March 26, 2001

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Global Opportunities

People around the world are starting to realize that the power of technology can help them escape poverty

By Mary E. Thyfault

More on digital divide strategies:

sidebar: Developing Nations Schooled In Quality, Reliability, Speed Divided We Fall E-Learning Crossfire (2/26/01) Advice To The President-Elect (1/8/01)

opper is precious to villagers in the most rural parts of Africa. Some people climb telephone poles, cut down the wire, then sell it as raw material for jewelry or household goods. These people who've never made a phone call, much less surfed the Web, don't appreciate the other value of copper: to connect to the outside world.

According to a recent U.N. report, 88% of all Internet users live in industrialized countries, which account for only 15% of the world's population. That means 98% of Asians, 98% of Latin Americans, and 99.5% of Africans aren't connected to the Net, the United Nations says.

But in pockets of the developing world, those deepest in poverty are starting to discover that they can use technology to pull themselves up. In tiny rural villages and overcrowded urban areas, people are using the Web to find day jobs, sell everything from crafts to cows, communicate, learn skills, and improve their lives. "The entrepreneurial spirit in developing nations is stronger than any other area of the world," says Roberto Milk, co-founder and president of Novica.com, a Web site that sells native crafts from 23 countries. "These people lead a tough life. If given the tools, incredible things will happen. They will do almost anything to succeed."

Take 30-year-old artist Thomas Kazvizva, who used to risk arrest because he didn't have a license to sell his crafts on the streets of Harare, the capital of Zimbabwe. He barely generated enough income for food and school.

Today, Kazvizva has found success selling his crafts on Novica. He now spends his days in his own shop, where he teaches his five employees how to sculpt bicycles, helicopters, saxophones, and cars by twisting scraps of copper wire. "Because of the Internet, I'm doing well," Kazvizva says. "People say, 'Thomas, you're so clever.' But it is the Internet system that is so clever."

The Net opens up opportunities in otherwise disadvantaged areas. "With the Internet we can empower people," says Dick Sabot, president of eZiba .com Inc., a for-profit site similar to Novica that sells crafts made by natives in developing countries. Lyle Hurst, director of Hewlett-Packard's World e-Inclusion program, agrees. "We want to give the 4 billion people who aren't being targeted today by the Internet access to social and economic opportunities of the digital economy."

That's the goal. Governments, organizations such as the World Bank and the United Nations, nonprofits, high-tech powerhouses, and small entrepreneurs are working to make technology bridge the global digital and economic divides. Geekcorps.org, a nonprofit organization committed to expanding the Internet internationally, is working with more than a dozen companies to send IT pros into the developing world. Two groups of volunteers from Geekcorps have already gone to Ghana.

Others are acting on their own. In 1998, Lucent Technologies Inc. employee Ron Sackman and eBay Inc. employee Karin Stahl brought computers and the Internet--initially via a cell phone with a 9.6-Kbps connection--to Colego Bethel, a small school in San Pedro La Laguna, 90 miles outside of Guatemala City. This summer, with the help of the eBay Foundation, where Stahl is a manager for corporate planning, they plan to set up a community telecenter that will provide the villagers with education and training via satellite access to the Internet. Initial revenue for the telecenter will most likely come from tourists checking E-mail. Eventually, Stahl hopes the villagers can sell their crafts to the developed world, possibly even on eBay's site. "One of the next growth stages for eBay is to focus on some of these areas," she says.

Though individuals can focus on one village, it will take the political and economic clout of public and private powerhouses to make a real difference. In July, the leaders of seven industrialized nations appointed a Digital Op-portunity Task Force--known as Dot Force--to make rec-ommendations on bridging the digital divide. Japan alone has pledged $15 billion over five years to bring technology to unwired developing countries.

High-tech companies are active as well. Cable & Wireless plc teaches about 30,000 students a year the ins and outs of deregulating a telecom market. Last year, Microsoft contributed more than $21 million ($8 million in cash and about $13 million in software) to fund more than 95 community-based projects that offer education, employment training, and disaster relief to developing countries. Cisco Systems has committed to extending its educational Cisco Networking Academy program to 24 of the world's least-developed countries, as ranked by the United Nations.

