GSS 2014
I. INTRODUCTION
The inaugural Global Solutions Summit (GSS), which convened in Washington, DC on April 9-10, 2014, was based on the premise that with rapid population growth, rising incomes, and increasing rates of urbanization in emerging markets, in the coming decades billions more people will have the income needed to afford such basic necessities as affordable, renewable electricity, adequate nutrition, clean water, clean air, and essential health care as well as other middle class amenities and life styles. Meeting these demands is both a moral imperative and an unparalleled business opportunity that can generate high returns for investors in both developed and developing countries and serve as a new, powerful engine of global growth.
The Summit was also premised on the belief that business-as-usual methods may not up to the task of meeting these development challenges and exploiting these business opportunities. Capitalizing on these burgeoning opportunities will require new private financing mechanisms, new business models for deploying proven business ideas from one part of the world to other communities, regions, and continents, and new approaches to designing goods and services tailored to the tastes, needs, and customs of these new consumers. The challenge, in other words, is nothing less than transforming the way that pension funds, institutional investors, sovereign wealth funds, venture capitalists, individual investors pooling their resources via crowd funding, members of the Diaspora, social and for-profit entrepreneurs in developed and emerging markets, inventors with game changing, disruptive technology, foundations, NGOs, development institutions, and government officials meet these daunting challenges and exploit these dazzling opportunities.
Fortunately, there is no shortage of promising initiatives to tackle such challenges as providing off grid renewable energy and clean drinking water, low-cost, high-quality health care, and food security. The world is awash in proven, cost effective technologies and new solutions are coming on line at an accelerating pace from such diverse sources as foundation and NGO financed prize challenges, community based innovators and tinkerers, R&D labs, the US Department of Defense, and many others. At the same time, many smaller financiers are cobbling together a new financial architecture for financing these emerging opportunities and NGOs, foundations, and entrepreneurs are developing new business models and distribution channels for deploying technology and delivering essential services to diverse groups of consumers at the bottom as well as the middle of the emerging market pyramid. All around, the pace of change is accelerating.
But two critical challenges remain: first, deploying these solutions at scale in hundreds, if not thousands, of rural villages so that they can have a truly transformative impact on global development and second, breaking down artificial silos so that formally independent financial, technology, and business model initiatives can be knit together into a coherent system. This cross fertilization is especially important because focusing on one single dimension of the problem – financial engineering, for example -- in isolation from all the other dimensions will not generate the desired outcomes. What is required to ensure that the whole will indeed be greater than the sum of the parts is an integrated systems approach which synthesizes all of these dimensions into a new model for development and doing business in emerging markets.
II. THEMES
With these challenges in mind, the inaugural GSS focused on trying to understand the relationship between three broad themes:
A. Mega-Trends
We are on the verge of a new era in which the rapid-fire emergence of breakthrough, disruptive technologies, the rise of megacities and peri-urban areas, the youth bulge in emerging markets, and ageing populations in many developed countries promise to usher in either a new era of abundance or dystopian chaos, depending on how we respond. These megatrends will exert a strong steering influence on the evolution of the global economy over the next 20 to 30 years. They will shape the contours of the broader global economy, defining and creating new opportunities, shaping challenges, and posing threats to stability, the status quo, and business-as-usual complacency.
Three mega-trends are especially pertinent:
1. The rapid introduction of breakthrough, disruptive technologies. Advanced manufacturing, 3D printing, crowd sourcing innovative designs and financial resources, and new forms of organizational and managerial innovation enabled by low cost transportation and communication hold the potential to disrupt existing business relationships, reshape the manufacturing landscape, change location decisions, alter the globalization terrain, and create new innovation opportunities for entrepreneurs experimenting with new business models. To remain on the cutting edge, cities, regions and countries will need to adapt to this new and rapidly evolving reality since old economic models and behavior patterns may no longer be as effective as they once were.
