[GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Global Knowledge Dev. Moderator]

Last week, GKD members discussed some of the benefits that can be gained
from "pro-poor" business strategies, along with some examples, and the
striking challenges to creating and implementing those strategies. This
week we examine profit, and the functional, and dysfunctional, role it
can play in promoting activity that provides real value to the poor.

Telecenters are a telling example. During the past decade, international
donors have spent tens of millions of Euros/dollars to fund telecenters
throughout the developing world. Yet most telecenters have failed to
become sustainable. Worse yet, subsidized telecenters often drive out
for-profit companies that cannot compete with the subsidized prices.
When the donor funding ends, the telecenters often founder and fail, and
the community is left with nothing.

A couple of years ago, GKD received a message from an enterprising young
Nepali, describing a striking contrast. He had established a cyber-cafe
(i.e., for-profit telecenter) in a small town, and explained how he had
made his company successful. Initially, he followed the standard
approach: put out some signs, talked to some of the town leaders, handed
out some flyers. But few people came and he faced failure. He decided to
take a new approach. He visited people at their homes and shops to find
out what they were interested in. Then went back to the cafe and
searched the web for relevant websites. When he had collected enough
material, he invited them to the cyber-cafe to review the material
(sometimes with his accompanying translation) for free -- the first
time! His driving motive: profit.

The story has been repeated with other products and services. This kind
of experience has convinced some that profitability is essential for
sustainability. They argue that profit provides the incentive needed for
the kinds of effort and investment needed to make enterprises
successful. Further, the need to make a profit forces all companies --
large and small -- to identify and deliver products and services that
are valued by customers, i.e., that customers will pay for.

Others harshly criticize the recent emphasis on "public-private
partnerships." They feel that for-profit firms inevitably place profits
above the well-being of poor communities. They charge that companies,
especially international corporations, will make the investments needed
to serve the middle and upper class, but not the poor. They argue that
for-profit companies are less likely to provide sustainability, because
they will desert a poor community as soon as higher profits can be found
elsewhere.

Key Questions:

1) Is profit important -- even essential -- to successful and
sustainable "ICT for development" activities?

2) Do you know of large or small local companies that have used ICTs to
serve the poor while making a profit? How about multinational
corporations?

3) How do we ensure that the profit motive drives companies to provide
ICT goods and services with real value for the poor? To succeed in
selling to the poor, do companies have to create trust by providing real
value?

4) Are there ICTs that offer entrepreneurs from poor communities a
chance to create successful small enterprises, either free-standing or
as franchisees of a larger entity?

5) When large corporations seek to serve the poor, who are the "winners"
and "losers"? What "win-win" models are possible?





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[GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Arrigo della Gherardesca]

Dear GKD List Members, 

On Friday, November 26, 2004, Shahid Uddin Akbar wrote: 

> Still we didn't find any single project which can claim itself as
> Sustainable in terms of being financially viable and serving the local
> rural communities anywhere in the world.
..snip...
> Why are the organizations rushing for financial sustainability in the
> case of rural ICT projects? It also must have some donor driven ideology
> to make the development initiatives Commercially viable, which is not
> possible in a realistic approach.
..snip...
> So, can we put the idea aside to make all rural ICT for Development
> projects commercially viable?


I would say yes and no. We have developed a viable model for financing
the initial investment to set up rural TeleCenters/kiosks, with Donor
money, on a wide scale.

But thereafter, Telecenters HAVE to be able to pay for maintenance,
amortization of equipment and operating costs, by themselves! In fact,
a lot of Donor money DEPENDS on providing credible forecasts about
this.

One year's costs can be as much as the whole initial investment and the
Donors we work with don't want to have to come in year after year, or
see the projects fail.

Therefore, we have developed (and are close to marketing even in
Bangladesh) a system called "VillagE-volution", a Knowledge,
Information, Commercial and Consultancy system, aimed at rural
communities wordwide, that should greatly help villagers in their
development process and therefore even in paying for the Telecenters.

We are even putting together a good, sustainable, Telecenter business
model, based on VillagE-volution and the best services that can be
provided with today's most up-to-date technology (VSAT, wireless and
all), to be presented very soon to the Donors and then implemented
locally, through NGOs and other entities with which we are connected.

Therefore, we are analyzing all the information that we can find on
rural Telecenter profitability (the main sources of revenue in the more
successful examples until today and the reasons for failure of the ones
that did not succeed).

>From your first sentence, it looks like you have some knowledge on the
matter, or you may know someone that does. Or other List Members may.

If so, could you kindly provide us with such information?

Thanks for your support and the enlightening contributions that List
Members and the Organizers have provided us.


Arrigo della Gherardesca 
Managing Director 
ItAfrica - Italian African Alliance srl 
Milano, Italy




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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Meddie Mayanja]

Dear Colleagues,

Whether profit is essential on not for successful ICT for Development
activities depends on the nature and over all mission of the activity
under question. Profits are certainly necessary for financial
sustainability.

As far as I know, however, the "profit" is not the problem/issue at all
-- the issue should be probably what is the price mark-up on the ICT for
Development activities -- which activities/services are charged for
profit?

We may recall that one of the reasons why rural communities can not use
ICT to improve livelihood is cost and availability of ICT resources.
It's not an either or situation; once ICT tools are made available
(e.g., Telecenters) they should be affordable. You also notice that
affordability is relative to community economics.

On the other hand, it's OK for an ICT for Devlopment initiative to seek
profits to ensure that services are available the next day. Detailed
planning would have to be made to decide upon which services to charge
for and which will be essential for fostering development - where
profit-motivated charges could kill interest for the service.

A strategy that I have found useful is to identify a few core services
that businesses would charge less for (e.g., cost recovery fees) for
their community development impact, and leave others on a full cost
basis to support sustainability. This would ensure that poor people are
not neglected for services in pursuit of profits. The rush for profit
(in the extreme) is an engine for promoting the digital divide and
growing the gap between the rich and poor. I understand it is the
bedrock of the growth of civil society organisations to balance up
effects of private sector led development around the world.

There is also such a thing as cost-recovery which can be applied to
critical services selectively.


Regards, 

Meddie Mayanja




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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Jim Forster]

Dear GKD Members,

I'm Jim Forster. I am a Distinguished Engineer at Cisco Systems and have
worked here since close to the beginning.

Bettina Hammerich made some very good points in her recent posting that
also pertain to the current question of the role of profitability,
including:

> * Businesses are more likely to be efficient service providers
> 
> * Governments and NGO's can be corrupt and/or ineffective

and

> * Environmental and human rights are not best served by the free market
> 
> * The level playing field is uneven and everyone is not "free to choose"
> 
> * MNCs are not transparent

Perhaps some of the concerns in the second group can be addressed in
time. I would hope, for instance, that some of the environmental effects
could be reduced by burdening the products with projected environmental
costs and in some way capturing the externalities. This is easier said
than done but simple examples include requiring recycling fees at the
time of purchase. MNCs are not transparent; neither are some NGOs and
some governments. All should be pressured to be more transparent.

To me, a major benefit of a for-profit goal is that the profit (or loss)
is a very convenient metric that indicates whether the goods or services
are useful when compared to alternatives. This metric includes factors
from both the demand side (do people want it enough to pay for it) and
the supply side (is it being done efficiently). I've been very
suspicious of other metrics because I think they're too easily 'gamed'
by insiders. Even the profit system can be cheated with an uneven
playing field or without the rule of law.

Without feedback from the people it's very easy to fall into the trap of
'knowing what is good for others'. I've worked at for-profit company
(Cisco Systems) for a long while, and I have to say that while I think
we've got great employees, we've succeeded because we learned how to
listen when our customers have voted with their wallets. I trust our
customer's judgment of what they want more than our expertise.


-- Jim




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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Cornelio Hopmann]

Initial remarks: the Moderator's question does not contain a definition
of "profit"; it might be a monetary return on invested capital, it might
be an excess over pure operation-costs, it might be equal to the
operation costs but those who use the offered ICT-services do better by
using those services.

Second remark: we made a large comparative study on Telecenters in
Nicaragua and do continous monitoring and -except in very special
settings like schools- we didn't observe any significant difference in
services offered, prices charged and people attending, between
supposedly "for profit" and supposedly "non-profit" Telecenters.

Third remarks:

(1) Unfortunately ICT-services are not free -like air- someone has to
provide them and someone has to pay those who provide them.

(2) Costs to be covered are the use of communication-infrastructure, the
personel involved in bringing the service, the replacement of equipment
and consumables, the place (or the rent for it), the energy used.

(3) It turns out that 1 years full operation-costs (including
depreciation for equipment replacement) in many cases comes already
close to the initial investment-costs or even exceeds them.

(4) The current trend -look at Cellular phones and their business model
or Ink-jet printers- for communication-technology makes that initial
investment become more and more irrelevant compared to operation-costs.

(5) Hence the whole question boils down to "who pays" and "how" (and to
a certain degree "why") and specifically the operation-costs.

Fourth remark: if -as in some cases- philanthropic initial donors also
cover the operation-costs -mostly they don't- still the question is
whether donors should be encouraged to spend on ICT or is the money
better spent on other more important issues. If it is claimed that
Governments -either donors or local- should cover these costs, the
question becomes even more important. The only reason might be that ICT
is more effective than other means to fight poverty (or it's a basic
requirement to achieve those other means). Generalized hard evidence is
missing.

Fifth remark: if there is no substantial gain for "beneficiaries" -i.e.
they are truly better off with ICT than without or ICT provides
essential services at lower costs -then there is no reason to spend on
ICT- neither for them nor for anyone else. This depends on a case by
case analysis -and unfortunately this analysis in many, many instances
is not done, neither before nor after.

Sixth remark: A telecenter -or whatever other type of ICT-service-
without a sound business-model with respect to the above ... shouldn't
even be started.

Seventh remark: We found -and there are other examples in the
literature- that non-benefactor Telecenters (i.e. those either started
"for profit" or by the beneficiaries themselves) had in general more
sound business-models than those mounted "for benefit" (i.e. by any type
of Benefactors, public, private, NGOs).

Corollary: "self interest" -some times expressed in terms of
profit-expectations- is a necessary requirement for sustainability.


