SUSTAINABLEBUSINESS FOR THELOWER CLASS

USING THE BOP IMPACT ASSESSMENT FRAMEWORKTO CHANGE THE NATURE OF BUSINESS INDEVELOPING NATIONS

Brooks Dow | Tegan Sevier | Mark Kudrov | Ian Sevier

Right now , there are 4 Bil l ion people in the world that make lessthan $4 per day . This group is collectively cal led the Bottom of thePyramid (BoP ) . These individuals lack many of the basic necessit ies

or quality of l i fe benefits that the rest of the world takes forgranted . The BoP has historical ly been served almost exclusively

through free handouts ; however , more social enterprises in the pasttwo decades have sought to empower the poor through fresh ideasand revolutionary business models . This is where Impact Assessment

comes in . Impact Assessment is a framework that allowsorganizations to measure i ts posit ive impact in serving the poor .Through this framework , your enterprise can maximize i ts social

impact and develop a more sustainable , profitable business model .

The Bottom of the Pyramid (BoP) is a term that

describes largest and poorest socioeconomic group

in the world. It consists of 4 billion individuals living

on less than $4 per day. The term Bottom of the

Pyramid was popularized by C.K. Prahalad in his

book The Fortune at the Bottom of the Pyramid, in

which he describes the world’s poor not as victims

but as potential entrepreneurs who are willing to

better themselves. (Phrahalad 2005 & London

2009) In the past, the poor in developing countries

were seen as helpless and needy. More recently,

organizations and businesses around the world have

realized the economic potential that lies at the

bottom of the pyramid. This massive segment of the

world’s population has the potential to become the

future middle-class and to achieve unprecedented

financial growth. As developed nations become

increasingly saturated, more and more organizations

are looking to the BoP as the next, big untapped

market. Before the BoP can achieve this status,

however, much work remains to provide this

segment with even the most basic of needs.

People in BoP countries, like Africa, are known to

receive handouts from large corporations or

organizations. Both governments and NGOs

continually provide basic necessities to the poor in

emerging countries in an effort to alleviate their

challenges for survival. Unfortunately, this can create

long-term problems, as individuals become reliant

on the handouts that are constantly given to them.

As these communities continue to receive a

relatively constant flow of supplies, it damages

economies and harms the entrepreneurial potential

of the local populace. After all, who would want to

purchase an item like rice from a nearby farmer if

they could simply wait for another free shipment

from an overseas charity or government

organization? Free handouts are not even a reliable

source of provision for the BoP. (Hanes

2007) Without infrastructure and the development

of local talent, many in the BoP simply are not able

to maintain a sustainable income to take care of

themselves or their families. As a result the majority

of the BoP are stuck in this vicious cycle of

dependency. Still, there is hope. As the popular

Chinese proverb goes: “Give a man a fish, and you

feed him for a day. Teach a man to fish, and you

PAGE 1 APRIL 2016BUSINESS COMMUNICATIONS

What is the BOP? The Catch 22

"The BoP consists of 4 billion individuals living on less

than $4 per day."

Using business as an avenue to serve the poor

provides a long-term pathway to sustainable

empowerment. As the world’s poor are able to rise

above the daily struggle of survival they can create

long-term wealth. This wealth can then be used to

benefit their families and local communities.

Meanwhile, social empowerment can contribute

toward greater income equality and communal

health within the BoP. Of course, empowering the

BoP also means empowering the generations that

will follow, which can keep this cycle going.

Empowerment through business reduces reliance

upon charity, which will reduce needed donations

from governments, nonprofits, and philanthropists.

The end goal is to provide the world’s poor with the

opportunity to live a better life and empower them

to create a better world.

The Impact Assessment framework is implemented

through a 3X3 graph. Horizontal factors cover who is

impacted while vertical factors concern how people

are impacted, which includes positive and negative

impacts:

PAGE 2 BUSINESS COMMUNICATIONS

Economic Well-Being

This category evaluates both the positive and

negative consequences that a BoP venture has upon

the target market’s financial standing. Examples can

include more regular income or an increase in

income.

Capability Well-Being

Capability involves the intangible benefits gained by

individuals in terms of greater quality of life.

Examples include improved education, better

health, or job advancement.

Relationship Well-Being

The last factor deals with effects on relationships

through the impact of a firm’s BoP Venture.

