Paul Polak – TRANSCRIPT
I feel a little bit like an 18-year-old virgin in a 77-year-old body. [The Future Corporation] Many people tell me I’m a contrarian, but I take the opposite view.
Three years ago, General Motors, the biggest, most powerful corporation in the world, was brought to its knees by failing to react quickly and effectively to competition from Japanese imports, which were smaller, more fuel-efficient, and cheaper. I believe that companies like Walmart, Coca Cola, and Microsoft will share the fate that awaited General Motors if they don’t react quickly and effectively to learn how to operate successfully in emerging economies. But this will require nothing less than a revolution in how they currently design, price, market, and distribute their products.
I’m going to spend the rest of my life trying to help foment that revolution. Thirty million people shop at Walmart every day, but there are 3 billion people who will never set foot inside a Walmart store. They’re people like this farmer who earns a living with his family of about a dollar a day on his one-acre farm. I’ve had long, personal conversations with more than 3,000 of these customers who are not served by existing markets, and they’ve become over the last 30 years my teachers and my friends.
Coca Cola sells what amounts to an aspirationally branded, fizzy sugar water for 25 cents a bottle in villages all over India. In those same villages, 50% of the children are malnourished. What would happen to Coca Cola if a well-financed Chinese company started selling a nutritious soft drink at a nickel a pop in millions of villages around the world? They’d be in the same shape fairly quickly, I think, as GM was.
The Gates Foundation has helped millions of people move out of poverty, and millions of other people had their illnesses treated effectively as a result of the Gates Foundation.
But Microsoft, the parent company, as far as I know, not a single Microsoft product sells to the 26 billion people in the world who live on less than two dollars a day. The opportunities to create profitable businesses serving 3 billion bypassed customers are almost limitless. For example, there are a billion people in the world who will never connect to electricity.
That’s about the same as the total population of the United States and Europe combined. There are another billion people who don’t have access to safe drinking water. Many of them get sick, and some of them die as a result of it. Why don’t existing businesses get to involve successfully in emerging markets? There are three main reasons. First, they don’t see a profit in it. Second, they don’t have a clue how to design radically affordable products which are what’s needed and desirable for people who live on less than three dollars a day. Products like this low-cost drip irrigation system that costs $20 for about an eight of acre. Or this $25 prosthetic knee that another organization that I started, D-Rev, has designed, and is being happily used by some 2,500 people right now. Or this $25 treadle pump. It’s not a treedle, it’s a treadle, sort of like a StairMaster.
IDE, the organization based in Colorado that I started has sold more than two million of them, and there are 3 million people using treadle pumps in the world today. Affordable devices like treadle pumps and drip irrigation combined with the last mile supply chain has helped 20 million people move out of poverty as a result of IDE’s work alone.
Finally, existing corporations don’t know how to run profitable last mile supply chains. Maybe it really should be the last 500 feet. Many poor people live in small villages, and getting goods in and out of those villages has proved very difficult.
I believe there are three keys to profitable business serving the poor. The first is simply big volume – low margin. It’s the Walmart principal times three, or times 300, or times 1,000. The second is designed for radical affordability. There’s a whole movement that is gaining a lot of momentum, learning to design things that are affordable enough for people who live on less than three dollars a day, and that are also income generating.
And finally, implement profitable last mile supply chains. I’m going to be talking a little bit later on about the Spring Health Model which is an example of that. To demonstrate that this is feasible and practical, I’ve started in the last 3 years a private company, Windhorse International, and their related company operating in India, called Spring Health. The mission of that company is to sell safe drinking water at scale to people who don’t have access to it now. This is a picture I took as part of a video in state of Orissa, in Eastern India recently.
This gentleman is taking a ritual bath in the village’s main cooking water source. There are some 300 million people in Eastern India alone who don’t have access to safe drinking water. Most of them live in small villages with 100 to 300 families. And those villages have little in the way of markets. But they do have – every one of these small villages has 3 or more mom and pop shops like this one. They sell everything, from cigarettes to soap, to candy, to cookies, and all kinds of consumable household items.
What Spring Health has done is build a 300-liter cement tank for about 100 bucks beside each shop, and then purified the water in it using a radically affordable water purifier manufactured by Spring Health. The shopkeeper then sells that water at a cost of less than half a cent a liter to people in the village, and they’re experiencing a major drop in illnesses and expenses to pay for the medicines and treatments that they receive for those illnesses.
The mission of Spring Health is to provide safe drinking water to 5 million people within 3 years through 10,000 village shops, and within 10 years, to provide safe drinking water to more than a hundred million people through shops in 400,000 villages around the world. I want to show you a little bit what this looks like in a two-minute video that I took recently at this work.
[Selling safe drinking water to small villages in East India] (Video) Narrator: The opening of the water shop is an important ceremony in a life of the village. More and more customers in rural Orissa are buying safe water from their local small shop for four cents a day. They are buying it from small village shopkeepers Windhorse and Spring Health India partner with the shopkeepers and install a 3,000-liter cement tank next to the shop, which the shopkeeper fills with water from his shallow open well, which is usually contaminated with vehicle pathogens. A company staff member purifies the water in the tank by adding chlorine and other water purifiers. A central part of the Spring Health roll-up strategy is creating a strong, dependable brand identity in small, remote rural villages. A bicycle home delivery service carries jerrycans filled with safe drinking water to customers homes, up to 3 kilometers from the kiosk at a cost of 8 cents for 10 liters compared with 4 cents at the kiosk [Up to 3 kilometers delivery for 4 cents] The people in rural villages in Orissa report a rapid drop in diarrhea, and they are very happy with the result Over the next 3 years, we will partner with 10,000 village shops, and sell safe drinking water to 5 million people. Over 10 years, that number will increase to 400,000 shops in 20 countries, and with new access to safe drinking water, 200 million rural people will lead more prosperous and healthy lives.
Thank you. So you can probably tell I think that there are thousands of opportunities for creating new markets and creating new companies, serving the three billion customers in the world who are bypassed by current markets. I believe that, as I’ve said before, it will take nothing less than a revolution in current business practice, a revolution in how products are designed, priced, marketed, and delivered. But that revolution will create millions of new jobs. It will help more than a billion people move out of poverty, and it will take a giant step towards ending environmental imbalance on the planet.
You’ve been a very attentive audience, and I must say that now. I feel more like a 77-year-old virgin in an 18-year-old body. Thank you very much.
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