Gawad Kalinga and the I Love Iloilo Movement partnered with SeaOil for “EntrepreneurShift”  - a conference advocating for a Social Enterprise movement in Iloilo. Subtitled, ‘How Social Enterprise is Changing the World’, it brought together different advocates of social enterprise to share their perspectives and experience  in this field (myself and Reese included :p). The invitation was given out by lead organizer (and Iloilo councilor) Jason Gonzales, a friend whom I last met in the Peace & Equity Foundation Social Enterprise Conference held in November 2011.

The conference was like a reunion of sorts as Reese and I spoke with friends and colleagues Tito Tony Meloto (Gawad Kalinga Founding Father), Mark Lawrence Cruz (Gawad Kalinga), Dylan Wilk (Human Nature), Noreen Bautista (Jacinto Y Lirio), Rico Gonzalez (Managing Director of xchange, as well as a Hapinoy Board Member/Advisor) and Chit Juan (ECHOStore). Rounding up the group was Mark Yu, CFO of sponsoring company SeaOil, himself already getting more and more immersed in the Social Enterprise field.

An interesting factoid was that the venue was held inside an SM Cinema (hence the large backdrop behind the pictures below), and must have accommodated an audience of at least 1,000 Ilonggos – students, government officials, local businessmen and entrepreneurs, academe, and NGO/social enterprise practitioners.

Mark Lawrence Cruz, one of the leaders of Gawad Kalinga, did the honors of hosting the event. He is certainly one of the most passionate advocates of GK, poverty alleviation, nation-building, and social entrepreneurship.

Noreen Bautista, co-founder of Social Enterprise Jacinto Y Lirio, started the series of talks. The main message she shared was this – NOW is the ideal time to be young and to start a social enterprise. This is not only evidenced by the impact that J&L has done through community development and eco-fashion, but also further reinforced by young social entrepreneurs in GK’s Center for Social Innovation. In her talk, she also reminded that we first met when I myself shared about social entrepreneurship in her Ateneo Student Leaders Assembly (ASLA) batch; In a sense, it felt as if things had come full circle, and it was certainly great to see Noreen inspiring the next generation of social entrepreneurs.

Tito Tony Meloto, Founding Father of Gawad Kalinga and national icon delivered the keynote. The visionary TM found himself back home to Iloilo where he has his roots (in fact, the first five minutes of his talk were done in native Ilonggo). He then shared the story, mission, of vision of Gawad Kalinga – on poverty alleviation and nation-building – and how it is now moving from housing/community development into social entrepreneurship. Whereas the first phase of GK focused on providing land for the landless and homes for the homeless, the current phase now focuses on enterprise and livelihood. This has come to life through the Enchanted Farm – a social enterprise incubator / platform – the first site of which is in Angat, Bulacan. I’ve visited it quite a number of times and I must say that exciting times are ahead in this space.

Mark Yu, CFO of Seaoil, then took the stage to deliver his insights on the emerging model that is social enterprise. I like Mark’s framework of how it merges two distinct yet related paradigms – that of Making a Million (Business) and Making a Difference (Philanthropy) – and making it work as a unified whole. True to form, Mark shared a well thought-out perspective , an example of which is how the value chain of customers-employees-suppliers-shareholders-community are reconfigured with the community as the primary stakeholder. Reese and I have known Mark from the Asia Society Philippines21 Young Leaders Network, and I for one am very happy that he is now beginning to apply his mastery of business into this field. (We talked a lot later that day on models and principles in social enterprise, and let me just tell you that it was quite the head-trip :p)

Dylan Wilk, co-founder of Human Nature, was as usual charming and funny, but still very effective in sharing the story of Human Nature, most certainly one of the most successful and scaled-up social enterprises in the Philippines. He started his talk by sharing the story of his transition from one of the richest young men in the UK into being one of GK’s staunches advocates and leaders – living proof that happiness is not always found in material wealth alone. In fact, he not only married to the GK cause, he literally married the daughter of Tito Tony, Anna Meloto-Wilk who is also the other leader of Human Nature (along with Dylan and Camille Meloto). Human Nature’s principles are Pro-Poor, Pro-Environment, and Pro-Philippines, and it is indeed gratifying to see how they are rewriting the rules of business as they further grow.