Cornelio




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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Kamwati Wango]

My first reaction is that profit is essential for sustainabibility.
Despite the different approaches taken to development, we have to
recognize that sustainable growth will only come when people are
assimilated into markets, where they can sell their capabilities
(skills) and goods, for profit.

The same applies to ICTs, just as a household has to spend to keep
afloat, the ICT service provider needs to spend on bandwidth, equipment
etc., and therefore as such, profit is the only way.

The large number of subsidized ICT projects in my opinion fail because
they take the implicit assumption that ICTs are a special service, but
they are not and in fact they should be considered another factor of
production such as land or capital. The focus should be in creating a
market for information, which as you note from the case in Nepal, if
properly done can be pretty successful, you just need to market the
right product.

In my opinion, the other option to sustainability, though far more
uncertain, is government funding. Governments should realize ICTs are
becoming more and more important enablers of welfare and the economy,
and should therefore provide them in the same way they provide
agriculture extension services, or business support services. However,
given that most governments in the developing world have cut support to
these traditional areas, which are more accepted as needs, the
possibilities of government funding of ICTs is lower, so I have to
conclude profit is essential.

While you may argue that companies will focus on the middle and upper
markets, profit motive will in the long run force them to move 'down
market'. Here in Kenya, the cell phone providers were initially elitist
with expensive services, but as the elite market was filled up, services
more accessible to poor people have been developed to maintain the high
growth rates experienced at first.

The challenge then is to make the private sector invest in the poor's
access. One way is to channel funds currently used for subsidy in the
development of capital funds tied exclusively to the development of
pro-poor access.


Regards, 

Kamwati




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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Al Hammond]

Bettina Hammerich and Jim Forster both make useful points. Of course,
markets don't attend well to everything. But the core of providing
useful services at prices people will pay--and the market discipline of
listening to customers that Forster underscores--is a strength of the
business approach, one that might be usefully incorporated further into
development strategies even in very poor communities.

I'd like to share some analysis that pertains to this question. We have
been analyzing income structure in developing countries, using a cut-off
of $6000 per household/y as a working definition of the level below
which the "bottom of the pyramid" or poorly-served market exists. This
is not absolute poverty, but it is still very low income, a few $ per
day per person. In China, there are 286 million households below this
cutoff with a collective income of $691 billion/y--67% of the total
income in China. For India, the figures are 171 million households, $378
billion, 75% of the total income. Across some 18 countries, the BOP
market has more than $1.7 trillion in income--about the size of
Germany's GDP. This is a substantial market. From a number of detailed
case studies, we can document that low-income households are willing to
spend 4-7% of their income on communications and access to information
(because it often substitutes for more expensive travel). Thus the
potential ICT market in developing countries exceeds $100 billion per
year, most of it larely untapped. 

The size of the market means that substantial investment to tap it might
be warranted. It's dispersed character (much of it in rural areas) means
that wireless systems may have an advantage in aggregating that demand
up to commercially viable levels. And it means that the market
opportunity is for services (including the infrastructure and device
cost) that cost $50-$300 per household per year. That in turn means a
strong advantage for shared use models or other approaches that spread
network and device costs over a large number of users or concentrate
them in local entrepreneurs serving pre-paid or pay-per-use customers,
as well as for services that can be bought in increments of a few cents
up to a few dollars.

Not surprisingly, we find that most of the successful models we have
documented in case studies have one or more of these characteristics. A
few examples, some well-known, others perhaps less so. GrameenPhone's
rural village phones generate an average of $96/m each--they are very
profitable. Smart Telecommunications in the Philippines has built a
profitable cellular phone business with over 14 million customers on the
strength of selling pre-paid text-messaging units to low income
customers at units as small as $.03. They use a network of some 500,000
local entrepreneurs to sell those units; the business grew 40 % last
year. ITC's e-choupal network in India reaches 4 million poor farmers
via an Internet-connected PC network, more than recouping the cost of
the system by savings on the price of the grain it buys over the network
and other sources of value. 

Similar imbedded systems can be found in health care, education, and
banking enterprises aimed at BOP markets. We do not believe that these
examples, and others we have documented, though limited, are unique or
due to special circumstances. The underlying business models are quite
robust and, we believe, replicable; indeed, the GrameenPhone model is
now being successfully adapted to Uganda, and many of the elements of
the ITC model are being adapted by Pride Africa to Kenya. So we conclude
that there is enormous untapped scope for market-driven ICT services
that confer significant benefits on the customers and communities
served.


Allen L. Hammond
Vice President for Innovation & Special Projects
World Resources Institute
10 G Street NE
Washington, DC 20002 USA
V (202) 729- 
F (202) 729-7775
[EMAIL PROTECTED]
www.wri.org
www.digitaldividend.org




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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Andy Lieberman]

Dear GKD Members,

I would like to add to Meddie's comments with a couple of things that
have worked well for us in Guatemala. I would also like to describe a
dilemma I am going through on the issue of profitability in a NGO.

With the help of USAID/AED/EDC and World Learning, we have set up 28
school-based telecenters, all of which are sustainable (so far) and
almost all are putting social service over profits. The two principles
that we have applied are:

1. Select partner implementors that are really dedicated to serving the
community. In our case, most centers have been given to community-run
schools, but a couple of others have been small, local NGOs.

2. Let the partners cover all recurrent operating costs from the outset
and some of the start-up costs. This scares off many potential partners,
but has served as a good filter to ensure that the partner schools have
the economic base and administrative capacity to sustain the center.

When we find a partner that responds well to both of these principles,
the result is a telecenter that instinctively finds a happy balance
between keeping the center sustainable and providing needed community
services.

These centers compete fairly with the small local entrepeneurs who set
up private Internet cafes. The schools have the advantage of a captive
user base while the entrepeneurs have lower overhead and better capacity
to respond to local demands in terms of services and scheduling. We
accept this competition as inevitable and healthy because it keeps
everyone on their toes. In the end, the consumer wins.

While I feel comfortable with the above-stated model at the local level,
I am struggling a bit with the ethics and reality of whether a mid-sized
local NGO should build its sustainability off end users. For example,
some people have suggested that our NGO could create a franchise scheme
where our partner centers could pay us a fee for which we would provide
ongoing technical and administrative support. It is certainly solid as a
business plan, although I wonder about our capacity to provide quality
services at a low enough cost. Regarding ethics, I would not feel
comfortable knowing that my salary is coming directly from the pockets
of the rural poor we are trying to help. Yet, if we are not able to
offer those services, the telecenters end up paying private companies
for that assistance. So, maybe I am wrong in my thinking and that this
scheme would really be a win-win. Our NGO is doing its best to be
transparent, so that any "profits" obtained should truly be channeled
back to our target population.

I would welcome testimony from anyone or any organization that has gone
through these types of growing pains.

Thanks,
Andy

Andrew E. Lieberman
Presidente (Nab'e Eqanel)
Asociacion Ajb'atz' Enlace Quiche
5a. Calle 3-42, Zona 5
Sta. Cruz del Quiche, Guatemala
Tel. y Fax:  (502) 7755-4801, 7755-0810
[EMAIL PROTECTED]
www.enlacequiche.org.gt
Para recursos y noticias sobre educacion bilingue intercultural en
Guatemala, visite:  www.ebiguatemala.org




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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Kevin Jones]

Jim Forster makes some good points below. One thing I'd like to add is
that the pricing changes coupled to getting externalities to be included
in the cost of goods sold is a branding issue that extends all the way
from state fiscal and monetary policy down to the level of consumer
purchases costing more at the cash register.

That pricing change will come if it's accompanied by a value change that
is deep and heartfelt and desires expression throughout a lifestyle. A
first target might be the LOHAS market (lifestyles of health and
sustainability). Get this ethically purchasing consumer to wake up to
poverty and get them willing to pay to fight the conditions that foster
it and you have something. If you can get the selfish yuppies who are
trying to treat their own bodies and minds well to think about extending
that kind of regard to somebody else who has less than they do, then it
could work.

They'd have to see how global economic justice is in their best
interests, just as they have become enlightened consumers of personal
products and services, this is about them becoming enlightened
consumers, about expanding their horizons of what is in their best
interests. You would in effect get them to pay a poverty
fighting/environment cleaning surtax, but do it through being willing to
pay a premium for poverty fighting just like they already do for
environment cleaning. It would also have to be tied to those developing
world cultures selling their culture effectively into the developed
world, just as the developed world shoves media and culture into the
developing world. The transmission of value would be two way... If that
happened, then market forces can make the difference.


Here's Jim's response to a previous post:
 
> Bettina Hammerich made some very good points in her recent posting that
> also pertain to the current question of the role of profitability,
> including:
> 
>> * Businesses are more likely to be efficient service providers
>> 
>> * Governments and NGO's can be corrupt and/or ineffective
> 
> and
> 
>> * Environmental and human rights are not best served by the free market
>> 
>> * The level playing field is uneven and everyone is not "free to choose"
>> 
>> * MNCs are not transparent
> 
> Perhaps some of the concerns in the second group can be addressed in
> time. I would hope, for instance, that some of the environmental effects
> could be reduced by burdening the products with projected environmental
> costs and in some way capturing the externalities. This is easier said
> than done but simple examples include requiring recycling fees at the
> time of purchase. MNCs are not transparent; neither are some NGOs and
> some governments. All should be pressured to be more transparent.
 
..snip...



Creating conversations between tech marketers and their customers

Kevin Jones, co-founder, Microcast Communications




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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Sam Lanfranco]

This question is really two questions. The first part is "Must a
venture/project" earn an adequate return to be sustainable?" The answer
is an obvious yes, but leaves open what is meant by an adequate return.
An adequate return must generate a revenue flow to sustain operating
expenses. It should also provide for the replacement of the initial
investment (fixed assets). Whether it needs to return a competitive rate
of return on those initial assets depends on the nature of that
investment. If it is venture capital (from investors) it needs a rate of
return in addition to covering operating expenses. If it is a grant
there may only be need for replacement investment.

The second part of the question is "Must the profit motive be a driving
force for success". The answer here is more mixed. The profit motive
includes maximizing revenue, but it also involves minimizing expenses.
The profit motive is as much about good cost management as it is good
marketing. Both are possible without an explicit self interested profit
motive on the part of those who own the assets and receive the profits,
but both are more difficult and require extra dedication and care.

