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>View discussions about this entry Country: United States
Organization: Living Goods
Focus of activity - Service/process
Year the initiative began (yyyy) - 2006
Positioning in the Mosaic of solutions
Define the innovation - What is the main focus (product, services, etc) of your innovation? Who are the primary beneficiaries? How does it make health and/or health care more affordable, accessible, and simpler to achieve/use? How does it differ from what currently exists in the market? Living Goods is an Avon-like network of village-based mobile Health Promoters who make a modest income selling essential health products at prices affordable to the poor in developing countries. The model combines the latest and best practices from the worlds of microfinance, franchising, and public health to create a sustainable system for defeating diseases of poverty. Living Goods (LG) reduces illness and death by significantly improving access to and adoption of simple, proven health interventions in the many places these are scarce or non-existent.
Living Goods focuses on the short list of diseases that account for over two thirds of mortality and can be prevented and/or treated at very low cost. These include malaria, diarrhoeal diseases, worms, and TB. The Health Promoters also provide basic family planning and reproductive health services with the twin aims of lowering fertility and reducing mortality for pregnant women and newborns. They market a diverse basket of goods anchored by essential items emphasizing prevention like bed nets, condoms and water treatment, and complimented with home and personal care items to enhance agents’ income and sustainability. The core principal of the Living Goods model is using the incentive of ownership to maximize efficiency. Through the incentive of ownership LG creates a virtuous circle. The more the Health Promoter earns, the more time she will invest in her work, and thus the greater health impact she will have. And of course, as her productivity increases she generates more contribution towards making the whole enterprise sustainable. Living Goods targets primarily smaller rural and peri-urban communities with inadequate access to essential health products, underserved by the existing public and private health infrastructure and with relatively high disease burdens Context for Disruption: - Describe how your innovation is transforming traditional health or related systems in the short and long term. Context for Disruption: In Uganda where Living Goods is working, half of the population lives more than five kilometers from the nearest public health facility. Where public facilities do exist frequent stock-outs are the rule. There are no pharmacy chains. The marketplace of private drug shops is fragmented, inefficient and is woefully under regulated. This results in the widespread occurrence of untrained providers, inaccurate diagnoses and prescriptions (it is not uncommon to find 13 year girls selling antibiotics), and worst of all, a high prevalence counterfeit and expired drugs.
The Living Goods model contrasts starkly with the existing landscape: 1) It provides access to basic commodities right in the villages where people live, eliminating the barriers of distance, time, transportation expense and lost productivity. 2) It achieves high efficiency and low prices through significant scale, leveraging the infrastructure of existing partners, tight business controls on costs, and high productivity driven by best-of-class marketing and merchandising. 3) In provides consistent monitoring and tight controls. LG field agents visit Health Promoters (HPs) in person at least once a month and conduct regular compliance surveys by talking directly to the end clients. HPs who violate the rules lose their business. > BOTTOM LINE DISRUPTIVE CHANGES 1) Living Goods will provide high quality, low-cost access for essential health commodities to a wide population of the unserved. 2) It will replace or convert poor quality private sector providers. 3) By treating basic illness in the village it will take significant pressure off public health systems, thus reducing lines and stock outs at public health centers, and 4) Through effective peer education it will shift the emphasis of primary care for treatment to prevention. Delivery Model - How does your innovation reach its target populations? What mechanism(s) (e.g., communications, distribution channels, etc.) do you have in place? What is your current market penetration? How do you measure this? Delivery Model: GOING TO THE CUSTOMER
As noted LG is based on an Avon-like system of direct sellers. Like Avon LG does not need or depend on traditional print, radio or forms of mass advertising. Its direct selling model is driven by relationships – people selling to people they know. LG helps its Health Promoters employ a range of approaches for taking their message directly to customers and increasing the uptake of key health products: • Giving health talks at schools, churches, local council meetings, MFI borrowing groups, and community groups • Going door-to-door to talk with customers one-on-one • Keeping standard daily ‘open hours’ at their homes or a convenient designated place • Making health presentations at local events • Setting up stalls at local market days EFFECTIVE PROMOTIONS AND INCENTIVES CONSISTENT SUPPLY AND CAREFUL MONITORING STRICT CONTROLS Key Operational Partnerships - What key partnerships have you established to make your disruptive innovation model possible? Who are your partners (business, social, government, other) and what are their roles? How central are these partnerships for your initiative. LEVERAGING KEY LOCAL PARTNERS.
