USING THE BOP IMPACT ASSESSMENT FRAMEWORK TO CHANGE THE NATURE OF BUSINESS IN DEVELOPING NATIONS Brooks Dow | Tegan Sevier | Mark Kudrov | Ian Sevier
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
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