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"Poor
are not the begging bowl of our economic system. They are an opportunity.
800 million poor of India represent one of the largest untapped
consumer markets on this planet. Their combined economic power
is greater than the economy of some sovereign nations. They are
an immense source of innovation offering the biggest business
opportunity of our times". This was stated by Dr Madhav Mehra
in his keynote address at the First National Conference on Corporate
Social Responsibility held in New Delhi on 9th November 2004.
He added, "Widening socio economic disparities are indicator
of the lethargy of business innovation. The business should have
a vested interest in thinking of revolutionary ways to remove
the widening gap. The greatest business challenge of our times
is to include the poor in the market economy and reassure them
that globalization will work for them. Corporate leaders should
aggressively publicize the bottom line benefits of tapping the
poor markets so that more and more corporates adopt CSR as a business
goal and not shy away assuming CSR is about giving handouts.
Oddly enough both poverty and global warming, the two most critical
challenges of our times, have a common cure. It is in innovating
products and services for the four billion poor making sure they
are also eco-friendly. The strategy is summed up in POISED (Poor
Oriented Innovation for Sustainable and Eco-friendly Development)
and can be achieved through eleven simple steps termed as PROACTIVATE.:
pricing non financial capital, radically increasing resource productivity,
public private partnerships for innovating products for the poor,
abolishing all subsidies, conserving natural resources, turning
all products to services, introducing designs robust enough to
stand heat, dust, humidity and mishandling but simple in skill
levels, diversity in work force, mobilizing and activating women
groups, transparency in governance and education for entrepreneurial
skills.
Global warming has become a reality and has started
affecting all of us. We need to change our growth model. Conservationism,
not consumerism should drive economic growth. A saving grace of
India's poverty is that India's environmental footprint is one-twelfth
of US. Against 80 tonnes of natural material used by an average
American, India's per capita material usage is under 7 tonnes
(per person). The rabid rate at which consumerism is growing in
India can eventually lead to ecological catastrophe. There is
a complete lethargy in eco-innovation. We need to curb the proliferation
of products and innovate products for multiple use. A cell phone
is a classic example. It is not only a phone but also a camera,
a watch, a radio & a TV. All this at a fraction of the cost
and size.
Innovations are no longer following the traditional
'S' curve. The cycle time between the launch, its diffusion and
maturity is shrinking turning 'S' curves into 'I' curves. Our
planet is in danger of being cluttered up with half-baked products
that leave customers half-longing and half-spoilt. There is an
urgent need to move from products to services, from tangibles
to intangibles and gear the economy upwards from acquisition mode
to experiential mode, if we have to avoid the ecological disaster.
Poor may be capital poor but they are asset rich. It
is the lack of transparency in contractual transactions that prevents
them from unlocking their assets. Hermando de Soto, Hermando de
Soto the noted author of "The Mystery of Capital" estimated
that the trapped resources of Mexico are $300 billion. India is
bound to be higher. Besides, India's GDP based on purchasing power
parity increases from half a trillion dollars to three trillion
dollars, way ahead of UK. Poverty, therefore, is at least partially,
a self-imposed problem in most of the world. FDI or philanthropy
are but a mere fraction of the potential for capital-trapped in
the country because of poor and opaque governance system. The
primary face of private sector in most developing countries is
the extra legal black market controlled by mafia, moneylenders,
slum lords and strongmen.
The problem cannot be solved by government alone. Solutions to
involve poor in the market economy have to be co-created through
active partnership between government, NGOs and the business.
Indeed business has to take a deep interest. It is the business
which will be the biggest beneficiary of tapping the BOP- Bottom
of the Pyramid, a term used by Prof. C K Prahlad for the poor.
There are galore examples of how ITC, HLL, ICICI Bank and Aravind
Eye Hospital have improved their profitability by innovating processes
to access this market. Studies have shown that return on capital
employed on products innovated for poor markets such as Nirma
was 121%. In the case of Aravind Eye Hospital where only 40% are
paying patients and the average charge for cataract surgery is
$50 including stay, the return produced constantly has been of
the order of 120-130%. In the case of e-Choupal, ITC has been
able to get the payback on their PC Kiosks within one full season.
Poor do not need handouts. They need education and infrastructure.
Developing rural markets by encouraging transparency in governance
structures will unlock the hidden assets of the rural poor and
accelerate their integration in the market economy. Business can
fundamentally alter the rural landscape and stimulate commerce
and development by bridging infrastructure gaps in rural areas,
linking the informal economy to established markets and providing
distribution channels and transaction platforms.
The government instead of spending Rs. 30,000 crore on poverty
alleviation and proposing a further outlay of Rs. 30,000 crore
on Employment Generation Scheme for 100 days per household will
do better to divert this expenditure on health, education, roads,
bridges & electricity and bridge the infrastructure gaps to
link the informal poor economy with established markets. Guaranteeing
jobs for 100 days is a mirage and a misutilisation of scarce resources
but including the poor in market economy by upgrading infrastructure
is a sustainable path to real prosperity. We are entering an era
where there will be a lot of work but little employment. Our effort
henceforth, should be to equip young people to become entrepreneurs.
"Don't give them fish. Teach them how to fish instead".
Test of the progress is not whether we add more to the abundance
of those who already have too much, it is whether we provide enough
to those who have little. As Mahatma Gandhi said "the test
of orderliness in a country is not the number of millionaires
it owns, but the absence of starvation among its masses".
People can live with poverty but cannot stand injustice. Disparity
drives people to desperation. These disparities are a time bomb
waiting to explode and pose the greatest threat to the security
of business. This is specially true in India where 54% of the
population is under 25. Most of the unemployed are under 30. The
business should have a vested interest in thinking of revolutionary
ways to remove the widening gap. It was John F. Kennedy who said
in his inaugural address back in 1961: "If we do not make
a peaceful revolution possible we will only make a violent revolution
inevitable".
On 8th December 1927, Mahatma Gandhi wrote in Young India "A
time is coming when those who are in the mad rush today of multiplying
their wants vainly thinking that they add to the real substance,
real knowledge of the world, will retrace their steps and say:
'What have we done?'".
Since the writing of Mahatma, the technology has opened unlimited
opportunities for the business. The role of business today is
far more pervasive than ever before. Business today is running
governments. Out of 100 biggest economies in the world 51 are
transnational corporations. The largest 100 multinationals with
$2000 billion in foreign assets outstrip the combined GDP of China,
India, South Korea, Malaysia, Singapore and Philippines. Never
before in human history the business had so much power to make
a difference to the lives of poor. All it needs is commitment.
The understanding of the way the new economy works
itself is tantalizing and has an immense potential to transform
society to make it more humane. In the new economy knowledge is
the measure of wealth. Knowledge when shared benefits both sides.
The degree of benefit is determined by the diversity between the
parties. Greater the diversity more is the gain. This realisation
can have a monumental impact on our geopolitical landscape. Societies
divided today between classes, races, religions and regions can
unite and reap the huge benefits from working together. This will
signal the death of clannish and caste politics which has brought
havoc specially in India. As people realise that the value comes
not from homogeneity but dissimilarity, the hatred based on religion
and race will disappear. Hence there is a strong case for the
business to take affirmative action to increase diversity of workforce.
Our problem for far too long has been of posturing
instead of practicing. We are being increasingly trained to become
performers, adept in acting the part. Time has come to get real
with the problems of poor and develop a strategy for integrating
them. We should no longer use CSR simply as a PR tool. CSR will
be meaningless unless it becomes part of the core business. The
urgency is not because social good is a competitive differentiator
and part of innate human creed but that the alternative is anarchy
where nothing but violence and terror will succeed."
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