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.