Cultural Innovation: Designing Offerings Around Ad Hoc "Bridge Practices" II

10 Jan 2006|Added Value

This blog takes up a second element of cultural innovation. Previously, I wrote about thematizing an ad hoc practice so as to re-articulate it for consumers. A second important element is intensifying a bridge practices, i.e. identifying what makes the practice reduce or resolve a tension and designing attributes that will intensify the mechanism. Indeed, when designing offerings around cultural practices, it is necessary to “intensify” the mechanisms that allow the practices to resolve tensions for customers. No matter how familiar transformed bridge practices are, the rigor with which they are focused on the announced goal will be disorienting and thereby stimulate some fleeing behavior. Consequently, the offer designer has to intensify the sanctioning mechanism in the traditional practice, and shape the new offer so that the sanctioning power is both familiar but stronger than is customary.

Returning to the CEMEX example, we can learn about what makes the tanda practice, a pervasive practice for savings among Latino’s in the world, including people in the U.S. Hispanic market. It is rare that anyone defaults on a tanda payment. Unlike payments to patron-like institutions, which should forgive a default if a borrower does not have the money, failure to give money owed to a fellow neighbor is a breach of civil conviviality and causes a significant loss in status. A nonpayer could even be ostracized from festive gatherings. But the tanda practice does not have a specified punishment for a nonpayer. In developing Patrimonio Hoy, CEMEX found that the shame effect was felt whenever more than two people, or at least least three people, entered the system together. While the normal number of people is ten, over time, it became clear that less people in a group intensified the shame mechanism. It formalized exactly what penalties a defaulter had to pay and how the group would be penalized as a whole. Ostracism was retained as the basic penalty. Members of groups with a non-reconciled default are not allowed to join other groups or receive any other benefits of Patrimonio Hoy. In order to bring out the responsibility of monitoring and collecting even more formally, each group has to elect a new leader, or gestor, every ten weeks, who is precisely responsible for keeping the group out of default.

Yunus’s biggest achievement in intensifying the normal sense of responsibility and shame that comes to such groups of five women developed out of his additional requirement that the women become part owners of the Grameen Bank. As such, he requires that they take a week-long course on their responsibilities as bank members and individually pass an oral examination. Each has to pass before the group is authorized to receive any loans. Thus, Yunus causes them to institute shared support, monitoring, and governing practices in undertaking the formal educational program, before anyone obtains a loan. The practices of monitoring, supporting, and governing that they develop in taking the course are applied to each other as fellow borrowers growing businesses. Grameen intensifies the sanctioning power further by staggering the issuance of loans. The first two members of the group to receive a loan have to be nominated by the group, and then they have to pay for six weeks before the next two can become eligible for a loan. The last member of the group has to wait an additional six weeks. Yunus found that these groups not only monitor and support each other but also compete with other groups to run the most successful businesses. In order to make monitoring something other than fearful suspiciousness, Yunus established that groups have access to their own emergency funds and that they can apply to the bank as a group for an additional emergency loan. Finally, if there is a default that is not quickly corrected, the whole group is barred from additional loans.

In short, although people invent ways to resolve their own tensions, for the most part, these are ineffective or simply awkward. Businesses have the opportunity to redesign these when marketing new services.

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