Living Goods strategy is to partner with local NGOs, community groups, and microfinance organizations to leverage their existing infrastructure for recruiting and possibly financing and/or supporting mobile Health Promoters. To this end, LG extensively canvassed local organizations in Uganda of each of these types over the last nine months, including in-depth in-person interviews. From this group, LG distilled a short list of the most effective and motivated groups. At the top of this list is BRAC, with whom LG is now partnering with on the implementation of Living Goods in Uganda. In just one year in Uganda BRAC opened 25 branch offices in eight districts in Uganda, created 1000+ village organizations with 30,000 members, and made loans to over 20,000 women. BRAC Uganda is recruiting Living Goods Health Promoters from its existing VOs. The advantages of this are potent. The members of the VOs are essentially pre-screened by local officials and BRAC. The VO also provides both a natural customer base for the HP as well as an imprimatur in the community. Living Goods field agents work out of existing BRAC branch offices to train, support and monitor the mobile Health Promoters. Existing branch offices are leveraged as supply depots as well. BRAC and Living Goods will work closely together on the pilot phase in Uganda. If the pilot is on track after the first 12-24 months LG will look to collaborate with other similar NGOs. Financial Model - Describe the financial model for your innovation. What percentage, if any, of the total operating costs does earned income (from products, services, or other fees) represent? The key to the Living Goods model lies with the economics for the Health Promoter (aka unit economics). If the average HP generates enough sales with an adequate margin, the whole system will break even. The target retail sales per health promoter is approximately $2400 per year or $6.60 per day. At a retail margin of 25% and after expenses of about $100 the HP should take home about $500 per year, or just under twice the per capita income in Uganda. This represents ample income to motivate the HP to remain engaged and invest increasing time in her Living Goods business.
Achieving robust sales per agent is critical for becoming financially self sufficient. It is just as important for achieving LG’s health objectives. Here is why this level of productivity is achievable: The economics at the organizational level can also be boiled down to a few fairly basic assumptions. The target average wholesale margin is 16.5% and agents will pay a small $2.50 per month franchise fee to Living Goods. This results in a contribution to LG of about $325 per year per HP. The question then simply becomes: At meaningful scale can LG support agents at a cost of ~$330 per year per agent, or about $25 per month? The budget in the appendix details how LG aims to accomplish this. But in a developing world context, the $25 a month number passes the gut test.
Effectiveness - What has been the measurable impact of your project to date? How many people have benefited from your program in total? What policies, communities, or institutions have been influenced to make fundamental changes because of your work? Living Goods is in start up mode this year and just recruiting and deploying its first 200 Health Promoters. LG aims to accomplish the following goals in its first five years:
• Improve access to and adoption of affordable health products in underserved communities by deploying 3,000 well-trained, well-stocked mobile Health Promoters serving a total population of three million. Target sustainable income per agent of US$ 200-500 per year. • Materially reduce mortality and morbidity rates, especially for children under 5 and their mothers - proven through university quality control studies. • Save poor families money on health care and keep wage earners healthy and productive. • Become financially self-sufficient on a run rate basis. • Propagate the replication of the health micro-franchising model by creating an advisory division to help social entrepreneurs replicate the model in other countries.
Scaling up Strategy - What is your priority for the next 3 years and please describe why. The number one priority in the next three years is proving that our mobile Health Promoters can generate their target sales of $6.60 per day / $2400 per year with adequate profit margins. If can achieve this then we have the foundation of a truly and fully sustainable system. With sustainability as a firm base all other problems are solvable in the long term.
Origin of the Initiative - Tell the personal story that will help people connect to your work. How did the initiative start? Was there a particular individual or event driving the idea? Tell the reader the story behind the innovation. From the SF Chronicle:
“Chuck Slaughter is founder of TravelSmith. In 1988, long before the term "micro-enterprise" was a buzzword Slaughter came across a story in the NY Times about Trickle Up, an organization giving seed money to people in developing nations to start small businesses. "It seemed like a lot more direct way to make a difference," he recalled. So he went to work for the group, seeing entrepreneurs at work in a range of activities from running tea stands to sewing dresses. Three years later, he created TravelSmith. He sold his interest in the company in 2004 and later (as its pro-bono president) lead the turn around of a nonprofit called Healthstore, which helps Kenyans set up medical dispensaries in their villages. (The challenges Healthstore faced in scaling and becoming sustainable) in turn inspired him to start Living Goods in Uganda.” i What are your two main challenges to finance the growth of your initiative - What are the two (2) main challenges in financing the growth of your initiative with respect to operating costs and capital expenses? What amount of financing would your organization need in order to scale up operations? 1) As a social venture that is initially partially self funding, LG does not fall neatly into one of many donors existing categories. It is neither a traditional NGO, nor a profit maximizing business.
2) We have elected not to employ a full time development officer. So my time is stretched between program and funding work. How did you hear about this contest and what is your main incentive to participate? - (This answer will not be published on the website.) Diana Wells mentioned it to me when we met in California in May. Our motivation to participate is twofold
1) To attract potential operating partners (anyone from CARE to Natura), and 2) To benefit from critical feedback. Do you have an annual financial statement? - Yes, we can provide 2006 FYE financials.
Do you currently have an annual financial statement that tracks profit/loss? - Yes.
Contact Information:
Charles Slaughter
President Living Goods (NGO) Discussions about this entry |
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