There is a further complication here, in that some development projects
are undertaken because there is what economists call a "market failure".
For such development projects this usually means that the benefits are
spread wider than just to those who pay. The market demand for the
service or produce will be less than socially optimal unless there is a
subsidy to reduce costs and lower prices. Education and health are areas
where one frequently finds market failure.

There are then three lessons to be drawn here.

First, "profitability" as the need to pay attention to keeping costs in
line and worrying about pricing/marketing is essential whether the
operation is a private "for profit" operation or a social "for
community" project. Capitalists ignore this at the risk of their
capital. NGOs ignore this at the risk of their projects.

Second, If the profit motive of owners is not the driver for efficiency
and effectiveness in the provision of goods and services, some other
explicit benchmark measures need to be in place to assess and discipline
the projects. For community projects this needs to be more than
"bookkeeping", it needs to be strategic financial planning.

Third, If projects involve addressing externalities an explicit strategy
of dealing with externalities needs to be part of the strategic
planning. Are private sector projects subsidized to better align wider
benefits with project costs? Are NGO project subsidies assessed in terms
of their ability to align wider benefits with costs?

The sustainability of good projects requires "profitability" as a
performance indicator and performance tool. If the "profit motive" is
not the driving force for decision makers, something else must operate
as the driving force for cost and marketing decisions. If there are
externalities these must be explicitly addressed in strategic planning
and in how projects are costed, funded, and how their goods and services
are priced.

Lastly, all of these require a level of management, administration and
accountability that is seldom found in development projects.



Sam Lanfranco
Distributed Knowledge Project
York University




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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Jim Forster]

Dear Colleagues,

I realize I left out one other point about ICT development and
profitability:

I was making the case for profit as an important metric, and indeed I
think that private, for-profit companies can and should take the lead in
much of ICT, but profit is not the only metric and there is an important
and natural role for the public sector in creating part of the network
infrastructure for ICT.

In the networking part of ICT I would propose a hybrid of public/private
investment, somewhat analogous to many of our transportation systems
(except railroads). The public sector builds the roads and highways, but
the private sector supplies the vehicles, fuel distribution systems,
trucking companies, etc. I think the road construction, while not cheap,
is quite smaller than the rest of the system.

In particular, I think in many cases it makes a lot of sense for the
public sector to build what we call "Layer 0" of the networking stack:
the physical layer. In cities that would be fiber conduits and possibly
fiber bundles. They could then rent access to these conduits or fibers
to companies that install equipment that uses these to make useful
services, such as voice and data connectivity. These companies in turn
would sell voice or data service to individuals and businesses.

Secondly, in some cases it may make sense for the public sector to take
the lead in building a backbone network, to which smaller regional or
community networks might attach. And in most cases the public sector
funds much of the educational system. The Internet is now a vital part
of the educational system, and as such, public funding of educational
uses of the Internet makes sense too.


Thanks,

-- Jim
   
   


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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Lee Thorn]

Dear Colleagues,

Thanks for all the input, both on this forum and privately.

I agree: financial sustainability of IT products in rural areas means
either 1) government or supragovernment subsidy or 2) profit-making.

If 'profit-making', this profit can be taken by an individual
entrepreneur or by a community (itself or an association within it or a
cooperative) or government institution (like a school) seeking profit.
Jhai has experience in all these forms in small applications in various
programs (coffee, high school ICT, Jhai PC, weaving). They all can work
(or fail) with people in remote rural villages, we find. Our database is
small, so I choose not to draw conclusions on which form is better. Our
experience is that the key thing is that the process must be 'owned' in
an empowered sense by the people of the village who use it.

'Profit' is what is left over after all outputs, including, I should
think fixed costs, replacement cost, MAINTENANCE, and running costs, are
covered. We have developed a tool (with farmers, local entrepreneurs and
Stanford MBA/engineering students) that can be modified infinitely for
particular situations. If you want it, write me and I will include you
in our distribution of our next Jhai Update. I'd give it to you, now,
but it includes a small application that I was given by a Stanford
student who is now in Singapore and I have to find out how you might
purchase that part.

Running cost includes electricity costs. In remote areas generation has
to be done by alternative means. In the (probably) short term
alternative electrical generation will be more relevant everywhere, but
especially where money is in short supply. This is due to the increased
demand for petroleum and the soon-to-be fall off of supply.

If one uses lead acid batteries, then questions of disposal of them
becomes an issue of sustainability. In fact, years ago I had the
opportunity to spend an afternoon with an inventor who holds most of the
patents for passive solar. He told me that one should look at all
components' elementary forms and ask oneself what would happen if
everyone in the world adopts this? What happens environmentally and what
happens in terms of costs. I think this is a good idea.

In all cases, if the community or enough individuals within a community
does not want the thing, then they won't use it. This means market
research. Market research cannot be overlooked. To get good market
information from a remote, poor village, in my experience, is not a
simple thing. It requires trust, otherwise the cultures of dependency
will lead to people saying 'yes' to almost anything that has any chance
of improving their standard of living...with a high probability that
whatever is given becomes junk.

I totally agree with Sam Lanfranco. A) You have to choose your shots. B)
small NGO's have certain advantages over large NGO's: it is much more
likely we won't be selling cookie-cutter solutions and much more likely
we actually know the people we are working with. These beliefs are
central to why Jhai Foundation will do a roll-out of the Jhai PC by a
method that over time reduces our inputs to ground-level programs
because it reduces the need for us by programs. We also won't go into
manufacturing or the publishing business. If you would like to see our
business plan, please write me and I will add you to our Update list and
include the business plan again in our next Update. Our plan is
organized around two things: 1) our willingness to work initially with
grounded programs in carefully distributed locations; and 2) our
committment to devolution, open source, and open design protocols as key
factors of our work.

I found Jim Forster's comments particularly useful in this way: you have
to know your customer and listen to her.

I also think his outline of how capitalism works is apt, although I
would quibble here and there because, as we know, the devil is in the
details. But so what? And, of course, I know he would agree that
monopolies are by nature quite inefficient.

I personally find the key piece of business knowledge is that
relationships are nearly everything. You have to keep good books, you
have to be transparent as possible, and you have to constantly seek
improvement...but relationships rule.

I'm not naturally good at relationships. I'm a combat Vietnam veteran
and I grew up very hard. So I focus on relationships and how to make
them better. I focus on my deficits as a way to be more aware of myself
and I build as much as I can on my gifts. Both are helpful processes in
encouraging and following good quality relationships, I find. And, as
much as possible, really daily, I cultivate my spiritual life.

And when I have to make a choice between getting to know a poor person
or getting to know a rich one, I try to give preference to the poor
person. I simply find that more fun. I also find that when I refuse to
always choose the soft, easy way (which would be to hang out with
relatively rich people

Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Tom Abeles]

Al Hammond's posts on GKD are wonderfully articulated. And I think they
are on target. They validate the models developed by Harvard's Clayton
Christensen (Seeing What's Next) for example.

The focus on this list seem to me to be formed around social justice and
similar issues, where the ICT's are just the surrogates in this ongoing
debate between the neo-classical economic advocates (business models)
and the emerging heterodox thinkers (more driven by social justice
issues). The fact that these ICTs that Hammond cites bring social
benefit is more in the way of a rationalization that the standard
economic model can make money and still be socially and environmentally
responsible. The social activists on the lists, though, start with the
issues of social justice which is paramount, and if it makes money, that
is also good, as long as its not too much.

The problem is that the business model starts with private capital and
entrepreneurial spirit and risk. Such funds are unavailable to those
seeking social justice; thus, the latter group has little to do except
to try to inform the private capital of its social responsibility.
Advocating for public sector support, gives the social justice
organizations the funds they need to implement a different model.
Unfortunately, this latter model is dependent on government largess to
sustain it and there is little effort to concentrate on a business model
which seems to contradict the ideas around social justice.

If the larger ideas underlying the models that Hammond describes, work; 
and, if the business community does adhere to issues of environmental 
sustainability and social justice, then the roles of the NGO's will be 
seriously abridged and altered and, possibly, their voices may be muted. 
The NGO's have more than issues of thwarted social justice on their 
agenda. These are big IF's; but the NGO's may need to seriously 
reconsider their roles in this arena.

A number of years ago, the surrogate was "appropriate technology" or
"micro enterprises", today, ICT's and tomorrow...??

Thoughts?


On Wednesday, November 3, 2004, Al Hammond <[EMAIL PROTECTED]> wrote:

> Bettina Hammerich and Jim Forster both make useful points. Of course,
> markets don't attend well to everything. But the core of providing
> useful services at prices people will pay--and the market discipline of
> listening to customers that Forster underscores--is a strength of the
> business approach, one that might be usefully incorporated further into
> development strategies even in very poor communities.

..snip...




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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Meddie Mayanja]

On 11/3/04, Andy Lieberman <[EMAIL PROTECTED]> wrote:

> While I feel comfortable with the above-stated model at the local level,
> I am struggling a bit with the ethics and reality of whether a mid-sized
> local NGO should build its sustainability off end users. For example,
> some people have suggested that our NGO could create a franchise scheme
> where our partner centers could pay us a fee for which we would provide
> ongoing technical and administrative support. It is certainly solid as a
> business plan, although I wonder about our capacity to provide quality
> services at a low enough cost. Regarding ethics, I would not feel
> comfortable knowing that my salary is coming directly from the pockets
> of the rural poor we are trying to help. Yet, if we are not able to
> offer those services, the telecenters end up paying private companies
> for that assistance. So, maybe I am wrong in my thinking and that this
> scheme would really be a win-win. Our NGO is doing its best to be
> transparent, so that any "profits" obtained should truly be channeled
> back to our target population.
> 
> I would welcome testimony from anyone or any organization that has gone
> through these types of growing pains. 
  

Andy, I would understand your feeling against feeding from the poor's
hands.

I think the most important issue here is the service you will offer and
how it fits into the larger community aspirations. I have worked with
setting up School-Based Telecenters (SBTs) in Uganda and Zimbabwe under
the World Bank Institute program. In Uganda alone there are over 15
SBTs. The strength of the SBT is as much in the networking and sharing
of resources. They can negotiate fair prices and services etc., as a
block.

