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Moving Beyond the Moving Anecdote

5/18/2009 --

Ted London develops a detailed framework to measure the impact of ventures aimed at the base of the economic pyramid.

ANN ARBOR, Mich. — For years, groups working on poverty-fighting ventures have used stories, anecdotes, and milestone markers to highlight their work and secure funding.

Unfortunately, these things don't actually measure the effectiveness of an organization's effort. Nor do they showcase any unintended consequences, long-term changes, or missed opportunities. But Ross professor Ted London, after several years of field research, has developed the Base of the Pyramid Impact Assessment Framework, which organizations now can use to better assess the true impact of their work.

London's framework appears in the May 2009 edition of the Harvard Business Review and is in use by nonprofit and corporate partners in Asia, Latin America, and Africa.

"We sometimes haven't taken good business sense and applied it to the poverty alleviation domain," says London, senior research fellow and director of the Base of the Pyramid Initiative at the William Davidson Institute. He also serves as an adjunct assistant professor of business administration at Ross. "What you see mostly are a lot of anecdotes and output-based measures. But they don't really tell us much about the local poverty alleviation impact. In general, ventures are overestimating the good they're doing and under-reporting, or not reporting, the negatives. I think it's completely inappropriate to not have a full accounting of what's going on."

London says the tool was designed to be straightforward and simple to use. The base of the pyramid is a term that refers to people on the base, or bottom, of the global socio-economic structure.

"We believe this framework can become a standard that a wide variety of organizations will use to benchmark their work over time," London says.

But his system is not an audited look back with "over-the-shoulder" judgments. Instead, the framework is an "assessing and enhancing" tool that looks forward and gives an organization a good idea of its own hits and misses.

"The framework allows venture managers to fairly quickly get an in-depth assessment of what the overall picture looks like in terms of their on-the-ground impacts," says London. "It also provides critical insight into how ventures can improve their poverty alleviation outcomes by enhancing the positive impacts and mitigating the negative ones. It's not unlike marketing, where the idea is that the better you understand those you are working with and whose needs you are trying to meet, the better you'll do."

Filling in the Blanks

The framework has two main parts. The first is a strategic analysis that involves less numbers-crunching and more fieldwork. Members of the organization should interview local buyers, sellers, and other members of the communities being served. All expected effects — positive and negative — should be listed in the economic, capabilities, and relationships quadrants of the framework, and some key questions should be answered. How will buyers' capabilities be affected? How about sellers' incomes? How will the venture change relationships — business and personal — in the community?

"In some sense, it is filling in the blanks but it also takes a deep understanding of the local impacts of the venture's business model, and that means you're going to have to hear the voices of a wide diversity of stakeholders," London says. "You don't want to do this from an office in New York. You want to talk to the base of the pyramid and make sure your team is aware of the venture's holistic set of impacts."

Once the strategic analysis is complete, there should be enough material to create key short- and long-term metrics to track positive and negative effects. This step involves collecting and analyzing data, but it isn't as difficult, time-consuming, or expensive as it sounds, London says.

The organization should collect baseline and post-venture data on local buyers, sellers, and communities affected by the work and, if possible, on a similar unaffected group so they can see what would have happened if the work hadn't been done.

"This will take a little longer because you have to establish the baseline and then follow up, but once it's in place it should be relatively straightforward to continue to collect that data over time as part of your regular business operations," London says.

A Clear Vision

VisionSpring used the Base of the Pyramid Impact Assessment Framework to enhance the outcomes of its work in India. VisionSpring uses a micro franchising system to help address a common problem: blurry vision as people age. The company recruits local people to become Vision Entrepreneurs by setting them up with an eye glass inventory and business forms, as well as the training and equipment to perform eye exams.

London says VisionSpring thought the venture was gaining ground based on the sales numbers from its Vision Entrepreneurs, but knew it needed more substantial information to expand the effort. After performing the strategic assessment, VisionSpring found big potential in improving the lives of its buyers. In one market, locally produced weavings were in high demand, but aging artisans were losing their sight. VisionSpring's glasses improved the quality of life for these artisans, helping them increase productivity.

But VisionSpring also identified some potential social land mines. In many areas, families are unused to women taking on new roles. Armed with that knowledge, VisionSpring was able to avert unnecessary strife by encouraging husbands and other family members to join the business.

VisionSpring then worked with London and some colleagues at Ross to develop performance metrics. They measured changes in the level and stability of sellers' incomes, capabilities and relationships of the consumers, and changes the business brought to the community.

"VisionSpring is always challenging itself," London says. "They thought they were doing well on the ground but felt they weren't sure what their true impacts were. They had the courage to say, 'We'll take the risk because our goal is to alleviate poverty, not promote our organization.' Hopefully, these aren't mutually exclusive."

Looking Ahead

London thinks his framework can serve as a valuable tool for donors focused on poverty alleviation, as well as members of nonprofit boards.

"Funders can ask the ventures coming to them for resources to please take some time and fill out this framework," he says. "It will tell you a couple of things. If they struggle with it, then the venture team may not have a good understanding of what's actually happening on the ground. Funders can use this as a red flag to reject this request, or maybe use it as an opportunity to work with this team to help them gain a better understanding of their poverty alleviation impacts. Additionally, once implemented, the ventures now have a standardized tool in place they can use to improve their impacts over time."

A larger goal of the framework (and London's long-term research efforts) is to collect enough data from different ventures to make broad recommendations on the intersection of venture strategy and poverty alleviation outcomes.

"We don't know those relationships right now," London says. "As scholars, we want to be able to assess poverty alleviation outcomes across multiple business ventures. We want to help the individual ventures but we also want to say, as a field, what is the real impact of different types of ventures? Does it make business sense and does it make poverty alleviation sense, and how do you maximize those? The key is finding the relationships among specific venture types and specific poverty alleviation impacts."

—Terry Kosdrosky



For more information, contact:
Bernie DeGroat, (734) 936-1015 or 647-1847, bernied@umich.edu