The winner of the 2019 Barry & Marie Lipman Family Prize at the University of Pennsylvania is World Bicycle Relief, a nonprofit organization that mobilizes people in the developing world by building and distributing rugged bicycles in rural areas where walking is the primary mode of transportation. With help from its business partners, World Bicycle Relief has delivered more than 450,000 bicycles to people living in sub-Saharan Africa and other developing areas around the globe. Wharton management professor Michael Useem, who is also director for the school’s Center for Leadership and Change Management, spoke with Dave Neiswander, chief executive officer of World Bicycle Relief, about the organization’s unique business model that combines philanthropy with social enterprise to achieve results.

An edited transcript of the conversation follows. You can listen to the podcast here.

Michael Useem: Tell us about the organization and its origin. How did you get involved?

Dave Neiswander: World Bicycle Relief is about 14 years old, and it started as disaster relief for the Indian Ocean tsunami. I don’t know if you remember that terrible devastation that took place in December 2004 — all of us started looking at what we could do differently.

The Day family came together, thinking through, “What can we do differently?” They started an organization called SRAM Corporation about 30 years ago. SRAM Corporation, if you’re not a cyclist, is probably not a household name. But they are the world’s second-largest, and the U.S.’s largest, bicycle component manufacturer, making very high-end products for Tour de France-type bikes.

F.K. Day and his wife, Leah, and the leaders of SRAM said, “What can we do? We have global operations. Would bicycles make a difference in that disaster recovery?” F.K. and Leah went to Sri Lanka and spent time with development workers and development organizations that were just getting started as far as the recovery. Most of them said, “No, no. Please just send us money. We’re fine.” But we did find a partner and delivered a program of about 24,000 bicycles. About a third of those went to health care workers who were helping with the disaster recovery, a third to students who were reconnecting with school, and a third to entrepreneurs. An example would be a fisherman who was displaced because of the tsunami, now having to reconnect with the marketplace.

It was almost going to be a one-and-done, but there was a good impact study that was done that said this made a huge difference. People with bicycles all of a sudden had better access to health care, education, economic opportunities.

Unfortunately, the 230,000 people who perished in the tsunami — well, that happens every six weeks in sub-Saharan Africa based upon preventable disease, hunger and other challenges. Immobility in Africa is a huge challenge. There are over half a billion people in sub-Saharan Africa in the rural areas. That means they’re primarily walking. So, our first program was in Zambia. It was a program in 2006 that was funded by the U.S. government, combating the HIV epidemic. And they had a challenge. They had 23,000 volunteer health care workers who were doing angels’ work. They were going to their community, going to do home-based care, going to work with orphans and vulnerable children, and they had a challenge because they were walking long distances. The bicycles that were there in the marketplace were not a very high quality. They had those bicycles breaking down. It was a disincentive. The care was not getting out. They needed a transportation solution, so the folks that were running that program reached out to F.K., and that’s when I came on board at the same time. I was the first employee on the ground in Zambia back in 2007 and started implementing a program. But what we found was the bicycles readily available were just not of high quality.

So, we started thinking and designing. With his background in product development at SRAM Corporation, F.K. says, “You know what? What we can do is start designing for purpose. We can start taking our expertise of product development that’s been used at the high end of the cycling industry and apply that to the lowest part of the economic pyramid.”

We’ve gone through an evolution of working with what we now call Buffalo Bicycles – a heavy-duty bicycle that is about 50 pounds of steel, 50 pounds of love. It can hold over 100 kg. — 200 pounds — on the rear carrier. It has a single-speed, durable kickback brake. It’s a tool for people to help themselves.

Useem:  Dave, that’s really interesting because you reference the earthquake that came out of Aceh, Indonesia, and the tsunami that swept throughout the region, reaching Sri Lanka, India, much of Africa, as well. From talking with many other organizations and individuals, an event of that kind — such as the earthquake that hit Haiti or the disasters that came in the wake of the 2011 earthquake in Japan — has a remarkable impact and brings people to action. Thinking about your own interweaving of your personal biography with that, how did you get involved?

Neiswander: I’ve been with the organization 12 years. My background was going to business school, and I went on and did a 15-year career in investment banking, primarily focusing on how to take banks public. After 15 years and facing down 40, I was thinking, “You know what? Maybe I need to be doing something different with my life. Maybe I need to look at something of impact.”

At that time, I fortuitously met F.K. and Leah on a safari in Kenya randomly, and with that chance meeting got to learn more about the organization. I was really intrigued. A series of circumstances and opportunities happened, and I got to Zambia. What I saw was the great need, the issue of distance, the issue of people having to travel, and when their primary mode of transportation is by foot, how can that be overcome? Then looking and listening to F.K., who is a leader in the bicycle industry, saying, “I think I know how we can work on this.”