Therefore if you can make your services available to help organise
common interests around a need - for instance PC servicing and repairs,
training etc, that would be great. They can in turn pay some fees at a
price deemed necessary for the service. In case there is a doubt - take
it that if you don't help, someone else will, but might require higher
fees than what you might be willing to do the same job for.

I think its all a WIN-WIN situation if you help and charge less than the
market cost - if you can get a good service for that amount. I would be
happy to know how you get through on this.


Regards, 

Meddie




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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[John Broomfield]

Dear Colleagues,

This really is a fascinating discussion. So fascinating that I feel
compelled to make my first post - so please be gentle.:)

One observation to the comment on Branding.

I'm not sure I agree with Kevin Jones (or maybe I just missed the
context?) that

> ...the pricing changes coupled to getting externalities to be included
> in the cost of goods sold is a branding issue...

I agree brand is important in terms of increasing the likelihood that
consumers will pay a higher price for goods which cost more because of a
pricing component which compensates for "externalities". In this sense a
particular brand is providing some intangible value to consumers who buy
into (or can be persuaded to buy into) the approach that Kevin outlined
below.

Brand is also doubly important in this context if particular
organizations are acting in isolation in taking on this additional cost
burden while competitive products or services continue to enjoy a free
ride.

However I'm guessing that regulation/legislation forcing or
incentivising (maybe through tax breaks) all producers of a particular
product or service to internalize  some of the external costs of
production - and therefore create a level playing field for all -  plays
a more important role here. Especially for products and services which
are becoming more commoditized and consumers are therefore buying more
on price than values or attributes associated with a particular brand.

Just my 2 cents.

Regards to all,

John




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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Jeff Buderer]

Dear GKD Members,

It is great to hear all the thoughtful ideas and I am encouraged by them
particularly as a nice counterpoint to the recent political setbacks in
US.

I am working with a start up social enterprise called the oneVillage
Foundation . We are excited by this
conference and the potential of BOP. We currently are in the beginning
stages of developing what we call Unity Centers. I hope that our work on
this may have some relevance to this discussion.

> Most telecenters are not profitable or economically self-sustaining.

This would not be an issue so much if the telecenters were developing an
integrated program of development that incubated social enterprises in
the communities they operated out of. It is not so much an issue of
whether telecenters are directly profitable but whether they are
building economic value in the communities they are operating in.

Yet as Meddie Mayanja seems to imply, profit is essential not only for
successful "ICT Development" but for all things done in a civilized
society. If one is ideologically downed by the idea of profit then one
can use the term resources. To replicate sustainable communities-based
economies you need to have a return on the initial investment.

Here is one scenario we have looked at as we have worked to develop a
comprehensive plan for local community development around ICT centers:

ICT centers could be designed as money losers but the businesses and
other organizations they incubate or assist could pay a fund to keep the
operation going from their profits or "surplus revenues". At the same
time, the program could be designed to subsidize small groups doing
research and organizational work relevant to increasing the momentum of
local development.

People just wanting to see the Madonna website or find out if Bush won
the re-election on CBS.com would have to pay to use the computers, as
would be the case in normal cyber-cafes where everyone has to pay. The
subsidy towards serious computer usage would discourage frivolous use of
what is still a very precious resource in non-affluent countries. I
think it is important to not only look at profit but how the profits are
spent. This is a real issue in non-affluent nations and also affluent
ones (probably more so as they are the 15% of the world's population
that unsustainably consumes 85% of the world's resources) as well.

More on this later...

Jeff




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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Bettina G. Hammerich]

Dear Colleagues,

Once again I have mixed views.

I think that Jim Forster's point about the public sector role in
investing in part of the infrastructure for ICT is very important and
indeed important from a country's e-readiness perspective as well, and
that there is a clear similarity here with other public sector
investments into water, railways etc. I also agree that the market's
ability to listen to customers is one of its key qualities (however,
this is assuming that all customer voices are heard).

Allen Hammond's research is excellent, needed and very encouraging for
businesses in doubt about investing in poorly served markets, and with
the current trend for corporate responsibility some "externalities" will
no doubt be taken care of. However, if we are talking about eliminating
poverty, the cut-off of $6000 per household per year is rather high. But
perhaps this is not the point? Perhaps it is merely that there is a
large untapped market amongst the poorer (not the absolute poor) and
that this group would benefit from the investment?

If the key question is can profit alone eliminate poverty and
businesses take over where NGO's and Governments fail -- then I think
the answer has to be no -- simply because their motivations and goals
are different.

But if the key question is can businesses provide ICT services better
than NGO's, and is there a business case for entering "bottom of the
pyramid" markets, I think the answer is without a doubt - yes!

When it comes to the very poor or otherwise disadvantaged groups, and
when it comes to market externalities such as the environment,
governments and NGOs must continue to play a role. Albeit, a more
efficient role than in the past! In this regard, I found Sam Lanfranco's
analysis of the driving forces of development projects excellent, and I
agree that often development projects do not have the required level of
management, administration and accountability. The latter is an area
that the not-for-profit organisations desperately need to address.

Although I don't think that NGOs' function will become superseded by
business (rather, they have different roles to play), Tom Abeles' point
here that the current trend poses new challenges to NGOs is very
relevant, and perhaps this debate will lead to greater transparency and
efficiency in the not-for-profit sector, which in itself, would not be
such a bad thing.


Best wishes,

Bettina Gronblom Hammerich




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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Klaus Jaffe]

Dear Colleagues,

I would place the question into a broader context:

For example, if we call 'S' the benefit to society (or the community) and
'I' the benefit to the individual (profit), any type of human action can
be grouped as follows:

S > 0 and I > 0 : "social investment"
S < 0 and I > 0 : "destructive egoism"
S > 0 and I < 0 : "true altruism"
S < 0 and I < 0 : "destructive behavior"

Yet economic history, logic and computer simulations (see:
http://atta.labb.usb.ve/Klaus/altrupun.pdf) show that only the first one
on this list causes sustainable economic growth.

In relation to non-economic benefits, estimated through the human
development index (HDI), there is a very close correlation between HDI
and GDP (more data on this, though in Spanish, can be had at
http://www.cee.usb.ve/La%20riqueza%20de%20las%20naciones.htm). Thus
clearly, at least for the poor, economic considerations are the most
important (if not they wouldn't have been called poor in the first
place).

Does anybody know of a web site with a list of successful projects
worldwide?


Klaus Jaffe
Universidad Simon Bolivar
Apartado 89000, Caracas 1080
http://atta.labb.usb.ve/Klaus/klaus.htm




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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Jean-Patrick Lucien]

My comments:

How about an NGO running a franchise where they license those
cyber-cafes to small entrepreneurs.

1) The NGO provides the training and investment seed to individuals who
want to start their cyber-cafe.

2) The individuals purchase a franchise license to run the cyber-cafe.

3) The investor in return pays a yearly franchise fee to the NGO and
also complies with some rules set to protect the community. For example,
the cyber-cafe has to remain in the community.

4) A portion of the franchise fee is used to cover internal costs to pay
the NGO and also to support other projects in the community.

This way, the NGO does not control the financial profit of the investor
but controls the benefit of the cyber-cafe in the community.


Regards,

Jean-Patrick Lucien 
EDEM Foundation 
www.edem2.org




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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Adriana Labardini]

Dear GKD List Members,

If someone is still skeptical about the potential impact of ICT in
productivity, knowledge opportunities, finding resources and expertise
and social capital, just take a look at this very discussion forum that
without the Internet would take hundreds of people having to pay travel
expenses plus opportunity costs of their time to be able to have a
dialogue like this. So thank God for Tim Berners-Lee, the creator of the
World Wide Web. The problem is how many have ACCESS to ICT and at what
price?

This hits the very keen observation of Mr. Sam Lanfranco about the
existence of a market failure when it deals with providing basic
infrastructure for even telephone services, not to mention Internet, to
poor, remote, disperse communities mostly in developing countries.

To our great disappointment, introduction of competition of telecomm
services in countries like Mexico did not raise the penetration of
services in rural areas, and service diversification and penetration
happened basically in medium and large cities. Even cellular phones that
grew exponentially, are not affordable or available for poor, rural
people. So in a regulated industry such as telecommunications, reaching
the BOP through affordable, ad hoc ICT services where purchasing power
is low, fixed costs high and competition policies weak, takes a really 
BOP-empathetic approach and a NEW MINDSET:

1. Perhaps there wouldn't be a market failure if providers were to offer
services at the same prices they do to urban/wealthier customers, on the
theory that they will have a much larger market with great needs of
communication and information, provided they are affordable.

2. Reducing the cost of deploying infrastructure through disruptive
technologies that leapfrog the expensive wire-based ones. For example,
through WiMax networks that can even be owned by the community or town.

3. Government support of these access technologies through policies and
incentives that enable use of free spectrum, which means giving up
proceeds from spectrum auctions.

4. Working on the demand side training people on the use of IT and
developing useful LOCAL applications that meet the communities' needs
rather than providing cookie-cutter solutions.

I am sure some of you have worked, or are currently working, on economic
development projects through ICT using innovative technologies. Please
share your experiences and challenges as to access issues and using
unlicensed spectrum and VoIP, and if you dealt with regulatory problems.

Thanks to you all for your enlightening comments and stories.


Adriana Labardini
Attorney 
Mexico City
[EMAIL PROTECTED]
(52 55) 5812 1356




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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Nevine Gulamhusein]

On 11/9/04, Jean-Patrick Lucien wrote:

> How about an NGO running a franchise where they license those
> cyber-cafes to small entrepreneurs.

Jean Patrick Lucien, to add to your comments, perhaps, better still
would be to allow these individuals to run the cyber cafe on a "day"
basis for a small fee which would cover the franchise fee (apportioned
daily); the "day owner" should be able to keep the remainder of the
day's earnings. This way the poorer individuals would be able to afford
the cost and we are creating an enabling environment and increasing
opportunity, almost the same way as Unilever India created the sample
size soap bars to offer to the BOP market. Just as Barry Coetzee
suggested, we need to scale our product to the requirements of the BOP
market.


Nevine Gulamhusein, 
Tel: 281-980-4747 Ext 359
Fax: 281-980-4787
  
 


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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Kevin Jones]

John, my quick response is that regulation follows public sentiment and
values, thus, for me an appeal to branding is a consistent touch stone
in that persuasion of the public, involving people in a values shift. We
don't pay the gas taxes they do in Europe because our higher value is
the open road rather than the impact on global warming. Reaching an EU
level of environmentally sound level of regulation would require
branding our impact on the environment more than our desire for open
road, heavy-footed independence.