2. The Rise of Megacities and the Growth of Urbanization. Urban areas in general and megacities of more than 10 million people in particular are expected to grow especially rapidly in the coming decades, doubling in population from 3 billion to 6 billion and housing 70% of the world’s population by 2050. Consider the following:
If they are to remain viable, cities (and the peri-urban areas around these cities) will have to find new ways to deliver clean drinking water and sanitation, off grid sustainable energy, transportation, governance and citizen interaction, and low cost health care delivery, among other essential services. Cities will inevitably become laboratories for experimentation and pilots for implementation and scaling. Older, established urban areas will need to think in terms of retrofitting while new urban areas, especially in emerging markets, will have the opportunity to leapfrog, bypassing older technological solutions and moving straight to the cutting edge.
All this portends new opportunities for leapfrogging and disruptive innovation: smart buildings, smart cities, smart infrastructure, and new service delivery models for household or neighborhood based distributed drinking water, electricity, and sanitation will generate new business opportunities and give rise to demands for new financing models. Scaling up the deployment of scaled down distributed solutions will become the driving force in urban development over the coming decades. New innovation ecosystems will be created by those dynamic entrepreneurs and policy makers with the imagination, agility, and audacity to seize these opportunities. With today’s technological advances, we no longer have to build cities on the model of industrial revolution where vital services were delivered by large scale centralized infrastructure – power plants, water treatment systems, telephone systems in which everyone’s phone was linked to everyone else’s by a spaghetti network of wires and telephone poles, etc. We can use emerging distributed technology solutions to leapfrog to new models of urban development and service delivery.
3. Resource Shortages, Youth Bulge/Demographic Dividend. The first two mega-trends will unfold within a context of youth bulge in many emerging markets, where the average age is projected to remain in the late-teens or mid-20s for the next several decades. As a result, the work force, purchasing power, and supply of potential entrepreneurs will grow rapidly in emerging market, as will the demand for good jobs and appropriately designed goods and services. Meanwhile, OECD populations are expected to get older and to shrink unless they are bolstered by a rapid influx of immigrants. These population trends will be unfolding within a context of resource shortages – especially in the realm of food, energy, clean air, medical services, and water. Meeting the demand from these new markets for appropriately designed goods and services while remaining cognizant of the resource shortage constraints will open new vistas for innovation and new arenas for entrepreneurship.
B. Developing a New Financing Architecture
Two simultaneous, complementary financial trends are influencing the way commercially viable projects in emerging markets will attract private finance in the years ahead.
The first, drawing on a series of meetings convened by HRH Prince Charles beginning in 2006, starts with the observation that trillions of dollars of capital are lodged in pension and sovereign wealth funds (including sovereign wealth funds in such new petro-rich countries as Gabon, Ghana, Angola, and Tanzania and mineral rich countries such as Botswana) as well as in other institutional investors. Unfortunately, few conduits exist for getting the money from these funds to where it is needed to finance commercially viable enterprises and projects.
Developing new financial conduits to deploy this capital is primarily a financial engineering task – subdividing the large investments that pension and sovereign wealth funds want to make into smaller investments that can be absorbed by local project and businesses and finding local agents and organizations who have the knowledge of the national and local political, legal and commercial conditions required to handle due diligence, oversee the management of funds, and supervise local investments. New financial tools and instruments, representing several billion dollars of private capital available to finance commercially viable projects and companies, have already been mobilized and the pace of mobilization is accelerating rapidly.
If the first revolution is about disaggregating large chunks of capital lodged in institutional investors, the second revolution is about aggregating the small amounts of capital held by individual investors and lodged in the crowd, in the Diaspora and in personal savings and retirement accounts. This is the so-called crowd funding revolution which is spreading rapidly to emerging markets.
Fortunately, these two revolutions are not in opposition to each other. They are complementary and with foresight and planning, can even be mutually sustaining.
