Harvard Case - MIA: Profit at the Base of the Pyramid
"MIA: Profit at the Base of the Pyramid" Harvard business case study is written by Lynda M. Applegate, Jose Antonio Davila Castilla, Sarah Mehta, Aldo Sesia. It deals with the challenges in the field of Social Enterprise. The case study is 22 page(s) long and it was first published on : Jun 15, 2017
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At Fern Fort University, we recommend MIA (Micro-Insurance Agency) to pursue a hybrid organizational model that leverages its social mission with a sustainable business model. This approach will allow MIA to scale its impact, reach more people at the base of the pyramid (BoP), and achieve financial sustainability.
2. Background
MIA is a social enterprise operating in India, providing affordable micro-insurance products to low-income individuals. Founded by a group of passionate individuals, MIA aims to address the critical need for financial protection among the vulnerable population. The case study highlights MIA's initial success in establishing a strong social impact, but also points to challenges in achieving financial sustainability and scaling its operations.
The main protagonists of the case study are:
- Rajeev Sharma: The founder and CEO of MIA, driven by a strong social mission to improve the lives of the poor.
- The MIA team: A dedicated group of individuals committed to providing affordable insurance solutions.
- The target beneficiaries: Low-income individuals in rural India facing significant financial risks.
3. Analysis of the Case Study
Strategic Framework:
This case study can be analyzed through the lens of the Social Impact Framework, which considers the following key elements:
- Mission: MIA's mission is to provide affordable micro-insurance to low-income individuals, promoting financial inclusion and reducing poverty.
- Market: The target market is the BoP population in India, a vast and underserved segment with significant unmet needs.
- Model: MIA's initial model relied heavily on grants and donations, which posed challenges for long-term sustainability.
- Measurement: The case study highlights MIA's focus on social impact measurement, but it needs to incorporate financial performance metrics for a holistic view.
- Management: MIA's leadership team is driven by a social mission, but they need to develop stronger business acumen and strategic planning skills.
Key Issues:
- Financial Sustainability: MIA's reliance on grants and donations is unsustainable in the long run.
- Scaling Operations: Expanding reach to a larger BoP population requires a more efficient and cost-effective business model.
- Market Segmentation: Identifying specific customer segments within the BoP market can help tailor products and marketing strategies.
- Competition: MIA needs to understand the competitive landscape and differentiate itself from existing players.
- Governance and Structure: MIA needs to establish a robust governance structure and organizational design to support growth.
4. Recommendations
1. Hybrid Organizational Model:
MIA should adopt a hybrid organizational model that combines social mission with business viability. This model can be structured as a Benefit Corporation or a B Corporation, which allows for a dual focus on social impact and financial performance.
2. Sustainable Business Model:
- Product Diversification: Develop a range of micro-insurance products tailored to specific needs within the BoP market.
- Pricing Optimization: Implement a tiered pricing strategy based on customer risk profiles and affordability.
- Distribution Channels: Explore innovative distribution channels like mobile technology and partnerships with microfinance institutions.
- Cost Reduction: Streamline operations and leverage technology to reduce administrative costs.
- Impact Investing: Seek out impact investors who prioritize social impact alongside financial returns.
3. Strategic Partnerships:
- Government Agencies: Collaborate with government agencies to leverage their reach and resources.
- NGOs and Microfinance Institutions: Partner with organizations already operating in the BoP market to access their networks and expertise.
- Corporate Social Responsibility (CSR) Initiatives: Engage with corporations interested in investing in social impact projects.
4. Enhanced Data and Analytics:
- Social Impact Measurement: Develop robust social impact measurement frameworks to track and demonstrate the impact of MIA's activities.
- Market Research: Conduct regular market research to understand customer needs and preferences.
- Financial Performance Monitoring: Implement financial performance dashboards to track revenue, costs, and profitability.
5. Leadership Development:
- Business Skills Training: Provide leadership training programs to develop business acumen and strategic planning skills.
