Summarize and Analyze

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Please find an assigned article for attachment,summarize and analyze, of the assigned article.

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Dept Kit Tool Name Dept Name Making Better Investments at the Base of the Pyramid BY TED BYLINE LONDON Making Better Investments at the Base of the Pyramid RAMA WAS A SEAMSTRESS by trade, not an optician. Before she connected with VisionSpring, a venture providing vision care to the poor, she sold hand-sewn clothes and blankets from her home and used her earnings to help support her husband (a farm worker who was often between jobs) and their two children. She took home about $44 a month – not nearly enough to make ends meet. Despite Rama’s outgoing personality and strong work ethic, she was unable to drum up increased demand for her handiwork. Then, several years ago, she was trained to be one of VisionSpring’s “vision entre- 106 Harvard Business Review 1116 May09 London layout.indd 106 | May 2009 | preneurs.” Now she is selling eyeglasses and offering vision screenings in her rural Indian community, consistently earning around $100 a month. Rama’s economic turnaround is featured on the website of VisionSpring, which, like a growing number of ventures doing business with the base of the economic pyramid (BoP), shares success stories to demonstrate its results to funders and other stakeholders. These ventures often use anecdotes to highlight how they’re helping families build houses in Latin America, providing health-related products to children in Caroline Hwang Managers of business ventures that work with the world’s poor need more than financials and feel-good stories to measure success. They need to know exactly who’s benefiting and how. hbr.org 4/3/09 11:43:31 AM Africa, or linking farmers in rural Asia to new markets. Feel-good stories aside, however, it’s been nearly impossible to gauge the efficacy of these ventures. Businesses, nonprofits, and other organizations that deliver products to and purchase goods from the base of the pyramid usually don’t have robust-enough systems to accurately assess how well they’re reaching the people they set out to serve – or they simply look at the wrong measures. They judge their success at alleviating poverty on the basis of tasks completed and milestones achieved – amount of money invested, quantity of products distributed, number of interventions initiated, and so on – rather than on how well their activities translate into changes on the ground. While such metrics are potentially useful indicators, they fail to capture the complete picture of a venture’s impact. Managers of BoP ventures need to take a more holistic, learning-oriented approach to assessing performance – one that factors in dimensions beyond economic well-being. Consider Rama’s situation: Her experience with VisionSpring not only increased her income but also prompted changes within her family. Her husband, who was at first reluctant to support his wife’s work outside the home, decided to join the program once he saw how successful and self-confident Rama had become. Both say their marriage has improved as a result of their working together as a sales team. After several years of field research, I’ve developed a framework to help BoP ventures assess the impact their initiatives are having locally, in the short term and over time. It measures how a venture affects the well-being of its critical constituencies in three important dimensions: their economic situation, their capabilities, and their relationships. Whereas traditional monitoring-andevaluation metrics generally serve to track preestablished milestones and justify past results, this framework can be used as a forward-looking tool. It helps managers identify and enhance the posi- ■ Businesses serving the base of the pyramid (BoP) may have basic data on financial outcomes and milestones achieved and some success stories to share, but they still lack a reliable method for assessing and enhancing their poverty alleviation performance. ■ This framework gives managers a detailed look at the impact a BoP venture has on the economics, capabilities, and relationships of three critical groups: local buyers, local sellers, and local communities. ■ The tool can help managers identify what’s working and what’s not – and can give them a better understanding of how to increase the value the venture is creating for itself, for funding sources, and for the people it has set out to serve. tive effects of a venture’s products and services, understand and mitigate the negative effects, and more clearly articulate current performance and prospects for improvement. With this information in hand, they can create more successful, sustainable business models serving the base of the pyramid. Perhaps most important, the framework can amplify for a venture’s management team the voices of those living in poverty. You Are What You Measure