Reese Fernandez-Ruiz, President of Rags2Riches, talked of R2R, but wove it intricately with her message of interconnectivity – of how the decisions we make inadvertently affect the lives of others. She herself knows this from fact, having been awarded a scholarship by individuals whom she has never even met! That generosity certainly led to her Ateneo education which in turn molded her into the person that she is today. I myself firmly believe her perspective as well (and not only because she’s my wife :p) -

Rico Gonzalez then talked on the topic of navigating the start-up stage of social enterprises. Funnily enough, the topic requested of Rico was ‘avoiding the pitfalls of social enterprise’ – hinting of his pragmatic and well-studied approach to things. (On the side, Rico and I work closely together in Hapinoy, and I must say that his perspective and help has been instrumental in sharpening our thinking and actions). He talked on building business models (check out www.businessmodelgeneration.com) but perhaps the line I take with me from his talk was this – ‘Huwag mong isipin kong mahirap, isipin mo kung mahalaga’ (Don’t ask if it is difficult, ask if it is worth doing).

I then shared on – what else but Hapinoy of course! The organizers wanted me to talk on Innovation in Social Enterprise, and so I touched on how we can imagine and innovate on simple things – Hapinoy+ Stores from the humble sari-sari (sira-sira) store, Rags2Riches’ High-end Eco-Stylish Bags from recycled scrap, and Gawad Kalinga’s revitalized communities from slum communities.

Chit Juan rightfully ended the conference, touching on a lot of key points that all the previous speakers had elucidated on during the day. Chit of course has been one of the pioneers of social entrepreneurship (having gone the transition from being an entrepreneur-leader) – it just really seems that it is in her blood and DNA! Her social enterprise, ECHOStore, has now  diversified into multiple lines – touching on retail, community development, a design lab, and now even ECHO markets. She’s relentless – a true social entrepreneur.

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To end, I just want to give a heartfelt thanks to the organizers – the hospitality and warmth was just so inexplicably tangible! Jason, Rose, Churchille, Tahani, Joey, Tajen, Frances, Chris … you were such gracious hosts and hostesses – thank you so much and hope to see you in the upcoming Bootcamp in GK’s Enchanted Farm!

I recently gave a talk in TEDx Xavier School;

The conference’s theme was “Innovation Built on Tradition” and as I mulled over it, I of course couldn’t help but relate it to our work in Hapinoy – on how the humble, traditional sari-sari store is slowly but surely being reinvented through our program.

This then totally coincided with a simple yet profoundly powerful idea that Hapinoy is living out – the idea that Small is the New Big*
(*no relation to Seth Godin’s book)

I could write about it, but I realized that it would be infinitely easier to just post the video. Let me know whatchathink :

That sounds way too sensationalistic, and it probably is. But the drama of that statement is certainly rooted in truth.

Allow me to explain.

Several years ago, I got enamored with the concept of ‘innovation’.

So much so, in fact, that it became a personal buzzword, advocacy, unifying battle-cry.

I read all the books and delved into all of the websites. Innovation and Entrepreneurship. The Innovator’s Dilemma. Innovation : The Five Disciplines. Closing the Innovation Gap. Innovation to the Core. Open Innovation. Innovation Nation. Innovation X. If the book had the word ‘innovation’ in its title (even the sub-title), it had a 90% chance of ending up on my bookshelf. I would get indoctrinated in the religion of IDEO (the Shopping Cart video and the innovation bibles, The Art of Innovation and The Ten Faces of Innovation).

For a time, some really cool friends and I put up Kolektib – an Innovation Hub in the creative hustle-and-bustle of Cubao X. We did Innovation Workshops internally and externally. It was an exquisitely fun time.

Even social entrepreneurship, for me, was a form of innovation – albeit social innovation. Hapinoy and Rags2Riches are expressions of melding social development with business models, a rather revolutionary approach which would certainly qualify as innovating.

I eventually synthesized my knowledge. I wound up conceptualizing, creating, and teaching a class in Ateneo on Innovation. It would tackle the why’s, the what’s, the how’s of the topic. I wanted to transmit the spirit to a next generation of innovators which would try to conquer and/or change the world.

The one line i always wanted my students to remember : Innovate or Die.

But beginning last year, my innovation lens would slowly shift. Not on a different tangent, but rather on a different depth.

I’m significantly more experienced and quite wiser. For all intents and purposes, I’ve changed. But more importantly, the world has changed at a mind-spinning rate – far outstripping my own evolution.

The first decade of the 21st Century was characterized by dizzying change, hyper-competition, unbridled growth – all of the factors that led to an innovation explosion. Globalization was at full-swing, the Internet began to fulfill its promise of changing everything.

And everything seemed possible. Growth was so palpable and reachable, and so businesses began pouncing on the massiveness of the opportunity. Driven by sheer momentum, they just plowed full steam ahead.

An innovation avalanche would ensue.

Innovation and Design consultancies would have a field day. So many new products, services, processes, and business models would emerge. I should know – it’s what I taught :

How Zara had reinvented the supply chain, allowing them to launch new fashion lines at lightning speed.

How the Wii would tackle the Blue Ocean of game consoles, beating the higher-performing Xbox 360 and Playstations by going on a different tangent and tackling non-gamers.

