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Microsoft Research India

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Microsoft Research India. Established Jan 2005 - Bangalore. Goals. World-class academic research ... Computer-skills camp in Nakalabande, Bangalore ... – PowerPoint PPT presentation

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Title: Microsoft Research India


1
Microsoft Research India
  • Established Jan 2005 - Bangalore
  • Goals
  • World-class academic research
  • Contributions to Microsoft products and
    businesses
  • Support growth of research programs in India and
    elsewhere
  • Six research areas
  • Cryptography, Security and Applied Mathematics
  • Vision, Graphics and Visualization
  • Mobility, Networks, and Systems
  • Multilingual Systems
  • Rigorous Software Engineering
  • Technology for Emerging Markets
  • Collaborations with government, academia,
    industry, and NGOs

Computer-skills camp in Nakalabande,
Bangalore (MSR India, Stree Jagruti Samiti, St.
Josephs College)
Understand potential technology users in
economically poorer communities Adapt, invent,
or design technology that contributes to the
socio-economic development of poor communities
worldwide
http//research.microsoft.com/india
2
The Fortune at the Top of the PyramidWhy the
BoP should care about profiting from the ToP
Gucci embroidered handbag, 2905
Pantene shampoo sachet, 0.06
  • Aishwarya Lakshmi Ratan, Microsoft Research India
  • BoP in Practice workshop, IMTFI, June 1, 2009

3
Overview
  • The classic BoP approach (and its detractors)
  • Returning to the evidence what enables ascent
    from poverty?
  • Inverting the classic BoP paradigm
  • Pursuing BoP Producer ? ToP Consumer linkages
  • Technologys role in enabling ascent from poverty

4
(1) The classic BoP approach (and its
detractors)
5
ToP Producers ?BoP Consumers
  • Huge collective purchasing power at the BoP
    5-13 trillion (PPP)
  • Large and small companies can make significant
    profits by selling to the BoP
  • Small margins, large volume business models
  • Selling products services to the poor can
    enable poverty exit through improved consumption
  • ToP corporations development impact is in
    selling quality and needed products to the BoP

Sell
But to what extent can lowering the cost of
consumption at 2 a day incomes eradicate
poverty?
Figure source Edelweiss Research
Prahalad 2004 Hammond 2007
6
Limitations
  • Inaccurate measurement much smaller mkt at 1.2
    trillion (PPP). Even smaller at real fx rates.
  • Cost of and constraints in serving BoP very high
  • Cited examples either non-profit or serving MoP
  • Significant poverty exit can only occur through
    increasing the real incomes of the poor
  • State must deliver key services to the poor and
    protect from bad consumption
  • ToP corporations development impact is in
    employing the BoP

Is the supply of labour and primary commodities
the only way that the BoP can participate in
markets?
Karnani 2007, 2009
Photos Indrani Medhi, Rikin Gandhi, Jonathan
Donner, Aishwarya Ratan
7
(2) Returning to the evidence what enables
ascent from poverty?
8
Stages of Progress studies
Krishna et al, 2003, 2004, 2005, 2006
9
(1) Dominance of income-related improvements in
ascending households
10
(2) Diversification of income sources critical
  • Diversification of income sources was mentioned
    as a principal reason in the corroborated
    accounts recorded for 35 per cent of escaping
    households. Accounted for in equal part by
    irregular, informal sector employment and by
    ancillary activities, especially dairying, such
    diversification of income sources is a very
    significant reason for escaping poverty in these
    villages, and it is almost as important in more
    industrialised Vadodara district as in less
    industrialised Sabarkantha district (Krishna,
    200519)

11
(3) Inverting the classic BoP paradigm
12
Status quo
  • Every participant in a market economic system is
    both a producer and a consumer
  • Those who produce primary goods and supply wage
    labour are numerous, the valuation of their
    offerings in the market is low, and they are only
    able to consume that which is cheap, i.e. primary
    goods and labour-intensive services.
  • Those who produce processed goods with
    value-added components and supply specialized
    services are few, the valuation of their
    offerings in the market is higher, and so they
    are able to consume higher-priced processed goods
    and services