We have a motto, which is, “All answers are found in the field.” Spending lots of time with the people on the ground, listening to them and seeing where that opportunity to take the top end-product development that F.K. and SRAM Corporation brought, and giving a voice to those at the bottom of the economic pyramid — I was just inspired.

With that first trip to Zambia, I moved there within six weeks, went on a sabbatical from my investment bank. I was about 10 years in Africa, setting up our programs and operations, looking at country expansion, program expansion, and then recently came back to the U.S. to take on the role of CEO.

Useem: I’m a biker. I grew up with it as a kid, and I loved to watch the Tour de France. Bicycles in the West are often an object of leisure, of fun, of recreation, of sporting. You’ve just made the point that in some settings, bicycles are the necessity.

Neiswander: Absolutely. There are over half a billion people in sub-Saharan Africa who are living in the rural context. That means that walking is their primary mode of transportation. So, when you’re trying to take your sick child to the clinic, and that clinic is 10 miles away, you’re walking there all day. Or if you’re a student, you’re having to walk seven miles one way to get to school. And if you’re an adolescent girl, there are safety concerns in that.

Having a bicycle is really a life-changer. Any person who has started a business or knows about building up as an entrepreneur — transportation is often part of that process. If you’re transporting your produce to the market, maybe it’s not the market that’s the closest, but maybe the market that’s a little farther away where there are better prices. All those things are coming together. That’s why it’s interesting working in this field of development, because really bicycles are cross-sectorial.

Useem:  I have a couple of questions on your business model. Let’s start with the funding. How do you put together cash to buy the bicycles?

Neiswander: We started off as a disaster response, so we got a wonderful response from SRAM Corporation, the other industry leaders — from Trek, from Specialize, from Cannondale, working with Giant Bicycles, Tata Bicycles. All those people, and individual cyclists, came together to help us with that initial response and continuing assistance, so we’ve sort of grown up with grassroots fundraising.

As we’ve studied the impact of our programs, we’ve been able to do research and show that with a bicycle, a girl is 28% more likely to have improved school attendance and 59% improvement in her academic performance. A farmer can increase his income by 23% using a Buffalo Bicycle to carry his milk to the dairy. As we started getting this information, we’re now starting to engage more major donors as well as institutions and are really highlighting the issue of distances and transportation.

When we first started delivering the Buffalo Bicycles into our programs, what we found is people started knocking on our door. People started saying, “Hey, I’ve seen your bicycle in the field. It’s better than anything else that’s out there. I want that bicycle for my health care program. I want that bicycle because I’m a farmer and I see how strong it is. I want that bicycle to take my kids to school. How can I buy one?” F.K. and I sort of scratched our heads and looked at each other and said, “OK, what do we do with this?”

As a small nonprofit, we weren’t prepared to fund those philanthropically through donations, but there was a strong demand out there. We worked with some very good attorneys and Deloitte, and we came up with a very innovative structure where we have World Bicycle Relief, the nonprofit, that owns 100% of Buffalo Bicycles, the for-profit entity. Buffalo Bicycles sells bicycles to nonprofit organizations that are doing development work in health care, education. Some of our big customers are UNICEF, World Vision, Care International — those types of organizations that realize that mobility and having a strong bicycle in their program actually helps them achieve their goals and helps improve their key performance indicators.

It’s an interesting design challenge. When you think about when you’re serving this bottom of the economic pyramid, we could have gone off and designed a very fancy and a very strong bicycle at, let’s say, $350. That’s a reasonable price for a good bicycle here in the U.S. Well, that’s not meeting the customer where they are. That’s not serving the markets that we were serving. Working within the constraints of engineering, product development, existing supply chains, making sure that our bicycle is also compatible with the existing spare parts that are readily available — it’s a really interesting design challenge. Again, it’s taking that top end-product development knowledge that comes from SRAM Corporation and F.K., and how can we apply that to give a voice to that bottom-of-the-market consumer?

We’ve just started opening up retail outlets over the last 18 months retail. These are Buffalo Bicycle shops, small little shops right there on the main drag in different regional towns throughout Zambia, Zimbabwe, Kenya and Malawi. And we’re seeing great uptake. We’re seeing that individuals — when given a choice, when given a voice — will go for the Buffalo Bicycle.

Useem: It sounds like you’re a hybrid between a purely philanthropic-driven organization, where you have the product that people need and give it to them. But you’re also letting the markets speak a bit, so those who have a real need for a bike at an affordable price point are able to walk in and get what they really couldn’t get from any other provider in the region. Does that sound about right?