How Procter & Gamble used Open Innovation and launched connect + develop, unleashing a torrent of growth for their brands under AG Lafley’s watch.

More consumers were opening their wallets, and companies were feasting.

But towards the end of the decade, the world would undergo yet another step-change, perhaps an even larger one than the last.

Crises of global proportions would enter the lexicon.

A financial crisis would infect the world over, leading to national economies teetering on the brink. It was a full-blown meltdown and it washed over countries like a worldwide tsunami.

And speaking of tsunamis, the world became a real-life disaster movie. Environmentalists have been banging the alarm bells on the planet for so long, but it’s certainly only in the past few years that climate change has become real to the person on the street. When Typhoon Ondoy hit the Philippines, it was a shock to the system – it dumped one month’s worth of rain in half a day, causing floods in areas we never imagined were possible.

This climate change crisis is of course linked to to the energy crisis – our over-dependence on carbon-based fuels. Generations ago it wasn’t tangible, but now we see just how finite non-renewable energy is. It’s like we’ve got lung cancer and yet ironically still need two packs of smokes a day just to keep on moving.

And while all this was happening, the gap between the rich and the poor continued to widen. The proportion of the world’s population that survives under $2 a day still goes between a third to one-half of the total human race! (depending on which statistics you look at). Without a doubt, the population and poverty crisis continues to rear its ugly head.

And so in the span of a decade, we went from an age of seemingly unbridled growth … and plummeted into an age of uncertainty. An Age of Massively Complex Problems.

And that’s why a nagging feeling in my gut gradually snowballed, until my lens shifted.

I remember some of the projects that were conceptualized in my Innovation Class. A better kind of toothpaste. Refillable packaging for laundry detergents. Heck, even an innovative cigarette that would light without matches. Of course there were some that were more interesting – especially those who were in the social innovation track.

But with all due respect to my former students, it was the teacher who was at fault. We were thinking too small. We were throwing our energies at the wrong things. (just look at my slides)

Power is useless, if misdirected. Same goes for Innovation.

Innovation is good at tackling any problem, but it can be so much greater if it tackled the right ones.

And so I’m drawing a line on the sand, demarcating where my old thinking ends and my new perspective begins :

The only problems worth solving, worth investing your life in, are meaningful ones.

In an Age of Massively Complex Problems, do we really need to design a better toothbrush?

Do we still want to use innovation to drive unbridled growth and overconsumption, for things that people don’t really need but we’d just want them to buy?

Do we want to continue ransacking the planet with novel products that don’t really add anything extraordinary to people’s lives?

I say, that may have its place in the world, but certainly not in mine.

I will invest my time, my resources, my life, in innovation that, frankly, matters.

Meaningful innovation that adds real value to people’s lives, that tackles real problems plaguing individuals, society, and the world.

A lot of Big Problems. A lot of Big Opportunities. A lot of Big Innovations needed.

I call this new evolution of my definition, Innovation(+). Innovation plus, Innovation positive, Innovation with meaning.

The time has come for us to put collective energies into innovations that can create positive differences in people’s lives, for society, and the world at large.

We need platforms for participation; Heck let’s take it a step further as Platforms for Activation – where people are actively engaged in helping things move not just onwards, but upwards.

And so it’s in these specific challenges that I will be investing my energies on :

1. Social Innovations at the Base-of-the-Pyramid
- How can we co-create business models, products, and services that serve essential needs for those that live under $2/day?
- How can we make the poor active participants and co-creators in the common drive to get them out of poverty?

2. Development of Technologies, Products, and Services that Positively Advance the Human Condition
- How can we create new innovations in education, healthcare, energy, and communications that sustainably serve the needs of this generation and the next?
- How do we use innovation and design thinking to tackle everyday problems of society – traffic gridlock, transportation, crime as some examples? (in fact, IDEO has evolved Design Thinking into tackling Big Problems – just look at Open IDEO).
- How can the Big Brands, Big Products, and Big Services reinvent themselves into positively advancing the human condition?

3. Harnessing the Web for Massive Connection, Collaboration, and Change
- As I mentioned earlier – how do we create Platforms for Activation? I can think of no better example than how Iceland recently engaged its citizens to write the constitution.
- How can we use web to either rebuild or create new institutions? Financial institutions, Educational Institutions, Healthcare Institutions, even Governments?

4. A New Kind of Society
- How do we transition a paradigm shift from the traditional economics of GDP into one that measures happiness and prosperity?
- How do we go from unbridled production-consumption-growth into true, sustainable living?
- How do we balance the currents of globalization, localization, and community?

