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Innovation & Design September 11, 2008, 5:00PM EST

Philips: Philanthropy by Design

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Creative chief Marzano wants to use design to boost developing nations Ricky Chung/SCMP

A rechargeable lantern, Uday, is aimed at users with unreliable power Stuart Heir/Redux

says Bob Hoekstra, former head of Philips' innovation campus in Bangalore whose firm, Opportunity India, advises companies looking to do business in the country. "You have to provide people the means of generating the income necessary to pay for your products."

On the chula project, Philips teamed up with nontraditional partners that aim to do just that. Local development agencies will set up small roadside factories for creating the components for the stoves, which are made from mud, sand, and cement and require no costly manufacturing equipment. Once the stoves are built, self-help groups of women sell them for a small commission. Villagers, with the help of microfinance institutions and possibly income from jobs at the manufacturing sites, can earn the money to pay for the chula in installments. (Philips' research found users will pay up to $20 for a stove; prices will be determined locally.) The alliances boost Philips' credibility locally—and give it a better understanding of these new consumers.

Of course, such initiatives are fraught with difficulties. It can be tough to find the right partners, gain the trust—and input—of locals to develop new methods of distribution, and then convince them that the product is worth the price. In the past, many grassroots outfits would have considered an alliance with a global brand to be a sellout. Increasingly, though, these groups realize that finding affordable solutions to major challenges such as reliable energy, accessible health care, or clean water requires cooperation with corporations. And that's why says President Sai Prakash of the Erin Foundation, a Bangalore-based development group, has signed on to the Dutch giant's chula initiative. Because the company isn't charging for its designers' time, "we are convinced Philips has no hidden agenda," says Prakash.

For Philips' designers, finding the appropriate solutions requires an entirely different approach. When designing lights for the U.S. and Europe, for instance, Philips focuses largely on mood and ambience. In emerging markets, though, electricity is often unreliable or even nonexistent, so consumers want durable, affordable lights that aren't dependent on a continuous supply of electricity.

THE CHALLENGE: BRINGING DOWN COSTS

Those issues became clear four years ago, when Philips began looking for an alternative to the kerosene lanterns that are ubiquitous in developing countries. These lamps aren't very bright, their fumes are unhealthy, and they can cause fires if knocked over. And the fuel they need can eat up as much as a third of a poor family's income.

Enter SMILE, or Sustainable Model In Lighting Everywhere. That's the name Philips gave to two ideas it came up with after working with NGOs to better understand consumers' needs. Kiran, a hand-cranked flashlight, uses long-lasting light emitting diodes (LEDs) and is aimed at users with no access to electricity. Uday, a rechargeable portable lantern, is aimed at middle-class users with erratic power supplies.

SMILE rolled out last year in eight Indian states. Since then, it has been extended to Africa. Not only does SMILE bring lighting to people who desperately need it but it also offers a clean technology that costs less to use than kerosene lanterns. "It's not about taking older, cheaper products and technology to emerging markets," says Simona Rocchi, director of sustainable design at Philips Design in The Netherlands. In the case of SMILE, "it's about taking a new technology and adapting it in smart ways to allow people . . . to leapfrog into the latest in lighting—LED."

One of the biggest issues for Philips and others developing products for emerging markets is how to turn such social innovations into self-sustaining businesses. That was the main problem with a telemedicine project called Distance Healthcare Advancement, which concluded in 2005. Philips and several local partners wanted to create affordable access to high-tech medical services for people in India living on $2,000 or less a year. While the group overcame numerous cultural, technical, and operational problems, usage didn't meet expectations, and the parties couldn't agree on what fees, if any, to charge. Ultimately they failed to find a way to lower costs and make the project a viable business. "We've managed to deliver the solution and crack the concept," says Murali Sivaraman, CEO of Philips India. Now the company is trying to figure out how best to tackle the problem of cost.

For Philips and other multinationals looking to reach out to consumers across the income spectrum in emerging markets, this remains the biggest obstacle. Says Unmesh Kulkarni, senior design manager for Philips in Pune: "Designing for simple solutions at the lowest possible cost is in many ways more challenging than designing a very advanced, high-tech solution."

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Tailoring Products for the Poor

If you want a foothold in poor countries, create products specifically for them, consultant Joshua Weissburg writes in the spring issue of Stanford Social Innovation Review. Companies typically tweak their developed-world business models for emerging markets. Instead, they should ask what consumers in those countries really need. This sort of grassroots design will help them come up with products and services that are useful, employ local materials, and reflect the culture of their customers.

To read Weissburg's article, go to http://bx.businessweek.com/social-innovation.

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Capell is a senior writer in BusinessWeek's London bureau . Lakshman covers India business for BusinessWeek.

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