Mobile Sands

May 15, 2009

On MIT NextLab and Mobile Ventures for the Next Billion Consumers

Filed under: Mobile Apps, Netbooks, New business models, Smartphones — AJ @ 7:16 pm

Yesterday, I attended the “finals” of MIT NextLab, a social entrepreneurship class that aims to “launch mobile ventures for the next billion consumers”. It was heart-warming to see how ubiquitous connectivity (via SMS) and low-cost mobile computing devices (smart phones) can be used to make a huge difference in the lives of poor people in developing countries. Still, the premise that somehow these socially beneficial projects could be turned into self-sustaining ventures without expanding the addressable market seemed a stretch.

MIT NextLab and the Next Billion Network Project

The NextLab course is offered as part of the Next Billion Network (NBN) initiative at MIT Media Lab. NBN’s goal is to encourage grass-roots level development using cell phones in developing countries. The program was founded by Telmex’s Jhonaton Rotberg little over two years ago. Telmex, its mobile arm America Movil, Nokia and Bank of America are the primary sponsors of the activity.

 Like most good entrepreneurial ventures (or successful IT projects), NextLab projects start with the end-customer. Each student team is paired with a NGO, corporation or some other representative group in a developing country who has a problem that needs to be solved. Projects are typically designed for a 1-year team period, encompassing two semesters, and MIT’s winter and summer breaks. At least one project started in this class (MoCa) has continued for almost two years, while few others have been taken over by local partners or are stand-alone ventures.

 Videos of this year’s projects are worth checking out. These projects address problems like making healthcare accessible in remote rural areas (MoCa), enabling people without bank accounts to do basic financial transactions (Dinube), making the life of truckers in Colombia easier (Hammock),  creating an even-playing field for small farmers in Mexico (Zaca), fighting crime in large cities via crowdsourcing (Civirep), and spreading adult literacy in India (CelEdu).

 Freemium Model for Social Enterprises?

 Most student teams claimed that they could somehow create a business by selling to the customers they are currently working with.  Though laudable, in my opinion,  it is very difficult to build businesses that cater ONLY to people who have very little or no money. Proponents of creating such businesses argue that they can make up for low gross margin per customer through scale. Alternatively, social ventures try to sell to governments or well-financed NGOs.  However, but for a few exceptions like Bangladesh’s Grameen Bank, success stories are tough to find.  

Take the One-Laptop-Per-Child (OLPC) initiative as an example (also, see Wikipedia link). OLPC was launched in January 2005 at the World Economic Forum with a singular focus of bringing a $100 laptop to the poorest children in the world and with a business model of selling these machines to governments and NGOs. It was not until late 2007, when the original business plan was not working out, that OLPC (half-heartedly) decided to sell its machines in the US via its “give-one-get-one” program. By then it was too late. OLPC’s XO was never designed with US consumers in mind and most consumers who got one were disappointed. By mid-2008, netbooks stormed the market and there were few takers for XO. But this does not mean that model of leveraging technology developed for the poorest to meet needs in more affluent markets is flawed.

One way to create viable ventures would be to gain scale by selling to poor customers in developing markets but earn profits by catering to more affluent customers in developing and developed markets. Such a business model would be similar to the freemium (free + premium) model used by many Web2.0 companies.

One company that is following such a model is AssuredLabor. This company started as NextLab project in the fall of 2007 with a local partner in Brazil, and that is where they built their prototype. In mid-2008, the team decided to turn the project into a stand-alone venture, with Boston as their first pilot market in the US.  Technology commercialized and developed here could be applied back in Brazil as well as other developing countries.

Many current NextLab projects hold similar potential. Hammock’s SMS-based logistics management system may be useful for small delivery companies in developed markets. CelEdu’s mobile games could be used to teach foreign languages. MoCa could play a role in connecting clinics in rural America to hospitals in larger cities. And, at the same time, these ventures could keep on providing technology to their NGO partners in the developing world at affordable prices.

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