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). In fact, it was a dream come true when I met Brian Quebengco and became a partner in the industrial design firm, Inovent.

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(+).

Awakening a ‘Sleeping Giant,’ Microfranchise as a Distribution Platform

The following is the full transcript of an interview with Mark Ruiz, the co-founder of Hapinoy, a franchise of sari-sari stores in the Philippines.  It is a companion piece to an article published on NextBillion.

Develop Economies: How did Hapinoy start? What, in your opinion, was the problem? Why is Hapinoy the right innovation for solving this problem?

Mark Ruiz: Hapinoy started as a fusion of paradigms, ideas, and people. In terms of paradigms, we wanted to fuse social development with the discipline of business. It started a combination of people from social development and the business sector. We wanted representation from a diverse set of relevant backgrounds, including microfinance, NGO’s, government, as well as corporate experience in distribution/marketing/sales/advertising, and entrepreneurship.

There were three fundamental problems we were looking at:

1. The products and services needed by the bottom of the pyramid (BoP) don’t reach them. The operative word is needed – for example, medicine, water, and electricity.
2. The products and services that do reach the BoP end up becoming more expensive due to distribution inefficiency. The poor end up paying more for noodles and shampoo than those who have money!
3. The BoP doesn’t have access to market opportunities, whether it is sari-sari stores looking for financing, new businesses, etc. or microproducers looking for a distribution/market for their products.

There’s a fundamental gap to the BoP. So we ask ourselves – how do we bridge this gap? How do we enable the last mile and bring products, services, and opportunities to where they’re needed the most?

Now tackling this problem could have different approaches. Do you create new infrastructure? Do you set-up new large distribution chains and mechanisms? We thought differently by asking ourselves – is there something that already exists which we can just tap and build upon?

Well, it happens there is something that already exists. Sari-sari stores, the smallest unit of retail in the country due to being such an easy microbusiness to set-up, have literally sprouted in every nook, cranny, and village in the Philippines. In the furthest regions and areas, you’ll find a sari-sari store – in fact there are almost 700,000 of them nationwide. In aggregate, that’s potentially 40% of all retail in the Philippines.

These sari-sari stores have been largely untapped because they’ve mushroomed independently and thus have no unifying system por organization to unleash that inherent power. And so what MicroVentures/Hapinoy is doing is merely awakening a sleeping giant – a human network of microentrepreneurs at the BoP that can band together and realize their strength. And as we organize these sari-sari stores together, we then create a vibrant alternative channel to bridge the gap to the BoP. There is no need for costly set-up of infrastructure. It sounds funny, but the best way to reach the BoP (the people), is actually through the BoP (the sari-sari stores) itself. It’s a distribution platform made up of the poor, in order to help the poor.

So the approach is – if we help the Hapinoy Sari-Sari Stores, then we are able to achieve the goal of reaching the BoP – and thus bring products, services, and opportunities to where they’re needed the most.

For us, it’s the right innovation fundamentally because:

1. It’s sustainable because there’s an inherent business model in distribution, retail, production, marketing, and sales
2. It’s low-cost and modular, and thus scalable. Again, there is no need to add new infrastructure.
3. Most importantly, it’s a collaboration with the BoP to help the BoP, wherein everybody has a social and economic benefit, resulting in greater prosperity for all.

DE: What other organizations – for-profit or not-for-profit – influenced the Hapinoy model? Did you take some cues from the private sector (i.e. Coca-Cola or Wal-Mart, or SM)?

Mark Ruiz: In the beginning, we never saw ourselves as a big box retailer – in fact we were quite on the opposite end of the spectrum and rather than becoming a few-big, we would go into the many-small. (For a lengthier explanation, I blogged about this point as well http://ruizmark.com/2010/03/01/a-heritage-of-smallness-21st-century-bigness/)

There are fundamental lessons that we do take from big box retailers – eventual efficiency in the chain, influencing the right product mix, etc, but our initial inspirations were:

1. Microfinancing organizations (CARD) – especially since we are in strong partnership with them and they have already invested in MicroVentures. Dr. Alip founder of CARD is our vice-chairman; mainly because of the intention for poverty alleviation, the model of creating low-cost infrastructure to serve the poor and provide access to opportunities (through microfinancing)
2. Jollibee (the local McDonald’s) – not so much for food, but the branding. Hapinoy means Happy Filipino and we really wanted – from the very beginning – to create a powerful brand that Filipinos can resonate with, as well as something that sends a very positive message out there
3. Convenience Stores – although we would eventually realize that there are fundamental differences; But the inspiration for operations, systems, of discrete smaller stores that are widely distributed is there

DE: What do you see as Hapinoy’s biggest strengths (i.e. it’s ability to be used as a platform for other services, driving down costs for franchisees, increased income and employment for the poor, etc.)?

