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Archive for June, 2010

Hunger-driven creativity

June 30th, 2010

One of my favorite charities is Opportunity International, a global non-profit that in the past 27 years has put in place an incredible network of overseas banks and NGO partnerships to provide small loans (aka “micro-finance”) to poverty-stricken families starting small businesses. These occur in Africa, Asia, and Latin America primarily.

A lot of small loans moving the needle

According to Opportunity’s SVP of Resource Development, Dave Knibbe, 1.3 million individual loans (each on average about $150 or so in size) were given out to “clients” in 2009. That’s a LOT of entrepreneurs getting funding at a micro level…enough to move the needle in a small community, given the loans are appropriated on a group basis (usually 20-30 families cross-collateralizing each others’ loans as a group and paying small interest weekly) Opportunity claims a 96+% repayment rate on these micro loans…and the loan money is then available for the next family and the next and the next….

Opportunity reports that there are some 2 billion people in the world today living with under $2/day in wages or income.  The organization is on a mission to affect 1 billion people through it’s financial operations in the coming years.

Seeing the work – in Latin America

My recent trip to see Opportunity’s work took me (along with daughter, Kayla), to Colombia.  We visited deeply impoverished sites outside the capital, Bogota, and the coastal city of Cartagena.  Our week-long visit with other families who give to Opportunity, consisted of visits to the local bank/NGO offices to meet “loan officers” and regional managers and then out to visit “clients”, most of whom ate living in unbelievable conditions…photos of the trip are posted HERE.

What drives creativity?

This is my 3rd trip to see this innovative organization in action – and these trips are ALWAYS uplifting…because it turns out that the street barracks of Cartagena, Colombia — or the villages of Malawi, Africa or the inner city in Manila, Philippines — are full of highly motivated and creative entrepreneurs. They create businesses ranging from pottery to vegetable stands to leather goods to beauty salons…

These Entrepreneurs are a whole lot different from those that I’ve deal with for the past 20 years in the Silicon Valley. The education they have may not be what it is in the Silicon Valley, but the drive is is more focused and never-ending.

By  our U.S. standards these are very basic businesses with basic business models.  What amazes me is the differences in motivation. It got me thinking about 3 types of entrepreneurs…the typical American entrepreneur I’ve engaged with either seems to be focused on social needs or conquest/wealth generation.  For example, I know a lot of young entrepreneurs who have engaged with Web 2.0 and developed unique social applications – it was their way of providing something back to the world to allow us all to be more social.  Some of these companies haven’t created great wealth, but they’ve connected people like never before. Most of the entrepreneurs I’ve dealt with are after wealth creation or simply proving they can build something (“out for the kill”). Looking at Abraham Maslow‘s theory on hierarchy of human needs (see purple band above), these two sets of entrepreneurs fill needs for Social growth or Esteem.

The Opportunity entrepreneur (90% are woman, ages 25-55), in contrast, is driven by the need to feed her family personal hunger, desire for shelter, desire for safety – and or desire to see her children have a better life. Most are driven by all three.  Farther down on Maslow’s hierchy they are.  There’s quite a bit of motivation involved when your food shelter and clothing depends upon it.  The result is quite a bit of human ingenuity…finding solutions to getting around the system, using I call it true hunger-driven creativity.

At the top of the Pyramid

The third type of entrepreneur, an area that I am exploring in detail with my own career these days, is what I call the “social entrepreneur”.  These are typically those that have started a non-profit, or even a foundation, to serve others or a for-profit with a triple-bottom line.  These are sometimes successful entrepreneurs who have decided to give something back to others. Examples include Bill George, Bill & Melinda Gates, Bob Buford (author of HalfTime). Their Life work is focused on the top of the pyramid, self-actualization – typically in giving to others.

Although I teach a course at UC Berkeley about all the impressive ways that entrepreneurs use their creativity – in all aspects of business – I’m truly amazed when I visit and interact with hunger-driven entrepreneurs.

