By Christine Hamilton-Pennell
Growing Local Economies, Inc.
February 24, 2011
Dr. Paul Polak, psychiatrist, entrepreneur, innovator, and founder of International Development Enterprises (IDE), has a crazy notion. He believes that poor people are poor because they need to make more money. This simple but revolutionary concept has spurred his work among the world’s poorest people for 30 years. Polak asserts that traditional development approaches to ending poverty have been misguided, expensive, and mostly haven’t worked. There are around 800 million people who live on a dollar a day, mostly rural farmers with less than an acre of land. These subsistence-level farmers typically grow staple crops during the monsoon season, sometimes supplementing them with vegetables such as tomatoes and cucumbers. Most of the food is consumed by their families, and if they are lucky, they have enough to cover their basic needs and a little left over to sell in the marketplace. In bad years, they may go hungry for part of the year.
After talking to thousands of such farmers in Nepal, Bangladesh, India, Vietnam, and other developing countries, Polak determined that if they could irrigate their plots during the dry season, they could grow and sell high-value, labor-intensive products, such as off-season fruits and vegetables, to customers who can afford them. The challenge, then, was to figure out how to develop and market low-cost drip-irrigation systems that would be affordable and accessible to dollar-a-day farmers and allow them to increase the revenue from their land.
So, in the spirit of Thomas Edison, Polak and his team at IDE set out to develop just such a technology. IDE used the principles of “design thinking,” long before it was a fashionable concept, to solve this problem. Tim Brown, CEO and President of IDEO, an innovation and design firm headquartered in Palo Alto, defines design thinking in a recent Harvard Business Review article as “a discipline that uses the designer’s sensibility and methods to match people’s needs with what is technologically feasible and what a viable business strategy can convert into customer value and market opportunity.”
After much trial and error, IDE designed and developed a human-powered treadle pump that cost $25.00 and could irrigate a half acre of land.
Polak knew that this was not enough. Subsistence farmers also needed new markets capable of bringing them the inputs they needed to grow their crops, such as seeds and fertilizer, as well as new value chains capable of bringing their goods to market at reasonable prices. Polak and his colleagues took eight practical steps to make this happen. IDE:
1. Did not accept subsidies from government or development agencies for their products, choosing instead to sell them at fair market value to the farmers. Their experience showed that subsidizing the costs of products and services undercut the local market mechanisms.
2. Lowered the cost of their products by simplifying the design and finding less expensive materials, and by providing different quality standards at different price points for consumers.
3. Recruited small-scale manufacturers to build the pumps.
4. Recruited village dealers to sell the pumps.
5. Trained well-drillers to install the pumps.
6. Opened access to microcredit.
7. Implemented marketing and promotion initiatives.
8. Established strategically placed demonstration plots.
IDE energized 75 small-volume workshop entrepreneurs who each invested $500 to $2,000 (US) to get into the treadle-pump business. In addition, more than 2,000 village dealers and 3,000 well-drillers now earn their living by making, selling, and installing treadle pumps at an unsubsidized fair market price of $25.00.
The results? More than one-and-a-half million treadle pumps have been sold to subsistence farmers through these private sector supply chains, irrigating more than 750,000 acres at a fraction of the cost of conventional systems. More than 17 million people have been able to move out of poverty because of the additional income their land has been able to generate. IDE has gone on to develop many other devices and systems that allow subsistence farmers to efficiently store and deliver water to their fields and homes.
Polak hasn’t stopped there. He sees market opportunities among the millions of dollar-a-day slum dwellers as well. Instead of viewing slums as hellholes of misery and deprivation, he sees them as “a beehive of grassroots enterprises” where people who eke out a living making and selling simple products could leverage their low-cost labor and learn to produce higher-value goods to sell outside their local areas.
Polak doesn’t minimize the need for international aid to support education, healthcare, and infrastructure in poor communities. He has repeatedly found, however, that when farmers and slum dwellers begin to move out of poverty, they do make investments in education and healthcare for their families.
If design thinking and simple market mechanisms such as these can have such a profound impact on the world’s survival entrepreneurs, what lessons can be learned for our situation here in the U.S.? Research shows that the number of “necessity entrepreneurs” in this country—those who have launched a new business out of necessity after losing a job or not being able find employment—has risen dramatically in the past several years. How can we find simple and affordable solutions to support the business, technical, financial, and market needs of these start-up entrepreneurs, many of whom live in low-income communities with minimal business support systems, and help them move to the next stage of becoming “opportunity entrepreneurs?”
I welcome your thoughts.
©2011 Christine Hamilton-Pennell, Growing Local Economies, Inc.