Mark Ruiz:

1. The Nanays (mother – storeowners) themselves. Hapinoy is working with them – we call them business partners, not beneficiaries – and it is really their entrepreneurial spirit which will make or break the success of the stores
2. From another perspective, we believe it’s fusing social development with the discipline of business that will poise us for scalability and sustainability
3. The innovation of the model itself – of creating the highways to the BoP (made up of these microentrepreneurs), transforming it into a platform for new businesses, which then allows us to bring products, services, and opportunities to the BoP where they’re needed the most.

DE: Where do you see the organization in a few years? What new innovations are you considering (i.e. healthcare hub, pharmacy program, etc.)?

Mark Ruiz:

1. Nationwide presence – to be in every village in the Philippines which is realizable because CARD, being the leading microfinancing institution in the Philippines with 1.3 million borrower-clients, is already there. That being said, Hapinoy is also an open model in the sense that we do work with other MFI’s, Cooperatives, etc so that they can become part of the program. Consider us the Operating System that can be fused in different hardware/computers – you’ll find Linux in Dell, HP, Acer, Asus computers. We can plug-in to multiple organizations.
2. Product diversification – especially branching out into solutions for the BoP e.g. solar, water, healthcare, health and wellness
3. Format expansion – into technology, nutrition, etc. we start small and simple and then go deeper. for example, for healthcare we wanted to start with Step 1 – distributing and retailing over-the-counter medicine first, and then explore higher-order models such as telemedicine, remote diagnostics etc – which is now our next phase.

DE: What key lessons have you learned about microfranchising? What has been successful, and what has been unsuccessful?

Mark Ruiz: We learned that, in the BoP, we have to change our notion of the term microfranchising. A lot of people consider it as just scaling down franchising models as we know it. But there are huge differences in the model once scaled down.

For example, a 7-11 or McDonald’s will look 100% the same everywhere you go. That is not so in microfranchises – we have to be comfortable that this is not a cut-and-dry business-in-a-box that will be cleanly perfectly executed in each node. Also, the people running the franchise are obviously different. The educational levels vary, which affects the training requirements, what can be implemented (e.g. technology, etc). On the business model, there should be very creative ways to generate revenue.

I’d say that the introduction of franchising in terms of systematization will come progressively, and then cap off at around 50% (as opposed to McDonald’s 100%). say for example, we start with financing systems, then assortment / inventory systems, then supply systems, then merchandising systems, and so and on so forth. there’s a phase-in. it’s actually a lot messier than a traditional franchise, but that’s the reality of working in this sector.

In behalf of our partners, SEVEN Fund and Fisherman Foundation, we would like to give our sincerest appreciation to everyone that submitted their entries to the Hapinoy Fisherman Breakthough Innovation Grant.

There were so many great ideas and your participation in the contest is overwhelming. Over a hundred entries from all over the world came in!

It was rather difficult to choose. For those who didn’t make it to the finals, it is still possible to pursue your idea for Hapinoy. We encourage you to e-mail us (info@hapinoy.com) if you’re interested.

With an equal representation from MicroVentures Inc., SEVEN and Fisherman Foundation, we are pleased to announce the Top 12 Ideas that made it to the finals. They are (in no particular order):

1. Social Solar Rain (Matthew Cua, Paul Cabacungan)

Our Big Business idea is for Hapinoy Stores to have 1 to 4 solar panels at the top of their sari-sari store with a rain catching system and a waste management system for their sari-sari store or even their community.

2. Hapinoy + (Sanjith Yeruva)

Hapinoy + is a hapinoy with medical diagnostic facilities.Modern medical diagnostic devices are portable, inexpensive and easy to use. A variety of diagnostics like  blood pressure, blood sugar level, temperature, cholesterol, pregnancy tests  etc can now easily be performed using these medical device. They are relatively inexpensive but not everyone can afford to own them. People have to visit a medical facility to undergo these tests and they have to needlessly spend time and money in doing so. Particularly people with certain medical conditions (diabetics) have to monitor their blood sugar level quite frequently. It is important to note that generally the cost of these medical   devices is low but the diagnostic strips required for the test are expensive. Besides the strips are usually sold in bulk and may require a refrigerated storage. Clearly these are limiting factors for a section of people.

