Back to basics: emerging business models

Business leaders in the West are looking to emerging markets for revolutionary ways of working that overturn accepted models of profit-making and efficiency. Vision reports

Imagine trying to cook 200,000 hot lunches every day, and then deliver them on time in a city where traffic is regularly gridlocked. And then imagine having to pick up and return the food containers, collect the money and pay the drivers – most of whom cannot read or write.

The logistics and organisation needed would almost certainly defeat the best efforts of any European or American food chain, airline or supermarket group, perplex corporate distribution teams and baffle efficiency-driven business leaders.

But a small miracle has taken place in Mumbai nearly every working day for more than 100 years. Five thousand or more white-capped “dabbawallas” get on their pedal bikes, each loaded with around 40 lunches packed in steel or plastic containers called tiffins.

They then weave their way through the throngs of India’s business capital to deliver lunch to shop, office and factory workers. Meals might include dishes such as daal, vegetables, chapatis and rice, or specialities such as Mexican and macrobiotic. On average, they fail to deliver on time just one meal in six million.

New approach

It is testimony to what quite ordinary people can achieve, but what excites Western business leaders such as Richard Branson, Harvard Business School professors and even governments is that the dabbawallas are turning Western business models on their head.

They are recognised as a textbook example of efficiency and organisation, but instead of using a complex, technology driven administrative system, they have built a giant business on trust, experience and, above all, the knowledge and intelligence of families. The dabbawallas do not need complex management structures or computers.

Earlier this year, Arvind Talekar, who worked as a dabbawala for two years, and is now a spokesman for the Nutan Mumbai Tiffin Box Suppliers, came to Dubai for the GCC (Gulf Cooperation Council) 3rd & 4th Line Leaders’ Development Conference.

“We keep it simple. I have seen that many times technology doesn’t work. It is best not to use it, because if it fails, then we can’t deliver the boxes on time. We are illiterates, and we prefer to keep a mental note. We don’t depend on gadgets,” he said.

In an increasingly globalised world, the West is looking East and South to emerging economies for new business models, and is finding some unique ways of doing things. It is a case of “children teaching their parents”, says Alexander Settles, a professor of corporate governance at Moscow State University.

Africa, once disparaged for its seeming lack of business innovation, is now exporting pioneering ideas that are being picked up in Europe and the US. Its young population and lack of infrastructure has encouraged entrepreneurs and corporations to leapfrog the West.

Kenya is at the centre of a mobile phone revolution that is expected to impact Europe and the US imminently. Six years ago a company called Safaricom introduced a revolutionary service called M-Pesa, which allowed users to store money on their mobiles.

Today, you can simply dispatch funds by text and the recipient converts it into cash at a local M-Pesa office. Almost one third of Kenya’s economy now goes through the mobile money system.

But banking is just the start of the African mobile revolution. The system has moved into a platform for all sorts of other businesses that Western companies are eager to explore. In Nairobi, the phone is used both as a savings account and to collect money for funerals and weddings and to pay for a cup of coffee and electricity. Google Chairman Eric Schmidt was in Nairobi earlier this year and said he was impressed.

Now M-Pesa is coming to Europe. By the end of 2013, Visa Europe and 15 other major companies and banks including RBS and NatWest will have launched the system in Europe. It is also being launched in India by Vodafone, which hopes to tap into the 700 million people who have no access to conventional banking.

Mobile tech

New business models are also helping light up the world. Mobile money transfers can now switch on solar-powered lamps in the millions of homes without power. It is cheaper than the traditional rudimentary, low-quality kerosene-fuelled lamps, and the same technology is being extended to pay daily for fridges and even irrigation.

In India, solar lamps are also taking over, thanks to a radical new business scheme devised by energy research group Teri. People can buy the lamps on micro-credit, but in the past few years nearly 450,000 homes have turned to renting them for a few pence a day. How it works is simple: a local villager is trained to run a lamp rental business, with prices for renting the lamps set at no more than villagers used to pay for kerosene. Villagers rent fully charged lamps in the evening and drop them back to the charging station the next morning to be replenished.

The business model is exciting Western companies. Teri does not make, distribute or even sell the lamps. Instead, it acts as a combined social, developmental and technical enterprise. Its scientists and designers work closely with manufacturers to improve the quality and reliability of the lamps, and bring down their cost, while other teams work with villages, NGOs and banks to identify people to run the charging stations. Teri helps to set up repair shops, trains people and provides technical support.

“People were paying about US$1 per month for kerosene lamps, so we had to have an economic model which allowed people to pay about the same as they did before. At the start, the lanterns used to cost about US$100 each, but now they are down to US$15-$30. At this rate, in 10 more years, most Indian villages will have light. People were suspicious to start with, but now they are queueing to put their names down for them,” says Ibrahim Rehman, director of Teri’s social transformation division.

The consensus is that businesses must reinvent themselves and that success depends on philosophy as much as on technology and education. The West no longer has a monopoly on what works. Instead, it may now be the turn of emerging countries to come up with the best ideas for the future.