5. Innovating for The Planet
- There’s just no way getting around tackling the Climate Crisis head-on, it’s quite simply the biggest problem that we as a collective species have to contend with.
- In fact, I love what Al Gore writes in his new book/app ‘Our Choice’. In addressing the Climate Crisis, he wants ‘to make the rescue of civilization the central organizing principle of our politics, economics, and action.’

So there. A new personal roadmap, a clearer direction, a manifesto on where I wish Innovation+ will go. Where it will take us, or where we can drive it towards.

One of my all-time favorite quotes is by technologist Alan Kay – “The best way to predict the future is to invent it.” Such wise words in an Age of Massively Complex Problems, an age which needs more and more of us to do Innovation(+).

My personal dreams exist on several levels – for myself, my loved ones, my ideas, my causes, my enterprises, and of course, for my country (and if imagined at the highest levels, perhaps the world-at-large :p)

For the Philippines, specifically, I’ve always dreamt that I can have the biggest impact from my chosen field of business and entrepreneurship. I never aspired to be a politician, a social worker (in the purest sense), or an artist. I took up a business degree, worked in the corporate sector, and eventually transitioned into my current life’s work in social enterprise and innovation/design thinking.

The perspective I’ve been carrying for the longest time is that business and entrepreneurship can help eradicate poverty, create jobs and opportunities, and move our country along a positive economic trajectory. The Philippines will be globally competitive, world-class, “developed”, and recover our ‘lost glory’. Using economists’ jargon, my dream was that the Philippines will hurtle from the Third World into the First.

But for these past few months (probably even years), I’ve begun to challenge this long-held belief.

Picking up on the First World-Third World economic dichotomy, things don’t look so rosy on the other side of the fence, if you ask me. The developed world’s financial markets reached near-critical meltdown while the emerging markets held their ground; Unemployment and unrest in America is reaching fever highs, while Europe’s social safety nets are being challenged – the discomforting examples of Greece and Ireland coming to mind immediately. The question we ‘Third-World’ Citizens have to ask is this – is this what we want to aspire for? What our dreams will ultimately add up to?

I’ve got an even simpler example to illustrate my point.

I have a European friend who lived in a country where everything just works – the trains come and go on time, one can make a very decent living, government is reliable, personal security is not a day-to-day battle, and so on and so forth. He was living it up in a “developed” environment.

But this is what’s peculiar – he turned his back on all of that, and of his own free will, decided to move here to Manila – here, with all our flaws, our poverty, our corruption, our chaotic public transit systems, our social problems.

Why?

Why did he seemingly “regress” from the First World into the Third?

My friend will answer you with a straight face : Because he wasn’t happy there. And it seems that he is “happier” here.

Of course one could probably argue that he has money and that’s why he doesn’t contend with being poor the way a majority of Filipinos are. Yes, I agree – and I will revisit that point later. But let me tell you as well that he is certainly not living a lavish lifestyle. He’s got some level of financial security, he put up a small business, and yet he is certainly not living like an expat. In fact, he is renting a small house, commutes using our jeepneys, MRTs, and taxis, and quite enjoys going to un-airconditioned public markets to buy fresh meat and vegetables. It’s a simple lifestyle – and certainly a far cry from what he was used to.

My point is this : our concepts of progress or regression between First World and Third World, Developed and Developing – these concepts shape the direction of our aspirations and our dreams. The current mindset, the current dream – is that we want to go from Third to First, from Developing to Developed, From Emerging to Emerged. But if we look at all the latter examples of First, Developed, and Emerged – again – is the grass really so much greener?

I’m not trying to create divisiveness nor incite misplaced arrogant comparisons – it’s certainly true that Third World, Developing, and Emerging countries have their own massive issues to contend with, and are in certain cases ‘worse off’. We’re not model citizens nor countries of the world as well, if you ask me. And as such, I’m not suggesting that the direction – the aspiration – should be from First to Third, Developed to Developing, or Emerged to Emerging.

What I am saying is this : whichever side of the First World-Third World dichotomy you’re on – your aspirations, your dream – should be oriented towards the ‘right’ things;

It’s not all about the economy, the GDP, the productivity nor the consumption statistics -  all of which are the variables of how most most of the world measures progress now. (I do recognize that the Millenium Development Goals have elevated the conversations beyond GDP, and this is a great example of the direction we are moving towards.)

Hit me on the head for probably being way too late to the party, but I’ve now begun to realize that economic development is a must, but it is certainly not a panacea. And for somebody who’s held that lens for the longest time, it’s quite the personal lightbulb moment, to be brutally honest about it.

Yes, the Philippines must no-holds-barred tackle poverty head-on. Yes, our GDP must indeed grow to create jobs and opportunities – we most certainly need progress in that sense. And yes, economic solutions could certainly be one of the magic bullets. But yes, all this movement, all this “development” – should lead to a situation not just of wealthy unsatisfied people living lives of unbridled consumption but – pardon my being philosophical about it – a state of happiness.