In some ways, the anecdotes about thriving entrepreneurs and other positive outcomes that many ventures tell are akin to the tall tales told by corporations that manipulated their economic returns to present better financial results. That is, by reporting mostly upbeat results, the venture managers fail to present the full range of promises and perils that their activities generate. On the upside, for example, a venture might help local entrepreneurs not only add to their income but also develop new skills and relationships. On the downside, it might promote ineffective or so- hbr.org 1116 May09 London layout.indd 107 cially inappropriate products, or prompt people to overuse or mistreat community assets, such as arable land or fishing waters. The bottom line: The supporting development agencies, potential funders, and other critical stakeholders of BoP ventures – and even their own managers – usually aren’t getting the whole story. The Base of the Pyramid Impact Assessment Framework keeps the whole story in mind. Over the past three years, I’ve implemented and refined this framework with partners in corporate, nonprofit, and development sectors in Africa, Asia, and Latin America. It provides a comprehensive process for collecting and analyzing information about the “who” as well as the “how.” (See the exhibit “Getting the Complete Picture.”) Who is being affected? Any BoP venture potentially affects three groups of local stakeholders: sellers, buyers, and the communities in which it operates. Some ventures use local distributors (sellers) to offer products or services to local consumers (buyers). An example is the Mexican company CEMEX’s Patrimonio Hoy initiative, which provides home-building materials to low-income families in Latin America. Other ventures, such as ITC’s e-Choupal agricultural initiative in India, rely on local agents (buyers) to act as intermediaries between BoP producers (sellers) and the venture. How are they being affected? It obviously makes sense to focus on an individual or a community’s economic wellbeing (gains or losses in income, assets and liabilities, and so on) when evaluating the effects of a venture. Consumers may get cheaper prices and greater access to needed products and services; producers may enjoy expanded markets and higher productivity; and communities may see a rise in the number of jobs available and companies interested in serving their needs. On the flip side, however, an entrepreneur who decides to invest his own hard-earned capital in a new business may open up himself and his family to unanticipated shocks, such IDEA IN BRIEF | May 2009 | Harvard Business Review 107 4/3/09 11:43:39 AM Tool Kit Making Better Investments at the Base of the Pyramid Getting the Complete Picture The Base of the Pyramid Impact Assessment Framework offers managers of ventures serving the poor a systematic process for measuring – and enhancing – the effects their activities are having on the ground. It involves examining the positive and negative impact those activities have on the well-being of three constituencies: sellers (local distributors or producers), buyers (local consumers or agents), and communities. As a starting point, managers can consider the potential changes listed below, though each organization may have its own unique effects. Sellers and Buyers Community POTENTIAL CHANGES IN ECONOMICS Income and income stability Incomes of existing businesses as a result of competition Debt levels; access to credit Productivity (buyers) Number/type of new businesses serving the community Product pricing, availability, and choice (buyers) Jobs and economic opportunities Infrastructure Prices received for products and services (sellers) Opportunity costs of not pursuing other livelihoods Vulnerability to economic or household shocks POTENTIAL CHANGES IN CAPABILITIES Skills and knowledge through training and education Access to free information and educational opportunities Health and morbidity as a result of involvement with venture or use of product or service Perceptions about and awareness of opportunities (such as health care and education) Self-esteem, self-efficacy, and contentment Sense of dignity and respect Collective aspirations and goals Aspirations and goals POTENTIAL CHANGES IN RELATIONSHIPS Access to individuals and networks Relationship with government and other institutions Dependence on intermediaries and partner organizations Gender equity, or views about castes, races, or religions Reputation, levels of trust, and respect Social cohesion Household roles and relationships Values regarding traditional customs, consumption, and consumerism Community roles and relationships Social status 108 Harvard Business Review 1116 May09 London layout.indd 108 Relationship with natural environment (ecosystems, land and water quality) | May 2009 | as those generated by health- or croprelated crises. Even when local entrepreneurs do succeed, their actions can still