- Diversity and Inclusion: Foster a diverse and inclusive leadership team that reflects the BoP market.
5. Basis of Recommendations
These recommendations are based on a thorough analysis of MIA's current situation, considering the following factors:
- Core Competencies and Mission: The recommendations align with MIA's core competencies in providing micro-insurance and its mission to improve the lives of the poor.
- External Customers and Internal Clients: The recommendations address the needs of both external customers (BoP individuals) and internal clients (MIA staff).
- Competitors: The recommendations consider the competitive landscape and emphasize differentiation through product innovation and strategic partnerships.
- Attractiveness: The recommendations aim to enhance financial sustainability and scalability, increasing the attractiveness of MIA to investors and partners.
- Assumptions: The recommendations are based on the assumption that the BoP market in India has significant potential for micro-insurance products and that MIA can successfully adapt its model to meet this demand.
6. Conclusion
By adopting a hybrid organizational model, implementing a sustainable business model, forging strategic partnerships, and strengthening its data and analytics capabilities, MIA can achieve financial sustainability, scale its impact, and create a lasting positive impact on the lives of millions of people at the base of the pyramid.
7. Discussion
Alternatives:
- Continuing with the current model: This would lead to continued reliance on grants and donations, limiting MIA's growth potential.
- Becoming a purely for-profit company: This could compromise MIA's social mission and alienate potential investors who prioritize social impact.
Risks:
- Market volatility: The BoP market is susceptible to economic fluctuations, which could impact demand for micro-insurance products.
- Regulatory changes: Government policies and regulations could impact the micro-insurance industry.
- Competition: Existing players in the market could pose a significant challenge to MIA's growth.
Key Assumptions:
- Demand for micro-insurance: The assumption is that there is significant demand for micro-insurance products among the BoP population.
- Financial sustainability: The assumption is that MIA can achieve financial sustainability through the recommended strategies.
- Partnerships: The assumption is that MIA can successfully forge strategic partnerships with government agencies, NGOs, and corporations.
8. Next Steps:
- Develop a detailed business plan: Outline the specific steps for implementing the recommended strategies.
- Secure funding: Seek out impact investors and other funding sources to support the transition to a hybrid model.
- Pilot test new products and services: Conduct pilot programs to validate the effectiveness of new product offerings and distribution channels.
- Build partnerships: Initiate discussions with potential partners to explore collaboration opportunities.
- Monitor performance: Continuously track and evaluate the progress of the recommendations, making adjustments as needed.
Key Milestones:
- Year 1: Develop a detailed business plan, secure initial funding, and pilot test new products.
- Year 2: Launch new products and services, strengthen partnerships, and expand operations.
- Year 3: Achieve financial sustainability, demonstrate significant social impact, and prepare for potential scaling.
By implementing these recommendations, MIA can transform itself from a social enterprise with a strong social mission to a sustainable and scalable organization that creates a positive impact on the lives of millions at the base of the pyramid.
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Case Description
In January 2016, Guillermo Jaime had just returned home to Mexico City after attending a Harvard Business School executive education program. Jaime was the founder and CEO of Mejoramiento Integral Asistido (MIA), a company providing affordable housing to low-income Mexicans living at the base of the pyramid (BOP), defined as those living on less than $10 per day. Since its launch in 2009, MIA had built nearly 25,000 homes-which provided safe shelter to more than 100,000 Mexicans-while generating an earnings before interest, taxes, depreciation, and amortization (EBITDA) margin of over 8%. At the executive education program, Jaime had learned that entrepreneurs could build on their unique attributes and capabilities to expand and grow their businesses. Should he continue to expand the services MIA offered to BOP customers? Could he leverage what made MIA unique-offering affordable homes for its BOP customers in Mexico-to fulfill other critical needs at the BOP for water, clean energy, and health care services? Jaime was an expert in housing, but could he translate that expertise to such diverse sectors? If so, how should he begin?
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