Nivedita Agarwal
Friedrich-Alexander-Universität, Erlangen-Nürnberg, Germany

Alexander Brem
Friedrich-Alexander-Universität, Erlangen-Nürnberg, Germany

Introduction

Social enterprises are hybrid ventures that use innovative business models to address existing societal challenges in a financially sustainable way. Creating social impact is the main goal of such enterprises, and generating economic value is necessary for their sustainability. The immense success of these social enterprises in emerging markets has caught the attention of both business and academia. Blending business strategies with inclusive growth, these enterprises have reached unimaginable scale and inaccessible markets. Leading exemplars are the Grameen Bank and the Bangladesh Rehabilitation Assistance Committee in Bangladesh and Aravind Eye Care System (AECS) and Narayana Health in India. For example, Grameen Bank offers microfinancing opportunities to more than 97% of the villages in Bangladesh while the Bangladesh Rehabilitation Assistance Committee has successfully delivered healthcare services to more than 90% of the households in hard-to-reach regions. Similarly, AECS and Narayan Health, accessing over 15 million blind people and around 2 million heart patients every year, have been successful in reaching the poor population in India who were cut off from traditional healthcare structures.

As indicated in Chapter 8, scaling and creating access to low-end consumers has always been a challenge for businesses commercializing at the low-income segment. Increasingly, businesses are adopting inclusive business models (including customers also as suppliers) and collaborating with local social enterprises, government, and stakeholders to reach the inaccessible markets. For example, Philips and GE have collaborated with local banks and other partners to generate a robust distribution network in resource-constrained regions. Telenor, in collaboration with both Grameen Bank and the Bangladesh Rehabilitation Assistance Committee, has started affordable Village Pay Phones services. Avon and Unilever have adopted inclusive models of microfranchising, a creative form of microcrediting to reach people far and wide. Unilever's Indian subsidiary provides training to local women in selling, commerce, and accounting and also simultaneously generates micro-entrepreneurs.

Given the growing focus of businesses that target inclusive growth, this chapter offers insights from successful social enterprises and their organizational adaptations that helped them overcome the specific constraints of emerging markets and sustain economic growth. Using specific examples from the Indian healthcare sector, five different adaptations to overcome infrastructure limitations in low-resource markets are illustrated and detailed.

9.1 Market and Innovation Constraints in Emerging Markets

There is no doubt that the role of emerging markets in the global economy is rising. In order to catch the core of innovation in emerging markets, there is a need to understand the particular market characteristics and innovation constraints. Emerging markets are often characterized by both market and societal constraints, including informal and underdeveloped regulatory infrastructures, high levels of poverty, unemployment, and high trade barriers. This implies that while emerging markets provide promising opportunities for firm revenue growth, they also represent a difficult business environment for organizations to navigate through.

The Indian healthcare market, where a majority of the population lacks basic healthcare services, is an appropriate example for understanding the market constraints of emerging markets. India currently suffers from a large healthcare service divide due to high rates of illiteracy, income disparity, low awareness, a fractured regulatory framework, and accessibility constraints. Although India is one of the largest producers of doctors in the world, it still suffers from an acute physician shortage. The physician/population ratio of India of 1 : 1700 is way below the worldwide average of 1 : 666 (Srivastava and Shainesh, 2015). Almost 70% of the Indian physicians reside in urban areas that cater to only 30% of the total population. That means the medical requirements of almost 70% of the population living in rural areas go unattended due to inaccessible resources and poor healthcare services.

In such a scenario, the unavailability of a social security system further worsens the situation. Consumption of any kind of healthcare services thus directly impacts people's disposable income. Therefore, due to low awareness and income constraints, health-related problems are either reduced in priority or are never even considered by the majority of the population living under the subsistence level.

In these unique market conditions, where most of the population is still not consumers of healthcare services, the major challenge for healthcare companies is to convert these nonusers to first-time users and change their behavior toward healthcare. Table 9.1 summarizes the market constraints of the Indian healthcare sector at the environmental, institutional, and customer levels.

This chapter emphasizes organizational adaptations in the form of inclusive strategies that are necessary to overcome these specific healthcare market constraints and tap the economic potential for the bottom-of-pyramid (BoP) customer segment. It shows how businesses and practitioners can rethink and move beyond traditional marketing strategies toward shared value creation and purpose-driven branding to drive healthcare services access in these markets.

