For Profit Development: Good Business, Good For All

05 Apr 2004|Added Value

A new kind of business is emerging that bridges the gap between the conventional realms of commerce and government. These new businesses are profitable and gaining a strategic advantage in the critically important markets of the future. At the same time, they are engaged in effective and caring development activity, the sort normally reserved for development banks, NGOs, and government programs.

A great example of a for profit business that is engaging in developing customers is CEMEX’s Patrimonio Hoy. To differentiate itself from its competitors, CEMEX designed and launched its Patrimonio Hoy program, which sells cement (and other building materials) to low-income, do-it-yourself homebuilders. This is no normal program of selling cement by the bag. The Patrimonio Hoy program sells a system like the Weight Watchers’ system, only for building homes one room at a time instead of losing weight. Patrimonio Hoy is good for people who can build on their own, but it is great for those who do not have the discipline to see a building project through. With Patrimonio Hoy’s system, a do-it-yourselfer completes, a room, the basic unit of patrimony in 70 weeks, almost three times faster than the normal build, thus,“patrimony today.” Patrimonio Hoy customers join into groups of three who take joint responsibility for making weekly payments. They payments entitle them to a room’s worth of quality building materials, which are delivered in general a little before the middle of the payment program. Customers also become members of the local Patrimonio Hoy club, which gives them technical advice on designing their rooms, warehousing privileges, rights to delivery, and other preferred customer rights with the local retailer. With these advatanges, Patrimonio Hoy do-it-yourselfers not only build faster but also at two-thirds the traditional cost. Do-it-yourselfers come back to build rooms again and again. They also develop a range of capacities beyond saving and building.

The value of the CEMEX program is illustrative. There are still many questions about how business can incorporate this sort of socially responsible activity into their organizations considering the kinds of short term focus of many publicly traded corporations today. The important lesson is that unlike some much-criticized purveyors of globalization—and development as a form of globalization—for-profit development businesses cannot make offerings to lower-income people that require them simply to adopt modern, market-oriented, transactional values. Such programs fail as businesses. To sell development products to lower-income people, these products have to appeal to their way of life and the values they currently have, both traditional and modern. Development agencies that offer subsidies do have the luxury of paying lower-income people to ignore certain social values they care about in order receive needed goods. But paying people to ignore certain values does not make those values go away. Indeed, it often promotes suspicion. For-profit development integrates peoples historical values with brining them into a new future. These businesses increase their customers’ freedom to act effectively in modern economies in three ways.

  • First, they make it easy for their customers to engage skillfully in financial transactions that would normally be closed to them.
  • Second, they provide social contacts and help their customers learn by involving them in financial and other educational programs.
  • Third, they let their customers know clearly what is promised and what they are getting, and thereby build new and high levels of trust in commercial transactions.
  • They do all this while significantly increasing their and their customers’ wealth.

    To increase global economic stability and wealth, senior corporate managers and policy makers should know why this emerging activity is good for traditional commerce, why it is good for government development efforts, and what can be done to enhance it.

    For more information and pictures visit Change Maker’s case study.

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