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Inclusive

Business
As a model for
socio-economic
development in
Uganda

knowledge management
initiative
Oct 23, 2014

Objectives

Why Inclusive
Business

IB - case studies

Meet B-Space

IB Lessons from
facilitators

Towards an IB
coalition in Uganda

Definition

Objective of this knowledge management


initiative

Enhance understanding &


appreciation

of Inclusive Business

as an effective tool for


poverty alleviation

Objectives

Why Inclusive
Business

IB - case studies

Meet B-Space

IB Lessons from
facilitators

Towards an IB
coalition in Uganda

Definition

What is understood by Inclusive Business?


Inclusive business broadly describes the deliberate and strategic
efforts to integrate low income populations as key stakeholders
within a company's business model.
An Inclusive Business is a
profitable and
sustainable entrepreneurial initiative, that seeks to include the
low-income population within its value chain either as:

o Suppliers;
o Employees;
o Distributer;
o Consumers.

Definition

Conventional versus Inclusive Business


Some Bold Comparisons
Conventional businesses

Inclusive businesses

Exist primarily to maximize


shareholder wealth (bottom
line)

Exist to make profit, but


redefined as shared value
creation

Target primarily mainstream


and premium customers in
developed markets

Define markets in terms of


unmet needs or social ills, and
develop profitable products or
services that remedy these
conditions

Might source primary inputs


from smallholders farms, but
do not necessarily engage in
deliberate farm-firm
relationships

Integrate smallholder farms in


their supply chain, creating
equitable and mutually
dependent firm-farm
relationships

Rationale behind Inclusive


Business

Why Inclusive Business will be the


Business as Usual of tomorrow
Globally

In Uganda

A significant part of the


global population survives More than 4 Billion
About 9 million people
under economically
people survive on less [25%] are living at the
challenging
than $4 dollars a day BoP (< $1 a day)
circumstances.
Economic Inclusion
opportunities for the BoP
lie in self employment
rather than formal
employment

Small Scale Farmers,


Only 20% of Ugandas
manage about 85% of
workforce is in paid
the worlds farms, their
employment, of which
output supports a
3 million are working
population of roughly
poor
2.2 billion

Agriculture provides 80% of Ugandans that


Agriculture is the primary
jobs for roughly 1.3
are self employed
source of livelihood
billion small holders are involved in
opportunities for the BoP..
and landless workers subsistence farming
Source: CIAT

Source: UNHS 2010

Rationale behind Inclusive


Business

IB

Businesses that develop


supply chains that..

include
small
holders

Businesses that develop


products that..

are
affordable &
accessible

can

BOP

Shared
value
Creation

can

Improve rural
livelihoods

Create new
Profitable
opportunities
for business
growth

Rationale behind Inclusive


Business

Doing business with poor people


brings them into the marketplace
a critical step in the path out of
poverty and for entrepreneurs and
firms it drives innovation, builds
markets and creates new spaces for
growth

Source: United Nations Development Programme (UNDP)


Creating Value for All: Strategies for Doing Business with the Poor, 2008

Rationale IB Knowledge
Sharing Event

An organized whole is perceived as more than


the sum of its parts (Gestalt)

Objectives

Why Inclusive
Business

IB - case studies

Meet B-Space

IB Lessons from
facilitators

Towards an IB
coalition in Uganda

Meet B-Space

About
us
Expertise
Meet B-Space

Our Story

Recent work

Creative

Iterative

B-Space Ltd is a Ugandan social


enterprise, consisting of a
multicultural team of Associates.

Cocreation

We build impact coalitions and


accelerate business solutions to
address development challenges in
Uganda.

Systemic

Tailormade
Marketbased

Our DNA

Meet B-Space

About
us
Expertise
Meet B-Space

Our Story

Recent work

Consumer Insights
Market Insights
Innovation Management
Inclusive Business Advisory
Business mentoring
Orchestration of Public Private
Partnership Initiatives
Finance brokering (social impact
funds)

Our complementarity in expertise means


that we take a holistic approach, and a
market assessment might follow up in the
actual implementation of the marketing
plan with one of our management
consultants

Meet B-Space

About
us
Expertise
Meet B-Space

Our Story

Recent work

How can private and development


sectors effectively work together, to
make markets work more sustainably
and beneficially for the low income
households?
What kind of innovations are needed
to generate return on investment, but
also include the lower income
population as suppliers, employees
and consumers?
Oxfam, SNV and BoP Innovation
Center identified the need for inclusive
business advisory services in Uganda.
B-Space Ltd was born.

