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High-growth markets: Scaling business innovations to grow with the future middle class

Around the world, consumers in low-income communities who are starting to accumulate some disposable income want to acquire simple, yet affordable products that will improve the quality of their lives.

Overview

Companies that develop products and services that address institutional and infrastructural deficits can help low-income communities enter the growing global middle class. The most successful companies can also generate new growth possibilities with such ventures—which we call inclusive business initiatives (IBIs). New business technologies are helping companies to deepen their reach into low-income markets as well as strengthen their understanding of these consumers’ priorities. Moreover, many governments, non-governmental organizations (NGOs) and low-income communities are willing and eager to participate in and to benefit from IBIs.

But for these initiatives to take hold and succeed, they must achieve scale. And that has proved to be a daunting challenge. Why? Large companies have found it difficult to harness key stakeholders’ strengths in ways that influence low-income consumers’ preferences and gain local communities’ trust. Without these capabilities, an inclusive business initiative—no matter how promising—won’t be adopted widely enough to deliver value to its intended beneficiaries or to be profitable for its originator.

All this can change, however. There is growing evidence of companies that have managed to launch successful IBIs. We analyzed IBIs operating in high-growth markets across five emerging economies to glean insights into how large businesses have surmounted the core challenge of scaling their initiatives.

Our research reveals that leaders of exceptional inclusive business initiatives—those that enhance low-income consumers’ quality of life as well as companies’ bottom lines—apply a rigorous, three-step process. In this report, we describe how that works within real companies and suggest how it can be applied much more widely around the world.

DOWNLOAD THE REPORT [PDF, 6 MB]

Key Insights

Scalability is at the heart of any inclusive business initiative’s (IBI) success. But efforts to achieve it are fraught with unanticipated dangers. Even when equipped with a viable offering at the right price point, firms often fail to convince enough low-income consumers of its value and thus never achieve the scale needed to make their inclusive venture profitable.

In looking at companies across the emerging world, however, we’ve seen that scale can be achieved. There is indeed a path forward, but as always with important business and social change, the path is a challenging climb.

Recommendations

Through our research we’ve identified three broad steps that companies can take to help improve their chances of success with an IBI.

Step 1: Identify stakeholder-driven processes relevant to your IBI
Which stakeholder-driven processes are most critical to the execution of your inclusive business initiative? A review of research papers, journal articles and case studies, revealed six processes relevant to more effective execution of IBIs.

  1. Co-creating solutions with local low-income communities
  2. Collaborating with NGOs and small entrepreneurs
  3. Partnering with governments
  4. Fostering a balanced regulatory environment
  5. Reconfiguring organizational structures
  6. Gaining top leadership buy-in

Step 2: Identify processes vital to scale; assess their sensitivity to local market conditions
Having identified the six stakeholder-driven processes relevant to IBI-execution, the question arises: are all six processes always and equally necessary? We’ve found that while all six are generally important, a dominant number of them yield robust scale only when deployed in combinations.

We conducted a comparative analysis of 18 IBIs across 17 large companies and one industry collaborative, with the aim of understanding how IBIs in different environments reach scale. We strived to build a sample characterized by authentic and diverse experiences with IBIs.

Applying qualitative comparative analysis techniques to the data collected through rigorous interviews with decision-makers and IBI-managers working on the ground, we found that top leadership buy-in for an IBI is an imperative—without it, the IBI will not scale successfully. Our analysis suggested that none of the other five processes independently helps inclusive ventures achieve robust scale. For example:

  • Co-creation of solutions with communities did not help achieve robust scale unless it was simultaneously accompanied by government support (in the form of collaboration and a balanced regulatory environment).
  • Collaboration with NGOs or small entrepreneurs did not result in robust scale if it was not adequately complemented by reforms in organizational structure to suit a venture’s business-model needs. Moreover, we discovered that combinations of certain processes were more or less effective depending on location. In Brazil and India, sponsors and managers of the inclusive initiatives in our study achieved scale by combining two processes: collaboration with NGOs and small entrepreneurs, and organizational structure reform. By contrast, in China, balanced regulation and active governmental support helped the ventures we studied rapidly achieve economies of scale.

Step 3: Design actions to leverage stakeholders’ strengths to achieve localization and scale
We found successful companies taking concrete actions to leverage strengths of their key stakeholders linked to processes critical to achieving localization and scale:

  • Driving scale through top leadership support
  • Encourage top leadership to have a personal stake in building IBI scalability
  • Prevent too much focus on near term bottom line
  • Get top leadership to bring in the right talent
  • Use government support effectively
  • Collaborate with governments committed to implementing IBI-friendly decisions
  • Reform Organizational architecture
  • Establish in-house platforms to help partnerships run smoothly
  • Partner with authentic NGOs

For further insights read:

Inclusive Business Initiatives: Scaling innovation for an emerging middle class in Accenture’s Outlook

Making Inclusive Growth a Reality: Lessons from India (The European Business Review)

Hidden Pitfalls of Inclusive Innovation (Stanford Social Innovation Review) [PDF, 3 MB]

DOWNLOAD THE EXECUTIVE SUMMARY [PDF, 209 KB]

CASE STUDIES

Alibaba: Connecting low-income rural entrepreneurs with urban consumer markets

Alibaba’s e-commerce platform has allowed village-based furniture makers to connect with higher-income consumers in urban markets, and under the company’s guidance, Shaji village entrepreneurs have begun to build recognizable furniture brands among urban consumers.