negatively affect the community’s economic well-being – for instance, when indigenous businesses suffer because of increased competition. Ventures focused on the base of the pyramid also affect local capabilities – the skills, health, and confidence individuals and communities need to help themselves and influence the world around them. These capabilities include access to intellectual resources, such as training and education; physical resources, such as clean water and quality medical care; and psychological resources, such as opportunities to influence self-esteem, contentment, and aspirations. BoP-focused initiatives also shape the relationships of their stakeholders. Indeed, social exclusion and geographic isolation are often components of poverty. BoP ventures can help individuals and communities develop new partnerships and access new networks. They can give individuals and communities a greater voice, which can increase responsiveness and service from the public sector. But they can also encourage greater use of natural resources, damaging the relationship the community has with its local ecosystems. Additionally, these ventures can prompt people to reconsider their views about gender, ethnicity, and culture. If local women play an important role in the venture, for instance, their status in the family or community may rise. Conversely, ventures serving the base of the pyramid can sometimes significantly disrupt traditional family norms and community perceptions about social structure – and, particularly in the case of gender issues, breed not only discontent but even verbal and physical abuse. Taking It All In Implementing the impact assessment tool is a two-stage process. Established ventures, as well as those still in the design phase, can initially use it to conduct a strategic analysis of how their activities hbr.org 4/3/09 11:43:45 AM can (or will) directly alleviate poverty. Then the venture can use that analysis to develop a set of performance indicators to track the results of initiatives over time, thereby establishing a solid process for continually evaluating what kinds of business models and activities work best and under which conditions. The strategic analysis: understanding the impact. Conducting a strategic analysis does not involve an inordinate amount of data crunching. It does require, however, that the venture’s assessment team rigorously and collaboratively fill in the cells of the framework. This team, comprising central members of the venture plus any important partners, must list all the expected effects of the venture – both positive and negative – on local stakeholders. How will buyers’ personal capabilities be affected – will they be healthier and more self-confident? Will sellers’ incomes become more stable? How will critical relationships in the community change as a result of the venture’s activities? To avoid double counting, teams should log only direct effects in the framework – noting an increase in, say, buyers’ incomes but not how the additional income will or could be spent to improve other aspects of well-being. The team’s ability to fill in all the cells is, of course, contingent upon its ability to listen to and respect the opinions of a variety of stakeholders – field staff, development professionals, academics, and local community members. Those stakeholders should include successful and unsuccessful sellers, happy and disgruntled buyers, aggressive participants in the program and quiet nonparticipants, and pleased and dissatisfied representatives of the community. The team should use a variety of methods to collect data – such as semistructured surveys, focus groups, in-depth discussions, and group forums. Once the assessment team has a detailed understanding of all the venture’s effects, it needs to evaluate each one along two dimensions: its expected magnitude, and the relative likelihood that How will buyers be affected – will they be healthier? Will sellers’ incomes become more stable? initial inventory of 40 pairs of reading glasses of different magnifications and styles, eye-screening materials, marketing resources, and accounting and sales forms. VisionSpring also offers the entrepreneurs several days of training in how to conduct vision screenings, determine the proper power of the glasses needed, when the likelihood that they will happen is relatively small. Of course, the decision about which critical effects to pay attention to first will depend on the context – which is why it’s imperative to consult with the people who face poverty on a daily basis and use their feedback to help set your priorities. hbr.org 1116 May09 London layout.indd 109 The India team of New York–based VisionSpring used the framework to get a better view of its impact. As alluded to earlier, the venture’s microfranchising model helps address the widespread problem of presbyopia, a medical condition most people face as they age, which results in blurry up-close