On 11/4/04, "John Broomfield" <[EMAIL PROTECTED]> wrote:

> One observation to the comment on Branding.
> 
> I'm not sure I agree with Kevin Jones (or maybe I just missed the
> context?) that
> 
>> ...the pricing changes coupled to getting externalities to be included
>> in the cost of goods sold is a branding issue...
> 
> I agree brand is important in terms of increasing the likelihood that
> consumers will pay a higher price for goods which cost more because of a
> pricing component which compensates for "externalities". In this sense a
> particular brand is providing some intangible value to consumers who buy
> into (or can be persuaded to buy into) the approach that Kevin outlined
> below.
> 
> Brand is also doubly important in this context if particular
> organizations are acting in isolation in taking on this additional cost
> burden while competitive products or services continue to enjoy a free
> ride.
> 
> However I'm guessing that regulation/legislation forcing or
> incentivising (maybe through tax breaks) all producers of a particular
> product or service to internalize  some of the external costs of
> production - and therefore create a level playing field for all -  plays
> a more important role here. Especially for products and services which
> are becoming more commoditized and consumers are therefore buying more
> on price than values or attributes associated with a particular brand.
 


Creating conversations between technology marketers and their customers

Kevin Jones co-founder, Microcast Communications



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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Lee Thorn]

Thank you, Professor Lanfranco for your message on 11/4/04. I find your
position very clear and helpful. I have some questions for you:

> Are NGO project subsidies assessed in terms of their ability to align
> wider benefits with costs?

Do you know of any proven ways to do this or even just ways you like? Is
it always necessary to quantify these benefits to compare them with
costs? Is it important to quantify social costs (or savings), such as
envirnomental ones, when measuring in this way?

> The sustainability of good projects requires "profitability" as a
> performance indicator and performance tool. If the "profit motive" is
> not the driving force for decision makers, something else must operate
> as the driving force for cost and marketing decisions. If there are
> externalities these must be explicitly addressed in strategic planning
> and in how projects are costed, funded, and how their goods and services
> are priced.

How would you describe these 'externalities' you mention? They seem
very important to me and in my experience with strategic planning they
are expressed at least in the SWOT or similar analysis phase, even in
the newer planning formats like dialog or visioning, but I am not sure
how to quantify them or change them in some way so that they are/can be
expressed in costs, funds, and prices.

> Lastly, all of these require a level of management, administration and
> accountability that is seldom found in development projects.

I think this is a crucial point. It is certainly true about Jhai
Foundation.

I am not sure quantification is the key to measuring these other inputs
and outputs. What is the key? For now I wonder if a whole marriage
between profit-making and benefit-producing is necessary in the extreme
conditions that many of us work. Perhaps the measures can be parallel
rather than integrated, partial rather than holistic, paradoxical rather
than sublime. What may matter most is how we report these things so
that a discussion takes place where we agree to terms. Are we there
yet? Are we near?

At the same time there needs always to be room for 'the gift'. 'The
gift' is usually understood in terms of flows rather than snapshots.
Sometimes I wonder if what we need to do is examine more closely what a
gift really is in cultures where people think more in terms of family
and community than they do in under-developed places like the United
States. Maybe there are clues there for all of us.

I really like what you have written. I just am a bit ignorant and would
like more help.

Thanks.

Yours, in Peace,

Lee Thorn


Jhai Foundation
Lee Thorn
Chair
[EMAIL PROTECTED]
www.jhai.org

350 Townsend St., Ste. 309
San Francisco, CA 94107 USA
tel: 1 415 344 0360
fax: 1 415 344 0360
mobile: 1 415 420 2870





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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Al Hammond]

Adriana Labardini raises a very important question--how to get
infrastructure and connectivity into rural areas. She poises the
question of prices, but the real failure of old-line telcos is that they
are wedded to a subscription model--the right business model (shared
use, pre-paid in small units, local entreprenuers as resellers) would
open up service in many places. Grameen Phone's village phone model,
Vodacom's community phone shops, and others show this approach can be
very profitable, and also provide affordable service where it is needed.

Leap-frogging though wireless technologies, evolving fast and inherently
cheaper services for serving dispersed communities, is her other
suggestion. But she points to the real barrier here--most developing
countries have not made unlicensed spectrum freely available, because
they don't understand that the entrepreneurial explosion would generate
more economic activity and more tax revenue than they would get from
license auctions--especially in poor, rural areas. Others have high
import duties on the specialized radio equipment needed to do WiFi or
its successors. So we need to make the business case to governments as
well as to companies.

There is a third possible model, and that is for infrastructure
companies to build and manage the infrastructure for a variety of
users--government agencies, banks, comsumer goods companies--that need
to get to rural consumers/communities. A number of companies are now
contemplating such strategies--both big companies and some
entrepreneurial companies. So one question is, where would governments
welcome such investment and help clear away regulatory barriers?


Allen L. Hammond
Vice President for Innovation & Special Projects
World Resources Institute
10 G Street NE
Washington, DC 20002  USA
V (202) 729- 
F (202) 729-7775
[EMAIL PROTECTED]
www.wri.org
www.digitaldividend.org




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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Ed Deak]

The main problem here are the vague philosophical concepts and ideas,
like the so called "social justice" that can not be defined, but can be
infinitely distorted to suit the theories and demands of incredibly
powerful would be rulers and pressure groups, who invented a new
language and new meaning to many commonly used words to reach their
goals, backed up with a strictly controlled media to mislead people.

For example, the often quoted past prophets, like Smith and Ricardo,
have never said, or wrote the things attributed to them, now used to
justify limitless greed and exploitation. Ricardo never advocated the
free movement capital with his marginal advantage theory and the way
Smith's "self interest" and "invisible hand" theories, both in the same
short paragraph, have been distorted to come up with idiocies like "In
competition individual ambition serves the common good" is outright
fraud. (I have the book, so I know exactly what he wrote and also how
Friedman et al have distorted his words).

If we really want to solve growing global poverty, ideologies and faith
based "isms" are dead and should be buried, because sooner, or later
some would be rulers will distort them and use them for their own power
trips as they have distorted every religion, ideology and philosophical
theory through history.

Then we come to the calculations used by neoclassical market economists
today, like the totally meaningless and fraudulent GDP, "growth",
"productivity" and even "inflation" and "unemployment" figures and we
can only shake our heads in awe how they can get away with it and how
the public and politicians can be gullible enough to tie the lives of
billions of people to these transparent lies ?

For example, the stated purpose of economics, in every textbook, is "The
science for the management and distribution of scarce resources". At
the same time economic efficiency is defined in several different ways,
but basically with the same meaning as " The biggest monetary returns
for the smallest monetary inputs", totally ignoring the "distribution"
aspect, replacing it with pigs fighting at the trough, as the ideal
economic model.

To the best of my recollection, scientific laws and definitions are
supposed to be sector neutral and apply equally to everybody, regardless
of race, creed, or financial standing, while this aberration of decency,
justice and logic gives a free hand to any sector to exploit others and
the environment for their demands.

Monetary values can not be used for any scientific, or economic 
calculations, because they do not represent realities, but often violence 
induced, temporary perceptions, therefore the presently used definition of 
economic efficiency is false and the cause of the biggest environmental 
destruction and human destitution on Earth. Neoclassical economics are not 
a science, but the biggest crime wave in history.

With bank deregulation, money ceased to exist at a certain level and
became a "Licence to control energy and resources, issued by a special
interest sector for its own benefit". The present monetary system
permits the creation of inflated, infinite amounts imaginary monetary
capital by self appointed powers, who are then licenced by the perceived
power of that non existing money to overcapitalize resource conversion
systems and take control of whole countries to divert the benefits into
the pockets of an international aristocracy, while the legal owners of
the resources are disenfranchised and destituted. E.g., the population
of oil producing countries, while their GDPs are flying high, in praise
of the "wealth creating global marketplace" and tens of millions are
starving.

"Wealth and property are the temporary control of resources and energy".
This also includes profits. Neither can be created, only taken from the
environment, or from other sectors. Profits are a form of unilateral
taxation without representation and although they are necessary for the
survival of businesses, when they reach certain levels in the hands of
multinational oligopolies and conglomerates, they become outright theft
and the cause of daily growing global income gap.

There's nothing wrong with private property, in fact it is necessary for
human existence, I'm a property owner and and independent business
owner/manager in BC since 1957, just as there's nothing wrong with the
occasional glass of wine, or beer. But there's a lot wrong with
drunkenness and alcoholism, just as there's a lot wrong with the fact
that less than 400 people own and control half of the world's resources
and wealth, CEOs taking home tens of millions every year, while firing
and outsourcing thousands of jobs and raising prices in the name of so
called "economic efficiency" . As JK Galbraith wrote many years ago
"The purpose of economic competition is to eliminate competition". Today
the main purpose is to raise incomes for a few and expropriate the lives
of many with the perceived power of imaginary money.

The key 

Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Kris Dev]

I would like to react as follows to Lee Thorn's comments on
sustainability and profitability:

For any project or venture to be successful, there has to be a return on
investment, tangible or intangible. Without this, the initiative is
deemed unproductive and hence a waste.

Preferably, for sustainability, at least the variable cost should be
covered fully. If it covers either a part or fully the fixed cost, it is
ideal.

If it can also cover the "opportunity cost", there is the possibility of
creating other better income generating opportunities in lieu of doing
the current project, then there is motivation to continue and scale up
the project. This is what is termed as profit by others.

I don't know, if I am right or wrong.

I would like to benefit by others' opinions.


Kris Dev (Krishnan)
[EMAIL PROTECTED]
http://ll2b.blogspot.com




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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Peter Burgess]

Dear Colleagues,

Over the years I have made many observations about sustainability in
development, and often my views have not been very well received.

In my view, not enough of the analysis of sustainability has been done
taking a comprehensive view of the development situation as a whole. The
official development assistance (ODA) community has done little to
measure performance in development at a level where decision making can
be improved. There is a lot of information that shows, in the aggregate,
that developing countries have deteriorated in the overall quality of
life over a period of many years while similar data show that rich
countries have become significantly richer over the past forty years.