DOWNLOAD THE FULL REPORT [PDF, 1.05 MB]

Bendigo and Adelaide Bank: Co-creating banking solutions with local communities

Bendigo and Adelaide Bank’s Community Bank initiative illustrates how some companies are mitigating the risks of exploring new markets while setting the foundation for future growth. The key: Working with local communities to “co-create” new solutions.

DOWNLOAD THE FULL REPORT [PDF, 1.53 MB]

Esoko: Empowering low-income farmers with real-time market data

Companies like Esoko have begun experimenting with partnership models to reduce the costs of scaling up. Esoko’s creators adopted a franchise model that has enabled them to connect with more small farmers in 15 African countries.

DOWNLOAD THE FULL REPORT [PDF, 891 KB]

Haier: Using a franchise model to build a quality brand in remote, low-income markets

By adopting a franchise model, Haier has mastered the balancing act between brand ownership and cost control, and has built one of the most respected and differentiated brands in rural China.

DOWNLOAD THE FULL REPORT [PDF, 1.21 MB]

Idea Cellular: Establishing a local sales channel in low-income markets

Fierce competition for low-income subscribers is leading to market saturation. But a wave of fresh growth is under way, thanks to new thinking by Idea Cellular about how to reach those who have not yet participated in the telecom revolution.

DOWNLOAD THE FULL REPORT [PDF, 781 KB]

ITC: Sourcing from small rural suppliers on mass scale

On their own, farmers have limited production capacity. ITC’s “e-Choupal” helps solve this problem. The online platform now coordinates more than 4 million small Indian farmers in a mass procurement operation that serves its nationwide food business.

DOWNLOAD THE FULL REPORT [PDF, 1.55 MB]

KLABIN: Growing the capabilities of local suppliers to ensure effective co-creation

Co-creating products with low-income communities can be one of the most effective methods for developing a valuable relationship with tomorrow’s middle class. By making targeted investments in capability development at the local level, KLABIN has forged sustainable co-creative partnerships.

DOWNLOAD THE FULL REPORT [PDF, 1.51 MB]

SGM Wuling: Bringing affordable vehicles to low-income consumers

Building products that appeal to low-income customers is rarely straightforward. Their demands for high value and low prices often exceed those of consumers in higher-income markets. China’s SGM Wuling has tackled both issues, offering innovative vehicles at affordable prices.

DOWNLOAD THE FULL REPORT [PDF, 1.58 MB]

ITAU UNIBANCO: Tapping into local knowledge to finance Brazil’s suburban entrepreneurs

Low-income markets offer huge opportunities that are equalled by unforeseen pitfalls. One way to mitigate the risks of navigating these uncharted markets is by tapping into local knowledge. In Brazil, ITAÚ Unibanco has shown how this can be done with Its microcredit initiative.

DOWNLOAD THE FULL REPORT [PDF, 877.55 KB]

UNICA: Equipping low-income workers with new skills, at scale

In labor-intensive industries that depend on workers from low-income communities, training efforts must be done on a massive scale to have an impact. UNICA has proven that “reskilling” at scale in labor-intensive industries is possible.

DOWNLOAD THE FULL REPORT [PDF, 1.14 MB]

Hindustan Unilever: Scaling a cost-efficient distribution and sales network in remote markets

With “Project Shakti,” Hindustan Unilever has managed to meet the needs of difficult-to-reach consumers through a blend of strong local connections and changes to its organizational structure.

DOWNLOAD THE FULL REPORT [PDF, 1.83 MB]

YES BANK: Serving low-income communities with a variety of innovative offerings

Banks across India have been ramping up efforts to serve low-income communities. Yet it is difficult to launch and manage the right mix of new products these communities need. By striking the right partnerships and recruiting top talent YES BANK is able to offer the best services to low-income communities.

DOWNLOAD THE FULL REPORT [PDF, 879 KB]

About the Institute for High Performance

The Accenture Institute for High Performance develops and publishes practical insights into critical management issues and global economic trends. Its worldwide team of researchers connects with Accenture’s business leaders to demonstrate how organizations become and remain high performers through original, rigorous research and analysis.


Author

Raghav Narsalay
Managing director of Innovation Research as well as for India and China Research

 

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