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Journal of Service Management Toward a service ecosystem perspective at the base of the pyramid Soumaya Ben Letaifa Javier Reynoso

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JOSM 26,5

Toward a service ecosystem perspective at the base of the pyramid

684 Received 30 May 2014 Revised 23 February 2015 Accepted 15 April 2015

Soumaya Ben Letaifa École des Sciences de la Gestion, University of Quebec At Montreal (UQAM), Montreal, Canada, and

Javier Reynoso


Tecnológico de Monterrey, EGADE Business School, Monterrey, Mexico Abstract Purpose – The purpose of this paper is to combine service-dominant logic premises with ecosystem characteristics in the base of the pyramid (BoP) environment, aiming to establish the foundations of a new service ecosystem framework for BoP contexts. Design/methodology/approach – This conceptual paper is developed by connecting service logic with an ecosystem perspective, developing theoretical propositions for sustainable service ecosystems at the BoP, and identifying future research direction using this new framework. Findings – The paper first highlights main challenges faced in the BoP environment. It then constructs an ecosystem framework for BoP contexts composed by four theoretical propositions: first, need to shift from a top-down to a multi-actor BoP approach; second, need of social embeddedness for successful BoP initiatives; third, service co-creation for and with local communities with actors playing multiple social roles; and fourth, multi-actor and multi-dimensional value creation. Future research directions are identified related to these propositions. Research limitations/implications – Theoretical propositions integrating the service ecosystem framework need further exploration and confirmation with additional empirical studies. Practical implications – Proposed framework and propositions provide useful insights for practitioners from different types of organizations aiming to participate in BoP markets. Social implications – Understanding the need to integrate a service ecosystem perspective in BoP contexts is fundamental to better address the needs of all actors involved. Originality/value – The conceptual framework proposed offers a comprehensive, multi-dimensional, and multi-actor perspective on how to understand, and better address services in BoP contexts. Future research avenues identified offer a more inclusive agenda for increasing service knowledge at the BoP. Keywords Service dominant logic, Service logic, Base of the pyramid, Value co-creation, Ecosystem perspective Paper type Conceptual paper

Journal of Service Management Vol. 26 No. 5, 2015 pp. 684-705 © Emerald Group Publishing Limited 1757-5818 DOI 10.1108/JOSM-04-2015-0133

Introduction Marketing and management practice and literature acknowledge the dominant logic of co-creative users or consumers, referred to as “competent customers” (Prahalad and Ramaswamy, 2000), “co-creative customers” (Vargo and Lusch, 2008), or “working consumers” (Cova and Dalli, 2009). Both North American and Nordic schools converge in critiquing a passive consumer role, rooted in a conventional goods-dominant logic (Vargo and Lusch, 2004; Grönroos and Ravald, 2011). Whereas North American scholars propose a new service-dominant logic (SDL) for business (Vargo and Lusch, 2004), Scandinavians call for a service logic (Grönroos, 2011; Edvardsson et al., 2005). The former recognizes the co-creative role of the customer; the latter posits that


interactions of firms and customers enable firms to know their customers better and become co-creators of value with them (Grönroos, 2011). A service logic also emphasizes the role of interactions in the value creation process and the facilitating role of suppliers in value co-creation processes (Grönroos, 2011). According to both perspectives, value creation processes should involve customers and occur in ecosystems in which multiple business and non-business relationships influence service production or innovation (Akaka et al., 2013). Despite conceptual discussions of their differences and similarities, these approaches are considered equivalent, because they both advocate for a new service perspective for studying service ecosystems. Ecosystems are networks (Moore, 1996; Iansiti and Levien, 2004) or communities (Lescop and Lescop, 2013) that gather complementary resources to co-create value. An ecosystem perspective is becoming more relevant for SDL applications, because it provides a comprehensive social and institutional framework to describe business and non-business relationships (Wieland et al., 2012; Ben Letaifa, 2014). This specific systems perspective includes appreciation of the complex, holistic, nested, networked structure of service systems in business and society, consistent with the SDL and the economic, social, political, ecological, and cultural cocreation processes of actors (Maglio et al., 2009; Vargo and Lusch, 2011; Lusch and Spohrer, 2012). Recent theoretical developments of the ecosystem perspective also have proven its capacity to tackle multiple value creation contexts, for not just intended users but the whole ecosystem of actors (Ben Letaifa, 2014). An ecosystem framework supports a network approach that can map and include direct and indirect stakeholders and influencers of the service. This multi-actor perspective resonates with recent calls for “total wealth maximization” (Zahra et al., 2009) in networks of profit and non-profit sectors that collaborate to create multi-dimensional value at the base of the pyramid (BoP) (Weerawardena and Mort, 2006). Customers at the BoP suffer from inadequate provision and quality of basic services, such as health, energy, sanitation, and water, and they also face the poverty penalty, which forces them to pay more for these services than their counterparts in middle- or high-income segments (Hammond et al., 2007; Mendoza, 2011). An ecosystem perspective could help BoP researchers resolve sustainability and scalability challenges (London and Hart, 2011). As the paper illustrates herein, key BoP challenges include a dominant top-down approach, the passive role of consumers, and the lack of connection from local contexts. These issues are important enough to motivate the borrowing, use, and application of service management frameworks that combine the SDL and ecosystem perspectives. As a fundamental premise for value creation, the SDL refers to ecosystems of relationships that acknowledge the diversity of actors and contexts (Vargo and Lusch, 2011; Wieland et al., 2012). People living at the BoP typically have been ignored as a market or as active resources (Prahalad, 2011) and instead been addressed mainly as passive aid recipients from philanthropic institutions or consumers who receive services (Gebauer and Reynoso, 2013). Recent case studies of sustainable models highlight the role of network effects, according to an ecosystem conceptualization of market opportunities or service transformations. For example, “Fundraising networks, technology networks, scaling networks, advise networks, incubators – all can be viewed as part of an ecosystem” (Hammond, 2011, p. 205). Ecosystems underlie a successful approach and business model that nurtures partnerships between civil society and ventures and opens