In developing countries, there are lots of guns and greed, but rather
less of grace and good. Sad.

High performance development, from my perspective, is when achievement
is the maximum it can be given local resources, financial, human and
natural. If this is the principal measurement, then development in
places like resource rich Nigeria, for example, is a terrible failure
while resource poor Somaliland should be considered successful.

After forty plus years of development, the position has been reached
where many of the developing countries are not "sustainable" without
external support. In such places, it is not simply enough for a business
or project to be profitable in an accounting sense, but it must also
prove to be "valuable" from the community and indeed the national
perspective.

I want to keep this post shortbut this is a big topic. I would
suggest that sustainable development needs, more than anything else, to
be creating value. Value creation needs to be funded. Success in
development cannot be funded at this point in history by internally
generated cash flows, so external funding is needed. But this funding
has got to be allocated to, and go to, value adding activities.

This is in contrast to the resource allocation that has dominated
development for most of the past 40 years and continues today. Too much
of the resource flows from the international community has been going to
value destruction, including foreign direct investment ("FDI"). FDI can
be very profitable, but it is frequently a value destroyer in the host
country and in the community where it is operating. Not always, but very
often. "Studies" carried out by international experts and funded by the
ODA community are often value destroyers. Too much of what is done in
the ODA world has value to the donor, but not much to the nominal
beneficiaries.

I am a proponent of the sort of analysis that shows what an activity
costs and what are the values derived, both in terms of local profit and
in terms of indirect socio-economic value to the local community and to
the national economy. An approach using value creation is better than
using just a profitability measure. In the corporate (business)
environment profitability is often a good measure of value creation, but
in many of the needed development interventions there is no simple way
to measure profit, but it needs to be very clear that the local society
does get value. Roads, communications, education and health are
difficult to measure using the business profit concept as the measure,
but can be measured by thinking through the "value" that is derived from
such initiatives.

The World Bank uses some of these concepts in its project appraisal
process but for some reason it has not delivered success in development.
In my first World Bank assignment in 1978 I learned in part why the
World Bank was getting it wrong. While its project analysis was quite
rigorous (MacNamara liked numbers) the position of the project in the
community context, the national context, and international context, was
being ignored. In a local sense the projects did not address local
priorities, and to some extent this was true at the national level, and
in the global context the projects were so huge as to disrupt markets
for decades! Not suprisingly it is in areas where the World Bank has not
been marginally involved that development has progressed, notably places
like Singapore, Mauritius and China, to name some.

Value creation is needed for sustainability, and profitability may be a
measure of value creation, but not necessarily.

Sustainability is also determined by "cash" and it is cash where
development has most failed. Good value adding projects get terminated
when the cash runs out and nobody wants to keep funding them. Many
countries with significant human and natural resources are stuck with no
cash, and no way to handle their cash crisis. The UN, World Bank, IMF,
capital markets and the corporate world have not yet created a financing
vehicle that works for developing countries, and in reality, are still
trending in the wrong direction.

This week the UN Year of Microfinance will be launched. This is good
news...but it is only a small piece in the development puzzle...and
without all the oth

Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Atanu Garai]

While believing that info-kiosks can reduce poverty, especially in rural
areas, we espouse the socio-economic role of an info-kiosk in a rural
community. Given the decreasing costs of wireless access equipment in
general, access to rural wireless networks seems to be profitably
feasible in some areas -- areas where agricultural and SME
productivity, literacy and an enbling infrastructure exists.

For those areas, a multi stakeholder collaboration involving private,
public and civil society institutions can start and operate small to
large scale community wireless networks. Private sector Telcos can
think of BOT mechanism, taking loans to build the infrastructure to
later transfer to the rural entrepreneurs. While the role of public
organisations would essentially be to facilitate the entrepreneurial
venture availing the infrastructural, regulatory and financial
facilities. Civil society institutions can be instrumental in feeding
knowledge-based products into the network's services that can enhance 
the knowledge of rural communities.

But what about those areas where the profitability seems to be a distant
dream? How can we address that issue? What would be the role of
government, private sector and civil society in that case? For
developing countries, grant mechanisms, be it through a USO model or
donor-funded model, seems to be only solution as of now. We shall
really seek an answer to this issue. Can we think of giving access to
info-structures like community info-kiosks as essential as giving
access to primary education or healthcare?

-- 
Atanu Garai
ICT Advocacy Officer
OneWorld South Asia
C-2/6 Safdarjung Development Area
New Delhi - 110016.
T (91 11) 517-56975
F (91 11) 517-56976
E [EMAIL PROTECTED]



On 11/11/04, Al Hammond <[EMAIL PROTECTED]> wrote:

> Adriana Labardini raises a very important question--how to get
> infrastructure and connectivity into rural areas. She poises the
> question of prices, but the real failure of old-line telcos is that they
> are wedded to a subscription model--the right business model (shared
> use, pre-paid in small units, local entreprenuers as resellers) would
> open up service in many places. Grameen Phone's village phone model,
> Vodacom's community phone shops, and others show this approach can be
> very profitable, and also provide affordable service where it is needed.

..snip...




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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Michael Bosse]

Dear Colleagues,

I'd like to share a wonderful story about the concept of sustainability
and profitability in the area my organization 
works, providing information and education to rural and under-served
communities by broadcast technologies. It's also an idea and short-cut
for measuring sustainability where there is large reach. Equal Access
uses audio programs (radio) but the central challenge presented applies
to anyone who measures impact and profit beyond the direct price paid
for services delivered (as Lee Thorn and others have suggested, profit
can be much more than monetary).

Sam Lanfranco's comments about market failure where services are being
delivered en mass that are difficult to charge for speaks to the heart
of my organization's challenge: how do we show profit and achieve
sustainability when we deliver a bi-weekly educational radio program to
1,000,000 listeners or more. Certainly there is the option of
advertising, but in rural Nepal where we work, a 30 second prime time
spot on a rural radio station reaching 500,000 population can be had for
US $0.50 so the production costs of quality educational programming
(even programs completely produced in country) eclipses advertising
revenue and advertising itself can clash with the nature of our
programming.

Fortunately there is modest ongoing funding support available from those
donors interested in providing education and communication for social
development to rural populations, so our local staff are able to attract
funding from donor sources and our local office can sustain its
activities and continue to provide programs to our audience. In this
sense we are not sustainable in a "user pays" way, like a telecentre,
but we are sustainable in that we can continue to convince funding
agencies of the impact and efficacy of what we deliver to rural
populations.

But how do we concretely demonstrate value in terms that are
quantifiable and can be compared to our cost so that we can determine
whether we are being cost-effective and efficient in our use of funds?
First we must determine our regular listening audience so we know the
size of our impact challenge enough in rural Nepal and Afghanistan with
ongoing conflicts, lack of road access and difficult geography, but we
can do it. What about impact? What value can you assign to one person
listening to one half hour radio program about a development issue? Or,
more importantly, a whole series which is entertaining and weaves a
number of issues into the program, educating listeners over time? We are
working on that challenge too, but it is expensive, time consuming and,
importantly, the impact metrics change for each type of information
delivered, so it is not possible to say that since farmers adopted new
methods they heard on the radio, that women will adopt improved
pre-natal care practices.

Our idea: What if we assigned a value to one person listening to one
program that was so low it could not be challenged by a few grains of
rice, per listener, per program. (A few grains of rice is worth less
than an economic determination of the time cost of listening for our
rural audience and our listeners are paying with the opportunity cost of
the time they spend listening.) Then, if we multiplied those few grains
of rice by 1,000,000 regular listeners, listening to an average of four
programs a week, as long as we could demonstrate the number of listeners
and our very low assigned value was accepted, we could start to work on
metrics of impact. (One million times a few grains of rice times four
programs a week and you are actually talking about significant numbers).
There are holes in this approach of course but it is the unorthodox
approach we are working on in terms of demonstrating the economic value
of our program impact. Whilst grappling with our next steps in trying to
put a framework around this somewhat crazy idea, I got an email from a
UNESCO bulletin about a strikingly similar approach taken in reality by
one of our rural partners in Nepal to deal with a funding crunch. Radio
Modanpokhara, which broadcasts many of our programs to its listeners,
now funds a significant portion of its operations directly from its
listeners through rice collection. For those in the US think of it as a
public radio pledge drive with rice instead of checks in the mail. I've
copied the link to the story below so that the author and UNESCO can be
properly acknowledged. It is a fascinating example of a community coming
up with a new approach to local sustainability for a service that is
difficult to quantify and charge for.




Michael Bosse 

Director of Projects 

Equal Access 

www.equalaccess.org




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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Vickram Crishna]

On 11/12/04, Kris Dev <[EMAIL PROTECTED]> wrote:

> For any project or venture to be successful, there has to be a return on
> investment, tangible or intangible. Without this, the initiative is
> deemed unproductive and hence a waste.
> 
> Preferably, for sustainability, at least the variable cost should be
> covered fully. If it covers either a part or fully the fixed cost, it is
> ideal.

Who can argue with this?

But how is the cost to be met, there lies the difficulty and also to a
large extent the disconnect between what works in one place and doesn't
work in another.

When I pick up a phone in India, I hear a certain kind of dial tone,
which is quite different in the US and UK. I don't remember which place,
it's a few years now, but I recall hearing a tone somewhere that made me
get upset, thinking the phone wasn't working at all.

Similarly, if a project does not return more rupees and paise, or
dollars and cents if you prefer, than what is put into it, I could
conceivably get upset. But only if I wasn't prepared to think that maybe
there are other paybacks taking place, just that my monetary or even my
measurement system hasn't learned to be flexible or inclusive enough.

I notice that most postings about 'social' benefits are dismissed as
wishy-washy thinking, and cannot help but wonder why this is so? What is
so difficult for an economist to quantify about spinoffs? A lot of long
term R&D - like the space program for instance - is almost solely
justified by the remarkable spinoffs we already enjoy in daily life -
just that there was no decent model in place for NASA to recover its
investments other than from space exploration (for which sadly its
record has not been unblemished, but let's not go there in this forum).

Maybe a lot of modern economists are shy about acknowledging social
benefits - do they think this will label them as socialists?

