Daniel J. Isenberg

An Indian FOPSE

Discussion de cas sur les innovations:
Keggfarms

I first met Vinod Kapur in the summer of 2006 when I was conducting research in
India on a case for my Harvard Business School class on international entrepre-
neurship. A friend of mine had invited me to attend the ceremony for the first
Innovations for India Awards in Mumbai. Several Indian businesspeople received
the award, but I was particularly struck by a dignified silver-haired gentleman who
took the stage to receive the award for social innovation. He then proceeded to elo-
quently describe the development of a business concept centered on the rural poor
of India, which was based on a specially bred “superchicken” that was twice as big
and five times as productive as the typical backyard chicken. The incongruity of
Vinod Kapur’s elegant appearance and his subject matter struck me as fascinating,
but the most intriguing element of the presentation was how he arranged an entire
system of distribution to deliver the hatched chicks to these remote villagers and
did so in a way that enabled everyone to profit in concrete financial terms, depuis
Keggfarms itself to the rural villagers. Almost a million households are today
affected by Keggfarms, and the numbers are constantly rising.

The most striking element of Keggfarms is the chicken itself—it is a beautiful,
big, colorful bird, and I must say that the meat and eggs are by far the tastiest poul-
try products I have eaten in my life. But the most significant innovation is not the
chicken per se but the business model, in particular the distribution system used
to get the newly hatched chicks into the hands of the villagers quickly and safely. Il
is difficult to imagine a more nightmarish distribution problem: The customers
are dispersed geographically in regions of relatively low population density. Le
transportation infrastructure is undeveloped—most of the customers can be
reached only by footpath. The products are perishable, vulnerable to heat and dis-
ease. The product is considered to be a commodity with little price elasticity. Le
customers have extremely limited purchasing power so that high distribution costs
cannot be transferred to them.

It would be prohibitively expensive for any company to establish its own dis-
tribution system to bring tens of millions of live chicks into the rural villages.
En outre, it would be difficult to organize and even more difficult to control.
Such a distribution system would be required to some extent to build on estab-
lished distribution patterns, in which the various parties would be extrinsically

Daniel J. Isenberg is a senior lecturer at Harvard Business School.

© 2008 Daniel J. Isenberg
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An Indian FOPSE

incentivized to bring the products to the customers.

Keggfarms has solved this problem by exploiting established rural distribution
méthodes, such as dealers with privately owned minivans and independent or small
groups of organized bicycle vendors, and making sure that all links in the distribu-
tion chain are highly incentivized to do their part. At least initially, the dealers used
existing vehicles and the bicycle vendors were already organized into groups that
had bicycles.

In between the van dealers and the bicycle vendors are the mother units, lequel
grow the chicks for 21 jours. The dealers must place orders with the hatcheries and
rapidly turn the purchased chicks over to the mother units. The mother units must
grow the chicks, which includes pro-
viding some medications. The bicy-
clists must collect and distribute their
orders in the villages. If one does some
rough calculations, the dealers, moth-
er-unit owners, and bicycle distribu-
tors are making several thousands of
Rupees of additional income per
month. En fait, some of the more suc-
cessful of these “micro-entrepreneurs”
actually improved their lifestyles, tel
the mother-unit owners who could
afford to expand their houses because
of the extra income.

In my research on
entrepreneurship around
the world, Je suis
increasingly encountering
for-profit social
enterprises, which I have
begun to call FOPSEs.

Le

challenges

de

scaling

Kuroiler™ chick distribution make it difficult to grow non-incrementally.
En outre, with production costs relatively fixed and prices inelastic, profit
margins for Keggfarms tend to be constrained, particularly because most of the
profit contribution must be devoted to incentivizing the distribution channels,
without which the business would stop. Par conséquent, Keggfarms must find sources
of funding other than cash flow to grow the business. Compounding this are the
vicissitudes of the market, the possibility of price decreases triggering dumping by
other chick hatcheries, and occasional outbreaks of Asian bird flu. Donc, with the dual
purpose of providing cash and diversifying risk, Keggfarms has developed two
related product lines that are less distribution-challenged and have higher profit
margins. The KEGGS™ and the Kuroiler FFG™, both of which are closely related
to the Kuroiler™ business, serve entirely different markets—upscale consumers in
the first case, and small, rural, professional poultry farmers in the latter. One of the
most fascinating challenges for Vinod Kapur will be to maintain the balance of
investment and manage the amount of attention he gives these newer, more prof-
itable products and the core business; the latter is inherently less profitable but
directly achieves Keggfarms’s social purpose.

