Democratizing Commerce:

The Challenge for the 21st Century

C.K. Prahalad
Paul and Ruth McCracken Distinguished University Professor
The Ross School of Business
at the University of Michigan

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 The Critical Question:

Is Globalization “Good” or “Bad”

for the Poor?
vs.
How to Make Globalization Work
for the Benefit of All?

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 Democratizing Commerce:
Every Person to have Access to the Benefits
of the Global Economy.

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 Democratizing Commerce:
Every Person to have Access to the Benefits
of the Global Economy.

Every Person as a Consumer:

Afford world class products and services,
Shape their own experiences.
+
Every Person as a Producer:
Have Access to Global Markets
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 Democratizing Commerce:

Inclusion of Consumers
4 billion underserved Shape their own
in the Market Experiences
Economy
Micro Consumers & Consumers ~ Firm
Micro Producers
Co Creation of
BOP as a Market
Value
The Fortune at the Bottom The Future of Competition
of the Pyramid
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BOP: A Contested Ideological Market?

Public Sector,
AID, Multilaterals
Universal
Solutions

Social Personal Philanthropy

CSOs
Justice Agendas

New Business
Opportunities
Private Sector:
Large Firms, including MNCs ? 6
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 What You See is not What it is………..

Source: FT, April 20, 2004 7

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Source: Mr. Subrato Bhowmik 8
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 The Cell Phone Industry:
1. Great growth Story in BOP markets around the world
Sub Saharan Africa, S. Africa
China, India
Thailand, Philippines, Indonesia
Latin America
2.5 billion connected around the world
2. The industry has Cracked the BOP Code

3. India is one of the fastest growing Markets: 7 million/month

4. Cost of service: Lowest in the world
5. Market Cap of 4 firms in India: $ 75 billion +

6. Cell phone is becoming the device of Choice not the PC

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 Participation In BOP Markets
1. Converting consumers from Unorganized, inefficient
markets to Organized and Efficient Private sector

2. It is a Market Development Task

3. BOP Markets will Force Breakthrough Innovations

4. We have to think differently;

Price - Profit = Cost
Cost + Profit = Price
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Desire for Eyesight
Target Price

Target Profit

Target Cost

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Desire for Connectivity
Target Price

Target Profit

Target Cost

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Desire for a Car?
Target Price

Target Profit

Target Cost

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The Desire for Connectivity

Target Price

Target Profit

Target Cost

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 Building New Supply Chains:
Connecting Rural poor to Global
Markets
The Role of Micro Producers

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Scale and Decentralized
Manufacturing

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 Milk Collection Centers:
Twice a Day Ritual in Rural India

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 The Complex Reality

1970 to 1970 to Ongoing 2000 +

Now

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Scale and Decentralized
Manufacturing
Gujarat Cooperative Milk
Marketing Federation
Milk procured/day 6.4 million Kgs.
# of Farmers 2.2 million
# of Villages 10,755
# of collection centers 3,000 +
Revenues $ 840 m
Exports $ 30 m

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Do We Need a New Methodology
for Innovation at BOP?
Creating Micro Consumers

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 Making Products/Services Affordable
e.g. Prosthetics for the Poor
Evidence: Jaipur Foot, India

Approach: Barefoot Walking,

Squat on the Floor
Sitting Cross legged
Walking on Uneven Ground
Paucity of Doctors
Need for Custom Fitting in a day

Defaults As good as US Models

Size and Scope Largest in the World
Viability Profitable
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Basic Foot Movement is
Complicated

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The Functionality Requirements in India
are Different from the West
Activity Functionality:1 Functionality:2

Squatting Need for Dorsiflexion

Work Needs,
Sitting Cross Need for transverse
Poverty,
Legged Rotation
Lack of
Trained
Walking on Need for Inversion and
manpower,
Uneven Ground Eversion
Time for
Fitting
Barefoot Walking Need for Natural Look

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New York Times, October 3, 2006 26
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Comparison of Scale and Quality
Scale Quality: Outcomes
Jaipur Foot 16,000/year As good as US

Aravind 250,000/year As good as UK

Eye care

NH 7,500/year Better than NY State

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 The Health Care Revolution:
Field of Cost Adv.
Group Specialization Over USA Size

Jaipur Foot Prosthetics 200 x 16,000/year

Aravind Eye
Hospital Eye care 100 x 250,000/year

Escorts Cardiac care 15 x 7,000/year

Narayana Pediatric 30 x 7,500/year

Hridayalaya cardiac care

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 What Should be the Role of
Philanthropists?

1. Support Contained Local Initiatives?

2. Supporter of “Proxy Experimentation” ?

3. Pool Resources and “Scale few Initiatives”?

4. Support the Development of Institutions

that Create Market Based Solutions at BOP?

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Transformation Requires:
Imagination
Passion
Courage
Humanity
Humility
Intellect
Luck !
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Do these Children Deserve Our Attention?

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