Seems to me that most corporate models of growth - and definitely those
of publicly held companies whose shares are listed in heavily trafficked
exchanges - are driven by such short term indicators that they cannot
find any way of acknowledging in their balance sheets the work they do,
and therefore too often don't do, to ensure that they are a part of
society and not some kind of adjunct to it.

Such a model leads us to a self-destructive way of doing things, whereby
corporate funds get spent on ensuring that all the obstacles to
'efficiency' are swept aside, be it through payments directly to
affordable GOs and/or NGOs, or indirectly. We keep seeing this in India,
where the share of the organised sector is still a small fraction of the
total economy. I can only imagine that it is far worse in more
'developed' economies. Some of the vignettes from documentaries like
'Bowling for Columbine' hint that such a surmise is not that far off
target.

My discussions with academicians from Indian management institutions (of
which I am myself a product, or alumnus, as they prefer to put it)
indicates that there is no space for thinking beyond these narrow
confines. The result is that young bright minds are led like sheep into
the well paying corporate sector, when the obvious need for measuring
and building productivity outside the corporate sphere is much much
greater.

I don't have a better model to suggest, but am certainly dissatisfied
that the model of profitability we are discussing here is sufficient or
even necessary to serve the purpose.

-- 
Vickram




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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Pamela McLean]

On Tuesday, November 9, 2004, Adriana Labardini wrote:

> If someone is still skeptical about the potential impact of ICT...just
> take a look at this very discussion forum...

..snip...

> 4. Working on the demand side training people on the use of IT and
> developing useful LOCAL applications that meet the communities' needs
> rather than providing cookie-cutter solutions.

It is important to build the capacity of local people to recognise and
define local needs related to ICTs. Teachers in rural Nigeria are
community leaders - they are also farmers in addition to being teachers.
In a very real sense if you teach the teachers then you teach the
community.  This is something  very much in the minds of the people
running the "Teachers Talking" course at Fantsuam Foundation's centre at
Kafanchan later this month. We hope to take advantage of the present
situation of teachers seeking to "know computer" and use it to give
these community representatives an insight into the potential of ICTs
not just in education but in wider community development and economic
growth.

The current interest amongst rural teachers is caused by the Nigerian
government saying that teachers who want a promotion will need to be
computer literate. As a result some teachers are turning to community
development centres like Fantsuam Foundation and the InfoCentre in
Ago-Are to seek training.

The teachers in rural communities are the educated minority, literate
and bi-lingual, able to use English to learn new ideas and gain new
experiences, able to share those ideas in their mother-tongue with their
whole communities, not just their colleagues and pupils.

We hope the course we are setting up for them - called "Teachers
Talking" - will open their eyes to the potential of ICTs for themselves
and their communities. They will have a week as "visitors" to the world
of computers and connectivity. We are setting up a virtual community for
them to join during their course so they are "welcomed into the
connected community".

As part of their introduction to ICTs we hope they will experience the
power of the Internet as a resource for Life Long Learning - especially
discussion lists and peer-to-peer learning across cultures. For further
details of Teachers Talking (TT), or to apply to join the TT virtual
community see 

We hope these "ICT tourists"  will be inspired by their visit and will
go back to their communities with positive "travellers tales" about the
connected world, a desire to revisit it whenever the opportunity
presents itself, and the stirrings of vision for how it could benefit
the rural communities they know so well. We hope to develop the course
and offer it more widely, gradually building up a nucleus of
teachers/community leaders who can contribute to informed discussion on
the role of ICTs in rural education and development.

To link this back in with the main subject of the discussion: Fantsuam
began as a micro-credit organisation. The course organisers are
concerned with various aspects of training and livelihoods and are
realistic about the need for establishing sustainable initiatives. The
TT work is part of a wider vision for sustainable development.


Pamela McLean




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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[John . Rogers]

Dear Colleagues,

Vickram Crishna's comment "But only if I wasn't prepared to think that
maybe there are other paybacks taking place, just that my monetary or
even my measurement system hasn't learned to be flexible or inclusive
enough" is my cue to introduce myself.

My name is John Rogers. I am coordinator of the Wales Institute for
Community Currencies working in the former mining and steel-making
communities of South Wales which drove the Industrial Revolution in the
UK for 200 years.

Working here in a 'post industrial' context we are experimenting with
the tool of 'community currencies' to regenerate social networks in
depressed communities with high unemployment and sickness rates.

The concept of a 'community currency' is deceptively simple. Sometimes
known as 'complementary currencies' they are local, regional or sectoral
currencies designed to work in parallel with rather than to supplant
national currencies. The problem with national currencies is their
in-built scarcity due to factors of central control. Complementary
currencies offer a different 'measuring tool' for effort, skills and
value at the *local* level and they can be used by individuals, groups
and businesses.

The first challenge for all of us (and the biggest) is to recognise the
hegemony of mono-national currencies, not just over trading
relationships, but over politics, economics and, most difficult of all,
over our thinking.

Once we admit the possibility of parallel currencies all manner of
creativity and 'thinking outside the box' is made possible. In fact
whole new worlds of relationships can be created which are not possible
with single currencies.

In systems-thinking terms this is a matter of creating measuring tools
which capture 'local variety' to complement the 'national variety' which
national currencies measure.

All for now. There is much, much more to say on this and lots of
possible links to leading writers in this field.


John Rogers
Cydlynydd Prosiect
Project Coordinator

Sefydliad Arian Cymunedol Cymru
Wales Institute for Community Currencies

Canolfan Dyfeisgarwch   Innovation Centre
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Banks UK part financed with European Regional Development Funds.




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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Jeff Cochrane]

Answer: Of course not. But it might be the best answer in many more
cases than we think.

***

Take any given activity deemed socially worthy -- an educational radio
boradcast, for example. If it is socially worthy, then by definition it
**should** happen. How, then, shall the costs of making it happen be
afforded?

There are likely many possibilities, each likely to succeed to some
extent. Sustainability is presumably part of the definition of success.

Of course profitability is not essential for sustainability. Kassides
at the Bank is an economist who argues essentially that there will
always be some services ripe for public-sector management. That's
perhaps another way of saying that some population broader than the
immediate consumers of a good should pay for its production, if only
because the benefits of the good flow beyond the immediate consumers to
that broader population. So, if profitability is not essential for
sustainability, there are of course successes out there that do not rely
on profitability.

Nonetheless, I do think that in some circumstances a solution based on
profitability can be the optimal one. In those circumstances, the
challenge seems to be finding an innovative business model that targets
the poor as consumers. The emphasis is on **innovative**.

While I do not know what form that kind of "profitability" answer would
take, in the case of the program Michael Bosse describes (below) in
Nepal, which has to do with education carried out by broadcast radio for
a large number of very poor people, I have heard (through Digital
Dividend and elsewhere) that there are interesting ideas worth
exploring. Many of these move beyond the conventional advertising
models perfected in the West for wealthier audiences.

The innovators will essentially ask, "If the traditional advertisers see
no market through our radio programs sufficient for them to pay a lot of
money for 30-second spots, then is there some other group out there
willing to buy time on our show in order to meet some other market
demand for their products?"

Or perhaps more cleverly they might ask, "Is there some entirely new way
of using broadcast radio that can generate revenues sufficient to cover
costs in a way we've never even thought of before?" In Mali, I hear
birth, death, and wedding announcements generate the big bucks. In the
USA I see we get the consumers themselves to pay for some programming.
I'm sure none of these are the right answer for Nepal, the point merely
being that the key can be finding the right business model.

Or stepping out into the bold new frontiers of innovative questioning,
"Is there some way to tap the collective wealth of the very poor in
order to provide our educational product while covering costs, whether
with broadcast radio or without?"

And then there's the "supply-side" question: "Are we truly selling a
worthwhile product? Was our determination of "social worthiness" for
our educational program properly done at the outset?" That's all part
of the business model, yes?

Thus the crux of the matter for me boils down to this:

How do we set about the task of first unearthing, and then exploring,
those innovative business models that can make profitability work for
the poor, not necessarily in every case, but at least in more cases than
we're seeing now?

My personal sense is that standard approaches to program development
cannot cope.

Cheers!
Jeff
  

Bureau for Economic Growth, Agriculture and Trade
Office for Energy and Information Technology RRB 4.06-066
1300 Pennsylvania Ave NW, Washington, DC 20523-3800
Tel +1 (202) 712-1956, Cell +1 (301) 728-2160
Email [EMAIL PROTECTED]
http://www.usaid.gov Keyword:InfoTech



On Tuesday, November 16, 2004, Michael Bosse wrote:

> I'd like to share a wonderful story about the concept of sustainability
> and profitability in the area my organization 
> works, providing information and education to rural and under-served
> communities by broadcast technologies. It's also an idea and short-cut
> for measuring sustainability where there is large reach. Equal Access
> uses audio programs (radio) but the central challenge presented applies
> to anyone who measures impact and profit beyond the direct price paid
> for services delivered (as Lee Thorn and others have suggested, profit
> can be much more than monetary).

..snip...



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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[John Lawrence]

Something I may have missed from this conversation is upfront rigorous R&D
traditionally required before launching innovations out into the business
mainstream... (legal) drugs are a good metaphor...maybe profit is down the
road, but to get to the stage where that is possible, big (business) risks
have to be taken on a sometimes slender set of hypotheses i.e. that this
product a) will pass regulatory requirements for human experimentation,  b)
pass optimally through a protracted, expensive expensive clinical trials
process, and ultimately  c) survive legal challenges in the open
marketplace investments in this process are argued for by drug
companies as rationale for high prices, and relentless profit seeking 

In the social service arena, do we go out too readily with marketing
'products' (services) based on little except flawed 'best case'
precedents... ? 

John Lawrence
former Principal Adviser, UNDP


On Monday, November 22, 2004, Jeff Cochrane <[EMAIL PROTECTED]> wrote:
  
..snip...

> Nonetheless, I do think that in some circumstances a solution based on
> profitability can be the optimal one. In those circumstances, the
> challenge seems to be finding an innovative business model that targets
> the poor as consumers. The emphasis is on **innovative**.
..snip...
> How do we set about the task of first unearthing, and then exploring,
> those innovative business models that can make profitability work for
> the poor, not necessarily in every case, but at least in more cases than
> we're seeing now?
> 
> My personal sense is that standard approaches to program development
> cannot cope.




