Cocreating business's new social compact.
Moving beyond decades of mutual distrust and animosity, corporations and nongovernmental organizations (NGOs) are learning to cooperate with each other. Realizing that their interests are converging, the two sides are working together to create innovative business models that are helping to grow new markets and accelerate the eradication of poverty. The path to convergence has proceeded in three stages. In the initial be-responsible stage, companies and NGOs, realizing that they had to coexist, started to look for ways to influence each other through joint social responsibility projects. This experience paved the way for the get-into-business stage, in which NGOs and companies sought to serve the poor by setting up successful businesses. In the process, NGOs learned business discipline from the private sector, while corporations gained an appreciation for the local knowledge, low-cost business models, and community-based marketing techniques that the NGOs have mastered. Increased success on both sides has laid the foundation for the cocreate-business stage, in which companies and NGOs become key parts of each other's capacity to deliver value. When BP sought to market a duel-fuel portable stove in India, it set up one such cocreation system with three Indian NGOs. The system allowed BP to bring the innovative stove to a geographically dispersed market through myriad local distributors without incurring distribution costs so high that the product would become unaffordable. The company sold its stoves profitably, the NGOs gained access to a lucrative revenue stream that could fund other projects, and consumers got more than the ability to sit down to a hot meal-they got the opportunity to earn incomes as the local distributors and thus to gain economic and social influence.
Brugmann
Jeb
J
University of Michigan's Ross School of Business, Ann Arbor, USA.
Prahalad
C K
CK
D000288:Administrative Personnel; D003132:Commerce / Q000458:organization & administration*; D006801:Humans; D008962:Models, Theoretical; D011203:Poverty; D012941:Social Responsibility; D014481:United States