A Frontier Economy For Adventurous MBAs

You put a lot of emphasis on getting to know the target customers and understanding their needs. Could you describe your survey process in more detail and why it’s so important to your work?

Before I started IDE, I was working as a psychiatrist. In my spare time I was also an entrepreneur–I still am. I created several businesses, which generated enough income for me to start IDE. What I learned from those businesses and psychiatry is that you actually have to listen. That should come as no surprise to business students. It’s well-known that a successful business is one that understands its customers. I learned that from scratch. When I started IDE, I said I would interview in some depth at least 100 1-acre farmers every year, and I’ve done that. At this point, I’ve interviewed more than 3,00 families, so I really know this customer group in a variety of countries. The approach I use turns out to be more successful in some ways than those used by successful conventional businesses.

I will go to a village–if I don’t speak the language, I go with someone who is respected in the village and act as an introducer and translator–and I will select a typical family and spend seven hours with them. I’ll walk them through their fields, have a look at what they’re growing, compare it to market prices. The first thing is to form a relationship, and then I ask them all kinds of questions about their lives, including what they had for breakfast that morning, how many kids they have, and how far their kids are going in school. When we get to know each other better, I ask them about all their sources of income and how they spend it. Then I do the same thing with another seven or eight families in the village for only one or two hours. That process has never failed to come up with at least one transformative idea.

I believe that it’s really important to talk to at least 100 customers in depth before you ever come up with an idea. Once we have the idea, we go through a routine process of building a proof-of-concept prototype, we test it, we modify it, and then we put it in the hands of a bunch of customers and find out what’s wrong with it and adapt it. Once a product is launched, all of our staff focus on continuous learning from the customer. We will change what we’re doing 180 degrees depending on what we’re learning. Customer focus is not unique to this population of poor customers. I think if companies did more of that with a product that services developed economies, they would do better.

Are business schools buying into the idea of servicing this 3 billion-person market?

There is a growing unstoppable movement in business schools where students are demanding to learn how to make a difference in addition to the skills they need to find a job when they graduate. Business schools are making courses available that give students hands-on experience with starting up companies. A lot of business schools have that already for companies in the West and an increasing number are opening up those opportunities in developing economies.

I worked for five or six years helping set up a course called Design for Extreme Affordability at Stanford. One of the principles was to form multidisciplinary design teams for deeper, more effective learning. This is being adopted in many places. Business students don’t just work by themselves, they may work with students in the humanities, engineering, or sociology departments.

In the Stanford course, there is a whole process of defining a problem, designing a solution, and pilot testing it. At the end of the course, the teams are judged according to several criteria: Did they come up with a business plan that is persuasive to actual commercial investors in the audience? Did they come up with a transformative product or service? Did they have an effective communication piece such as a PowerPoint presentation or video?  When I was working on the course, we received 120 to 130 request applications for 40 positions. So I think there is both interest and opportunities for students to actually do different versions of businesses or projects that are relevant to this population. In fact, in the book we’ve included a study guide to help with doing just that.

Your book works off the assumption that these new multinationals will act ethically and empower the $2-per-day consumers rather than exploiting them. Is this realistic?

I not only think this is a realistic viewpoint, I think that unless more businesses adopt that viewpoint in the future, they will fail. The context of business is changing. For example, the assumption that businesses can and should undergo rapid growth without regard to planetary carrying capacity is no longer practical, and companies that continue to do that will get an increasingly bad name.

I think we need to develop a different model of business for the common good, and there’s a whole movement in that direction. There has been a prior movement encouraging investors to invest in companies that are good global citizens. The bottom line is this: A company that only exists to optimize profits for its shareholders is not going to be so viable in the future. That doesn’t mean I’m against profit. In fact, I think these new companies will be more profitable than the average company today, but I think that incorporating certain base values into the DNA of a company actually facilitates profit rather than inhibiting it.

What was your most spectacular failure and what did you learn from that?

My most spectacular failure would have to be a jet barge project we did in Nepal. About 40% of the people in Nepal live two to 12 days from the nearest road, but many of them live in direct contact with whitewater rivers that flow through the Middle Hills. They tend to get products in and out of their villages on porters’ backs. In the Snake River there are jet boats that bring rafters back to their original locations. So we built a jet barge, basically a 5-ton version of a jet ski specially designed for the rivers in Nepal.