The idea is to solve this problem by transforming hapinoys as personal diagnostic centers. A hapinoy can host a range of personal diagnostic gadgets readily available in the market today. Even uneducated and under privileged people can visit a hapinoy and avail these self service diagnostics with little guidance from Nanays

3. Clean Water System (Paul M. Cabacungan)

The stores can clean rainwater to produce drinking water. A simple off-the-shelf system with a UV disinfection lamp and a ceramic filter will purify rainwater to potable water. For those stores who are in remote areas without electricity, the UV filter consumes only 10 watts and it can be powered by a solar system.

4. Blocks of Hope (Mary Jean Netario Cruz)

Plastic Pollution is one of the major reasons of the last years “Ondoy” disaster that put Metro Manila under a devastating flood.  In spite of this horrible experience it has been noticed that drainage and floodways continued to be clogged by plastics.

An enterprising solution must have to be achieved to recycle and make money out of this garbage.  These plastics can be made into blocks where in it can be used to build a shelter.  Other use is it can be made into furniture, just like how lego works.

An electric block machine has to be designed, either for every home use or for cooperative to process the used plastic into a block. Each block will be sold to the one who build the house or create the furniture using the blocks as one of its major materials.  These manufacturers or engineers will design a system where all they have to do is to be like a kiddo playing creation from lego toys.  These blocks will be mainly to be used as walls, tables chairs or depending on the block per part design basis.

This will solve problems of the plastics and generate income for the household.

5. Hapinoy Tingi Tawag Abroad (Jimson Gelbolingo Ngeo, Lorlynn Asuncion Mateo)

With the sari-sari store’s current use of the telephone as a payphone for local calls, we are introducing a system that is simply an add-on to an existing service. To increase the revenue of Hapinoy Sari-Sari stores, we are proposing Hapinoy Tingi Tawag Abroad, which is a payphone service for overseas calls using Voice Over Internet Protocol (VOIP) technology. Using VOIP, calling abroad can be very affordable, accessible and easy.

An internet-calling kiosk can be set up in stores by packaging VOIP services like Skype or Vonage with a programmed computer server that is remotely managed. Hapinoy stores with the system can be loaded up with credits for overseas call. This is done alongside the existing payphone, using the same or a separate phone for ease of operation. The store may charge and monitor calls per minute.

A separate unit, who is the system provider, may be in charge of all technical responsibilities. The system provider will set up and remotely manage the system, create, monitor and load store accounts with credits. The store owners will only have to turn on the computer, log into their accounts and run the payphone business as they usually do.

6. Garbage for Goods (Ira Chloemn B. Daylo)

Individuals, households and establishments, expecially commercial ones like stores all produce garbage.  This big idea motivates households/individuals to access stores, not just to buy goods -for those who have the money.  But also to access the same to exchange garbage for goods sold in the store without using money -for those who have none or less.  The process starts with households bringing their clean garbage to a sari-sari store/Hapinoy community store, anytime this is open, which exchanges this for goods, of the same value, sold in the store.  Garbage collected by sari-sari/Hapinoy stores are picked up by Hapi delivery trucks, every time it delivers merchandise to these stores, and turns them over directly to recycling companies/manufacturing plants that Hapinoy has links with, also in exchange for goods.  Pilot testing of 1 Hapinoy community store, exchanging only used (clean) cartons, plastic  bottles and metal cans for goods will be for 1 year.  Expansion in other stores will be in Year II-III.

7. Job Bank for Communities (Trevor Chan)

Most if not all people who purchase from Hapinoy live on a limited budget. As such, we can infer that most belong to the E and D economic brackets. People in these brackets are  characterized as having low paying and menial jobs. As such, they eek better opportunities but just aren’t aware where to find them. After all, it is difficult to find work when their skills do not match those which are available for them – at least from their perspective.

Firms, on the other hand, face a different problem.  Private companies, government and households regularly hire labor but are faced with high fees from employment agencies. As such, these firms often chose to cut down on employment.

