The challenge—scaling inclusive business initiatives

Scalability is at the heart of any inclusive business initiative’s success. Although geography- and community-specific, without scale, IBIs can’t become commercially viable or deliver benefits to a large enough group of people. Support from internal and external stakeholders is critical, but obstacles can waylay even very promising efforts. Mere partnerships with governments, non-governmental organizations, and local small entrepreneurs may just not be enough to create the trust needed in local communities to change consumer preferences even with disruptive solutions.

One large resources company learned this the hard way. The company developed an innovative nutritional food product at affordable prices for low-income consumers. In an effort to scale the product, the company invested in creating a sales and marketing force of local women who developed recipes for the product and coordinated community cooking sessions to market the product. The final product and locally embedded sales model seemed perfectly suited for consumers with lowincomes—the product served a valuable nutritional need at a lower cost than commonly used alternatives and the customized recipes ensured it was aligned with local tastes.

The initial year-long trial showed that the intended beneficiaries found the product easy-to-use and affordable. The initiative also realized margins that were in line with the company’s core business within its first year of operation. Still, the product ultimately failed. Commercial trials across three low-income markets failed to reach enough new customers at a pace the company’s leadership believed was necessary to justify another round of investment. In other words, despite having a viable product co-created with the community and a nascent network of local partners, the managers failed to achieve the scale at the speed needed to make the initiative a commercially viable business within the context of a large company.

Why are IBI sponsors and managers in large firms having such difficulties in their efforts to achieve scale through deeper localization? In many low-income markets, reputation is one of the biggest indicators of a community’s acceptance of (and trust in) NGOs or entrepreneurs. Inclusive innovators may collaborate with apparently wellregarded NGOs and small entrepreneurs, only to realize later that their reputations do not travel well to new, untested markets. Moreover, large IBI-minded companies may be just some of the many clients these external stakeholders are working with. That can make it hard for them to attract the lion’s share of a stakeholder’s available resources. In addition, stakeholders’ incentive structures differ radically from those of large businesses. For example, in the case of governments, officers in charge may not be rewarded professionally even if they collaborate with IBIs in ways that generate social benefits. But the toughest nut to crack may be internal. Within a large organization, IBI sponsors and managers need to secure backing from the board and top management. For several reasons, lack of real or sustained support from the top can doom an inclusive business initiative. For example, many boards want to see “numbers”—sales and even profits—quickly once they have approved an inclusive business initiative. That’s a high bar for fledgling businesses aimed at low-income populations. Directors and senior leaders are often reluctant to treat IBIs differently from normal ventures in other ways as well. They often fail to appreciate that shaping purchase behaviors and winning trust in low-income communities requires more time than middle-class markets need. Further, when doubts about an IBI’s potential surface, they won’t allocate top talent or necessary financial resources to the venture. Nor will they sanction organizational reforms that would help align the company better with the requirements of external partners. Scale, then, is necessary but highly elusive. In looking at companies across the emerging world, however, we’ve seen that it can be achieved.