C. Business Models for Technology Transfer and Deployment
Entrepreneurs working in emerging markets, often with financial support from USAID, the World Bank, and various foundations, have developed innovative, financially viable business models for delivering such essential services as off grid renewable energy, clean drinking water, food security, and low cost health care delivery systems. However, many of these entrepreneurs and their financial backers lack a mechanism to scale these successful local businesses and deploy their pilots at scale in other regions, countries, and continents. Similarly, many SME’s in the US, Europe and elsewhere, including many firms backed by Silicon Valley venture capital funds, have innovative, proven technologies which could potentially find enthusiastic customers in emerging markets. Yet many of these VC-backed firms are missing out on the opportunity to generate new sales in emerging markets because they too lack a mechanism to scale their businesses and deploy their technologies in new regions, countries and continents.
Although the starting points of a USAID-backed entrepreneur working in a rural village in Haiti or Ghana and a VC-backed entrepreneur commercializing a technology in Silicon Valley may be different, the challenges they face are more similar than each of them or their financial backers may recognize. One common challenge is devising business models which can help to deploy these technologies from where they were invented and deployed initially -- Silicon Valley, India, Brazil, Europe, etc. -- to new and unfamiliar places where they are needed and would find ready markets. A second common challenge relates to the fact that both sets of entrepreneurs frequently lack the financial, managerial, and organizational capacity to begin deploying their solutions in a diverse array of rapidly growing, emerging markets. For example, entrepreneurs do not have a comprehensive strategy and specialized support to enter multiple markets simultaneously. They frequently lack sufficient capital for additional staff and other resources necessary to service the international markets. They do not know how to identify qualified and well capitalized local in-country partners or "franchisees" to distribute and service the products and/or to act as a local project developer. And last but not least, they lack the know-how to access all of the governmental, NGO and public/private related assistance that is available and often do not have the time and resources to develop such assistance on a case by case basis.
As a result, many potentially lucrative business opportunities lay dormant and potentially viable investment opportunities do not see the light of day. Tackling the technology transfer and deployment dimension will entail developing innovative business organization models and technology deployment mechanisms which, in turn, can attract financing directly and indirectly from crowd funding sources as well as pension, sovereign wealth funds, and institutional investors via the newly engineered financial conduits.
Fortunately, new innovative solutions to each of these problems have already been developed and additional new ideas are coming on line every day.
The objective of the GSS was not to prescribe a precise set of solutions that can be deployed cookie-cutter style in every new market. Rather it was to give showcase a small sample of the pilot initiatives currently underway in the financial, business, and technological arenas and discuss (i) what was done; (ii) how it was done; and (iii) what valuable lessons of experience could be imparted to others who are striving to finance similar projects and develop a similar business in other parts of the world.
The inaugural Global Solutions Summit (GSS), which convened in Washington, DC on April 9-10, 2014, was based on the premise that with rapid population growth, rising incomes, and increasing rates of urbanization in emerging markets, in the coming decades billions more people will have the income needed to afford such basic necessities as affordable, renewable electricity, adequate nutrition, clean water, clean air, and essential health care as well as other middle class amenities and life styles. Meeting these demands is both a moral imperative and an unparalleled business opportunity that can generate high returns for investors in both developed and developing countries and serve as a new, powerful engine of global growth.
The Summit was also premised on the belief that business-as-usual methods may not up to the task of meeting these development challenges and exploiting these business opportunities. Capitalizing on these burgeoning opportunities will require new private financing mechanisms, new business models for deploying proven business ideas from one part of the world to other communities, regions, and continents, and new approaches to designing goods and services tailored to the tastes, needs, and customs of these new consumers. The challenge, in other words, is nothing less than transforming the way that pension funds, institutional investors, sovereign wealth funds, venture capitalists, individual investors pooling their resources via crowd funding, members of the Diaspora, social and for-profit entrepreneurs in developed and emerging markets, inventors with game changing, disruptive technology, foundations, NGOs, development institutions, and government officials meet these daunting challenges and exploit these dazzling opportunities.
