In a post on Nextbillion.net yesterday, Derek Newberry, wrote a great piece on how SMEs serve as an ideal player in modifying technologies and products to reach the BoP. He starts off by recognizing the recent interest by large multinational corporations (MNCs) in serving the bottom billion, but then pushes forth the inquiry about the role of SMEs in this process. Interestingly, instead of viewing MNCs and SMEs as antagonistic in this space, as they most often are vis a vis each other in traditional markets, Newberry recognizes the potential for cooperative coordination between these two players to better serve the poor:
Their competitive advantage is an ability to quickly and efficiently innovate new technologies and services that meet the specific needs of BoP markets in different regions. New Ventures enterprise Big Tree Farms is an example of this in reverse, where they are offering Whole Foods value as a partner by supplying exclusive access to authentic Indonesian foods. In other words, SMEs are a perfect channel for MNCs based in Europe and the US to intelligently connect with new markets and producers in emerging economies.
In essence, this approach leverages larger organization’s capital and innovative capabilities with the contextual knowledge of local SMEs to accelerate delivery of innovative ways to address poverty. Pulling from data collected by an informal survey done by the WBSCD, Newberry notes that the more pleasantly surprising statistic is that this partnership is already commonly utilized by both parties.
The results of the survey indicate that many companies already understand this – with 44% saying at least half their suppliers worldwide are SMEs. Still, as with any business relationship, particularly across regions and populations with differing resources and business practices, these engagements are never perfect.
However, the survey also recognized the challenges. From the MNC perspective, reliability of the SME distributors appeared to be a major concern, while for the SMEs they were unappreciative of the bureaucracy that hindered their ability to do business.
Taking a step back as well, one must be careful to ensure that such relationships are not merely facades to reintegrate colonialism type mechanisms where the instead of the focus being on providing better products for the poor, it becomes the desire to utilize such relationships to extract and eploit indigenous knowledge or products to then be sold in the first world markets.