I was invited to participate in the CDKN (Climate and Development Knowledge Network) Action Lab last week in Oxford. The lab was run over five days and followed Peter Senge’s “Theory-U” process of ‘profound innovation through change’ to arrive at initiatives on climate compatible development. A very striking observation was that I was one of very few participants (of the 180) from the private sector and representing ‘enterprise’ in the room. Neither the impact investment community was present or those representing the business/corporate community – albeit a sprinkle of consultants like myself who work closely with corporate business.
Where is the “E” for “Enterprise” in the CDKN acronym? And why is it needed?
CDKN Action Lab is the brainchild of Lead International with technical input from PwC, and funding from the Dutch and UK governments. The aim: to arrive at action-orientated output (projects) which address climate change mitigation and adaptation challenges with a development focus and an multi-lateral approach. It was an extraordinary convention of those working at the front-line of development challenges globally, most of who are leaders in their field. The output: a set of innovative multi-lateral initiatives that may or may not receive project funding from CDKN.
The absence of the commercial community or the potential for enterprise amid the CDKN lab was very striking given we were there to drive innovation and action around climate compatible development. Striking because the development agenda is increasingly adopting market-based solutions to alleviating poverty/social issues. And the corporate and investment agenda is increasingly interested in the innovation and value opportunity an enterprise approach presents, particularly in the emerging markets. Vodafone’s work on mobile payments (M-PESA) with Safaricom is just one example of the evidence of this.
Market-based approach to development
The market-based approach to addressing development challenges has been framed in a number of different ways, such as: “Inclusive Business” by Neil Ghosh, Director SNV USA, the “Hybrid Value Chain” by Bill Drayton the founder of Ashoka, and “Enterprise Development” by SABMiller. The core idea of Inclusive Business, as Ghosh describes in a latest piece published on NextBillion, is that national and global businesses provide a platform for local entrepreneurs and producers to address systemic issues that directly or indirectly relate to their supply chain and/or their growth plans. As example SABMiller is investing in local sourcing and smallholder producers in their supply chain, elevating the use of alternative crops that are local to where production happens versus importing them. And, as Jonathan Jenkins director of UnLtd describes in a recent piece titled Corporates key to the next big social enterprises, Novartis has been “systemically working to create health care solutions for the poorest in India and is now looking to invite partners, including social entrepreneur start-ups, to piggback the distribution network it has created”.
Nokia case study
In 2010 I spent nearly a year working with Nokia looking at Inclusive Business opportunities. Nokia’s core proposition – mobile tech – is an inherently enabling platform. The question is how does this become more enabling in the context of significant development and environmental challenges? Our task was to identify social innovation opportunity and the role of ICT addressing systemic challenges in the world’s poorest communities. At the core of the work was a large ‘elephant in the room’ question, which was: What is the role of global business in the C21st? And what will the future of value creation look like for global corporate business? The work unearthed a mass of opportunity areas (enabled by mobile tech) including addressing climate change mitigation and adaptation, health, livelihood, learning and civil needs. And it identified a mass of potential NGO, governmental and social entrepreneur partners in Africa, India and Latin America to collaborate with. It also unearthed a corporate strategy and vision for a very different looking company –one that’s role would emerge as a platform for others to create value and the solutions to social challenges and an incubator of many millions of entrepreneurs in the markets Nokia are particularly interested in growing in.
The future of global business: to Unlock Human Potential – locally?
My framing of Inclusive Business emphasizes “Unlocking Human Potential” to address macro social, environmental and economic challenges. The role of corporate business here is to maximise the potential of local entrepreneurs outside the corporation together with intrapreneurs inside it, by solving problems and driving long term sustainable development and value collaboratively. In the case of the untapped human potential in developing countries which equals billions of people’s potential. Take Africa as example of mass untapped potential: over 40% of the population of Africa is under 15 years old, (the largest global youth population), the continent has a wealth of untapped natural resources and sources of renewable energy, and a culture of ingenuity lies within many of the people that have for so long have had so few technological resources at hand. ICT is obviously changing this.
The approach to Unlocking Human Potential is participatory and enabling; it enables entrepreneurs to scale innovative solutions to social problems through access to the resources of corporate business (tech, distribution system, supply chain, human capital etc.). And for corporations it enables them to enter wholly new and untapped markets, build local relationships, learn from the people closest to development challenges, address social issues and create long term sustainable value opportunities. The approach also injects (open) innovation value into the business. For companies such as Unilever that have set ambitious sustainability targets such as to “Help more than 1 billion people take action to improve their health and well-being”, working with local entrepreneurs, sourcing locally and unlocking the growing potential in these markets begins to make more than sense. It may actually be the only way to reach their sustainable business targets in time!
What is the incentive for corporate business?
I was asked by the people behind the CDKN lab what incentive corporate business or private investors would have to attend the event. My argument for market-based solutions to address development and environmental challenges reflects my response. The Action Lab had a concentration of the world’s leading NGOs and policy makers working at the front-line of development and climate change challenges. It is these issues and these communities that present significant opportunity for corporate business and impact investors. The incentive for the private sector is therefore the opportunity to develop strong partnerships on the ground; to better understand the real needs around climate compatible development, to prototype potential innovations, to share leadership and provide a powerful platform to bring the missing “E” for “Enterprise” into the room.
My sense is that there are a few positioning challenges to overcome. Vodafone, Nokia, IGM, Unilever etc. you should of course all have been in the room.
Impact Investment as an alternative
The other approach to seeding enterprise development is through the growing industry of Impact investment that aims to solve social problems while generating long-term financial returns to the funders. JPMorgan and the Rockefeller Foundation have gone as far as describing impact investment as a separate asset class, which should be treated as such, in a recent 2010 study. I have not touched on this in much detail but most definitely this community should have been bringing the E to the room as well.
