The Elevator Pitch
Inside the Business School’s ambitious venture to lift people out of poverty.
Oluyemisi Iranloye had heard it over and over again: “It’s not going to work. It’s going to fail.” After all, how could a city girl and 40-something mother of two who had never lived in a village — “Not for one day!” — build a factory that makes food-grade starch in the back of the Nigerian beyond? There was no water at the site. The nearest electricity was 10 miles away. She’d need technicians and young professionals willing to work far from any bright lights other than the stars at night. Plus, she’d have to persuade hundreds of farmers to change age-old practices so they could supply her with enough raw material, cassava. And she’d have to give up her position as the COO of a major Nigerian agricultural processing company. Even her parents didn’t believe it would work.
None of the naysaying got to her. In 2012, she built a small house atop a huge granite dome from where she would be able to oversee the company’s and farmers’ fields, demonstration plots, farm settlements and her factory. Because Iranloye thought the word for a stringed instrument — found in the Old Testament — sounded sweet, she named her company Psaltry.
Four years later, Psaltry’s factory — where capacity has already doubled — is profitable, and produces between 20 and 50 tons of cassava starch a day for buyers such as Heineken, Nestlé and Nigerian Breweries. The company has 200 employees and 10,000 job applications in its database. Hundreds of farmers supply the factory and are paid through a mobile phone banking app. Several thousand others have requested training. International food companies want Iranloye to replicate her model in other African countries. She’d like to do so first in other parts of Nigeria.
Psaltry’s growth and ambitions are just what the Stanford Institute for Innovation in Developing Economies, known as Stanford Seed, seeks to bolster.
A Bold Investment
It’s “a nice round figure,” Bob King says of the $100 million he and his wife, Dottie, initially planned to give Seed. As word got around about the Business School initiative, others on campus wanted to participate. To accommodate them, the Kings upped their ante to $150 million. They consider it an investment, not a gift.
Devout Christians, the Kings are deeply troubled by the increasing worldwide disparity between the haves and have-nots. They are also firm believers in the power of free markets and capitalism to transform society. “When I think about how incredibly fortunate we have been over our adult lives, business careers, whatever,” says King, MBA ’60, “we feel we are called to be a blessing to others.” The return they expect on their investment in Seed is to “solve poverty by job creation.” Seed aims to accomplish this by providing intensive management training and support to established enterprises — those with $150,000 to $15 million in annual revenues — enabling them to scale up by orders of magnitude and vastly expand employment opportunities.
Announced in 2011, Seed got off the ground two years later with the launching of the Seed Transformation Program (STP) in Accra, Ghana, at the institute’s first overseas center. The timing was auspicious. Two recent cover stories in the Economist had featured “Africa Rising”; one was graced by a giraffe with a neck shaped like the rapidly rising growth curve of a Silicon Valley unicorn, the other by a child pulling a high-flying, rainbow-colored kite cut in the shape of the continent. Experts from the World Bank and International Monetary Fund noted that high rates of return on investments in Africa could soon have the continent following “in the footsteps of Asia.”
STP is a yearlong program. Four weeks of MBA-style executive education are spread over six months when leaders from participating companies gather in Accra or at the center Seed opened last May in Nairobi, Kenya. They attend seminars given predominantly by GSB faculty, network with regional peers and develop transformation plans for their companies; over the rest of the year, they begin implementing those plans. Companies can receive up to a year’s worth of intensive, hands-on, “high-touch” coaching from seasoned businesspeople who typically volunteer for 12 to 18 months to advise, cajole, motivate and buoy spirits. Seed collaborates on an internship program with STP companies and supports campus academic programs.
Seed also sponsors academic research by faculty spanning more than a dozen disciplines. Faculty Director and Executive Director Jesper B. Sørensen, a professor of organizational behavior, expects that work to produce “fundamental breakthroughs that will transform the way we think” about problems in the developing world and how they relate to poverty. Another ambition is to make Stanford “the leading research university for thinking about the challenges of poverty in the developing world.
In popular corporate parlance, these are BHAGs — big, hairy, audacious goals worthy of the Business School’s motto: “Change Lives, Change Organizations, Change the World.” In their philanthropy, the Kings say they are “intentional” and “results oriented.” They would like to see Seed lift millions of people out of poverty — generally considered to be those living on less than $2 a day — by the 2030s. “It’ll be after we’re gone,” says Bob, who is 81, while sitting next to Dottie, who is 80, on a sofa in their large, comfortable and entirely unostentatious home in Menlo Park. “But that’s OK.”