13
A BoP Consumer Focus
  • Encourage ToP producers to reach out to BoP
    consumers (Prahalad and Hart, 2000, 2006).
  • The size disparity between these two segments is
    vast, with the BoP constituting two-thirds of the
    worlds population.
  • ToP innovation in making and selling processed
    products and services to the BoP can lead to a
    new source of revenue for them through
    thin-margin, large-volume sales.
  • The poor would like to consume more. Why not sell
    them what they want to consume in affordable
    packets.

14
Inverting the paradigmA BoP Producer Focus
  • Encourage BoP producers to reach out to ToP
    consumers
  • BoP producers have a comparative advantage in
    their low costs of labour and production
  • Small scattered producers find efficient ways of
    aggregating what they produce, adding value in
    ways that will specifically please ToP consumers
    who can assure demand, and marketing/distributing
    these products and services to those at the top
    of the income distribution

15
(4) Pursuing BoP Producer ? ToP Consumer linkages

16
Why should the poor care about the rich?
In India, the top 20 of the population is
responsible for 45 of aggregate consumption.
  • BoP as Consumers
  • ToP as Consumers
  • Income streams of the poor highly unreliable
  • Poor consumer seeks standard products that have
    the lowest ticket price
  • Poor consumer may face welfare trade-offs between
    consuming in the present vs. the future
  • Income streams of the rich steady and
    well-insured against numerous shocks
  • Rich actively seek differentiation from peers
    -drive consumption of luxury, custom-made goods
  • Rich consumer has sufficient surplus to consume
    in the present and invest in the future

17
BoP Producers ? ToP Consumers
18
(A) Institutions for Aggregation and Processing
  • CONTRACTUAL PRODUCTION
  • Third party assures producers of demand and sets
    price
  • Risk is borne by the external aggregating agency
  • Earnings gain is only through sales, and does not
    include any stake in any further value addition
    or the final product
  • Producers still retain individual ownership of
    assets

19
(A) Institutions for Aggregation and Processing
  • PRODUCER COMPANIES
  • Aggregate the production of the poor in a manner
    that allows greater bargaining power in the
    market around both sales as well as procurement
    of inputs
  • Use the Producer Company structure to allow
    member-ownership structure (one member-one vote)
  • Hire management to target new markets
  • Allow thousands of producers to pool their
    output, and invest in some amount of processing
    and value-addition
  • Producer-members have a stake in the final
    returns generated by the company
  • Distributed dividends alone 4 of annual
    household income (Masuta)

20
(B) Sustaining demand Meeting the Aspirations
of the Rich
  • Hansiba production styles, designs, colour
    combinations and marketing incrementally enhanced
    to match the palate of external high-end
    customers
  • Brand ambassador at the recent opening of a third
    Hansiba outlet in Mumbai was Leah Martin, an
    American singer and model

21
Sustaining demand Meeting the Aspirations of
the Rich
  • The Amul Moppet was initially targeted at urban
    upper class homemakers
  • Sensibilities and tone of the campaign are mostly
    urban
  • The gimmicky one-liners used, called topicals,
    are in English and are drawn from national and
    international news

22
(C) Mobilising Capital
  • Providing finance for production becomes a less
    risky proposition for most banks when the
    supply-side is streamlined, efficiency gains from
    aggregation and specialisation are realized, and
    a collective of producers shares the risk of
    production
  • In a Producer Company, internal management of
    working capital is moulded to suit production
    timings, input purchase, and the consumption
    needs of the producers. Innovations in financial
    management allow convenient cash flows for the
    producers throughout the production cycle.