Ecosystem perspective at the BoP 685

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efficient access channels beyond traditional, commercial ones (Hammond, 2011). A “socially embedded market place vision” (Viswanathan, 2011, p. 144) requires more emphasis on the social milieu, as well as local networks of individuals and communities. At the operational level, ecosystems in Africa, Latin America, Asia, and North America reveal that value can be created only if sourcing, distribution, product, co-development, franchising, and financing are established through networks (Hammond, 2011), and the initial node of the network is the customer. Despite calls to include customers in service activities at the BoP (Ismail et al., 2012; Lindeman 2014; Viswanathan et al., 2010), a need remains to connect service research with an ecosystem framework to serve the BoP market (Ostrom et al., 2015). A service ecosystems approach provides an original articulation between service research and the community context (Akaka et al., 2013), because it operationalizes service research assumptions and theoretical premises and provides a tangible network perspective connected to local and global communities. This approach also aims to capture the complexity of BoP markets and contexts. It contributes to the “service imperative,” or the immediate need for service research and service innovation for companies and institutions in the global economy (Bitner and Brown, 2008; IfM and IBM, 2008). Accordingly, this paper offers an alternative view on services at the BoP, suggesting the effective use of an ecosystem perspective for service management research. Its objectives are threefold: first, connect the service logic with an ecosystem perspective; second, develop theoretical propositions for implementing sustainable service ecosystems at the BoP; and third, identify future research directions. In the next section, this paper outlines some key challenges facing BoP research, highlighting the main limitations of current perspectives adopted in the effort to enhance services for BoP markets. It also provides some well-documented examples to illustrate these gaps, selected carefully from known BoP-related sources. A particular emphasis is assigned to examples whose documented results and impact in theory and practice illustrate the specific arguments of this paper. In considering the extensive body of knowledge developed in relation to the BoP (Kolk et al., 2014), this work links these contributions to existing discussions in development literature, which features many equivalent arguments related to the complex BoP context (Banerjee and Duflo, 2007, 2011). Then, the paper describes how the fundamental premises of the SDL might be bridged with the core dimensions of the ecosystem to create a BoP service ecosystem that can meet BoP challenges. Finally, some research directions, managerial implications, limitations, and conclusions are presented. Current research and management issues in BoP contexts Recent recognition of BoP segments denotes them as distinctive, complex markets (London and Hart, 2011). Some scholars call for the development of specific service BoP agendas, because many BoP ventures initially focussed mainly on delivering services (e.g. health, energy, water, communications, transportation), such that customers were not considered co-creators but rather as aid or service recipients (Gebauer and Reynoso, 2013). At a glance, this argument creates a paradox with the inherent co-creative characteristics of such services. Any service contains components naturally related to co-creation, though this feature does not mean necessarily that the people obtaining such services have been involved as active co-creators of their own solutions. For example, medical service implies patients’ willingness to seek and accept medical


help and take medications. The scarcity of energy and water at the BoP leads to a natural need for conservation; the lack of communication and transportation prompts people to share and collaborate to integrate their resources. However, from a traditional BoP perspective (London and Hart, 2011; Kolk et al., 2014), even services with such intrinsic co-creative components that demand recipients’ participation frequently are designed and developed without actively integrating customers throughout the process (Fisk et al., 2016). Scholars also recommend the use of ecosystem perspectives to achieve sustainability and scalability (London and Hart, 2011). This paper proposes that combining a service logic with an ecosystems perspective might better address the BoP context. An ecosystem framework would support the identification and inclusiveness of multiple actors in the co-creation process and leverage the co-creation dimension developed in service logic. To understand why BoP markets require these new theoretical advances, it is helpful to discuss current issues that impede BoP services from fulfilling both suppliers’ and users’ needs and expectations. With an examination of how BoP services develop in different countries and through different actors, this paper highlights some limitations of current approaches. For example, despite calls for “inclusive capitalism” (Akter et al., 2013; UNDP, 2008; Simanis et al., 2008), some rooted BoP assumptions and initiatives still do not acknowledge that value creation requires more interactive and inclusive frameworks to allow initiatives to work and expand (Altenburg, 2009; Reynoso et al., 2015). Many existing BoP contributions investigate intervention projects as case studies (e.g. Prahalad, 2009; Nielsen and Samia, 2008; Webb et al., 2009); to a lesser extent, others include some conceptual developments (e.g. Rangan et al., 2011; Seelos and Mair, 2007) or present empirical research (e.g. London and Hart, 2004; London et al., 2010). Thus, three main challenges emerge from BoP literature. First, many BoP service initiatives lack balanced centricity (London and Hart, 2011; Simanis and Milstein, 2012). Even despite the important contributions by those who argue for a more inclusive economy and joint initiatives at the BoP, other developments mainly seek to extend international push marketing thinking, as independent attempts to address local issues. Whether initiated by multi-nationals, non-profit organizations, or social entrepreneurs, many BoP initiatives continue to involve vertical push marketing or isolated efforts, with value determined by the promoter of the initiative rather than the beneficiary, which suggests a goods-dominant logic (Vargo and Lusch, 2004). Second, authors display increased interest in the active role of customers (e.g. London and Hart, 2011; London et al., 2010; Ramachandran et al., 2012; Reficco and Márquez, 2012); for example, Bonsu and Polsa (2011) highlight the importance of expecting the consumer to regulate him- or herself by using entrepreneurial skills to pursue economic efficiency. Viswanathan et al. (2009) propose that understanding the interactions of individuals and communities, with considerations of life circumstances and existing marketplace dynamics, is essential for businesses to achieve a sustainable market orientation. Nevertheless, BoP service users continue to be considered passive consumers who do not really participate in the co-creation process; they mostly can accept, ignore, or refuse the services offered. Many of the failures of BoP initiatives presented in case studies might fail to find suitable solutions because of the lack of interaction with and involvement of the intended users. Worse, some of the cases highlight a gap between the solutions provided and the ability of the targeted customers to afford or use the service.


