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“Trust is Critical to Inclusive Business”

Justin Dekoszmovszky talks about recent shifts in the field of corporate strategy, the inclusive economy and how to incorporate local knowledge in business decision-making.

Justin Dekoszmovszky is the Founder and Managing Partner of Archipel&Co’s UK office. Justin has headed sustainability strategy at SC Johnson, PUMA and OVO Energy, leading inclusive and circular business model innovation, shaping internal “cultures of responsibility” and integrating sustainability into core products, partnerships and value chains.

Archipel&Co partners with organizations to support and accelerate their transition to an inclusive economy.

Christophe Bruchansky: Could you tell us what an inclusive economy is?

Justin Dekoszmovszky: There are a variety of definitions and a variety of academics who have coined it in different ways. The way it’s most typically used is within the realm of diversity and inclusion (D&I), quite often in the U.S. We are not working on D&I. We’re working more externally on how our clients do their business and engage with consumers and suppliers. It’s more about inclusivity outside of the firm. But the two go nicely together, of course.

When we talk about an inclusive economy, we’re talking about one that includes those who are marginalized in communities, cultures, societies and governance: those who are most precarious, not necessarily those who are poor in absolute terms but in relative poverty.

We work as much in Europe as we do in Africa and India and in other parts of the world. We still have this sort of colonial, post-colonial, neo-colonial conception of where poverty is. What we’re seeing more and more often now in “developed” countries is that relative poverty is increasingly everywhere.

For us, an inclusive economy is one that is delivering value for a much more inclusive, broader set of stakeholders, not primarily focused on delivering value to investors and to owners of capital and companies. We’re not deep socialists *laugh*, but we absolutely believe that our economic system will only be sustainable if we improve the way it can create value for a much broader set of human beings.

How does Archipel&Co make it happen?

We’re going through a bit of a transition. We have been in the past very much acting as a consulting company. We have worked with large companies to improve how they do business in the first and last mile of their operations.

The first mile is where do they get their supplies from. Can they be more nuanced and more strategic about how they use their procurement to create positive impact, primarily social and income benefits?

The last mile is more focused on how they engage low income, precarious consumers. If they have a product or service that is valuable to those consumers, how do they do that in a way that is inclusive? How do we improve that value proposition for those types of consumers or buyers or users? Can they create a broader set of opportunities within their sales and distribution operations to create interesting opportunities for the informal sector, micro entrepreneurs, small businesses, etc.?

Multinationals are experts at standardization, which is the opposite of what makes the informal sector a generator of a majority of value in a lot of countries, and certainly a majority of employment. The informal sector is inherently agile, bespoke and customized to the city level, subdistrict level, the individual block sometimes, really the smallest unit of community. That’s what makes them really interesting.

Big companies and informal sector are the two ends of the spectrum. But when we create the connective tissue, the strategies and the operational processes to have them work together really well, the benefits are massive. You have the scalability and safety of the big company working with that kind of agility of the informal sector.

The transition we’re going through now is one from thinking of ourselves and acting as a consulting firm – which is very much at the service of its clients – to thinking of ourselves as an accelerator agency. We’ve been working more and more often with social enterprises, foundations and development organizations. We’re still operating to deliver value to our clients. And we wouldn’t have a business if we didn’t do that. But we want the inclusive economy to be at the core of what we do. We can work more flexibly with a variety of players to deliver that.

What are the main challenges in creating that “connective tissue”?

We’re quite often working with our partners to understand their ecosystem and prioritize who to engage with and when. We’ve developed methodologies around how they can run a more participatory market research with loops within so that they can get feedback on a more regular basis.

Trust and time are two big challenges. Even in the best of scenarios, it takes longer to do something in a group than it does to do something individually. When you look at the overall process to get to a positive outcome – something that actually works and delivers value -, I think you’re going to get that endpoint faster with co-creation methodology. But it takes longer to get to some of those interim milestones, which quite often are what people are really focused on. So I think time is a really important element.

