which have several times the demand but are tough business or delivery models to crack. Such instances abound.

Eventually, as the markets they are comfortable with (India's top 200 cities and towns) saturate, producers will increasingly move to the interiors but there are—as the following eight pages in this special feature on for-profit businesses with social impact tell you—models emerging that show how producers, including governments, can crack the intersect of affordability and cost. And, make profits.

Mobile telephony, for one, says Ashish Karamchandani, a Partner at consultancy firm Monitor Group and Founder of Monitor Inclusive Markets, in the scale that India has today (500 million connections) came about only because sub-Rs 1,000 phones became widely available in the country. "The phone service was there but the cheap phone was the innovation that allowed a large number of consumers" to enter the market, he says.

Using this example of what affordability can do to a market, Karamchandani drives home how group-owned facilities with a no-frills offering and a pay-per-use approach can be silver-bullets in opening up new businesses. An example of this approach is Neurosynaptic Communications, which finds itself changing into a wide telemedicine platform spread over states as more and more remote medicine centres adopt its device. Or, the ambitious MokshaYug Access, which dreams of setting up a supply chain deep into the hinterlands carrying milk to tomatoes.

There are other innovations too. Like cancer health care specialist HealthCare Global, which stretches its spread through a hub-and-spoke model or Vaatsalya Hospitals, which tailors its business model to suit its target market: Tier I and Tier II towns. But, what perhaps stands out is Poorvi Enterprises in Hyderabad. In 55 Andhra Pradesh villages, its water purification plants are paid for in as less as three years when used by local communities. It is more likely than not that these villages will not lose a child to diarrhoea.

With Josey Puliyenthuruthel

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