So far in my blogs I have highlighted some of the things that have been going wrong with enterprise promotion efforts at the base of the pyramid. In this blog, I will discuss some of the things that need to be done to correct this.
For any enterprise to be sustainable (viable) in the long run, there are at least four things it must get right.
1. PROCESS ORIENTATION
Unlike a ‘craftsman’ or ‘artisan’ approach, a scale enterprise must have replicable products and operations, which means it must have processes. This requires shifting our mindset away from an idealized notion of artisans creating one-of-a-kind products and towards a collection of skilled people producing 1000s of units of the same product. In other words, this requires a process orientation – one of the biggest contribution of the Indian IT industry to software development was to take the “black-box” of software development and convert it into a repeatable process.
A garments stitching unit may take an assembly-line approach with one worker stitching all the sleeves, another the necklines, etc. A pottery unit may have one worker make handles for cups while another makes the cup. Periodic rotation of these duties can ensure that all workers develop a complete set of production skills (and avoid boredom). Being called a ‘producer’ or a production worker, may not be as glamorous as being called an artisan, but it may generate more income more steadily in the long run as the business grows.
And it goes without saying, the process orientation should be adopted together with proper production management tools, record-keeping and improvement techniques that help the organization continuously improve productivity and quality of its products. (More on this in later blogs.)
2. UNDERSTANDING CUSTOMERS
Social enterprise founders and proponents talk about providing market linkages. And unfortunately, they do exactly what they say – provide market linkages, but often without market understanding. They offer various means of selling products – exhibitions, single-brand retail outlets, multi-brand retail outlets, etc. Many of them also help with product design inputs. But in most cases, it is based on the personal likes/dislikes of the founders of these organizations. But hardly any of them have spent time to systematically understand the customers of these products. Why does someone like me like to buy hand-made products? Is it because of comfort, is it because of style? Is it because of some do-good-feel-good ideology? Why do I buy niche brands instead of buying similar items in mainstream stores? Consumer choices are not an easy thing to study and understand, as any market research professional will tell you. But at least there should be some effort to understand customers, if not by the producers, at least by the providers of the so-called “market linkages”.
3. MANAGING FINANCES
During my first course in accounting, all the credit-debit stuff seemed contrived (after all, I was training to be a physicist). When I started working with a small start-up and later with large corporations, I understood the real meaning and value of financial statements and financial analysis. But we expect a newly formed ‘group enterprise’ start managing its finances with the help of a well-intentioned (but untrained and inexperienced in finance) NGO staff member. The answer is obvious. Social enterprises, whether the ones run by producers themselves or the ones that act as intermediaries (market linkages), need a crash course in financial management of their business. Accountants can be hired. But using financial information to make sound business decisions is something the entrepreneurs have to become good at, if they want to survive in the long-run.
4. MANAGING PEOPLE
There are a few different models of how social enterprises are structured. In some cases, the enterprise simply sources from individuals who produce merchandise at their homes. In some cases, “group enterprises” are formed, where the producers are grouped into 5-10 people each, giving them the responsibility of running their own operations. In other cases, groups are formed first and a production activity is assigned/decided later. In rare cases, single-owner proprietorships are formed. There are other models that are hybrids of various combinations of the above. In some cases, the enterprise decides to do away with the headache of dealing with individual producers by working with NGOs who do the coordination of individual producers.
But regardless of the model of “enterprise promotion” rarely is the commercial activity accompanied with skill enhancement or infusion of new technology. In fact, more often than not, there is perverse pleasure taken in talking about preservation of traditional methods of production or idyllic notions of production done at home. In these cases, the only thing and really the only thing that the intermediary enterprise does is to act as a buyer of merchandize that may or may not have been sold otherwise.
Why am I talking about this in the context of people management? Because people management is not literally about managing people but helping them improve their skills (and therefore their earning potential) over time. In mainstream industry, any organization that doesn’t offer its employees to earn more and more with every passing year sees high attrition. Generally, the higher income is earned through improved skills. In handicrafts enterprises, in the absence of up-skilling through better process or technology or diversity of experience, the producers are left with the same skills they started with.
So the idyllic notions of preservation of traditional methods of home production run counter to the premise behind social enterprises – to increase incomes of the poor over time (not just once, but repeatedly).
The solution is obvious. Invest in training for improving production skills, in financial skills (to help make better financial decisions), in market skills (so that they understand their customers and their needs better and know how to handle competitive situations), in business management skills (so they can run their own production centres and the well meaning social enterprises are no longer needed). Invest in infusion of technology where appropriate.
If enterprise promotion efforts take these aspects account, they should go a long way in helping their enterprises become sustainable in the long run (assuming, of course, that the business opportunity they are pursuing is real and profitable in the first place – and not a micro-scale paper cups business!)