B3B Model.

New technology and developing markets

NPT Contributing Editor Tim Mills-Groninger recently attended the World Resources Institute "Creating Digital Dividends" conference as part of the Ericsson Erica awards program, where he served as an advisor. Along the way he attended several conference sessions and filed this story.

During his presentation at the recent "Creating Digital Dividends" conference, entrepreneur Iqbal Z. Quadir recounted a conversation he had with his seatmate on the flight to the meeting site in Seattle. They talked about technologies and business initiatives in the letter and number code that has become so common. B2B for business-to-business, B2C for business to consumer; there is even an emerging B2P business model of Business to Philanthropy.

Quadir recounted that when asked what he did, he replied, "I'm into B3B development, which stands for 'Bottom Three Billion'," or that portion of the world population that makes less than $500 (U.S.) per year.

The idea that the poorest individuals in the poorest countries in the world could be the target not only of good corporate citizenship but of sustainable (read profitable) business development was the major theme of the conference. Organized by the World Resources Institute (WRI), the meeting gathered 300 leaders in the technology and information sector to talk about issues of the digital divide. However, the stated intent was to focus on business opportunities, which was why the conference used the word "dividends" rather than the pessimistic "divide."

WRI has a long history of work in the environmental sector facilitating sustainable development. WRI argues that a forest with planned logging will provide lumber indefinitely and complement the larger ecosystem. Clear cutting, the more common approach, will result in short-term profits and depleted resources with no future development opportunities.

The philosophy that long-term profitability can result from social responsibility and green practices when developing natural resources has been extended in recent years to include general economic development. The extension to information technology as part of sustainable development is part of WRI's natural growth into new issue areas.

The approach to the problem of the world-wide digital divide as an opportunity for digital dividends is also consistent with WRI's overall belief that the ability to financially benefit is the carrot that will bring businesses to the table. The three-day conference in October drew representatives from 3Com, AOL, BP, Cisco Systems, Ericsson, Hewlett-Packard, Microsoft, Motorola, WorldCom, and other corporations. The foundation world was represented by the Bill & Melinda Gates Foundation, C. S. Mott, Joyce, Real Networks, W.K. Kellogg and others.

The importance of this meeting to nonprofit executives in the United States is the possible shift in emphasis of a portion of corporate giving programs and foundations to a global focus. This shift could move resources out of the United States and into the developing world. However, it could also develop new approaches to dealing with traditionally disadvantaged populations that can also be used domestically.

A recurring theme in many of the presentations was that the global digital divide will not be closed by a redistribution of wealth but will be a creation of new wealth enabled by new technologies.

This new business model was outlined by University of Michigan School of Business Professor C. K. Prahala. His thesis is that the poorest people can participate in an economy that, like the new Internet economy, relies on low profit margins and low-cost, high-volume transactions. To really work, traditional assumptions about markets in developing world have to be rethought.

The biggest shift advocated by Prahala, and echoed throughout the conference, is that government and charitable subsidies are not part of the solution, and that real, sustainable change will come from new products and services that are easy to use, fit into the local power grid, and are consistent with the local culture and customs.

The case study referred to most often during the three days of the conference was Grameen Phone in Bangladesh. Founded, by Quadir, Grameen Phone uses the micro finance model pioneered by Grameen Bank in making small loans (a typical loan is $15) to individuals (usually women) for some business activities.

The classic example of a Grameen Bank loan is to buy a cow and sell the milk locally. Loan repayments approach 99 percent. The Grameen Phone project places a wireless telephone with an individual in a village. That person, again, usually a women, sells access to the telephone to other residents. People will make calls to check prices in other villages, gaining information about markets, or they may call family in other villages or even countries.

The success of Grameen Phone is due to minimal government involvement, private financing that produces a real return on investment, and the most advanced technologies.

Hewlett-Packard has responded to this new business model with its new e-Inclusion strategy. As outlined by HP's CEO Carly Fiorina in a videotaped presentation, the e-Inclusion program will place $1 billion in HP products or services into projects addressing the needs of the rural poor in Africa, Asia, Latin America, and Central and Eastern Europe by the end of 2001.

In this same time frame HP plans to have worked with 1 million partners drawn from regional organizations to local project teams. These partners will help HP "touch" 1,000 villages during this period with projects similar to Grameen Phone and community cyber cafes and distance learning centers.

Fiorina further compared the economic shifts of today with the Italian Renaissance. Calling the globalization of technological development the Digital Renaissance, she made a strong parallel between current innovation and the point in the Italian Renaissance where "Hundreds of years of inward, isolated, parochial thinking gave way to wonder, and curiosity about potential."

3Com CEO Eric Benhamou stated in his presentation that "joint ventures create joint futures" and that increasing the information infrastructure in the developing world will "create annuities rather than windfalls." He went on to state that in addition to access to technology, people will need basic skills, meaningful content must be developed, and, most importantly, people need the desire to participate in this shift.

Benhamou went on to say that "complexity is a source of embarrassment and frustration to new users and diminishes or limits digital dividends." The creation of "radical simplicity" in technology, particularly for user interfaces, was promoted by several exhibitors and presenters, including Benhamou, as the key element in meeting the challenge of usability. Industry analyst Mark Anderson hypothesized that a device that was part book-sized PC and part cell phone that could accept voice commands, boot fast, and fail gracefully would be accepted into not only in developing nations but industrialized countries, as well.

Privately, some representatives of foundations in the United States in attendance expressed reservations that new interfaces would advance economic development without a strong emphasis on traditional issues such as literacy and critical thinking skills. Others, such as Richard Akeroyd, executive director of the Gate Library Initiative of the Bill & Melinda Gates Foundation, were more enthusiastic.

Akeroyd said he believes that the conference message was appropriate to the foundation community and that foundations have a role in building capacity to make the shift happen.

"The solution to AIDS," he said, "is an information problem prior to contracting the virus. When people have access to the right information about AIDS they will not become infected." He went on to point out the foundation's library initiative already includes training and technical support with its cash grants for PCs and software.

More information about the conference is available at www.digitaldiviidend.org. For information about the World Resources Institute go to www.wri.org.

Tim Mills-Groninger is associate executive director of the IT Resource Center in Chicago which assists nonprofit organizations in making effective use of technology.