"Our best contribution lies in making technology tools more accessible and useful," says Brad Smith, deputy general council for Microsoft.

Perhaps most ambitious of all, HP in October revealed its World e-Inclusion strategy, which involves dedicating $1 billion in products and services to assist at least 1,000 villages in the first year alone. Its goal: to use technology to develop measurable social and economic benefits. "We're focusing not first on PCs and servers, but on how information can contribute to their needs," Hurst says. "If we never sell a single PC, we can still be very successful." This year, HP wants to recruit at least 1 million e-Inclusion partners, from global alliances to grassroots groups.

One such partner is PeopLink.org, a nonprofit group that provides digital cameras, notebook computers, and the training necessary for rural villages to sell their crafts, clothing, and furniture on the Web. Earlier this month, Daniel Salcedo, founder and CEO of PeopLink, took a small plane from Panama City to the San Blas Islands, just off the coast of Panama. Working with Peace Corps volunteers, he trained Napas Indians on how to use the new CatGen "catalog generator" E-commerce software. Now the Napas can more easily sell their Molas--colorful native clothing and decorations--on their own Web site. "We're only in the middle to get the ball rolling," Salcedo says.

The work isn't only philanthropic; it can be profitable. The Naushad Trading Co., which sells wood carvings, pottery, and baskets, saw its revenue soar from $10,000 to more than $2 million in its first two years online. At Novica, where Kazvizva sells his wire-art creations, half the merchants are profitable and the rest are expected to turn a profit within three years of their opening.

CEO Sabot says eZiba will "break even before Amazon .com, and eventually have a profit margin three to four times that of Amazon." Unlike dot-coms that have spent millions to capture mindshare, eZiba has built exclusive relationships with suppliers that give it access to goods not widely available, Sabot says. "We have a proprietary product database," he says. "We're not in a land-grab game."

Still, turning an E-commerce profit in the developing world isn't easy. Not only can many of the world's poor not read English, the dominant language used in E-commerce, many can't read at all. Most can't get credit cards, and the delivery logistics in the Third World are often unreliable.

In addition, there's suspicion. "There's a lot of skepticism to Western companies showing up," says HP's Hurst. With that in mind, "everything we do will be coinvented with the local people who will be using these applica-tions." For some early e-Inclusion projects, HP is developing icon-based touch-screen devices to make the Internet easier to use.

Praja Inc., a San Diego company run by business and development scholar C.K. Prahalad, is developing new Web-navigation technology. "We need to move from a search paradigm to a navigation paradigm. With a search paradigm, you know what to ask for. A navigation paradigm assumes that the knowledge is all there and people can just look for things that interest them," says Prahalad, who's also a professor at the University of Michigan School of Business.

Navigating the Web could mean big business in the de-veloping world, especially in China. Millions of Chinese have Net access, even though buying a PC can cost a half-year's income. The government is backing China Netcom, which is building a 5,300-mile fiber-optic network linking 50 million people in 17 of China's most prosperous cities.

It's already big business for Madeforchina.com, a 3-year-old IT research and interactive marketing firm in Beijing that provides consumer information to the likes of Ford, IBM, Motorola, Nokia, and United Airlines. Madeforchina already has developed a marketing database of more than 2 million customers; 30,000 to 40,000 people each day opt to be included in the company's database. What's the pull? "People are jumping on the Net because they're starved for information," says Michah Truman, president of Madeforchina. "It's not like the [United] States, where people are saturated with information."

Much of the technology development work in Third World countries involves so-called telecenters that offer Web access to communicate and find information, training, and jobs. Typically, the telecenters house community computers that are shared by hundreds or even thousands of people who pay by the E-mail or the minute.

In Dakar, Senegal, a sleep-deprived Lisa Goldman is developing Joko Club cybercafes with African-based Adama Sow and the support of HP. Goldman is director and Sow is director general of Joko Inc.; the two plan to open five cafes in five countries this year with E-mail, telephone, and other services, and plan to add hundreds more during the next couple of years. "There's unlimited potential," Goldman says. The goal is to demonstrate a sustainable business model in about nine months.