Fortunately, there is no shortage of promising initiatives to tackle such challenges as providing off grid renewable energy and clean drinking water, low-cost, high-quality health care, and food security. The world is awash in proven, cost effective technologies and new solutions are coming on line at an accelerating pace from such diverse sources as foundation and NGO financed prize challenges, community based innovators and tinkerers, R&D labs, the US Department of Defense, and many others. At the same time, many smaller financiers are cobbling together a new financial architecture for financing these emerging opportunities and NGOs, foundations, and entrepreneurs are developing new business models and distribution channels for deploying technology and delivering essential services to diverse groups of consumers at the bottom as well as the middle of the emerging market pyramid. All around, the pace of change is accelerating.
But two critical challenges remain: first, deploying these solutions at scale in hundreds, if not thousands, of rural villages so that they can have a truly transformative impact on global development and second, breaking down artificial silos so that formally independent financial, technology, and business model initiatives can be knit together into a coherent system. This cross fertilization is especially important because focusing on one single dimension of the problem – financial engineering, for example -- in isolation from all the other dimensions will not generate the desired outcomes. What is required to ensure that the whole will indeed be greater than the sum of the parts is an integrated systems approach which synthesizes all of these dimensions into a new model for development and doing business in emerging markets.
II. THEMES
With these challenges in mind, the inaugural GSS focused on trying to understand the relationship between three broad themes:
A. Mega-Trends
We are on the verge of a new era in which the rapid-fire emergence of breakthrough, disruptive technologies, the rise of megacities and peri-urban areas, the youth bulge in emerging markets, and ageing populations in many developed countries promise to usher in either a new era of abundance or dystopian chaos, depending on how we respond. These megatrends will exert a strong steering influence on the evolution of the global economy over the next 20 to 30 years. They will shape the contours of the broader global economy, defining and creating new opportunities, shaping challenges, and posing threats to stability, the status quo, and business-as-usual complacency.
Three mega-trends are especially pertinent:
1. The rapid introduction of breakthrough, disruptive technologies. Advanced manufacturing, 3D printing, crowd sourcing innovative designs and financial resources, and new forms of organizational and managerial innovation enabled by low cost transportation and communication hold the potential to disrupt existing business relationships, reshape the manufacturing landscape, change location decisions, alter the globalization terrain, and create new innovation opportunities for entrepreneurs experimenting with new business models. To remain on the cutting edge, cities, regions and countries will need to adapt to this new and rapidly evolving reality since old economic models and behavior patterns may no longer be as effective as they once were.
2. The Rise of Megacities and the Growth of Urbanization. Urban areas in general and megacities of more than 10 million people in particular are expected to grow especially rapidly in the coming decades, doubling in population from 3 billion to 6 billion and housing 70% of the world’s population by 2050. Consider the following:
- Cities in high income countries accounted for 2/3 of global GDP in 2010 but emerging market cities will account for nearly 75% of GDP growth from 2010-2025
- 70% of the buildings that will exist in India in 2030 have not yet been built
- In the next 30 years we will need to build the equivalent of 60 new New York City’s to meet the projected growth in urban population in emerging markets.
If they are to remain viable, cities (and the peri-urban areas around these cities) will have to find new ways to deliver clean drinking water and sanitation, off grid sustainable energy, transportation, governance and citizen interaction, and low cost health care delivery, among other essential services. Cities will inevitably become laboratories for experimentation and pilots for implementation and scaling. Older, established urban areas will need to think in terms of retrofitting while new urban areas, especially in emerging markets, will have the opportunity to leapfrog, bypassing older technological solutions and moving straight to the cutting edge.