Meet B-Space

About
us
Expertise
Meet B-Space

Our Story

Recent work

Strengthening the Ugandan SME sector through tailor- made business


support.
B-Space provides business development support services to SMEs in
Uganda, and thereby develops a pipeline of investment ready SMEs for
the Oxfam Impact Investment Fund and other social impact investors.
Crickets the new superfood?
In Uganda, the 2SCALE consortium is establishing a new value chain for
cricket as a food product. But, how do you market the nutritional benefits
of crickets?
Identify PPP interventions to address menstrual care issues in Uganda
SNV invests in business development support for companies, to facilitate
access to affordable and quality menstrual care products for the BoP.
Want to know more?
www.bspace.co.ug

Market assessment seed cotton oil


Is there market for cotton seed oil as a finished consumer product for the
BoP?

Objectives

Why Inclusive
Business

IB - case studies

Meet B-Space

IB Lessons from
facilitators

Towards an IB
coalition in Uganda

IB - Firms

Several Multinational and Local for-profit firms


have inclusive business at their core strategy

Case Study

Result: lower
production cost,
increased market
share

Including the BoP as Suppliers


The Firm perspective

IB Initiative

Benefits

Nile Breweries wanted to reduce Eagle Lager captured 30% market


its direct costs. They established a
share
local supply chain of starch
Eagle is currently best selling beer
sources (sorghum, Cassava,
in Uganda (Sales: 2003: 1mn
Barley) through contract farming,
crates; 2009:4mncases; 2011>7m
substituting the expensive
crates.
imported malt.
By 2011,
By citing the impact of their local
9,000 farmers were included
sourcing intervention, NBL was
in SAB Millers supply chain,
able to attract excise duty
>100,000 direct and indirect
concessions from government,
beneficiaries supported
ensuring that bottled products
Ush 7.6 billion was income
could be priced cheaper.
from NBL into its supply
ecosystem-(farmers, input
Result
suppliers, dealers etc.)
Eagle Lager could be produced
and sold for 1/3 of the original
price, and extend market share to
lower income consumer groups

Case Study

A lucrative business

Including the BoP as a Consumer


The Firm perspective

IB Initiative

Benefits

Revolutionary initiative to bank the


unbanked through a mobile based
savings and payments system

The adoption of Mobile Money


for the previously unbanked
(rural poor), increased level of
financial inclusion in Uganda
from below 30% to > 60%
MTN benefited from a new and
highly lucrative profit center,
easing pressure from the very
competitive prepaid telecom
segment

Case Study

Did you know, there


are only two countries
in the world where
Coca Cola is not sold?
The soft drink giant
must be doing
something good.

Including the BoP as Distributor


The Firm perspective

IB Initiative

Benefits

Coca-Cola needed to deepen


market penetration in East
Africa, and launched the Manual
Distribution Center model.

MDC Model has deepened


market penetration to last-mile
retailers where previous truck
deliveries did not reach.

The MDC is characterized by a


hub and spoke system: a central
warehousing point in the region
with manual distribution via
push carts

The Coco Cola Company created


>2,500 MDCs in Africa
generating> 12,000 jobs
supporting an estimated
48,000 households
Promoted women
empowerment.

Introduced in 1999, Coca-Cola


now relies on the MDC model as
its core distribution model in
Eastern Africa

Case Study

Including the BoP as Employees


The Firm perspective

IB Initiative

Benefits

Trade companies wanting to


derive produce from small
holder farmers, by aggregating
supply, uniform quality
standards. Ex employee from
coffee coop launched a
consultancy firm for
cooperatives wanting to export.

Bringing cooperatives into the


market place, at no cost burden.
No cure ( deal-made) no pay.

Coop support: Finance,


Marketing, Sales, Quality control
(audits), Production. Advance
ICT to manage data flows.
Services delivered on success
fee basis

Ease Agriculture 9 regular


consultants
Generating> 35 skilled jobs
in coop, 200 semi-skilled
Turnover of 3 coop 120,000
USD to USD 1,600,000
Price premium + 10% / USD
200,000

Introduced in 2012, now


supporting 5 coops involving
15,000 farmers (Coffee 4 ).

Farm to plate model: more


added value to producers and
consumers. Cutting out the
several middle-men

Case Study

Including the BoP as Suppliers


The Firm perspective

IB Initiative

Benefits

Yield Uganda recognizes shift in


global food trading dynamics
away from delinked spot
purchasing towards long term,
vertically integrated
partnerships between buyers
and sellers.

