What’s the Secret Sauce for Scaling Up?
How can one go to scale? This is the continuous challenge that confronts all successful social entrepreneurs. For Grupo EOZ in Mexico, there were a few key elements behind their answer: a combination of funding, partnerships and publicity, much of it due to its participation in a national TV competition called Iniciativa México.
From August to November 2010, 50 finalists from a pool of 47,000 initial applicants were featured weekly on the national TV competition. Grupo EOZ’s project, 100% Clean Water for Mexico, made it to the top 25. The President of Mexico and some of his Cabinet Ministers attended the final awards ceremony, and a few months later, President Calderón hosted a breakfast at his residence for the 50 finalists of Iniciativa México.
The President’s interest in the competition translated into direct financial support. All finalists received an award of 1 million pesos or USD 86,426 for their projects. This was in addition to the 1 million pesos per project promised by the TV program for their participation. Moreover, seeing the potential for an innovative technology patented and produced in Mexico, the Ministry of Economy awarded Grupo EOZ 1.6 million pesos to set up their entire production line in La Paz, Baja California Sur, for machinery, parts, and specialized equipment, while the Ministry of Social Development awarded the project another 1 million pesos to jumpstart its rural development work. In less than a year, Grupo EOZ received national publicity, 4.6 million pesos, and a mandate to bring clean water to 1 million families in rural Mexico — a huge step forward in its efforts to scale.
Grupo EOZ traces its roots to a Development Marketplace (DM) 2006 award for the project UV buckets to disinfect water in rural Mexico, led by Florence Cassassuce. The project provided affordable water disinfection systems to 3,500 rural households in Baja California Sur. From the DM experience, Cassassuce learned that in order to bring clean water to rural households in an economically sustainable manner, a different kind of economic model would be required.
In 2009, Grupo EOZ was born, composed of two separate but connected organizations forming a hybrid social venture: EOZ SA de CV and Instituto EOZ de Tecnologías Rurales AC. EOZ SA de CV was set up as a private company to target the urban market for UV tap sales. A percentage of the company’s profits would then subsidize the rural distribution of UV taps by Instituto EOZ, the nonprofit arm of Grupo EOZ. The rural distribution model of Instituto EOZ will be piloted in one county from July 1 – December 31, 2011, and if successful, will be scaled up.
Grupo EOZ has taken a non-conventional approach to scaling up its social enterprise: having faced difficulties raising funds from traditional channels (such as foundations and private investors), it entered a highly competitive national TV competition. Being selected as one of the finalists, it secured not only a cash award for participation, but also publicity. The attention and coverage generated by the TV show led to partnerships and additional funding from various government ministries. In less than a year, Grupo EOZ has quickly expanded and is testing its rural distribution model — we’ll check in with them in early 2012 and report back on their progress. Stay tuned!
To see a short TV clip (in Spanish) about Grupo EOZ and Iniciativa Mexico, click here.
Rural Distribution Model for Grupo EOZ
- EOZ SA de CV generates income from urban sales of the tap. On a monthly basis, EOZ s.a. de c.v. donates 30-50% of its net income after tax and amortization to Instituto EOZ de Tecnologías Rurales.
- With that monthly funding, Instituto EOZ purchases water purifiers from EOZ SA de CV and distributes them at zero cost to a network of County Promoters, each receiving 40 water purifiers per county per month.
- County Promoters sell the water purifiers at subsidized price of 150 pesos to rural families in poverty (as defined by Federal Program ¨Oportunidades¨). They also provide training on water, health and other monthly topics for each village and family.
- Each Promoter’s monthly target is 40 rural families. So if they reach their target they earn4800 pesos.
- A Promoter can establish their own price structure and accept smaller monthly payments from families, or non-cash payments. The only imposed rule is the maximum price of 150 pesos.
- The County Promoter is trained and supervised by a State Coordinator in charge of all County Promoters in his-her state. The State Coordinator manages inventory, logistics, training and evaluation of Promoters. The Coordinator also visits 10% of beneficiaries in each county on a monthly basis to ensure quality service and product delivery. State Coordinators are under supervision of National Coordinator.
- State Coordinators earn 20% of the monthly rural sales of their County Promoters. Each Coordinator supervises a minimum of 10 Promoters and earns a minimum of 12,000 pesos per month. A State Coordinator can also sell-distribute the water purifier commercially, in which case terms and conditions for urban distributors would also apply.
- The State Coordinator also takes water and stool samples in 10% of the households per county per month. The State Coordinators then sends monthly progress reports with the data to report towards achieving “scientific indicators” to National Coordinator who publishes the monthly updates on the website.