Neiswander: It does. It’s interesting. With F.K.’s background with SRAM Corporation and my business background, we really approached the whole organization and the growth of the organization as, how can we apply best business practices to development? And one of the first things with best business practices is know your customer, know your environment. I think there’s a challenge with a lot of development programs and organizations — a lot of times it’s top down, you know? We have an idea that we think we should implement. Our motto is, “All answers are found in the field,” so you go and you understand and be empathetic to those customers, and you give them a voice. I think that’s the difference in what we’re trying to achieve.

Knowledge@Wharton: If I’m in Lilongwe, Malawi, and I’m thinking, “I could really use a bike in this region because I’m doing some back roads, looking at some of the agricultural development projects,” can I walk into a bike shop and buy one of your bikes?

Neiswander: You can. We have two outlets in Lilongwe — currently a Buffalo Bicycle stand-alone shop, which is in the main shopping area of Lilongwe, as well as our assembly facility.

Knowledge@Wharton: You can walk into bicycle stores near here in Philadelphia, Pennsylvania, and spend a couple thousand dollars and even much more for an extremely high-end road bike. What’s your average retail price for the needy?

Neiswander: In Lilongwe, it’s about $145. It varies by countries because of the different costs of transportation and import tax and duties that are, unfortunately, put on the bicycles as they come in. It was a real question for us. It was really an open question of, will this value proposition of quality and price be the right fit for that marketplace? Is this going to work? Is this really going to be something that can be driven? What we found, in fact, is that it is. It’s the right value proposition for that market.

Knowledge@Wharton: Dave, a last question about your business model. Say I’m a Malawi farmer. I’m going to have a lot of cash after I sell my crop, but I don’t have a penny right now. Can I make this some kind of loan to get me going? Can I borrow the money?

Neiswander: Yes, absolutely. We started to talk about a three-legged stool, if that makes sense. As far as reaching this consumer, first we want to have the right product and the right quality value proposition. Second, we have to have the distribution, so making sure that we have the shops that are out there making it accessible as it relates to physical locations. Third, it has to be financially accessible, so we have programs of microfinance. We partner with microfinance organizations. We have layaways, so they can pay for the bicycles over three to six months.

Useem: Let’s think about the future. It’s now 2024. What’s your target number?

Neiswander: I think we’re going to be in the millions of bicycles at that point. Part of what we’re doing is raising the awareness of the challenge of distance and the fact that the quality bicycle can really help overcome that barrier of distance, so I think we’re going to get more and more. We want to be the mobility solution within larger development organizations.

As I said, over a half a billion people living in the rural areas in sub-Saharan Africa alone are most likely walking as their primary mode of transportation. With that, a bicycle could be really helpful. A quality bicycle could make a difference. I think we’ll also be expanding outside of sub-Saharan Africa and be looking at other areas in South America. We’ve done programs in Southeast Asia, as well. Those 450,000 bicycles are into 19 countries.

Useem: Looking back, you’ve been there pretty much from the start. What are a couple of your experience-founded principles that would be useful to others who want to operate in the development space?

Neiswander: I think listening to best practices in development that would include focusing on the field — having a field focus versus having a focus that is about following the money. I think it’s important for us to think through and make sure that we are listening to the end user and making sure that we are also working in collaboration. We have a model of partnership, so our model doesn’t work unless there’s a partnership in the field and with the communities that we work with, as well as other leading nonprofit development organizations, as well as the government. We’re working closely with the ministries of education and health, so it’s a collaborative effort.

What I would say is our flagship program is focusing on girls’ education. Girls in the developing world have the toughest time of any demographic, clearly. Educating girls truly helps break that cycle of poverty and disease. What we’ve found with our program, in the rural context of sub-Saharan Africa, is that bicycle is going to be the most valuable asset in that household. All of a sudden, you tie that girl’s education to that most valuable asset. It changes her negotiating power, and it allows her to have a voice in what her future looks like. We’re really excited to see that. We have a randomized control trial study that’s coming out by Innovations for Poverty Action, and it’s showing great improvement as it relates to not only educational outcomes, but also girls’ empowerment outcomes.

Useem: As the recipient of the 2019 Lipman Family Prize, a check of $250,000 is in your hands. What do you intend to leverage or make happen now that you have it?

Neiswander: We’re very grateful for the Lipman Family Prize as well as this awesome opportunity to engage with the University of Pennsylvania community. We’re very excited about that. As it relates to the financial gift, we’re very grateful and excited to be able to expand our impact and deliver more bicycles to students, to health care workers, to create the availability for entrepreneurs — it really goes a long way.