vision. The company recruits “vision entrepreneurs” and gives each a kit – dubbed a “business in a bag” – that contains an it will occur. High-magnitude and highlikelihood outcomes should clearly be considered the most important factors in measuring the venture’s performance, while low-magnitude and low-likelihood outcomes deserve the least amount of management’s attention. The other two categories are less clear-cut, but in general it probably makes sense for venture managers to pay close attention to potentially high-magnitude outcomes even | May 2009 | Harvard Business Review 109 4/3/09 11:43:52 AM Tool Kit Making Better Investments at the Base of the Pyramid One Microfranchisor Takes Inventory VisionSpring, a venture that employs a microfranchising model to provide eyeglasses and vision screening to the base of the pyramid, used the framework to get a fuller and more accurate picture of the effects it was having locally in India. Here’s its assessment of its impact on the well-being of its sellers, buyers, and communities. (Effects are categorized as major or minor on the basis of their expected magnitude and likelihood.) Sellers Buyers (vision entrepreneurs) (local consumers) Communities POTENTIAL CHANGES IN ECONOMICS MAJOR EFFECTS: MAJOR EFFECTS: MINOR EFFECTS: Increased income Income instability (lack of guaranteed income) Opportunity costs of not pursuing alternative livelihoods Consumer surplus (lower prices and greater convenience) Increased productivity Increased income MINOR EFFECTS: Savings used or debt incurred (the cost of the glasses) Increased interest from other businesses in serving the community Drop in existing businesses’ income because of increased competition Fewer apprentices enter certain trades because established artisans regain productivity MINOR EFFECTS: Increased synergy with existing businesses Drop in assets (due to investment in business) POTENTIAL CHANGES IN CAPABILITIES MAJOR EFFECTS: MAJOR EFFECTS: MINOR EFFECTS: Increased communication skills Better management skills If successful, increased self-efficacy and contentment If unsuccessful, decreased self-efficacy and contentment Improved vision health Increased contentment Heightened awareness of eye care Greater sense of dignity and respect Higher aspirations of women in the community MINOR EFFECTS: Treatment for other eye problems through referrals Failure to receive proper diagnosis (eye problems not solved) MINOR EFFECTS: Increased eye-care skills POTENTIAL CHANGES IN RELATIONSHIPS MAJOR EFFECTS: MINOR EFFECTS: MAJOR EFFECTS: Improved role in family Increased access to networks Stress on family relationships Better relationships with community and family (less dependent on others) Improved professional reputation Greater gender equity MINOR EFFECTS: Improved relationships within community Stress on relationships within community 110 Harvard Business Review 1116 May09 London layout.indd 110 | May 2009 | MINOR EFFECTS: Improved caste relations Conflict over gender equity issues make referrals to hospitals if additional eye care is necessary, and manage their inventory. Each entrepreneur is then assigned a cluster of local communities within which to market glasses. The financial information collected from the entrepreneurs – how many pairs of glasses they sold, the earnings they reported, and so on – showed VisionSpring’s management team that the venture was taking hold in the community. But to expand operations and attract the capital necessary to solve a problem that affects hundreds of millions of individuals globally, VisionSpring’s senior leaders knew they would need to develop a more rigorous approach to assessing performance as well as a more robust feedback loop that would help them make better-informed decisions. So, to get beyond anecdotal evidence, they filled in the cells of the framework. (See the exhibit “One Microfranchisor Takes Inventory.”) The group’s strategic analysis provided a much clearer articulation of the value VisionSpring created, in particular for buyers. In one district of Andhra Pradesh, for instance, locally produced weavings and other handicrafts were in high demand. Many of the artisans, though, were aging and could no longer see well enough to do the intricate work required. As a result, their incomes declined. Previously, this had been the accepted nature of this occupation; the older you were, the less productive you became. By providing glasses that improved their near vision, however, VisionSpring allowed these aging artisans to return to a higher level of productivity – and regain their sense of dignity and self-respect. So whereas VisionSpring tended to promote to stakeholders the economic and status gains that its female entrepreneurs were making, the strategic analysis reminded the management team of all the ways that buyers and community members were affected by the venture. The analysis also helped uncover Vis ...
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