Scaling up impact through platforms: The case of Hello Tractor

Ezequiel Reficco¹, Francisco Layrisse^2*

¹ ECSP Europe ([email protected]);

² Friedrich-Alexander-University Erlangen-Nuremberg (*[email protected])

Keywords 

Social Entrepreneurship, Social Enterprises, Digital Platforms, Digital Ecosystems, BOP

Extended abstract

The Base of the Pyramid (BoP) agenda emerged at the start of the 21st century around the idea that large firms could alleviate global poverty profitably, through products that addressed the needs of the masses. In this view, multinationals had the financial resources, distribution channels, technological knowledge, large-scale production, and management capabilities to seize these opportunities (Lodge, 2002; Prahalad & Hammond, 2002). Although individuals at the BoP lacked purchasing power, they collectively shaped a significant market opportunity, the “Next four billion” of neglected consumers (Hammond et al., 2007). Major firms responded with excitement, attracted by untapped markets and the opportunity to make a positive impact. However, to-date despite widespread interest, profitable, large-scale ventures at the BoP remain rare (Jenkins & Ishikawa, 2010).

Subsequent research revealed cracks in the vision of early BoP scholarship. The large aggregates at the BoP masked several significant heterogeneities —in consumption patterns, cultural preferences, or geographical distribution— undermining the promise of profits through volume and unitary razor-thin margins, which assumes homogeneous markets. Emerging countries turned out to be widely diverse, with varying consumption patterns from village to village and challenging last-mile delivery (Barki, 2015; Vachani & Smith, 2008). Heterogeneity hindered standardization; the few industries that succeeded at turning a profit at the BoP (microcredit), used contact-intensive business models that delivered customized solutions. The obvious downside was that high marginal costs and high prices inhibited growth. This was the order of things until the digital revolution changed everything.

In the last three decades, most traditional markets have been disrupted by the “platform revolution” (Choudary, 2015). Platform-based business models have enabled aggressive growth without the need to commit massive CAPEX in costly infrastructure and fueled by low marginal costs and cross-side network effects (van Alstyne, Parker & Choudary, 2016). Platforms have allowed entrepreneurs to shift their focus from value capture to value creation (Chesbrough & Rosenbloom, 2002) to deliver value to consumers on a massive scale at minimum prices –or free of charge (Russell & Cohn, 2012). The prospect of creating substantial value for those in need at affordable prices would constitute an intriguing proposition for any mission-driven organization. The focus on value creation predominant in platform-based business models fits nicely with social entrepreneurship, which also seeks to focus on value creation and merely “satisfice” on value capture (Reficco et al., 2018; Santos, 2012).

While this is relevant for theory, it also carries with it substantial practical implications. As Choudary persuasively argues, “The implications of platform scale are not restricted to specific industries. Much of the disruption that we see around us today may be accounted for by a universal shift from linear to networked business models” (2015: p.30). Yet, the field of social enterprise has barely taken notice of the implications of this transition. The emergence of platform-based impact enterprises opens new possibilities by breaking known barriers at the base of the pyramid.

One well-known advantage of digital platforms is lowering barriers to access and reach (George, Merrill & Schillebeeckx, 2021; Pouri & Hilty, 2018) by connecting users to services, products, or people aimed at improving their economic or social well-being. Boundary resources provided by platforms facilitate scaling up to participating entrepreneurs (Cutolo & Kenney, 2021; Hein et al., 2019). Digital platforms that comprise the emerging “sharing economy” (Cusumano, Gawer & Yoffie, 2019; Pouri & Hilty, 2018; Sutherland & Jarrahi, 2018) brought together previously unconnected individuals and organizations to access and exchange resources and capabilities (Acquier, Carbone & Massé, 2019; Elia, Margherita & Passiante, 2020). By harnessing the resources distributed among thousands of individuals through increased connectivity (Elia, Margherita & Passiante, 2020), actors can reuse resources and create value by intermediating transactions rather than producing themselves. The strong network effects created by these platforms (Acquier, Carbone & Massé, 2019) have been observed to scale up the relationships among previously unconnected actors to an unprecedented level (Martin, 2016). Digital platforms have been found to lower barriers to knowing (George, Merrill & Schillebeeckx, 2021); they generate positive impact widely disseminating valuable information on the various conditions, actors, and elements within a complex societal problem (George, Merrill & Schillebeeckx, 2021). Platforms can act as brokers that provide a virtual location for creating new linkages, from producers to suppliers and retailers to customers, as they join the same “ecosystem” to facilitate collective efforts towards increased societal impact (Ciulli, Kolk & Boe-Lillegraven, 2020). Finally, platforms make possible fast expansion across borders, as their growth is decoupled from the need to aggregate labor and capital (van Alstyne, Parker & Choudary, 2016). This reduces the costs and efforts of international expansion compared to traditional firms (Brouthers, Geisser & Rothlauf, 2016).

To date, the literature on hybrid organizations and social enterprises has taken little notice of this paradigmatic shift; there is scant research on this topic, with few exceptions (Layrisse, Reficco & Barrios, 2020; Reficco, Layrisse & Barrios, 2021). This is the gap we seek to start filling through this paper. By looking into the implications of the platform revolution of impact hybrid organizations, we heed Santos’ call, for whom “there is much to be gained by understanding what types of business models and strategies can be developed when the main driver of action is value creation, not value capture” (Santos, 2012: p.346).

Given the complexity of the factors that may affect the creation, operation, and scale of platforms in this setting, we focus on a qualitative case study. In the context of Sub-Saharan Africa, our research focuses on Hello Tractor: a technology-based, profitable, multinational company that aims to “disrupt the current practices of agriculture in Africa and improve the livelihoods of the continent’s farmers” (The Economist, n.d.). Since its foundation in 2014, the company has achieved robust growth. It is becoming the first true multinational focused exclusively on the BoP: it has reached more than half a million smallholder farmers in 17 countries in Africa, Asia, and Latin America within eight years (Hello Tractor).

Agricultural production per capita in Africa is about half the developing world’s average, with the potential for 2-3 times growth through targeted investments in improving productivity (Goedde, Ooko-Ombaka & Pais, 2019). This lag is largely due to low capital intensity and limited access to critical inputs. To address this challenge, Hello Tractor has leveraged the sharing economy concept of temporary access to under-utilized physical assets for mutual gain by providing a “Uber for farmers” solution (Foote, 2018). Hello Tractor provides farmers with access to a tractor for a fee, resulting in increased yield and income. Simultaneously, Hello Tractor generates opportunities for tractor owners, connecting them with this huge latent demand and increasing their investment returns. Additionally, the company offers value-added services, such as market intelligence on what crops to grow, when to cultivate them, and the projected value of their future harvests. Finally, every tractor is equipped with a low-cost IoT (Internet of Things) monitoring device to track operations and provide reliable data that enables farmers to apply for loans and business growth (Foote, 2018).

Hello Tractor has built a digital platform that can leverage economies of scale, fulfilling the early promise of BoP scholars based on volume, thin margins, and robust returns on capital. What has changed? How has this venture managed to overcome the barriers identified in extant literature? How do mission-driven platforms structure ecosystems and partnerships for scaling social impact? The case has the potential to bring light to meaningful lessons for other social impact entrepreneurs (both for and not for profit) interested in tackling the BoP market in emergent nations.

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