In the history of the world, no institution and only one nation has ever raised up so many in such short order: China, where the Kings’ already considerable wealth was bolstered significantly by an early investment in Baidu, China’s version of Google. Without the pesky distractions of democracy, China managed this unprecedented achievement thanks to Deng Xiaoping’s Open Door and the country’s “one child” policy, which helped limit overall population growth since 1978 to about 30 percent. During the same period, the population of sub-Saharan Africa tripled from around 350 million to more than a billion.
Since 1960, Ghana and Nigeria — the two countries where Seed has been most active — have received the equivalent of more than $90 billion in foreign assistance, much of it to little enduring effect. Former Seed coach Hans Nilsson, MBA ’83, says handouts and Western-style democracy have been “a bad combination.” The development money floods in and “evaporates.”
Learning Curves and Transformations
Emmanuel Kitcher is a compact bundle of energy who radiates optimism with a warmth that rivals the way the sun warms the Earth. Kitcher, who had a long, successful career in Ghanaian industry before becoming Seed’s first regional director, views Africa’s economic potential through glasses ground in the “silver linings” school of optometry. Once people’s needs are met and their material problems solved, opportunities for businesses to make outsize returns become harder to find. By this way of thinking, opportunities in Africa abound because consumer demand is only just ramping up, and so much of everything is still in short supply. Kitcher expects 80 percent of the companies participating in Seed to take off. “I like the challenge of ‘impossible,’” he says as a way of explaining why he signed on with Seed.
Not all businesspeople are striving for the kind of success that will bring them Champagne wishes and caviar dreams, says Kitcher. “Many are already content.” When Seed approaches them and says, You can be a regional leader. You can be a global leader. You can employ large numbers of people and help eradicate poverty. You just need to scale up, to transform, “this does not make everyone jump up,” Kitcher says. But for those for whom the message resonates, it seems to do so on a life-changing frequency.
O.T. Aderinwale, CEO of Justrite, a Nigerian chain of big-box discount stores, says that after an STP module on design thinking, “My brain just opened . . . I became a changed person.” It had taken her 11 years to open her second store. In the past three years, she’s opened four more and plans to open another 34 by 2021.
“You almost live with the companies,” says Geoffrey Otieno, a Kenyan and former director at Nokia, of his experience as a coach. Faculty Director Sørensen, MA ’92, PhD ’96, says that the coaches are “incredibly motivated and incredibly passionate,” but it’s expensive to recruit and support them, and — because of the intensive nature of the coach/company relationship — “they don’t scale.” That restricted the number of individuals Seed could train, but it’s a bottleneck that changes rolled out last September are expected to resolve.
For one, locally hired facilitators now work with Seed companies in between weeks of STP training to bring employees up to speed on the gist of what their bosses are going over in class. This is where many business development programs fall down: Although they teach “the talk,” they don’t help companies “walk the walk.” Sørensen expects Seed’s use of facilitators to free up time for coaches and to bridge the gap between book knowledge and changed behaviors at STP companies.
According to former coach Jerry Hudson, an early problem was that some companies were too small, too young or insufficiently committed to benefit in a cost-effective way from what Seed has to offer. Now, high-touch coaching is extended to STP companies based on their leadership skills, potential for innovation, revenue growth, expanded employment and profitability, and on their application of the managerial techniques covered during STP. In another significant change, participation now costs: $5,000 for the training and $5,000 for the coaching — considerable amounts for smaller businesses but still heavily subsidized. Constantin Salameh, MBA ’84, extended his coaching commitment for a second year and relocated from Accra to Nairobi. “Ultimately you need to charge. If [the companies] get it for free . . . they won’t value it the same.”
To date, 23 coaches, 23 Stanford faculty, eight regional lecturers and 160 companies have participated in STP — 134 in six West African cohorts and 26 in the first East African cohort. Seed expects to open its next center sometime this year, in either Southeast or South Asia. Longer-term plans include opening more centers to expand Seed’s reach and facilitate networking and cross-pollination among developing countries.
When Alex Adjei Bram first heard about Seed, he was indifferent. He was already a serial entrepreneur, albeit at a small scale, who in 2005 co-founded SMSGH — a rapidly growing apps developer — with his best friend from high school. He didn’t get how CEOs were supposed to take off four weeks to do “this” — classwork in strategy, organizational design, finance, accounting, value chain, ethics, governance, leadership, marketing, value proposition, HR, design thinking — and come up with a transformation plan that would, well, transform their companies. Skeptical, he dropped in on day one of STP. If he found anything useful, maybe he’d stay. By day four, he says that if they had asked him to jump, he would have asked, “How high?” SMSGH has now surpassed $10 million a year in revenue, and its 80-plus employees will soon outgrow the office building they put up in downtown Accra.
