Wednesday, August 1, 2007

Article in the Wall Street Journal by Ravi Venkatesan

Innovate for India's Poor

July 18, 2007

BANGALORE -- When the Korean steelmaker Posco decided to invest $11 billion in the bleak hinterland of eastern India, it might have expected to be greeted with flowers. Instead, two Posco executives were recently kidnapped, but later released unharmed, in a protest over government policies to transfer land from struggling farmers to the mega-corporations driving India's modernization.

It is only the latest evidence of gathering rage among the hundreds of millions who remain mute spectators to the Indian economic miracle. In recent months, peasant revolts have been flaring up across the country, protesting against industrialization and the land grabs that accompany it. Harnessing the anger of rural poor, Maoist-inspired insurgents roam freely across much of central India, causing Prime Minister Manmohan Singh to call them the largest threat to India's security.We business leaders for the most part tend to believe that growth will cure most sins and that our responsibility stops at creating competitive enterprises and paying taxes. Eradicating poverty is the government's job, not ours. Right?

Wrong. The consequences of abdicating this issue will be grave. There are already signs of growing lawlessness as disaffected young people turn to crime, insurgency and terrorism. But even more ominously, inequity inevitably generates a political response that can thwart the ambitions of the affluent. Last year, political parties, vying to tap the discontent created by inequity, enacted legislation reserving half the seats in India's educational institutions for lower-caste students. It is not hard to see how the extension of such quotas to jobs in the private sector can well bring the economic miracle to a halt.

This policy, and the controversy surrounding the creation of special economic zones, should serve as an early warning of what majorities can lawfully do when we elites ignore them. Furthermore, unless we educate hundreds of millions of people at the bottom of the pyramid and create jobs for them, we will starve our businesses of the skilled talent and the consuming middle class we need to buy our products and keep growing. So eliminating poverty is very much in our self interest.

However, even when business leaders agree that poverty is our problem, the approach is often confused. Two methods in particular have dominated recent thinking on the subject, and, in my view, both are well-intentioned but futile against so vast a problem.

Lifting hundreds of millions of people out of poverty cannot happen through "corporate social responsibility." Important as these initiatives are, they are neither sustainable nor scalable, and therefore achieve limited impact. Nor will poverty be overcome through the "bottom of the pyramid" initiatives that seek to make the poor into bigger consumers of shampoos and televisions by enabling them to pay per use.

We need a new approach driven by innovation. We need to focus less on doing small, nice deeds for the poor, and less on selling them affordable versions of what rich people consume. Instead, we must marshal the best resources of big, innovative corporations to think freshly about the shackles that keep people poor and invent solutions that break these shackles.

India is filled with efforts of this kind. For instance, the biggest hope for the next agricultural productivity revolution in India lies in the rural business initiatives of companies like conglomerate Reliance Industries, telecom operator Bharti Airtel and tobacco company ITC, which are investing billions of dollars to create an efficient agricultural supply chain bypassing scores of middlemen. Look, too, to the rural banking initiatives of companies like SBI and ICICI that will deliver affordable credit and insurance to half a billion people, helping them finally break a historic cycle of poverty.

Doing good is also good business: Scalable business models that help the poor access markets, or deliver essential services like education, health care or drinking water, represent huge economic opportunities waiting to be tapped. For example, at my company, Microsoft India, engineers are working on problems like how to learn English using a computer or cell phone, how to use the Web to deliver services to rural entrepreneurs, or how to help tiny businesses access global markets.

Microsoft is not doing this for charity. If we get it right, the poor will be happy to pay to get jobs they otherwise wouldn't have and we will have expanded the potential base of users for our software to 500 million from 100 million. It is very conceivable that the next big innovation could come from immersion in the problems of India's poor. They don't need our charity or single-use sachets of shampoo. They need us to innovate them out of their morass.

Mr. Venkatesan is Chairman of Microsoft India.

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