18-12-2012, 03:04 PM
The Fortune at the Bottom of the Pyramid
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This book by C K Prahalad, Harvey C. Fruehauf Professor of Corporate Strategy and International Business at the University of Michigan Business School addresses a challenge that the author had thrown to himself in 1995 - "What are we doing about the poorest people in the world? … Why can't we mobilize the investment capacity of large firms with the knowledge and commitment of NGOs and the communities that need help? Why can't we co create new solutions?"
The ideas given in the book had earlier been propounded in a working paper, called "The Strategies for the Bottom of Pyramid", which the author had produced with his colleague, Professor Stu Hart but was considered too radical for publication by journals. However, a number of managers at Hwelett-Packard, DuPont, Monsanto and others read it on the internet and accepted its premise. Widespread discussions and acceptance came with publication of two articles, "The Fortune at the Bottom of the Pyramid" in Strategy+Business (January 2002) with Stu Hart, and "Serve the World's Poor Profitably" in the Harvard Business Review (September 2002) with Allen Hammond.
The book is divided into three parts. First part, 'The Fortune at the Bottom of the Pyramid' gives a framework for active engagement of the private sector at the Bottom of Pyramid (BOP) and is divided into six chapters. The starting proposition of the author is that 'if we stop thinking of the poor as victims or as a burden and start recognizing them as resilient and creative entrepreneurs and value-conscious consumers, a whole new world of opportunity will open up.'
The first Chapter is titled "The Market at the Bottom of the Pyramid" and discusses the unique character of the BOP market. The BOP as a segment consists of an estimated 4 billion people who live at below $2/day. They represent a latent market for goods and services. Active engagement of private enterprises at the BOP is a critical element in creating inclusive capitalism as private sector competition for this market will foster attention to the poor as consumers. The author states that each of the groups that is focusing on poverty alleviation - the World Bank, rich countries providing aid, charitable organizations, national governments and private sector - is conditioned by its own dominant logic. For example India had a deep suspicion about the private sector. Multinational companies (MNCs) suffer from deeply entrenched logic regarding cost structure, consumers and BOP sector. The donors consider private sector greedy. All these agencies have come to an implicit agreement that market based solutions cannot lead to poverty reduction and economic development.
Chapter 2, on "Products and Services for the BOP" calls for a new philosophy of product development and innovation in tune with the realities of the BOP market. The author has identified 12 principles of Innovations for BOP Markets:
1. Price performance: Quantum jumps in the price performance are required.
2. Hybrid Solutions: Advanced and emerging technologies that are creatively blended with existing and rapidly evolving infrastructure.
3. Scalable, transportable across countries, cultures and languages: Ease of adoption in similar BOP markets is a key consideration for gaining scale.
4. Focus on conserving resources: Eliminate, reduce and recycle resources.
5. Product development must start from a deep understanding of functionality not just form.
6. Process innovations are as important as product innovations.
7. Deskilling work is critical. Products and services must take into account skill levels, poor infrastructure, and difficulty of access for service in remote areas.
8. Education of customers on product usage is key.
9. Products must work in hostile environments.
10. Research on interfaces is critical given the nature of consumer population.
11. Innovations must reach the poor – designing methods for accessing the poor at low cost is critical.
12. Product developers must focus on the broad architecture of the system – the platform – so that new features can be easily incorporated.
Innovating at the BOP may seem daunting, but it is highly rewarding. It is also necessary for the MNCs who want to stay ahead of the curve. Such successful innovations are seen in Reliance Telecom’s “Monsoon Hungama”; Dr Venkataswamy’s Aravind Eye Care system in Madurai; Molecular encapsulation technology for iodizing salt by Hindustan Levers Limited; Amul’s Automatic Milk Collection System Units; Ram Chandra and Dr P K Sethi’s Jaipur Foot; Device agnostic system by Voxiva, Peru; ICICI banks multi channel delivery mode; ITC and EID Parry’s access to farmers through their networks.