Ending Poverty Through Business - Interview with Stuart Hart
Interview w Stuart Hart (co-author of The Base of the Pyramid 3.0 with Fernando Casado
Cañeque). July 17, 2015
Adam Crigger: It’s great to speak to you Stuart. I know you’ve published two other books prior to this one that are kind of the building blocks to the concept you’re trying to portray with The Base of the Pyramid 3.0. What would you say the main premise of this book would be?
Stuart Hart: We have learned a lot over the past 15 plus years. We have really seen progress when it comes to how deal with poverty in an effective way. The perspective 20 years ago is that poverty, lack of opportunity and lack of services was primarily the responsibility of inter-aid agencies, governments or philanthropists. What we have found is that private business can play a useful role. Maybe even a catalytic or crucial role. This is the main premise of 3.0.
Adam Crigger: I completely agree. I believe over the past 5 – 10 years organizations have started to see that providing solely relief aid or handouts cannot effectively combat this issue. There has to be sustainable solutions through increased economic growth and business development. Could you tell me a little about your first two books and how they helped you come to this point?
Stuart Hart: In The Base of the Pyramid 1.0 we discussed affordable products for the lower income category. We covered things such as affordable unit cost and extended distribution. This was the main premise in 1.0 and that was a good starting point. However, we quickly found out that it wasn’t just about taking current products from the top of the pyramid and putting them in smaller packages with better distribution. We found it was really important to engage the people in these communities and develop partnerships.
In 2.0 it was all about co-creation. We discussed the fact that you can’t just figure out what a person’s household income was and what their expenditures were and then come up with something you think would be affordable and try to sell it to them. It was really important that you engage people in these communities in the actual co-creation of a product and a business model that works for them. Something that is not only going to serve them but elevate them at the same time. It’s got to be livelihood generating. It’s going to be something they find value in rather than something we think they should value. Not a top down affordable solution from the outside but rather a solution from the inside out. It is vital to treat individuals within these communities as partners and colleagues rather than walking in and defining a problem and trying to fix it from the outside.
In 3.0 it builds on these principles of co-creation. In some instances businesses will use these methods as a side project. These premises are a small portion of the company and it is very different than what company is all about. In 3.0 we discuss how this can be more about what the central purpose of the company is. Companies like PepsiCo that state the idea that it’s really about performance with purpose. Rather than viewing this as a small experiment you start to view this as the main purpose of the business. You move more toward a purpose driven environment where you build an eco-system in which you are creating partnerships with people on the ground. Where you are not only creating a product but building a business model that generates value in multiple dimensions. It’s bringing value in a variety of ways so it’s more like an animated eco-system. We’ve gone from thinking of this as more of philanthropy or doing this out of the goodness of our heart to more of a purpose driven role. It has to be more than just providing affordable products but rather co-creating products. Building an innovation eco-system from the ground up with the communities themselves so they become equal partners in what amounts to a development proposition.
Adam Crigger: I think you really hit the nail on the head there. So many times when people try to help it ends up hurting more than it helps. For example, when items are being given away on a large scale you end up flooding the market. Although disaster relief is very important but without long term goals and an understanding of the local economy you end up killing local business.
Stuart Hart: You end up killing the whole market in some cases. It’s well intended but the consequence is that you kill the market.
Adam Crigger: Right, and that is why a book like this is exciting because it gives people an understanding of what they are doing. Sometimes we want the quick, feel good fix and that isn’t a long term solution. What you mentioned before about developing partnerships is important. As an organization we try to focus on just that. It’s about empowering communities and creating holistic, sustainable environments. The business model that needs to be taught goes from solely profit driven to value driven. If you give away something for free it’s not very valuable but if they’ve learned to work with you or helped work for something it adds so much more value to it.
Performance with purpose is a great slogan that really helps people understand that you can’t come into environments that you aren’t even accustomed to and create a solution from the outside and ever expect it to gain any traction.
Stuart Hart: It’s well intended but when you think about it fully it’s actually quite arrogant.
Adam Crigger: Exactly. Many times in the poverty stricken communities I travelled to, I saw a real need to train and equip individuals within these communities so they can then stand on their own. So many times the bottom line for companies can be profitability no matter what the cost unless you have a value system set in place. If that is not in place it becomes more about how we can make the most money instead of how can improve the community and create something sustainable.
Stuart Hart: The paradox is approaching an issue with the intent of making the most money doesn’t typically produce that result. When you use the methods mentioned in The Base of the Pyramid 3.0 it leads you to superior profitability for the company because the company has to be profitable or it’s not going to continue and invest in the business. It’s possible to have a value based eco-system that serves and lifts the communities up, engages them and offers livelihood in that area. If you are doing those things and it makes profits for the business then you are motivated to invest more into it. When it just a side portion of your business it will never grow to it’s potential because it’s not your core foundation.
