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College » BA » News Archive » Feature

It's an Art: Crafting Solutions for the Subsistence Marketplace

04/15/2011

PDF version shortcut[Reprinted from Perspectives Spring 2011]

As hard as it may be for us to believe, there are billions of people in the world who live on $2 a day or less. The average businessperson might think it's a waste of time to focus any marketing attention on these people who live in subsistence. And the average businessperson would be wrong, say ILLINOIS professors Madhu Viswanathan and John Clarke.

Clarke and ViswanathanJohn Clarke and Madhu Viswanathan

"First of all, you have a large population of people who have the ability to buy products that serve their immediate needs and some aspirational needs as well," says Viswanathan, professor of business administration. "There are clearly markets for certain types of products
but substantial challenges as well" in subsistence contexts, he affirms. In addition, the people living in subsistence are the future lower income and lower middle income people, says Clarke, clinical professor of business administration and assistant dean of the College.

Viswanathan agrees. "You're seeing that in India and in China today," he explains. "They are current producers. They are current entrepreneurs. They are the people providing customer service.

If, as a business, you want to understand culture in an emerging market, you should work in subsistence marketplaces. In the shadow of the emerging market are the people who retain the culture that is getting diluted in the middle class."

Viswanathan highlights Microsoft Research India, which has a strong presence in Bangalore, the capital of the Indian state of Karnataka. Microsoft is focused on understanding subsistence marketplaces "although there is no bottom line in sight," Viswanathan says. "Microsoft has a lot
of young people going out and doing experiments and learning about the culture. It's a way for them to engage, and they understand that this is the future."

And, Viswanathan adds, the research and product design that takes place in and for subsistence marketplaces has the potential to find markets elsewhere. "These resource-constrained contexts can also lead to innovations for all markets. The potential for reverse innovation is real," he says. "I believe we're going to see more and more potential for solutions created in subsistence marketplaces to then come back to other marketplaces." He cites examples of telemedicine that
can be used in communities in the United States and of rugged and inexpensive cell phones that can work in high temperatures, do not reflect the glare of sunlight, yield a good grip, and are functional. "Think of how the rest of the world could use innovations that arise from resource-constrained settings," he says.

A Simulating Experience

Viswanathan has carved out a career of studying subsistence marketplaces. He has researched low-literate, low-income consumers in the United States for 14 years and has produced user-friendly nutrition education materials that are being used in Illinois. For the past decade, he has also focused on subsistence consumers and entrepreneurs mainly in India, developing a small team there. He created the Subsistence Marketplaces Initiative at the University of Illinois in 2005, which develops and disseminates knowledge for creating sustainable solutions in subsistence marketplaces.

Clarke, too, has been involved on the ground floor of ILLINOIS efforts to develop international initiatives. As director of the College's Technology and Management program several years ago, one of his goals was to create new collaborations across disciplines. A yearlong graduate-level course and international immersion experience led by Viswanathan since 2006 has contributed to and benefitted from these collaborative efforts. During the past three spring semesters, Clarke has co-taught the course with Viswanathan.

In the class, students develop a deeper understanding of poverty and the behavior of subsistence consumers; they design and develop products for those consumers; and they prepare for an international immersion experience over part of the winter break. According to Clarke, this preparation is key. "Generally, in the U.S. we grow up without wanting much in life, so when we encounter people with very limited resources, in strained environments, operating in tough day-to-day conditions, we sometimes have a hard time processing the information and accepting the stark realities. To best prepare students for this kind of culture shock, it is important for them to understand as much as possible about the environment so that they are positioned for success and tooled to deal with the challenges they encounter."

Viswanathan believes that the virtual immersion section of the course, and particularly the poverty simulation, are extremely valuable components of this preparation. "What I ask students after the simulation is, 'What did you do? How did you feel? What did you learn about poverty?'

This is a great way to get them started, to change their perspectives by being engaged," he says. "They realize that 'Wow, this is not a choice to be poor.' They realize how you can go down in a negative spiral. And how you can't take care of your family and how anxious you are, and as you are anxious you make bad decisions. I find that it's a great way to get students engaged in thinking about poverty."

Jenna Goebig, MBA '12, agrees. "The pain, anxiety, fear, and frustration of living in poverty never goes away," she says. Participating in a poverty simulation last fall before traveling to India in December, she found herself fighting against time to complete her tasks for the day—whether it was to renew an electronic benefits transfer card, pawn a television to buy groceries, or attempt to find a job as a senior citizen.

"We were so busy trying to find means to provide for the physiological needs of the family that we exhausted ourselves," recalls Goebig. "It was an eye-opening experience about the real obstacles facing families in poverty, and it was instrumental in preparing me for the harsh reality of physical immersion into the subsistence context."