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Third, a lack of awareness or knowledge of the sociocultural context creates an additional barrier to successful service adoption by local communities. Initiatives must connect to the institutional context, because value is socially defined and differs from one context to another (Akaka et al., 2013). Gummerus (2013) distinguishes value creation systems and value outcome determinations: value creation systems focus on active creation processes, whereas value outcome determinations address how customers make value assessments and the value of results. The latter is thus more complete, in that it covers value as both means and ends (Gummerus, 2013). However, in the value creation processes, different parties participate, whereas in a determination analysis, the outcome is the result of a single actor and therefore uniquely determined (Gummerus, 2013). These gaps appear in BoP-related literature, as illustrated with examples next. Challenge 1: BoP services designed with a top-down approach This first challenge highlights the missing network approach in service design for consumers at the BoP. Even if services seek to serve individuals, groups, or communities at the BoP, and despite some partnerships among multi-national enterprises (MNEs), non-governmental organizations (NGOs), and other actors, many BoP initiatives continue to be developed solely by MNEs or NGOs (London and Hart, 2011; Seelos and Mair, 2007; Webb et al., 2009), to provide solutions to essential needs and transform daily lives. This complaint is not to discount the work by some social entrepreneurs at a grassroots level, involving people in finding service solutions together. Yet the top-down process persists, creating failures to benefit from the richness of the ecosystem. Typically, one main actor leads the service innovation and does not interact with the network of local actors when designing the solution. Patrimonio Hoy, developed by Cemex, a Mexican materials company, targets the housing needs of low-income populations (London, 2008) and reflects how MNEs often underestimate the importance and complexity of connecting with a network of actors to design a solution to a specific socioeconomic problem. Although today, Patrimonio Hoy is considered the most successful social initiative, according to the Inter-American Development Bank (IADB, 2011), initially it had to overcome many challenges. Cemex started Patrimonio Hoy to increase sales in BoP markets during a crisis in the Mexican economy. In its initial approach, it “listened” to customers, to learn how to adapt its offering to their market needs. It developed adapted versions of its products (e.g. smaller bags of cement) and tested financing group schemes (e.g. through community saving groups called tandas), without success. Soon Cemex came to realize that conventional business methods would be insufficient, whereas being rooted in the community and truly understanding its idiosyncrasies would be a key factor to success (Moreno, 2008). After changing the focus of its program, from selling cement to building houses, and collaborating more deeply with the community, Cemex created an offering that provided access to microloans for construction materials and technical assistance for building or renovating homes with a DIY (do-it-yourself) scheme (Clinton, 2014; Cemex.com, 2015). Patrimonio Hoy financing is based on trust; it does not require paperwork or any collateral. In turn, it has created a network of promoters, mostly female entrepreneurs from the communities, who help generate jobs (London, 2008). Although a goods-dominant approach often has proved successful in global markets, BoP segments require more open and collaborative network perspectives, because their contexts are more complex and experience peculiar constraints. They require more resource integration and interactions across several


actors. That is, BoP segments must be approached differently than mass markets (Pitta et al., 2008; Viswanathan et al., 2010; Viswanathan and Rosa, 2010). The Nike World Shoe project, offering athletic shoes to the poor at an affordable price, mainly in China, is another example. As its pillars, it was based on local-for-local manufacturing, a concurrent engineering product-development approach, and market classifications. However, the company failed to understand that creating solutions for the BoP would require complex interactions, empathy, and a deep understanding of the local context, not just an adaptation of a product at a reduced price (McDonald et al., 2002). Nike did not meet its sales objectives and was unable to reach the targeted consumer (i.e. low-income markets in China). The business model was disconnected from the local context and lacked any empathy (Hart, 2007), such that it was unable to build trust or engagement with the local market. Challenge 2: BoP service users regarded as passive consumers A second challenge refers to the specific role that customers play in BoP contexts. Whereas the first challenge points to the need for a holistic implication of the network of actors in the co-creation process, this one zooms in on the importance of active participation by customers. Many top-down BoP initiatives have failed to solve the social problems they sought to address (Ashoka, 2013). Purely top-down venture creation often is disconnected from local contexts and does not involve the true beneficiaries (London and Hart, 2011; Viswanathan et al., 2009). Patrimonio Hoy has been successful because it changed its focus: Cemex initially failed to acknowledge that BoP markets have, in addition to low incomes, a lack of construction competence and limited resources (e.g. credit), and it underestimated the importance of insights into daily practices, routines, and issues. In another example, Unilever provides a wide range of consumer goods in small packages, called low-unit package, to increase consumers’ purchasing power, but it does not involve them in developing solutions (Karnani, 2009). The passive role of customers led both these examples to different types of failures, because of the assumption that the service solutions provided by MNEs did not require involvement by local communities to ensure successful adoption. Passive customers create detriments for the entire ecosystem, with political, economic, and social impacts. This view is supported by Bonsu and Polsa (2011), who note that by mobilizing BoP consumers, a strategy becomes more powerful, in that it attracts organizational investments and exploits opportunities related to the social sphere. Challenge 3: Solutions are disconnected from the local context This challenge relates to the importance of social embeddedness as a means to address BoP services. A closer examination of BoP initiatives reveals that local contexts often are misunderstood or poorly addressed, prompting failures in serving BoP markets. Patrimonio Hoy, when creating its offering, assumed that customers wanted cheaper versions of the same products, thus underestimating the variety of factors that affected their customers (e.g. political, economic, social). Local consumers did not accept the product, despite its lower price per unit, easier transport, and ability to prevent spoilage. By changing its focus though, Patrimonio Hoy learned to offer constant distributions of material to avoid spoilage and waste and satisfy the real needs of people to improve their well-being in the short term. In this vein, literature on customer and market orientations has great potential value, because authors in this field highlight the importance of information from markets, including the psychological and sociological aspects that affect business


