ERB PERSPECTIVE BLOG

By Santiago Bunce

OLYMPUS DIGITAL CAMERAWelcome back to our blog series Social Enterprise: Understanding the Base of the Pyramid. Over the past few weeks we’ve been taking a look at how businesses can avoid some of the potential pitfalls in emerging markets. This week we examine the benefits of collaborating with local organizations to mitigate some BoP market barriers.

In previous posts we have noted some of the difficulties of providing products and services to the BoP.

  • Poor infrastructure in developing countries may limit distribution of products and services.
  • Limited households resources may make consumers less likely to purchase new products from unfamiliar brands
  • Products that are not easily integrated with day-to-day activities and lifestyles are unlikely to penetrate the market enough to insure profitability.

To some extent, these issues can be mitigated by partnering and collaborating with local organizations and experts. As demonstrated in the examples that follow, partnerships with local organizations and community leaders significantly increase the likelihood of a product’s successful adoption. Continue reading

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by Jill Carlson, Jenny Cooper and Marie Donahue

DetroitSkylinebyAndrewLangdal-Flickr-600

Detroit Skyline. Photo credit:  Andrew Langdal, Flickr

Cities across America and around the world are feeling the impacts of climate change, and in their long-term planning efforts should be incorporating climate change—both reducing greenhouse gas (GHG) emissions and adapting to the impacts of climate change—into their decision-making.

A key step in the development of such urban climate change policy—a climate action plan—is understanding how much greenhouse gas (GHG) emissions the city produces, and a baseline for these emissions. In other words, conduct a GHG inventory.

This week, Detroiters Working for Environmental Justice and the University of Michigan Center for Sustainable Systems published the first-ever comprehensive GHG inventory of Detroit, which was written by a team of University of Michigan graduate students from the School of Natural Resources & Environment and the Erb Institute (U-Mstudents complete Detroit’s first comprehensive greenhouse gas inventory). The GHG inventory will serve as a critical component of the work of the Detroit Climate Action Collaborative, a grassroots multi-stakeholder effort to develop a climate action plan for the city of Detroit. Continue reading

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by Tamar Koosed

visionspring-1

A VisionSpring entrepreneur screens a potential customer for reading glasses. Photo credit: Gaurav Parnani,  Erb Institute MBA/MS Program alum.

Welcome back to our seven-post blog series, Base of the Pyramid – The Underlying Potentials and Pitfalls of the Pyramid. Check out our first and second posts:  Social Enterprise: Understanding the Base of the Pyramid  and  The Business Case for BoP Strategies  to contribute to the dialogue.

This week’s blog discusses a common mistake made by companies entering BoP markets: assuming that social needs quickly manifest themselves as market demand. We provide three examples of how companies have had to change course in search of demand and profitable and sustainable business models. BoP markets face many challenges including lack of reliable distribution channels for scaling up efforts, limited product awareness and understanding, scarce after-sale support, and cash poor consumers, to cite just a few. Continue reading

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by Jacob Talbot

power_stripBehavioral approaches to energy efficiency have gained increasing acceptance over the past several years. Policymakers and regulators now incorporate behavioral techniques into their toolkits and private enterprises such as Opower and Tendril have achieved success in deploying for-profit behavior change programs. Thus far, these behavior change initiatives, as well as most research on behavior change strategies, have focused on influencing the behavior of people in their homes. There are legitimate reasons for this emphasis, but now with substantial experience in deploying behavioral programs in domestic settings, there is new attention toward using behavior change techniques to influence energy consumption in commercial buildings.

This new interest is well founded. Commercial buildings account for about a fifth of all energy use in the U.S. as well as a large portion of the waking hours during which people make decisions about how to use energy. Not only is the magnitude of energy use large, but also recent estimates by E Source place energy waste in U.S. businesses at a $60 billion annual cost.

In light of this opportunity for energy savings, the commercial buildings sector has long been a target of energy efficiency rebate programs, but these programs have largely ignored occupant behavior, in part because there are unique challenges to addressing behavior in commercial settings. For example, commercial buildings are far more heterogeneous than homes, so it is difficult to concretely identify which behaviors will be most impactful in a given building without seeing the equipment in situ. After all, how much do the energy loads in your local corner store resemble those of the coffee shop across the street? These differences make it challenging to scale behavioral interventions. Continue reading

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By Santiago Bunce

Tenda Atacado in São Paulo, Brazil

Tenda Atacado in São Paulo, Brazil

Welcome back to this seven-part blog series: Social Enterprise: Understanding the Base of the Pyramid. This week, in our second post, we are exploring the business case for engaging the market at the base. Specifically, we’ll take a look at a leading Brazilian food retailer and the steps they took to engage the BoP and obtain profitable results.

