William Warshauer on Fighting Poverty Through the Power of Business
TechnoServe President and CEO William Warshauer joins Denver Frederick, host of The Business of Giving, to discuss how TechnoServe’s business approach creates long-term impact; the keys to reducing poverty in the future; and what he finds “nuts” about the development field.
Denver: TechnoServe is a leader in harnessing the power of the private sector to help people lift themselves out of poverty. Impact Matters, an organization that rates nonprofits based upon their impact, has rated TechnoServe the No.1 nonprofit in cost-effectiveness when it comes to reducing poverty. And here to tell us about how they do it, it’s a pleasure to have the President and CEO of TechnoServe, Will Warshauer.
Many listeners may not be familiar with TechnoServe. How and when did the organization get started, and what’s your mission?
Will: You’re right. We’re one of the best-kept secrets in international development. We were founded 52 years ago to provide business solutions to poverty. Our founder, Ed Bullard, had that insight, and that was a radical notion 50 years ago. People didn’t talk about profits and development in the same sentence. It’s become the middle of the mainstream now, but we were one of the first to work in that area.
We have grown. We’re working in 29 countries, reaching millions of people every year, working with small farmers because most of the world’s poor earn their living through agriculture, and also working with the entrepreneurs and helping people get jobs in the various ways that people earn more and become prosperous.
Denver: There’s a tendency, Will, to look at governments and foreign aid as the key drivers to lifting people out of poverty. But, increasingly, business is becoming more important. In fact, would it be fair to say that it has become the key driver?
Will: Absolutely. If you look at the statistics, you will see, a long time ago, in most emerging markets, foreign aid became eclipsed by direct foreign investment, and about two years ago, that even became true for the continent of Africa where there’s more investment dollars flowing in than aid dollars.
We work with some of the great corporations in the world – Coca-Cola, Unilever, Nespresso and so on – but we don’t ask them to be philanthropic. We take them a hard business case.”
So, the smart people that are thinking about aid and development are thinking about how they can leverage that private sector investment, dynamism, and energy to drive development.
Denver: That’s really interesting.
Well, let’s talk about that work. There are three major elements of how you go about doing it. The first is empowering the small-scale farmers and entrepreneurs with the skills and knowledge they’re going to need. Now, how do you provide that?
Will: Whether it’s a small farmer or a small business person, we are really trying to help them in three ways. I should preface that by saying that although we work with some of the poorest people in the world, we don’t give anything away for free. We’re even against subsidies. That sounds a little strange, perhaps, but the reason for that is if we can help people get into commercial relationships that really work on straight commercial terms, that’s what will last over time, and that’s what we’ll scale up. So, that is our approach.
A lot of the skills building involves business skills, whether it’s a small farmer or a small business person, gaining those basic skills so that he or she can understand and run their business effectively. And then various technical skills, ranging from everything to growing coffee to making soap or other products that they may be manufacturing.
Denver: A second important aspect of this work is to strengthen market connections. Now, what’s often missing, and what are you able to provide?
Will: This is an area where I think the world is changing fast in a way that really advantages the small farmer and the small business person. We think about this in terms of a concept called shared value…the insight that there are a growing set of opportunities where the business opportunity actually lines up with the social opportunity. So, we work with some of the great corporations in the world – Coca-Cola, Unilever, Nespresso and so on – but we don’t ask them to be philanthropic. We take them a hard business case and say, “This is great for your bottom line. And by the way, in executing this, you’re going to take thousands or tens of thousands of families out of poverty in a way that they can stay out.” And so that is our approach to them.
Denver: And the third and final leg of the stool is to improve the business environment for small-scale producers. Tell us about that.
Will: Well, it’s really looking at the whole market system. It doesn’t make sense to help a farmer learn how to grow more of a certain crop if there is no good way to get it to market, or no good way to connect them with the next border. So, it’s really looking at the whole business environment.
Denver: Hey, Will, in what ways is TechnoServe different from other international development nonprofit organizations in terms of your composition of staff and the way you go about your business?
Will: What is really different about TechnoServe is our staff. Most of our staff come to us from the private sector. Many of them come from top tier management consulting firms like McKinsey and Bain, and so they bring a world-class ability for analysis. What struck me when I joined TechnoServe over five years ago now was the depth of analysis upfront. That drives much, much better project selection and project design because it’s based on a deep understanding of these markets and market dynamics, and local culture.
Denver: Well, that leads me into, and what I mentioned in the opening, TechnoServe focuses not just on impact, but cost-effective impact. On average, what is your ROI for every dollar spent?
Will: On average, our ROI is over three. I want to be clear about this because this is looking at the cost of a project. This includes every dime of cost, every administrative dime and everything else, so all the costs of running a project, and then looking at the benefits, which are the extra income earned by our clients.