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success and existing marketplace dynamics (Viswanathan et al., 2009). However, most of this literature regards customers not as co-creators but rather as sources of information (Narver and Slater, 1990). To close these three gaps, this paper proposes connecting service literature to an ecosystem perspective, which should better serve the BoP agenda. Successful initiatives, such as Grameen Bank in Bangladesh (Yunus et al., 2010) and Dabbawalas (Baindur and Macário, 2013), Barefoot College (Roy and Hartigan, 2008), and Novartis (Weidner et al., 2009) in India could expand their scale because they adopted a network perspective, included users as value co-creators, and embedded their services in the social context. These success factors enable value creation throughout the ecosystem and make the BoP innovation sustainable. Therefore, these dimensions are used to propose a new service ecosystem framework for the BoP. Toward a BoP service ecosystem New business models should provide more inclusive, comprehensive frameworks, in which services get socially co-created in and for a specific context (Gummerus et al., 2013). Traditional BoP initiatives fail largely because the business remains external to the communities it intends to serve. From a consumption-based perspective, they look to turn the poor into consumers, without a deep understanding of local needs and aspirations (Simanis and Hart, 2009) and without considering the dynamics of the context. They aim to increase the market where needs exist, rather than understanding how those needs might create new markets (Gebauer and Reynoso, 2013). A new service logic approach is required to build sustainable ecosystems, which should be neither bottom-up nor top-down (Ben Letaifa, 2015; Reynoso et al., 2015). They should feature balanced collaborations, driven by different socioeconomic actors who can build on their complementary competencies to create value in the ecosystem, which is multi-dimensional (social, economic, ecological, and cultural) and multi-actor, instead of venture- or user-specific (Ben Letaifa et al., 2013; Ben Letaifa, 2014). Strategy and management researchers propose an ecosystem perspective or theoretical framing to gain a better understanding of current and changing contexts (e.g. Moore, 1993, 1996, 2006; Wieland et al., 2012; Ben Letaifa, 2014; Hammond, 2011). This interdisciplinary metaphor offers a systemic, dynamic vision of socio-economic exchanges among various entities. Specifically, the ecosystem implies that everything is related, and nothing happens in isolation. Value creation and extraction then can be analyzed in terms of a network of actors, rather than a single actor, and mobilize various shared capacities and skills (e.g. Gummesson, 2008; Iyer and Davenport, 2008; Moore, 1996, 2006; Teece, 2010; Vargo and Lusch, 2011; Wieland et al., 2012; Zahra and Nambisan, 2012). This perspective also broadens the concept of value creation to peripheral actors, such as governments, universities, associations, investors, service users, and other traditionally concealed actors. It acknowledges the complexity of the observed reality and the importance of studying various levels of interaction to grasp the socio-economic processes that influence service development. An ecosystem perspective requires expanding the definition of an exchange to a vision in which the reality of the relationship is defined in all its complexity, rather than simplifying or reducing it to a few interactions or actors. Services require balanced centricity, instead of a focus on one specific actor (e.g. local or global; supplier or customer; firm or individual) (Gummesson, 2008). The shift to a more co-creative framework represents an evolution to a more inclusive ecosystem, in which all socio-economic actors can draw


on their resources and capabilities to build sustainable service innovations (Reficco and Márquez, 2012; Rivera-Santos and Rufín, 2010). Some scholars even suggest that firms and institutions should take smaller roles than customers and users in the co-creation process (Grönroos, 2011). Because users capture the value created, they are co-creators, and they give meaning to the value creation process. If customers do not appreciate or cannot afford the services rendered, value is not created. Thus, suppliers of service activities should adopt a value facilitator role in the co-creation process (Grönroos, 2008, p. 308). A new multi-level, multi-actor perspective on value, value creation, and value capture thus distinguishes ecosystems (Gummesson, 2008; Vargo and Lusch, 2008; Spohrer et al., 2012). With the emergence of the service- and knowledge-based economy, the concept of value is becoming more knowledge based, social, subjective, intangible, and complex (Pitelis, 2009). Some authors thus talk about experience spaces (Prahalad and Ramaswamy, 2004), in which actors capture different value in context. An ecosystem framework for BoP To provide a meaningful framework for both scholars and managers, SDL axioms are integrated with ecosystems characteristics to propose a new ecosystem framework for BoP contexts. This framework generates 16 BoP context components, as described and conceptually analyzed in Table I. From the original ten fundamental propositions that shaped the SDL, four have emerged as the foundational axioms (FP1, FP6, FP9, and FP10; Vargo and Lusch, 2014). Four main characteristics also can be identified from ecosystem literature (multi-actor approach, social embeddedness of actors and resources, biodiversity, and ecosystem value; Moore, 1996; Iansiti and Levien, 2004; Ben Letaifa, 2014). A multi-actor approach implies inclusiveness of different stakeholders in the innovation or transformation process; social embeddedness indicates the need for connections with social and local contexts; biodiversity suggests that a multi-actor approach should include different stakeholders but also heterogeneous members and profiles from each category of actors; and ecosystem value pertains to multi-dimensional value (social, economic, political, cultural, ecological). The instigators of SDL already have called for its integration with an ecosystem perspective (Akaka et al., 2013; Wieland et al., 2012). Thus, the SDL is a theoretical premise that requires a network perspective and approach to be applied empirically in contexts. Table I offers an initial illustration of this effort to combine the SDL and an ecosystem framework. The 16 BoP context components result from analyses and illustrations of each of the four ecosystem characteristics, in relation to each of the foundational SDL axioms, within the BoP environment. These components can be integrated into four theoretical propositions (Table II). The first proposition is to shift from a top-down to a multi-actor BoP approach, to include local active resources. This initial proposition refers to Challenges 1 and 2 and is consistent with the transition witnessed in BoP literature toward more inclusive approaches (Kolk et al., 2014). Although some initial contributions called for including customers and other actors in co-creation processes (e.g. Yunus, 2007), others have not acknowledged the involvement of actors and active customers (e.g. Prahalad, 2009). Scholars also have started to call for a new, inclusive approach that features the network of BoP actors (BoP Summit, 2014; Gummerus et al., 2013). This approach would enable multi-dimensional co-creation, suggesting that a new ecosystem approach, rather than a stand-alone venture, is required to build on complementary competencies. Value co-creation entails the integration of multiple resources (Akaka and Chandler, 2011), and SDL ecosystems rely