Happiness.

It might sound too simplistic, too dumbed-down, too abstract, even. How in the world do you intend to measure that?! But at the end of the day, as human beings – isn’t that what we should all be aspiring for, dreaming for? Not just for ourselves, our families, our friends, our communities … heck, yeah … our Countries? Our World?

I’ve met a lot of rich people in my life, and my current work keeps me in touch with a lot of poor people. And I tell you, the latter – despite their lack of material wealth – seem sincerely, genuinely happier. I don’t want to romanticize this. The poor certainly have aspirations to get out of poverty : decent human standards will just have to be met – food, shelter, clothing, education, livelihood, dignity of work. And yes, wealth is always something that people naturally aspire for. But it’s certainly not a trajectory of unbridled greed, excessiveness, and consumption (which is what has happened in ‘developed’ economies and is the scary direction of the rapidly-’developing’ ones).

So to this piece on wealth I say, maybe it’s not just about material possessions and riches per se, but prosperity. Having what you want in life, without going overboard.

Happiness, and Prosperity.

I think it’s what we should all be aspiring for – regardless if you’re First World or Third World, Developed or Developing, Emerged or Emerging.

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The American Dream has been a light for countless of people and generations : that a nobody – regardless of race, religion, or social class – with nothing but the shirt on his/her back can go to America and realize wealth if s/he works hard enough.  It is an idea of a country wherein opportunities are abundant, and a comfortable life is realizable. Just think of all those Filipinos migrating to the US in order to chase that dream (and for quite a number, indeed achieving that). The American Dream, for most people, has become the poster child for finding, realizing, and achieving material wealth and prosperity. (let’s take current situation aside – I really believe that the US will bounce back).

But a lot of people often forget that the United States Declaration of Independence proclaims that “all men are created equal” and that they are “endowed by their Creator with certain inalienable Rights” including “Life, Liberty and the pursuit of Happiness.”

Again – it’s not just about material wealth, it’s about prosperity. And this prosperity is just a means to an end – the end of which is the pursuit of Happiness. It’s what people seem to have forgotten, drowned out by the glitz and glamor of excessive wealth, debt, and consumerism.

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If you ask me, that’s what my dream is now – Happiness, and Prosperity. (side note : how to measure all of this – I leave all the economists and social scientists to figure it out. But as in the Little Prince, “what is essential is invisible to the eye”.)

Happiness, and Prosperity.

Yes, I still want my gadgets, a nice house, a comfortable life, the occasional vacation. But i want just enough, just enough. I would never trade excessive material wealth for my peace of mind and the genuine happiness of being alive where I am now, and where I’m headed in the future.

Happiness, and Prosperity.

It’s my dream for myself, my loved ones, my ideas, my causes, my enterprises, and of course, for my country, my world.

Let’s Re-Dream.

Let’s re-dream our country into an idea – an idea that we say ‘No’ to the current dominant logic of First World and Third World dichotomies, of being beholden to measures of “global competitiveness”, of being measured by standards not our own.

We can become an idea – an idea that we stake and fashion our dream on our own terms, and this dream at the very end of the day is rather simple, so simple and yet possibly so beautifully powerful – the idea that our country is a place where Happiness and Prosperity are ultimately realizable.

So I had my car’s compressor (an integral part of a vehicle’s air-conditioning system)  replaced the other month, and it cost me an ouch-worthy twenty thousand-plus pesos.

I for the life of me have absolutely no more use for it. And so I asked around on where I could sell this worn-out piece of machinery. It turns out that the only establishment that will accept it is a junk shop.

And so I canvassed across a few of these junk shops. I then realized that this one-time twenty thousand peso spare part was now going for the princely sum of – uhmmm, five hundred bucks. That’s a full 97.5% percent depreciation of it’s original value!

For all intents and purposes, the compressor can now only be remelted as scrap metal.

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In my innovation class, I share a personal observation on the proliferation of junk shops around the Philippines. It’s a phenomenon you’ll see whether you’re in the city or in rural roadsides.

There are apparently a lot of Filipinos who reap the residual value from trash by transforming it again into raw material. The peculiar thing though is that a junk shop is agnostic on the throwaway product – it can be a laptop, a chair, a compressor, a high-end watch – once melted, they all transform into un-engineered homogeneous steel. This is why the way scrap material is bought is in volume and in weight – the ubiquitous ‘per kilo’. Plastic will fetch X amount per kilo, steel will fetch Y amount per kilo, Rubber is at Z and per kilo, and so on and so forth. And as my personal experience with my compressor shows – the value plummets dramatically with this process.