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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Shahid Uddin Akbar]

Dear Colleagues,

Sustainabiliy is a very critical issue for any ICT for Development
project with the focus on rural areas. Still we didn't find any single
project which can claim itself as Sustainable in terms of being
financially viable and serving the local rural communities anywhere in
the world. And again, the Profitablity is another major issue that needs
to be addressed. Do all social initiatives need to be financially
viable? Is it something of a purely business nature? Why are the
organizations rushing for financial sustainability in the case of rural
ICT projects? It also must have some donor driven ideology to make the
development initiatives Commercially viable, which is not possible in a
realistic approach.

Experience of different successful Rural ICT initiatives categorically
shows that the social benefits of the rural ICT project is much more
valuable than financial viability. These projects are aimed towards
EMPOWERMENT of rural communities which can not be done through a
commercial venture.

So, can we put the idea aside to make all rural ICT for Development
projects commercially viable?

Best,
  
Shahid Uddin Akbar
ICT Consultant
SwissContact / KATALYST
BANGLADESH



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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Peter Burgess]

Dear Colleagues,

I will not make this a long post. From what I learned as an engineer and
economics student, and then as an accountant and involved with business
management and consultancy, and then relief and development ... it is
absolutely clear that profitability is needed for sustainability. The
word for profitability can be changed to suit the not-for-profit world
or the public sector ... but nothing survives in the long run unless its
value creation is greater than its cost.

In my view there can be enormous value in using modern ICT to facilitate
productivity improvements ... but as private practitioners know,
governments and regulators and incumbent controllers of local monopolies
are not encouraging new innovations, but rather are discouraging
valuable innovation. Hopefully enlightened leadership will soon embrace
the great possibilities of modern ICT and make progress possible.

My favorite major development project ... one that resulted in enormous
improvement in US productivity was the US Interstate Highway System ...
initially promoted by President Eisenhower ... and eventually built at
tax-payer expense for the profit of almost everyone in the USA. The cost
was huge but the incremental economic value was many times as much. And
the capital markets encouraged the program. From the perspective of the
US economy as a whole this was a profitable investment, though costly
for the government.

In contrast the information highways in developing countries are not
getting built and the political and business leadership and the
financial community (capital markets) have not yet become committed
beyond the easy high profit elite (rather than universal) market.
Hopefully this is now changing and will soon change a lot more.

Some time ago I evaluated an FAO - UNDP project. It was an excellent
project that did not cost much, and made a huge difference to a quite
large rural community. The project was sustainable ... bit it did not
sustain because, in this case, the country itself could not sustain
anything beyond mere subsistance. The country had become totally
dependent on foreign donor funding  and then landed in the vicious
cycle of guns and diamonds and all that. Sad. But the lesson is that
both micro (the entity) and macro (the nation) need to be profitable to
be sustainable.

Sincerely,

Peter Burgess


Peter Burgess
in New York
Tel: 212 772 6918 
Email: mailto:[EMAIL PROTECTED]
Database http://www.afrifund.com/wiki/index.pcgi?page=AfrifundDatabase
Coffee: http://afrifund.coffeefair.com
Blog: http://taame.blogspot.com




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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Jeff Buderer]

Dear Colleagues,

I am not sure if the time on this focused discussion is up, but it would
be too bad if it was, because I feel there is much to discuss and the
discussion here has been continual and robust. 

[***Moderator's Note: Although today is the last day of the focused
discussion, the GKD List is ongoing (and has been for over 7 years); we
will continue to post messages relating to the theme of "Technology,
Globalization and the Poor" after today, as well as more general
submissions.***]

When I fist read your article Shahid, I thought you were referring to
ecological sustainability. Reading it more carefully I now see you are
talking about financial sustainability. However many say the same truth
also applies to the development of ecologically and socially sustainable
projects. I know there are at least a few of us here who are concerned
with the social, ecological as well as financial issues of
sustainability. In America, we refer to this as the triple bottom line.

In terms of what we at OVF  are shooting
for, we want an integrated model for rural or urban (what do we actually
mean by rural) development that is community oriented. There are several
missing gaps I have seen in these email exchanges that focus on these
two areas:

1. The important social and community aspects of sustainability
2. A whole systems approach to sustainability as mentioned below

Andrew Kean previously worked for a leading eco-think tank in America
called Rocky Mountain Institute. He explains the importance of whole
systems thinking, specially looking at the development of the Factor Ten
Engineering movement in the engineering field:
http://www.rmi.org/sitepages/pid1081.php

Factor 10X engineering is based on a proactive approach and optimistic
outlook despite the challenges. An influential book - Factor Four

suggested that large productivity gains are possible, that it is
possible to double output while halving resource consumption. Factor Ten
is based on a revision of this by Friedrich Schmidt-Bleek of the
Wuppertal Institute  of Germany who
suggested that in developed countries factor four was unlikely to be
enough. Professionals from governmental, industrial and academic
institutions met in Carnoules, France
 to
further define Factor Ten in 1994. This is known as the declaration of
the Factor 10 club.

The phrase factor ten, comes from the realization that globally, the
material turnover (per unit of production) needs to be drastically
reduced in order to ensure sustainable resources use and ultimately
survival of industrial society. They noted that to address adverse
ecological and the associated health and social affects of modernization
to sustainable levels, we would need to reduce the current human
footprint by around a factor of TEN.

Large gains in resource productivity are achieved by a shift in
thinking, by an integration of management, technological and process
improvements. Attention is directed not only to the manufacture of
products and delivery of services but to consideration of the way your
products and services are designed, produced, packaged, transported,
sold, used and disposed of 

While we at oneVillage Foundation are not engineers we feel that we have
a grasp on the necessary changes that need to take place to make human
systems sustainable over the next few years.

1. Introduce pedagogic tools on whole system design. The first stage of
our program is aimed at developing Community and Technology centers to
provide hands-on experiences in the design of sustainable systems for
the grassroots/bottom up economy starting with communities we have
identified in Africa to be the first sites for Unity Centers. Our
proposed Open and Distance Learning Program will teach Africans to
develop and evolve sustainability concepts based on their own local
perspectives and needs.

2. The next step involves exploring case studies/best practices on whole
systems design that are relevant to local needs. Sustainable systems
will be designed to boost resource productivity and replicate them at
the community level, first in the centers and then expanding to the
surrounding community or communities, using factor ten or similar
methodologies in all aspects of human design and development.

3. Develop financially profitable self-sustaining economies at the local
rural level to encourage local production empowering local economies and
mitigate unsustainable global trade flows of capital and resources.

All social initiatives do not need to be financially viable but they
have to be aligned with cross sector partners who will see a reason to
fund these projects indefinitely. I see a model that might fit your
needs and concerns.

It is not so much an issue of whether a project is of a purely business
nature so much as the reality that t

Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Tom Abeles]

Peter Burgess has nailed some critical points on the head. He writes
convincingly and hints at some caveats which are worth considering:

1) I think that we are in agreement that a sustainable project needs
sufficient cash flow to cover operating costs with sufficient reserve to
replace equipment and/or to expand the operation - This is a typical
"business model" regardless of the organizational structure.

2)  Of significance, here, is Peter's introduction of the governmental
sector into the equation, such as the US government's underwriting the
interstate highway system. This was done, largely with US funds and US
contractors, so funds stayed in the country. USAID has been purported to
quote that 80+ % of funds provided for development flow back to the US.
Similarly, projects sponsored by other agencies, such as the WB, also
see a large percentage of the loans flow out to developed world
contractors and suppliers, including non-profits.

The loan portion of these funds must, then, be repaid with hard
currency. Often these repayments require structural shifts in the
developing countries in order to generate this foreign exchange. The
issue can be made more problematic when the results also increase the
loss of hard currency, due to, for example, an increase in imports over
lower value agriculture exports, for example.

ICT's are small infrastructure projects when considered on the community
level. Building and sustaining these as macro structures, such as an
interstate highway or electric utility grids, needs one to think well
beyond a small village access to ICT's. It is more than foot-dragging
Luddites in bureaucratic positions that are the only barriers that need
systematic attention. Like Peter, i can cite numerous examples. For the
really dark side, one might want to look at John Perkin's recent book,
Confessions of an Economic Hit Man.

3) Corporate models are fairly straight forward. Income-Expenses =
Profit to cover overhead, replacement, growth and dividends (if any).
"Non-profits" are another matter. The costs are often not visibile
until, for example, a volunteer leaves and needs to be replaced or a
piece of donated equipment fails. Many "volunteer" organizations even
pay volunteers because the cost for maintaining an unpaid staff can be
expensive as is the infrastructure support. Many projects become tenuous
or fail when these costs are made visible by the cost of replacement.

Real cost/benefits are unknown because ICT's are not fully deployed and
hindsight is better than foresight. But the felt need, or the felt
importance and benefits, for ICT's, have seemingly blocked consideration
of the critical arena that can bring a project down, the hidden costs,
or those which are wished away. It would be good to see an honest
micro/macro analysis that did not shove many of these issues into the
category, "externalities".

thoughts?

tom abeles




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Re: [GKD-DOTCOM] Is Profitability Essential for Sustainability?

[Peter Baldwin]

Dear GKD Members,

I too will keep this short.  But first, per instructions, a brief
introduction:

I am currently in Mali working on sustainable (from a profit-seeking
standpoint) business models for Internet access in some of the poorest
regions of the world. Not only is the profit motive an essential
focusing element in the work I do, but it is a fun challenge. And, I am
happy to report, it is possible to make a profit providing Internet
access here. One List member quoted an email I had sent to him on a
different discussion thread, so I figured if I was going to be quoted
here, I might as well have some control over what was being quoted!
(humor implied, if not achieved)

Peter Burgess said essentially all that need be said with regard to the
need for profit as a necessary condition for sustainability: "nothing
survives in the long run unless its value creation is greater than its
cost." If this isn't intuitively obvious, you need think only of the
opportunity cost of money-losing projects. If a project is not creating
value, then it is destroying value and resources that could be put to
better use elsewhere. Such a situation will not long endure; anyone
reading this has an interest in value-creation (or they wouldn't
subscribe to this List) and must surely take offense at the squandering
of finite resources.


Peter Baldwin
[EMAIL PROTECTED]
www.anapurnawebdesign.com




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