9.2 Inclusive Strategies of Social Enterprises

Extreme resource constraints not only affect people but also impact the business environment. Starting businesses in resource-constrained areas with extreme conditions forces companies to adopt innovative ways of doing business and often results in new organizational adaptations. Developing inclusive strategies is a major organizational adaptation firms can use to sustain economic growth in emerging markets. The term “inclusive” refers to moving from selling to customers to integrating them as suppliers within the value chain. Inclusive business models are about enabling participation of disenfranchised poor people into economic activities in the form of ownership, managerial control, employment, consumption, and supply-chain involvement. In markets where the majority of the population does not participate in or is excluded from economic activities, inclusive growth and proactive inclusion allow for firm success. Research has shown high relevance of this approach in the context of emerging markets, and the phenomenal success of social enterprises is a testimony to this trend.

Social enterprises are business ventures created to generate social value. They implement new business ideas for the well-being of the society and to enable the population to have access to basic services. While these enterprises are not profit oriented, inclusion of a sustainable business model that generates revenue is necessary for their long-term success. Social enterprises operate on a dual mission of financial sustainability and social value and strive toward creating economic value via societal development.

Social enterprises specifically in the Indian healthcare market have shown exceptional performance in delivering world-class healthcare services in an economically viable way to the masses. Delivering on the dual objectives of creating economic value and offering affordable healthcare services to the masses has required multiple organizational adaptations to overcome the constraints of emerging markets.

We take eye care in India as our example domain. Nearly 63% of the total vision impairment cases in India are due to cataract and diabetes. While 80% to –90% of cases of blindness can be cured, due to lack of awareness and unavailability of the basic healthcare infrastructure in the rural regions, most such cases go unattended, leading to a huge productivity loss. In such a scenario, successful proliferation of affordable eye care is not only important for the society but also inspiring for other businesses. The prominent examples delivering affordable eye care to the rural masses are AECS, Sankara Nethralaya, and Siliguri eye hospital.

AECS was set up in 1976 to offer quality eye care at no or low cost to the masses. Over the last 40 years it has overcome multiple constraints in the Indian market to run a profitable healthcare system. Dr. Govindappa Venkataswamy started AECS with a goal of replicating the standardization model of McDonald's for eye care within the healthcare delivery system. In order to use key resources efficiently and also to generate additional resources, AECS adopted several strategies for educating, employing, and engaging the local population that resulted in inclusive growth of society generally. AECS employed local women and provided them with basic training to perform noncritical tasks related to eye care so as to offload 60% to 70% of the doctors' work. AECS worked with local community workers to conduct outreach camps and started in-house academic institutions. These inclusive strategies not only increased the utilization rate of doctors but also offered educational and employment opportunities to the local population. The replication of AECS by several other social enterprises situated in emerging markets (across sectors and regions) further emphasized the importance and necessity of inclusive strategies.

Sankara Nethralaya and Siliguri eye hospital also were set up to offer affordable and quality eye care to the masses. Sankara maintains a self-sustainable status even after offering a free and highly efficient transportation network to customers, and Siliguri eye hospital is successful in sustaining its operation through actively engaging local community workers in the value chain.

Utilizing locally trained healthcare professionals (known as paramedics) and local community workers is a common phenomenon across different cases. Process standardization also emerged as an integral part of organizational adaptations, as in the case of AECS. Standardized and integrated processes ensure the provision of identical services and medications to patients, irrespective of location or paying capacity. This format built trust and provided the needed transparency in the healthcare structure. Formalizing educational institutes and collaboration with the government, in the case of AECS, also helped facilitate financial and operational stability and expansion opportunities.

These examples demonstrate a direct linkage between inclusiveness and business growth and show how including individuals from the BoP segment in the value chain is necessary to overcome specific constraints of emerging markets.

The remainder of this chapter focuses on the specific inclusive strategies of successful social enterprises from the Indian healthcare sector that enabled them to overcome emerging market constraints and sustain their operations over the long run. The intention is to provide guidance to businesses of all sizes seeking to engage commercially in emerging healthcare markets and looking for strategies for inclusive growth. The best practices offered in this chapter will help managers recalibrate their current strategies using a lens of inclusivity for long-term sustainability. Five key takeaways, summarized in Table 9.2 and presented next, are derived from cases of successful social enterprises in the Indian healthcare sector.