Adam Crigger: That foundational truth right there is what would change the mindset of many in the business world whether it be non-profit, NGO’s or for profit companies.
Stuart Hart: In this territory there are a lot of people rotating around in the field. There’s different DNA in many cases and some that believe that an enterprise based approach is important but it shouldn’t make money for investors. That return on capital should be zero. Investors should possibly get their money back but they shouldn’t expect to make return on capital. That’s sort of one end of the spectrum and the result is yes we can find examples of those kind of ventures but they never really get there. The truth is there aren’t enough philanthrocapitalist’s in the world to address the scale of the challenge we face. In my mind the only way we get after this is you have to have a big enough imagination to create wins for all the stakeholders involved. Which includes the companies, communities and investors. The investors have to get return on capital otherwise they won’t keep investing.
Adam Crigger: That’s it exactly. It appears as though there are two ends of the spectrum. One can be what we think of as the greedy corporate end where it’s all about profitability and the other end is a non-profit that spends the majority of its time asking for money and barely scrapes by because everything they have is spent helping those in need. The truth is in order to fight poverty you have to create a successful, profitable business and at the same time have a purpose to provide sustainable solutions to poverty.
Stuart Hart: That’s right, and I hate to say it but there is a bit of an old wine and new bottle phenomenon that goes on where you sort of rebrand old ideas. There is basically the triple bottom line idea that goes back twenty plus years where the bottom lines are now in separate accounts. When people think of the triple bottom line it usually refers to having environmental value, social value and financial/economic value. Sometimes when you think of triple bottom line you think in order to get social value you have to get less financial value like a tradeoff. However, that was never the intention of the triple bottom line. With a little imagination it is possible to drive up all three bottom lines simultaneously.
Adam Crigger: Right, and that’s where people start to realize that with a little creativity you can revamp the idea that our purpose as a business is just to make the most money possible. People can come to the realization that you can increase capital for your company while providing the holistic care that’s needed to create economic increase and sustainability in communities.
Stuart Hart: It’s when you have a bigger mindset and imagination that can help you get wins for all the stakeholders involved and it ends up being a much better business. A much more sustainable and profitable business over the long run than going into it with one dimensional obsession about short term profitability which actually never really produces that result.
Adam Crigger: I feel like we veered off into this spectrum where we felt like money and currency was the only thing valuable. In turn we see companies that provide that holistic approach of caring for employees, providing performance with purpose, enhancing the communities around them etc. All those things that provide a positive and uplifting environment where not only employees thrive but the business has values that develop respect and loyalty from consumers and from the communities in which they help.
Stuart Hart: The trendy term is shared value or mutual value but it really is a great model for the long term.
Adam Crigger: As we have discussed building successful businesses that help stimulate the local economy, what would be your thoughts on the large relief effort organizations that are flooding the markets in already vulnerable areas? What do think the best avenue would be in order to approach these organizations and issues to try and combine forces and create sustainable solutions to reduce poverty instead of temporary fixes that tend to do more harm than good?
Stuart Hart: That is a good question. I think there are certainly NGO’s and other organizations out there that have come to this realization and kind of shifted their strategy over the last decade or more. We can certainly point to some examples of NGO’s and others that have adopted the enterprise based model. At some level I think people have to come to this realization on their own. You can’t really force this on those who aren’t ready to change. At the end of the day I think those NGO’s and aid agencies that have this epiphany soon realize they end up being much more effective at actually achieving their mission.
Adam Crigger: That’s true. When I started in this field awhile back I just didn’t have the full picture of what was going on. As I travelled I realized that although there were many programs out there that couldn’t see the bigger picture and wanted the quick fix there were also organizations that were veering toward holistic care and the social entrepreneurship that is needed to see sustainable change. So it is really good to see that shift is happening. Maybe not to the scale that we would like but I think the information is getting out there. With individuals such as yourself and Fernando writing books like The Base of the Pyramid or even posting this interview, I think these things can play an intricate part of raising awareness.
When I talk to people about this subject that I work with and especially those living in poverty, I can see the excitement on their faces because they realize this is something that can cause sustainable change. They realize this is something that empowers them and they value that partnership. Through that relationship they can take control of their own future and provide for their families.
Stuart Hart: One thing that you and maybe some of the readers might be interested in is a new MBA program called Sustainable Entrepreneurship MBA. It’s an AACSB accredited MBA degree in which the entire program is focused on sustainable entrepreneurship. Obviously, the core MBA tool kits are there but a whole set of new skills and tools are added to go along with that. It helps bring the kind of skills that we have been talking about here such as on the ground co-creation and participatory development skills.
