The Fortune at the Bottom of the Pyramid

Professor Jonathan mentioned CK Prahalad, the Ross School Professor in our last class. I started reading his book The Fortune at the Bottom of the Pyramid a while ago but slowly the fast paced quarterly system took over completely and the book rests on the shelf.

Although, I didn’t finish the book but I realize how more than social entrepreneurship he is talking about pure business in the Friedman sense. At the same time he is talking about a paradigm shift in the approach of people and businesses towards the four to five billion who live on less than $2 per day. The basic premise of this book is to stop thinking of them as "poor" who need charity, and instead consider them as a huge class of consumers who present a great and profitable business opportunity. The book calls this class as the "Bottom of the pyramid" - the largest set of consumers, but mostly under-served as of today. The key aspect to realize is that the exploiting this business opportunity requires innovation in every aspect of the product cycle - from product development, cost, packaging, marketing and distribution. The consumers are value conscious yet very discerning. Merely tweaking solutions originally created for developed economies and rich consumers are almost certain to fail. New and creative approaches are needed to convert poverty into an opportunity for all the players; the book aims to bring together the NGOs, governments and communities who understand the BOP well, with the investment and business acumen of large MNCs and domestic firms. By effectively targeting the BOP, businesses can not only make huge profits but in the process also serve to improve and lives of billions of people potentially serving as a powerful tool to help alleviate poverty. He cites successful examples of companies such as:

HLL, India - http://www.hllshakti.com/sbcms/temp15.asp HLL used an innovative approach to penetrate rural areas where two-thirds of India's population lives, with a scheme named "Shakti" (meaning empowerment). Provided small-scale enterprise opportunity and improved rural living standards through health and hygiene awareness

ITC, India - http://www.itcportal.com/ one of its products is cigarettes, for which the company has won several awards for occupational health and safety, environmental managements systems as well as product excellence

Cemex, Mexico - http://www.cemex.com/su/su_lp.asp http://en.wikipedia.org/wiki/Cemex - world's largest building materials supplier and third largest cement producer yet socially and environmentally sustainable.

Casa Bahia, Brazil - http://findarticles.com/p/articles/mi_gx5202/is_2004/ai_n19123371/ - the largest retail chain store in Brazil. It was one of the first companies to offer the highly successful credit sales schemes in Brazil mainly aimed at selling electronic and other household products to the urban poor.

I must go back to the book soon...