Now, in the same vein of talking about junk shops, I also share a perspective on how innovation creates more worth as you go through the value chain – the process wherein one goes from

Raw Materials > Product Design and Development > Production > Distribution > Marketing & Sales

In other words, the process whereby inventors, engineers, designers, entrepreneurs – a.k.a. innovators -  take the raw material and layer more value by identifying critical market insights, and then develop and make products and services that people need and are willing to pay for.

Now that’s not as easy as it sounds – there’s a lot of thought and investment that goes into the innovation process. But it’s precisely this line of thinking that begs the question, the choice :

Do we extract, manufacture, or recycle raw materials – OR do we layer on insight, engineering, and design to create a much-more valuable product? It’s a fundamental choice between producing a P500-peso piece of scrap metal or a P20,000-peso compressor.

Put another way : Do we want more junk shops – or more design and production shops?

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For me, the proliferation of junk shops already shows which side of the fence the Philippines is on. It seems that we’re focusing on the low-value side of the spectrum. Even worse, we’re moving backwards through the value chain – we take something valuable and take the easy way out by simply reworking them into scraps. By doing this, we actually end up depreciating and devaluing products!

This now results in a downward spiral because we’re not creating the products and services that people want – and hence we end up having to rely on other people – other countries – to fulfill this gap.

As such, I think that as an individual company, or at a much more macro-national level, we’ve got to seriously consider the following options :

1. Move through the Value Chain

We’ve got an abundance of raw materials – let’s take it through its logical conclusion and move across the value chain – processing, production, packaging, design, and marketing. In the Philippines, a simple example could be  processing of agricultural products into packaged goods. But aside from this, there are more industrial areas that we can certainly enter.

2. Innovate!

Discover, engineer, invent! Countries with much less natural resources than us are sourcing raw materials elsewhere and yet are able to transform these very same materials into higher-value products. There are so many entrepreneurial opportunities out there – so many industries and products that the ever-evolving marketplace is demanding, running the gamut from food to daily needs to technology.

Now, this is actually the stand that InoventDesign is taking.

3. Upcycle!

if we must deal with scraps, then let’s make sure that whenever possible, we create more value and not just regress back to low-value raw materials. There are certainly environmental benefits on recycling; But the truth is that sometimes, the energy and costs used to transform scrap waste into raw materials is more expensive than just extracting new raw materials.

This approach is obviously the one that we are taking with Rags2Riches. Scrap pieces of cloth have become high-end designer bags – thus resulting in high-value impact.

Even in such a simple business as Hapinoy’s Sari-Sari Stores – a business as relatively low-value as junk shops (especially since it’s retail rather then production) – we are also grappling with value creation. Our roadmap is precisely on a long-term trajectory to create new wealth for the communities. (read : watch this space for the next few years)

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It’s certainly my hope that we as Filipinos create world-class products and services. Let’s not be content with mediocrity!

If we really want to build a better future, we’ve got to rethink the fundamental logic of our businesses – are we happy to take leftover scraps, or do we want to create more value?

I recently got an invitation from INSEAD to become an SEiR (Social Entrepreneur in Residence) – essentially interact with MBA students to share my experience as a social entrepreneur. It’s done in-campus, and is in the form of consultations and talks.

Coincidentally, Reese’s Rolex Young Laureates Awarding (woohoo!) was slated in Geneva, and so we were able to request a stopover in Paris so we could drop by the INSEAD Campus. So the good news is that Reese and I were both able to go as SEiRs.

Now, the INSEAD Campus is actually not in Paris but in a beautiful area called Fontainebleau, accessible rather speedily forty minutes away by train.

Now, the experience of taking a train is not something new for me; I’ve previously taken them when I was in the US, and also when my family took a vacation in Europe.

But for some reason or another, on this particular train ride some thoughts struck me.

What I realized – and pardon the simplicity of this insight – is that this efficient transport system facilitated easy, daily flow between Paris and neighboring areas outside the city. It’s fast, and it’s comfortable.

It actually made a daily commute possible – bridging the gap between one’s work and one’s home. In fact, Christine Driscoll of INSEAD is a reverse-commuter – she works in Fontainebleau, yet lives in Paris. What this does is it makes decongestion of urban areas possible – allowing people to live outside the city, yet work in the city (or in Christine’s case, the other way around) – a dichotomy solved by infrastructure.

While looking outside the window during the train ride, I reminisced on my personal experience of driving from Manila to visit our Hapinoy Communities outside the city. I only know of two ways to do that – 1. using one’s personal car, as in my case – or 2. riding buses, which tends to take more time (and if recent news reports of accidents are any indication, becoming slightly more dangerous).

But what if the Philippines had a very good consumer railway system? Trains that make the link between Manila to  the South or the North easy? It would certainly make access to jobs in Manila easier, and possibly stem the rural-urban migration flow  – which leads to high urban density, squatters, and eventually poverty. (To be quite honest, i’ve factored out the carbon footprint of this daily flow in my thought process).

