1. Explain in detail what theories and concepts you learned in class are helpful to understand the case.
The case discusses an entrepreneur named Sethu Sethunarayanan, who invented and marketed an innovative trap to help poor Irula people (an Indian tribe) catch rats more efficiently. He is the founder of the Center for Development of Disadvantaged People (CDDP) – one of a few recognized non-profit organizations in India. The case is an example how technological innovation and human capital can be used to improve the life for the poor.
This rat-trap entrepreneurship was a social entrepreneurship because the inventor used the resources to cater to the needs of poor people. Prior to the innovation of the new trap, Irula villagers needed to use their mouths and their hands to catch the rats directly; their health was severely affected when touching the rats. After talking to a rat-catcher’s wife, Sethu realized that there was a problem and with the instinct of an entrepreneur, he knew that there would be an opportunity for him to solve the problem and improve the lives of Irula people. With the help of a mechanical engineer, Sethu developed a new trap to help people catch rats without contacting directly to the rats and the hot area of the trap. The values created from this innovation were a better health and a better income for rat-catchers. A concept test was implemented to fifteen rat catchers to see whether it worked. This was an important process to determine whether the entrepreneur needed to revise his innovation. After six iterations in eight months, the trap met most of the needs of the rat catchers. Sethu then applied for the grant from the World Bank to commercialize the innovation. It was a good choice of raising fund since social entrepreneurships usually do not attract numerous investors (because the aim is not for profit but for a better life of people).
Sethu also planned various processes for the implementation of the project. Firstly, he identified the market which consisted of 1,500 neediest villagers and communicated the benefits of the new trap directly to this segment by visiting their villages. Secondly, Sethu created more values for customers by creating the women’s microcredit funds, which operated like loans and enabled women to afford a trap. These funds helped bring the traps to more villagers. Thirdly, he chose the right people to take care of the production. Since the young and unmarried women were selected to be the workers, the men and the boys were kept for catching the rats. Finally, he already thought of the exit strategy when the demand for the traps decreased. In such a situation, the factory would produce other steel products that were useful for Irula people.
2. What were crucial factors that determined success or failure?
The success of the rat trap entrepreneurship was contributed by numerous factors. Firstly, it was due to the human capital: Irula people. Although Irula young women were illiterate, they were able to produce the traps by themselves after being instructed. Selecting these women to operate the factory was a wise strategy because it made Irula people feel proud of their tribe. These workers might also persuade and instruct their relatives and neighbors to use the traps. As a result, the customer base for the business would be enlarged.
Secondly, the technology innovation was also an important factor. It was the simplicity of the trap that made it usable for Irula people, 99% of whom were illiterate. Sethu and the mechanic engineer spent eight months inventing and testing the trap before it met all the needs of the rat catchers. If the trap was more complex, Irula people could not use it and the entrepreneurship would become a failure.
Thirdly, the $98,500 grant from the World Bank served as the source for Sethu to implement his business plan. The plan included many costly processes such as health checks and treatments for the beneficiaries,...
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