Designing business models for the poor | Jason Fairbourne | TEDxSaltLakeCity

would be audacious for a moment I'm gonna pose a question how can we use design principles to change the world I need to think about that for a little bit and I guess the second thing is is what is design principles what is it to be a design thinker I've never thought of myself as a designer or as a design think in fact I didn't even know what that was until recently as I started you know researching a little bit and reading up that I thought you know what in a sense I am a designer just a different kind of designer and I like some of the definitions I was looking up and you know I was looking at design thinking you know one of the definitions was visualizing or creating something that is outside of the ordinary is it something beyond our grasp it's not inductive or deductive reasoning is something that that is greater than something that already exists it's outside of the box and and so we do try to apply some of those things in my work and I also saw Design Thinking and good design thinking as solving problems in a certain sense just as good business solves problems and there are number of ways we can apply design thinking and design work to solving various problems and the problem that I spend most of my time on trying to solve and work on is the problem of global poverty and give you a little taste of that the majority of the world 2/3 of the world live in homes like this one right here two-thirds of the world so we're really in this room we're in the vast minority of the world you know the majority that people live like this they live on about roughly $4 a day they live in homes like this one above eking out a living you know day by day 30,000 children under the age of five die each day in this type of environment in developing world most people don't have access to clean water healthcare they I pay what we call the poverty penalty the which is in essence people that the base the pyramid at this poor the base of the economic pyramid the poorest of the poor they pay more for products and services than we do it costs more to buy a t-shirt in this environment than it does a Walmart down the street so they suffer from a number of these things and oftentimes they turn to the market as finding ways to survive you know they try to eke out a living by selling something and maybe trying to be innovative and creative with a local product to create something that has value for somebody else that they can potentially sell but oftentimes these are individuals who haven't grown up in a market economy maybe they know nothing about business they have very little education they don't know how to operate in this space and so design thinkers have come along and you know worked in this space I'd say more regularly of late and mostly on designing products for the poor you know like for here you know designing an innovative technology with through solar power that can recharge you know cellphones now power a radio like in this case here light bulbs or perhaps it's designing low-cost access to water like with digging this well or it's designing low-cost easy to use tools or products to move that water once it comes out of the well through this water wheel but the kind of design thinking I think if I was to even consider myself a designer at all it would be outside of all this type of design that we're talking about here today well why focus on is designing business models for these markets and how do we design models that can grow and scale and take these types of products to the four billion people that live at the base of the pyramid and Design Thinking is very important because if we don't think as designers and we leave Design Thinking up to the consumer we get the African blue tooth and you know although this canyon you know he it's working for him it may not be the most effective bluetooth out there and I think we can do it more effectively and we can also do it less painfully and so I I spend most of my time trying to figure that out and not only designing business models that work in these environments but also designing for-profit business models because I think being for-profit is also a very large key and I know this that may sound funny or different because traditionally we've always thought if you want to change the world if you want to do something great you joined a non-profit you go do humanitarian work and that's how you change the world well that's changing and I'd offer up the idea today that that is no longer the way to change the world and if you want to change the world you get involved with for-profit business in these countries and a recent report came out from coming it out from monitoring institution shows this graph here and it shows this variation between philanthropic giving and globally managed assets going into foreign direct investment or invested otherwise in the market and if we look at the the philanthropic giving it's a fraction it's point three trillion right and that includes higher education that includes humane society that includes money that's going to cancer research medical areas a very small proportion of that actually goes internationally to economic development that actually helped those four billion which is a large population four billion poor that really need that assistance so what I suggest is that we try to figure out ways that we can access larger amounts of capital that we can use to scale and really impact that that segregation or that a segment of the population and it's very simple actually the more profit you make the more incentive you have to scale which has larger impact and this is where we we spend most of our time is working in this space now it's taken me a while I didn't just wake up you're going to think you know what we need to switch from humanitarianism to for profit business design it's been a process that's been running through my mind for the last 13 years and I want to share with you a few of the lessons we've learned along the way that helped it get to this point and it all began one day and I'm gonna confess something here a little bit it took me 10 years to get an undergraduate degree so not the brightest person that will be up here today by any stretch of the imagination but I found myself in those Lost years that that 10-year period in the Himalayas and I was sitting up you know this is Mount Everest this is me at 20,000 feet and me being a poor ski bum at the time you know I couldn't afford to climb the big peak so I had to only go to 20,000 the the permits were too expensive go any higher but as I found myself here in the Himalayas and I was in Katmandu this was my first time really seeing poverty and seeing the way that the rest of the world lived and that my life and my bubble in my world wasn't reality that the reality was nearly everybody else on this planet and I ended up meeting a number of homeless children in Kathmandu and