Social Enterprise
Making a DifferenceFall 2006
Colombia: Colcerámica and the Base of the Pyramid
Citizenship above consumerism Colombia’s ColcerámicaDiana Trujillo-Cárdenas and Roberto Gutiérrez
Ana Delia Ibarra, a 40 year old mother of three, is one of 80,000 Community Mothers who work in marginal neighborhoods in Colombia. Back in 1986, when President Virgilio Barco created the Community Homes day-care program, many of these women were already organized to care for children— their own and others’—before the law was passed, providing resources, food and training. In 2006, the program was recognized by several studies as one of the state programs with greatest impact.
As a girl, Ana and her family moved to Bogotá from the faroff city of Palmira for better opportunities. She lived with her mother on the outskirts of the city even after she was married and had children of her own, until a friend of her husband Noel offered the family a lot in Usme, a neighborhood of some 250,000 residents on the fringes of Bogotá. Recalls Ana, “We paid a third of the price and the rest in monthly quotas. When we finished the payments we moved close by and began construction.” The family laid the foundation and, two years later, raised the house in slabs and later added other material piece by piece.
Ana joined Community Homes in 1996 when the director of El Portal, a foundation where she had worked caring for children of prisoners, told her that she was eligible because she had her own house, a high school diploma and experience with children. Ana agreed. For a long time, she had yearned to work from home to be with her three children, now 4, 11 and 13 years old. She brought together 20 of her neighbors’ children, but although she was an experienced childcare provider, she faced typical difficulties such as financial deficit, criticisms and lack of formal training.
Ana’s day care functioned on the first floor of her house; there were two rooms, a kitchen and a bathroom with plumbing but no tile. The upper floor was halfway constructed. In early 2006 a Bogotá Health Department visitor said she would have to tile the bathroom and kitchen for “hygienic reasons.” Since 2001 the health department had been promoting such improvements, and daycare facilities that did not meet hygienic standards were shut down. Ana, like the other 670 Community Mothers of Usme didn’t have the $207,000 pesos (US$ 85) of monthly income to make the improvements to their homes. Each Community Mother tended 13 children between the ages of one and five years, with health services, nutrition and education. If Ana and her colleagues could not find a solution, the closure of their day cares would mean the loss of their employment, income and their greatest happiness, that of “serving and caring for children who had no other possibilities.” They would be visited again in six months.
Ana’s Community Mothers cooperative got together and negotiated improved conditions for their homes. In February 2006 Haidy Duque, a social worker who worked for 11 years in Usme with women who had sought refuge there from Colombia’s long-lasting internal war, arrived to the cooperative office with an offer. Ceramics of Colombia—Colcerámica—, a branch of the Corona Company, invited them to participate in a project to improve their housing. Ana and her colleague Patricia Abril accepted.
The precedents of the project go back to the beginning of the 90s when Colcerámica enjoyed a monopoly position in the market. The company’s different businesses such as tiling, porcelain toilets and faucets were managed as one business and were offered on the market as distinct brands which, according to Carlos Espinal, director of Mass Marketing, “we would continually invent to compete with ourselves.” The marketing of products with the Corona label, with high technical and design specifications, was geared to middle and high income groups; the Mancesa label was geared to the lower middle and lower income markets.
When Colombia lifted most of its trade restrictions in 1991, creating an economic opening, foreign companies entered the market with better prices for the middle and lower segments. Colcerámica’s participation in the market diminished. To recuperate lost terrain, in 2000, the company decided to manage three independent business units. Tiling remained with the Corona name, and sought to offer a new product with lower design specifications at a very low cost, launching the Ibérica line in 2003. Another part of the strategy was to open new channels: national and local wholesalers, and large retailers marketed to the first two levels of the social “strata” (the Colombian Department of Statistics classifies the population in six socio-economic strata; the highest income earning Colombians belong to level 6). By 2006, the Ibérica line was so successful that sales surpassed production capacity. Nevertheless, the growth goals of the company kept the directors attuned to new business opportunities. At this point, Carlos discovered the book The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits by C.K. Prahalad. The idea interested him and he sought more information.
The Ibérica line allowed the company to compete in the lowest income segment of the market. Carlos was put in charge of developing this market. To avoid the problems faced by other companies entering this segment, Carlos contacted Ashoka to identify a social entrepreneur who could facilitate contact with potential consumers. This multinational organization has invested in social leaders since 2003 in an initiative called Full Economic Citizenship that develops capacities and opportunities so that citizens may participate in the global economy. Ashoka’s mediation role was not immune to the problems of lack of confidence between business people and social entrepreneurs. Nonetheless, Haidy Duque liked the proposal. She thought the Colcerámica products would improve the living conditions of the women she worked with and, furthermore, she knew Corona to be a socially responsible organization. The Corona Foundation was one of the best known corporate foundations in the country, part of its work being with grassroots organizations.
