Development and Cooperation in the 21st Century

It is now almost three months that I have been working full time as a business manager for “The Constellation for AIDS Competence”. While I have always been convinced of our societal vision of working towards an AIDS competent society I must admit that I didn’t really know how an organization that wants to contribute to such a goal should concretely look like.

When I started working for the Constellation I remembered the vision of Jim Wolfensohn, the former World Bank President, who aimed at transforming the institution he was heading into a “knowledge bank”. The vision is attractive, but that model wouldn’t really do it for us because I think the Bank got stuck in an old “knowledge banking model” that was hoarding its assets (i.e. storing knowledge) rather than putting them to productive use. So it wasn’t really something we could identify with as an organizational model.

Now, after three months of working the fog is clearing. Astonishingly, I realized some things about our organization more clearly today when I was reading an article in The Economist. The text was about one of the most successful Internet companies to date, the online auction platform called eBay. One of their top managers, Bill Cobb, was saying “managing is the wrong word for what we are doing. We enable, we listen, we respond”. He went on to emphasize: “generally in a company the employees know the most about the business. In eBay, our community knows more than we do”.

While there are certainly limits to comparing eBay to the Constellation I believe we can learn a lot from eBay. We are also a platform. While eBay catalyzes local businesses and auction exchanges over the Web we catalyze local responses to AIDS and the exchange of experiences. Like eBay we think that the individuals, communities and networks we work with know more about their “business” than we do. Our roles are very similar: to connect, to foster exchange and to grow our reach in order to grow the value of our platforms for the user’s benefit. And it all comes together in one organizational mission: listen and enable to foster local action.

I have just started working on business models for NGOs. It is actually quite interesting to see that not-for-profit organisations have similar needs in terms of business modelling than the business sector. Although not many organisations want to admit it, some early adopters (or change agents) in the NGO world are realizing that there is no way around applying modern management practices to their organizations if they want to survive...

As soon as I have some results from my work with some NGOs I will post the material on the Web. As usual, interested people may contact me by email.

A while ago I have conceptually represented the successful business model of GrameenPhone (GP), a telecom operator in Bangladesh. I see conceptual modelling as an elegant way to share successful experiences in development. The mini-case presented below focuses particularly on the Village Phone Program of GP and is structured and presented through the nine business model building blocks described above.

GP started its operations in 1997 as a joint venture between four companies from as many countries: Grameen Telecom of Bangladesh, Telenor AS of Norway, Marubeni Corp. of Japan and Gonofone Development Corp. of the United States. Today this venture has more than 820,000 subscribers, commanding 70 percent of the market share. The company has become one of the largest corporate tax-payers in the country while some 30,000 people directly or indirectly depend on GP for their livelihood.

GP's Village Phone Program aims at connecting all rural villages in Bangladesh through sharing mobile phones. It presently has 23,000 Village Phones that are in operation around the country. The Village Phones in operation presently provide access to telecommunications facilities to some 40 million people in remote, rural areas.

Value Propositions. The Village Phone Program has two main value propositions that it offers to two segments of target customers.

• Value proposition 1: In co-operation with Grameen Bank, a micro-credit institution, GP sells mobile phones on credit to creditworthy women in rural villages. The women then become local operators and sell GP's telecommunications services to the villagers. For them this has become an new opportunity to make a livelihood with as a micro-enterprise.
• Value proposition 2: Through the intermediary of the village operators GP sells communication services to villagers. Contrary to all predictions the rural poor have shown an enormous interest in these communication facilities that have become a tool to increase their productivity.

Target Customers. The Village Phone Program targets two segments of customers.

• Target Customer 1: Creditworthy village woman living in the centre of a village and willing to operate a telecommunication service.
• Target Customer 2: Villagers in rural Bangladesh even with very low incomes.

Distribution Channels. The Village Phone Program markets its two value propositions through two distinct channels.

• Channel 1: The first value proposition is marketed through Grameen Bank because as a micro-credit institution they possess the information of who is creditworthy and could be interested in becoming a village phone operator. And it is the Bank that finally lends the money to the future operator to buy a GSM mobile phone.
• Channel 2: The actual telecommunication service is marketed to the villagers through the local village phone operator.

Relationships. The main relationships GP maintains are with the village operators. They are essentially handled through the local branches of Grameen Bank. The relationships with GP's final customers, the villagers are handled by the village operators.

Capabilities. This business model building block describes the core capabilities GP's business model is based on and that it has to ensure in order to function. These capabilities are offered internally or through partners.

• Capability 1: Network infrastructure management, ensured by Grameen Telecom
• Capability 2: Billing, carried out by Grameen Bank.
• Capability 3: Identifying village operators, done by Grameen Bank.
• Capability 4: Service provisioning, offered by GP

Value Configuration. GP's value configuration is a complex relationship of the activities and resources of the different actors involved. These are Grameen Bank, GP and Grameen Telecom. All parties ensure an essential function in their main domain of expertise and the whole works as a network organization.