Telecenters and cybercafes are catching on. Many are based on a model started in remote areas throughout Costa Rica, where villagers step into facilities made of large shipping containers--which are less expensive than constructing new buildings--outfitted with computers. Developed by the Costa Rican Foundation for Sustainable Living and the Massachusetts Institute of Technology media lab, the Little Intelligent Communities, known as Lincos, provide access via satellite to the Web, E-mail, videoconferencing, IT training, and telemedicine. Seven Lincos operate in Costa Rica; the goal is to install 35 throughout Latin America and, ultimately, some in Africa and Asia.

The Lincos model, complete with the shipping containers, is also being rolled out by Pride Africa, a Nairobi, Kenya, organization that has established 58 primitive bank branches in five African countries for 100,000 of the region's poorest people. Most loans are for only about $150, but the payback rate is 98%.

Lucy Wamboi Kirita was one of the first to use a Pride Africa banking center, called SunLink, when she took out a loan to stock her small grocery shack. Soon, with the help of a satellite hookup, Kirita can go to the SunLink branch to tap into the Internet and discover the price of goods in neighboring communities. She'll also be able to work online with other grocers to purchase goods at volume prices.

In India, milk cooperatives use E-mail to do business. Dairy farmers go online at the co-ops to check prices in neighboring towns, then auction their milk. Others, such as Sushila Jaganath Kuth of Baherwadi Village, Maharashtra, in India, will go to a nearby cooperative to weigh milk, and then send the weight via E-mail to a larger cooperative. "They don't know it's called E-commerce," says Prahalad, a native of India. "That's just what they do."

Of course, giving people in developing nations ubiquitous Internet access requires infrastructure. In India, just 25 million people out of a population of 1 billion have telephones, and only 2 million have Internet connections. "Imagine a villager who hasn't had a phone getting both a phone and Internet access," says Mike Haidar, general manager of the software and systems technology division of Analog Devices Inc.

Midas Communication Technologies PVT Ltd. and Analog Devices have developed a low-cost fixed wireless network that can be deployed to villages within 35 kilometers of a phone line. In India, $700 will buy a village a complete kiosk, a computer telephone, a wireless connection, and power backup. Despite the money it will cost to build the infrastructure, the founders argue that one kiosk and network connection--which can support up to 1,000 subscribers--will pay for itself with only 100 subscribers who pay about 5 cents per E-mail.

The technology is also being sold in other countries, including Argentina, Brazil, Columbia, Fiji, and Iran. Fixed wireless is also appearing in the African nations of Ghana, Mozambique, and Uganda, says Mike Jensen, a partner with the African consulting firm Tam Tam Solutions.

Will all of this momentum close the digital divide? Yes and no. Vinton Cerf, senior VP for Internet architecture and technology for WorldCom and one of the creators of the Internet, says that by 2010, half the people in the world will have access to the Internet. That's up from just 2% today.

But who will be left behind?

"The world is moving at a number of different speeds," says Tom Phillips, group director of public policy for Cable & Wireless. In Africa and other places, some of the biggest blocks to bridging the global digital divide are politics and "whether the governments see networks as a threat to their sovereignty," Phillips says.

Prahalad has a challenge for the business world: Turn the 4.5 billion poor people at the bottom of the economic pyramid into customers. Not charity cases, but real live customers who generate healthy profit margins.

Prahalad has been right before. In a 1990 Harvard Business Review article that advised businesses to stick to their knitting and focus on what they know, Prahalad coined the phrase "core competencies." The article is still the Business Review's most requested reprint.

Mining for profits in poverty-stricken markets requires a new way of thinking, Prahalad says. "Companies assume their own cost structure is a given, that the poor are not a market, and that they won't be able to access the Internet."

Some large companies have already had success challenging these assumptions. Back in July 1996, when former Citibank chairman John Reed was boasting of the company's 70 million card-carrying customers, Prahalad asked the chairman to think about the larger customer base of the very poor. "I asked him, 'Why not 1 billion customers?'" he recalls. Reed liked the idea and six months later, Citibank launched Suvidha in India, an ATM-only service for people who open accounts with just $25. In the first year--four years ahead of schedule--Citibank broke even.

Prahalad has plenty of similar stories.

Photo of Prahalad by Dan Brinzac

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