Three months later Haidy and Carlos set to work. They understood that “a social entrepreneur must continue his or her activity in order to develop a hybrid value chain…to join knowledge and action to construct a model.” The first actions were to choose a location and study its housing issues, to understand very well the cultural and political context in which they were to operate, and to identify where the project could begin with a certain amount of guaranteed success.. Because of her experience, Haidy suggested Usme, where the entire population belonged to strata 1 and 2. Using student interviewers, she took 80 surveys in the area to gather basic information. With this data, Ashoka and Colcerámica determined the potential market, convincing themselves of the viability of the project. For Carlos, “the contact with Usme was excellent. The only thing I lacked was taking people from marketing here to undermine the idea that executives won’t get their feet muddy.”
For the consumer, buying materials from traditional merchants meant buying everything at once, paying in cash and doing all the work oneself: design, purchase, pick up of material, and all the labor. In the new model, a promoter offered the product directly at the home of the low-income consumer, providing advice and a variety of payment options. Furthermore, community members participated as sellers in order to overcome three barriers: the lack of income of consumers, their belief that they could not bring about their own development, and the barrier of entering the home of a potential consumer.
To create the new channel, Haidy and Carlos thought of the possibility of setting up a cooperative among community leaders, extending beyond the already-existing daycare cooperative. Yet, while Colcerámica wanted to formalize everything, the community held informality as the norm. In discussing the project with the community, the promoters of the project identified organizational and administrative strategies that, while they were informal, they could work. For Carlos: “we became more relaxed about the issue of formalization when we had more contact with people. I met a woman who managed a lending chain for years; she managed a lot of money and everyone had confidence in her. There weren’t any papers or contracts.”
After six months of work, Haidy and Carlos held a community meeting to present the model. Haidy observes, “It was the moment of truth: they challenged us for proposing cooperatives. The community said that if they already had their organizations, why should we create new ones?” Carlos recalled: “After hearing the community leaders I asked myself, who are the experts here? We hadn’t recognized the real value of the contribution from the community. We had been cocky; we needed to be more humble.” The meeting also served to identify other interests of the participants that could be contrary to those of Colcerámica. For example, one attendee expressed the following: “Two years into this and I’ll get to be elected to the city council.” The team concluded, “In order for this to work we need to find an intermediary point between being naive and arrogant.”
After the meeting, Carlos and Haidy defined the elements of the model: the product, easy financing, communications, community participation and custom design. They also decided to use existing networks in the community. They called the project “Your house made new, step by step” and they defined the vision: “to provide options to low-income citizens to reach the personal dream of improving their homes through collective support, to commercialize ceramic tiles and to improve the quality of life of communities.” Furthermore, something more than tiling would remain in the community: management capacity in their organizations.
Colcerámica and Haidy, together with the selected community organizations (CO), conformed a Organized Community Nucleus (OCN). The responsibility of the OCN was to adapt the model to the needs of the community and to offer a space in which organizations could share their experiences. The COs were in charge of managing promoters (selection, accompaniment, supervision and payment, with criteria defined by the company), as well as the administration of money from the sales and the exhibition of products in their spaces. Each CO received 3% commission on sales profits. The first OCN was conformed of three local city council associations (Juntas de Acción Comunal) and one Community Mother association.
Women only were chosen to be promoters for three reasons: they were more sensitive to the idea of home improvement, they had the time necessary to carry out the sales work and “because of the issue of suspicions and jealousies.” Their responsibilities included visiting clients, advising them, measuring spaces and quoting products/services that they sold, closing the sale and following up on payments. The women had a good sales argument: “Who doesn’t want their house to look nice?” The income for the promoter was 7% of the profit which was estimated to reach, on average, 230,000 pesos (US $94) per month. In December 2005 the first group of promoters visited the factory where Ibérica was produced. There they became convinced that the product was indeed new, produced for their community, and that it was not in fact left-over materials from other production lines. Between January and May 2006, the promoters sold nearly 40 million pesos (US $16,500) of products. Each month the sales doubled from the previous month. Until that point, the costs of what was considered a pilot project reached 100 million pesos (US $40,900).
Initially, Colcerámica did not offer credit to its clients; it did freeze the price of the product/service when the client began to pay, but it only delivered the product once the product/service had been fully paid. Nor did the company, or any person under its control, interact with the client. Colcerámica offered a lot of flexibility to its community clients, both in terms of payment forms and its product/services. In the case of the Community Mothers it did agree to provide the product/service on credit, delivering after the first payment.
In March 2006, Ana began participating in “Your house made new, step by step” both as a promoter and as a client. As a promoter, she brought in 37 Community Mothers who, like herself, faced pressure from the health department to raise their hygienic standards through tiling. With the proper renovations achieved as a result of the program, the daycare centers continued to serve 481 children. For Ana, this meant nearly doubling her income. As a client she finished tiling her kitchen and continued with her bathroom. According to Ana, “we have benefited from all of it… training, development of values; one becomes enriched as a person and learns many new things.”
Diana Trujillo-Cárdenas is an Instructor in the School of Management at the University of Los Andes. And, Roberto Gutiérrez is an Associate Professor in the School of Management at the University of Los Andes. He currently chairs the Social Enterprise Knowledge Network (SEKN). Both collaborate with the Program on Social Initiatives (IESO for its acronym in Spanish) at the University of Los Andes.