TEACHING & LEARNING
Ideas
That Are Hotter Than July
OUTREACH
Nourishing
Businesses – and Bodies
PLUS: Watch the "Alumni Impact" video interview of Josh Kopelman
Faces of Wharton Entrepreneurship
RESEARCH
Creativity
Is Bunk
Creating a Sustainable Business among South Africa's Poor 'One Bite at
a Time'
Nourishing Businesses — and Bodies
Snider Center Helps to Spur Entrepreneurship in Africa
Snider
Center Helps to Spur Entrepreneurship in Africa.
Zambia is one of the poorest countries on the world's poorest continent. More than two-thirds of its people live on less than a dollar a day. One in six of its children dies before reaching five years of age. Malnutrition, a scourge throughout much of Africa, often plays a role in their deaths.
But thanks to an enterprise assisted by WEP's Sol C. Snider Entrepreneurial Research Center , hundreds of Zambians in the country's northern Copper Belt are eating better than they ever have. Backed by consulting from the center, a six-year-old animal-feeds maker has helped to ramp up chicken production and thus protein consumption in the region.
The enterprise, called LocalFeed, is part of the Snider Center's Societal Wealth Generation Program and produces affordable, high-quality feeds focusing on selling to subsistence farmers and small-scale commercial poultry operations. The Societal Wealth Generation Program has worked with LocalFeed since 2000, providing technical assistance. It also enlisted the expertise of the University of Pennsylvania's School of Veterinary Medicine to help formulate feeds.
As a result, LocalFeed, which operates as a division of another firm, employed 60 people and reported net income of $500,000 (in U.S. dollars) in its most recent fiscal year. And its impact has reached far beyond the confines of the business itself. "We have 600 customers earning a better living, approximately one-third of whom had never produced poultry, eggs or other livestock products, prior to attending our seminars," says the founding entrepreneur, who, for reasons of confidentiality, the center identifies only as "Greg." "Furthermore, between 10 and 15 percent of our clients have grown to production units of 1,000 to 4,000 broilers per month. They are employing family members and others to work with them."
Atop that, LocalFeed, along with three other Societal Wealth Generation Program enterprises in Africa, is validating an approach to the alleviation of social problems through entrepreneurship pioneered by Ian MacMillan, the Snider Center's director and a Wharton professor of management, entrepreneurship and innovation. "Our basic thesis is that many social problems, if looked at through an entrepreneurial lens, create an opportunity for someone to launch a business that generates profits by alleviating the social problem," say MacMillan and Jim Thompson, the center's associate director, in a forthcoming book chapter.
While MacMillan aims to spur entrepreneurship, he doesn't rule out a role for philanthropists. He envisions them providing seed funding for some businesses. Once that happens, "it should be possible to attract local entrepreneurs who are quite happy to live with the smaller profit streams eschewed by their counterparts in more wealthy economies," MacMillan and Thompson write. The appeal for the philanthropists would be solving problems, rather than merely alleviating them temporarily. As the adage goes, give a man a fish, and you feed him for a day. Teach him to fish, and you feed him for life.
In Greg's case, his enterprise needed no philanthropic seed funding, thanks to its birth within an existing company. Greg, a former farmer himself, dreamed up the business because he believed that existing feed producers charged too much and ignored small farmers' needs.
Greg initially approached MacMillan and Thompson, who are both originally from Africa, for advice. Among their recommendations: Sell only for cash, not credit. "This policy would support liquidity and force the product to withstand the market test on price and quality, rather than on ease of purchase," they write. "If the quality and price were right, the customer would pay cash." They also suggested that Greg not sell to large farmers. That way, he might avoid being noticed by bigger competitors, at least for a while.
MacMillan and Thompson then sent Greg on his way, unsure that they would hear from him again. "Our position was, ‘Come back when you have real results to talk about,'" Thompson recalls. It was a test of Greg's commitment.
Soon enough, he came knocking again. "He'd done much of what he set out to do," Thompson says. "We took a look and said, ‘Maybe it's time to formalize something.'"
So they began to deepen the relationship, helping Greg develop tools for managing the business' growth and enlisting the vet school's aid. Their assistance included helping Greg improve his product. Using a technique developed by MacMillan called "attribute mapping" along with customer interviews, they learned that customers wanted Greg's feeds to last longer. His products' shelf lives were only six weeks, compared with three months for competitors. Once Greg discovered that, he tweaked his recipes, at little additional cost, to solve the problem.
Around this time, Greg also learned that a large competitor, who by now had heard of him, planned to cut its prices in an effort to drive him out of business. MacMillan and Thompson, assisted by a team of Wharton undergrads, helped Greg identify ways to cut costs.
To their dismay, they found that he had extended credit to several of his larger customers, and they had fallen behind in their payments. Aggressive collections became a priority. With the vet school's help, the team also created easy-to-use software to help Greg manage his feed recipes, balancing lowest possible cost with highest possible quality. And the team helped Greg to implement inventory controls.
At this point, he was able to pre-empt his competitor with a 20 percent price cut of his own. Today, LocalFeed thrives and is considering regional expansion. And thanks to lots of additional chickens, Zambians in its area are better nourished. "What you have is a huge increase in protein consumption in the region," Thompson says.
MacMillan and Thompson, for their part, are seeking ways to expand the Societal Wealth Generation Program and the knowledge they have gained from working with Greg to other fledgling African enterprises. Greg's outfit doesn't need their help anymore.
"They probably haven't needed our help for a year,"
Thompson says. "They're a profitable, well-managed enterprise. They're now comfortably able to hold their own in that market."
This summer, Thompson spent several weeks in Africa investigating possible locations for a freshwater fish-farming operation. "There seems to be the possibility that we can take part of the animal-feeds model and morph it into an aquaculture model in Malawi or Zambia," Thompson explains. "That's a key part of what our efforts in Africa are about — the ability to transfer learning from one project and one region to others."
To
learn about another entrepreneur working with WEP's Societal
Wealth Generation Program read about Alicia Polak and her Cape Town,
South Africa based Khayelitsha Cookie Co read the Knowledge@Wharton
article here: Creating a Sustainable Business among South Africa's Poor
'One Bite at a Time'
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wharton Entrepreneurial Programs