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Theoretical framework axioms of service1 Multi-actor dominant logic approach FP1: service is the fundamental base of exchange

BoP service results from interactions between several actors inside and outside the base of the pyramid

FP6: the customer is Customers are always a co-creator of co-creators among other actors in the value BoP ecosystem

Table II. Theoretical propositions for service-dominantlogic BoP ecosystems

Service is socially The diversity embedded in a specific of actors allows a BoP context diversity of service exchanges in the BoP ecosystem The diversity BoP customers of customers co-create value allows a according to their specific contexts and diversity of value resources co-creation processes in BoP markets The diversity All social and of actors economic actors allows the should be socially integration of embedded while different integrating their capabilities resources and resources

BoP service generates an ecosystemic value that should be analyzed and measured BoP customers create and capture some of the ecosystemic value

Ecosystemic value is achieved through all socioeconomic actors’ resources integration Value is always The diversity Value should FP10: value is always In a multi-actor be multisocially embedded of actors is approach, value is uniquely and dimensional crucial to uniquely and phenomenologically and multiachieve phenomenologically determined by the actor to be ecosystemic determined by beneficiary sustainable value different actors Note: aDefined as the total of social, cultural, economic, and ecological outputs captured by all actors

FP9: all social and economic actors are resource integrators

Table I. Connecting ecosystem components with fundamental SDL premises for BoP context

Ecosystem components 2 Social embeddedness 4 Ecosystemic of actors and resources 3 Biodiversity valuea

The multi-actor approach is based on how social and economic actors integrate their resources

Traditional BoP perspective

Service BoP ecosystem

Top-down approach to BoP enterprises in which individuals are passive consumers (e.g. McDonald et al., 2002; Pitta et al., 2008; Prahalad, 2009; Prahalad and Hammond, 2002) Venture creation follows an exogenous perspective (e.g. McDonald et al., 2002; Sanchez and Ricart, 2010) Each actor has a specific social role: the beneficiaries receive services (e.g. Akula, 2008; Prahalad, 2009) The value is determined for one actor and is onedimensional (social or economic) (e.g. Hart, 2007; Rangan et al., 2011)

A multi-actor approach to the social problem in which individuals are active operant resources Social embeddedness is required to design relevant services with local focus Actors play different social roles as services are co-created with and for local communities The value is determined as multi-level and multi-dimensional: the ecosystemic value (for all beneficiaries; social, economic, ecological, and cultural)

on local and global connections. The success of the Novartis Foundation for Sustainable Development in reducing the impact of leprosy in India illustrates this first proposition:

Ecosystem perspective at the BoP

P1. Its core service results from interactions of several actors inside and outside the BoP.


Patients suffering from leprosy and other social and economic actors involved in the suffering and cure of this disease participate as co-creators in the service process, integrating their resources. Each of these multiple actors determines the value captured from this service. The second proposition argues that: P2. Social embeddedness is necessary for successful BoP initiatives. Micro-level challenges can be met only if the local context is well understood. Institutional and social knowledge may enhance service innovation designs and facilitate their social adoption and success (Simanis et al., 2008; Viswanathan, 2011). As previously described, this was one of the most valuable lessons learned from Patrimonio Hoy’s initial construction ventures. Similarly, Dabbawalas’ core service is socially ingrained in the chaotic context of Mumbai, and it could not succeed without the effective integration of multiple local active resources, to deliver more than 300,000 tiffin boxes every day. The specific contexts, needs, and resources of BoP customers shape the co-creation of value, in which all participants and the value they capture are socially embedded. Microsoft thus has partnered with Dabbawalas to deliver printed information to promote the use of its software among Mumbai’s society, an illustration of this effect. The third proposition builds on SDL co-creation to state that: P3. Services are co-created for and with local communities, and actors have multiple social roles. This premise acknowledges the importance of associating multi-faceted social roles with local actors (co-creator/co-producer; user/consumer; e.g. London and Hart, 2011; Simanis and Hart, 2009). With an ecosystem perspective, resources and actors are not trapped in linear, unique roles but rather nurture multiple interactions and relationships. This proposition affirms the dynamic and evolutionary nature of resources and actors. For example, at Barefoot College, diverse actors participate directly or indirectly to enable educational service exchanges. Men and women, children and elderly people participate as students in various educational programs. Some eventually take the role of teachers and may become entrepreneurs who sell community solutions, which reveals the diverse value co-creation processes that integrate different resources and capabilities. This diversity is essential to obtaining value for all parties involved. Finally, the fourth proposition illustrates: P4. The output of service innovation or co-creation by suggesting multi-dimensional, multi-actor ecosystem value (Ben Letaifa, 2014). Here, the notion of value comprises two components: value processes (value creation) and value outcomes (value capture) (Gummerus, 2013). Grameen Bank illustrates the situation well: financial services offered for the BoP create value for the ecosystem. All different parties and customers in this social business model create and capture value in some way.