And then the trust piece is really critical: moving away from a very transactional arm’s distance relationship and moving towards a partnership. What I’m talking about are true partnerships where there’s a shared experience, a shared mission, shared objectives and shared understanding of the challenges. These are really difficult issues that we are dealing with. 80 percent of new businesses fail. And we’re not trying to just make a new business that can pay the rent. We’re trying to make a new business that pays the rent and delivers value in social benefits and all these other things. So it’s that much more difficult.

So I think that the trust element of being able to engage on the journey of co-creation between different parties, companies, communities, NGO partners, the social sector, public sector, whoever needs to be at that table, that trust element is really critical and quite often it takes a long time.

Would you say that decentralized decision-making is a prerequisite of an inclusive business strategy?

There is the decision-making process and also whose opinion, whose knowledge is valued within the company. Those are two different things. It is a huge red flag if a client can’t really integrate and sometimes even just respect that local knowledge, the knowledge that’s coming from the very bottom of their value chain. It’s really a matter of recognizing the expertise, the deep knowledge and the extremely unique and diverse knowledge that sits in those kinds of areas of a company’s value chain and being able to integrate that into the decision-making that I find really critical.

A major part of the work that I love is getting those insights from a place where people aren’t used to getting them, but they become absolutely central to the value propositions or the new offerings that we’re pulling together.

For instance, we were working with a large beauty company and we were able to bring insights into their professional brands (brands that sell to salons) by spending time in very informal hairdressing establishments in India, South Africa and Mexico. And, especially in the Indian context, we were able to bring back some insights around the context in which women were coming into the hairdressing industry, which had been typically male dominated.

These young women were building their business throughout their 20s, doing their apprenticeships in big cities, and then quite often coming back to tier two, tier three cities where they were from in their late 20s to open up their own shop. And it might be a very informal kind of thing, they are building up their clientele and building up their business and becoming an interesting buyer and brand ambassador for this international beauty company.

But the second that they get married, their new mother-in-law or father or husband have a go/no-go decision on whether they continue their business. None of them said this with any kind of animosity or regret. It was just a matter of fact: I’ve built up a successful business and a profession, but when I get married, I might have to leave that.

That wasn’t something which the company’s local team, who are male dominated, had fully embedded into their thinking. It was an insight which we were able to garner because we were talking to someone much more individually and personally. They were able to embed that insight: we need to help these women because we’re investing in them as a brand ambassador; we’re investing in creating loyalty, which can go up in smoke the day after the wedding.

So I guess this is one insight that we’re able to garner by having a very different, broader and more trust-based and kind of ethnographic approach.

As a CEO, why would I put any energy into an inclusive business strategy if it doesn’t maximise shareholder value?

First of all, if you’re a CEO and you’re only focused on shareholder value, you’ve been asleep for five years, so figure that one out. It’s why I left corporate sustainability and focused on inclusive business.

We’re talking about the C.K. Prahalad and Stuart L. Hart argumentation. If you look at the demographics, where is growth happening from a population and demographic perspective? It’s happening in the lower income base of the pyramid, lower income sectors. It’s happening primarily in the southern hemisphere, urban settings. That’s where there are going to be more and more human beings. And if you’re a consumer business, you should at least have that on your radar.

If you’re selling Teslas, you might not need a Bottom of the Pyramid (BOP) strategy on the last mile of your situation, but you should be focused on where your nickel comes from, where your cobalt is coming from. And those are also a component of inclusive business. There’s almost always a sourcing function that can have a more inclusive element to it.

There are a huge amount of opportunities to focus on marginalized, precarious and the relatively poor in a variety of markets. So, you don’t have to have a footprint in Africa, India or Asia to be able to engage in these things. Ben and Jerry’s has done some phenomenal work creating opportunities for refugees. We’ve done a lot of work with Le Bon Coin in France, a large peer to peer e-commerce platform, on how they can help those retail businesses in tier two, tier three cities to not only become digital but also to compete given their brick and mortar infrastructure.

If you’re a CEO whose teams are 100 percent utilized delivering the current business, and you don’t think that there are opportunities outside of that, then I can’t help you. But if you do think that there are opportunities, I would argue you should be focused on them in an inclusive fashion. It’s the direction of travel for whoever your regulator is, it’s the direction of travel for what investors are looking for, and it’s the direction of travel for what customers and consumers are looking for as well. So at least start becoming aware even if you’re not acting on it.