All this portends new opportunities for leapfrogging and disruptive innovation: smart buildings, smart cities, smart infrastructure, and new service delivery models for household or neighborhood based distributed drinking water, electricity, and sanitation will generate new business opportunities and give rise to demands for new financing models. Scaling up the deployment of scaled down distributed solutions will become the driving force in urban development over the coming decades. New innovation ecosystems will be created by those dynamic entrepreneurs and policy makers with the imagination, agility, and audacity to seize these opportunities. With today’s technological advances, we no longer have to build cities on the model of industrial revolution where vital services were delivered by large scale centralized infrastructure – power plants, water treatment systems, telephone systems in which everyone’s phone was linked to everyone else’s by a spaghetti network of wires and telephone poles, etc. We can use emerging distributed technology solutions to leapfrog to new models of urban development and service delivery.
3. Resource Shortages, Youth Bulge/Demographic Dividend. The first two mega-trends will unfold within a context of youth bulge in many emerging markets, where the average age is projected to remain in the late-teens or mid-20s for the next several decades. As a result, the work force, purchasing power, and supply of potential entrepreneurs will grow rapidly in emerging market, as will the demand for good jobs and appropriately designed goods and services. Meanwhile, OECD populations are expected to get older and to shrink unless they are bolstered by a rapid influx of immigrants. These population trends will be unfolding within a context of resource shortages – especially in the realm of food, energy, clean air, medical services, and water. Meeting the demand from these new markets for appropriately designed goods and services while remaining cognizant of the resource shortage constraints will open new vistas for innovation and new arenas for entrepreneurship.
B. Developing a New Financing Architecture
Two simultaneous, complementary financial trends are influencing the way commercially viable projects in emerging markets will attract private finance in the years ahead.
The first, drawing on a series of meetings convened by HRH Prince Charles beginning in 2006, starts with the observation that trillions of dollars of capital are lodged in pension and sovereign wealth funds (including sovereign wealth funds in such new petro-rich countries as Gabon, Ghana, Angola, and Tanzania and mineral rich countries such as Botswana) as well as in other institutional investors. Unfortunately, few conduits exist for getting the money from these funds to where it is needed to finance commercially viable enterprises and projects.
Developing new financial conduits to deploy this capital is primarily a financial engineering task – subdividing the large investments that pension and sovereign wealth funds want to make into smaller investments that can be absorbed by local project and businesses and finding local agents and organizations who have the knowledge of the national and local political, legal and commercial conditions required to handle due diligence, oversee the management of funds, and supervise local investments. New financial tools and instruments, representing several billion dollars of private capital available to finance commercially viable projects and companies, have already been mobilized and the pace of mobilization is accelerating rapidly.
If the first revolution is about disaggregating large chunks of capital lodged in institutional investors, the second revolution is about aggregating the small amounts of capital held by individual investors and lodged in the crowd, in the Diaspora and in personal savings and retirement accounts. This is the so-called crowd funding revolution which is spreading rapidly to emerging markets.
Fortunately, these two revolutions are not in opposition to each other. They are complementary and with foresight and planning, can even be mutually sustaining.
C. Business Models for Technology Transfer and Deployment
Entrepreneurs working in emerging markets, often with financial support from USAID, the World Bank, and various foundations, have developed innovative, financially viable business models for delivering such essential services as off grid renewable energy, clean drinking water, food security, and low cost health care delivery systems. However, many of these entrepreneurs and their financial backers lack a mechanism to scale these successful local businesses and deploy their pilots at scale in other regions, countries, and continents. Similarly, many SME’s in the US, Europe and elsewhere, including many firms backed by Silicon Valley venture capital funds, have innovative, proven technologies which could potentially find enthusiastic customers in emerging markets. Yet many of these VC-backed firms are missing out on the opportunity to generate new sales in emerging markets because they too lack a mechanism to scale their businesses and deploy their technologies in new regions, countries and continents.