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Everybody wins. Social and economic actors ensure the sustainability of this cooperative, because they integrate their resources to achieve value for the whole ecosystem. In turn, it has made it possible for thousands of low-income customers to escape poverty, benefiting their families, groups, communities, organizations, and society. In summary, the first proposition offers an open network approach to SDL ecosystems; the second highlights the sociocultural and local focus required; the third pinpoints the multi-faceted social roles of actors, including beneficiaries; and the fourth proposition describes the output (i.e. multi-dimensional value co-created). These propositions, inspired by the four SDL premises, fit BoP ecosystems and fully reflect their multi-actor perspective. Further research on BoP service ecosystems The conceptual framework developed here offers a new, comprehensive perspective on how to capture, understand, and address BoP contexts. This perspective offers a way of mapping and simultaneously integrating the challenges that might have been overlooked, due to the lack of multi-actor, multi-dimensional frameworks. Further research might take the next step by exploring and digging more deeply into the four central propositions. The service ecosystem framework for BoP contexts reveals several specific research avenues related to its four conceptual propositions. This paper also proposes that research should focus on connections across micro, meso, and macro levels of the BoP context to promote a more integrative agenda, beyond a traditional, dyadic analysis. These research avenues intertwine with and nurture one another; they reflect interdependent BoP propositions. Therefore, any theoretical advance achieved in one dimension can enhance understanding of the others, as illustrated in the following sections. Research on the multiple-actor ecosystem perspective for sharing of a common vision In line with the first proposition and as indicated by increasing numbers of authors (Viswanathan et al., 2010; Lindeman, 2014), a “BoP 2.0 mindset” is required (BoP Summit, 2014). This mindset would acknowledge the need for more collaboration and co-creation across various socioeconomic actors. A new service logic ecosystem perspective thus might bolster the virtuous cycle of value co-creation. For example, the Novartis Foundation for Sustainable Development managed to decrease the impact of leprosy in India by involving different social actors, such as the media and opinion leaders from the entertainment industry (Weidner et al., 2009). The demystification of the disease through public communications and movies featuring well-known stars helped spread the message that leprosy could be cured. Public actors from the health, environment, education, media, and energy sectors all helped replicate this message and raise awareness among the population. Private and international partners also have important roles: They introduce different capabilities into the ecosystem and provide either technology (e.g. for energy transfer) or competencies (i.e. know-how). Novartis also offers a good example of how, in interconnected ecosystems (Iyer and Davenport, 2008), open innovation at micro, meso, and macro levels enables BoP organizations to exploit their internal and external resources better. Social changes are disruptive, in that they flip the conventional innovation pipeline and transform traditionally top-down BoP venture creations into open, emergent processes. The ecosystem depends on the diversity of its members


(Iansiti and Levien, 2004), so any healthy ecosystem should respect biodiversity and be able to nurture different capabilities (Moore, 1996). From its very first phases, the ecosystem’s members must engage different resources to resolve social or economic issues. Once the members have agreed on the service proposition, they should identify which public and private resources need to be integrated. The “solution approach” has not been well studied in service innovation literature; studies might address how it can help advance innovations in not only service industries but other sectors as well (Govindarajan and Ramamurti, 2011). How might cooperation and competition coexist in the BoP environment? Individuals, groups, and networks participating in highly dynamic environments demand, coproduce, and consume services in exchange for other resources, sometimes without ever using money as currency. In such settings, which values and principles provide the key foundations for these initiatives? For example, trust-based relationships and customer engagement are relevant issues for research (Sama and Casselman, 2013; Yunus, 2007). This paper also calls for more sociological and ethnographic lenses, to capture how trust can be nurtured in different contexts. Sociological and ethnographic studies produce more fine-grained data about sociocultural patterns that, once known, facilitate market entry (Morschett et al., 2010; Arnould and Price, 2006). Building social ties with local networks and local customers requires a deep understanding of how local communities are structured and how they build strong relationships, which demands a greater focus on local embeddedness. Research on local embeddedness of the ecosystem to grasp micro issues Local embeddedness reveals sociocultural and institutional logics. On the one hand, the outputs of service innovation for the BoP must have a traditional flavor and identity (local lifestyle, cultural habits). On the other hand, institutional proximity helps create efficient communication and knowledge sharing and build sustainable relationships and congruent visions (Boschma, 2005). Sociocultural embeddedness thus is required to better serve BoP customers (Viswanathan, 2011), and the concept of community is essential to understanding BoP services. For example, the Mumbai Tiffin Box Suppliers Association, also known as the Dabbawala of Mumbai, helps 350,000 people receive homemade lunches on time, without dealing with the chaotic traffic conditions of Mumbai. Local embeddedness is a key factor in its success. The service is famous for its reliability; it delivers food by foot, bicycle, handcart, and train, making use of local infrastructures to link local village kitchens to urban offices in Mumbai. This successful, well-known case shows that social and local embeddedness is required of ecosystems if they are to address all of the context specificities and identify key resources, issues, and actors for service proposition. Some pertinent research questions thus arise: RQ1. What can we learn from small groups, families, villages, micro-companies, cooperatives, and networks regarding how their services should be designed, operated, and managed? (Dominguez and Waltkins, 2003; Rivera-Santos and Rufín, 2010; Viswanathan et al., 2010). Research also should address the effect of cultural characteristics in emerging economies on the creation of indigenous service innovations: RQ2. How do different cultures, with their specific values and norms, influence service innovations?


