Tuesday, October 05, 2010

Wharton University's Societal Wealth Program

A program from Wharton University of Pennsylvania tries to create businesses that can build wealth for the poor and ease societal ills. Wharton's Societal Wealth Program not only tries to build businesses in the under-developed world but in the United States as well.

A new paper released by the SWP outlines 12 different projects the program has tried to start and the degrees of success each has achieved. The professors behind the project say that there are more failures than successes.

From Knowledge@Wharton section of Forbes magazine we find out more about the program

The WSWP initiatives are designed to move beyond a charitable aid model for combating poverty by creating economic enterprises that lead to self-sufficiency rather than dependency and that will have a major and lasting impact. "There are plenty of charities doing things for free. What we are attempting to do is create poverty reducing businesses," says James D. Thompson, director of the WSWP, who co-authored the paper with Wharton management professor Ian C. MacMillan.

Since its launch in 2001 WSWP has been involved in 10 projects and is in the early stages of evaluating two others. The four cases highlighted in the paper represent a range of outcomes from success to termination. Many of the other six projects were disengaged or significantly altered--a rate Thompson says is comparable to findings on typical entrepreneurial startups. "You're likely, if you follow this approach, to encounter more failures than successes," he notes.

MacMillan adds that the principles that apply to building societal wealth should not be limited to use only in poor nations or developing economies. "We have misery in the United States," he says. "There are many areas of high unemployment in appalling ghettos, where single mothers are trapped in environments where the best they can do is eke out a living. It's no joke that we can apply the same principles here."

The four projects detailed in the paper range from a highly successful animal feed effort in Zambia to a proposal to improve nutrition through better peanut processing that was never put into practice. The feed project used linear programming to calculate optimal feed mixes resulting in high-quality, lower-cost feed for farmers who were able to expand chicken production. Starting with six men mixing feed on a cement floor, the effort is based on a network of small producers, rather than a conventional high-volume model.

In South Africa, WSWP backed a project to train uneducated single mothers to work in bakeries making high-end healthy cookies for sale to tourist hotels. The authors call this program "marginally successful" and note that it is now directing sales toward exports to developed countries. The authors write that the "jury is still out" on a project in Botswana designed to use electronic medical records to improve care for HIV/AIDS patients by allowing nurses to make more diagnostic and prescriptive decisions, which in turn frees up doctors for administering higher-level services.

The WSWP ultimately dropped a plan to improve nutrition with more effective peanut processing. The idea was appealing because peanuts could provide high nutritional value to the diets of people throughout sub-Saharan Africa and in Latin America. However, an early analysis revealed that high transportation costs and the likelihood of losses through theft at various points in the logistics system made it impossible for the project to sustain itself financially. "This is a great example of one of those ideas that was initially put to us that we thought had enormous potential," Thompson says. "But during our due diligence and modeling process, we just couldn't find a way of getting the business model to make financial sense."

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