Given these, I propose that Hapinoy stores serve as “recruitment centers” for the public and for these firms. Essentially, Hapinoy will market the program to firms and households who will then pay a fee for each employee hired. Hapinoy will then distribute commissions accordingly to the store from where the hired employee was based. This system is competitive because Hapinoy targets unskilled labor which are often hired in bulk. Moreover, Hapinoy can afford to price lower than employment agencies because the system is just an add-on to existing revenue generating streams.

8. Strategy for Building the Nationwide Medical Database through Low-cost Diagnostic Tools in Hapinoy Stores (Marc Ericson Santos)

THE VISION: The Hapinoy network of sari-sari stores has a strong advantage in founding the Philippines’ medical database system. That is, every person in every barangay will have a secured profile that documents their health history at low-costs. WHAT HAPINOY NEEDS TO DO: Hapinoy simply equips sari-sari stores with cheap but high quality digital blood pressure meters, digital weighing scales and digital body fat analyzers that will cost around Php3000.00. Since its digital, it is easy to use and less prone to human error. Blood pressure, weight and body fat percentage are powerful indicators that allow doctors to monitor the health of little kids, pregnant women and people suffering from heart diseases.HOW THE SERVICE WORKS: Customer goes to the sari-sari store to have his blood pressure, weight and body fat percentage taken. The Nanay may also ask other relevant information like height, current illnesses, etc. The Nanay writes the information on paper (or on an Excel sheet, or on an Adroid-based phone application) and compiles all of the customer information for the week. Then, the Nanay brings these information to the local health center where that data can be encoded to the medical database.

9. Sari-Sari Jr. (Fernando J. Limbo III, Kevin A. Climaco)

Our big business idea is the creation of mobile sari sari stores which would act as a store annex. Each “bilihan” (place to buy) bike would be composed of a bike, a storage unit in the front, two side storage areas (by the wheel), and an umbrella. One of the side storage areas will contain house hold necessities (soap, shampoo sachets, etc.), while the other contains drinks. The front storage/ main storage; will contain food items, snacks,  popular ingredients, and daily special items which rotate based on need/popularity. The “bilihan” bike will also feature information boards on each of its sides which will contain important news headlines (local and national), fun facts, and miscellaneous information. The bikes will to travel various areas which contain several potential customers. In essence we bring the store to the consumer. It is important to note that the bikes not be generic, in that the store owners can decorate it in anyway they want.

10. hUPinoy (Lou Marvin H. Diaz)

Hapinoy stores can act as retail outlets of products produced by the Pilot Food Plant of the University of the Philippines-Diliman. 4th year students of BS Food Technology of UP Diliman engage annually in developing new, innovative, creative, cheap, and easy-to-make foods. Their direct market are the immediate population at the College of Home Economics. With Hapinoy, the market could be extended outside the premises of the college and in return marketing skills of the students will be further developed as they will hone their products to make them more appealing to a wider market. One major issue here though is patenting of the products – because this is a sensitive topic, I will leave it and make the refinement if the concept will progress.

11. Hapinoy Refilling Station (Anne Ong Lopez)

Hapinoy can serve as refilling stations of personal care items such as shampoos, body wash, lotions, insect repellents, hand sanitizers and even household items such as powder detergents and lubricants. Basically, items that can be easily and manually put into a container are targeted in this refilling station idea. This can be done so as to eliminate the use of sachets, given that sachets are being marketed so as to cater to the tight budget of lower-income communities. The upside of using sachets is that products now become more affordable for the communities. However, it can be noted that sachet packs are mostly made of plastics, which may then be carelessly dumped in improper areas, such as streets. What I propose is that small reusable bottles can serve as a replacement to sachet packs. When the bottle containing that certain personal care item is already empty, consumers may easily go to the Hapinoy sari-sari store and have the bottle refilled. This idea may serve as a trademark of each and every Hapinoy stores—serving as an eco-friendly reminder to the community such that they must be conscious about taking care of Mother Earth.

12. Happy Padala (Marc Ericson C. Santos, Rod Michael P. Coronel)

We envision Hapinoy to be a medium for money transfer between the clients of the store and their relatives in Manila, abroad or other places. Hapinoy stores shall make use of their Smart Money account that is tied to their BDO account. For example, Juan works in Manila and he wants to send 2 cans of sardines as well as 500 pesos to his family in Bicol. What he could do is use his Smart Money account and send the desired amount to a Hapinoy store near his family. The family then picks up the padala in the Hapinoy store. A small charge can be applied, at the same time, the family bought their sardines in the Hapinoy store. The Hapinoy store would always have available cash to dispense to the recipients of padalas.