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Culture might promote or hinder entrepreneurship; encourage or discourage risk taking; facilitate or prevent the integration of fragmented resources in emerging economies; or boost or interfere with service innovation in emerging economies that lack formal institutions. The insights gained from answering these questions might reveal how people adopt new services and which social communications and promotions should be instituted. For different contexts and ecosystems, various opinion leaders should be involved, and different actors could leverage their unique positions and social roles. This last argument is supported by Bonsu and Polsa (2011), who note a shift in corporate attitudes, which now recognize local cultures and resources as a means for success in foreign markets. Research on the different social roles of value co-creators to integrate their resources Actors should take on a variety of roles in ecosystems (Iansiti and Levien, 2004). Heterogeneous resources and actors lead to productivity and innovation. Each actor can serve different roles, depending on the activity in which he or she is involved. Some social roles support more effective value co-creation (Akaka and Chandler, 2011). Each context favors different positions and roles. Social embeddedness can shed light on the choices of social roles required for each situation and context. For example, Barefoot College is a rural school in India, built by and exclusively for the poor. The college applies rural, traditional knowledge and skills to build homes for the homeless, collect rainwater in rural schools and communities where potable water sources are scarce, and spread socio-economic messages through puppetry. One of its main beliefs is that “literacy” (school formation) and “education” (traditions, culture, and personal experiences) both are key to individual growth. Both students and teachers represent education resources and function in different roles. All Barefoot initiatives are designed and implemented by rural men and women, who create networks of professionals. It has encouraged and trained physically challenged persons to be independent rural entrepreneurs and full- or part-time workers as teachers, pathologists, computer instructors, transistor FM radio assemblers, screen printers, toy makers, kabaad se jugaad (recycling) professionals, and phone or milk booth operators. Most have received training in more than one occupation (Barefoot College, 2013). Different research opportunities are relevant here. For example, what are the needs for and implications of resource integration for effective service delivery in BoP businesses (Tipraqsa et al., 2007; Viswanathan et al., 2010)? The characteristics of different actors are useful for understanding the different co-creation roles that BoP populations serve, as consumers, clients, or coproducers (Rangan et al., 2011). How can entrepreneurs in varying roles, at different internal and external units of analysis, such as individuals, groups, families, and communities, learn best about the operation, planning, and execution of services? How do social networks influence decision-making processes? Rivera-Santos and Rufin (2010) provide relevant insights into how structural characteristics, network boundaries, tie characteristics, and member diversity all might influence the dynamics of BoP networks. What role does technology have in the operations and delivery of services among employees and customers who possess low educational levels? What can large businesses learn from BoP management practices, such as employee multi-task cooperation, friendship-based relationships, and high levels of flexibility? Research also is required to understand the integration of scarce, dispersed resources among communities – in particular, operating strategies with limited and fragmented


resources for co-creating value, including the integration of assets, capabilities, and labor potential – to execute effective service delivery systems. The role of technological advances for solution-based thinking in such integration is also worth studying (Esposito et al., 2012; Govindarajan and Ramamurti, 2011; Hart and London, 2005). Grasping the role of local technology and understanding daily practices enhances the value creation process for BoP markets. The resource-integration process should be efficient to deliver ecosystem value to all actors successfully. Research on value creation and capture by all actors in the ecosystem A healthy ecosystem thrives due to the intrinsic motivation of multiple local actors, who actively leverage their resources, networks, and competencies. A sense of ownership increases service creation commitment and service adoption (Simanis, 2011). The voices of BoP consumers allow for an emic understanding of local issues and effective service co-creation (Simanis, 2011). Furthermore, when value creators are also value capturers, the process of value creation is efficient, and the outputs are well defined. Then BoP services are co-created in a dynamic ecosystem of interactions and relationships. The success of Grameen Bank has stemmed mainly from its origin: the service, which aims to improve the financial situation of the poor, was made by and for them. The poor own 94 percent of the bank and receive dividends from deposits, which generates a sense of pride and loyalty toward the bank, while also liberating Grameen from paying taxes. The government benefits, because the service helps make people less dependent on it. Basically, everybody wins. The great results obtained by Grameen Bank reveal clearly that value creation and capture by all actors is a fundamental premise, of both ecosystems and SDL (Vargo and Lusch, 2004). In this vein, different research initiatives arise. For example, what does business success mean for each of the actors involved (e.g. customers, firms, beneficiaries) at the BoP? How do informal entrepreneurs assess their success? Expanding on recent work by Toledo-López et al. (2012) offers an attractive research opportunity. What are the main value drivers for low-income customers? Are social or relational service attributes more relevant for low-income customers in different service settings? Additional qualitative and quantitative research could assist BoP entrepreneurs in improving their service quality (Greenland et al., 2006). Furthermore, what role do internal and external social networks serve, at different levels of analysis, in the co-creation of value and then eventual service growth? Which are the main value drivers for low income, family vs unrelated employees? Research also could serve to increase understanding of the creation and existence of BoP organizations that offer different value propositions, participate in different value constellations, and create different profit equations, with either financial or social profit maximization and repayment or else no recovery of invested capital (Yunus et al., 2010). These questions indicate original perspectives and highlight the need for a new BoP agenda that captures different interactions and relationships, beyond a traditional dyadic analysis (users as MNEs or users as NGOs or users as social entrepreneurs). This route might be explored by “zooming in” (Nicolini, 2009) to shed light on the micro, meso, and macro levels and the interactions among them. Research on connecting micro, meso, and macro levels in BoP contexts Many marketing and management scholars discuss the limitations of unbalanced perspectives (customer- or user-centric) for building a comprehensive view of how value gets created and shared (Gummesson, 2008). Unbalanced perspectives lead to


