When you look at a satellite map of the world at night, you are struck by the vast contrast between the “developed world” with its brightly light skyscrapers and “the rest”, the developing world that largely remains in darkness. There, people live without access to energy to light up their homes, warm themselves in winter or cook for their families. The astute businessman would recognise that such a disparity must represent an opportunity, a vast undeserved market with limitless growth potential.
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Increasingly, forward thinking businessmen and multinational companies are doing just that and beginning to notice that perhaps as the late business thinker C.K. Prahalad predicted there may be a “fortune to be made at the Bottom of the Pyramid” (BoP), the term that has come to refer to the economic segment of the world’s poorest people. These people - who live on less than $2.5 a day - comprise nearly half the world’s 7.1 billion people, a market estimated at having a purchasing power parity of over $5 trillion.
But even once a potentially huge market of consumers has been identified, it doesn't necessarily flow that businesses schooled in developed world markets can simply replicate their products and strategies in a very different environment. There's no “business as usual” in this field: Indeed, unmet needs can’t automatically be equated with ‘demand’ in the way the developed world sees it. Serving these markets means that innovative business models as well as technologies are often a pre-requisite for success.
How do you manage distribution channels that are based on thousands of micro-entrepreneurs to reach “last mile” villages in rural areas? How do you convince communities that have been drinking from the same well for generations that if they were to buy water purifiers their children would no longer suffer from diarrhoea? How do you partner with NGOs or use micro-financing to increase the affordability of your products?
Last month’s BoP Summit at Michigan University brought together 200 business leaders, academics, impact investors, social entrepreneurs and international development practitioners to discuss what has worked and what hasn't when building scalable and sustainable developing world businesses and how to use this experience for the next decade.
Now it's Tel Aviv's turn to turn its technological talents to the developing world. 150 developers, business and international development professionals will be coming together today and tomorrow to 'Develop apps for the developing world' at the Dev4Dev Cleanweb Hackathon.
The hackathon, organised by the IsraelDev Network (a grassroots movement of young entrepreneurs dedicated to the developing world, supported by the Pears Program for Innovation and International Development) and Terralab Ventures. Terralab Ventures aims to expose Israel’s business and technological community to the opportunities both to make profit and create social impact in the developing world. The challenge for the teams of Israeli hackers will be to find ways to produce low margin, high volume technologies – the exact opposite of the aims of most Israeli innovations.
On the developer side, this 'frugal innovation' means learning to innovate without all the gizmos and gadgets that the latest iPhone 5 provides. The hackathon will kick-off with a workshop on innovation for feature phones, the basic version of smartphones, which comprise around 70 percent of mobile phones sold worldwide and are the primary source of connectivity for the majority of the developing world. On the business side teams will have to think of business models that make their products accessible and desirable to people with low individual/personal spending power.
More than 25 specific challenges for the Hackathon have been submitted from Africa, Asia And Latin America, from applications that provide advice on basic nutrition, disease or family planning (submitted by fieldworkers in Tanzania and Malawi) to a simple translation device for fairtrade growers in India.
The teams working on these challenges are made up of experienced “techies”, business development and seasoned international development professionals. Already we have seen a merger between the “Start-Up Farm” team, looking to create out-of-the-box farm kits for small-holder farmers that will be paid for in instalments through cell phones, with the “Aquaponics App team”, a team of developers working on an app to teach farmers how to use waste produced by fish to grow agricultural produce. Another team will be flying in all the way from Ghana and will be working on a patient drug and monitoring application while also learning more about the Israeli entrepreneurial eco-system during their visit.
While these initiatives may be new to Israelis, innovating for Bottom of the Pyramid markets is something that is growing steadily elsewhere in the western world, where companies such as General Electric, Procter and Gamble, Google and IBM recognize that demographics and growth rates mean they have to grapple with these markets' needs. Leading aid agencies have also began to recognise that market- based solutions offer the best opportunity for achieving sustainable impact and scale.
As the overwhelming positive response to this hackathon has demonstrated, the BoP buzz is starting to spread in Israel.
Israel's technology sector and recognised expertise in the fields of water, renewable energy, health and agricultural technologies is well suited for working at the Base of the Pyramid. These new markets could offer Israeli start-ups and companies immense opportunities if they can adapt to the appropriate technologies for these markets and if they can develop the new business models necessary to successfully serve poor customers in these countries.
Slowly we are working to build the infrastructure in Israel that supports and promotes Israeli businesses working at the BoP in developing countries. Hopefully, when the time comes to host the next decade’s Global BoP Summit, successful Israeli entrepreneurs will proudly occupy a healthy share of the seats on the stage.
Caylee Talpert works at the Pears Innovation and International Development Program at Tel Aviv University. She recently returned from the BoP Summit in Michigan and is one of the co-organisers for the Dev4DevCleanweb Hackathon which is being held at the Google Tel Aviv Campus.
The Pears Innovation for Development Challenge based at the Hartog School of Government and Policy at Tel Aviv University will be launched in March 2014 to provide mentoring and support to ventures focussing on the developing world.