I know that there have been plans to put up a train system, but to date they are still just that – plans. Most of the recent investments has gone into highway infrastructure – and indeed we’ve seen marked increase in travel speed (and a corresponding increase in toll rates). But what it has essentially done is decongest traffic on the expressways – an issue trains really wouldn’t have to deal with.

So why don’t we have trains?

Maybe it’s politics, or political will. Maybe nobody has just risen up to the opportunity. Or maybe there are engineering challenges.

As I was thinking about it, perhaps it’s also at heart an economic issue. And this is really what struck me.

Quite simply, taking the trains is expensive. Paris to Fontainebleau already cost almost 10 Euro – PHP600 – per head, one way! So assuming we could perfectly transplant the cost structure to Manila – that means commuters would have to spend PHP1,200 just on daily transportation!

I’m feeling a bit nerdy right now, so let’s factor in a cost-of-living and currency adjustment with an ummmm, a McDonald’s Cheeseburger Meal Index; A cheeseburger meal in France is roughly 300% more expensive than in the Philippines. So, doing the math, that means the daily train commute could be around P400 (1/3 of PHP1,200).

The brutal truth is that PHP400 is around the minimum wage in Manila. So for the trains to make economic, sustainable sense, people should be willing to spend their entire salary on getting back and forth, something that is obviously not going to happen.

It’s just not affordable.

In fact, a couple of months ago there were news reports that the in-city metro trains are being dramatically subsidized by the government. It is actually costing the government millions (if not billions) of pesos in losses just to be affordable by daily commuters.

I don’t think the solution is in subsidy.

The root insight that I’m really getting at here is that we need Filipinos to get higher salaries. And people will only get higher salaries if they do work that has higher value.

Again, very simple thoughts.

But that IS precisely what we need.

We need better jobs that simply pay better. We need to build up our skills. We need to work ourselves up the value chain.

Now, I’m obviously not wearing my perspective as a social entrepreneur working with the poor with my thoughts here – that is an entirely different model driven by extreme affordability and livelihood creation. And I’ve certainly shared a lot of my thoughts on that already.

What I am certainly talking about is a burgeoning Filipino middle-class, also a concrete driver of growth and development for the country.

What are the industries of the future? What are the valuable jobs that will be created by them? And how do we build our human capital to precisely take advantage of these opportunities?

Interesting questions driven by a simple train ride; Certainly one that I’ll be seeking answers to in the coming years.

i wish this was for Social Enterprise of the Year – to recognize the HaPeeps, CARD, and of course all the Hapinoy Storeowners

Paolo Benigno Aquino IV
Mark Joaquin Ruiz
President/Managing Director
MicroVentures, Inc.

“Two roads diverged in a wood, and I — I took the one less traveled by, And that has made all the difference.” These often-quoted lines by poet Robert Frost aptly describe the journey of school friends Paolo Benigno “Bam” Aquino IV and Mark Joaquin Ruiz. Years later, their minds would meet and together would embark courageously on the road not taken. They would co-create a revolutionary microenterprise business model to address the economic and social inequity for those marginalized by the status quo — the more than 50% of the total Filipino population who lives on less than $2 a day.

They had gone on different career tracks after graduating with Management Engineering degrees from the Ateneo de Manila. After college, Mr. Aquino established himself in the public service sector, while Mr. Ruiz ventured into the corporate world.

“I always considered myself a social entrepreneur,” Mr. Aquino says, “because I was driven by a strong public service perspective.” As a fresh graduate, he joined the ABS-CBN Foundation’s Special Projects Group and was involved in a rehabilitation center for abused and neglected children, disaster management projects, relief operations and volunteer recruitment. He then spearheaded the National Youth Commission as its commissioner-at-large in 2001 before becoming its chairman and CEO in 2003. “In government, I witnessed programs that had short-term gains but no long-term effects for the people it served. That influenced me to think of something that could make a lasting, transforming difference for Filipinos.”

Mr. Ruiz, on the other hand, joined global company Unilever as customer development executive and merchandising supervisor. There he honed his skills in customer marketing, promotions development and planning. In just six years, he rose to the position of senior customer marketing manager and CMD head. Mr. Ruiz says, “Unlike Bam, I only considered myself an entrepreneur when I resigned from Unilever to collaborate with him. But being in sales and marketing, I always pushed for social development through innovation and entrepreneurship — the intersection of my passions and skills.”

Mr. Ruiz’s experience in marketing fast-moving consumer goods led to the idea of leveraging on the Filipino sari-sari or convenience stores, usually found in lower-income communities, that make up around 40% of total retail sales in the country. Seeing both the problems and the potentials of the sector, they theorized that for the stores to grow and be truly viable, they needed to enter a new phase of microentrepreneurship development.