Partnerships. As the value configuration illustrates GP's Village Phone Program is based on a number of partnerships in different areas.

• Partnerships in financing: Grameen Telecom, Telenor, Marubeni, Gonofone, World Bank.
• Partnerships in infrastructure: Grameen Telecom, Telenor.
• Partnerships in customer handling: Grameen Bank, Village Operators (micro-enterprises).
• Partnerships in service provisioning: Grameen Telecom.

Revenue Model. GP's Village Phone Program revenue model is based on revenue flows from the village phone operators who offer telecommunication services to the villagers on their own account. In fact, the operators can independently price their services though GP gives price recommendations. The billing of the operators, a critical activity of every telecommunication company is done through the partnership with Grameen Bank.

Cost Structure. GP has two main categories of expenses to cover.

• Network costs. GP pays Grameen Telecom for the network capacities it effectively draws on in order to offer its services to the villagers.
• Administration costs.

I stumbled across this webiste this morning, which shows the growing influence of Civil Society in questions of international development politics. It's about the election process & candidates for the position of the World Bank President (because James Wolfensohn has definitively announced he is going by June 2005).

If Civil Society may not yet have sufficient power to influence the decision itself, it can certainly contribute to making the process more transparent!

WorldBankPresident.org

Who do you think will be the next President and in what direction will he guide the Bank? Wolfensohn went towards the "Knowledge Bank"... Will the next President have the wisdom to go towards a "Wealth Facilitator's Bank"?

Lately I had a discussion on the bytesforall mailing list about the dangers of donor funding, particularly in Information and Communication Technology for development projects (ICT4D). I tried to show why entrepreneur-based approaches in offering ICT services in financially poor areas are in many (of course not all) instances better:

If I am an entrepreneur or company I will offer my customers a service they a) need and b) are willing to pay for. As a consquence, if the services are useless nobody will buy and if they are too expensive nobody will pay. Hence, the entrepreneur or company will either adapt his product or lower the price. If not, he will go bankrupt...

In the case of the Grameen Village Phone project the rural poor were willing to pay a certain price for access to communication for various reasons.

Now, in many donor-funded projects these incentives are just inexistent... That is simply a fact. There is little reason to a) automatically adapt the service to the needs of the "customer" and b) do it at reasonable cost (i.e. price)... As somebody lately told me: donors often have their own agenda and goals that do not necessarily coincidence with those of the communities they address.

Following from this I conclude: Donor-funded ICT4D projects should only concentrate on areas where market mechanisms don't play and where there is little opportunity to build on a sense of entrepreneurship and ownership.

The efforts of the international community when it comes to development are respectable but not impressive. However, the results are largely disappointing. William Easterly, for example, documents this failure in his book "The Elusive Quest for Growth".

I believe this non-performance of development work is mainly due to the focus of development institutions on macro-economics and a bird's eye view of policy making in general. With no means I want to state that these are not of importance, yet I think they are only part of the story. Focusing on this macro-view is as if we would believe that an economy with a sound policy framework wouldn't need any companies and knowledgeable managers and entrepreneurs to function.

So I think the development community should complement their macro-view with a micro-view. For example why not learn from modern management theory? A concept that is currently en vogue is the empowerment of employees to foster innovation and rapid response to market changes. It's all about respecting an employee's knowledge and competencies and giving him the space to own a part of a company's performance by giving him the power to act. One hugely successful "development initiative" that has built on ownership is the Grameen Village Phone project.

Another concept from management theory is knowledge management. The World Bank is currently trying to apply this concept by repositioning itself as a knowledge bank. Another place where knowledge management has had an impressive, yet small, impact was at UNAIDS. Through a partnership with BP they introduced modern management tools to empower knowledge exchange between communities in order to reply to AIDS.

The application of modern management theory and tools in International Organizations and NGOs is still rare but in my opinion essential if we want to achieve results in development.

Nice overview of facts & figures on development and globalization: http://www.unctad.org/en/docs//gdscsir20041_en.pdf

This document relased by the United Nations Conference on Trade and Development (UNCTAD) provides analyses supported by detailed statistical documentation. The report is aimed at a broad audience, including readers with little or no background in economics. It provides an overview of the evolution of developing countries in the context of globalization. It is a quick-reference tool for evaluating the growth prospects of developing countries. General topics covered include population and economic trends, external finance and debt, foreign direct investment, transnational corporations, international trade, production and trade of commodities and manufactures, and information and communication technologies (ICT). Dated 2004, 119 pages. (Rafael Hernandez)