Emerging markets: Monitor Group study offers lessons in business excellence

What makes businesses succeed in emerging markets, where the customer profile and demands are quite different from more affluent western markets? Monitor Inclusive Markets, part of the consulting company Monitor Group firms, has released Emerging Markets, Emerging Models, a report analyzing the actual behaviors, economics, and business models of successful market-based solutionsfinancially-sustainable enterprises that address challenges of global poverty.

Emerging Markets, Emerging Models is addressed to those organizations and individuals most concerned with making a real and enduring improvement to the lives of the poor. Monitors findings highlight data from global working models, including more than 270 organizations based in India.

Five years after C.K. Prahalad introduced the concept of The Fortune at the Bottom of the Pyramid, Monitor Group has carried out the first critical examination of how these emerging market-based solution models are functioning, said Ashish Karamchandani, Founder, Monitor Inclusive Markets, and Partner, Monitor Group. This report provides strong evidence that engaging the poor as customers and suppliers presents an exciting and significant opportunity to establish new paradigms to bring genuine social change in economically sustainable ways.

Key findings of Emerging Markets, Emerging Models include:

The key to success is the right business model. But business models that function well in developed and emerging markets, especially when dealing with affluent middle-income customers, are unlikely to work as well for low-income markets. The best business models in low-income economic markets whether serving customers or engaging suppliers often need to organize the full value chain end-to-end.
New entrants and small enterprises are more likely than large corporations to lead the development of market-based solutions in low-end markets. Large companies have other sizable, appealing opportunities in emerging markets that are not as challenging to serve. Of the organizations observed, over two-thirds were either small and medium enterprises, or NGOs.

Non-commercial or soft funding plays an important role in low-end markets and helped many of the successful enterprises examined in this report to reach scale.

Meaningful scale is achieved in different ways but invariably takes time, especially if large corporations are not participating. Of the organizations surveyed, over 80 percent were not at or near scale. On average, most social enterprises require at least a decade to reach significant scale and only 18 percent of those organizations observed have been in operation for that long.

The most common mistake among unsuccessful market-based solutions involves confusing what low-income customers or suppliers need with what they want. People living at the base of the economic pyramid should be seen as customers and not beneficiaries.

The research has been supported by high profile sponsors, including Rockefeller Foundation, ICICI Bank, IDFC, IFC, Omidyar Network, Orient Global, The David and Lucile Packard Foundation, PATH, Sir Dorabji Tata Trust, Swiss Agency for Development and Cooperation, and TPI.

During the course of its research, Monitor conducted more than 35 field investigations, primarily in India and supplemented with research covering 19 countries across the world, but focused the research on India, which offers an advanced laboratory of social enterprise approaches and proved to be an especially fertile source on model effectiveness. Conclusions were based on more than 600 in-person interviews with low-income customers and small suppliers, and detailed interviews with and research on over 270 social enterprises in India.

Monitor Group works with the worlds leading corporations, governments and social sector organizations to drive growth on the issues that are most important to them. Founded and based in Cambridge, Massachusetts, with 25 offices around the world in five continents, the firm offers a range of services - advisory, capability-building and capital services designed to unlock the challenges of achieving sustained growth.