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ICTD and Social Entrepreneurship

ICTD and Social Entrepreneurship. Leslie Dodson ATLAS Institute University of Colorado-Boulder. Sustainable What?. What the heck does sustainable mean? Fluffy, vague, overused term. Donors expect it. We use it. Does financial sustainability mean: Costs are covered?

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ICTD and Social Entrepreneurship

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  1. ICTD and Social Entrepreneurship Leslie Dodson ATLAS Institute University of Colorado-Boulder

  2. Sustainable What? • What the heck does sustainable mean? • Fluffy, vague, overused term. • Donors expect it. We use it. • Does financial sustainability mean: • Costs are covered? • The initiative “thrives?” • The business turns a profit? • How does the community define sustainable?

  3. One Definition of Financial Sustainability A financially sustainable system should: • Generate long-term revenue • Maximize profitability • Not threaten the financial wellbeing of customers • Not have any significant liabilities www.espdesign.org

  4. ICTD-Related Businesses • Crowdsourcing, micro-work • Distributed work and information piecework • m2Work, TxtEagle, Samasource • E-commerce, Web 2.0 enterprises • Telecentres and other access points • Equipment, calling cards, accessory sales • ICT repair and maintenance

  5. Social Entrepreneurship • Triple bottom line: people, profit, planet • Hybrid business model • Social enterprises blend for-profit principles with non-profit goals. • Social entrepreneurs • seek to provide real social improvements as well as attractive social or financial returns to investors J. Gregory Dees. The Meaning of Social Entrepreneurship.

  6. Overview • 3 Features of Running a Business • Revenue sources • The Value Chain • The Value Proposition • 3 Key Components • The Customer • The Entrepreneur • The Technology • 3 Business Models • Micro-Finance • Micro-Franchise • Micro-Consignment

  7. 3 Features of Running A Business

  8. The Value Chain • Locate the business along the value chain • Raw goods supplier? Producer? Distributor? Marketing and Sales? Maintenance Provider? • This will help guide the role of the ICT and the potential for sustainability Michael Porter. Competitive Advantage. 1985.

  9. The Value Proposition • What is the ICT product or service? • How is it produced and delivered? • Who is the target market for the ICT? • Demographics & psychographics • How are buying decisions made? By whom? • Are buying decisions made on price, quality, service, convenience? • How frequently is the ICT product/service purchased? J. Timmons & M.H. Morris

  10. Revenue Sources • Access or monthly fees? • Pay per use? • Pay per view? • Advertiser supported? • Subsidized use? • Flexible price? • What happens: • if another vendor undercuts the price? • If the product or service is given away? • If the product becomes obsolete?

  11. The Customer

  12. ICTD and The “Bottom of The Pyramid” Customer • People in developing communities are avid buyers and consumers of ICT products and services • Developing communities represent new market opportunities • But…the “B-O-P” approach views the poor as customers, buyers, shoppers • Can selling to the poor alleviate their poverty? • Critics say the BOP approach exploits the poor

  13. The Entrepreneur

  14. The Iconic Entrepreneur 1 • Entrepreneurship is often the last choice. • “The poor are reluctant entrepreneurs.” • The poor desire stability through steady income • Failure rate for startups in the US: 50+% • How much tougher is it in developing communities? • Without credit & banking - Without regulation • Without infrastructure - Without contracts • Without disposable income - Without access 2 1 A. Banerjee & E. Duflo. Poor Economics. 2011. 2 Business Week

  15. The Technology

  16. The Technology • ICTD enterprises have to consider these and other technology-related costs • 1. Design costs • 2. Equipment costs • 3. Training costs • 4. Maintenance costs • 5. Replacement/upgrade costs

  17. 3 Social Enterprise Business Models

  18. Micro-Finance & ICTDAccess to Credit • Small, micro loans to the poor to finance ICT equipment or ICT-related businesses • Entrepreneur receives loan to buy tech or offer ICT services, uses sales revenue to pay back loans • Entrepreneur bears all of the financial risk up front

  19. Micro-Finance & ICTDPros and Cons Benefits: “My loan is my husband.” Provides working capital to under-served populations Group support Disadvantages: High interest rates Keeps borrowers in debt Constant pressure to pay back loan Group pressure and accountability

  20. Micro-Franchise & ICTDAccess to Business-in-a-Box • Applies franchise concept modified to developing community • Replicable small enterprises with a social component • Reduced level of risk compared to starting a business from scratch

  21. Micro-Franchise & ICTDPros and Cons • Benefits: • Simplified, pre-packaged, standardized business • Business model and training provided • Tested, proven businesses • Disadvantages: • Inflexible. Can’t easily change business • Requires management skills • Owner responsible for hiring, firing, managing employees • Often need to buy in to a franchise

  22. Micro-Consignment & ICTDAccess to Products • Entrepreneur is provided with a basket of products at no upfront cost • Entrepreneur pays for product after it’s sold, keeps profit, restocks • Risk is shifted away from the entrepreneur

  23. Micro-Consignment & ICTDPros and Cons Benefits: Entrepreneur does not bear burden of holding inventory. That risk held by an organization or NGO Can work well with new products in new markets Much lower risk for entrepreneur Disadvantages: Entrepreneur doesn’t decide what products to sell Consignment process dictates products to be sold

  24. The Downside of Business(Not a Complete List!) • Charging for a product/service diverts money that may be needed elsewhere • Profit-seeking behavior breeds greed • Business competition creates winners and losers, haves and have-nots • Profit doesn’t automatically create widespread wealth • The 1% syndrome • If you build it, they may not come

  25. Complications • Customers want the lowest price. • Businesses want the highest profit. • Donors want the biggest impact. • Lenders want the least risk. • Technologists want the widest diffusion.

  26. Thank you. Leslie Dodson ATLAS Institute University of Colorado-Boulder Leslie.dodson@colorado.edu

  27. Resources • Social Entrepreneurship: • C.K. Prahalad: The Fortune at the Bottom of the Pyramid. 2004 • AneelKarnani: Fortune at the Bottom of the Pyramid: A Mirage. 2007 • Value Chain: • Michael Porter. Competitive Advantage. 1985. • Microwork: • m2Work: www.infodev.org • TxtEagle: www.jana.com • Samasource: www.samasource.org • Micro-Finance: • Muhammad Yunus. www.grameenfoundation.org • Micro-Franchise: • Jason Fairbourne. MicroFranchising: Creating Wealth at the Bottom of the Pyramid. 2008. • Micro-Consignment: • Greg VanKirk. www.microconsignment.com

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