Eradicating Mud Cookies: Global Executives Try to Connect Profit to Social GoodPublished: July 08, 2009 in Knowledge@Wharton
Hunger, disease, waste and poverty are often considered challenges for philanthropists, not businessmen. And yet, where there is a need, there is a market -- and potentially, profit.
Finding a for-profit solution to a societal ill was the challenge presented to a group of global business executives recently at Wharton's Aresty Institute of Executive Education. The 39 executives -- from countries as diverse as Nigeria, India, Russia, South Africa and The Netherlands -- took on the challenge in a business plan competition that was part of the institute's five-week Advanced Management Program. The participants amassed a collective experience as varied as their cultural backgrounds, with expertise in fields such as oil, aerospace, finance, fashion, entertainment and HIV/AIDS education. Divided into six teams, the executives chose a current societal dilemma from one of their home countries and put their heads together to come up with a potentially profitable solution.
To address hunger, one group envisioned a cassava flour factory in Nigeria, and another proposed an embroidery factory in Haiti. One group tackled disease by suggesting a single-use syringe for India. Two teams focused on energy and the environment, offering proposals for a wind farm in Nigeria and the sale of energy efficient light bulbs in a small South African village. And chipping away at both poverty and pollution, one group suggested a clean and efficient wood-burning stove for India.
"These were the best [presentations] so far," said Wharton management professor Ian MacMillan, who has shepherded several groups of senior executives through the exercise in the past. The groups had 20 minutes to present their ideas, and then answer questions about their business plans from three guests: Wharton Vice Dean of Executive Education Thomas J. Colligan, strategic management consultant Len Marinaccio, and three-time entrepreneur Steven Katz.
Focus became a critically important lesson for nearly all of the teams, MacMillan noted. "You can't help everyone, so focus on someone now and expand to others later. The idea is to extract profit in the beginning, and then you can reinvest those profits into helping more and more people."
Establishing a pilot project and expanding on it later was also an important strategy that almost all the teams used. "Get something small going," MacMillan advised. "What I want to do then from my initial limited efforts is to save up for something that is much bigger... and if I'm really smart about this, I can take what I'm building and export it to other parts of the world."
A Flour Factory in Nigeria
Starting small and growing over time was the strategy behind one team's "Great Cassava" project. The cassava root is an important nutrient in many parts of Nigeria, a country characterized by poverty and high unemployment in its rural areas.
"Cassava is well suited to convert to flour but for unknown reasons, flour is not highly available. The [small amount of] cassava flour that is available is imported," said team member Henrik Wendler, chief operating officer of Dutch medical device manufacturer Ambu. "We want to create awareness about cassava flour. It's really tasty, and it's nutritious. But really, the differentiator is to make cassava flour available."
To accomplish that and to create jobs, the team proposed a cassava flour factory in the Nigerian states of Benue and Kogi. The pilot factory would employ 20 to 30 people and produce about 140 tons of cassava and yam flour annually, relying on simple, labor-intensive production methods. "We want to set up a pretty manually based plant, because we know there will be issues of maintenance of machines, so we want to keep the process manual," Wendler said. "On one hand, it will limit the need for high tech machinery, and on the other hand, it will create jobs." Keeping the factory simple would also make it easier to franchise later throughout the country, which is rich in cassava and yam production. "We think that within a five year period, it's realistic to replicate 20 factories in Nigeria," Wendler said.
The potential impact: cheaper cassava flour available to rural Nigerians, 400 to 600 jobs created in production and sales, stable income for 50 to 100 Nigerian cassava farmers, and $1 million in salaries that will funnel back into the economy to create more jobs.
Embroidery Jobs in Haiti
Like the "Great Cassava" project, the "Brodery La Kay" team also aimed to ease poverty by creating local, labor intensive jobs -- in this case, by employing embroidery workers in Haiti.
As the poorest country in the Western Hemisphere, about 80% of Haiti's nine million citizens lives below the poverty line, said team leader Olivier Bottrie, president, Travel Retailing Worldwide, at the Estee Lauder Companies. People in Haiti are so poor they sometimes stave off hunger pains by eating cookies made of mud, according to a CNN news report that Bottrie replayed for the group.
Traditional Haitian textile handicrafts such as embroidery could help hundreds of Haitians work their way out of poverty, the group suggested. Already, Haiti supports a textile industry, but most of the work is done in sweatshops for multinational corporations where more than 25,000 people work for about $1 per day, the team found.
By contrast, the "Brodery La Kay" project would employee Haitian women skilled in the traditional crafts to produce labor intensive and high-quality tablecloths, pillow cushions and other craft items for the U.S. market. The goal would be to create 100 jobs in the first year and expand to as many as 500 jobs by the end of the fifth.
The team decided not to make items such as T-shirts or uniforms because it would be too difficult for Haitian factories to compete with countries like China. On the other hand, producing high-quality handicrafts would create a valuable product and livable working conditions. "We want to revive traditional craftsmanship in Haiti. The more specialized we could be, the more likely things would be valuable," said Bottrie. "We think that, for the scale that is required, we could pay $7.50 a day and we could actually afford it."
