Socially responsible corporate entrepreneurship

In a previous column, I discussed b2B–the small "b" for small business and the big "B" for big business–and focused on how a small business can be strategically important to big business. The key was to understand the needs of the big business-customer and to demonstrate to big business how the small business is a critical strategic partner in satisfying and even delighting customers.

While on a research trip to Indonesia, I had the opportunity to meet Pak Frankie of Bogasari. Pak is a shortcut for Bapak, which precedes a person’s name as a sign of respect for the gentleman’s status. Bogsari is the largest flour manufacturer in Indonesia. On a single facility basis, it is also considered as the world’s largest and, as such, one can just imagine its market share in Indonesia.

One of the interesting entrepreneurial strategies implemented by Pak Frankie can be found in the way he increased and will still be increasing the flour sales of the firm. Keep in mind that Indonesia is a rice-eating country. Flour is largely used for bakery products and noodles. Thus, an increase of bakery and noodle consumption on a per capita basis will automatically increase flour sales. While it would have been easier to increase flour sales by buying out other flour manufacturers, this was not the way Pak Frankie wanted to grow the firm.

Rather, he designed and implemented an innovative way of increasing sales. Instead of increasing market share only, he increased the market and made sure that the increase in market size went to him. After listing to Pak’s strategy, I labeled it "B2b2L", a formula for socially responsible corporate entrepreneurship.

At the outset, Pak Frankie worked on making noodles a popular meal for Indonesians. He found out that noodles were already being consumed by the people. Mobile carts that retailed Mak Mee, a noodle soup with toppings, were among the biggest consumers since vendors with Mee carts were found in the more heavily populated lower income areas.

He also found out that these vendors bought their noodles from a manufacturer in the area who was running a home-based family-run small enterprise and bought flour as a basic and major input.

In the B2b2L formula, Bogsari is the "B", the home-based noodle manufacturer is "b", and the Mee vendor is the L.

Pak Frankie did an intervention among the noodle manufacturers. He provided training to make better noodles. He made credit available for equipment upgrades and the purchase of carts. Interestingly, credit was given in the form of flour bags. He taught the noodle manufacturers (1) how to standardize the quality of both the noodles and the topping; (2) how to manage the small enterprise better; (3) how to expand the business via investing in Mee carts plus recruiting and training of vendors; and (4) the value of product differentiation by having their own brand of Mee instead of a generic product plus uniquely designed carts.

When our research team visited one such noodle manufacturer, here’s what we found:

• The site of the business of the noodle manufacturers grew 10 times. This could be measured by the amount of flour bought.

• The vendors had a net income comparable to the minimum wage. This was discovered when the research team asked how much a cart sold and the cost of the inputs on a per day basis.

• The vendors did not finish formal schooling and migrated to the city.

• The vendors could not get a regular job in the city.

• The noodle manufacturer’s family could go on a pilgrimage (which he could not afford otherwise because of the income from the enterprise.

• The noodle manufacturer provided the vendors with a place to stay, rest and sleep.

• The noodle manufacturer encouraged the vendors to become noodle makers themselves.

• Several vendors have gone back to their provinces to set up their own noodle manufacturing and cart vendor network. This was also supported by Bogsari in the form of training and credit that it provided the original noodle manufacturer. This time, the venue was no longer the city but the countryside.

As shown by our Indonesian example, big business can grow by providing support to small business that generates livelihood. We must distinguish livelihood from small business, i.e. livelihood provides income for a person or a household while small business creates jobs or employment with greater value-added compared to a livelihood.

As a strategy, Pak Frankie’s moves can be labeled socially responsible corporate entrepreneurship. His moves have great social impact. They were big business initiated, and were innovative and creative. They created more livelihood opportunities, more small businesses, more jobs, and more income for the vendor, the small business owner, and Bogsari itself.

This what we mean by doing good while doing well.

Can Pak Frankie’s experience be replicated by other entrepreneurs? Is there an innovative opportunity to develop strategic partnerships with smaller businesses that would impact on livelihood development and also result in increased income for the "B", the "b", and the "L"? Herein lies the challenge.

(Alejandrino Ferreria is the dean of the Asian Center for Entrepreneurship of the Asian Institute of Management. For further comments and inquiries, you may contact him at: [email protected]. Published "Entrepreneur’s Helpline" columns can be viewed on the AIM website at http//: www.aim.edu.ph).