Nicole Amarteifio’s expectations for Seed were equally modest. The Ghanaian graduate of Brandeis and Georgetown had as her goals finding an accountant and going from “A to B.” She was too busy working on An African City — her taboo-breaking, made-for-the-web, Sex and the City knockoff television show — to think about anything else. Now, she says, it feels like she’s gone from “A to Z.”
Amarteifio, like many others in STP, spent years overseas and then decided to come home for good. She had two objectives: to help turn Ghana’s film and TV sector into a globally recognized “Gollywood,” and to disrupt the hackneyed “single story” of Africa as a continent mired in war, poverty, civil strife and dysfunction.
Starting with 10 episodes of 12 to 16 minutes, Amarteifio built an ongoing series about five young, rich Ghanaian women trying to find romance and success back on native soil. She was repeatedly asked — by Ghanaians and foreigners — why she didn’t create a show about “Sodom and Gomorrah,” the colloquial name for one of Accra’s roughest neighborhoods. To her, that would have been just another single-story show. She wanted to highlight a segment of African society that many people, off the continent and on, don’t know exists.
With its bare-bones budget and small cast and crew, it’s unlikely that An African City will make much of a direct contribution toward the Kings’ goal of lifting millions out of poverty. However, it is already changing some of those once immutable images. It’s been picked up by Ebony Live TV and Canal + Afrique, and featured in dozens of venues, including Forbes, the New Yorker, Ebony and the BBC.
Despite the success of many STP CEOs, every day they must lean in at angles that would have serial entrepreneurs in Silicon Valley looking up from the pavement, wondering what had hit them. Psaltry’s Iranloye spent half a million dollars to bring electricity from the national grid to the plant site. It works so sporadically that it’s now a kind of backup for her backup generators, which she must run days at a time. In 2016, when Nigeria was running out of refined fuel — despite being Africa’s then largest oil producer and the world’s 13th largest — Iranloye faced the prospect of no grid power and no diesel for the generators. “It was hell.”
Psaltry is 750 miles from where Boko Haram has been terrorizing northeastern Nigeria, and 300 miles from where the Niger Delta Avengers have been kidnapping oil workers, blowing up pipelines and killing Nigerian soldiers — but guards at local checkpoints brandish AK-47s out of extra vigilance.
Iranloye wishes her government had supported her the way it did highly experienced white farmers who had been run off their land in Zimbabwe by President Robert Mugabe. Through Nigeria’s resettlement program, those farmers got roads, power, loans, tax holidays and more — and still many failed. With similar backing, Iranloye says, Psaltry would be 10 times ahead of where it is now. “Where is the level playing field?”
Or take the case of GHS, Baffour and Benedicta Osei’s affordable housing company. In 2013, their plan to build 2,500 homes on rezoned agricultural land 40 minutes out of Accra looked like it would fly. Then, in February 2014, the Bank of Ghana closed its foreign currency window with no warning. Bank loans, if you could get one, rose to 3 percent — per month. In 2013, the couple had sold 128 houses. In 2014, they sold three.
Doing business where such events are routine is “not for the fainthearted,” says Victor Oduguwa, who gave up a high-powered job with MTN, a South African telecom multinational, to go into what he says Nigerians call a “laughable profession,” something to do when you are retired: chicken farming. In fact, Nation Feeders, started in 2012, is not just an egg-and-poultry business. It’s also a compost/fertilizer business as Oduguwa works out the best option for the nine tons of manure his birds produce daily. Everyone said he was crazy — including Abiola, his wife and now business partner, who has degrees in microbiology and bioinformatics and a master’s in drug discovery and artificial intelligence from Cranfield University in the U.K. At MTN, Oduguwa was at the top of his game, but his life was mapped out until the end of time. “I didn’t want that.” What he wanted was to prove to others that a vibrant, thriving economy could be built in rural Nigeria.
Like Iranloye, the Oduguwas started without water, without roads, without power. Oduguwa, who completed the General Management Program at Harvard and has an MBA and a PhD in engineering, likens running a business where so much infrastructure is missing to “trying to stand on water.” But for most entrepreneurs in the so-called third world, failure simply isn’t an option.
“It’s a badge of honor to fail in Silicon Valley,” says former Seed coach Clinton Etheridge, MBA ’74, who first went to Africa in 1970 as a Peace Corps volunteer. “If you go out of business in Africa, it’s your extended family (that) is going to suffer.”
