Every time I see a gimmicky product hailed as the “next big thing” to make a dent in world poverty I want to pull my hair out. There are already enough products in the market to change the lives of every single poor consumer on the planet. Poor consumers don’t need another slick product developed in the U.S., they simply need a product that reaches them in their village. Let me explain.
Many entrepreneurs (incorrectly) think the biggest challenge is actually making the product. They are so pleased they have invented a widget that is more efficient or lower cost or fancier than the other widgets on the market. Since there are 1 bazillion people whose life would be immeasurably improved by getting access to their widget, and their widget is the best, success is a sure thing.
Wrong! Actually, virtually none of these widgets ever get to their intended customers because of supply chain and logistics challenges. It is incredibly difficult to cost-effectively reach and then service customers who are are sparsely populated, many hours from a city, and on dirt roads with no electricity, Internet or water. A 2011 U.K. government report noted that transport and supply chain costs can represent as much as 75% of the value of goods in Africa. I personally think this is a little high, but my own experience running businesses in Ghana shows that a $10 product manufactured in China almost certainly ends up being sold for $25 to $30 or more in the village in Africa.
The focus on products is almost certainly because investors and the public flock to product companies like bees to honey. Maybe this a byproduct of Silicon Valley’s obsession with gadgets and apps, where we take our developed distribution channels for granted. And while very little is sexy about running a supply chain and distribution company, there is plenty sexy about building an interesting product, even if it doesn’t actually reach the intended customer or give them what they need and want.
An extreme example is Playpump (now defunct) which was a $14,000 to $20,000 merry-go-round that pumped water when children played on it. In 2010, Laura Bush and Bill Clinton announced a $16.4 million grant to build hundreds of Playpumps in Africa, but the organization struggled to come close to the initial hype because, as a Mozambique government report noted: children are not playing as expected on the merry-go-rounds and adults find it difficult to operate; pumps are out of commission for up to 17 months at a time; and maintenance is a real disaster.
A more recent example of our love of products is Soccket, a company that has made a soccer ball that harnesses kinetic energy to generate light. Cool right? This company has received loads of press (including here at Co.Exist), and has raised nearly $600,000 from crowdfunding sites. Even Obama and Bill Clinton love it. It is undoubtedly a nifty piece of technology.
The problem? At a cost of $60 per Soccket, it is the most expensive six-watt light on the market. D.Light, for example, produces a high-quality study light with a two-year warranty and similar functionality that retails for $10. The Soccket is also certainly the most expensive soccer ball the customer, presumably kids with no access to electricity, is ever going to see. (A more in-depth analysis of the concerns with Soccket’s approach can be found here.)
Thankfully, there are an increasing number of companies focused on the bigger, yet far less glamorous task, of delivering mundane but useful stuff to poor consumers. Honey Care Africa, for example, is building an integrated honey production value chain in East Africa. It does everything from educating smallholder beekeepers, to acting as their buying agent for inputs, to providing financing, distribution, and sales support for the honey. There are now 15,000 beekeepers in Honey Care’s network who are experiencing an increase in household income of up to 50%.
One Acre Fund is another great example of a business model that is built around an unglamorous idea–improving the supply chain. The organization provides financing, training and sales support to a rapidly growing network of farmers in East Africa. It currently reach 163,000 farmers, and their revenues have increased from $1.6 million in 2010 to $14 million in 2012. Farmers in their network make twice as much money from each acre of land as farmers out of their network.
When I search the term “solar lantern” on Alibaba, a site that connects buyers with factories in China, I come up with 70,000 products from over 1,700 suppliers. Do you know how many of these products I see in the villages I visit in Africa? Typically none.
It just seems too easy to transpose our obsession for the latest gadget or app on poor consumers in the developing world. Inventing a sexy, new product is not enough. It needs to also be something poor people would buy with their hard earned money. It needs to actually get to them. It needs to get repaired when it inevitably breaks. Unless you hit all of these criteria, your highly efficient solar powered nasal hair remover is not going to make a dent in anything–let alone global poverty.