they would sit on my lap and they would write in a journal they would I would teach them some basic English or mathematics or and they just loved to learn I mean they they ate it up and the passion for learning was astonishing because I'd never seen it before you know growing up in public school systems here it seems like every other apathy towards education nobody cared to learn it and I didn't care to learn I was on this 10-year program and and I started thinking these these kids that they're not poor because they're lazy or because they're not intelligent it's because of a lack of opportunity and it's learning you know what you're not part of a family and they're homeless they weren't allowed in the public school systems and they were part of this larger kind of group of boys and the larger boys would come over and would beat him and would take food away from him if I was to buy him some rice or some milk or let him have some pans to write on a piece of paper and as soon as they left my bubble they were beginning to get picked on and they would lose their items and and I had a little bit epiphany here and I saw a glimpse of these young boys futures these eight-year-old innocent boys I thought they're gonna turn out just like these older voice and they're in and it's gonna destroy who they are and their innocence and their desire and passion for learning and so it was at that moment that I made a decision to do something different and that you know to go and finish my education and for one of them but how can we help these people and so the first lesson I learned though is that often times people are a product of their environment and poverty is a result of a lack of opportunity oftentimes and not a result of laziness or unintelligence or whatever we may think poverty is the result of and so that's the first lesson the second lesson came from after this I moved to Kenya actually for six months I was recently married my wife and I are it was essentially a honeymoon we moved to a mud hut just like the one on that first picture and lived there for six months and the funny thing about this story is is we were we wanted to learn about working in this environment how can we change the world they went to work for an NGO and a humanitarian group and the project they put us on was building these lorena stoves and getting this lorena stove project functioning in East Africa and only took about a month I realized that people don't want to learn on stove in East Africa Allen ray no stove is that the stove that takes smoke out of the household and you know you can burn fires more efficiently but it was one took a little bit of observation to realize that people stored their maize above the fires that they cooked on and acted as a natural pesticide and it preserved their maize to the dry season but yet we have this NGO wanting us to go out there and implement these in everybody's house and we thought okay now we have to have expensive pesticides they're taking chemicals in like that's not a solution and so what we did is I restructured our whole program that our whole internship in this village in East Africans that we're gonna go listen to what people want and we design needs assessments and went around house with a household interviewing people after people wives husbands children and understanding what life was like doing these little mini ethnographies understand what life was like in that environment and listening to what people really wanted this also came from this kind of research as they were going along we found that oftentimes good intentions had unintended consequences so he met some people in rural Africa and I was in areas where they'd never even seen white people before I'm very remote very remote and and a family sat down and told me once he said why aren't your children in school you have a cow you have a you're one of the wealthiest people in this environment that we've been meeting your children are one of the few that almost it's like well we've heard that there are white people who come over and sponsor our our children and we've been waiting for that and we were and it was debilitating and it was hindering these people from developing and helping ourselves and we started recognizing these various patterns throughout that it was debilitating and causing dependency oftentimes through our good intentions and so there are these unintended consequences to our actions we also found that a lot of subsistence farmers in these areas we're now being forced to operate in the market where they didn't know how to do that historically and generationally they have been farmers but now with market globalization and family size is growing and you can't only divide the farm so far until it can't sustain you anymore and turning to market first for survival and microfinance and stuff had stepped in and helped out in this space and providing loans to these individuals to grow and start businesses to be more successful but then this is where my my next lesson came along was when I started with doing impact assessments on microcredit groups and I spent a number of months going from household a household interviewing women who are getting microcredit loans and what are they doing with these loans and how are they growing their businesses how successful are they and I started to realize that not that many people are entrepreneurial really and and it was a bit naive to think that we can just give out all these loans and that people can go go and start a business and if you think about it in the u.s. it's roughly in business school they they talk about it's down ten percent of the population that would be naturally entrepreneurial I mean how many people here think you're entrepreneurial or will consider yourself an entrepreneur raise your hands it looks like that's probably about the same thing around roughly about 10% here would resonate as being an entrepreneur well in sub-saharan Africa 72% of the population operate in the informal economy selling you know trinkets or little goods or tomatoes or whatever it is to eke out a living as a what I call a necessity entrepreneur or a forced entrepreneur they're forced into doing this to survive they're not doing it out because they think they can grow the best tomato or that those fish they can catch the best fish or they have the best product they're doing it because they need to do something to earn a buck so they can put food on their table and so there's so many groups nowadays that kind of focus on this idea of let's create entrepreneurs create entrepreneurs and I think there's a little bit of a fallacy in using entrepreneurship as the solution to global poverty I think we need to go to another route I think the other route is this kind of concept that we created when I went to the University so I took a position at BYU after doing a lot of this research as a research associate part-time and grew into a full-time position there and we