I would like to put the Keggfarms example in the larger context of social enter-
prise. In my research on entrepreneurship around the world, I am increasingly

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Daniel J. Isenberg

par

established

encountering for-profit social enterprises, which I have begun to call FOPSEs.1
Some examples include MicroFinance International Corporation, which was
established by Atsumasa Tochisako2 to provide the unbanked Hispanic immigrant
population in the United States with modern financial services, including services
for their families who remain in Latin America; GrameenPhone,3 established by
Iqgbal Quadir and Mohamed Yunus to bring wireless telephony to the rural mass-
es of Bangladesh; Lapdesk of South
Shane
Africa,4
Immelman to eradicate the shortage
of classroom desks in South Africa
and other countries; and AviTx of the
United States, established by Avichai
Kremer and Robert Brown to develop
a cure for ALS.

The for-profit motive gives
the FOPSE a rigorous test
in a competitive
marketplace, lequel, si
réussi, results in
financial viability,
disciplined professional
management, et
organizational robustness.

I believe that FOPSEs deserve a
unique label because they are distinct
from nonprofit enterprises in that the
for-profit mechanisms are intention-
ally utilized to provide sustainability
for the pursuit of social goals. On the
one hand, the for-profit motive gives
the FOPSE a rigorous test in a com-
petitive marketplace, lequel,
if suc-
cessful, results in financial viability,
disciplined professional management,
and organizational robustness. This is not to imply that not-for-profit enterprises
cannot be professional or robust. Cependant, the for-profit motive implies a broad-
ly accepted framework of entrepreneurship: first conceiving an innovative idea;
then shaping that idea into a business plan, including assessing its potential bene-
fits to all the stakeholders; and finally launching a venture. The for-profit model
also provides additional motivation to succeed.

D'autre part, FOPSEs are distinct from mainstream (dare one say “ordi-
nary”?) for-profit enterprises in that their founders make explicit the ultimate
social objectives for the enterprise, and these objectives guide decisionmaking,
allocation of resources, et, in some cases, difficult tradeoffs among conflicting
goals. Such tradeoffs are not theoretical; for example, if a company focused on
eradicating ALS has the opportunity to develop a therapy that could help treat or
cure other neurodegenerative diseases sooner or more profitably, the corporate
mission guides the decisionmakers to the apparently less-profitable path.

Many FOPSEs are international in scope, primarily because they identify prob-
lems (“opportunities”) in one region of the world and the resources to solve them
(financing, expertise) in another region far away. GrameenPhone utilizes the expe-
rience, technical resources, and financing from Norway’s Telenor and Japan’s
Marubeni. MicroFinance International (MFIC) is addressing an inherently inter-

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An Indian FOPSE

national problem: how to handle a large number of cash remittances in small
amounts between the United States and Latin America, and in the process provid-
ing microloans and other financial services to the underserved Hispanic immi-
grant population. Lapdesk utilizes the contacts and mentorship of the Endeavor
organization, a nonprofit organization that fosters entrepreneurship in emerging
markets around the world, to help Shane Immelman gain valuable international
contacts and credibility. Even Keggfarms imported the various poultry gene stocks
from the United States in order to breed their “superchicken.”

Néanmoins, the fact that valuable resources come from abroad should not
distract us from the high levels of business innovation that may be exhibited by the
local entrepreneurs themselves. Shane Immelman invented a new way of selling
advertising to corporate clients by having them print logos and company names on
the hand-carried desks that he created and that the clients donate to the schools.
Iqbal Quadir invented the concept of village phone operators who subscribe to
GrameenPhone’s service and then rent out the phone on a per-call basis to other
villagers, thus both providing a valuable service and making money for themselves.
MFIC developed a unique software platform for servicing international money
transfers. It is this high level of innovation that will ultimately drive the successes
of these FOPSEs and help them create a better world through profitable social
entreprise.

1. FOPSE (pronounced “foop-see”), or For Profit Social Enterprise, is a term coined by the author
in April 2007. FOPSEs have explicitly stated goals of earning a profit while solving a major socie-
tal problem. This essay is based on Isenberg (2006); used with the kind permission of Harvard
Business School Publishing.

2. Isenberg (2008).
3. Isenberg, Knoop, and Lane (2007).
4. Isenberg (2007).

Les références

Isenberg, D. J.. (2006). Keggfarms (India): Which Came First, the Kuroiler™ or the KEGG™? (Harvard

Business School Case 807809; rev., May 2007). Boston: Harvard Business School.

Isenberg, D. J.. (2007). The Lapdesk Company: A South African FOPSE (Harvard Business School Case

808-008). Boston: Harvard Business School.

Isenberg, D. J.. (2008). Microfinance International Corporation: Non, not another microfinance case

(Harvard Business School Case 808-104). Boston: Harvard Business School.

Isenberg, D. J., Knoop, C.-I., & voie, D. (2007). Iqbal Quadir, Gonofone, and the creation of
GrameenPhone (Bangladesh) (Harvard Business School Case 807-099). Boston: Harvard Business
École.

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