9.3 Conclusion and Outlook

Over the past two decades, there has been a tremendous growth in emerging markets (Agarwal and Brem, 2012). Countries like India have become a breeding ground for inclusive innovation successes. These innovations have shown phenomenal success, economically as well as in terms of societal impact (Sheth, 2011). Using specific cases of social enterprises that were successful in diffusing accessible and affordable innovations, this chapter discussed several inclusive strategies that are deemed important in sustaining economic activities in an emerging market context.

The chapter aimed to inspire business leaders to rethink their business strategies and apply “inclusive” strategies for commercializing at BoP. Drawing insights from the success of social enterprises in the Indian healthcare sector, this chapter emphasized the need for shared value creation through involving intermediaries, social embedding, and internalizing resources. Adopting innovative delivery models and purpose-driven branding also have shown high influence in reaching customers across the last mile of service delivery and influencing their service choice preferences.

Table 9.2 details the different inclusive strategies and implementation examples to overcome specific constraints of emerging markets covered in this chapter. In a communal society, relationship building and engineering the customer's social network is a crucial dimension in shaping customer preferences and building product meaning and reliability. Local alliances and social embedding provide in-depth understanding of the market and help in targeting a heterogeneous customer base, which is specific to emerging markets. In a society of strong social relationships, with influential faith-based and sociopolitical institutions (such as religion, social community, and government), acclimatizing to the societal norms and behavior is a necessary condition. Businesses that are sensitive to local customs and more congruent to the societal setting of the markets in which they are operating have greater chances of success. Contrary to advanced economies, considering emerging markets as homogeneous markets could prove to be disadvantageous for a company.

The example of internalizing resources or absorbing local population into the value chain shows multiple benefits for sustaining business operations over the long term. Investment in the local environment on the one hand helps businesses bypass resource constraints by generating their own local resources and on the other hand facilitates societal acceptance. The importance of cross-sector partnership is also highlighted for purpose-driven branding.

This chapter drew attention to an increasing need of reviewing current business strategies in the context of emerging markets and offered inclusivity as an optimal lens. Current business strategies primarily developed in the context of advanced economies have largely ignored the inclusion of nonviable customers and have also undermined the significance of inclusive marketing. However, the rise of emerging markets, where most of the population is still at the BoP, has reinstated the focus on inclusive growth and necessitated the inclusion of societal value creation into company goals for long-term survival. Therefore, the takeaways are to assist business managers in this transformation and provide them with several nontraditional and innovative practices from the social enterprise that appears to be leading this transformation.

About the Authors

DR. NIVEDITA AGARWAL is an Assistant Professor at the Chair of Technology Management at the Friedrich-Alexander-Universität Erlangen-Nürnberg, Germany. Her research focuses on new product development, social entrepreneurship, and constraint-based innovation especially in context of emerging markets. Inspired by the existing challenges at the bottom of the pyramid, her research highlights the role of innovation and entrepreneurship enabled by disruptive technologies in shaping the complex ecosystem at the bottom of the pyramid. She has reviewed and published articles in several peer-reviewed academic journals, such as the Journal of Business Research, IEEE Transactions on Engineering Management, and International Journal of Technology Management and is an Associate Editor of International Journal of Entrepreneurial Venturing.

DR. ALEXANDER BREM holds the Chair of Technology Management at the Friedrich-Alexander-Universität Erlangen in Nürnberg, Germany, which is located at the Nuremberg Campus of Technology. He is a Children's Commissioning Support Resource International Research Associate at DeMontfort University, in the United Kingdom, a Visiting Professor at the EADA Business School in Barcelona, Spain, and the HHL Graduate School of Management in Leipzig, Germany. Moreover, he serves as an Academic Committee Member of the Center of Technological Innovation, Tsinghua University, Beijing, China. In addition, he was appointed Honorary Professor at the University of Southern Denmark in May 2017. His research activities are focused on the management of research and development in high-tech firms, which involves research fields like idea management, constraint-based innovation, user innovation, and technology entrepreneurship.