Single-use Syringes in India
Some of the teams sought to help people, not through jobs, but with an innovative product. For example, team "I-Safe" hoped to save lives in India by introducing a one-use disposable syringe that could not be washed out and re-used. Unsanitary medical syringes cause 22 million infections and 1.3 million deaths each year worldwide, noted team member Doug Leather, chief executive officer of REAP Consulting, a leading international authority in customer management and customer experience management with offices in London, South Africa and Dubai. The burgeoning trade in used medical equipment in India has caused a deadly outbreak of hepatitis-B in India.
To solve this problem, the group suggested widespread use of an auto-disable syringe designed by Franklin Lakes, N.J.-based medical company Becton, Dickinson and Company. "You can't reuse it. It locks. The plunger gets blocked," said Manoj Gopalakrishna, managing director (elect) of Becton Dickinson India, one of the team members. The team suggested an awareness campaign and a safe-disposal system as part of their program, which they said could be exported to other countries as well.
Wind Power in Nigeria
Innovation was also an important part of the project "We Can Wind," based on the idea that Nigeria's energy problems could be solved through wind power. Today, only 40% of Nigeria's population has access to electricity -- and for those with access, it's available just four to eight hours per day, according to team member Olutoyin Oyelade, corporate treasurer at Intercontinental Bank in Lagos, Nigeria. Although Nigeria is rich in oil, little of it is used for energy within the country.
"Nigeria exported major commodities in the past before oil. With the discovery of oil, Nigeria's revenues come 80% from oil production," Oyelade said. For the Nigerians themselves, only about 5% of power comes from petroleum. Natural gas provides 34%; fuel wood -- which is scarce and expensive -- provides 37%; and hydropower, 24%.
But petroleum is expected to dry up within 20 years, and hydropower is threatened by the shrinking of the Niger River, Oyelade said. Yet energy demand is expected to increase. "Without electrical power, you cannot do anything. Today, basically everything is imported," said team member Ralf Sigrist, president and CEO of Chicago-based Nordex USA, part of the German-based wind turbine manufacturer Nordex Group.
Although a United Nations Development Programme (UNDP) report says that there is little potential for wind power in Nigeria, Sigrist and the group disagreed. Not only would a wind farm create jobs, it would help the environment and lead to a sustainable source of power, the team said. "We found the UNDP report helpful to get insight, but in terms of what they were doing to solve problems, the report was very weak," Sigrist said. "We believe that once we put this in place in Nigeria, other African countries will begin to put it in place" as well.
Energy-efficient Light Bulbs in South Africa
Energy efficiency was also on the minds of the "Eco Light" team, but on a smaller scale. To reduce high energy bills and use power more efficiently in poor South African villages where generation rarely meets demand, the group suggested a program to promote energy-saving light bulbs. "Our primary objective is to migrate people who are using incandescent bulbs to energy-saving bulbs," said Mongezi Veti, general manager of mining group Exxaro Resources in Pretoria, South Africa. "Our vision is to reach every poor household ... and help save the planet."
To help mitigate the higher costs of the bulbs, the group suggested they be sold through the local utility at a subsidized price that villagers could pay off monthly along with their electricity bill. Ultimately, the bulbs would pay for themselves through energy savings, according to the group.
Like the Eco-light team, the "Magic Stove" project focused on day-to-day life and tried to make it better with a small change. Instead of a new type of light bulb, this team suggested a new type of stove that burns wood more cleanly and efficiently.
The "Magic Stove," developed by Amsterdam-based Philips, is similar to small single-burner drum stoves used in many developing countries. But the Magic Stove uses 45% to 55% less wood than most traditional stoves, and reduces smoke by 65% to 90%, depending on the model. Widespread use of such a stove could slow deforestation -- given that three billion people worldwide use solid fuels like wood for cooking -- and would reduce indoor air pollution, which kills 1.6 million people each year worldwide, the group said.
"The major problem with the current project is that it has seen a slow roll-out," said team member Philip Doorduijn, an executive vice president and business unit leader for the domestic appliances business at Philips Consumer Lifestyle in Amsterdam. "So the objective is to make this a massive and profitable roll-out."
With 124 million households in India cooking with wood, the group decided to introduce the product in rural India. The team targeted several possible ways to build a buzz:
- Set up demonstrations of the stove in rural marketplaces such as eChaupal, where four million farmers from 40,000 villages across eight states in India buy and sell seeds.
- Work with Project Shakti, which aims to provide income generating capabilities to rural Indian women, enlisting them to distribute the stove.
- Cook mid-day meals for school children using the Magic Stove as a way to get their mothers interested in the product.
- Work with health advocates to promote the stove's low-smoke benefits.
- Partner with a local bank and offer small business start-up loans to women who want to sell the stove in rural markets.
"You didn't try to create new distribution channels; you piggybacked with what was there," said guest panelist Colligan, commending the team's approach during the question and answer session.
Such a strategy could not only make the Magic Stove successful, but could lead to future growth for the company, MacMillan noted. "If you get this thing going, what you do is build future markets for Philips. If these projects are successful, they [create] change."
In the end, Magic Stove's multi-pronged distribution earned it runner-up in the business plan competition. First place went to "Brodery La Kay" for its plan to export Haitian handiwork. Bottrie, whose wife is from Haiti, used samples of the traditional embroidery in the team's presentation and beamed triumphantly as his team members gathered to accept their award.
"You can't ignore it anymore, so of course you try to find a solution," said Bottrie, in response to a panelist's question about why he found the project important. "We're trying to find a solution that enriches people's lives.... When you see that CNN clip, how can you imagine that people eat mud?"