Smallholder production is
attractive due to its scalability
and relatively low production
risk.

We also believe that smallholder


producers are increasing
important stakeholders in the
food trade and food security,
sector.

Global food businesses are


becoming as concerned about
quality, security of supply and
traceability through the
production chain, as with price.
Currently Yield Uganda has 600
smallholder producers in
Northern Uganda contracted to
grow chia seed and pumpkin
seed for export to Europe.

Objectives

Why Inclusive
Business

IB - case studies

Meet B-Space

IB Lessons from
facilitators

Towards an IB
coalition in Uganda

IB The Facilitators

Several Development Organizations &


Investors are working to unlock potential of IB

The Facilitator
perspective

The IB Facilitator - Lessons learned

The Facilitator
perspective

Lesson 1
IB Strategies can be distinguished into 4
major subsets
Why Distinction?
Inclusive Business Strategies
are tailor made, there is no
one size fits all methodology

Each direction unique


challenges & opportunities

The Facilitator
perspective

Lesson 1

4 major subsets of IB strategies


Consumer
focused IB

Strategies to produce and market goods


and services, that meet the needs of the
BoP consumer. For firms, this means
tapping into a new growth market and
increasing market share.

Producer
focused IB

Strategies focus on catalysing Innovative


supply chains, that equitably include
producers or entrepreneurs at the BoP as
strategic suppliers of goods or services.

Diversifying
into IB

The IB design is for an established


medium/large company, that is
diversifying towards more inclusiveness.
The IB initiative normally represents a
small component of the whole business.

Core IB

These strategies are designed for startups, in which inclusive business is the
core business model (initiative) of the
company.

The Facilitator
perspective

Lesson 2
Implementing IB requires a long term
strategic outlook
It can easily take a decade from
inception to scale*

* Source: Monitor Institute & Business Innovation facility

Implementing requires a long term


strategic outlook, the implication

The Facilitator
perspective

Lesson 2

IB should not be mistaken for CRS, but it will also not


be a quick win cash cow: Locating IB within CSR, risks
it being kept away from mainstream business,
whereas when IB is mainstreamed, it could fall short
when measured against short term KPIs and not
benefit from a structure where innovation and failure
are tolerated.
IB needs high level Championship: Dedicated and
smart Partnerships are needed for successful IB
initiatives. Passion is important, but IB teams equally
need to have clear commercial focus, to push the IB
initiative towards profitability.

Moving
to Scale

Ideation

Impleme
ntation

Incubati
on

Realistic expectations of resource requirements is


critical: A realistic appraisal of the internal and
external financing that is required is essential, and
must be planned for before IB projects can be initiated
to avoid stalling midway.

The Facilitator
perspective

Lesson 3
IB requires patience capital
Why is the Investment decision in IB
challenging?

Why is the Investment decision in IB


Challenging?

The Facilitator
perspective

Lesson 3

Most IB Initiative are at early stage of development: Generating


minimal returns, within high risk situations as innovators of new or
untested business solutions. Implying trial and error, longer time
to market and/ or scale.
Dilution of investor returns due to first mover disadvantage:
Investor capital may also be unable to support heavy upfront
expenditures required for BoP market creation . Especially where
limited barriers to entry, provide opportunities for copycats, that
dilute the returns that can be recouped by the first mover firm and
its investors .

Moving to
Scale

Ideation
(Blueprint)

Implemen
tation
(Prepare)

Incubation
(Validate)

Unwillingness to finance VC activities: Creating successful IB


initiatives in developing countries, depends greatly on creating an
enabling external infrastructure to the firm. This is not a space that
impact investors are structured or willing to finance as it result in
further dilution of investor returns.
.
Most pioneers in Inclusive Business are still in the early blueprint,
validate and prepare stages, so this is where disproportionate support
is needed. Investors finance proven technology and business models

The Facilitator
perspective

Lesson 4
Scaling IB successfully depends on MultiStakeholder cooperation

Multi-stakeholder platforms are essential


for success

The Facilitator
perspective

Multi-stakeholder platforms are essential for


success

Lesson 4

IB

The Inclusive
Business will have
internal and external
barriers, that
require the
cooperation of
external partners
and facilitators.

Value chain

VC actors comprise
suppliers,
customers and
intermediaries, each
of whom present
unique challenges in
forging a shared
value ( mutual
benefit) relationship

Facilitators

IB facilitators, play
an important role,
especially in
facilitating those
essential but
expensive activities
that the IB or
impact investors
are unable to
finance

Regulators

Regulation that is
supportive of IB is
essential, for
unlocking barriers
to implementation
and scale.