After exchanging ideas on innovative microfinance development with like-minded individuals — among them Dr. Jaime Aristotle Alip, founder of the Center for Agriculture and Rural Development-Mutually Reinforcing Institutions (CARD-MRI) and with whom they would eventually tie up — Mr. Aquino and Mr. Ruiz concretized their plans and developed a business plan for aggregating microretail outlets, which led to MicroVentures, Inc. (MVI)

MVI started its formal operations in 2007 as a social business enterprise working with CARD-MRI and its borrowers through its flagship project, the “Hapinoy Store Program.” A combination of the words “happy” and “Pinoy,” Hapinoy aims to “make every Filipino happy” by using an ecosystem management approach to improve local microenterprises. Through the program, a borrower who has top credit scores can borrow capital to convert an existing convenience store into a small Hapinoy Store or a larger Hapinoy Community Store, which serves over 50 small stores.

Recognizing that sari-sari stores are usually owned and run by the woman of the household (the mother or nanay), the Hapinoy Program focuses on increasing these Nanays’ profitability. Nanays are given access to business management and marketing knowledge through the “Path to Prosperity,” a four-tiered program designed to assist a fledgling Hapinoy store. Mr. Ruiz says, “We believe that empowering the woman microentrepreneur is a pivotal factor in reducing poverty. Increasing her profitability leads to an improved quality of life for her family and her community as well.”

The Hapinoy Program harnesses the potential of smaller enterprises through microfinancing, aggregation, value chain integration, business model innovation, branding and training. By linking Hapinoy Stores with established manufacturers and microproducers, MVI brings sari-sari stores into an organized supply chain. Moreover, MVI is able to get goods directly and at a lower cost and is able to pass these savings on to Hapinoy Stores. “Our partner companies do very well on their own, but they also see the intrinsic value in helping the community,” Mr. Aquino says.

As marketing and branding consultant, merchandise consolidator and training provider, MVI teaches each Nanay to make her own business more resilient, profitable and sustainable. Through a training program named Sariskwela, members are equipped with best practices on pricing, inventory and credit management, business expansion and goal setting. Veering away from the traditional patronage relationship between an organization and its beneficiary, Hapinoy empowers each Nanay to be a proactive manager accountable for her own business decisions. While the program teaches each Nanay ways to increase her monthly earnings from P3,000 to P18,000 within six to eight months, MVI’s ultimate goal is to improve her entrepreneurial ability and, consequently, her family’s livelihood, self-esteem and dignity.

In this respect, the Hapinoy Program is different from similar microfinancing or social enterprise models in Mexico or India, where the main focus is on raising funds for the organization’s goals. Village stores in Southeast Asia exist but are not consolidated systematically. Mr. Ruiz mentions that international microfinancing organization Grameen Foundation has singled out Hapinoy’s uniqueness — while social in nature, it is run like a real business.

“We envisioned Hapinoy as a flexible and wide-ranging platform, giving us more areas of application such as retail, production, mobile banking, technology and healthcare,” Mr. Aquino adds. In fact, a grant from the Science and Technology Innovations for the Base of the Pyramid in Southeast Asia has enabled MVI to pilot its Hapinoy Health Hub, which makes affordable medicine available in Hapinoy communities.

Currently, there are 150 Hapinoy Communities of around 10,000 stores concentrated in Southern Luzon. MVI hopes to expand operations in North Luzon by next year and, eventually, establish a Hapinoy presence in every town in the country. Groups in other countries have also expressed interest in replicating the program, and both Mr. Aquino and Mr. Ruiz foresee international expansion.

Mr. Ruiz acknowledges, however, that the present business environment is not quite ready for large-scale social enterprises; for example, there is not much “patient” (long-term) capital source available given the developmental aspect, and for-profit organizations cannot accept donations without being taxed. Mr. Aquino sees this as an opportunity for advocacy, saying that, “It’s time more people push for social entrepreneurship. As donations for non-government organizations get scarcer, social enterprises need to take the lead.” Both believe that in the long term, they can help microenterprises integrate into the formal economy and create a system of entrepreneurs helping other entrepreneurs. They dream of changing the world, one happy Pinoy at a time — it is the road they have taken.

The Entrepreneur Of The Year Philippines 2010 is sponsored by SAP Philippines. Official airline is KLM Royal Dutch Airlines, operating on behalf of the Air-France KLM Group in the Philippines. Media sponsors are BusinessWorld and the ABS-CBN News Channel. The winners of the Entrepreneur Of The Year Philippines 2010 will be announced on October 12, 2010 at an awards banquet at the Makati Shangri-La Hotel.