Whether you’re the Gates Foundation, or whether you’re the private individual sending in a $20 check, you ought to be targeting that money for interventions which are proven to have long-term, lasting impact. “
So if we’re looking at a farmer, what we do is we look at a farmer the next village over who we did not work with, and that allows us to control for things like weather or global crop price changes. So we’re doing a really thorough job to try to isolate the impact that our project had and get rid of any exogenous factors.
There’s a big range in there. We just recently visited a project that had an ROI of 20-to-1. We’re thrilled about that, obviously.
Denver: And as you mentioned earlier about impact, since there are no handouts and there are no subsidies, you do have an impact after you leave because you’ve built a sustainable model.
Will: Well, this is the most important thing, and a bit of a hobby horse of mine, if you’ll allow me. Everyone who cares about international development, everybody who works in the field wants sustainable development. We want to teach people to fish. We want to have impact that lasts. You and your listeners may be shocked to know that that is almost never measured.
And so, we are, with the help of some forward-looking donors, we are increasingly measuring that. We are hiring external research agencies who are going back to find clients that we stopped working with five years previously. We have great data and evidence of where they were five years ago, the benefits that they got, and the question really is: What’s happened in the intervening five years? Did those persist or not?
[Take] coffee farmers in East Africa…I was sort of holding my breath. I pledge to make all that data public. We do make all our impact data public, our research data…Overwhelmingly, those farmers are still doing the practices that we taught them, still are realizing the yield gains and the price gains that they had five years ago. We’ve got research in the field, going into the field soon to look at entrepreneurship programs in Latin America through the same lens.
But there is not enough of this done. It’s nuts. It’s a huge gap. If you as a private individual want to give a dollar to a charity, if you’re like me, you want to give it somewhere where it’s going to provide impact, not just while that project’s running, but for years afterwards. And we don’t have the data in this field yet. And so, I am a real advocate for more and more of this kind of research. So that whether you’re the Gates Foundation, or whether you’re the private individual sending in a $20 check, you ought to be targeting that money for interventions which are proven to have long-term, lasting impact.
Denver: You’ve received support from the Bill and Melinda Gates Foundation, among others, to harness emerging technologies for the benefit of the rural poor. Which ones are showing the most promise?
Will: Look, it won’t be news to your listeners that technology is changing things so fast…Everybody’s got a mobile phone, and the ability to do a more virtual [farmer] aggregation and tie farmers together through technology is dramatically changing things, particularly when that’s linked with mobile money. Farmers can now be paid for their crops. They used to have to get on a bus, ride for two days, get paid in cash, and have a very dangerous journey home with a backpack full of cash. They now can be paid in real time over their mobile phones. So that’s been dramatic.
You’re never going to develop if half of your population is not treated properly and not given the same opportunities as men.”
We’re actively exploring a lot of technologies around distance learning. A lot of the training that we do of entrepreneurs and small farmers is done in person. If we can move some of that onto the mobile phone, we can be more cost-efficient, reach more people.
Denver: Yes. You’ve opened up TechnoServe Labs in Silicon Valley, right?
Will: We do. We have a small lab in Silicon Valley now run by a lifelong technologist. We’re having fantastic conversations with a range of technology companies. There’s a lot of interesting work going on around remote sensing, which is another area we’re quite engaged in, which should allow us to focus our field forces even better than they are today.
Denver: Let me close with this, Will. The world has made dramatic progress in recent decades lifting people out of poverty, which is now below 10%, as defined by the United Nations. What do we need to do to be vigilant to assure that it doesn’t start moving back up again? What needs to be done now that will reduce it even further?
Will: You’re right, Denver, and a lot of people are not aware of the dramatic progress that’s happened over the last couple of decades where we’ve seen more people come out of poverty than at any other time in the history of humankind. So, on the one hand, it’s enormously encouraging. On the other hand, you have more than 750 million people still living in what’s defined as “abject poverty”; 3 billion below the traditional poverty lines. So there is so much left to do.
I think we are making great strides with women. You’re never going to develop if half of your population is not treated properly and not given the same opportunities as men. So that is a lever that we need to push on to drive progress. [Climate change], that’s obviously a massive threat to all of this. There’s a healthy debate out there. Some people really want to see government as being in the lead on this. Unfortunately, the track record of a lot of developing country governments is not very good.
We hope that they can create an enabling environment largely, and we believe strongly in the power of business to do this, particularly where you find those areas for shared value where good business can result in good development as well. But it’s going to take a continued focus, a continued investment, continued creativity. I think technology will continue to unlock new opportunities we haven’t thought of. We’re beginning to use big data in international development problems in a way that we’ve never had the opportunity to do before. So lots of challenges and opportunities in front of us.