Product, Service & Design Innovation
On the Ground:
Cornell Center Demonstrates Benefits of Applied Research

To the uninitiated, persuading those living in malaria-prone parts of the world to buy low-cost insecticides seems simple: Explain the benefits and the products will, to use the old phrase, “sell themselves.”

For many years, the traditional theory for selling to bottom-of-the-pyramid (BOP) consumers, 4 billion of whom earn less than $1,500 annually, has espoused, “low price, low margin, high volume.”

However, applied research by faculty with Cornell’s Center for Sustainable Global Enterprise (CSGE) has deepened their understanding of key success drivers and led to innovative management tools for reaching BOP consumers, according to CSGE director Mark Milstein.

In the case of insecticides, for example, Erik Simanis, head of CSGE’s frontier markets initiative, worked with S.C. Johnson Co. and the Bill and Melinda Gates Foundation to create a sustainable business in rural Ghana that would result in higher use of insecticides and a decline in malaria.

The benefit of such research, according to Milstein, comes when he and other faculty members within Cornell’s Samuel Curtis Johnson Graduate School of Management are able to help companies successfully establish markets for next-generation clean technologies and business-led solutions to global poverty.

In another example of the vital role applied research can play in transforming the impact of private enterprise on global sustainability challenges, Milstein is leading the business development component of a $4 million, five-year project focused on improving economic links to marine ecosystems in Indonesia and the Philippines. Part of the Capturing Coral Reef and Related Ecosystem Services Project, sponsored by the World Bank and the University of Queensland in Australia, the overall goal of the project is to clarify and enhance the long-term value of resources such as seagrass beds, mangroves, coral reefs and fisheries to economic development, human welfare and the health of marine ecosystems.

“Many philanthropy and aid-based projects involve people who lack specific business experience or training,” Milstein says. “They often look toward a business component related to their work (i.e., alternative livelihoods), but they don’t really know what makes a business successful or not.”

Mark MilsteinFor his part, Milstein is leading a team focused on developing tools that will allow local communities that rely on natural assets for their economies, to refine existing or pursue new businesses that maintain a long-term balance between profits, social welfare, and ecosystem health. For example, instead of illegally destroying mangrove forests (impacting fishery nurseries) to turn them into basic charcoal, there may be new, profitable business opportunities for investing in clean, smokeless charcoal and biochar production with agricultural waste.

“Previous efforts to prevent illegal charcoal production have included livelihood programs that give people a motor for a boat and a net so that they turn to fishing,” Milstein noted. “But those folks aren’t fishermen. They sell the motors and the nets and go back to making illegal charcoal. That’s not a business solution. It is a failed aid policy. On paper, it may look like a good idea, but in reality it has nothing to do with building a successful, profitable and growing enterprise.”

“We are helping to integrate much-needed knowledge and tools of basic business decision-making into work with economists, natural scientists, and others trying to preserve the value of critical ecosystems,” Milstein said. “To effectively establish new ways for people to earn a living, their activity needs to embed in a specific business opportunity. Businesses are the key building blocks of a market and an economy. We believe it is the most impactful way to get people to change their current practices.”

From BOP, to Upstate New York, to Japan

For example, the Center has a current project with the Water Resources Institute to examine economic opportunities in the Hudson and Mohawk valleys in upstate New York.

“Examining water from a business perspective yields new insights. Unique water resources in upstate New York simply are not valued enough by industries to attract them to the region,” Milstein said. “To link water resources to economic development, you have to examine the issue from a business P&L perspective to identify where profits can be made.”

Other economic possibilities for the area include linking water in a more organized way to tourism. The center’s research is discovering that upstate New York hasn’t capitalized on its appeal to water lovers in the way that its neighbor to the north, Ottawa, has done with its canal system.

In Japan, Yasuhiro Karakawa, who serves as CSGE’s associate managing director for market creation strategies in Asia, is involved in work with a number of Japanese companies looking to leverage sustainability as a business opportunity — ranging from the introduction of cleaner-burning cookstoves in emerging markets to the development of new products for U.S. markets.

Both Milstein and Karakawa are involved with Japanese companies as well as the Japanese government to provide better training for business executives, managers, even civil servants from developing countries, such as Nigeria, Bhutan, Laos, Cambodia and Vietnam to link the challenges of sustainability to profitable business activity.

There are many efforts in the world today to link sustainability to business, but it is often slow and frustrating work to overcome a long list of roadblocks that prevent change.

Over the past decade, faculty and staff from CSGE have worked with more than 70 companies around the world in North and South America, Africa, Europe and Asia. They have worked in nearly every sector of the economy — including renewable energy and carbon markets, life sciences and sustainable agriculture, consumables, food and nutrition, health care and hospitality management, as well as finance and international development. And they’ve worked in every function of business to focus on the “rigorous application of management science (i.e., P&L)” to effectively address sustainability issues through business.

Finding the Right Questions

“Our goal is to make change happen,” says Monica Touesnard, CSGE associate director. “How do we rethink business models to create new markets within the infrastructures we have established?”

To answer those questions, corporations and organizations fund teams of students to explore a variety of issues and topics related to business opportunities and strategies.

“In most instances, the projects are strategic in nature with long-term implications for the sponsoring organization,” Touesnard says. As a result, student teams have worked on diverse issues from business development, to strategic marketing and operations and on occasion, explored opportunities for entrepreneurs.

While much of the work is done on the Cornell campus, companies do pay for students to travel and conduct on-site research when needed.

“Travel can really help the students gain insight into the project,” Touesnard says. “And sometimes, that’s the key to determining if the right questions are being asked.”

For example, she points to a recent project for affordable housing in Brazil. “The company was thinking about the project the same way you would think about it in the U.S.,” she says. “When the student team traveled there, they talked to groups that the company hadn’t considered. Their findings resulted in a complete revamping of the project.”

With nearly 100 years of collective experience working in the field of business sustainability, Milstein and his colleagues feel confident in CSGE’s nuanced focus on the private sector’s unique role in achieving sustainability goals.

“When it comes to sustainability, which is something that is so dynamic, you have to be able to cut through the fads and fashion. We have a long track record and a lot of experience across many sectors,” Milstein said. “If a sustainability problem calls for a fundamentally different way of doing things, there has to be a business rationale. We try to find a way in which a company can find a long-term business strategy. That clarity is what keeps companies coming back to work with us.”

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