Multistakeholder platforms that bring together all actors to find mutually


beneficial solutions that advance the implementation and scaling of Inclusive
business initiatives, is essential for success.

Objectives

Why Inclusive
Business

IB - case studies

Meet B-Space

IB Lessons from
facilitators

Towards an IB
coalition in Uganda

Towards an IB coalition in
Uganda

s aspirations for IB in Uganda


Steer Inclusive Business towards
Business as Usual

And widely recognized and adopted

as a sustainable & high impact driver

for poverty elevation in Uganda.

Towards an IB coalition in
Uganda

The Inclusive Business Accelerator Approach


The IB Accelerator exists of four components
1/

The IB Accelerator Collective: consisting of the founding


partners SNV, BoP Innovation Center, Venture Capital for Africa,
and Neyerode Business University. The core objective of their
interventions is to elevate inclusive business to the main
stream.

2/

The IB Accelerator Local: consists of a network of local inclusive


business advisory services, to identify, incubate and accelerate
business solutions to development challenges. B-Space is the
local IB office in Uganda ( next to Vietnam and Mozambique as
of now)

3/

IB Accelerator Commercial: a window of impact investors able


and willing to invest in the leads prepared by IB Collective. The
Inclusive Business Fund, provides an initial fund of 10 million
euro risk capital.
And the connector of the three?

4/

Inclusive Business online (see next slide)

Towards an IB coalition in
Uganda

IB Accelerator Online- Your virtual


incubation center
The IB Accelerator Online is a virtual incubation centre,
connecting start-ups, investors and business coaches.
The platform has been built by VC4Africa, the largest online
community of entrepreneurs and investors in the world (> 1,200
venture profiles registered, > USD $2 million raised by
entrepreneurs in funding). Entrepreneurs will have access to free
online tools, mentorship opportunities and private deal rooms.
Investor Pro Account users get tailor-made update feeds on the
type of deals they are looking for, and connect directly with the
entrepreneurs.
What is the difference between VC4Africa and IBA online?
IBA online is not confined to Africa, but global.
IBA focuses on more established businesses instead of start-ups.
Besides BDS coaching and finance brokering, IBA will also offer
local intelligence services through its local Inclusive Business
Offices (as of now, Vietnam, Mozambique and Uganda).
IB Online will be launched and goes viral in November 2014! It will
operate as a peer-to-peer network and open source approach,
efficiently connecting the power of Network, Knowledge and
Capital.
B-Space will organize an launching event in January next year.

Towards an IB coalition in
Uganda

Can we harmonize and standardize


effective IB support services?
IB advisory services are
developed in 3 core clusters

Bronze
Silver
Gold
For each cluster, B-Space defines
a clear
o IB Strategy
o IB Target Group
o IB Offer/ Initiative

.. And is typically a 6 cycle


process

Towards an IB coalition in
Uganda

The Inclusive Business Graduation Strategy

Towards an IB coalition in
Uganda

Mapping the Inclusive Business Graduation


Strategy

Towards an IB coalition in
Uganda

Effective IB Support Services covers a wide range of


interventions and calls for a multidisciplinary team
online sharing and connecting
Donor & Policy liaison, IB Impact
Measurement

We welcome talent

Developing capacity
of IB Service
Providers, Public
Private Partnership
Programme design

Understanding the market,


assessing gaps, defining
business opportunity

Feasibility assessment,
Validating
assumptions; Testing
market readiness

Go-to-market
planning,
Branding &
Positioning,
Supply chain
development
Impact Investor
linkages, Incubation
support towards
investor readiness

Towards an IB coalition in
Uganda

Ideation
Role and
Objective

B-Space supports clients to materialize their ideas and identify


Inclusive Business opportunities that represent the highest
potential gains for companies and BoP communities

Client
Benefits

A clear idea of the IB Opportunity, to make an informed go/no go


decision
A framework upon which to initiate or further develop the IB
Initiative
Assembling effective teams and innovation coalition partners

Deliverables

Sector/Industry innovation opportunities


IB Opportunity Assessment & Business Readiness at the firm level

Support
activities

Business Needs Assessments for improving IB Operations


Mapping the Market Analyses
Market & Consumer Research - including stakeholder workshop,
retail audit, sensory testing, consumer panel validation (online,
text message, telephone interviews, door-to-door surveys)

Towards an IB coalition in
Uganda

Incubate
Role and
Objective

Clients are supported with Technical Assistance services, to


introduce, pilot and refine their business operations that will
deliver a strong foundation for successful implementation and
scale of the IB Initiative