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inefficient value creation processes and outcomes, because partial approaches privilege some specific actors (firms, customers, NGOs), instead of adopting multiple stakeholders’ vision. As the concepts of “value” and “resources” increasingly get evoked in networks of actors or ecosystems, exploring their potential for providing a sustainable perspective on value creation at the BoP is necessary. Business and non-business actors’ interactions, at local and global levels can co-create better services for the BoP. Several authors recommend multi-actor and multi-dimensional approaches involving ecosystems (Prahalad, 2009; Moore, 2006; Hammond, 2011; Ben Letaifa et al., 2013). An ecosystem perspective seeks to connect the micro level (local service provided) to the meso level (local network involved, families, friends) to the macro level (global network and local public and private socioeconomic actors that indirectly influence the ecosystem). Integrating the micro, meso, and macro levels of analysis is an innovative notion, responsive to the new BoP research agenda (Gebauer and Reynoso, 2013). The ecosystem framework also is a dynamic, inclusive network concept, in which all resources, actors, and institutions are both mapped and connected. Every context can be illustrated on the three separate levels, which in turn allows sociocultural dimensions to be highlighted and understood. This exhaustive network encompasses complexity and temporality. Mapping all the actors and resources means developing a potential roadmap for long-term service innovation. The service design process follows from this map. The co-creation of new value concepts and inclusive service innovations in BoP marketplaces (Chaudhary et al., 2012; Zhu, 2010), as well as the need to explore service ecosystems (Anderson et al., 2013), represent new and relevant areas for research exploration. Research on service ecosystems and networks (e.g. Håkansson and Snehota, 2006) could provide valuable insights into the social, economic, and managerial integration of indigenous services, created innovatively in emerging economies (Lemon, 2013; London et al., 2010; Ostrom et al., 2010; Reficco and Márquez, 2012). Managerial implications Several implications arise for managers and executives of different BoP-related organizations that plan to participate in BoP markets. First, initiatives by MNEs, NGOs, and social businesses must be developed from an open network approach, in which multiple actors – companies, institutions, customers, and beneficiaries – actively integrate resources within the ecosystem. For a true multi-actor perspective (P1), a common vision among managers and effective communication channels based on trust are essential, considering that the BoP relies mainly on informal economic activities. Second, to interact in this ecosystem, managers must achieve sociocultural and local embeddedness to gather appropriate, in-depth knowledge about various needs, aspirations, social patterns, and dynamic interactions. Otherwise, they cannot overcome micro-level challenges successfully (P2). Local embeddedness supports a deeper understanding of the structure of the community and how trust-based relationships develop. It also implies open-minded, humble leadership that is willing to learn from local practices and that recognizes traditional assumptions about markets are not necessarily applicable at the BoP, but that BoP communities can be sources of intrinsic knowledge and innovation. Third, successful ventures related to the BoP context require acknowledgment that the social roles of actors, including beneficiaries, vary depending on the situation (P3). This point is particularly pertinent when we consider the existence of different BoP segments and BoP-related organizations, aiming to serve their needs in a variety of


ways. Thus, flexible business models with simple organizational structures are required to successfully integrate all these roles while also fostering open innovation and co-creation. Fourth, managers interacting at the BoP should base their decisions and understand value by using a multi-dimensional, dynamic perspective, such that the context and interactions among different actors determine the value of the service (P4). This view also requires the definition of business strategies and metrics aligned with what different actors truly value, as well as the creation of business models that consider the impact of interactions at micro, meso, and macro levels. Thus, executives need T-shaped skills. Conclusion and limitations This conceptual work proposes a new framework and new agenda for BoP researchers and practitioners. Building on current challenges, as documented and identified in prior literature, this paper follows recent calls for comprehensive and multi-dimensional conceptualizations of BoP contexts (London and Hart, 2011). The theoretical propositions suggest a new ecosystem perspective that integrates an ecosystem vision the SDL premises, to better serve the BoP. This comprehensive framework addresses the complexity of the BoP and allows for scalability and sustainability. However, it is also preliminary, conceptual work that needs further development and validation, as well as confirmation with additional empirical studies. This framework offers a first milestone; the field demands future qualitative and quantitative work to sharpen and refine these notions. Acknowledgements The authors would like to thank three anonymous reviewers for their useful feedback in the improvement of this manuscript. They would also like to express their gratitude to professors Chiara Orsingher, Sylvie Llosa, and Kiane Goudarzi for their consideration and invaluable support during the elaboration of this paper, as members of the organizing committee of the 13th International Research Conference in Service Management held by Aix-Marseille Graduate School of Management, at La Londe les Maures, France, May 27-30, 2014. Javier Reynoso would like to acknowledge the collaboration of senior researcher Karla Cabrera in the preparation of this manuscript. References Akaka, M. and Chandler, J. (2011), “Roles as resources: a social roles perspective of change in value networks”, Marketing Theory, Vol. 11 No. 3, pp. 243-260. Akaka, M., Vargo, S. and Lusch, R. (2013), “The complexity of context: a service ecosystems approach for international marketing”, Journal of International Marketing, Vol. 21 No. 4, pp. 1-20. Akter, S., Ray, P. and D’Ambra, J. (2013), “Continuance of mHealth services at the bottom of the pyramid: the roles of service quality and trust”, Electronic Markets, Vol. 23 No. 1, pp. 29-47. Akula, V. (2008), “Business basics at the base of the pyramid”, Harvard Business Review, Vol. 86 No. 6, pp. 53-57. Altenburg, T. (2009), “Building inclusive innovation systems in developing countries: challenges for IS research”, in Lundvall, B., Joseph, K., Chaminade, C. and Vang, J. (Eds), Handbook of Innovation Systems and Developing Countries: Building Domestic Capabilities in a Global Setting, Edward Elgar Publishing, Cheltenham, Northampton, pp. 33-56.


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