Customer First: Paul Basil on Building Successful Social Enterprises in Developing Markets
In 2001, Paul Basil founded Villgro Innovations Foundation as a social enterprise incubator in India. Since then Villgro has worked with over 200 early-stage, innovation-based social enterprises throughout India and is currently in the process of expanding its model to Kenya, Vietnam, and the Philippines. On October 29, 2019, Mr. Basil spoke at SOM and shared his perspectives on key success drivers for social enterprises in developing markets.
One thesis overarching Mr. Basil’s talk was his belief that a successful social enterprise must be “customer first”. He described one business, Venus Burner, whose social mission was to improve the lives of rural Indians through a redesigned cookstove. Despite a potential market of 300-400 million customers, cookstove design hadn’t seen innovation in decades. Venus initially developed a lighter, more fuel-efficient alternative to the traditional stove. To the company’s surprise, however, customers refused to buy it. Why? The Villgro team discovered two issues. The price was too high, and the lightness of the product was perceived by customers as an indicator of lower quality. Going back to the drawing board with a renewed focus on the target customer, the team came back to market with a more affordable, heavier cook-stove that maintained most of the fuel efficiency advantages. Though the second iteration was technically a "worse” product, it met the needs of the customer and therefore was far more successful.
Another key message from Mr. Basil was that many social enterprises are successful because they effectively make unit economics work at a local level. Mr. Basil shared a specific case of a healthcare start-up which aimed to address the gap between medical expertise (centralized in urban areas) and rural healthcare needs. Many rural health clinics lack specialists, meaning people in rural areas must sometimes travel long distances for diagnosis and treatment. This business sought to bring improved medical diagnostics to these rural health clinics, leveraging the internet to remotely connect these underserved communities with experts in cities. Technological innovation allowed the business to operate at low unit costs while improving the accessibility and quality of health information. The result is a wider product reach and greater overall impact.
During the question and answer portion of the talk, Mr. Basil was asked about his expansion plans, investing ethos, and overall business model. Mr. Basil had some especially interesting insights about the challenges of investing in the three countries into which Villgro is currently expanding. Although Villgro’s goals in each country remain the same, the realities of working internationally mean the processes for reaching those goals are different. For instance, in the Philippines, the financial industry is far less developed than it is in India. Therefore, he’s found himself making riskier investments in earlier stage companies just to get them off the ground. Mr. Basil has had to lean on local experts to understand the environment and ensure he can be effective. Whether investing across industries or across countries, finding subject matter experts has been a crucial factor in Villgro’s success.
For budding entrepreneurs, Mr. Basil also has some pointed advice about skill development. He urged founders to differentiate between a product and a customer focus. Although it’s important to deliver a good product, it also must meet a market need. As in the example of cookstoves, the first iteration was a good product, but was too expensive for its target customers. The second iteration used “worse” materials but was built with the problem and end-customer in mind, and was ultimately more successful. Mr. Basil also urged founders to build solid financial and operational skills.
Paul Basil has been at the forefront of social investing in India and around the world for nearly 20 years. Therefore, his broad insights into the drivers of business success come from deep experience and can be applied broadly to social-entrepreneurial ventures anywhere in the world. Though the nuances certainly vary between countries, the importance of centering a social enterprise around customer needs and of building a solid business on a strong operational and financial foundation are universal success drivers – great takeaways for anyone interested in creating a sustainable social business.
By Ripley Carlson, MBA ‘21