The Oseis credit former coach Andrew Meade, MS ’86, with helping them pull through. In his own career, Meade had experienced the wild swings of the construction and real estate industries and could share the lessons he had learned not just on a whiteboard but also in the unforgiving reality of concrete.
“It isn’t like we are such geniuses,” Hans Nilsson says of the coaches’ ability to bring real-world lessons into play. “It’s just 30 years of learning stupid things that we stumbled onto. If you’re 34, you just don’t know.”
Although the physical, financial and structural challenges facing Africa appear daunting, it may be cultural practices and entrenched psychological conditioning that present the highest, though largely invisible, hurdles.
Iranloye sometimes notices visitors poking their heads around Psaltry’s offices and factory as though looking for something they expect to find but cannot: a white or Asian expatriate running the place. Even Nigerians are surprised when they learn that Psaltry is owned and operated solely by locals. “We have refused to believe in ourselves,” Iranloye says, even as she herself exudes the confidence of someone who would not be daunted if commanded to part the Red Sea and lead her people — peasant farmers — to the Promised Land.
That comment echoed over and over last July during week three of the STP in Accra and again in conversation with 15 participating CEOs in Ghana and Nigeria.
Samuel Agyapong Appenteng is the deputy managing director of Joissam, a well-drilling and water service company based in Accra. He remembers being taught as a child that everything African was inferior. He shakes his head recounting how many Ghanaians still believe that the only solution for their country is to be recolonized. Decades of handouts and ineffective government have created an atmosphere of hopelessness and disempowerment for millions of ordinary citizens who have been “developed” into dependency.
In their collective 118 years of independence, Ghana and Nigeria have had 27 governments between them, 11 of which were brought about by coups, assassinations or both. Leslye Obiora, JD ’00, served as minister for mines and steel development under Nigerian President Olusegun Obasanjo. She says that by the time one government gets settled in, the plans of previous ones “have grown legs and run away.” The combined effect is made clear by an oft-repeated statistic: In 1960, Ghana’s per capita gross domestic product was higher than South Korea’s; now it’s about one-twentieth of South Korea’s.
Obiora, now a law professor at the University of Arizona, underscored the lack of a national and continental vision at the 2016 Stanford Africa Business Forum. “We’ve not really built that national identity, let alone had a conversation about who really are we, where are we going, and who do we want to become,” she said. If Nigeria and other African nations continue racing headlong down the Western, consumer-based model of development, they risk losing “the cultural heterogeneity and uniqueness of our people,” which she called a tragedy. “We’re going to be this hodgepodge of wannabes.”
When, over lunch, Afua Tetteh, a Ghanaian researcher at the Medical School, hears that Obiora is a Stanford graduate, she congratulates her effusively. “Please,” the former minister says dismissively. “I graduated from the University of Nigeria, which was more of an achievement.”
Networking is another cultural challenge. So commonplace in the United States, that’s not the case everywhere. In many traditional cultures, an elder’s word is law, squelching discussion and innovation. And because of Africa’s turbulent history — in which nails that stood out tended to get pounded down — there remains a strong hesitation to speak out and share, whether in a touchy-feely way, or about the nuts and bolts of running a business. The Seed Transformation Network hopes to change that.
In September in Lagos, the first meeting of the network brought together 92 past STP participants from Nigeria, Ghana, Senegal and Ivory Coast. The hope is that when the number of STP companies reaches a certain scale — 250 or 500 have been mentioned — a critical mass will start, as will a Silicon Valley-like chain reaction of ideas generating more ideas and companies spawning start-ups at an accelerating rate. However, Seed’s valley will span the globe and include companies from high-tech to low-tech. Whether critical mass can be achieved in such an expansive, distributed network is another question.
From Seed to Harvest
Like any start-up, Seed has not always germinated according to plan. Two of its early prime movers, former executive director Tralance Addy and former GSB dean Garth Saloner, are no longer in their posts. Executive Director Sørensen says, “We can’t solve all the problems through the Transformation Program. It’s clearly very hard in countries that have weak institutional environments.” He adds that Seed is a “very complex project never tried by a university before” and that “it’s unrealistic to think that there’s a perfect vision and no growing pains.”
In the United States and elsewhere, many think of poverty as something for the government, not the private sector, to address. Can the combination of executive education, intensive, high-touch coaching and business networking make a substantial impact on the millions living in poverty? “Five years down the road, we might be in a better position to answer that question,” says coach Constantin Salameh. Bob King also expects that it may be another five years or so until everything comes together.