Client
Benefits

Reduced risk due to feasibility assessment - validating


assumptions, testing market readiness - input on Bankable
Business Plan development
Capacity building mng team: through coaching & consulting
Linkages to suppliers/distributors/wholesale and consumer
segments orchestrated
Liaison with development actors and investors to bridge risk
capital needed for prototype development and sales pilot

Deliverables

Feasibility assessment
IB Strategy and Business model (tested & refined)
Appropriate IB technology introduction

Support
activities

IB Model design
Co-creation of Business Plan Development
Sourcing and facilitating adoption of improved technology.
Testing & Piloting IB parameters (products, distribution,
technology etc)
IB coalition building to support the IB Initiative such as
awareness raising, grant funding, leveraging BoP networks

Towards an IB coalition in
Uganda

Implement
Role and
Objective

Implementation requires facilitation of linkages between the firm


and its upstream and downstream actors, ensuring that the
objective of shared value creation is realized and maximized.

Client
Benefits

Deliverables

Internal Business systems and processes optimized to deliver for


IB.
BoP Market linkages operational
Supply chains relationships setup.

Support
activities

Tailor-made Management Consulting support services


(accounting & admin systems, strategic planning, systems
improvement)
Baseline assessment for future impact measuring
Support with contract negotiations with farmers/ suppliers
Input for you branding & positioning strategy
Go-to-market planning

A functional IB model, that is generating shared value.


Security of supply from strong Inclusive supply relationships.
Market access (growth) into new BoP market space
Increased business profitability

Towards an IB coalition in
Uganda

case studies: Intervention ONNI


Client:
Oxfam Novib Impact Investment Fund
Objective:
Developing a pipeline of investable social businesses in Uganda
that can be linked to impact funds
How:
Tailor-made business development support services for SMEs
Team of coaches & consultants from various disciplines

Who work with entrepreneur on improving his/her business


operations

Towards an IB coalition in
Uganda

case studies: Intervention MHM


Client: SNV
Objective:
To map the market for MHM in Uganda, in order to understand
business models and market segmentation within the supply chain of
menstrual pads;
Advise on the strategic choices SNV could make to maximize its added
value for the MHM market sustainably, whilst promoting informed
choice with consideration to consumer needs and preferences
How:
1/ Space engaged with various market actors in the MHM sector in
Uganda, in order to understand:
If and how they try to reach the low income consumer
How development actors can facilitate improvement of the MHM
sector at large
The deliverable was a Mapping the Market report with suggestions for
PPP interventions and presenting the findings at the world Menstrual
Hygiene Day.
2/ Facilitation multi-stakeholder workshop, based on findings of report
3/ Orchestra BDS support

The Re-cap

Conclusions

Re-

Re-cap

Re-

Why Inclusive Business is an sustainable


approach to poverty alleviation:

Firm Level

Opportunities to increase volume and market share among a


new consumer segment. Generate new areas of profitable
growth and easing reliance on highly competitive mainstream
markets.
Confers higher security & guarantee over supply sources.
IB can reduce production costs ( import substitution)
IB can be a powerful reputation and brand building initiative;
IB initiatives can unlock additional profit generating incentives
(e.g. tax incentives)

BoP Level

Increased formal job employment. Sustainable inclusion into


profitable market systems is created, where small holders can
achieve guaranteed of future earnings
Streamlining of supply chains increases share of value chain
income to the primary producers
Empowerment of the consumer: access to affordable,
appropriate and often livelihood improving goods and services

Facilitator
level

IB is a proven and affordable model for generating sustained


share value. (Business Innovation Facility estimates that the total
cost of IB TA per household impacted in their 2010-2014 project,
will approximate $4)

There are a number of strategic partnerships that


can be leveraged for IB Initiatives in Uganda
Policy
Makers

Risk
investors

IB
Coalition

IB TA
providers

Lead
firms

We would like to keep in touch


And keep the discussion going on how we could help
filling the gaps across the IB cycle

We are always interested to discuss:


o What services might be missing?
o Identifying competencies needed
o Where do market actors see their participation
across the cycle?

Thank You!

Contact us:

Laura van Dijk

Gustaaf van de Mheen

Managing Consultant

Strategy Director

+256 788 925 799


laura@bspace.co.ug

+256 773 832 736


gustaaf@bspace.co.ug

Stanley Musiime
Inclusive Business Advisor
+256 752 449 590
stanley@bspace.co.ug