Beyond philanthropy, why should global companies invest in social impact projects in developing countries? In a world of competing demands and economic challenges–even for the wealthiest companies-–why is this a good use of resources?
Speaking in New York to an audience of world leaders, corporate titans, NGOs, and foundation heads at the opening session of the 2012 Clinton Global Initiative, Tim Brown, CEO of the design and innovation firm Ideo, said it was in multinationals’ self-interest to invest in things like health, education, and economic development in emerging nations.
In setting the stage for the meeting, whose theme this year is “Designing for Impact,” Brown noted that “if we don’t deeply understand the communities that we serve, we can’t design for impact. But by being embedded, we can get insights to ideas that may lead to products or services that that market may need.”
Expanding on that idea, Brown sketched out five good reasons for building sustainable markets by building sustainable communities around the globe:
That idea, pioneered by C.K. Prahalad, holds that investments in developing countries raise their overall standard of living. Those populations can then become vibrant markets for the company’s goods and services. Along the way, as corporations help to improve education or sanitation, create jobs, and enhance infrastructure, they will simultaneously imbue their new customers with the dignity that comes from being treated as a valuable market. It is a far more powerful paradigm than the one before it, that the solution for the developing world was simply food aid and money. And it bespeaks of a virtuous circle. “We must get people out of poverty if we want to have the markets we wish to serve,” says Brown.
With scores of projects in the developing world, Ideo has rich experience in plumbing the unknown. And, Brown said, his team never fails to be surprised at what they discover when they ‘go deep’ on a project in a culture far from home. “These markets [in non-Western] countries don’t necessarily evolve in identical ways as they do in the West,” he said. “If you’re there, and involved, and are part of creating them, you have an opportunity to understand them from the ground up.”
He points to a surprise his team had in learning banking traditions in Jordan. Unlike Western banks, which deal with each account holder as an individual, banks in the Middle East often operate within a family’s ecosystem, with the patriarch often acting as the chief investment officer. It’s a model that might also work in China, or other cultures which revolve around a family-centered financial system.
You can’t sell something for which there are no distribution channels. You can’t sell something in which people have no trust. Brown’s team learned, for example, that one way to overcome this hurdle was to create a brand that people could identify as a product with reliable quality. For example, Brown says, within days of arriving in Kenya, a team of Ideo workers setting up water services had created a little brand prototype to determine what products were appealing to the local residents. They evolved that idea into something that was tailored specifically to the market they hoped to serve–not the market that designers back in San Francisco might have assumed was the best.
Often we call this “learning from the edge” or reverse innovation. Brown points to the Aravind Eye Institute in India which found a way to bring the cost of replacement lenses for cataract surgery down from $200 a pair to $4 a pair. “Constraints offer us the opportunity to be the most creative. The worst brief is a blank piece of paper,” Brown says. The solutions from disadvantaged countries can often help industrialized countries rethink entrenched products or services.
Brown points to Coca-Cola’s commitment to being water neutral by 2020-–that is, to safely return the same amount of water the company uses in beverage production to the communities and their environment–as an example of a target that energizes the employees of the company and helps guide their day-to-day decision making against an aspirational goal.
“Design is all about learning from doing,” Brown says. “That’s how we evolve to the best solution.”