created this kind of concept called micro franchising where we'll take a business we systematize it and then we replicate it so it can scale so go back we create a business we identify market needs we identify what the consumers want we create a brand we create the model around how it operates price points packaging everything you need to run that business and take it from one person and then we can give that business to many and what it does is it alleviates the entrepreneurial burden there's a burden of being entrepreneurial and so this innovative creative how do I sell what do I sell how much do I sell it for how do i market how do i advertise it and it's difficult especially for people have no education living in very rough difficult environments and so we help alleviate that and provide somebody with an opportunity to own and run a business and there's a big difference between being a business owner and entrepreneur and that's what we've tried to focus on is how to create economically self-sustaining livelihoods through letting people be business owners and not forcing you in this box of being an innovative entrepreneur now here's an example of one of the businesses we've worked with a bit and this is in Ghana group here is that micro franchise called fan milk they sell ice cream at 30 cents a pop at a small little sachet they have scaled that employ 10,000 young men in Ghana they last year they had 72 million dollars in revenue 20 million dollars in profit this company was so accessible Ghana they have now scaled into Benin they have over 10,000 in Nigeria they're opening up a number of other West African countries because they're profitable they're helping people and they're scaling and I did a three year longitudinal study with this group and what we found was there was a high retention rate and they were earning roughly twice as much as their counterparts were in microcredit and sandal owned businesses in the same market so it was benefiting the the micro franchisee running this business and it was also benefitting the the franchisor as well and so when I was at the University had a number of publications put on number of books and articles on this kind of concept of micro franchising but as I just mentioned that research we found that there wasn't a lot of research in fact we kind of we created this idea this concept of micro franchising but there were actually organizations out there doing it they just weren't calling it micro franchising from that initial research we found two or three organizations that were doing this idea of systematizing a small business and scaling it and branding but we put a term on it but there's been no real research so we set up to do this three year longitudinal research and our basic findings were that it dramatically reduced the risk of the individual and starting of a business because at a proven product that's been tested in the market price went so there the branding is there brands are very strong particularly in the developing markets we found the franchisees were earning nearly twice as much as their counterparts in this case with this group in Guatemala we found that if we averaged out aggregate ly the amount of money they made per day it was only slightly higher than a microcredit borrower or a standalone business but when we broke it down by hourly rate it was nearly three to four times higher because they had to put less effort into running this business that they could allocate other time their family activities and we found that retention was very high the three years later the same hundred people that were in the micro franchises ninety-five percent of them were still there three years later when we looked at the microcredit in the standalone businesses three years later it was the opposite there was really a very few amount of them that we're still doing the same business three years later and they were still are earning less money than they were three years ago and because they had that burden of being an entrepreneur and deciding what kind of businesses to run so we have a process that we use implementing all of this and it starts with our research and design you know we do observations we look we do what we call market safari I take pictures of people's trash we do a lot of interviews listening to people who do mini ethnographies and it's really important to listen to what people want and that's part of this research than is I know I'll tell you one one story here when I was in a rural village and I had this woman come to me we were doing this vast market analysis trying to understand what people need and this woman held out her hands and she showed me her hands and she said I work in the fields all day long she's my hands are cracked they're bleeding the sore I feel like an animal I feel like livestock she's like if anything if you could bring some lotion some cosmetics and things to my village when I put that out it makes me feel like a woman it makes me feel like a human again and that was another second epiphany for me because that was the point I realized we come into these markets so often with our assumptions that people want access to electricity want healthcare they want access to you know clean water and these are needs but we're so presumptuous to say nobody needs a makeup I'm not gonna sell cosmetics in these marks that's not what these people need and I realized that I've never want to be that as arrogant or presumptuous to assume what other people want and are willing to spend their money on it but I want to listen to what they want and if that makes that woman feel like a woman and it makes her feel happy and it increases her self-esteem I'm gonna sell cosmetics in those villages and that's been the corridor one of our processes identifying needs from there we test we iterate we see a business plan as a hypothesis that we test and we modify and we change as we go and we iterate and we iterate and we modify and then we are able to launch replicate and scale and I know what I'm talking about changing the world is difficult and but I think using design principles to design models for the four billion port is how we can change the world and sometimes it may feel like you're wrestling a crocodile but again if you know the guy that takes ten years to get to grad or graduate was quicker undergraduate school ten years to get through undergraduate school didn't wrestle a crocodile can work in the space anybody can do it thank you

Channel: TEDx Talks

Views: 21,047

Rating: 4.903904 out of 5

Keywords: ted x, ship, TEDxSaltLakeCity, Jason Fairbourne, TED, microfranchise, TED talk, entrepreneur, English, Technology, microfranchising, Base of Pyramid, Salt Lake City, slc, design thinking, BoP, third-world, microcredit, entrepreneurship, Design, Africa, ted talk, TEDx, Utah, tedx talks, tedx, ted talks, business, tedx talk, ted, USA

Id: Qqh8r3Z1e8I

Length: 20min 42sec (1242 seconds)

Published: Mon Jun 20 2011