Although the starting points of a USAID-backed entrepreneur working in a rural village in Haiti or Ghana and a VC-backed entrepreneur commercializing a technology in Silicon Valley may be different, the challenges they face are more similar than each of them or their financial backers may recognize. One common challenge is devising business models which can help to deploy these technologies from where they were invented and deployed initially -- Silicon Valley, India, Brazil, Europe, etc. -- to new and unfamiliar places where they are needed and would find ready markets. A second common challenge relates to the fact that both sets of entrepreneurs frequently lack the financial, managerial, and organizational capacity to begin deploying their solutions in a diverse array of rapidly growing, emerging markets. For example, entrepreneurs do not have a comprehensive strategy and specialized support to enter multiple markets simultaneously. They frequently lack sufficient capital for additional staff and other resources necessary to service the international markets. They do not know how to identify qualified and well capitalized local in-country partners or "franchisees" to distribute and service the products and/or to act as a local project developer. And last but not least, they lack the know-how to access all of the governmental, NGO and public/private related assistance that is available and often do not have the time and resources to develop such assistance on a case by case basis.
As a result, many potentially lucrative business opportunities lay dormant and potentially viable investment opportunities do not see the light of day. Tackling the technology transfer and deployment dimension will entail developing innovative business organization models and technology deployment mechanisms which, in turn, can attract financing directly and indirectly from crowd funding sources as well as pension, sovereign wealth funds, and institutional investors via the newly engineered financial conduits.
Fortunately, new innovative solutions to each of these problems have already been developed and additional new ideas are coming on line every day.
The objective of the GSS was not to prescribe a precise set of solutions that can be deployed cookie-cutter style in every new market. Rather it was to give showcase a small sample of the pilot initiatives currently underway in the financial, business, and technological arenas and discuss (i) what was done; (ii) how it was done; and (iii) what valuable lessons of experience could be imparted to others who are striving to finance similar projects and develop a similar business in other parts of the world.
III. BACKGROUND EVENTS
The Global Solutions Summit was designed as a follow-up to a series of meetings convened by HRH Prince Charles beginning in 2007, as well as, the December 2012 P80 Group Foundation-Club de Madrid meeting in Little Rock, Arkansas. These meetings discussed measures that could encourage pension and sovereign wealth funds, along with other institutional investors, to finance commercially viable businesses and projects in emerging markets and accelerate the deployment of proven technologies which will address growing resource shortages in areas such as energy, water, clean air, food and medical services. Prince Charles’ 2007 initiative, as well as the subsequent Little Rock meeting, was predicated on four observations: 1. With rapid population growth, rising incomes, and increasing rates of urbanization in emerging markets, in the coming decades billions more people will be demanding access to such basic necessities as electricity, adequate nutrition, clean water, clean air, and essential health care as well as upscale middle class amenities and life styles. Meeting these demands for basic necessities and a higher standard of living will simply not be feasible or sustainable on the basis of current resource-intensive consumption patterns. New technologies, business models and financing mechanisms will be required to meet these challenges. 2. Technological solutions for many of these sustainable development challenges already exist and additional inventions are coming on stream every day. The critical challenge, therefore, is removing the obstacles impeding the diffusion and deployment of these technologies. 3. Public funds to finance these high priority sustainable development projects and programs will either be stagnant or dwindling. Therefore, private finance, especially from pension and sovereign wealth funds as well as other institutional investors, mobilized and deployed in collaboration with innovative public private partnerships, will be required. 4. These sustainable development enterprises and projects can generate high returns for the investors and serve as a new, powerful growth engine for both developed and developing countries. Each of these observations highlights a distinct opportunity (i) to deploy existing sustainable technologies and new ones as they are developed; (ii) to develop new businesses and new business models which can scale up the diffusion and deployment of these new technologies; (iii) to finance viable businesses which can deploy and diffuse these technologies; and (iv) to generate high rates of return, especially compared to returns currently available from most financial instruments, while providing vital goods and services in large, rapidly growing markets. One of the things that we committed to do in the post-Little Rock environment was to convene a second meeting – the inaugural GSS – to highlight and start cataloguing all the initiatives that are underway to address the challenges outlined in Little Rock. |