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Finalists move on to the last stage of the competition to take their chance in winning the Grant of 100,000 pesos. Keep on checking the website for updates on the contest.

Congratulations to the Rags2Riches team – special mention to Matt Pardinas, Nelson Baclayo, and the Nanays – for the successful launch of the RIIR Aranaz Fall Holiday Collection!

Unfortunately, Reese and I were unable to go – the first Rags2Riches event that we missed since inception, understandably so due to the Rolex Young Laureates Awarding :p – but I think the pictures below say it all. (thanks to Ed San Juan for the pics!). Special thanks as well to Rags2Riches partners ActivAsia (especially Direk Pogs, Rache, and Manny de Luna!), Patty Laurel (for graciously hosting), and Chin-Chin Gutierrez (R2R’s eco-ethical style ambassadress) for making the event such a sweet success.

Rags2Riches Team and the Nanays who make these wonderful products. “The Back End is the Front End!”

But of course, the lifeblood of the event was certainly the new collection. And with this one, RIIR Partner-Designer Amina Aranaz-Alunan has certainly pushed Rags2Riches to new heights with her exciting and exquisite eco-ethical style designs. Cheers to you Amina!

Here’s the new collection. For more details on where to buy, visit Rags2Riches’ website here.

One of of the major influences that led to my journey into social entrepreneurship was Muhammad Yunus’ book, Banker to the Poor. It opened my horizons to the world of microfinancing, as well as social development from a very practical and entrepreneurial perspective.

I didn’t yet know exactly how or when at that point in time, but I knew deep in my gut that I would one day be working in the same field.

A few years later, we would eventually found MicroVentures / Hapinoy, along with Dr. Aris Alip, founder and Managing Director of the Center for Agriculture and Rural Development – the leading microfinancing institution in the Philippines.

Banking to the poor – microfinancing – had undeniably become a global movement, but we felt that the next phase of evolution was emerging.

As its name suggests, microfinancing is focused on access to capital – giving the poor credit without collateral in order for them to work themselves out of poverty. But the emphasis on credit meant less attention on the market side of the equation.

And so we wanted to solve a problem – now that a microentrepreneur has access to capital, how can she make the most use of it? With this question, the perspective subtly migrated from access to credit to access to market opportunities.

And so simply put – whereas a Microfinancing Institution is the Banker to the Poor, MicroVentures aspires to be the Business Partner of the Poor.

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Now, the last thing I want to do is to romanticize this concept. Business partnerships with professionals in the formal economy – while more practical and normal – can already be quite tricky; All the more when we talk about business partnerships with the informal sector at the base-of-the-pyramid (BoP). There are fundamental challenges that I myself experience day-to-day in this sphere – a slew of issues from capacity-building, cooperation, communication, quality standards, culture, market orientation, and professionalism.

But then again, it is precisely the degree of the challenge which provides the imperative to dive headfirst into solving this problem; Because unlocking the model of business partnership with the poor can have tremendous social impact.

Much in the same way that microfinancing has unlocked the potential of capital and development at the BoP, the creation of microventures easing their way into the formal economy can be a catalyst for the poor to further help themselves out of poverty. It can – and should – work.

This is not a new theme for me. In fact, I’ve previously talked about it, as I strongly feel that the concept of business partnership with the poor – or the marginalized – is an important dimension of social (business) entrepreneurship. I’ve blogged on how Rags2Riches emulates the same philosophy of Business Partners, Not Beneficiaries. In a recent interview with The Broker – aptly entitled Business Partner of the Poor - I’ve also shared our social enterprise work in this context.

When we begin moving from the concept of charity into the concept of business partnership – not only are we beginning to think in terms of sustainability and scalability (it’s business!), we’re also beginning to talk about true empowerment of the people we serve. There is a fundamental difference.

For us, what comes comes to mind when comparing charity and business are seen in the following images which Reese shared in her talk in WhyNot?Forum 8.0 :

This is our image of Charity : the giver is superior to the recipient; mildly messianic.

This is our image of Business Partnership : solidarity, equality between two parties, and strength;

Just to clarify that for me, charity will always have its place in certain situations, most especially when there is no fundamental business model to pragmatically explore (disaster relief, human trafficking, etc).

But when possible, I would encourage the latter path – to aspire to become true business partners of the poor. If you’re a social entrepreneur, I hope that you would earnestly consider it too.

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.