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Inside magazine issue 12 | Part 03 - From a corporate perspective<br />
This process will help companies to<br />
better understand customers and<br />
identify currently underserved needs.<br />
The identification of these underserved<br />
needs leads to innovation and market<br />
opportunities.<br />
A key example of a company that has been<br />
able to capitalize on its CSR strategy and<br />
engage in product innovation is Vodafone.<br />
Vodafone’s M-Pesa product, which<br />
generated significant social impact, has<br />
also become the worldwide largest mobile<br />
payment service and helped Vodafone to<br />
diversify its product portfolio from pure<br />
telecommunications to inc<strong>lu</strong>de operations<br />
typically associated with the banking<br />
sector.<br />
Place: Identifying new distribution<br />
channels to access new customers and<br />
disposing of inefficient or costly channels.<br />
The Vodafone case study also highlights<br />
the opportunities that CSR can generate in<br />
terms of product distribution. Although it<br />
initially capitalized on its existing network<br />
of vendors, Vodafone was able to develop a<br />
much larger network of individual vendors<br />
through M-Pesa, eventually reaching a<br />
much larger part of the Kenyan population<br />
than before and consequently being able to<br />
access new customers.<br />
A well-crafted CSR strategy requires<br />
a company to reconsider its entire<br />
supply and distribution chain, and to<br />
identify possibilities for positive social<br />
or environmental impact. This in-depth<br />
analysis allows the company to identify<br />
new innovative distribution channels and<br />
dispose of costly, less efficient channels,<br />
all while having a positive social or<br />
environmental impact.<br />
Promotion: Communication on social and<br />
environmental impact has a multitude<br />
of benefits.<br />
In terms of promotion, CSR can have<br />
two key benefits. Firstly, a stringent CSR<br />
strategy will allow a company to actively<br />
communicate about it and engage in<br />
credible cause marketing, which can have<br />
significant benefits for a company.<br />
Case Study: Vodafone—<br />
business model innovation through CSR<br />
In 2004, Vodafone carried out a study<br />
on CSR, which showed that<br />
information and communication<br />
technologies were one of the main<br />
tools in combating social and<br />
economic challenges in third world<br />
countries. The CSR team<br />
subsequently decided to reflect upon<br />
CSR initiatives that Vodafone could<br />
undertake in this area.<br />
The CSR team leader, Nick Hughes,<br />
proposed a concept using Vodafone’s<br />
existing mobile network in Kenya to<br />
provide a mobile payment so<strong>lu</strong>tion<br />
called M-Pesa to a largely unbanked<br />
population. Initially, the board, which<br />
was preparing the launch of 3G at the<br />
time, did not support the project.<br />
Hughes believed in his project,<br />
however, and obtained almost<br />
£1,000,000 in funding from the UK<br />
Government’s Challenge Fund, which<br />
covered 50 percent of his capital<br />
requirements. Returning to the CFO<br />
of Vodafone with this backing, he was<br />
more successful. Vodafone’s CFO<br />
now supported Hughes’ project,<br />
recognizing its potential business<br />
benefits.<br />
M-Pesa was launched as a pilot<br />
product in Kenya through Vodafone’s<br />
subsidiary Safaricom in 2007 and<br />
allowed Kenyans to deposit,<br />
withdraw and transfer money using<br />
mobile phones. M-Pesa provides<br />
payment services to a largely<br />
unbanked population in developing<br />
countries.<br />
A market study carried out by<br />
Safaricom shows that Kenyans<br />
identify the following as the main<br />
positive social impacts: increased<br />
personal savings due to less money<br />
being lost to theft, increased<br />
convenience and reduced transaction<br />
costs when sending money, reduced<br />
travel costs when receiving money<br />
through M-Pesa and increased<br />
access to funds, especially in remote<br />
locations.<br />
Within three years of its launch,<br />
M-Pesa had more than 10 million<br />
users and supported transactions<br />
amounting to US$375 million every<br />
month. In 2013, the Economist<br />
reported that 25 percent of Kenya’s<br />
GDP flowed through M-Pesa.<br />
M-Pesa was able to generate<br />
business benefits beyond returns<br />
for Vodafone and the product has<br />
been internationally rolled out in<br />
other countries, such as India and<br />
South Africa. Some of the tangible<br />
benefits M-Pesa generated for<br />
Vodafone are:<br />
••<br />
New profits: Safaricom, Vodafone’s<br />
subsidiary, reported a record<br />
profit of approximately US$315<br />
million. M-Pesa was the key driver<br />
in revenue growth, contributing 20<br />
percent of revenues in 2015.<br />
••<br />
New customers: Vodafone<br />
was able to gain new customers<br />
through its M-Pesa offering,<br />
which attracted a great following,<br />
especially as network effects<br />
started to materialize with<br />
increasing market penetration.<br />
••<br />
Long-term customer loyalty:<br />
M-Pesa is credited with reducing<br />
churn rates and binding customers<br />
to Safaricom in the long term. In<br />
2011, Kenya introduced mobile<br />
number portability and Safaricom<br />
was concerned it might lose up<br />
to 1 million customers. In reality<br />
they lost only 30,000—research<br />
carried out by the independent<br />
research institute CGAP shows<br />
that attachment to M-Pesa was the<br />
main reason for this.<br />
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