Partner with an NGO and Profit

Harvard Business Review by Ndubuisi Ekekwe  

 

Last month, Bloomberg Businessweek reported that pharmaceutical companies are reducing prices and licensing AIDS drugs for free to non-governmental organizations (NGOs) or local manufacturers in developing countries. Such a model made it possible for a South African doctor to develop a breakthrough vaginal gel that reduced, by half, HIV transmission in women, by using a key ingredient donated by California-based Gilead Sciences. Conrad, a nonprofit reproductive-health organization, has been granted a royalty-free license to distribute the product in Africa. Other drug makers, such as Merck, Johnson & Johnson, and Pfizer, have similar plans.

This model of using NGOs to enter new markets can work in other sectors. A few years ago, African Institution of Technology, the nonprofit I founded, helped a toolmaker sell its product in Africa. The toolmaker noticed that the local companies were not competent; developing a direct distribution channel was risky. The company approached us, understanding that we already run workshops, seminars, and other activities across Africa on microelectronics. We incorporated its products, which we need, in our programs and helped develop a new channel.

Across Africa, there are many farms run by nonprofits but funded by for-profit organizations from Western countries. The Owerri (Nigeria) pineapple farm is managed by a non-profit through funds generated from multiple sources, including a foreign investment company. The Ghanaian non-profit mPedigree has partnerships with many companies, including HP. The company started eliminating counterfeit drugs; it now serves many non-drug companies who aim to prevent counterfeits.

Going global, especially to poor nations, is not an easy task. The business models that work in the advanced economies may not work in developing ones. The purchasing power of customers is low, credit is limited or absent, infrastructures are sub-standard, and institutional governance is weak.

Making products that appeal to customers in developing economies, considering their meager resources and most times cultural ties, is not easy. Succeeding here requires unique cost mechanisms and price-driven innovative product offerings. Most multinational firms or global brands simply ignore these markets. Retooling business models to adapt to the markets seems very expensive. When a firm reaches that level, it could be the time to partner with specialized NGOs that know how to work with these potential customers. Just as the Businessweek story shows, most Western firms are not prepared to handle HIV drug distribution in developing nations because of the cost and transportation challenges.

Some specialized NGOs are evolving and their operations are structured to be self-sustaining. They operate lean and depend lesser on donations. They create social enterprises, solving social problems while breaking even to help advance their causes. This is exactly what mPedigree is doing and foreign companies are joining its networks to protect their brands from counterfeits.

Working with NGOs to enter new markets should not be construed as donations. In most cases, I see it as helping the customers. Just as drug companies are working to help on HIV drugs through channels created by NGOs, similar programs could be done for malaria, polio, and other diseases which are mainly suffered by the poor.

Firms must understand that nonprofit organizations are practicing in nearly all the most obscure markets. The knowledge they have about these markets is deep. Some have operated there for decades and understand the customers very well. Yet, this knowledge is often overlooked when organizations plan to go global, especially to the least developed nations. Next time you plan to introduce pesticides and new seeds to some markets, consider the farming NGOs that have worked there for decades. A little partnership could provide better understanding and make success far more likely.

Ndubuisi Ekekwe is the founder of non-profit African Institution of Technology. He recently edited Nanotechnology and Microelectronics: Global Diffusion, Economics and Policy.