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V K Madhavan

Operations Director , A4e India Pvt Ltd

TEDCRED 200+

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Mere transfer of approaches and processes from successful enterprises to poverty eradication will not work, and could set back efforts too

Increasingly, with entrepreneurs turning their attention to poverty eradication - rarely to address the root causes of injustice or inequality- approaches and processes used successfully in enterprises are being used for social development and poverty eradication. There is a belief that (a) profit - the greatest incentive - is the crucial differentiator to solve problems that have hitherto remained and (b) that a simple solution or product exists or can be created, for every problem - a solution or product that can be made available on a large scale with the accompanying economies.
The process of finding simple solutions is leading to an over-simplification of why poverty exists and persists. The belief that 'a product' exists for every need - it only needs to be invented if it doesn't exist - doesn't recognise the inherent complexity of human life and motivations.
The emphasis on 'products' rather than in 'processes' and 'people' is leading to the root causes for poor governance and the persistence of poverty being swept aside.
We need to pause and apply tools that make for successful enterprises selectively without losing sight of the fact that the reasons for poverty are not just complex but intrinsically linked to human emotions - fear, love, hatred, desire, ambition, shame, insecurity, joy ....
The need for the hour is for a hybrid approach to social development - in other words a new path and not a blind belief that the 'market' offers solution to all our problems.

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      Feb 16 2011: That is not necessarily true: Huge profits have been made when China and India (although there is still a substantial amount of poverty left) have started to develop. In fact, isn't it quite the opposite: As regions develop (ie. poverty decreases) this increases the potential for non-zero-sum games, as these regions are integrated in a web of dependencies, specializations and sharing of labor. So there is clearly a profit to be made from eradicating poverty. However, this is an effort that requires long-term investment and patience, whereas there are other investment opportunities which yield more short-term profit.
      The "problem" isn't that there's no profit in investing in poverty regions, but that there's more profit in other regions like emerging economies.
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        Feb 16 2011: I believe this will change. D.Light and others are breaking barriers to change our minds about the profitability of serving those who earn less then $2 a day. Paul Polak is building a new company to prove that there is respectable profit to be made. I look forward to seeing billions being served by sustainable, scalable, social enterprises.
      • Feb 16 2011: Hi Phillip,
        I think you have missed the point being made by Mark Meijer & V.K. Madhavan. Everything you mentioned above speaks to the typical top down Economic & Business models that is pervasive in the Poverty realm, however, we are saying that these approaches limit and stunts success when applied in a bottom-up approach by social entrepreneurs. Further; we are advocating a new way to think about profit, what it is, how to achieve it and what it means to our clients. Expanding the definition of 'profit' leads additional success. A bottom-up approach requires that we think of the client first, even before creating a business plan or economic model. Putting our own training and perceptions aside so that we can really see what is in front of us without our parabolic screen. Whilst your argument makes complete sense if you are a government agency or an enterprise not focused on poverty, success by Kiva.org and others didn't come from starting with those models. -Cheers
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      Feb 16 2011: Mark.
      Is it really that there is no profit to be made or have we been ignorant of one billion potential customers?

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