Photo PRADAN, Masuta
23
(C) Mobilising Capital
  • Surviving shocks
  • PRADANs poultry cooperatives grew by 50 in
    2005-2006
  • But the bird flu scare caused the market price of
    chicken to plummet to half the cost of production
  • Heavy losses of Rs. 5 to Rs. 20 lakhs per coop
    that year
  • Yet, the size of the organisation allowed the
    producers to use reserve funds, collectively
    mobilise more working capital, wait out the
    downturn
  • They subsequently rode the boom in 2006-07 to
    more than double their revenues the next year

Photo PRADAN
24
(5) Technologys role in enabling ascent from
poverty
25
The role of technology
  • Technology, it is already apparent, can be as
    powerful a tool for addressing barriers and
    inefficiencies at the bottom of the pyramid as in
    more established markets. (Prahalad and Hammond)
  • Yet, the effects that investments in technologies
    have on enabling the poor to move out of poverty
    vary greatly, and in many cases are hard to
    establish.
  • Technology primarily works as an amplification
    tool. The impact of technology in enabling
    poverty alleviation is then only as good as the
    task it seeks to enable.

26
Enabling Consumption of the Poor
  • M-PESA a mobile money transfer/payments service
    with outreach to 6M in Kenya
  • Used predominantly for small-denomination (lt80)
    domestic P2P remittance transfers between family
    members and friends
  • Weakest case Urban migrant paid 1 more per
    transaction using M-PESA once every 2-3 months
  • Strongest case Urban migrant saved 8 of
    monthly income by using M-PESA

Photo Indrani Medhi
27
Enabling Exchange with the Poor
  • ITC's empowerment plan for the farmer centres
    around providing Internet kiosks in villages
  • ITCs e-choupal is primarily used to facilitate
    the distribution of coupons for procurement of
    crops like soybean by ITC - less for accessing
    information for negotiation or arbitrage by the
    farmers
  • The disintermediation leads to an average net
    upgrade of 6 of annual income per farmer

Photo PC Quest
28
Enabling Production by the Poor
  • The Masuta Producer Company coordinates and
    aggregates the production of Tasar silk yarn. The
    fabric produced goes on to be part of FabIndia
    textile products,
  • A combination of TV, DVD players and videocameras
    (through Digital Green) enables training in
    productivity-enhancing opportunities and assists
    with the ongoing promotion and sharing of best
    practice
  • The average producers income has involved an
    increment of 30-40 of household income

Photo Rikin Gandhi
29
Wrap-up
30
Summary
  • Some market-based mechanisms to assist poor
    households to rise out of poverty are more
    effective than others
  • The most powerful mechanisms have to do with
    substantially improving incomes of the poor
  • Strong earnings gains have been realised by
    aggregating production of the poor, collective
    risk-sharing, specialization, value-addition
    through selective processing, and direct sales
    and marketing to rich clients
  • Pursuing BoP Producer-ToP Consumer linkages
    through Producer Companies and enabling these
    with appropriate technologies can indeed make
    significant progress towards eradicating poverty
    through profits

31
Additional considerations
  • Role of Government in Producer Companies must be
    limited to infrastructure provision and prudent
    industry regulation
  • Social and psychological effects of technology
    adoption/consumption are critical to well-being
    as well, but often do not themselves drive ascent
    from poverty
  • In an economic downturn, overall demand falls.
    Yet, the rich have greater buffers to sustain
    consumption than the poor.

32
Last wordMumbais dabbawallas
  • The century-old supply chain of dabbawallahs is
    operated by 5,000 semi-literate men and women who
    pick and deliver 200,000 tiffin boxes to office
    goers per day.
  • The average turnover of the dabbawallah industry
    is 8.5 million per annum.
  • 'The method we adopt is simple and easy. For us,
    customer satisfaction matters a lot and we are
    here to deliver services to them.

Source Rediff , Pawan Agrawal, Sanjay Sawant
33
Thanks!?aratan_at_microsoft.com
Hansiba embroidered handbag, 2905?
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