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Thursday, January 20, 2022

Cultivating impact entrepreneurs

Sectors like agriculture, health and education should be renamed as impact sectors as they can impact the lives of many

Written by Ronnie Screwvala | Mumbai |
Updated: March 21, 2014 4:30:46 pm

I recently read about a company in Israel developing technology to create water out of thin air. The idea is literally an elementary one—use the moisture in the air to turn it into water in arid areas. The company created a water generator, which runs on solar or electric power and has the capability to produce 10-20 gallons of fresh, cold drinking water per day! The concept is not just innovative but builds on scientific knowledge and know-how that we already possess. This innovation, if put to good use, has the potential to bring an essential commodity like drinking water into the lives of thousands living in water-starved regions. This report set me thinking about the situation in India.

I often find a restrictive mindset at work in India where only innovations achieved in the Silicon Valley are lauded. Creating a faster or smaller gadget or improving performance of already efficient machines or processes is the defining quality of innovations in advanced and developed countries of the global north. For existentialist economies like India, we need to rethink what constitutes and qualifies as innovation or innovative practice. In my travels across the length and breadth of our country, I have come across numerous innovations or what is locally called as ‘jugaads’ in villages and semi-urban towns. These innovations make life easier but are neither acknowledged, feted nor replicated. When large-scale desalination of water can be achieved with an innovative low-cost model developed in the region, that innovation needs to be recognised and celebrated. Similarly, creating cheaper toilets that are easy to construct and maintain should become a highly valued innovation in a country like ours where over 626 million people still defecate in the open.

I strongly endorse frugal innovation at all entrepreneur forums that I participate in. In areas with specific paucity of resources, local knowledge and wisdom can be channelled into evolving ingenuous solutions. Using resources frugally to make it accessible to many more is also an innovation. However, smaller steps taken by communities to build self-reliance and self-sufficiency are rarely encouraged. This leads to a stagnation of ideas and a lack of leadership or vision to help scale it to reach many more needy populations. This is where I see the role of an impact entrepreneur emerging.

Several people have asked me why I like to use the term ‘impact entrepreneurship’ as against the more conventionally preferred ‘social entrepreneurship’. The reasons are: First, it is the presence of a handful of social funds investing in developing infrastructure and capacity building that has given this sector the moniker of social sectors. The implication that these sectors are for the larger social good leads to expectation that any ventures or processes undertaken might need subsidising to tide over low returns expected. Social entrepreneurship, therefore, becomes one where the motive of the enterprise becomes subsidy-driven, curtailing the desire to grow and expand. Second, the non-profit baseline makes it impossible to channel a large influx of capital into these sectors. These sectors, like say agriculture, health and education, are those that require intensive capital to be ploughed in to scale the impact of the intervention. Otherwise, the impact is largely localised and becomes a mere pilot study, which languishes due to lack of capital to scale the processes.

Renaming these sectors as impact sectors allows for a fresh line of thought and intervention plan. Impact sectors, therefore, become those that impact the lives of a large number of people. These are sectors that need to attract massive capital. Most entrepreneurs that do not see big margins of profit in these sectors shy away from them. However, I see them as highly challenging sectors that can prove to be not just profitable but high in value production at the bottom end of the pyramid. The bottom end of the pyramid does not necessarily have to translate into subsidies or ventures where losses need to be largely written off. The picture that impact entrepreneurs need to focus on is the large consumer base that they get to target. If impact entrepreneurs run their businesses like commercial business, the outcome is twofold. The profit motive that is the baseline of any commercial venture is achieved, even as the needs of a huge consumer base that cannot afford top-of-the-line goods and services are sufficiently met.

There is adequate headroom for growth in these sectors, provided that there is thought leadership and the willingness to back innovation. Another key question that is often raised is—how do you identify impact sectors that offer the potential for growth and the altruism of giving back to the society? My thumb rule is simple. Impact sectors are those where there is massive under-consumption of resources due to non-availability, lack of access or lack of opportunity. If your enterprise can plug these critical blocks in service or product delivery, then you are an impact entrepreneur making a difference to the lives of millions in India.

We need to begin measuring success and achievement in key sectors like education, healthcare on economies of scale rather than subsidies. The perceptions surrounding social entrepreneurship need to be altered to minimise the necessity of subsidies, doles and expectation of low returns. Then, these sectors of impact will begin to receive the influx of money, talent and resources that are sorely lacking.

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