Of the 3 types of entrepreneurs, can you guess who shows the most gratitude?

Bogotá

Pepsi’s Innovative Business Model for Entrepreneurship

June 14th, 2010

I was intrigued to hear about the Pepsico 10 challenge, announced at InternetWeek NY in May.

The challenge involves four main components:

How it works

Contestants from around the world are invited to submit their companies for the contest. The only criteria is that require is that the company already have a product, be producing >$250,000 year in revenue, and (presumably, but it isn’t stated on the website) the company should be focused on the Internet (but who isn’t nowadays?).  Ten companies will be selected during a 2-day event at Pepsi headquarters as finalists and invited to pitch to a panel of VCs, Pepsi execs, and other participants.  The winner wins money, fame and a host of contacts for increasing the lifespan of their company.

More details available here.

What’s innovative about this?

It seems like a win-win-win for all parties involved. Entrepreneurs who submit plans presumably get feedback on what works and what doesn’t about their current business model – and what’s needed to scale their businesses.  Mashable is a big winner in associating itself with leading edge entrepreneurial ideas – particularly those that are related to social media. This helps steal the thunder from its competitors (like TechCrunch) by allowing Mashable to report on innovations in entrepreneurship AHEAD of the competition and track potential hot companies of tomorrow.  InternetWeek wins by associating itself with a new model for recognizing entrepreneurship – potentially increasing its readership and following (among those who want to be on the leading edge of technology).  Highland Capital wins by seeing some of the best plans on the planet.  Pepsi, who presumably is matching the largest monetary and time commitment to this experiment, is potentially the biggest winner (although it may be hard to measure this) by associating its most precious asset – it’s brand/name – with young, risk-taking, intelligent entrepreneurs who are trying to change the world. In the world of the Millenials, these young social media start-up execs represent the future leaders…so Pepsi is associating itself with a great group of people.

Wait, Where Have We Seen This Before (Welcome Back Kotter)?

For those of you old enough to remember, the word “challenge” has a rich history at Pepsi, and is in fact a major component of the Pepsi brand. In 1981, here is one of the early commercials released by Pepsi in a series of “Challenges”…which went on to win many advertising and branding awards:

So, creating a “challenge,” in this case to find leading edge social media companies and technologies is a smart fit for this particular company and brand.

What Pepsi, Highland Capital and Mashable May be Missing

A short-coming I see from this model is the lack of specificity in the type of business start-up that is being sought.  What area of consumer internet should the company be from?  What customer needs should the technology address?  By being open to a wide range of opportunities, I think the contest creators may get a lot of applicants who really do not fit the criteria for what Pepsi was initially looking for.  I also think a lot of companies will pass on the opportunity to submit applications because of their uncertainty as to what Pepsi is really seeking.  On the flip-side, by keeping the “scope” wide, presumably the challenge brings in a wider range of opportunities.
Another short-coming might be awareness. The best plans will come to this contest only if entrepreneurs are aware of the contest.  Among 10 entrepreneurs I personally spoke with, only one was aware of the “Challenge” and no one I spoke with planned to submit a business plan.  (yes I realize my sampling was small and random)  Some significant marketing dollars (and lots more PR) need to be applied to this contest in order for it to become known to the community.  Perhaps partnering with Universities, other online social media broadcasters (TechCrunch or Vator.tv, for example) will help in the long run. As a professor at UC Berkeley, I’d love to get my MBA and Engineering students thinking about the contest next year.  Hopefully, Pepsi realizes that it needs to commit to 4-5 years of this model in order to really reap the benefit.

Noth withstanding these things, I like the fact that a major brand who could have spent millions by throwing out more advertising, billboards, and magazine back covers, is devoting some attention to this (yes, I realize the budget for this contest was infinitesimlly small compared to Pepsi’s overall brand annual budget). Give them kudos for trying…and give Mashable and Highland high marks for assisting in an innovative new approach to partnering for entrepreneurship.

Y Combinator …look out! There’s a new innovative model on the block.