Cultural Innovation: Designing Offerings Around Ad Hoc Cultural Bridge Practices

15 Dec 2005|Added Value

This blog is a different take on an article I co-authored and published in 2003 in the California Management Review, called “Developing Productive Customer in Emerging Markets”. The theme here is one of identifying ad hoc cultural bridge practices that produce economic value and at the same time bridge a value that customers feel are in conflict. In my work with lower income markets, identifying practices that people invent in order to resolve their own tensions, or conflicts that they experience as in tension, is core to designing offerings. I will refer to the same examples covered in that article: The Grameen Bank and CEMEX’s Patrimonio Hoy.

Designing a new offering that will provide a qualitative difference in the customer’s life amounts to transforming those practices into a system around the core product. Such transformation involves thematizing the goal of these practices, intensifying their sanctioning mechanism, and institutionalizing them as part of a regular business offering. Thematizing means identifying the goal the business will set for these practices, the productive behavior it will enhance, and then organizing the practices to achieve that goal. Intensifying the sanctioning process means identifying what social mechanisms make people responsible and bringing them to greater prominence, even formalizing them into rules with duties and damages to be paid if they are broken. Institutionalizing means designing a structure for delivering the offer that primarily identifies the promises the business will make, the role the customer will play in regard to the business, and the market category of the business. In short, institutionalization means designing the channel. In this blog, I will start by discussing thematization. I will discuss the others in upcoming blogs.

When Muhummad Yunus launched the Grameen Bank, he saw a number of ad hoc lending practices (or bridge practices) in place to enable women to engage in handicraft businesses. Generally traders will lend small amounts of money to handicraft workers to purchase the supplies for their crafts. Sometimes the loans are at no interest, but most of the time traders follow the custom of dadan in which they lend a small amount of money for production supplies and negotiate at the same time a below-market purchase price for the products. This custom usually prevents the handicraft producer from ever getting ahead. Yunus also saw that within the constraints of the purdah, women had practices for giving each other support and felt shame if they let another woman down. Likewise, the CEMEX innovation team, when they launched Patriomonio Hoy for serving the lower income do-it-yourself home builder in Mexico, came across the practice of the tanda, in which ten low-income people would join together for ten weeks. Weekly, each tanda member would contribute 100 pesos to the pool, which one person would “win” each week according to a lot drawn in the first week. In that way, each could have the fortune of receiving 1000 pesos all at once. Each of these practices enhanced economic productivity and bridged a number of value conflicts. The usurious dedan gave women small amounts of money with which they tried to achieve some measure of autonomy—at least to avoid begging—through production of handicrafts. Yet the loan enabled women to feel secure in their piety because no interest was collected. The tanda worked in a similar way: It mixed the fate of the lottery, the celebrative tanda meetings, and the sense of potential shame at missing a payment, with an appreciation of organizing (in forming and joining a lottery), a plan-like commitment to pay, and joining others with a good attitude for getting ahead. Joining a tanda involved having a plan (to spend 100 pesos each week and to spend the 1000 pesos on something particular) and not having a plan, since most of the time the 1000 pesos got spent on the current emergency.

Like others who have value conflicts, low-income people develop bridge practices for navigating between the conflicting values. Again, like others, they seldom realize that the bridge practices they have are the seed of a new way to live, because the practices seldom have a focused purpose. For instance, people join tandas to build their homes. But they also join them to purchase appliances. They join them to help others out and to be with others. Most of the time they spend the money on “emergencies,” which are mostly communal celebrations of one sort or another that just happen. The cultural innovator has, therefore, to determine the particular achievable goal that will bring out the practice’s value-bridging function. Companies must articulate that goal in terms of a theme that sets the basis for the core promises of the new business to the customer. CEMEX chose building patrimony and Grameen chose credit as a right. The theme is not solely an advertising or communications ploy. Rather, it is the basis for designing the promises attached to the central offer.
Determining the theme is a matter of careful design. CEMEX sought to articulate for customers a sense of “getting ahead” that could fit with such a traditional festive community. Within the community, building a home was understood both as getting ahead and as building a patrimony, a family home that would be passed down. As such, it was also a statement of solidarity with the traditional community. Thus, building a patrimony captured concretely both getting ahead and remaining a member of the traditional festive community. Once this theme was identified, then simple research showed that members of the low-income community understood building patrimony as building at least a room. The tanda practice was then dedicated to achieving this goal. Instead of saving for ten weeks, people were required to save for 70 weeks. Instead of receiving money, a participant received the materials to build a room. The offering promised that people would build patrimony—one room today—in contrast to having a vague hope of a family home someday. CEMEX also promised high quality materials and technical advice as parts of the offering, because it wanted to be sure that the homes produced would serve as monuments of the value of the offering.

Yunus, and his Grameen Bank, thematized his offer as the right of credit for poor people. In calling his offer a credit offer, he eliminated the vagueness of the customs engaged in by traders and aligned it with modern business. Guided by the theme of credit, he redesigned the simple usurious practices to maintain simplicity and provide the normal benefits of credit. Thus, Grameen made loans for as little as would help a small business; the bank changed 20% per year, collecting every week starting one week after the loan was issued, and lent strictly for fifty weeks. By thematizing his offering as a right, with all the universal connotations, he called attention to the necessity of making it fit his borrowers’ concerns, among which was Islamic piety. Guided by the notion of a right, he drew on the purdah practices, with which the vast majority of his borrowers had experiences of rights. Thus, Grameen lent to groups of five borrowers, normally women, who were jointly responsible for proposing the loans, and who would lose the opportunity to borrow more if any one of them defaulted. Last, Yunus made the women members of the bank to avoid any violation of Islamic law regarding interest. This set up the basis for the central promise to the customer: giving credit without collateral to poor people (mostly women) who want to grow their productive capacity. It is also worth pointing out that while many design elements are based on particular practices, they can translate to other environments where there are similar practices. Yunus has managed to export his credit practices to groups of women in other parts of the world. He has even had success in such individualistic places as Chicago, where the poor women found the practice valuable as a way of reducing their isolation.

Understanding the “theme” of an offering goes beyond testing positioning statements. It involves understanding new experiences customers are experiencing. Low, cost quick pilots are the best way to observe these experiences. Observing the experiences entails listening to the new language people are using, particularly where they are struggling to make themselves clear. A cultural innovator will help customers articulate the new experience and check these with them.

prev next