Examples here include gender equality or higher

social status.

feed him for a lifetime.” Handouts are temporary, butempowerment through business is a long-termsolution that can truly help the poor.

Making a Better World

BOP Impact AssessmentFramework

One powerful tool that can effectively and sustain-

ably serve the BoP is the BoP Impact Assessment

framework. This framework is a graphical tool that

helps both budding BoP initiatives and experienced

organizations to improve the execution of their value

propositions. This framework allows an enterprise to

identify its primary and secondary impact points

across a variety of factors. Once completed, an

Impact Assessment will aid organizations in

maximizing its current, positive impacts while also

lessening or eliminating negative ones. The core

purpose of this tool is to help enterprises to think

critically about the ways in which they can better

serve the world’s poor.

Horizontal Factors

Vertical Factors

Buyers

People in the BoP can be customers, partners, or

both. This factor deals with how a BoP enterprise

will impact the purchasers in a particular market

and/or geographic region.

Sellers

These are the distributors, middlemen, companies,

and other entities who engage with a BoP market.

Sellers include those who are affected through the

creation and distribution of products and services.

Community

This factor involves everyone within the direct and

indirect reach of an organization’s social impact.

From small local villages to entire regions, BoP

projects can vary in their scope for how they affect

the communities they serve.

APRIL 2016

By completing the framework, organizations can

better understand their value proposition for the

BoP. With this knowledge, the aforementioned

factors can then be assessed in accordance to two

subcategories: Magnitude and Likelihood.

Magnitude refers to the scope of a BoP enterprise’s

value proposition. If a project will only benefit a local

village then it would be Low, but if it could influence

an entire geographic region, such as a province, then

it would be High. Likelihood concerns whether or

not the desired impact is realistically achievable.

Factors such as culture, government regulations, and

financial constraints would need to be considered at

this stage of the process. Once all the frameworks

are completed, organizations can immediately begin

implementing new ideas or use the results from the

assessment to conduct market research before

moving forward.

The BoP Impact Assessment framework is an

excellent way for organizations to systematically

evaluate their business model. New enterprises can

benefit from a well-planned head start before going

into the field. Meanwhile, more established overseas

organizations can improve their ongoing operations.

Either way, this model can be used to better impact

the BoP.

PAGE 3 BUSINESS COMMUNICATIONS

London, T. (2009, May). Making Better Investments at

the Base of the Pyramid. Harvard Business Review.

Prahalad, C. K. (2005). The Fortune at the Bottom of

the Pyramid. Upper Saddle City: Wharton School

Publisher,

Hanes, Stephanie. 2007. “A ‘Zero Handout’ Approach

in Africa.” Christian Science Monitor. September 05. 13-

16. Academic Search Complete. EBSCOhost (accessed

April 16, 2016).

Why Eyeglasses?. (2013). In Vision Spring. Retrieved

April 17, 2016.

"The core purpose of this toolis to help enterprises to thinkcritically about the ways inwhich they can better servethe world’s poor."

Success Story | Vision SpringVision Spring is one example of an organization that

has successfully utilized the BoP Impact

Assessment framework. In 2007, the company

performed this assessment to better quantify their

APRIL 2016

impact in the BoP. Along with the William Davidson

Institute, Vision Spring discovered that providing

affordable reading glasses to the poor has improved

their productivity by 35%. Meanwhile, those who

receive reading glasses had the potential to increase

their average monthly income by 20%. The BoP

Impact Assessment helped Vision Spring in two

primary areas: the firm gained a more detailed

understanding of their work in the BoP and were

also in a better position to effectively communicate

their value proposition to secure more funding.

(Vision Spring 2013)

The Next StepPartner with us at the

William Davidson Institute.

We have the knowledge and

experience to help you

empower the poor and bring

your vision to life!

References

PAGE 4

The William Davidson Institute, founded in 1992 as part of the Universityof Michigan, focuses on providing private‐sector solutions in emergingmarkets. Their structure integrates research, field‐based collaborations,education, training, publishing, and University of Michigan student

opportunities to create long‐term value for academic institutions, partnerorganizations, and donor agencies active in emerging markets. WDI’s

mission is to create lasting, sustainable solutions to address the challengesand opportunities in emerging markets.

Expanding Leadership 2

015Law School

 Fascade 2009