Companies attempting to access the BoP often encounter internal and external barriers. Two typical examples include difficulty acquiring buy-in from key decision makers and the lack of data to conduct reliable market analysis. In addition, there is some doubt that the sheer magnitude of the BoP is enough to make engaging it profitable. While the BoP is comprised of roughly 4 billion people, according to some definitions, this population has a very low income per capita and very limited spending capital or disposable income. These factors, among others, often make companies hesitant to enter low-income markets.

Despite these challenges, there is evidence to support the business case for BoP engagement strategies. In addition to its immensity, the BoP market is composed of active consumers who spend significant amounts of money. Estimated at about $5 trillion, this market is mostly dominated by spending on food, but also sees heavy spending in energy and health (data from the World Resource Institute: The Next 4 Billion). Little competition and lack of existing brand loyalty among consumers may also make acquiring new customers easier in the BoP compared to more mature markets. This suggests that the BoP market is ripe for innovative products and services that meet a need and deliver a positive impact. Continue reading

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By Kelsea Ballantyne

Professor Ravi Anupindi

Professor Ravi Anupindi / Photo credit: Kelsea Ballantyne

When I joined the U of M Presidents Committee for Labor Standards and Human Rights last year, I had no idea how much it would open my mind to the power universities have to transform global supply-chains.

Helping to organize the Symposium on Global Human Rights & Labor Standards (commemorating the 15th year of the committee), brought me even more awareness of this enormous potential as well as a sense of the huge responsibility we bore to ensure that this event would push conversations to action.  I knew the market for university branded goods was large, but I had no idea that the market for collegiate licensed merchandise was worth more than $4.5 billion last year.

Following U-M President Schlissel’s opening remarks, Michael Posner, Assistant Secretary of State for Democracy, Human Rights, and Labor, presented his argument  for the role of American Universities in a globalized world citing university endowments ($450 billion dollars), food service, construction of new buildings, etc. “Each year, American colleges and universities spend hundreds of billions of dollars on commercial contracts for goods and services.” Continue reading

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MiTienda_IDB

Photo credit:  Inter-American Development Bank

By Santiago Bunce

Welcome to the first of a 7-post blog series entitled: Base of the Pyramid – The Underlying Potentials and Pitfalls. Each week will feature a post highlighting Base of the Pyramid (BoP) business models, theories, and examples. The series will showcase models that are serving the underserved while generating social impact and profits.

To ensure we are all at the same starting point, let us offer a brief introduction regarding the BoP. Debate exists regarding who exactly comprises the BoP. There is a range of thoughts including some sources who note that the Base of the Pyramid refers to the nearly 2.5 billion individuals in the world who live in extreme poverty (under $2 a day), while others expand the BoP to simply include the low income populations within a country or region, whether they live in extreme poverty or relative poverty. What is certain is that the BoP population is not uniform as it varies across regions and countries and that those at the base are not actively engaged or integrated in the formal global economy. Continue reading

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Remarks to the Erb Class of 2017, By Andy Hoffman

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Community Day, Class of 2017 and 2016 mid-year admits

One of the benefits of being a professor is that we forget that we are aging. Each year, we are met by a fresh crop of new students that are always the same age.  So, in effect, we are constantly surrounded by a group of people that never grow old.  But of course we are aging.  I can see things as they have evolved while you, the new students, see everything as if it were new.  I envy your perspective.

I have been reflecting on this passage of time as I enter my last year as Faculty Director of the Erb Institute.  Though my five-year term ends in September 2015, I will still stay involved with the institute and continue to work on sustainability research, education and outreach.  But the pending end of my term as Faculty Director marks a significant point in our history that I think you will benefit from knowing, especially on this occasion of  “Community Day”  as you mark the beginning of a new school year. Continue reading

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by Theresa Miranda

Photo: Courtesy of “The Rawanda Focus” (focus.rw/wp/)

How will it be possible to meet the needs of the 1.4 billion people who lack access to electricity? One of the most common arguments is that developing countries will leap-frog developed countries to implement cutting edge technology just as they did in eschewing landlines in favor of mobile phones. New technologies emerge, costs drop, and developing countries take advantage of the R&D money spent by developed countries, bypassing traditional costly centralized infrastructure solutions in favor of light-weight decentralized solutions.

I espoused that view on more than one occasion before spending twelve weeks on the ground in Rwanda, where I worked with Nuru Energy, a company that provides human- and solar-powered LED lighting and mobile phone recharging to rural villagers who lack access to electricity. It became clear that the argument ignores some fundamental differences between phones and lights including:

  • The absence of substitutes in the case of phones
  • The difference between lighting needs in developed and developing countries
  • The ability to easily connect the product with meaningful benefits

Yet, it is precisely these differences that make access to lighting a much bigger challenge than mobile phone adoption. Continue reading

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