Midwestern Values Meet Entrepreneurship: 4 Startup Lessons from Fuse50 Cincinnati
In a small, low-income township in South Africa, it took days of commuting, missing work and waiting in lines to see a doctor. Now, it takes less than an hour.
Enter Quali Health: a business solution created by entrepreneur and physician Nthabiseng Legoete, who grew up in Johannesburg, home to the impoverished township of Diepsloot.
Quali Health is a disruptive healthcare startup that delivers affordable clinical services to the working poor in townships around Johannesburg. It’s an example of social impact investing that was profitable within the first three or four months—not only because of its digital and efficient model, but because of how it treats its customers: with respect.
Adrian Saville, chief investment officer at Cannon Asset Managers and a professor at the Gordon Institute of Business Science (GIBS) in South Africa, invests in inclusive market businesses in sub Saharan Africa.
“Legoete recognized a gap in the market in South Africa,” says Saville. “While about 15 percent of the population receives quality, private healthcare, 85 percent must brave the public sector healthcare system, which often means an expensive and long commute, an unfriendly customer experience, a long wait and missed days of work—potentially leading to job loss.”
“Quali Health steps into that gap,” Saville continues. “Despite the fact that you have a sluggish economy, elevated unemployment and high inequality in this area of South Africa, Quali Health converted to profits in the space of months. And it’s only at four sites so far, with the capacity to see 4,000 to 6,000 customers a month per site. There could be a market for 100 sites in the country. They haven’t even scratched the surface.”
“One of the biggest contributions Quali Health makes is a deep value that goes beyond formal clinical care. What comes with this model is dignity,” says Tashmia Ismail, also faculty at GIBS. “People are not treated like cattle; they’re treated like human beings. There is a lot of care put into the customer experience, and I think that gets lost in formal healthcare. Quali Health’s biggest competitive advantage is not the low cost, but how they deliver care—by understanding who they are serving.”
The Kelley School and the Gordon Institute of Business Science have an existing collaboration in South Africa, and Powell recently teamed up with Saville and Ismail to write a case study using Quali Health as an example.
“There are lessons from the African experience that we can apply in the U.S. context. That’s revolutionary, because we are looking to Africa for lessons on how we invest in our own backyard,” explains Philip T. Powell, associate dean of academic programs—Indianapolis for the Indiana University Kelley School of Business.
“How do we do social impact investing in the United States?” asks Powell. “Social impact investing is not about charity or break even. You have to generate profit, post an acceptable return for investors and be economically sustainable. Business has to be well-managed and innovative. You need to have a return, but the enterprises you invest in are financially sustainable. You have to change the way you do business.”
Powell goes on to point out specific lessons that come from inclusive markets in Africa:
“The best business models that serve the working poor are unapologetic about making money,” Powell says. “This forces the business to treat the working poor as legitimate customers. They become customers with the same legitimacy as if they were buying luxury items. The businesses must design a product for the context in which these people live. The retail needs of someone who lives in a more upscale neighborhood will be different than those living in more traditionally low-income areas.
“We often forget just how important the role of context and environment is,” says Saville. “Understanding context is important to investors everywhere because of the impact context has on outcomes. Does your business truly serve the needs of the customers in that area of town? Innovation at the base of the pyramid can be relevant and important.”
“A true product design starts by considering the daily needs of a customer in his or her own environment (neighborhood), and then you work backwards to build solutions,” Powell adds. “For so long, we assumed low-income markets weren’t profitable; we assumed they just want cheap stuff. We don’t give them the respect we give customers in an upper market, and it’s been a blind spot in strategy.”
This brings a level of respect to low-income customers that they’ve never had before,.
“Social impact investing is attractive to generations from baby boomers to millennials, as it combines both doing good and doing well,” says Todd Saxton, associate professor of strategy and entrepreneurship at the IU Kelley School of Business.
“Historically, some have forced a dichotomy between the not-for-profit do-gooders with little business savvy versus the for-profit and self-centered entrepreneur. This has never been entirely the case, but it is becoming increasing less so,” adds Saxton. “With our strong presence in philanthropy, combined with solid grounding in entrepreneurial success, central Indiana is well-positioned to take a lead here in the U.S. in impact investing. We have strong core values of civic engagement and public private cooperation as key building blocks.”
There are examples of Indianapolis businesses that seek to do this right now. The Near West, River West Great Places 2020 district, is an area that is traditionally low-income and seen as a “brand desert” (an area of the city not populated by brand-name businesses). But through a neighborhood-driven quality of life plan, a new entrepreneurial education center has started—encouraging people who live in the area to create their own startups, based on the needs in the neighborhood. The center, SOURCE River West, was launched with the support and leadership of IUPUI (Indiana University-Purdue University at Indianapolis). It seeks to encourage home-grown businesses as well as draw entrepreneurs from other areas to relocate to the Near West.
“Right now, people living on Indianapolis’ near west have to drive 20-30 minutes away for basic products and services they need on a daily basis. That’s what they’re missing right now,” says center director Mark A. Roger.
Roger explains that SOURCE focuses on fundamental bread and butter businesses – like home healthcare, daycare, florist shops and business services (home based, mobile based and brick and mortar.)
“SOURCE River West entrepreneurial center is an economic and educational initiative designed to bring businesses to this area,” adds Roger. “We offer workshops and in-depth training to not only equip people entering the business world with start-up savvy, but we also work closely with those wanting to scale their existing business.”
Powell explains that this business model brings products and services closer together, responding to needs by increasing access to basic products for customers in these areas – a model cities across the United States can look to.
“SOURCE River West was created to bring education and capital to entrepreneurs in these communities,” says Powell. “The programs help business owners develop a business discipline in a community that has been almost written off in the traditional business lens. Charity is ephemeral, but education lasts. Businesses live on producing value. That’s why it’s so important to sustainability.”