An Indelible Impression

Greater understanding comes from the actual immersion into the subsistence marketplaces themselves. The trips to India leave an indelible impression on students. "The experience was incredibly eye-opening," says Brian Schertz, MS '09. Schertz went to India with the graduate class last winter. "We talked in detail during the fall about subsistence market characteristics, especially with respect to India, but it didn't compare to being there."

Schertz said many things impressed him about India: the sheer number of people, the unevenness of development, the friendliness and resiliency of the people, and the opportunities in the markets—"not only in what they need to improve their quality of life, but in what we can learn from them as they have managed to survive in these conditions."

Schertz notes that he came home feeling blessed and realizing that businesses have the responsibility to give back and help people who are in need.

Hedeman

John Hedeman, assistant dean of students, has been on two such immersion trips with students and says that's exactly the kind of impression an opportunity like this can provide. "The hope is that this experience will allow students to build the skills of understanding, of empathy, and of their obligation to use their leadership and skills to make the world a better place. We don't know what directions our students' lives will take. Some will be business professionals, design leaders, or engineers, and as they grow their careers, the difference they can make is going to grow as well. I hope that in 15 to 20 years, we're going to hear about these students making a difference in society."

LanesskogStig Lanesskog, associate dean for MBA programs, agrees. He accompanied Viswanathan and Clarke's class on their immersion trip last winter and brought along four of his MBA students who were working on a project for a retailer in Mumbai. "This trip absolutely helped to shape the students' perspectives of India and the global marketplace," he says. "They have a better realization that products and services for individuals in this market need to be considered very differently, as the MBA's norms do not often apply. I think this will serve them well as they transition to industry and consider how to best tailor offerings for different geographies across the world. Also, they were struck by the warmth of the people. Even those who lived in challenging situations were so welcoming and gracious. I think that is a good lesson for all of us."

Those are just the kinds of experiences Clarke hopes students take away from these opportunities. "A successful short-term study abroad trip to subsistence marketplaces in India is a life-changing experience for our students, even for our international students from developing nations. In just a few short days on the ground, they get to explore complex situations firsthand, wrestle in person with things that we see only as a video clip or sound bite, and process information in ways that enrich their understanding of their own environments, environments in developing nations, and perhaps the world as a whole."

After the winter immersion trips, students return to campus where Clarke and Viswanathan work with them to refine their product ideas for the subsistence marketplace. "First, they study the needs of consumers in the subsistence marketplace, then they collaborate on product or service ideas, then they take their ideas to India with them to see if they will work," says Clarke. "Sometimes, the ideas they think will work before they go get completely turned on their heads. Then the students have to reexamine what will work in an environment where people have to make very different buying decisions because they live in a resource-scare area, buy in small quantities, and have nowhere to store items. They use this post-trip knowledge to take the business concepts they've learned and create prototypes of business plans and product and service developments that can work for these consumers."

From the Top Down

The class and the trips also cultivate a view that's much different from the macroeconomic, or top-down approach, that students may learn in textbooks. Viswanathan describes the approach
as a bottom-up one. "My starting point is with the micro-level behaviors and life circumstances of consumers and entrepreneurs living in poverty," he says. "We start with understanding at this level and develop insights for product development and business models using this basis."

Viswanathan's view of these consumers and entrepreneurs is one of respect and humility. "I don't like saying these are valuable markets that we can sell to," he says. "I like saying these are preexisting marketplaces that we can learn from and that we can design solutions for. In turn, these solutions can help all of us. That is why I refer to them as subsistence marketplaces."

Those solutions, Viswanathan says, can be designed by a range of organizations "from an enlightened social enterprise that is basically trying to find solutions, but at the same time has a social mission, to a business that is enlightened to say, 'I think I can do well as a business, and to do so requires understanding individual and community needs and doing good as well.'"

One solution that is working is VisionSpring, a social enterprise in India that provides low-cost vision solutions. To assist the vision entrepreneur, ILLINOIS students created a bag for VisionSpring that stores inventory and a deployable kiosk for vision testing.

Other Creative Initiatives

Graduate students aren't the only ones who have the opportunity to creatively study subsistence marketplaces. Viswanathan has also developed a module on Sustainable Businesses for Subsistence Marketplaces for Business 101, a required course for freshmen business students. According to Clarke, "The Business 101 module ensures that all students have an early introduction to this very important business topic. In fact, that first exposure can be where they begin to develop their concepts for the future products and services they design for the graduate course."

For Viswanathan, it's a way to begin to develop global citizens and to fulfill what he considers his "larger purpose with teaching at ILLINOIS by creating early and later integrative experiences at both graduate and undergraduate levels on the topic of sustainability." To do so, he also offers courses on environmental sustainability at both the undergraduate and graduate levels.