Seed has spent more than $9.5 million on around 109 research projects. To date there are no breakthroughs of the kind Sørensen hopes for, but it is too early to assess them. One promising Seed-supported study is “Does Management Matter? Evidence from India,” co-authored by Stanford economists Nicholas Bloom and John Roberts, and three others. Their work showed that Seed-like coaching led to a 17 percent increase in productivity in a segment of the Indian textile industry in the first year and the opening of more plants within three years.
Surprisingly, since the world’s first business school opened in Paris 200 years ago, there is a dearth of research on whether business education itself, a big draw for Seed participants, makes a demonstrable difference to company performance.
Bloom attributes this to a lack of large-scale grants. “Funding tends to be small scale to spread the money around and also to favor interdisciplinary research,” which promotes equity but means “some big questions get ignored. I would challenge Seed to have a few larger grants that focus on big questions.”
One proxy to affirm Seed’s impact so far could be the willingness of STP companies to pay former coaches to continue advising them or to join their boards after the formal commitment has ended. Salameh now serves on seven boards and Nilsson on three. Several other former coaches continue to consult with their STP companies or sit on boards of advisers and of directors. Perhaps coaching is “scalable” but in a way that Seed didn’t originally envision.
The Kings and many others have been encouraged by Seed’s early results. Numerous companies have grown quickly, doubling sales two and three times and more. Kweku Fleming, MS ’87, MS ’88, who started coaching with the first STP cohort in 2013 and is now a facilitator, has worked directly with more Seed companies than any other Seed coach. To him, Seed is a “world-changing institution” that will help bring African companies into positions of global leadership. He believes that — in the near future — a few high-profile deals involving Seed companies will “change the game for entrepreneurs in Africa.”
However, improved productivity and even opening new plants does not necessarily translate to greater employment. High-growth, high-tech companies like SMSGH are unlikely to hire the poorest of the poor — they need engineers and university graduates. Agricultural endeavors like Psaltry may very well elevate the economic status of indigent farmers, who still represent more than 50 percent of the total population in many African nations. Other companies in the same sector, like Nation Feeders, may not have as big an impact on employment. Even as the Oduguwas plan to increase the number of their laying hens from 100,000 to a quarter of a million, their expanded use of automation means that employment levels grow only slightly, if at all.
Seed’s ultimate success or failure doesn’t diminish rewards already felt. Many STP graduates rave about the classes they took. Joissam’s Appentang can recite from the curriculum content as easily as he does from the Bible. Joissam’s transformation plan — nearly as thick as an old Manhattan telephone directory — is never far from his reach.
Moreover, the learning is not a stream that flows only from academics to practitioners. Sørensen says that faculty members sometimes encounter objections from STP participants who say, “No, no, no. That’s not how it works.” It drives the faculty “crazy to think their theory of the world” may not be applicable everywhere. Bob King chuckles as he recalls professors who came back to campus thinking, “Maybe I don’t know everything.” He hopes they’ll bring back ideas for solving problems in the United States.
Associate marketing professor Jonathan Levav says that Seed represents “the most rewarding teaching assignment that I’ve ever had,” a sentiment expressed by other faculty. After a 30-year career in the private sector, Salameh says he’s finally discovered his true passion, which is to coach “for the rest of my life.” At his 60th birthday party in September, he often had to hold back tears as he tried to express how thankful he has been to have Seed in his life. For Oduguwa, success for Seed will be “when people like us can do what Bob King is doing.” Iranloye has a different vision — when the children of some of her once-impoverished farmers can attend Stanford. “Why not?” she says. “Who knows.”
Six weeks before Nigeria’s economy was officially declared to be in recession last August, the New York Times ran yet another lengthy “single story”: “Nigeria Finds a National Crisis in Every Direction It Turns.” The next morning, CEO Yetunde Oghomienor and her senior staff at Aframero, a woodworking products and services business in Lagos, sat in a dimly lit room where a single fan—powered by a backup generator—turned languidly. Once again, there was no local power. What, in light of the New York Times article, would the Aframero staff like to say to the people who would read this article?
With pacing, intonation, a certainty about the future and a depth of conviction that the Rev. Dr. Martin Luther King Jr. could not have improved upon, operations manager Blessing Okoroafor spoke out.
“TRUE, we have Boko Haram issues here,” she said. “TRUE, we have Niger Delta Avengers disturbing us. I will tell this to the New York Times writers in America: What is happening in Nigeria, if it happened in America, they would all go down immediately. But that’s not happening in Nigeria. We wake up with hope every day that tomorrow is going to be better than yesterday.” (“Yes,” her colleagues call out as one.) “That is one thing we have in Nigeria. Nobody can take it away from us.” •