We will jointly be co-sponsoring the BoP Global Network Summit 2015 which focuses on exactly what we have been discussing in regards to sustainable entrepreneurship from the bottom up. It will bring together all the BoP labs from around the world which is about twenty five plus. We’ll be bringing them together to this summit which is held every two years where there is a whole set of programmatic activity and working sessions that go along with it. (The Global Network Summit was held on July 16-17, 2015. For more info please visit http://summit2015.bopglobalnetwork.org).
Adam Crigger: That’s great, I think that is exactly what we need. A place where people can gather and network to see what has worked and what we can do to enhance these models. The MBA would also be advantageous for those who are interested in this field and who are looking for some more insight into sustainable entrepreneurship to go alongside the basic business principles.
I believe most of my original questions have been answered throughout our conversation but I’ll add one more for the readers. What would be your advice for the common person who wants to get involved? They want to help those in poverty but don’t know what to do. What advice would you give that person so they could be most effective?
Stuart Hart: That’s a good question. One that I probably haven’t thought about as much as I should. There are probably a couple different levels to that. One would be if a person is basically looking to primarily be a donor, then that is one thing. If a person is actually looking to invest their time and energy then that’s another.
There are a bunch of platforms like KIVA and other organizations that small scale donors can get involved in. Which facilitates the flow of small scale investment capital to on the ground ventures around the world. Here is one question that might be raised: Does the core logic of BoP business (that has been focused primarily around the developing world for the past fifteen years) work with the developed world? This is where we unfortunately have a growing base of the pyramid. Meaning, inequality tends to grow in the U.S. which is tragic. The same thing is happening in Europe and Japan. Can some of the core ideas in BoP be applied to the developed world? I believe the answer is yes. During our summit we have a whole session devoted to that. There are a growing number of initiatives and enterprise based experiments happening right here in the U.S. It is possible, I would say, for the average person to become involved in that as well.
Adam Crigger: I agree. It is interesting to see people’s reaction when you inform them about some of the things we have discussed. I think most people start out just wanted to do something good and help people but you soon realize that maybe what you are doing isn’t the best for the long term. I think things like this are really going to open the eyes to the average person who wants to get involved. I think people will see whether it’s through donations or their time and energy, they can help create a sustainable solution.
One of the things OneEarth is trying to focus on is starting for-profit businesses that have a non-profit purpose. So the business itself helps those in need while any income created helps support that business and create a self-sustaining environment.
Stuart Hart: That’s it, certainly makes sense.
Adam Crigger: Well I really appreciate you agreeing to this interview. It was great to hear from someone who has been in this field for a long time and get some insight into this subject. I believe this will be beneficial to everyone. As someone who has started a non-profit and didn’t want to recreate the wheel I think this information is very helpful. It helps reiterate the idea of partnering with those who are already successful in their niche and filling in the gaps to help provide holistic care.
Stuart Hart: You may also be interested in another book I wrote entitled Capitalism at the Crossroads. It talks about global sustainability more generally and business strategies that move us towards a more sustainable world that includes BoP.
Adam Crigger: Absolutely, I think that would benefit not only someone like me but the any person wanting to get involved in poverty reduction. Thank you so much for taking time out of your schedule to do this and I wish you the best of luck in your future endeavors.
Stuart Hart: No problem, it was a pleasure. Thank you very much.
Stuart L. Hart is Professor and the Steven Grossman Endowed Chair in Sustainable Business at the University of Vermont Business School and the Samuel C. Johnson Chair Emeritus in Sustainable Global Enterprise and Professor of Management Emeritus at Cornell University’s Johnson School of Management. He is also Founder and President of Enterprise for a Sustainable World and Founder of the Base of the Pyramid Global Network. Professor Hart is one of the world’s top authorities on the implications of environment and poverty for business strategy. With C.K. Prahalad, Hart wrote the path breaking 2002 article “The Fortune at the Bottom of the Pyramid”, which provided the first articulation of how business could profitably serve the needs of the four billion poor in the developing world. With Ted London, Hart is also the author of a book entitled Next Generation Business Strategies for the Base of the Pyramid. His best-selling book, Capitalism at the Crossroads, published in 2005 was selected by Cambridge University as one of the top 50 books on sustainability of all time; the third edition of the book was published in 2010.
Adam Crigger serves as President of the non-profit OneEarth Solution. He has a Bachelor’s Degree in Business Administration and Economics. He had worked in corporate environments for ten plus years before resigning to pursue ministry in social justice. He worked in various fields including anti-human trafficking, sustainable entrepreneurship, poverty reduction and livelihood development. He is currently working to create sustainable solutions to poverty through partnerships with local community leaders, social entrepreneurship, and building practical, dynamic solidarity among those who are followers of Jesus Christ. He is passionate about working together as one body to break oppression and see hope and purpose restored to those in need. Adam believes business can play a crucial role in poverty reduction but more importantly it’s the condition of the heart that will drive people to change the world.