Marketplace literacy education is another creative initiative that Viswanathan has spearheaded for many years. He founded Marketplace Literacy Project, a non-profit organization, in 2003. He also developed a consumer and entrepreneurial literacy program for low-literate, low-income people that begins with "know-why" rather than "know-how"—that is, it centers on enabling understanding of the marketplaces among low-literate buyers and sellers. The program calls for a variety of educational methods, including picture sorting, simulated shopping, and role playing, all aimed at tapping into the learners' experiences—in hopes of placing these people on paths to lifelong learning.

For example, Viswanathan says, consider a poor woman who wants to start a food shop. "She needs know-how—that is, know where to locate, how to design the menu, and so on," he says. "Our feeling is, even if you're low-literate and poor, if you can think of the know-why in addition to the know-how, if you can think a little more broadly about your situation, then you're on a more promising track. For example, 'Why don't I start a food shop? Why don't I sell foods to middle-class households? Why don't I sell the ingredients to hotels?' and so on. Or 'Why should I even be in this business? Maybe it's the wrong business.' So if you can get people to understand the why of the marketplace, then they can understand why they should choose this and not that path. They can understand how to make wise choices and influence the marketplace around them."

Viswanathan says that his marketplace literacy education program is working on a small scale, and he is intent on widening the reach. In trying to expand the impact, his team is creating mobile phone animations that deliver lessons on marketplace literacy. The hope is that these animations would be in use worldwide.

In addition, Viswanathan mentions other efforts to expand the literacy education of people in subsistence marketplaces. One educational effort is based on a movie, Shakti Rising, made by Madura Microfinance Ltd., one of the largest microfinancing companies in the world. Madura worked with Viswanathan's team in India to embed marketplace literacy issues into the movie, which depicts a young mother of two in rural India who wants to start a business. She overcomes numerous challenges in doing so, both at personal and marketplace levels. The partnership between Madura and the Marketplace Literacy Project aims to use the movie as a platform to create self-administered, video-based educational modules that require no teacher, but can be used by groups of individuals who want to learn how to better themselves in subsistence marketplaces.

"My goal in scaling is to move from three zeroes to at least five zeroes in the number of people we reach," Viswanathan says.

But progress won't be determined by numbers alone. "I think you can measure the impact of our work by this: Are we giving people who have not had a chance, a chance? To me, that includes the people in the subsistence marketplaces as well as our students. Are our students getting the chance to understand the global challenges that they will face in their lifetimes? I hope that in a very small way we are moving in the right direction toward a larger purpose."

 

* The April 2011 issue of Inc. magazine featured Viswanathan's course as one of the country's "Top 10 Best Entrepreneurship Courses for 2011." For more information on subsistence marketplace initiatives, visit: www.business.illinois.edu/subsistence and www.marketplaceliteracy.org.

 

SIDEBAR

Preparation for the Global Marketplace

When he was a sophomore in college, John Clarke visited Germany as part of an international experience for students. It had such a powerful impact on him, that when he came to ILLINOIS seven years ago he began developing programs so that business students could have their own short-term immersion experience.

Since then, he has taken hundreds of students to countries around the world to give them a firsthand look at the global marketplace. While some of the trips have been to subsistence marketplaces in India, Clarke has taken students to China, Israel, South Korea, Brazil, and other countries as well.

"The College has a vision that every student should have an international experience," says Clarke, an assistant dean and clinical professor of business administration. "Since not every student will be able to study abroad for a semester, we offer shorter trips from one to three weeks to ensure that more students have the opportunity."

Why the focus on international trips? "It helps students to see what skills are required to work in a global environment and to start building those skills. Plus, it allows them to gain a new perspective on the world and on business and to just generally broaden your horizons, all of which are important to working in a global workforce," explains Clarke.

While on the trips, Clarke requires students to take photos and videos and to keep written journals. "We structure these trips so that a student experiences as much as six months of life in a week to ten days. So it's important that they have a process of capturing information, often personal reactions and observations, because processing that information over time is a very powerful tool."

For instance, last year students on the India trip interviewed tsunami survivors in coastal villages as part of research for the development of a disaster shelter that could be deployed to other parts of the world in danger of potential large-scale flooding from hurricanes and earthquakes. "I'm sure that as those students watched the recent events in Japan unfold they have a different appreciation of what is really going on, are far better positioned to sift through the bombardment of disparate information, and are able to better understand the realities of the Japanese situation."

While Clarke says there's no way of knowing what environments ILLINOIS students will work in, what roles and jobs they will have in their careers, or even what industries will employ them, he is sure about one thing. "My experience taking almost 500 undergrads, grads, and executives abroad tells me that these kinds of educational immersion experiences are invaluable when it comes to developing and preparing future global operators."