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Reaching the rich world’s poorest consumers

Harvard Business Review article by Muhammad Yunus, Frédéric Dalsace, Bénédicte Faivre-Tavignot and David Menascé

In their article ‘Reaching the rich world’s poorest consumers’ (Harvard Business Review, March 2015), Frédéric Dalsace, professor of marketing and Social Business, Entreprise and Poverty chair professor at HEC Paris, Bénédicte Faivre-Tavignot, affiliate professor of strategy at HEC, and David Menascé, managing director of Azao and lecturer at HEC, worked alongside 2006 Nobel Peace Prize laureate Muhammad Yunus to study innovative social businesses models developed by multinationals in France.

 

‘Reaching the rich world’s poorest consumers’ HBR

Recently, several major French companies have experimented in tackling poverty in France. Martin Hirsch, former French High Commissioner in charge of poverty alleviation—now chief executive of the Parisian public hospital system—and Emmanuel Faber, vice-chairman and CEO of food-products multinational Danone, have helped develop Action Tank Entreprise et Pauvreté, an initiative of the HEC Paris Social Business Chair, since its establishment in 2010. Under the leadership of Jacques Berger, the nonprofit has mobilized leading multinationals and NGOs to explore the social business model in France, among them Danone, Schneider Electric, Renault, oil supermajor Total, Veolia, Essilor, Bouygues and the Red Cross.

The authors tackle the question of how best to meet the needs of low-income populations in France. In the article, they note how social business is a credible alternative to the traditional low-cost business model. Unlike the low-cost model, with short-term profitability the predominant metric of success, social business have a diverse set of goals, though not without real benefits.

The first results come from experiments conducted in cooperation with Action Tank industry members, notably manufacturers Renault (carmaker) and Essilor (eye care company), the construction giant Bouygues, the telecommunications group SFR, and energy multinational Schneider Electric. These indicate that the social business model is not only an effective way of combatting poverty, but has real benefits in terms of innovation, employee satisfaction and corporate image.

 

The social business model is both an efficient way of fighting poverty and a productive source of new business ideas.

 

Innovation

Social business allows low-income customers to play a central role, rather than merely the development of low-cost products. The main objective is to provide a sustainable flow of high-quality goods and services at attractive prices. Social business also encourages an innovation ‘ecosystem’ in which corporates, NGOs and public authorities can collaborate.

Motivation

Social business generates employee goodwill, and a strong sense of purpose. Internally, the employees no longer see themselves as pawns exclusively in the hands of shareholders.

Reputation

Substantial reputational benefits flow from social business activities that, by extension, create trust among the stakeholders and secure the firm in case of crisis Nonetheless, developing a social business plan purely to reap the rewards of an improved image is the easiest way to derail such a project. An improved image is the result of a sincere commitment to corporate social responsibility, not a precursor.

Other multinationals, including Veolia and Michelin, are now seeking to implement similar projects. Following such success in France, other Action Tanks have grown in Portugal, Belgium and Germany.

Three years’ experience in France has enabled the authors to identify the key factors in the success of a social business:

  1. Prioritize the social goal, and business spillovers will follow
  2. Be patient and selective in partnering, as it takes time to construct the right model
  3. Keep the model as simple as possible
  4. Experiment locally before expanding

Still in its infancy, the authors conclude nonetheless that social business has the potential to create market-based poverty-alleviation solutions, while generating positive business outcomes.


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